Content :

1. States and the Centre’s fetter of ‘net borrowing ceiling’
2. Calling out exploitative labour dynamics on platforms
3. National Minority
4. Can India get rich before growing old?

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States and the Centre’s Fetter of ‘Net Borrowing Ceiling’

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Context:

• Net Borrowing Ceiling (NBC): Imposed by the central government in 2023 on Kerala, restricting borrowing to 3% of the projected GSDP for FY 2023-24.

• Scope: Encompasses all borrowing avenues, including open market loans, financial institution loans, and liabilities from the public account. Also covers certain borrowings by State-owned enterprises to prevent circumvention.

Relevance: GS 2 (Indian Polity )

Practice Question: What is the Net Borrowing Ceiling (NBC) and how does it impact the financial autonomy of states like Kerala? (150 words)

Financial Impact on Kerala:

• Restrained Expenditure: Kerala faces difficulties in meeting its expenditure and investing in developmental and welfare activities.

• Political and Legal Controversies: This led to conflicts between the Centre and the State, with Kerala approaching the Supreme Court, alleging encroachment on its fiscal autonomy under Article 293 of the Constitution. This is the first case in the Court’s history where Article 293 has just come up for interpretation.

Constitutional Provisions and Borrowing Powers :

• Article 292: Grants the central government the power to borrow upon the security of the Consolidated Fund of India.

• Article 293: Empowers State governments to borrow within India upon the security of the consolidated fund of the State, with conditions possibly imposed by the Centre if the State owes repayment of loans or guarantees provided by the central government.

Historical Context :

• Adoption from Government of India Act, 1935: Article 293 mirrors Section 163 of the 1935 Act.

• Constituent Assembly Debate: Emphasised the need for scrutiny in borrowing, suggesting a commission akin to the Finance Commission to oversee borrowings and loans.

Revenue Shortfall and Fiscal Deficit :

• FRBM Act, 2003: Implemented to maintain financial restraint, setting a fiscal deficit target of 3% of GDP.

• Amendments and Targets: The FRBM Amendment Act of 2018 set targets for the central government and States to control fiscal deficit and public debt. The central government aimed to bring the fiscal deficit below 4.5% of GDP by 2025-26.

Central vs. State Borrowing Autonomy

• Centre’s Restrictions: Imposing borrowing limits on States to achieve fiscal consolidation without considering individual State financial positions.

• Encroachment Allegations: Kerala argues that this impinges on State autonomy and budget-balancing capabilities.

Legal Challenge and Interpretation

• Supreme Court Case: Kerala’s challenge on the interpretation of Article 293, focusing on fiscal decentralisation and State autonomy.

• Referral to Constitutional Bench: The case highlights the need to reassess the balance of borrowing powers between the Centre and States.

Revisiting Article 293

• Need for Strengthening: Considering modern economic, political, and fiscal realities, Article 293 may need revisiting.

• Historical Warning: Section 163(4) of the Government of India Act, 1935, warned against arbitrary refusal or delay in granting loans, suggesting similar safeguards in the Constitution.

Recommendations for Strengthening Article 293

• Commission Proposal: As suggested by Ananthasayanam Ayyangar, creating a commission similar to the Finance Commission to resolve borrowing disputes.

• Guidelines for Centre’s Powers:

• Transparency: Clear procedures and standards for borrowing decisions.
  • Consultative Process: Engaging State governments in the decision-making process.
  • Equitable Treatment: Uniform borrowing terms for all States to prevent bias.
  • Fiscal Autonomy: Ensuring restrictions do not unduly hamper State financial management.

Conclusion

Kerala’s legal challenge underscores the need to revisit Article 293, ensuring it supports a balanced and cooperative fiscal framework between the Centre and the States.

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Calling Out Exploitative labour dynamics on platforms

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Context: The evolving gig economy in India witnessed a significant event recently—a nationwide digital strike during Deepavali, organized by women gig workers through the Gig and Platform Services Workers Union (GIPSWU), the country’s first union dedicated to women gig workers. This strike aimed to highlight exploitative and abusive labour practices in the gig economy.

Relevance. : GS 1 (Society ), GS 2 (Social Justice )

Practice Question: Discuss the significance of the nationwide digital strike by women gig workers in India. Highlight the issues and suggest measures to address these challenges. (250 words)

Exploitation:

• Discounted Offers: Platform companies offer discounts at the expense of gig workers’ wages, resulting in exploitative conditions.

• Employment Narrative: The focus on startup success often overshadows the exploitation of gig workers.

Public and Government Response:

• Awareness: The strike aimed to raise awareness about the exploitation faced by gig workers, gaining media coverage and public support.

• Government Inaction: There is a perceived lack of adequate response from the government to protect gig workers’ rights.

Social Security:

• Inadequate Measures: Existing social security measures for gig workers are insufficient and often appear as repackaged charity rather than constitutional entitlements.

Gender-Specific Issues:

• Patriarchal Job Roles: Digital platforms reinforce traditional job roles for women, such as beauticians and housekeepers.

• Job Insecurity: Women’s job security is tied to ratings and acceptance of assigned jobs, with refusals leading to termination.

• Vulnerable Demographics: Many women gig workers are single mothers, divorcees, or domestic violence survivors, making them more susceptible to exploitation.

Economic Exploitation:

• False Promises: Platforms promise flexible hours and independence but impose unrealistic targets and financial burdens.

• Lack of Returns: Gig workers bear significant costs without adequate earnings or social security benefits.

Systemic Failures:

• Regulatory Gaps: The absence of stringent anti-labour practice regulations and data privacy laws enables exploitation.

• Digital Patriarchy: Combines conventional and digital exploitation, deepening economic and social challenges for women.

