august 2014

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AUGUST 2014

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TABLE OF CONTENTS

POLITY ...................................................................................................................................................................................... 4

Supreme Court Judgments and Rulings ............................................................................................................................................ 4

SC notice on foreign Funding of political parties ............................................................................................................................................................... 4 Minimum qualification for MPs, MLAs .................................................................................................................................................................................... 4 Supreme Court holds back all coal allocations made since 1993 .............................................................................................................................. 5

Administrative Reforms ........................................................................................................................................................................... 5

Abolishing the PLanning Commission .................................................................................................................................................................................... 5 Banning the capitation fee ............................................................................................................................................................................................................ 8 Government move to check backwindow snooping ........................................................................................................................................................ 8 Fast Track Courts Violate due process: AP Shah ................................................................................................................................................................ 9 TRAI Reccomendations on cross media ownership ......................................................................................................................................................... 9

Legislations and policies ....................................................................................................................................................................... 10

National Judicial Appointments Commission (NJAC) ....................................................................................................................................................10 Several important bill lapse in parliament .........................................................................................................................................................................11 The Juvenile Justice (Care and Protection of Children) Bill, 2014...........................................................................................................................12

ECONOMY ............................................................................................................................................................................. 13

Policy Guidelines by RBI ........................................................................................................................................................................ 13

RBI releases charter of consumer rights..............................................................................................................................................................................13 RBI Governor Government should focus on increasing revenue collection ...................................................................................................13 RBI to cut down pre-emptions to spur efficiency ........................................................................................................................................................13 Reserve Bank proposes anytime anywhere bill payment system .........................................................................................................................15

SEBI - Securities Laws (Amendment) Act, 2014 notified ....................................................................................................... 15

Governmental Policies and Schemes ............................................................................................................................................... 17

Pradhan Mantri Jan Dhan Yojana (PMJDY) .........................................................................................................................................................................17 Measure to improve ease of doing business ......................................................................................................................................................................18 Come Make in India An analysis .......................................................................................................................................................................................19

SOCIAL ISSUES ..................................................................................................................................................................... 22

Health ............................................................................................................................................................................................................ 22

Who approves use of promotional drugs ............................................................................................................................................................................22 WHO urges crackdown on e-cigarettes ................................................................................................................................................................................22 Experimental vaccine for chikanguniya ...............................................................................................................................................................................22

Social Inclusion ......................................................................................................................................................................................... 23

Absence of a law to protect HIV infected .............................................................................................................................................................................23 Need for a demographic policy in the country ..................................................................................................................................................................23 Maharashtra forms board for Transgender Welfare .....................................................................................................................................................24

Women Related ......................................................................................................................................................................................... 25

Mahila Bank to have 25% presence in rural areas .........................................................................................................................................................25 Marriage driving urban women out of jobs ........................................................................................................................................................................25

INDIA AND WORLD ........................................................................................................................................................... 26

Issue of WTO and Trade Facilitation Agreement ...................................................................................................................... 26

India-China ................................................................................................................................................................................................. 29

China inaugurates new Tibet rail link near Sikkim border .........................................................................................................................................29 Chinas other Rail Links close to India ..................................................................................................................................................................................30 Dalai Lama in talks to return ...................................................................................................................................................................................................30 China General visited disputed region ..................................................................................................................................................................................30 China wants India to play key role in Silk Road plan...................................................................................................................................................31

India-Nepal ................................................................................................................................................................................................. 31

Modis visit to Nepal.......................................................................................................................................................................................................................31 Pashupathinath temple ................................................................................................................................................................................................................32 Disappointments .............................................................................................................................................................................................................................32 Deepening energy links ................................................................................................................................................................................................................32

India-Sri Lanka ......................................................................................................................................................................................... 32

Sri Lanka apologises over article on Jayalalithaa ............................................................................................................................................................32 TNA seeks Indias help ..................................................................................................................................................................................................................33


India-Pakistan ........................................................................................................................................................................................... 33

Talks off the table ............................................................................................................................................................................................................................33 Pakistan, India hold Indus water talks ..................................................................................................................................................................................33

India-Bangladesh ..................................................................................................................................................................................... 33

General (retd) V.K. Singhs visit ................................................................................................................................................................................................33 ULFA leader wants to come back to India ...........................................................................................................................................................................34

India-Vietnam ............................................................................................................................................................................................ 34

Sushma's Vietnam visit.................................................................................................................................................................................................................34

WORLD AFFAIRS ................................................................................................................................................................ 35

Ebola outbreak in West Africa ........................................................................................................................................................... 35

Symptoms ...........................................................................................................................................................................................................................................35 How it spreads? ................................................................................................................................................................................................................................36 Cure ........................................................................................................................................................................................................................................................36 Experimental treatment ..............................................................................................................................................................................................................36 Response plan ...................................................................................................................................................................................................................................37 WHO declares Ebola an international health emergency ............................................................................................................................................37 Growing unrest sets back Liberia's Ebola fight ................................................................................................................................................................38

Israel-Palestine ......................................................................................................................................................................................... 38

Cause of the Gaza war ...................................................................................................................................................................................................................38 Series of ceasefires and their violations: .............................................................................................................................................................................39 Why ceasefire? ..................................................................................................................................................................................................................................39 Demands of Hamas and Israel...................................................................................................................................................................................................39 Israels Iron Dome ...........................................................................................................................................................................................................................39 War damage .......................................................................................................................................................................................................................................40 UN Human Rights Council appoints panel for Palestine inquiry .............................................................................................................................40 Israel, Hamas agree to open-ended Gaza ceasefire.........................................................................................................................................................40 Both Hamas and Israel declare victory in Gaza war .......................................................................................................................................................40 Palestine planning to apply to the International Criminal Court .............................................................................................................................41

ISIS (Islamic State of Iraq and Syria) ............................................................................................................................................. 41

What is ISIS and its Goal? ............................................................................................................................................................................................................41 Root cause of its inception ..........................................................................................................................................................................................................41 Role of foreign fighters .................................................................................................................................................................................................................42 Strategy to deal with ISIS ............................................................................................................................................................................................................42 U.S.s stand ..........................................................................................................................................................................................................................................42 Role of Qatar ......................................................................................................................................................................................................................................43 Yazidis of Iraq ...................................................................................................................................................................................................................................43 Political crisis in Iraq .....................................................................................................................................................................................................................44

Syria ............................................................................................................................................................................................................... 44

Neutralization of Chemical weapons .....................................................................................................................................................................................44 Syria and ISIS.....................................................................................................................................................................................................................................44 U.S.s stand ..........................................................................................................................................................................................................................................45 Russias stand ....................................................................................................................................................................................................................................45 Syrian rebels attack peacekeepers in Golan Heights .....................................................................................................................................................45 Israels stand ......................................................................................................................................................................................................................................45

