. New regime at RBI debuts with rate cut
The Monetary Policy Committee (MPC) has reduced the repo rate by 25 basis points to 6.25 per cent which is a 6-year low.
The decision of the MPC is in consonance with the objective of achieving consumer price index inflation at 5 per cent.
- Key determinant of the policy Rate is neutral rate
What is neutral rate?
The neutral rate is the difference between the risk free rate and inflation
.Cauvery board formation put off, SC gives the nod for ‘technical team
Supreme Court has put on hold its order to constitute the Cauvery Management Board (CMB) and settled for the Centre’s suggestion for appointing a “technical team” to visit the Cauvery basin.
- The technical will visit the river basin along with nominees of Karnataka, Tamil Nadu, Puducherry and Kerala to submit a report in the Supreme Court by October 17.
- The court will hear the matter on October 18
. To be truly transparent
Author says that only a full-time commission, which is independent of the government and the judiciary, can impart transparency and credibility to the system of appointments to the higher judiciary
Regulating the executive & Legislature
Except the normal adjudication powers, Constitution of India also enshrines another important function upon the judiciary, which is,
- to regulate the executive and legislature to stay within the bounds of their powers — to prevent the executive from violating the laws, the Constitution and the fundamental rights of people guaranteed by the Constitution, and the legislature from violating the Constitution
Final arbiter of the constitution
SC is the final arbiter of the constitution. In the Kesvananda Bharati case of 1973, it was held that even a constitutional amendment could not violate the basic structure of the constitution. It is for this very reason that SC’s independence is necessary and is regarded as the cornerstone of Indian constitution
- It is on this basis that the Supreme Court, in the Second Judges Case in 1993, took over the power of appointing judges from the executive to itself
Opacity in the appointments
Since 1993, a collegium system is in place which appoints judges for SC and HCs in India
- Positive: Collegium improved the independence of the judiciary as judges were now less likely to be politically influenced by the executive
- Temptations exist: Collegium failed to rein in the problem completely because of the temptation of the post-retirement appointments in tribunals and commission & foreign trips as they were under the executive
- Arbitrariness & Nepotism: The collegium also did not lay down any criteria for appointments or any method for evaluating candidates on those criteria.It also did not lay down any system for transparency in appointments. Thus, appointments continued to be made in an arbitrary and nepotistic manner with the people not being informed about who was going to be appointed and on what basis
Earlier it was said that in order to become a judge, one did not need to know the law but the law minister. It is now said that one need not know the law but the existing collegium of judges to become a judge
National Judicial Appointments Commission (NJAC)
In order to regain some control over appointments, the government introduced the National Judicial Appointments Commission (NJAC) Act.
- Members: This Act provided for a selection committee of six people, which included three senior-most sitting judges of the Supreme Court, the Law Minister, and two persons to be selected by a committee of the Prime Minister, the Leader of the Opposition and the Chief Justice of India
- It also provided that the Secretariat of the Appointments Commission would be in the Law Ministry
- Veto power: It further provided that any two members of the NJAC could veto the recommendation of the other four
Why SC stuck down the NJAC Act?
It is believed that the Prime Minister and the Leader of the Opposition are usually in agreement to appoint weak and subservient people to regulatory institutions and to the committees who elect people to such institutions.
- This is done to weaken the regulation of the political class. Therefore, there were rightful apprehensions that NJAC would dilute the independence of the judiciary. So, SC struck down the NJAC Act as unconstitutional
Supreme Court did not take this opportunity to lay down any system of transparency in selection of judges.
MoP: It was left to the government to devise a Memorandum of Procedure which would be approved by Chief Justice of India (CJI).
Result: This has resulted in the government trying to introduce clauses that could enable it to veto any recommendation on national security considerations. The memorandum of procedure is therefore stuck, with no agreement in sight between the government and the Chief Justice of India
A possible solution
Author posits that
- the selection to the higher judiciary must be made by a full-time (not ex officio) body, which is independent of the government and the judiciary and which goes about the selection in a rational and transparent manner
Why full-time and not ex-officio?
Because appointments of hundreds of judges in a year to the higher judiciary would require at least a thousand candidates to be considered and comparatively evaluated over multidimensional criteria in a fair and rational manner.
