Think big: on import duty hike

Merely tinkering with import duties will not narrow the current account deficit.

he Centre’s decision to increase customs duty on imports of 19 “non-essential” items amounts to tinkering at the margins to address a structural macro-economic issue. Using tariffs to curb imports of these items will not have a significant impact on narrowing the current account deficit (CAD), which is the Centre’s stated objective. By its own admission, the aggregate value of these imported items in the last fiscal year was just ₹86,000 crore. At that level, these imports constituted a little less than 3% of the country’s merchandise import bill in 2017-18. With the first six months of the current fiscal having elapsed, the impact of this tariff increase in paring the import bill and thus containing the CAD is at best going to be short-term and marginal. On the other hand, the decision to double import duties on a clutch of consumer durables to 20% could dampen consumption of these products, especially at a time when the rupee’s slide against the dollar is already likely to have made these goods costlier. Here, it would be interesting to see if the government’s move turns into a psychological ‘tipping point’ that ends up altering consumption behaviour towards this category of imported merchandise. If it does, that could have the salutary effect of fostering greater investment in the domestic production of some of these goods. The tariff on aviation turbine fuel — which will now attract 5% customs duty instead of nil — may add to the stress of domestic airline operators, the rupee and rising oil prices having already hurt their wafer-thin margins.

A more robust approach in addressing the widening CAD would be to institute wide-ranging measures to boost exports and simultaneously reduce the import-intensity of the economy. Policymakers must renew efforts to ensure that export growth starts outpacing the expansion in merchandise imports. This includes expediting the refunds on GST to exporters — smaller exporters have been badly hit by working capital shortfalls — to working to woo some of the labour-intensive supply chains that are moving out of China to countries such as Vietnam and Bangladesh. On import substitution, it is an irony that despite the abundance of coal reserves, thermal coal is one of India’s fastest-growing imports. This is a consequence of under-investment in modernising the entire coal production and utilisation chain and must be addressed expeditiously. With global crude oil prices showing no signs of reversing their upward trajectory, and the sanctions on Iran that may force India to look for other suppliers looming, the government will need to act post-haste to address structural imbalances to keep the CAD from widening close to or even exceeding the 3% of GDP level.

The Supreme Court finds a pragmatic middle path between the Aadhaar scheme’s excesses and its benefits to the marginalised

The Aadhaar project has survived a fierce legal challenge. Ever since a nine-judge Bench ruled unanimously last year that privacy is a fundamental right, opinion began to gain ground that the unique identification programme was vulnerable in the face of judicial scrutiny. It was projected by sceptics, detractors and activists as an intrusion on citizens’ privacy, a byword for a purported surveillance system, a grand project to harvest personal data for commercial exploitation by private parties and profiling by the state. But the government has staved off the challenge by successfully arguing that it is essentially a transformative scheme primarily aimed at reaching benefits and subsidies to the poor and the marginalised. Four of the five judges on a Constitution Bench ruled that the law enabling the implementation of the programme does not violate the right to privacy of citizens; instead, the project empowers marginalised sections and procures dignity for them along with services, benefits and subsidies by leveraging the power of technology.

In upholding the constitutional validity of Aadhaar and clarifying areas in which it cannot be made mandatory, the Supreme Court has restored the original intent of the programme: to plug leakages in subsidy schemes and to have better targeting of welfare benefits. Over the years, Aadhaar came to mean much more than this in the lives of ordinary people, acquiring the shape of a basic identity document that was required to access more and more services, such as birth and death certificates, SIM cards, school admissions, property registrations and vehicle purchases. A unique identity number, that could be availed on a voluntary basis and was conceived to eliminate the rampant fraud in the distribution of benefits, had threatened to morph — with the Centre’s tacit acceptance — into something that was mandatory for various aspects of life. The judgment narrows the scope of Aadhaar but provides a framework within which it can work. The majority opinion has sought to limit the import of the scheme to aspects directly related to welfare benefits, subsidies and money spent from the Consolidated Fund of India. Thus, controversial circulars and rules making it mandatory to link mobile phone numbers and bank accounts to Aadhaar numbers have been declared unconstitutional. Section 57 of the Aadhaar (Targeted Delivery Of Financial And Other Subsidies, Benefits And Services) Act, 2016, has been struck down to the extent that it authorised body corporates and individuals to use the Aadhaar number to establish someone’s identity. Schools have been barred from making the submission of the Aadhaar number mandatory to enrol children. A few other provisions have been read down or clarified.