Hong Kong ................................................................................................................................................................................................... 45

China ruled out open nominations .........................................................................................................................................................................................45 Principle of one country, two systems ..................................................................................................................................................................................45 Occupy Central with Love and Peace (OCLP) ....................................................................................................................................................................45

Political unrest in Pakistan ................................................................................................................................................................. 46

Cause of unrest and demands ...................................................................................................................................................................................................46 Role of Pakistan Army ...................................................................................................................................................................................................................46

Political crisis in Thailand ................................................................................................................................................................... 46

Thai Army chief chosen as Prime Minister .........................................................................................................................................................................47

Cambodia tribunal convicts Khmer Rouge leaders .................................................................................................................. 47


POLITY

SUPREME COURT JUDGMENTS AND RULINGS

SC NOTICE ON FOREIGN FUNDING OF POLITICAL PARTIES

The Supreme Court issued notice to the Centre and the Election Commission on a petition filed by the

Congress challenging a Delhi High Court order initiating action against it and other parties for receiving funds

from foreign companies

Acting on a public interest writ petition, the High Court, finding prima facie violation of the Foreign

Contribution (Regulation) Act (FCRA), said the donations from Sterlite Industries and Sesa accrued from

foreign sources within the meaning of the law.

The counsel for the petitioner submitted that any company controlled from outside India through a

shareholding arrangement should be deemed to be a foreign company.

MINIMUM QUALIFICATION FOR MPS, MLAS

The Supreme Court has noted that the time has come for Parliament to prescribe some minimum

qualifications for Parliamentarians/Legislators as prescribed in other fields.

DISQUALIFICATION CRITERIA FOR MINISTERS

The Supreme Court has refused to add a new disqualification in the Constitution for appointment as

Ministers, saying it was the prerogative of the Prime Minister or the Chief Minister of a State to appoint

Ministers of his/her choice

This ruling was given in response to a public interest litigation petition filed in 2005 seeking the removal of

tainted Ministers from the Cabinet

However, the Bench said having regard to the role of a Minister and keeping in view the sanctity of oath he

takes, the Prime Minister would consider not choosing a person against whom charges have been framed for

heinous or serious criminal offences or charges of corruption

ANALYSIS

By sending a strong message that politicians facing criminal charges framed by a court should be disqualified

from becoming Ministers, the Supreme Court has stepped away from the age-old principle that a person is

presumed innocent unless proven guilty.

The court ruled that framing of charges is a judicial act by an experienced judicial mind and not the same as

lodging of an FIR. Charges are framed in a criminal trial after the judge is satisfied there is prima facie

evidence against the accused after perusal of the final charge sheet

Besides, a tainted Minister heading a high-integrity institution cannot take refuge with only a mere

presumption of innocence to defend him

Showing wise restraint, the Constitution Bench has declined to prescribe any fresh ground for disqualification

for the appointment of Ministers. Instead, it has advised the Prime Minister, as well as the Chief Ministers, to

live up to the trust that the Constitution reposes in them by refraining from advising the President, or the

Governors, when it comes to appointing as Ministers those with the taint of criminality.

The Election Commission has already mooted some reforms to curb the criminalisation of politics, notably an

amendment to make framing of charges in serious cases the basis for disqualification, instead of conviction,

as it stands now. The message from the latest verdict is that these issues ought to be addressed through

legislation rather than the judicial process.


SUPREME COURT HOLDS BACK ALL COAL ALLOCATIONS MADE SINCE 1993

The Supreme Court has the coal blocks allocated from 1993 onwards by a steering committee and through

government dispensation route were illegal, arbitrary, and non-transparent without any objective criteria but

did not cancel them yet.

The Supreme Court examined the following three questions:

o Whether allocation of coal blocks from 1993 should have been done by way of public auctions;

o Whether the procedure followed by the Screening Committee in making recommendations for

allocation of coal blocks was arbitrary and lacked transparency

o Whether allocation of coal blocks made by way of government dispensation route (i.e. by

Ministry of Coal) is inconsistent with constitutional principles.

The Supreme Court held that the allocation via public auctions was an administrative decision of the central

government and does not warrant judicial review.

In addition, it held that the process of allocation of coal mines on the recommendation of the screening

committee is arbitrary as no objective criterion was used to determine the selection of companies.

Further, the blocks allocated through the government dispensation route to State Public Sector Units was not

permissible under the Coal Mines Nationalisation Act, 1973.

Thus, all coal blocks allocated from 1993 are illegal. However, the allocation to Ultra Mega Power Projects,

which was done via competitive bidding for lowest tariffs, was not declared illegal. The court will decide

separately the fate of the illegal coal blocks.

ANALYSIS

The Supreme Court verdict holding coal block allocations made since 1993 illegal confirms a long-known, but

little-acknowledged malaise pervading the administration: cronyism often overshadowing merit, and systems

and processes being undermined by power and influence

The sweeping nature of the finding that allocation of coal blocks through the government dispensation route

as well as through a non-statutory screening committee suffered from arbitrariness is a fierce indictment of

successive governments, rendering it difficult to apportion blame on any particular party or regime.

Rather, as the judgment points out, the approach was ad hoc and casual. There was no fair and transparent

procedure, and this resulted in unfair distribution of national wealth.

Political parties may seek to blame one another, and industry may count its losses and lament the verdicts

impact on the cost and availability of power and the cost of importing or transporting coal. Some may fret

over the viability of existing projects and the fate of investments already made. They may calculate the

impact on financial firms with exposure to this sector. All these factors will now be weighed by the Court

when it sits again to decide whether to cancel the allocations or find a just alternative.

Those who consider the public interest paramount and are concerned about good governance and the

integrity of institutions will doubtless welcome this judgment. The tasks that remain are, first, to disgorge the

windfall gains made by the players in the scam; second, to save the mining and power sectors from the

consequences of the illegal allocations; and third, to bring to book those guilty of criminal conduct.

ADMINISTRATIVE REFORMS

ABOLISHING THE PLANNING COMMISSION

Planning Commission is an extra-constitutional and non-statutory body. It was established in 1950 by an

executive resolution of the Government of India, on the recommendations of Advisory Planning Board

constituted in 1946, under the chairmanship of K. C. Neogi.

Composition of Planning Commission

1. Prime Minister is the Chairman of the Commission. He presides over the meetings of the Commission.

2. Deputy Chairman is the de-facto executive head. He is responsible for the formulation and submission of

the draft Five-Year-Plan to the Central Cabinet. He enjoys the rank of a cabinet minister. He is not a

member of cabinet, but he is invited to attend its meetings (without a right to vote).


Planning Commission

prepares draft Five-Year plan

assesses resources

suggests measures to augment resources

supreme organ of planning for social and economic development

Union Cabinet

It approves the draft FYP

National Development Council

Objective is to secure the cooperation of states

prescribes guidelines for preparation of national plan

reviews the working of national plan

It is an advisory body to Planning Commission

Parliament

Once approved by Parliament, draft FYP becomes official Plan

It is published in the official Gazette.