- This would require a full-time body, which could devote itself to this process, with a large secretariat. The job cannot be done by an ex officio body of judges and the law minister, who are extremely busy persons
Following minimum standards of transparency should be ensured,
- Criteria for selection of judges should be made known
- The comparative evaluation of candidates also be made known
- Names of shortlisted/selected candidates should be announced before appointment, so that those who have relevant information about the candidate can send it to the appointing authority
Criteria on which candidates should be judged
Basic criteria to judge the competence of a candidate should include,
- Judicial temperament
- Common sense
- Sensitivity towards the problems of the common man
- A system modelled on the British Judicial Appointments Commission, which follows a method to evaluate candidates based on predetermined and set criteria, is well worth considering
Members of the selection committee& selection criteria
- The members of the selection authority could be Retired judges or even laypersons
- They should be selected by a broad-based selection committee in which the government and the judiciary play a role, but not a dominant one.
It is only such an independent full-time body that can be expected to select judges in a fair and rational manner.
Right to Information
SC has kept itself outside the ambit of RTI and has consistently refused to disclose information on its administrative or judicial functioning, judicial appointments and pending judgments
Author concludes by saying that judicial accountability can only be ensured by an independent full-time body
. Clinching the N-deal with Japan
Japan has decided to sign an agreement on civil nuclear cooperation with India.
Significance of the upcoming agreement:
Japan is the only country to have been the victim of a nuclear attack, and its decision to sign an agreement with India, a country that has not signed the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), would be a first.
Significance for India
- Given the strong domestic reservations in Japan against nuclear energy Japan’s support to the deal is an indication of the importance it accords to relations with India.
- It would convey a message of trust to the Nuclear Suppliers Group members and hopefully help in acceptance of India’s membership.
- Japanese nuclear energy technology and safety parameters are widely considered to be cutting-edge, and many critical parts needed for Indian reactors are made by Japanese manufacturers. These will not be available to India until the agreement is done.
- Even the U.S. civil nuclear deal, that is yet to be actualised, is contingent on the deal with Japan.
Sticking points in the past:
- India’s refusal to sign the NPT, as it considers the treaty unfair to the developing world.
- The Japanese insistence on a “nullification” clause that the agreement would cease as soon as India tests.
Judiciary has trusted the players to clean up Indian cricket. The Supreme Court-appointed Justice R.M. Lodha committee wanted the BCCI to embrace game-changing reforms.
Lodha panel would be covered in detail after a final judgment of SC over the issue
Article deals with RBI Governor interaction with the media
His views on
- After long time, weak global demand is actually going to drag down trade volumes to decline
- The systemic central banks of the world continue to pose uncertainties for emerging markets causing volatility in EMs. There is also the issue of the outcome of the U.S. Presidential elections.
- The NPA situation is an important issue for the RBI and India.The situation has not occurred overnight and therefore will require skill and thoughtful endeavor to resolve.
Contribution by different sectors
Just five sectors contribute 61 per cent of the stressed assets of the banking sector
The sectors are each individually important and dealing with stressed assets will require skill and creativity.
- There are many reasons that led to this situation, but now helping banks to deal with this situation is of the utmost importance for the country.
- The transmission through the money markets has been swift and decisive. And corporates are using those parts of the financial system more compared to bank creditover the next quarter or two, keeping in mind that the government has also reduced the small savings rate, that the MCLR calculation will now throw up more transmission. One thing to distinguish is that for new lending the transmission has been much more.
. Global growth to stay weak: IMF
In the latest update of its World Economic Outlookthe International Monetary Fund(IMF) has forecasted for a weak global growth.
The Fund kept its overall global growth forecasts unchanged at 3.1 per cent for 2016 and 3.4 per cent for 2017 after cutting its outlook for five straight quarters.
As per IMF
- advanced economies as a whole will see a weakening of growth in 2016, down 0.2 percentage point from July to 1.6 per cent,
- Emerging market and developing economies will see a 0.1 percentage point gain in growth to 4.2 per cent.
Growth forecasts for China remained unchanged at 6.6 per cent for 2016 and 6.2 percent for 2017.
India’s growth will improve slightly to 7.6 per cent in both years.
IMF also warned that further stagnation will fuel more populist sentiment against trade and immigration that would stifle activity, productivity and innovation.
. SEBI to audit its own governance standards
In the recent board meeting of SEBI, it was decided that independent board members will evaluate SEBI’s performance.
- The independent board members will conduct a performance audit of the regulatory body. The capital market regulator is also in favour of inducting a woman board member. SEBI has also asked the finance ministry to appoint a woman member to the board of the regulatory body.
- Currently, there are four part-time members on the SEBI board along with the chairman and the two whole-time members.