budget session of parliament - a recap

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BUDGET SESSION OF PARLIAMENT – A RECAP JULY 7 TO AUGUST 14, 2014

At the close of the Budget Session of

Parliament, the first since the

Narendra Modi-led National

Democratic Alliance (NDA)

government came into power in

May 2014, India’s changed political

reality has made itself distinctly

visible. According to the Parliamentary Affairs Ministry, the session, which saw 20 Bills introduced and 12 Bills passed

by both Houses, was more productive than previous post-election Budget sessions. Aside from the General Budget

and Railways Budget, the month-long session also saw passage of the National Judicial Appointments Commission

Bill, the Securities Exchange Board of India (SEBI) Bill and the Telecom Regulatory Authority of India (TRAI) Bill, among

others. Further, the Parliament cleared the Budget for Delhi, which is currently under President’s rule.

LEGISLATIVE AGENDA

FINANCE BILLS*

The Finance Bills, pertaining to the General and the Railways Budget, were passed by both Houses of Parliament.

The Railways Budget, announced by DV Sadananda Gowda, Railways Minister, included proposals to increase Foreign

Direct Investment (FDI) cap to 100 percent and encourage Public Private Partnerships (PPPs) to generate funds and

thus strengthen the rail network. The minister has assured the Parliament that the railways

will focus on timely project completion, mobilization of funds, safety and passenger

amenities. Furthermore, the Union Budget announced by Arun Jaitley, Finance Minister, is

aimed at creating jobs, generating economic activity and achieving growth. The measures

on taxation are expected to improve investor sentiment, by implementing the Goods and

Services Tax and refraining from indiscriminate levy of taxes with retrospective effect.

* Please ask for our Fiscal Budget Reports if you wish for more details

THE NATIONAL JUDICIAL APPOINTMENTS COMMISSION BILL

The legislation scraps the collegium system of appointing Supreme Court and High Court judges and proposes a

“National Judicial Appointments Commission (NJAC)” in its place. This 6-member commission, to be headed by the

Chief Justice of India, will include the Law Minister, two senior Supreme Court judges and two eminent people. The

latter will be selected by a collegium comprising the Prime Minister, the Chief Justice of India and the leader of the

single largest party in the Lok Sabha, with one of them nominated from among the Scheduled Castes, Scheduled

Tribes, Other Backward Classes (OBCs), minorities or women. The need for this legislation stemmed from alleged

flaws in the collegium system, which marred the appointment process by personal preferences and rivalries. This

was brought to the forefront by Justice Markandey Katju, current Chairperson of the Press Council of India, who

highlighted the elevation of Justice S. Ashok Kumar, alleging that the judge indulged in corrupt practices while serving

the Madras High Court under pressure from Dravida Munnettra Kazhagam (DMK), an alliance partner of the previous

United Progressive Alliance (UPA) government.

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THE INSURANCE LAWS (AMENDMENT) BILL

The Bill seeking to raise the FDI cap in insurance from 26 percent to 49 percent, alongside other reforms to

boost the sector at large, has been delayed yet again and referred to a Select Committee of the Rajya Sabha. The Bill

had been first introduced in the Upper House in 2008, by the then ruling UPA government. However, a parliamentary

committee led by BJP leader Yashwant Sinha had stalled the Bill. In an interesting turn of events, Arun Jaitley, Finance

Minister, brought up the reform in his Union Budget speech on July 7, and

it was eventually listed as part of business for the House. However, nine

parties from the opposition, led by the Congress, protested against the Bill

on account of the amendments proposed by the BJP, especially the

“composite cap” for foreign investment which accommodated both FDI and

foreign portfolio investors (FPI). Eventually, the Bill was sent for review by

a Select Committee of Parliament, after the government failed to drive

consensus in the Rajya Sabha (Upper House), where the NDA does not have

a comfortable majority. The committee, headed by BJP’s Chandan Mitra, is

expected to submit its report by the last day of the first week of the Winter

Session. The Congress has promised support in passage of the Bill once it

has been approved by the committee. The government, in line with reforms-friendly face and promised focus on

improved healthcare, is expected to pursue this long-pending reform, despite the setback it has received in the

current session.