Watch | Aadhaar: Where's it required and where's it not?

In upholding Aadhaar, the majority opinion was not oblivious to the impact of disbanding a project that has already completed much ground. For instance, relying on official statistics, the majority favoured the scheme’s continuance for the sake of the 99.76% of people included under it, rather than fret over the 0.24% who were excluded because of authentication failure. “The remedy is to plug the loopholes rather than axe the project,” the Bench said. With enrolment saturation reaching 1.2 billion people, the programme had acquired a scale and momentum that was irreversible. It was perhaps this pragmatic imperative that led the majority to conclude that the government was justified in the passage of the Aadhaar Act as a ‘money bill’, even though under a strict interpretation this is a difficult position to defend, the Centre’s objective being to bypass the Rajya Sabha, where it did not have a majority. The Court has addressed this issue by accepting the government’s argument that Section 7, which enables the use of Aadhaar to avail of any government subsidy, benefit or service for which expenditure is incurred out of the Consolidated Fund of India, is the core provision in the law, and that this makes it a ‘money bill’. It has chosen to accept the technical arguments on the safety of the Aadhaar architecture and the end-to-end encryption that underlies the transmission of captured biometric data to the Unique Identification Authority of India. The majority opinion has looked at the larger picture beyond the merits or demerits of the Aadhaar programme and the arguments for and against it. It held that the Aadhaar Act passes the “triple test” laid down in the ‘Privacy’ judgment under which there ought to be a law, a legitimate state interest and an element of proportionality in any law that seeks to abridge the right of privacy.

In his dissent, Justice D.Y. Chandrachud argued that the Rajya Sabha’s authority has been superseded and that this “constitutes a fraud on the Constitution” — a position that is impossible to fault if one adopts a strict interpretation of what a money bill is. As a result of this “debasement of a democratic institution”, he held the Aadhaar Act unconstitutional. He also expressed his displeasure at the government passing a series of orders making Aadhaar compulsory for various reasons, in defiance of interim orders from the Supreme Court. He highlighted the biometric authentication failures that have led to denial of rights and legal entitlements, and located the reason for such failures in the project’s inability to account for and remedy flaws in its network and design. He ruled that denial of benefits arising out of any social security rights is “violative of human dignity and impermissible under our constitutional scheme”. Few would disagree with him in that “dignity and rights of individuals cannot be made to depend on algorithms and probabilities”. Finally, it was the arguments in favour of benefits to the poor and the practical consequences of abandoning the scheme that won the day. Aadhaar possibly was simply too big to fail.

Not a crime: on Supreme Court's adultery ruling

By decriminalising adultery, the Supreme Court strikes a blow for individual rights

The cleansing of the statute books of provisions that criminalise consensual relations among adults continues, with the Supreme Court finally striking down a colonial-era law that made adultery punishable with a jail term and a fine. In four separate but concurring opinions, a five-judge Bench headed by the Chief Justice of India, Dipak Misra, finally transported India into the company of countries that no longer consider adultery an offence, only a ground for divorce. They have removed provisions related to adultery in the Indian Penal Code and the Code of Criminal Procedure. According to Section 497 of the IPC, which now stands struck down, a man had the right to initiate criminal proceedings against his wife’s lover. In treating women as their husband’s property, as individuals bereft of agency, the law was blatantly gender-discriminatory; aptly, the Court also struck down Section 198(2) of the CrPC under which which the husband alone could complain against adultery. Till now, only an adulterous woman’s husband could prosecute her lover, though she could not be punished; an adulterous man’s wife had no such right. In a further comment on her lack of sexual freedom and her commodification under the 158-year-old law, her affair with another would not amount to adultery if it had the consent of her husband. “The history of Section 497 reveals that the law on adultery was for the benefit of the husband, for him to secure ownership over the sexuality of his wife,” Justice D.Y. Chandrachud wrote. “It was aimed at preventing the woman from exercising her sexual agency.”