3. Finance minister and Planning minister are ex-officio members of the commission.

4. The commission has 4-7 full-time expert members in various fields like Economics, Industry, Science and

General Administration. They enjoy the rank of Ministers of state.

5. The commission has a member secretary. He is usually a senior member of IAS.

Functions of Planning Commission

The Planning Commission's functions as outlined by the Government's 1950 resolution are following:

1. To make an assessment of the material, capital and human resources of the country, including technical

personnel, and investigate the possibilities of augmenting them.

2. To formulate a plan for the most effective and balanced utilisation of country's resources.

3. To define the stages, on the basis of priority, in which the plan should be carried out and propose the

allocation of resources for the due completion of each stage.

4. To indicate the factors which tend to retard economic development

5. To determine the conditions which need to be established for the successful execution of the plan within

the incumbent socio-political situation of the country.

6. To determine the nature of the machinery required for securing the successful implementation of each

stage of the plan in all its aspects.

7. To appraise from time to time the progress achieved in the execution of each stage of the plan and also

recommend the adjustments of policy and measures which are deemed important vis-a-vis a successful

implementation of the plan.

8. To make recommendations from time to time regarding those things which are deemed necessary for

facilitating the execution of these functions. Such recommendations can be related to the prevailing

economic conditions, current policies, measures or development programmes. They can even be given

out in response to some specific problems referred to the commission by the central or the state

governments.

Process of Planning in India

Critical Evaluation

Achievements of Planning Commission:

1. The majority of experts in the Commission are economists, which helps in securing expert and unbiased

opinion on various topics.

2. In March 2013, Planning Commission launched a massive social media campaign for spreading

Awareness about 12th Five Year Plan. It was followed by series of Google+ Hangouts and a Plan

Hackathon. By September 2013, it had made a considerable presence on Social Media with over 1 lakh

Twitter followers which helped in greater involvement of people in planning process.


3. Planning Commission concerns itself with the building of a long-term strategic vision of the future and

decides on priorities of nation. It works out sectoral targets and provides promotional stimulus to the

economy to grow in the desired direction.

4. It also plays an integrative role in the development of a holistic approach to the policy formulation in

critical areas of human and economic development.

Criticism

Questions are being raised about the role of the Planning Commission as the government has been moving

towards market-linked development process since 1991.

In a dynamic and rapidly changing country, the Commission is unable to show a certain kind of nimble-

footedness that it needs in order to be more effective. The biggest casualties of this inability are states (as well

as cities and local governments), which are not given a say as to how they should navigate the fortunes of their

own space. Planning Commission has been criticised both as an institution as well as the way it has functioned.

1. Multiplicity of agencies- Planning Commission vs Finance Commission

Dr P V Rajamannar, Chairman of fourth Finance Commission highlighted the overlapping of functions and

responsibilities between Finance Commission and Planning Commission in federal fiscal transfers. To avoid

this, a practice has grown which has resulted in the limitation of FC to only revenue expenditure.

There is nothing in the Constitution that excludes from capital grants FCs scope. Central assistance for plan

projects by grants or loans is practically dependent on the recommendations of Planning Commission.

Similarly, the functions of NDC and Planning Commission also overlap.

2. Misdirection- Dr Gadgil criticised Planning Commission saying that it has come to mix itself with the

actual process of the formation of public policies even in matters other than that of development.

Membership of PM and Finance Minister has vested Planning Commission with unnatural importance.

3. Planning Commission is only an advisory body and has no executive responsibility. Its wide terms of

reference have led to its growth as Super Cabinet, or Parallel Cabinet.

4. It has become an Economic Cabinet not merely for the Union but also for the states. It narrows the

space of state governments to set priorities on expenditure.

5. Plan body exceeds the scope of its authority, particularly its influence on the allocation of funds to state

governments. Funds from the Finance Ministry are being routed to states through it. However, most

states are of the view that this could be done directly by the ministry.

Finance Commission

Statutory transfer

to determine revenue gap of each state

To recommend the distribution of net proceeds of taxes between Centre and states

Principles that should govern the grants-in-aid to states

Measures needed to augment the Consolidated fund of the state to supplement the resources of Panchayats and Municipalties, based on the recommendation of State Finance Commission

Planning Commission

Discretionary grants

PC is the supreme body for planning for social and economic development

Central assistance for plan projects by way of grants or loans is dependent on the recommendations of PC

It is based on Gadgil-Mukherjee formula adopted in 1991

It acts as interface between Finace Ministry and other ministries


6. It is staffed largely by non-specialist bureaucrats who lack the expertise to act as a think tank or serve as

an oversight body to review implementation of programmes and policies in the states.

7. The commission along with its advisors came under severe criticism from within the government for

blocking projects. Former roads minister Kamal Nath blamed it for delays in clearing projects. Former

Prime Minister Manmohan Singh had also called for restructuring of the institution.

8. Out of touch with ground realities- Planning Commission was criticised for declaring a very low, and

arguably unrealistic, threshold of poverty of a monthly consumption of 859.6 in urban and 672.8 in

rural areas.

9. Other concerns relate to its opaque functioning, the lack of parliamentary oversight of its leadership and

the lack of accountability of members.

The way out

A report by C. Rangarajan, former chairman of PMEAC, advocated doing away with the distinction between plan

and non-plan expenditure, and change the role of the Planning Commission to a growth Commission. As

suggested by a group of experts and parliamentarians, provisions should be made for active participation of

states in the planning process. Planning must be made a federally empowered function with active participation

of states and in a bottom up mode.

A suggestion is that Planning Commission must act solely as a think-tank sans financial allocation powers. In

Korea and Thailand, planning is done by research bodies, which are effective only because of government's

acceptance. Also, the reinvented Planning Commission should be a lean body. Also, there may be a need to

make the Commission accountable to Parliament.

Conclusion

Centrally directed planning is an anachronism in the present times of greater federal autonomy. But while the

Planning Commission may go, the important tasks it has been carrying out will still have to be carried out.

Actually one of the biggest criticisms of abolition of Planning Commission has been on the ground that no

alternative measures have been suggested. So, it is necessary that a suitable mechanism is put in its place in

accordance with the changed ground realities and the needs of an emerging economy.

BANNING THE CAPITATION FEE

Banned by law in many States and by the Supreme Court through a judgment in 2003, the collection of

capitation fees remains a hard reality,

The Supreme Court has asked former Union Minister Salman Khurshid to study the issue in depth and suggest

an appropriate mechanism by which it can be effectively stopped.

In this, he will have the assistance of the various governments in the form of provision of information and

data on complaints.

Supreme Court has made it amply clear in its numerous statements that Capitation fee is illegal in nature.