THE SECURITIES LAWS (AMENDMENT) BILL

The Bill empowers the Securities and Exchange Board of India (SEBI), market regulator, to curb ponzi schemes.

Among the key components of the Bill, SEBI can now call for relevant information from any person and also carry

out search-and-seizure operations related to investigations under a designated court in Mumbai. Further, the Bill

provides for powers to establish Special Courts to ensure speedy trial, seek call-data records, and enhance the

penalty imposed by an adjudicating officer.

The passage of the Bill comes a year after the first ordinance was promulgated by the previous government in July

2013. The ordinance was promulgated for the second time in September 2013, followed by a third ordinance in

January 2014. The need for the ordinance stemmed from small investors being duped by fraudulent investment

schemes across India, such as the Saradha scam and other such cases in West Bengal.

THE TELECOM REGULATORY AUTHORITY OF INDIA BILL

The Bill aims to cement the appointment of former TRAI chairperson Nripendra Misra as principal secretary to Prime

Minister Narendra Modi by amending rules of appointment of former TRAI chairpersons. The measure amended the

existing law that provided that a former TRAI chairman could take up a private job two years after retirement but

not a government job. The principal secretary to the PM acts as the main link for coordination among Prime

Minister's Office, cabinet secretariat and secretaries of ministries.

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THE APPRENTICES (AMENDMENT) BILL

The Bill seeks to augment skilled manpower in the country by allowing flexibility to hire apprentices and

improving monetary compensation. The Bill provides for apprenticeship training to non-engineering graduates and

diploma holders. The provisions includes new trades, including IT-enabled services, in the scheme of apprenticeship.

Further, the Union government and employers will also be empowered to make rules with regard to qualification.

Though the Bill initially met with protests from the opposition and labour unions, with the demand being to send it

to a standing committee for further discussion, the government managed to override the objections and it has been

passed by the Lok Sabha.

THE ANDHRA PRADESH REORGANISATION (AMENDMENT) BILL

The Bill seeks the merger of 236 revenue villages of Khammam district in Telangana with

Andhra Pradesh, in order to facilitate the Polavaram multi-purpose irrigation project.

Recently, Telangana Chief Minister K Chandrasekhar Rao opposed this on the grounds of

special responsibility being assigned to the Governor. However, he was criticised by Andhra

Pradesh ministers who said that their government was ready to negotiate contentious issues

with his government and find an amicable resolution in the larger interests of Telugu people.

THE NATIONAL INSTITUTE OF DESIGN (NID) BILL

The Bill seeks to declare NID as an institution of national importance.

The institute, which has a branch in Gandhinagar and also a satellite

centre in Bangalore, will now be an “institute of national importance”

and award degree to its students. This Bill has opened opportunities for

students who want to study for their Master's degree or Doctorate at

other institutes across the world. The legislation was introduced in Rajya

Sabha in March 2013 by the then Commerce Minister Anand Sharma

and referred to a Parliamentary Panel. The passage of the Bill will help

NID act as a nucleus for interaction between academia and industry by

encouraging exchange of designers and technical staff, sponsored

research and consultancy projects.

OTHER BILLS INTRODUCED IN LOK SABHA

A number of other important Bills were introduced in the Lok Sabha but could not be passed in this session. Among

these was “The Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Amendment Bill, 2014”, which

adds new categories of actions to be treated as offences against SCs and STs, and establishes exclusive special courts

to try offences under the Act. Taking its labour reform agenda further, the government also introduced “The

Factories (Amendment) Bill, 2014”, which amends the definition of a factory and strengthens safety provisions for

workers. Further, keeping in mind the increasing instances of crime in the country by juveniles, especially the

“Nirbhaya” rape case in Delhi, the “Juvenile Justice (Care and Protection of Children) Bill, 2014” was introduced,

reducing the age of juvenile from 18 to 16 years for committing crimes under certain categories of heinous offences.

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KEY ISSUES THAT HAD A BEARING ON THE SESSION

STATE LEGISLATIVE ASSEMBLY ELECTIONS

State Assembly elections are due in Haryana and Maharashtra later this year. The Election Commission of India has

also announced by-elections in politically crucial Uttar Pradesh, aside from Gujarat, Rajasthan and West Bengal.

