Content

1. The contours of constitutional morality
2. Winding up the clock of India-Nepal economic ties

The contours of constitutional morality

 Why in News ?

• Justice N. Anand Venkatesh (Madras High Court) revisited the concept of Constitutional Morality, emphasizing its role as a living ethos for constitutional governance.
• Comes amid growing judicial debates (e.g., Sabarimala review, Delhi Government vs LG, Puttaswamy) on whether morality in law should derive from majoritarian public morality or constitutional morality anchored in justice, liberty, equality, and fraternity.

Relevance

• GS-2 (Polity & Governance):
  • Constitutional values, judicial interpretation, and democratic ethics.
  • Role of judiciary in upholding justice, liberty, equality, and fraternity.
  • Separation of powers and moral foundations of governance.

 Practice Questions

• What do you understand by the term “Constitutional Morality”? Discuss its significance in maintaining a balance between majority rule and constitutional governance in India.(250 Words)

The Classical Relationship: Law and Morality

• Ancient Indian Thought:
  • The idea of Dharma in Vedic and post-Vedic traditions united law, morality, and justice (no separation between legal and ethical norms).
  • Thirukkural stressed Aram (virtue), aligning moral duty with social order.

• Western Jurisprudence:
  • Natural Law Theorists (e.g., Aquinas): Law derives validity from moral order.
  • Legal Positivists (e.g., Bentham, Austin, H.L.A. Hart): Law is valid because it’s enacted by authority, not because it is moral.

• Hart-Devlin Debate (1960s):
  • Lord Devlin: Law should enforce moral standards to preserve social cohesion.
  • H.L.A. Hart: Individual liberty must be protected from moral majoritarianism; law should not police private morality.
  • Sparked global discourse on morality’s place in liberal democracies.

The Indian Position: Law Reflecting Moral Evolution

• P. Rathinam vs Union of India (1994)
  • SC quoted Justice Frankfurter: Law embodies moral principles aligned with fairness and justice.
• Example of Divergence:
  • Law leads morality: Abolition of untouchability (Article 17) before social acceptance.
  • Law follows morality: Recognition of gender equality and LGBTQ+ rights over time.
• Lesson: Indian constitutionalism treats law as a moral enterprise, not merely a command.

Rise of the Idea of “Constitutional Morality”

• Origin:
  • Coined by historian George Grote (1846) in History of Greece: “A paramount reverence for constitutional forms combined with free speech and civic confidence.”
• Indian Adoption:
  • Dr. B.R. Ambedkar, citing Grote in the Constituent Assembly:
    “Constitutional morality is not a natural sentiment; it has to be cultivated.”
  • Warned that democracy in India is a “top dressing on undemocratic soil.”

Understanding Constitutional Morality

• Meaning: Adherence to the core values, procedures, and spirit of the Constitution beyond its literal text.
• Essence: Rule of law + Respect for institutions + Protection of minorities + Ethical exercise of constitutional power.
• Distinction:
  • Public Morality → Majoritarian social values.
  • Constitutional Morality → Justice, equality, liberty, and fraternity as guiding principles.

Key Judicial Landmarks

Theoretical Foundations

• Prof. A.V. Dicey:
  • Distinguished “law of the constitution” (enforceable) vs “conventions of the constitution” (non-justiciable but morally binding).
• Ambedkar’s Vision:
  • Constitutional morality = moral compass guiding exercise of constitutional power.
  • Needed to “hold together the diverse strands of democracy.”

Data & Facts: Institutional Embedding

• Constitutional Morality in Action:
  • Judicial Discipline: Over 70 references to “constitutional morality” across Supreme Court judgments (2014–2025).
  • Governance Practice: 2024–25 Lok Sabha debates cited it in contexts of ordinance misuse, governor powers, and freedom of expression.
  • India’s CPI ranking declined to 96 (2024, score 38) from 85 (2021, score 40), reflecting governance and institutional ethics gaps — highlighting Ambedkar’s warning that “constitutional morality must be cultivated, not presumed.