But the challenge before the court was not to equalise the right to file a criminal complaint, by allowing a woman to act against her husband’s lover. It was, instead, to give the IPC and the CrPC a good dusting, to rid it of Victorian-era morality. It is only in a progressive legal landscape that individual rights flourish — and with the decriminalisation of adultery India has taken another step towards rights-based social relations, instead of a state-imposed moral order. That the decriminalisation of adultery comes soon after the Supreme Court judgment that read down Section 377 of the IPC to decriminalise homosexuality, thereby enabling diverse gender identities to be unafraid of the law, is heartening. However, it is a matter of concern that refreshing the statute books is being left to the judiciary, without any proactive role of Parliament in amending regressive laws. The shocking message here is not merely that provisions such as Section 497 or 377 remained so long in the IPC, it is also that Parliament failed in its legislative responsibility to address them.

A fraught timeline: on Ayodhya title suit

The stage is set for a final hearing on the title suit to the disputed site in Ayodhya

he Supreme Court’s refusal to refer some questions of law in the Ram Janmabhoomi-Babri Masjid dispute to a seven-judge Bench has one immediate consequence: it could expedite the final hearing in the appeals against the Allahabad High Court’s compromise judgment of 2010 in the main title suit. The two-judge majority opinion has fixed the date for the hearing as October 29, a development that may mean that a final verdict is not far off and it could have a bearing on political events in the run-up to the general election due next summer. The final hearing ought to have begun a year ago, but was delayed because some parties wanted the reference to a larger Bench so that certain observations in a Constitution Bench decision in Ismail Faruqui (1994) could be reconsidered. The apprehension was that remarks to the effect that “a mosque is not an essential part of the practice of Islam” and that namaz can be offered anywhere, even in the open, would influence the outcome of the appeal. Justice Ashok Bhushan’s main opinion has sought to give a quietus to the controversy by declaring that “the questionable observations” were to be treated only as observations made in the context of whether land on which a mosque stood can be acquired by the government. It should not be taken into account while deciding suits and appeals. It is difficult to fault this approach, as it is a fact that the respective claims of the U.P. Sunni Central Wakf Board, Nirmohi Akhara and Ram Lalla, the deity, can only be tested against evidence adduced during trial and not by pronouncements on the significance of places of worship or practices in a particular religion.

At the same time, can one brush aside the possibility that observations on a sensitive religious issue would be exploited by one side to gain legal advantage? In his dissenting opinion favouring a reconsideration of Ismail Faruqui, Justice Abdul Nazeer notes that its observations have permeated the High Court judgment. Ismail Faruqui was a ruling on petitions challenging the validity of a Central law that acquired the land on which the Babri Masjid stood before it was razed by a frenzied and fanatical mob on December 6, 1992. The judgment was notable for upholding the rule of law by restoring the title suits that had been declared as having “abated” in the Act. It also declined to answer a Presidential reference on whether a Hindu temple stood on the disputed site before the mosque was built. Any observation made in the course of such a decision is bound to have a profound impact on the courts below. It is easy to contend that courts should work to their own timelines and not be influenced by such things as election season. But in the life of this nation, the Ayodhya dispute has gone through dark political phases and been more than a mere legal issue. The onus is on the apex court to dispose of the appeals at its convenience without giving any scope for the exploitation of religious sentiments.