Most of the assembly seats going to by-elections were vacated because the sitting legislators won the recently

concluded general elections. Further, the Supreme Court has asked the centre to take a decision on the holding of

Delhi Assembly elections as the capital has been under governor's rule since its former Chief Minister Arvind Kejriwal

resigned from his post. The Aam Aadmi Party (AAP) has alleged that BJP is indulging in unethical practices and trying

to lure lawmakers to form a government in Delhi. The government needs to reinforce its alliances, step up on its

reforms agenda and gauge public sentiment to ensure a favourable response in the elections.

INSTANCES OF COMMUNAL VIOLENCE IN INDIA

In the light of recent incidents of violence in Saharanpur and Muzaffarnagar in Uttar Pradesh, the issue of communal

violence was discussed in Parliament. There was an outburst from Rahul Gandhi, Congress Vice President, who

protested that the Parliament was completely one-sided – an allegation implicating the Lok Sabha Speaker. Rahul

Gandhi further said that the BJP deliberately engineered communal tension. In response, the BJP claimed that it is

in fact the Congress that is behind the communal riots, unable to desist from vote-bank politics after the major

defeat in the recent Lok Sabha elections.

GLOBAL TENSIONS

Ripples from the prolonged Gaza conflict, with more than 500 Palestinians killed and over 3,000 injured in Israeli

military attacks on suspected hideouts of the militant group Hamas, also reached the Indian Parliament. The violence

in Gaza was debated upon, with the opposition claiming that the government had been silent on the issue. Sushma

Swaraj, External Affairs Minister, dismissed the protests saying that India had reacted to the Gaza bloodshed at the

BRICS summit in Brazil. She further said that the emphasis of the House should be to condemn incidents of violence

across the world and to support the Egyptian-initiated ceasefire.

INDIA’S STAND AT WTO*

In July, talks with the World Trade Organization in Geneva failed on account of India’s

insistence that the Trade Facilitation Agreement (TFA) be taken up along with efforts

to find a permanent solution to public stock-holding for food security. International

media has criticised India's stand at the WTO saying it would jeopardise the Bali

agreement and hamper WTO’s credibility. This issue was taken up in Parliament with

the Congress creating uproar in Rajya Sabha and targeting Prime Minister Narendra

Modi over his remarks that the previous UPA government sacrificed the interests of

the poor at WTO.

*Please ask for our opinion piece “The WTO Imbroglio - Can the Trade Facilitation Impasse be Resolved”

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POTENTIAL OUTCOMES

Since the Narendra Modi-led BJP government came into power, the Indian economy has seen the appearance of

green-shoots across the board, representing a turnaround in the economy. There has been an improvement in

several economic indicators such as the Index of Industrial Production (IIP), which stood at 5.4 percent in June, up

from the 4.7 percent in May. The inflow of FDI has also increased, standing at $3.6 billion in May 2014 - the highest

in 8 months. The recent economic reforms of opening up railways and defence, combined with the Prime Minister’s

reiteration of manufacturing-push in his Independence Day speech, are expected to further fuel growth.

However, the Indian rupee has depreciated by 4.23 percent and has been the worst performing Asian currency in

the last three months. This is primarily attributed to the high trade deficit, high current account deficit and a

turbulent global environment. Standard & Poor, global rating agency, currently rates India as “BBB-“, the lowest in

the investment grade. However, S&P is known to be evaluating the new policies for a ratings review.

Looking ahead, the referral of the Insurance Bill to a Select Committee indicates the government’s consensus-based

approach. Realising that a confrontationist approach with political opponents will only slow down proposed key

legislations, the government bowed down to suggestions of the opposition, especially the Congress. Indeed, there

is a possibility of the opposition using its favourable numbers in the Rajya Sabha to delay each legislation.

Striving for a modus vivendi and working closely with the opposition will be imperative to ensure a productive Winter

Session, due in December 2014. Aside from the Select Committee’s report on the Insurance Bill, which is expected

to finally get the legislation passed, other Bills such as the Central Electricity Act Amendment, Major Port Trusts Act

Amendment, and Juvenile Justice Act are expected to be taken up in the forthcoming session.

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