The general thinking of courts has been that while educational institutions are entitled to a surplus of funds

that could be used for further expansion and provision of facilities, they should not indulge in profiteering.

The education sector has emerged as a significant generator of unaccounted money, as a recent report on

black money points out. No law, however stringent, can be made effective unless the targeted illegality

attracts public odium.

GOVERNMENT MOVE TO CHECK BACKWINDOW SNOOPING

In order to check the cyber-attacks and spying the Government is planning to make it mandatory for all

telecom equipment to be tested in India from next year.

MOVE AIMED AT CURBING CHINESE INFLUENCE

The new measures are taking shape at a time when Chinese content in Indian telecom networks is growing


In the past two years, Chinese equipment accounted for 60 per cent of total telecom equipment imports and

their percentage is now just over 50 per cent.

The government had in the past turned down the procurement of Chinese equipment on the suspicion that it

contained a back-window for transmitting information.

FAST TRACK COURTS VIOLATE DUE PROCESS: AP SHAH

As per the Law Commission Chairman, Justice A P Shah Fast-track courts are not the solution to the problem

of judicial backlog.

Stating that the quality of justice being delivered by fast-track courts was problematic, he said there was

often a violation of due process.

He further noted that to unclog the judiciary, traffic and police fines which the commission found make up

over a third of the lower judiciarys cases need to be removed from the court system.

AS FUNDS DRY UP FAST TRACK COURTS CLOSE DOWN

As per the law ministry, fourteen years after they were first set up, just half the fast-track courts set up across

the country are still functional.

Only five States Assam, Goa, Kerala, Meghalaya and Mizoram still have all their fast-track courts

sanctioned in 2000 functional

While the setting up of courts, including fast-track courts, is the responsibility of the State governments, the

11th Finance Commission recommended a scheme for the establishment of fast-track courts, and sanctioned

Rs. 500 crore of Central funds for the purpose.

The initial scheme was to run for five years and by 2005, 1,562 were functioning, the Law Ministrys data

show.

On the Supreme Courts directions, the Central funding was extended by another five years and discontinued

in March 2011.

By then, the number of fast-track courts still functioning was already down to 1,192.

After the gang-rape of a young woman in Delhi, the Centre decided to extend the scheme partially until

March 2015 by providing up to Rs. 80 crore a year as matching grant to meet the salaries of the additional

judges. But by July 2014, the number of functional fast-track courts was down to 976

Rajasthan, Uttarakhand, Himachal Pradesh and Arunachal Pradesh are the worst performers with none of

their sanctioned fast-track courts functional.

Fast-track courts disposed of over 3 million cases in their first 11 years. However, the quality of justice

delivered by them is disputed, as well as the impact they have on the speed of justice in the rest of the

system.

BACKGROUND OF FAST TRACK COURTS

Fast-track courts function by the same procedures as other trial and sessions courts, but have better

infrastructure and funding. They are expected to dispose of at least 14 sessions cases a month.

They were initially meant to look at long-pending cases and those involving undertrials, but were later

directed to try specific cases, such as crimes against women and children.

TRAI RECCOMENDATIONS ON CROSS MEDIA OWNERSHIP

The Telecom Regulatory Authority of India (TRAI) has suggested to bar political parties and government

departments from entering either broadcasting or TV distribution.

It has also recommended an independent regulator for the media.

It also suggested a formula for calculating media dominance that will likely affect at least some media

companies in some markets.

Both media organization and persons like an MP or MLA paying for favorable news should be held liable and

not only the politician. In case of "advertorials", a clear disclaimer should be mandated, to be printed in bold

letters, stating that the succeeding content has been paid for


TRAI said implementing its recommendations would address the immediate purpose of curbing unhealthy

media practices, but there is a need for a comprehensive evaluation of the legislative and legal framework in

order to establish a robust institutional mechanism for the long term. The authority, therefore,

recommended that a commission, perhaps headed by a retired Supreme Court judge, be set up to

comprehensively examine the various issues relating to the media.

LEGISLATIONS AND POLICIES

NATIONAL JUDICIAL APPOINTMENTS COMMISSION (NJAC)

The Constitution (121st Amendment) Bill, 2014 and the National Judicial Appointments Commission Bill,

2014 were passed by Parliament on August 14, 2014. The Constitution Amendment Bill has to be ratified by

at least 15 (of the 29) state legislatures before it is sent to the President for his assent.

The Constitution (121st Amendment) Bill, 2014 amends the provisions of the Constitution related to the

appointment of Supreme Court (SC) and High Court (HC) judges, and the transfer of HC judges.

Currently, the Constitution provides that the President would make such appointments after consulting

with SC and HC judges, as he considers necessary.

This has been interpreted by the SC to imply that the President will act on the recommendation of a

collegium consisting of the Chief Justice of India and four senior most SC judges.

The Bill modifies this process by creating a body called National Judicial Appointments Commission (NJAC)

that will make recommendations to the President for such appointments.

IMPORTANT PROVISIONS OF NJAC BILL

The bill is aimed at enabling the participation of the judiciary, executive and eminent persons to ensure

greater transparency, accountability and objectivity in the appointment of judges to the higher judiciary.

The NJAC will consist of the following six members:

(i) Chief Justice of India (CJI) (Chairperson)

(ii) Two senior most SC Judges

(iii) UnionMinisterofLawandJustice

(iv) Two eminent persons (to be nominated by the CJI, Prime Minister of India and the Leader of

Opposition in the Lok Sabha).

The NJAC Bill, 2014 provides for the procedure to be followed by the NJAC in recommending persons for

appointment as CJI, other SC judges and for the appointment and transfer of HC judges.

Of the two eminent persons, one person would be from the SC/ST/OBC/minority communities or be a

woman. The eminent persons shall be nominated for a period of three years and shall not be eligible for re-

nomination.

The NJAC will recommend the senior-most judge of the Supreme Court for appointment as the Chief Justice

of India

For appointing Supreme Court judges, the NJAC will recommend names of persons on the basis of their

ability, merit and other criteria.

The commission is vested with veto power not to recommend a person for appointment if any two members

do not agree for such recommendation both for the Supreme Court and High Courts.

If for some reason, the President requests the commission to reconsider certain recommendations and the

recommendation is reiterated, the President is bound to make the appointment.

VETO POWER A CONCERN

There is apparent parity between judicial nominees (the Chief Justice of India and two senior-most Judges)

and executive representatives (the Law Minister and two eminent persons chosen by a panel comprising the

CJI, the Prime Minister and the Leader of the Opposition) in the six-member NJAC.

However, any two members can veto any decision. While the veto could act as a restraint on a decision being

pushed through by one bloc, it could be seen as undermining the judicial members' opinion. Also, the CJI can

be outvoted by the political class when it comes to choosing the eminent persons.