Merely tinkering with import duties will not narrow the current account deficit

he Centre’s decision to increase customs duty on imports of 19 “non-essential” items amounts to tinkering at the margins to address a structural macro-economic issue. Using tariffs to curb imports of these items will not have a significant impact on narrowing the current account deficit (CAD), which is the Centre’s stated objective. By its own admission, the aggregate value of these imported items in the last fiscal year was just ₹86,000 crore. At that level, these imports constituted a little less than 3% of the country’s merchandise import bill in 2017-18. With the first six months of the current fiscal having elapsed, the impact of this tariff increase in paring the import bill and thus containing the CAD is at best going to be short-term and marginal. On the other hand, the decision to double import duties on a clutch of consumer durables to 20% could dampen consumption of these products, especially at a time when the rupee’s slide against the dollar is already likely to have made these goods costlier. Here, it would be interesting to see if the government’s move turns into a psychological ‘tipping point’ that ends up altering consumption behaviour towards this category of imported merchandise. If it does, that could have the salutary effect of fostering greater investment in the domestic production of some of these goods. The tariff on aviation turbine fuel — which will now attract 5% customs duty instead of nil — may add to the stress of domestic airline operators, the rupee and rising oil prices having already hurt their wafer-thin margins.

A more robust approach in addressing the widening CAD would be to institute wide-ranging measures to boost exports and simultaneously reduce the import-intensity of the economy. Policymakers must renew efforts to ensure that export growth starts outpacing the expansion in merchandise imports. This includes expediting the refunds on GST to exporters — smaller exporters have been badly hit by working capital shortfalls — to working to woo some of the labour-intensive supply chains that are moving out of China to countries such as Vietnam and Bangladesh. On import substitution, it is an irony that despite the abundance of coal reserves, thermal coal is one of India’s fastest-growing imports. This is a consequence of under-investment in modernising the entire coal production and utilisation chain and must be addressed expeditiously. With global crude oil prices showing no signs of reversing their upward trajectory, and the sanctions on Iran that may force India to look for other suppliers looming, the government will need to act post-haste to address structural imbalances to keep the CAD from widening close to or even exceeding the 3% of GDP level.

Freedom to pray: on Sabarimala verdict

The Constitution protects religious freedom in two ways. It protects an individual’s right to profess, practise and propagate a religion, and it also assures similar protection to every religious denomination to manage its own affairs. The legal challenge to the exclusion of women in the 10-50 age group from the Sabarimala temple in Kerala represented a conflict between the group rights of the temple authorities in enforcing the presiding deity’s strict celibate status and the individual rights of women to offer worship there. The Supreme Court’s ruling, by a 4:1 majority, that the exclusionary practice violates the rights of women devotees establishes the legal principle that individual freedom prevails over purported group rights, even in matters of religion. The three concurring opinions that form the majority have demolished the principal defences of the practice — that Sabarimala devotees have constitutionally protected denominational rights, that they are entitled to prevent the entry of women to preserve the strict celibate nature of the deity, and that allowing women would interfere with an essential religious practice. The majority held that devotees of Lord Ayyappa do not constitute a separate religious denomination and that the prohibition on women is not an essential part of Hindu religion. In a dissenting opinion, Justice Indu Malhotra chose not to review the religious practice on the touchstone of gender equality or individual freedom. Her view that the court “cannot impose its morality or rationality with respect to the form of worship of a deity” accorded greater importance to the idea of religious freedom as being mainly the preserve of an institution rather than an individual’s right.

Beyond the legality of the practice, which could have been addressed solely as an issue of discrimination or a tussle between two aspects of religious freedom, the court has also sought to grapple with the stigmatisation of women devotees based on a medieval view of menstruation as symbolising impurity and pollution. The argument that the practice is justified because women of menstruating age would not be able to observe the 41-day period of abstinence before making a pilgrimage failed to impress the judges. To Chief Justice Dipak Misra, any rule based on segregation of women pertaining to biological characteristics is indefensible and unconstitutional. Devotion cannot be subjected to the stereotypes of gender. Justice D.Y. Chandrachud said stigma built around traditional notions of impurity has no place in the constitutional order, and exclusion based on the notion of impurity is a form of untouchability. Justice Rohinton F. Nariman said the fundamental rights claimed by worshippers based on ‘custom and usage’ must yield to the fundamental right of women to practise religion. The decision reaffirms the Constitution’s transformative character and derives strength from the centrality it accords to fundamental rights.