Philosophical and Governance Implications

• Moral Legitimacy of Law: A law may be valid but not just (e.g., Section 377 pre-2018).
• Constitutional Morality as a Democratic Guardrail: Prevents elected majorities from undermining constitutional principles.
• Judicial Use: Expands interpretative horizons—guiding constitutional evolution through moral reasoning.
• Risk: Excessive moralization of law can blur boundaries of separation of powers, leading to judicial overreach.

Challenges

• Subjectivity: Who defines morality — judges, legislature, or society?
• Over-judicialization: Morality-based activism may intrude on legislative domain.
• Cultural Pluralism: Single moral code incompatible with India’s diversity.
• Selective Invocation: Morality often cited inconsistently across judgments and governance contexts.

The Road Ahead

• Institutional Reforms: Codify conventions of constitutional ethics (e.g., cabinet norms, governor conduct).
• Civic Education: Embed constitutional values in school curricula (NEP 2020 provision for citizenship education).
• Political Accountability: Foster adherence to moral governance through transparency and citizen vigilance.
• Judicial Restraint: Courts must balance moral interpretation with textual fidelity.

Conclusion

• The relationship between morality and law in India is symbiotic — law shapes morality, and morality legitimizes law.
• Constitutional Morality, as envisioned by Ambedkar, is not static but evolutionary — the moral foundation of India’s constitutional democracy.
• It ensures that majority rule never degenerates into moral tyranny, and that the spirit of justice remains the soul of governance.

Winding up the clock of India-Nepal economic ties

 Context and Background

• Date & Announcement: On October 1, 2025, RBI Governor Sanjay Malhotra unveiled three measures aimed at internationalising the Indian Rupee (INR).
• Geoeconomic backdrop: Follows RBI’s broader agenda of “Rupee Globalisation” and the South Asia currency integration drive under India’s Neighbourhood First Policy.
• Significance: Enhances India–Nepal economic interdependence, regional trade in local currencies, and de-dollarisation momentum in South Asia.

Relevance

• GS-2 (International Relations):
  • India–Nepal bilateral relations and neighbourhood diplomacy.
  • Economic interdependence and cross-border cooperation mechanisms.
  • Regionalism and financial integration in South Asia.
• GS-3 (Economy):
  • Internationalisation of the Indian Rupee (INR).
  • External sector management, currency stability, and de-dollarisation.
  • Role of RBI in fostering regional financial architecture.
• GS-3 (Internal Security & Economy Linkage):
  • Economic resilience of neighbouring states and its implications for India’s security and border stability.

Practice Questions

• Discuss how the Reserve Bank of India’s recent rupee internationalisation measures can strengthen India–Nepal economic relations and promote regional currency integration.(250 Words)

The Three RBI Measures

1. INR Lending to Non-Residents (Nepal, Bhutan, Sri Lanka)
   1. Authorised Dealer (AD) banks can now lend INR for cross-border transactions.
   1. Impact: Enables Nepalese industries to access Indian credit lines, easing liquidity and scaling trade operations.

• Expansion of Special Rupee Vostro Accounts
  • Foreign banks’ INR accounts in Indian banks (Vostros) can now invest in:
    • Corporate Bonds
    • Commercial Papers
  • Earlier permitted only for central government securities.
  • Impact: Deepens INR capital markets’ accessibility to foreign participants.

• Transparent Reference Rate Mechanism
  • RBI to establish a reference rate for major trading partners’ currencies.
  • Impact: Reduces volatility and ensures consistency in INR-based invoicing and settlements.

Historical Context: INR–NPR Peg

• Peg ratio: 1 INR = 1.6 Nepalese Rupee (NPR) (in place since 1993).
• Stability: Peg has shielded NPR from sharp depreciation against USD and other hard currencies.
• Caution: Economists warn against disturbing a working peg system, which underpins Nepal’s monetary stability.

Nepal’s Economic Challenges

• GDP slowdown: Post-COVID rebound driven by remittances (≈25% of GDP) faded by 2024.
• Industrial stagnation:
  • Limited access to institutional credit; banks are oligarch-controlled.
  • MSMEs face severe working capital crunch.
  • Unemployment: >11% (ILO 2024), highest among SAARC countries after Afghanistan.
• Supply chain disruptions: Domestic ancillary units struggling due to low demand and liquidity.
• Result: Political volatility and high economic vulnerability.