IMPORTANT MATTERS LEFT FOR REGULATIONS

Several significant aspects the criteria of suitability of judges, the conditions for selection, and procedures

on consultation with other judges and eminent advocates, and the manner of eliciting the views of the

Governor and Chief Minister have been left to regulations to be framed by the Commission.

Giving the power to amend these regulations to a panel that will itself keep changing from time to time

instead of being cast in law may undermine judicial independence, as the norms could be tweaked for

reasons of expediency.

PETITION FILED AGAINST NJC BILL

The Supreme Court Advocates on Record Association moved the apex court challenging the constitutional

amendment and National Judicial Appointments Commission Bills.

The petitioner sought a declaration that the Bills were unconstitutional, null and void, and a direction that the

present collegium system should continue with the appointment of judges.

The petition said the National Judicial Appointments Commission Bill was introduced even prior to the

Constitution 121 Amendment Bill to give constitutional status to the proposed National Judicial

Appointments Commission. The Bill was passed in both Houses of Parliament by voice vote even as the

provisions of Article 124(2), as originally enacted, were in force

The petition contended that since Article 124(2) remained intact, there could be no introduction or passing by

Parliament of the legislative Bill, known as the NJAC Bill. It said a constitutional amendment which was invalid

for violation of the basic structure of the Constitution could not be forwarded to the State governments for

ratification.

WHAT IS ARTICLE 124(2)?

Article 124(2) along with Article 217(1) of the Constitution made provisions for the appointment of judges of

the Supreme Court including the Chief Justice of India and for appointment of judges of the High Courts

including the Chief Justices of the High Courts.

The new laws have their deficiencies, but they are a product of sustained discussion across all political

lines, and are examples of a non-partisan process of law making.

Quite contrary to the fears propagated by its critics, the National Judicial Appointments Commission Bill will

replace a failed system with a process that maintains, at the least, an element of fidelity to the Constitutions

ideals.

SEVERAL IMPORTANT BILL LAPSE IN PARLIAMENT

After being passed in the Rajya Sabha in 2010, the Womens Reservation Bill, which provides for 33 per cent

reservation for women in Parliament and Legislative Assemblies, was sent to the Lok Sabha for approval, but

did not see the light of the day for lack of political consensus and will.

Under Article 107 (5) of the Constitution, it is amongst the 68 government Bills that have lapsed on the

dissolution of the 15th Lok Sabha.

If the new government wants to give reservation to women, it will have to come up with a fresh legislation

just as it did in the case of the judicial appointments Bill.

Besides the Womens Bill, the crucial Bills that have lapsed include the Constitutional 117th Amendment Bill

providing Scheduled Castes and Scheduled Tribes reservation in government job promotions; the Judicial

Standards and Accountability Bill, 2012; the Direct Taxes Code Bill, 2010; and the Rights of Citizens for Time-

Bound Delivery of Goods and Services and Redress of their Grievances Bill, 2011.

CONSTITUTIONAL PROVISION

Article 107(5) of the Constitution states: A Bill which is pending in the House of People or which having being

passed by the House of the People is pending in the Council of States shall, subject to provisions of Article 108

(joint sitting of both the Houses), lapse on a dissolution of the House of People.


THE JUVENILE JUSTICE (CARE AND PROTECTION OF CHILDREN) BILL, 2014

The Juvenile Justice (Care and Protection of Children) Bill, 2014 was introduced in the Lok Sabha. It replaces

the Juvenile Justice (Care and Protection of Children) Act, 2000.

The bill proposes changes to the Juvenile Justice Act of 2000, according to which children over 16 years of

age, who are charged with committing heinous crimes, can be tried as adults in a regular criminal court.

The Juvenile Justice Bill, 2014 requires the Juvenile Justice Board to determine whether the child should be

tried in a regular criminal court if he/ she is over the age of 16, and is alleged to have committed one of the

heinous offences listed in the section.

VIEWS AGAINST THIS MOVE

This process is in itself problematic, as the Board will be making a determination on facts and culpability, at

the initial stage.

The minister of Women and Child Development had said a little earlier that according to the police, 50 per

cent of all sexual crimes were committed by 16-year-olds who know the Juvenile Justice Act so they can do

it. But now for premeditated murder, rape, if we bring them into the purview of the adult world, then it will

scare them.

The Minister is wrong. In 2013, juveniles were charged with 3.4 per cent of all the rapes committed in India,

National Crime Records Bureau (NCRB) data show

The Hindu s recent study of rape cases in Delhis district courts showed that the largest category of cases (40

per cent of all cases that were fully tried) dealt with elopement and consensual sex between young couples,

and the girls parents filing rape charges against the boy. In most of these cases, the boy was between 18 and

20 years of age and the girl between 16 and 18 years.

Filing kidnapping cases where couples elope or are in relationships is not a new phenomenon

This use of kidnapping to regulate sexual autonomy and choice of young adults is a common practice and

continues till date.

Parents who disapprove of their young daughters eloping with their partners file kidnapping cases since the

age of majority in the kidnapping section in the IPC is 18 (for women).

In 2013, Parliament took the retrograde step of increasing the age at which a woman could consent to sexual

acts from 16 to 18.

With the age at which a woman can consent to sexual relationships being raised, a rape charge can now be

added to the kidnapping charge. This only provided an additional tool to parents and society to not only

indulge in moral policing and curtailing choice, but also to use the criminal law to prevent inter-caste, inter-

class, and inter-religious relationships.

What happens if a 17-year-old boy indulges in a consensual sexual act with a 15-and-a-half-year-old girl?

Under the proposed new JJ Act, if the Board determines that he should be tried as an adult, he will be tried by

a sessions court, which has no option but to sentence him to a minimum of ten years in prison.

Rape is a violation of a womans sexual autonomy. Increasing the age of consent and decreasing the age of

juvenility does not enhance sexual autonomy but restricts it, since it negates the agency of the woman to

choose a partner, by instead facilitating filing of criminal cases against her partner. In cases of non-consensual

sexual acts, the need of the hour was to strengthen the existing juvenile justice system in order to ensure that

the goal of reformation was effectively achieved.


ECONOMY

POLICY GUIDELINES BY RBI

RBI RELEASES CHARTER OF CONSUMER RIGHTS

The RBI has released a draft charter of consumer rights for public comments. The five consumer rights will be

applicable to entities regulated by the RBI (such as banks, non-banking financial entities, etc) and are as follows:

Right to fair treatment: There can be no discrimination on the grounds of age, sex, physical disability,

etc. If certain special products discriminate between consumers, the reasons for the same must be given

by financial service provider when asked for.

Right to transparency, fair and honest dealings: The financial service provider must provide information

related to contracts in an easy to understand language. Disclosure of the products price and associated

risks should be made.

Right to suitability: Products offered should be appropriate to the needs of the customers.