Way Forward:

• Regulation of Platform Companies: Implement stricter regulations to ensure fair treatment and compensation.

• Enhanced Social Security: Provide meaningful social security measures to gig workers as constitutional entitlements.

• Consumer Responsibility: Educate consumers on the exploitation behind discounted services and encourage ethical consumption.

• Support for Vulnerable Workers: Special provisions for single mothers, divorcees, and domestic violence survivors in the gig economy.

Conclusion:

The digital strike by women gig workers in India is a crucial step towards addressing exploitation in the gig economy. It underscores the need for collective action and regulatory reforms.

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National Minority

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Context:

• Issue: Determining the ‘minority character’ of educational institutions in India.

• Ruling: The seven-judge Constitution Bench of the Supreme Court of India laid down criteria for identifying minority institutions.

• Focus: Aligarh Muslim University (AMU) and its minority status.

Relevance: GS 2 (Indian Polity )

Practice question: What criteria did the Supreme Court of India establish for determining the minority status of educational institutions, and how does this ruling impact the Aligarh Muslim University (AMU)? (250 words)

Key Points:

Historical Background of AMU:

• Establishment: Founded by Sir Syed Ahmad Khan in 1875 as a college for Muslim students.

• University Status: Recognised by an Act of the Central Legislature in 1920.

• Constitutional Importance: Referred to as an institution of national importance in the Constitution.

Legal Precedents:

• 1967 Supreme Court Judgment: Held that AMU was not a minority institution as it was established by legislation, not by the Muslim community.

• 1981 Amendments: Changes to the AMU Act to challenge the 1967 verdict.

 Criteria for Determining Minority Status of Educational Institutions

The Supreme Court of India laid down specific criteria, also referred to as ‘indicia,’ including:

• Founding Entity: Who founded the institution?
  • Efforts to Establish: Who made efforts to bring the institution into being?
    • Purpose: Was the institution aimed at promoting the interests of a particular minority?
    • Administrative Structure: Does the administrative structure affirm the institution’s minority character?
    • Historical Context: The historical context and circumstances under which the institution was established.
    • Legal Incorporation: Whether a statute was enacted to confer university status and if such incorporation was necessary before the University Grants Commission Act, 1956.

Recent Supreme Court Ruling:

• Criteria for Minority Status: Based on the founder, efforts to establish the institution, promotion of minority interests, and administrative structure.

• Chief Justice D.Y. Chandrachud’s Judgment: Statutes conferring university status do not negate minority character if the institution was pre-existing.

• Dissenting Opinion: Justice Dipankar Datta held that AMU was not a minority institution.

Implications of Minority Status:

• Reservation Policies: If AMU loses its minority status, it may come under reservations for Scheduled Castes, Scheduled Tribes, and Other Backward Classes.

• Cultural and Educational Ethos: Preserving the original character of institutions with distinctive educational and cultural significance.

Conclusion:

The Supreme Court’s ruling highlights the importance of preserving the minority character of educational institutions like AMU, recognising their contributions to cultural and educational diversity.

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Can India Get Rich before growing old?

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Concept of Demographic Dividend

• Definition: Economic growth advantages when most of the population is in the working-age bracket.

• Current Perception: Seen as a perpetual assurance of economic growth, often taken for granted.

Relevance: GS 1 (Society ), GS 2 (Social Justice )

Practice Question: Discuss the concept of India’s demographic dividend. What challenges does India face in leveraging this demographic advantage, and what measures can be implemented to overcome these challenges? (250 words)

Reality Check on Demographic Dividend

• Population Statistics: Three-fourths of India’s population is aged 15-64.

• Declining Fertility Rate: Total Fertility Rate (TFR) is declining faster than anticipated.

• Projections: Within 10 years, the working-age population proportion will begin to fall.

• State Trends: Most states are below the replacement-level fertility rate of 2.1 children per woman.

Challenges to Conventional Wisdom

• Education and Income: Lower birth rates are not solely linked to improvements in education and income.

• TFR Decline: Dropped from 2.6 in 2010 to 1.99 today.

• Middle-Income Status: As India approaches middle-income status, the decline in TFR is expected to accelerate.

Wasted Demographic Dividend

• Low-Productivity Jobs: Many people remain in low-productivity agricultural jobs or are unemployed.

• Labour Force Participation: Urban labour force participation rate remains at a dismal 50%.

• Middle-Income Trap: Risk of falling into a middle-income trap, similar to other countries.

Focus on Manufacturing

• Economic Growth Path: Movement from low-productivity sectors to higher-productivity jobs in manufacturing and services.

• Manufacturing vs. Services: Manufacturing, especially in labour-intensive industries, creates more jobs than services.

• Textile Industry Example: Worth $150 billion and employs 45 million people compared to 5.5 million in the $250 billion IT-BPM sector.

Challenges for Manufacturers

• Business Constraints: Licensing, permits, access to land, and customs regulations are major hurdles. For example, according to World Bank surveys, one in six manufacturers cites business licensing and permits as major constraints.

Policy Recommendations

• Lower Tariffs: To make inputs cheaper and boost exports.

• Free Trade Agreements: Finalize agreements with the U.K. and EU to expand market access.

• Labour Reforms: Allow flexible work arrangements and address land and building regulations.

• Investment Climate: Improve to enable large-scale job creation.

Leveraging the Demographic Dividend

• Historical Example: China transitioned millions from agriculture to manufacturing with a similar per capita income in the 1980s.

• Action Plan: India must capitalise on its demographic dividend by focusing on manufacturing and improving the business environment.

Conclusion

With the working-age population set to decline, it is crucial to leverage this demographic advantage before it is too late. By addressing challenges in the manufacturing sector, implementing policy reforms, and improving the business environment, India can avoid the middle-income trap and achieve sustainable economic growth.

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