Potential Benefits for Nepal

• Access to Indian Credit:
  • RBI’s INR lending move could inject liquidity into Nepal’s industrial ecosystem.
  • Lowers dependency on expensive USD loans or foreign donor credit lines.
• Boost to Bilateral Trade:
  • India accounts for 65% of Nepal’s international trade.
  • Exports (FY24):
    • India → Nepal: USD 6.95 billion (FY24).
    • Nepal → India: ~USD 1 billion
  • Major exports: edible oil, tea, coffee, jute.
  • Nepal’s rank as Indian export destination: 28th (2014) → 17th (2024).
• Attraction of Investment:
  • Indian firms contribute 33% of Nepal’s total FDI stock, worth ~USD 670 million.
  • INR-denominated trade will improve FDI flows, especially for cross-border value-added supply chains.
• De-dollarisation and Forex Stability:
  • Reduces Nepal’s dependence on USD; shields from exchange rate shocks.
  • Eases hard currency shortages, improving Current Account Deficit (CAD) management.
• Employment & Industrial Multipliers:
  • INR credit enables scaling up of small and medium enterprises, generating local jobs.
  • Facilitates joint ventures and value addition industries (e.g., agro-processing, light manufacturing).

Strategic and Financial Multiplier Effects

• Rupee Trade Settlement System (RTSS): Builds on 2022 framework enabling INR-based invoicing with 18 countries.
• Regional Integration: Encourages South Asian Monetary Cooperation under India’s leadership.
• Resilience to USD cycles: Protects smaller economies like Nepal from Fed-driven volatility.
• Macro stability: Encourages balanced BoP management and stronger monetary coordination between RBI and Nepal Rastra Bank (NRB).

Institutional and Policy Implications

• For Nepal Rastra Bank (NRB):
  • Must frame prudential norms and risk assessment frameworks for cross-border INR lending.
  • Need for regulatory convergence with RBI guidelines on compliance, transparency, and borrower eligibility.
• For RBI:
  • Maintain prudential oversight to prevent misuse or arbitrage via INR lending.
  • Monitor liquidity flows and non-performing exposure risks from overseas borrowers.
• For Governments:
  • Opportunity for India–Nepal Sovereign Credit Framework, joint risk rating, and bilateral trade insurance mechanisms (e.g., EXIM Bank–NRB tie-up).

Broader Geoeconomic Context

• USD dominance: Globally, the US dollar accounts for ~54% of trade invoicing but dominates ~88% of foreign exchange turnover (IMF, BIS 2024).
• INR globalisation: India pushing for INR settlement with Russia, UAE, Sri Lanka, Mauritius, and now Nepal.
• Strategic payoff: Reduces transaction costs (~2–3% savings) and enhances India’s financial soft power in South Asia.

Challenges and Caveats

• Interest rate competitiveness: Indian banks must offer rates viable for Nepalese borrowers.
• Regulatory risk: NRB’s cautious stance could delay uptake.
• Credit monitoring: Cross-border lending requires robust credit evaluation and recovery mechanisms.
• Political sensitivities: Perceptions of “INR dominance” must be mitigated through joint consultation mechanisms.

Way Forward

• Institutional coordination:
  • Establish India–Nepal Financial Coordination Council (INFCC).
  • Regular review of INR–NPR peg sustainability.
• Capacity building:
  • Encourage joint banking ventures and financial literacy programmes for Nepalese SMEs.
  • Promote Rupee Corridor Initiatives via SAARC framework.
• Long-term goal:
  • Achieve South Asian Local Currency Settlement Mechanism (LCSM) akin to ASEAN’s system.
  • Position the INR as a regional anchor currency by 2030.

Conclusion

• RBI’s October 2025 measures mark a watershed in India–Nepal financial diplomacy.
• They represent the fusion of rupee internationalisation, regional integration, and developmental partnership.
• If prudently executed, the move can make INR not just India’s currency, but South Asia’s stability instrument—advancing both economic sovereignty and strategic depth for India and its neighbours.