Right to privacy: The customers personal information should be kept confidential, unless they have

offered specific consent to the financial service provider or such information is required by law.

Right to grievance redressal and compensation: The customer has a right to hold the financial services

provider accountable for the products offered and to have a clear and easy way for grievance redressal.

RBI GOVERNOR GOVERNMENT SHOULD FOCUS ON INCREASING REVENUE

COLLECTION

India has the capacity to bring its fiscal deficit under control, says RBI Governor Raghuram Rajan.

Reserve Bank of India (RBI) Governor Raghuram Rajan, said while the government might achieve the

target of restricting fiscal deficit to 4.1 per cent of gross domestic product (GDP), more important would

be the manner in which it would do so.

In an interview to a television channel, Dr. Rajan favoured an approach that focussed on increasing

revenue collection.

Describing the 4.1 per cent fiscal deficit goal, the difference between the governments income and

expenditure, for the current fiscal set by the government as an ambitious target, Dr. Rajan said, the

government will achieve it if it wants to do so. It has done before. But how it achieves it is what is

important.

India has the capacity to bring its fiscal deficit under control because we dont spend too much as

fraction of GDP. Where we do a less good job is collecting revenues. So, broadbasing revenue

collection process and expanding the base is the way we can do it, he said in the interview.

The RBI Governor saw better prospects for growth in the coming days, a factor that should encourage

the government to move towards the target. During 2013-14, fiscal deficit was 4.5 per cent of GDP.

Our sense of 5.5 per cent [GDP growth] is feasible. If it goes beyond that, the government gets some

headroom on the fiscal front, he added.

Current Scenario- Indias Index of Industrial Production touched a 19-month high of 4.7 per cent in May

due to a better showing by the mining, power and capital goods sectors. In addition, retail inflation fell

to a 30-month low of 7.31 per cent in June as prices of food items, including vegetables came down.

RBI TO CUT DOWN PRE-EMPTIONS TO SPUR EFFICIENCY

A day after he lowered SLR, the mandatory government bond holding requirements for banks, Reserve Bank

Governor Raghuram Rajan said RBI is all for reducing pre-emptions over a longer horizon for more efficiency in

the financial system.


The broader, longer term programme of five years, is that we should reduce the amount of pre-

emptions we have in the system including SLR and make a more effective priority sector lending (PSL)

process, Mr. Rajan said during the customary post-policy call with analysts.

Further, he drew attention towards the Nachiket Mor committee on PSL and said that the RBI is trying to

make the entire process more effective.

These are necessary changes in the system and should not be seen as tied to the monetary cycles, he

added.

Current Issue with Pre-emptions

Various stakeholders in the system, including the banks, have been expressing reservations about the

pre-emptions like the SLR and CRR. In the present scenario, banks have to set invest 22 per cent of their

deposits in government securities and 4 per cent gets parked as cash reserve ratio without any interest

payment.

Banks carry out lending on whatever remains, and 40 per cent of the lending as well is mandated to be

done to weaker sections of the society under the PSL.

Mr. Rajan conceded that on 5th of August, the 0.50 per cent cut in Statutory Liquidity Ratio is not going to have

any real impact in the immediate future and added that banks will continue carrying excess SLR for the

foreseeable future.

Impact of reduction in SLR - The cut in the SLR holding requirement, which has the potential to release an

additional Rs 40,000 crore into the system, offers banks the flexibility to manage their finances better when the

credit demand will go up, he said.

OTHER ISSUES

G-Sec market

About the limit for foreign institutional investors investments in government securities, Mr. Rajan said

the RBI is happy with their renewed interest and also acknowledged their preference for longer maturity

debt of over three years.

The situation is not such at present wherein foreign investors have come close to breaching the limits on

G-Sec investments and as and when the limits are closer to be exhausted, the RBI may look at relaxing

them, Mr. Rajan said.

Mr. Rajan added that with the maturity in the Indian markets, many domestic institutions beyond banks

like domestic institutional investors, pension funds and insurance companies will look at deploying their

money in this market.

He also stressed upon the need for getting more participation from the retail investors in the G-Sec

market.

Monetary Policy

On the stance of the monetary policy in the days ahead, Mr. Rajan said the primary objective of the RBI

is to ensure that the economy disinflates as per a glided path announced earlier under which it wants to

reduce the headline retail inflation to 8 per cent by January 2015 and narrow it further to 6 per cent by

January 2016.

Stating that at present the RBI considers the economy on course of its expectations, Mr. Rajan said the

RBI will cut rates if the inflation is faster than expected to boost growth, but will not be averse to hiking

rates should the price-rise fasten.

At present, the outlook on inflation hinges on the movement of the monsoon with regard to the impact

on the commodity prices and also on supply side measures undertaken by the government, he said.


The economy has disinflated considerably but it is too early to consider victory as RBI has not been

able to get a good hold over peoples inflationary expectations, he said.

In the surveys, peoples responses also talk of hyper-inflation, he said, clarifying that the policy will be

driven more by actual inflation on the ground rather than the expectations pronounced in the surveys.

When asked about a possible rate hike by the US Fed and the RBIs response in such a situation, Mr.

Rajan said that RBIs action on the rates will be determined by domestic conditions and not by any

interest rate differentials between the developed world and the country.

Mr. Rajan also stressed that we are in the positive real interest rate territory, and we are at par with the

developed world on this.

RESERVE BANK PROPOSES ANYTIME ANYWHERE BILL PAYMENT SYSTEM

The Reserve Bank of India (RBI), issued draft guidelines for the implementation of Bharat Bill Payment

System (BPPS).

The draft guidelines outline the requirement and the basic tenets of operating the BBPS, and prescribe

the eligibility criteria, standards for settlement model and customer grievance redressal, roles and

responsibilities and scope for entities seeking to be part of BBPS.

The RBI has invited comments from stakeholders by September 5.

Objective - The objective of the BBPS is to implement an integrated bill payment system across the

country and offer interoperable and accessible bill payment service to customers through a network of

agents, enabling multiple payment modes and providing instant confirmation of payment. Hence, it has

been decided that the existing players in the online commerce segment catering to the requirements of

bill payments as well as aggregation of payment services (in relation to bill payments) will be a part of

BBPS.

The BBPS will function as a tiered structure for operating the bill payment system in the country with a

single brand image providing convenience of anytime anywhere bill payment to customers.

The centralised bill payments infrastructure will consist of two types of entities carrying out distinct

functions an entity operating the BBPS which will be the standard setting body and will cover standards

related to payment, clearing and settlement process and Bharat Bill Payment Operating Units (BBPOUs),

which will be the authorised operational units, working in adherence to the standards set by the BBPS.

The tiered structure could be further strengthened through an effective establishment of agent network

by the BBPOUs, RBI said.

The RBI said that the bill payment is a major component of the retail payment transactions and over

30,800 million bills amounting to more than Rs.6 lakh crore are generated each year in the top 20 cities

in the country.

Though various forms of payments are accepted, cash and cheque payments continue to be

predominant, particularly at the Billers Own Collection Point, the RBI said.

While the existing systems are safe and robust, they do not fully address the needs of the consumers to

pay a variety of bills, including utility bills, school/university fee, municipal taxes and the like due to lack

of interoperability in the bill payment processes as well as lack of access to various modes of electronic

payments by a vast majority of customers, the central bank said.

SEBI - SECURITIES LAWS (AMENDMENT) ACT, 2014 NOTIFIED

The Securities Laws (Amendment) Act, 2014 was notified by the government on August 25, 2014. The

Act amends the Securities and Exchange Board of India Act, 1992 (the SEBI Act) and makes consequential

amendments to the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996.

Why there is a need ?

The passage of the Securities Laws (Amendment) Bill by Parliament is an important step in empowering

the Securities and Exchange Board of India to deal with financial shenanigans.


The regulatory body had not been fully equipped to deal with ingenious schemes masquerading as

collective investment schemes.

Many of these promised unrealistically high returns to lure gullible depositors, a notable example being

what the Saradha group in West Bengal indulged in.

They could sustain their business model as long as new depositors, lured by advertisement campaigns

boosted by outsized commissions to the sales force and aided by political connections, came trooping in

to repay exiting depositors.

Others like the Sahara group offered utmost convenience ostensibly collecting pygmy-size deposits

right at investors doorsteps even in remote parts of the country.

The key amendments

Collective Investment Schemes (CIS): The definition of CIS has been expanded to include all pooling of

funds of Rs 100 crore or above, that are not regulated by any law.

Search and seizure: The SEBI Act allowed the Securities and Exchange Board of India (SEBI) to conduct

search and seizure operations on a suspected violators premises after obtaining permission from a First

Class Judicial Magistrate. The Act amends this provision, requiring SEBI to obtain permission from the

Magistrate or Judge of a court in Mumbai (as designated by the government).

Consent settlement and disgorgement: The Act explicitly permits SEBI to: (i) enter into a consent

settlement with a person against whom proceedings have been initiated, and (ii) order disgorgement of

unfair gains made by a market participant.

Attachment of property: The Act permits SEBI to attach bank accounts and property, and arrest and

detain a person for his failure to comply with disgorgement orders or pay any monetary penalty.

Special courts: The Act provides for the establishment of special courts to try offences under the SEBI

Act

Analysis

While there have been other similar acts of malfeasance, the important message from the new

legislation is that the market regulator can deal proactively with them before they assume menacing

proportions.

SEBI now gets explicit powers to disgorge illegal gains made through fraudulent deposit schemes and

capital market offences. Those who lose money can be recompensed from the sale of recovered assets

of a delinquent company.

The money collected will be parked in SEBIs Investor Protection and Education Fund. SEBI can, with a

magistrates permission, conduct search and seizure operations and initiate recovery proceedings.

The new legislation was overdue: the UPA government had promulgated an ordinance in July 2013 and

then presented a draft bill, which lapsed.

Attention will now be focussed on SEBI, especially on whether it can act decisively against frauds that

have thrived amid a regulatory vacuum.

In its quarter century of existence, SEBI has had to deal with many sharp practices in the financial

system. Its very creation and periodic strengthening have been in response to one crisis or the other.

While the new law will deal with extreme cases of malfeasance, SEBIs overall regulatory framework

needs to be strengthened.


GOVERNMENTAL POLICIES AND SCHEMES

PRADHAN MANTRI JAN DHAN YOJANA (PMJDY)

Background

The Pradhan Mantri Jan-Dhan Yojana, a major socio-economic initiative of the National Democratic

Alliance government, was announced by the Prime Minister in his Independence Day speech.

It is an ambitious attempt at extending formal financial services in a country where only 58.7 per cent of

an estimated 24.67 crore households avail themselves of banking services.

Despite several steps taken by many governments over the years, financial inclusion has remained

elusive.

In rural areas 44 per cent of the households and in urban areas 33 per cent of them still do not have a

bank account.

Unlike in previous action plans, the Jan-Dhan Yojana will have as its focus households rather than

geographical areas.

Key features of PMJDY are:

Access: The programme aims to provide each household with banking facility either through a bank

branch or a fixed point business correspondent within a reasonable distance. The programme aims to

provide every household with at least one bank account within one year of its launch; it is expected to

cover 7.5 crore households.

Facilities: Every account holder will be provided a debit card with Rs one lakh accident cover. An

overdraft facility up to Rs 5,000 will also be permitted to Aadhaar enabled accounts after six months of

satisfactory operation of accounts.

Benefits transfer: PMJDY proposes to channel all central, state and local government benefits to the

beneficiaries through these bank accounts.

Timeline: The first phase of PMJDY will focus on providing all households with banking facilities and will

be concluded by August 2015. The second phase (to be concluded by August 2018) will focus on:

o provision of accident cover,

o offering pension schemes for unorganised sector workers (like the Swavalamban scheme), and

o creation of a Credit Guarantee Fund for defaults in accounts availing the overdraft facility.

Analysis

An important innovation is in extending need-based credit facilities to the new account holders upon

their fulfilling certain conditions.

A smart card the RuPay card will be issued. Using this it should be possible for customers to

operate their accounts without any external help.

This would be one of the most visible manifestations of technology as a tool to further inclusion, others

being money transfers through mobile telephones, e-KYCs and cash management by banks to extend

their services over such wide areas.

Insurance companies will be asked to offer micro-finance packages including insurance.

Challenges

Even if operational obstacles can be overcome, there is the important question of keeping the first-time

bank account holders engaged.

Experience suggests that a high proportion of such accounts are hardly used after the initial enthusiasm

wears off.


The plan of inclusion, which is part of the Prime Ministers vision of a Digital India, requires all-round

support. The government wants to use these accounts for routing cash transfers in lieu of subsidies for

essential commodities.

Financial inclusion in that sense is therefore much more than extending banking services.

Accompanied by an equally ambitious programme of spreading financial literacy, it can achieve many

important socio-economic objectives.

Plan for implementation

In its first phase, the Jan-Dhan Yojana will provide universal access to all the beneficiaries through sub-

service areas (SSA), each of them consisting of 100-150 families in a cluster of villages.

Each SSA will be serviced by a business correspondent, who is now being given a pivotal role in facilitating

account opening and ensuring smooth bank operations.

Unlike in previous action plans, the Jan-Dhan Yojana will have as its focus households rather than

geographical areas.

A smart card the RuPay card will be issued. Using this it should be possible for customers to operate

their accounts without any external help. This would be one of the most visible manifestations of

technology as a tool to further inclusion, others being money transfers through mobile telephones, e-KYCs

and cash management by banks to extend their services over such wide areas.

Insurance companies will be asked to offer micro-finance packages including insurance.

Aadhar Not mandatory

Aadhaar is not mandatory for opening the account under this scheme.

A technical platform has been built by National Payment Corporation of India to connect all banks and

telephone network operators in the country. The platform is being built to enable customers to access their

accounts on any mobile handset.

MEASURE TO IMPROVE EASE OF DOING BUSINESS

The eBiz project being implemented will create an investor centric hub-and-spoke based online single

window model for providing clearances and filing compliances, says DIPP.

The government, said it had taken a series of steps to improve ease of doing business that included

o having a timeline for clearance of applications,

o de-licensing the manufacturing of many defence products and

o Introduction of e-Biz project for single window clearance.

The emphasis has been on simplification and rationalisation of the existing rules and introduction of

information technology to make governance more efficient, effective, simple and user-friendly, the

Department of Industrial Policy and Promotion said.

This project will result in radical improvements in ease of doing business by reducing time, efforts and

costs taken in obtaining clearances and ensuring compliances. Integration with Central government

services is being done on highest priority, the DIPP said.

In order to improve the regulatory business environment, all departments and State governments have

been requested to take measures on a priority basis such as mandatory filing of all returns on-line

through a unified form;

no inspection should be undertaken without the approval of the Head of the Department and for all

non-risk, non-hazardous businesses a system of self-certification should be introduced.

Online registration

Besides, it has introduced online registration of employers with Employees Provident Fund Organisation

(EPFO) and the Employees State Insurance Corporation (ESIC). The government has also done away with

the requirement of affidavit from the applicants of the defence industry.


Further, a maximum timeline of 12 weeks has been finalised by the Ministry of Home Affairs for grant of

security clearance on industrial licence applications.

Now partial commencement of production will be treated as commencement of production of all the

items included in the licence, a move which will facilitate the entrepreneurs from hardship of repeatedly

coming to the administrative ministries for extension of validity of industrial licence.

The DIPP said the guidelines had been issued to streamline the processing of applications for grant of

extension of validity of industrial licence.

Defence products list for industrial licensing has been issued, wherein large number of

parts/components, castings/forgings and the like have been excluded from the purview of industrial

licensing, it added.

COME MAKE IN INDIA AN ANALYSIS

Prime Minister Narendra Modi, in his maiden Independence Day speech, articulated his vision of several

social and economic policy objectives of his government

The Prime Minister must be commended for stating so clearly that domestic manufacturing will be the

core and central tenet of his foreign investment policy as that puts job creation or employment

generation at the top of the objectives in inviting foreign investment to the country.

Global manufacturing hub

This welcome emphasis in our foreign investment policy on efficient and competitive domestic manufacturing

will serve multiple objectives.

First and foremost, it will enhance job opportunities within the country;

Second, it will minimisze the imports of such products into the country, thereby mitigating the pressure

on our trade deficit;

Third, in the long run, if not in the near-term, it will help augment and diversify our exports from the

manufacturing sector;

Fourth, it will help in bringing latest technologies into the country and

Lastly, such domestic manufacturing will help minimize some of the trade frictions we have with other

countries.

The importance of domestic manufacturing with foreign investment in reducing trade frictions with

other countries is at present ignored or underestimated. As a corollary, the focus on world-class

domestic manufacturing may also be the best way to cope with globalisation and to maximise the

possible benefits from it.

The size of our domestic market and the abundant availability of skilled and technical manpower at low

cost is a leverage that we need to put to use consciously to induce foreign investors to make India as a

manufacturing hub in their operations.

If there is one lesson we can learn from the Chinese, it is how the size of the domestic market and the

availability of skilled and disciplined manpower could be put to effective use for the industrial and

technological development of the country with foreign investment.

Action required for translation policy into practice

It is, however, in the translation of the policy into practice that co-ordinated action is needed on several

fronts.

First, it is of paramount importance that the foreign investment, foreign trade and intellectual property

rights (IPR) policies are viewed in a holistic manner to ensure that they mutually reinforce each other in

achieving the policy objective of world-class domestic manufacturing.

Second, with respect to the broad contours of the foreign investment policy, it needs to be remembered

that investment opportunities, as reflected by our large domestic market and low-cost skilled and


unskilled manpower, may be a necessary, but not a sufficient condition, to induce foreign investors to

come to India with their capital and technology.

The congeniality of the investment climate or environment, as reflected in the stability of the policies

and the rules as well as the conditions attached to the approval of the investments, is even more

important to assure foreign investors of fair and non-discriminatory treatment.

The focus of our foreign investment policy should be on the positive aspects of what is produced in India,

with what kind of technology and skills, how efficiently and competitively it is produced, and whether it

is of world-class standards, and not on negative aspects such as ownership and control, enterprise-

specific performance requirements, or other conditions that interfere with the internal commercial

decisions of the enterprises.

Competitive environment

The best way to ensure that foreign investment is of a high quality and yields value to the country is to

have a policy framework that requires it to operate in an unprotected, open and competitive

environment, and not behind high tariff walls or import restrictions, nor with the aid of subsidies or

other giveaways.

Third, with respect to the contours of the foreign trade policy, it is by and large confined now to dealing

with exports and imports compartmentally encouragement of exports with various kinds of subsidies

and prop-ups, and curtailment of imports by high tariffs and other so-called trade remedy measures like

anti-dumping or countervailing duties or other import restrictions.

Encouragement of domestic manufacturing of world-class standards, either by domestic or foreign

investors or both, has not been a major objective of our foreign trade policy so far.

Our foreign trade policy must recognise that encouragement of domestic manufacturing of world-class

standards, catering solely even to our own market, is a preferable alternative to protection and

subsidisation through high tariffs, trade remedy measures and financial giveaways.

Rather, the policy must encourage freer imports of capital goods, industrial raw materials, components,

tools and devices, as well as technology-laden imports, with a view to upgrading the quality and

competitiveness of our domestic manufacturing.

Fourth, the importance of the protection of intellectual property rights (IPRs) in the scheme of attracting

foreign investment and establishing high quality domestic manufacturing must not be overlooked.

Ensure IP protection

IPRs do not consist only of pharmaceutical patents as is commonly understood in our country: they

include as well copyright (computer software in our country is protected by copyright), trademarks,

trade secrets, geographical indications, designs, trade secrets, business confidential information and

data, and the like.

Even if our IPR policies do not have domestic manufacturing as a central objective, they need to be

implemented in such a way that they do not impede or deter technology-oriented domestic investments

from foreign investors. The protection of patents, trademarks, trade secrets, layout designs and the like

is crucial to these and other sectors where we want foreign investment of high quality with modern

technologies.

Our intellectual property laws are largely in conformity with international standards as reflected in the

TRIPS Agreement of the WTO and other international conventions to which we have subscribed. Yet we

tend to create an impression around the world that we do

august 2014

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