Daily News Mail - News of 03/06/2015

RBI cuts repo rate, airs worries
Rajan hints that the year may not see another cut

• As widely expected, the Reserve Bank of India cut the policy rate (repo) on June 2 by 25 basis points, the third time this year, to 7.25 per cent from 7.5 per cent. The repo rate is the rate at which the RBI lends money to banks.
• But the move comes with a message that any further cut this year is unlikely. Articulating the concerns of the RBI over the expected poor monsoon and crude oil prices, Governor Raghuram Rajan expressed fears that a monsoon shock could push up food prices and challenge its control over inflation.
• The stock market reacted negatively to the move, shedding 660 points. And India Inc. is fuming that the cut is too little as they expected a reduction of at least 50 basis points.
• The RBI cut rates by 25 basis points each in January and March from a peak of 8 per cent. But the benefits of these cuts did not reach consumers fully, as banks showed reluctance to pass on the benefits.
• In the previous policy announcement — the first bimonthly policy for 2015-16 on April 7 — the RBI had maintained status quo in the repo rate at 7.5 per cent, saying that transmission of policy rates to lending rates had not taken place despite weak credit off-take and the frontloading of two rate cuts,
• Later, several banks cut lending and deposit rates. June 2's cut is an incentive for banks to reduce rates further.

Climate change is stalling monsoon: Harsh Vardhan

• The unusual heat wave in May, followed by the delay in the monsoon by a week, is a definite manifestation of climate change, Union Minister for Earth Sciences Harsh Vardhan said on June 3.
• Announcing the likelihood of a deficient southwest monsoon this year, Mr. Vardhan said the India Meteorological Department (IMD) had downgraded its earlier April prediction from 93 per cent to 88 per cent this month.
• The IMD’s June forecast comes with a margin of error of 4 per cent of the long period average, and is considered more accurate than the April prediction.
• He said northwest India was likely to receive 85 per cent rainfall with a margin of error of 8 per cent.
• Speaking at the launch of the supercomputer ‘Bhaskara’ to better compute climatic changes at the National Centre for Medium Range Forecasting, he said the onset of the southwest monsoon over Kerala was likely around June 5.
• “It’s not just another unusually hot summer, it is climate change. Let us not fool ourselves that there is no connection between the unusual number of deaths from the ongoing heat wave and the certainty of another failed monsoon,” the Minister said.

RBI chief airs differences with govt.

• Wide differences emerged on June 2 in the assessments of the state of the economy by the Reserve Bank and the Modi government.
• “People should have different estimates… I have explained the basis of our Economic Survey forecast and let’s see how it pans out,” Chief Economic Adviser Arvind Subramanian said with regard to the RBI’s announcement in its monetary policy review that it was lowering projection for growth to 7.6 per cent from 7.8 per cent it had forecast in April. The government’s projection in the Economic Survey was that India is headed for 8 per cent-plus growth this year and on course for 10 per cent expansion in the near future.

Stateless and left out at sea

• The images of thousands of emaciated migrants on boats sent back to sea by Thailand, Malaysia and Indonesia, and reports of the discovery of the mass graves of trafficked people in Thailand and Malaysia have together done what human rights activists have been trying to achieve for decades. They have drawn international attention to the plight of thousands of Rohingya people who have been deemed stateless by the Myanmar government for more than 40 years as well as the issue of human trafficking in South and Southeast Asia. It appears that the images have managed to shock the world but this is not a new phenomenon. Nor can it be resolved just by a one-time acceptance of the migrants into these or other countries.While recent reports suggest that Malaysia and Indonesia will no longer turn away migrants, these horrifying images speak of a history of ethnicity-based marginalisation that has turned certain ethnic groups into perpetual victims of systematic oppression.

Exit as escape

• The Rohingya in Myanmar are perhaps the worst off among many minority groups that have been repressed by the military government of Myanmar as they were stripped of their citizenship and rendered stateless between 1974 and 1982. The government sees them as Bengali Muslims from Bangladesh who migrated there during the colonial period (and continue to do so) whereas the Rohingya see themselves as (Muslim) natives of Arakan (Rakhine), a state in Myanmar. In turn, Bengali Muslims in Bangladesh and India do not see the Rohingya as their kin in any respect, making the Rohingya the “safest” scapegoat. The Rohingya are thus deemed outsiders and continue to be persecuted and denied citizenship. In fact, the Rohingya are among the most persecuted minorities in the world according to the UNHCR.
• Many had participated in Myanmar Opposition leader Aung San Suu Kyi’s pro-democracy movement as members of the National League for Democracy (NLD), the main Opposition party, only to realise that the NLD, like the junta, has no place for the Rohingya in its “democracy.” There were and continue to be fringe armed groups mobilising to increase pressure on the government, but activists complain that there is no solidarity among the Rohingya let alone any consensus with regards to the future of the movement. Because many of the Rohingya are averse to armed struggle, they are unable to defend themselves when the military sweeps through their villages to clear the areas of “illegal immigrants.” Fleeing becomes the only option, no matter how dangerous that might be, the choice being between certain death and a small chance of survival. India and Bangladesh’s silence shows that they are unlikely to intervene in any way in what they would identify as being Myanmar’s internal affairs.

The water tribunal trap
The Interstate River Water Disputes Act, 1956 (IRWD Act) is an Act of the Parliament of India enacted under Article 262 of Constitution of India on the eve of reorganization of states on linguistic basis to resolve the water disputes that would arise in the use, control and distribution of an interstate river or river valley.

• At the Joint Conference of Chief Ministers of States and Chief Justices of High Courts held in April this year, Prime Minister Narendra Modi wondered if tribunals have become ‘barriers’ to delivering justice. Mr. Modi’s observations were about all tribunals in general, but most media reports understood them to be about interstate water dispute tribunals. Indeed, it was a reflection of a certain continuity in thinking for some time. At the moment, there are multiple tribunals in place to resolve interstate water disputes, but the National Water Policy 2012 proposed setting up a permanent tribunal to replace them.

An important exception

• The Constitution attaches a special status to interstate water disputes, whereby they neither fall under the Supreme Court’s nor any other court’s jurisdiction. These disputes can only be adjudicated by temporary and ad hoc interstate water dispute tribunals. This constitutional exception is why water tribunals cannot be bundled with other tribunals and need careful consideration before any reforms. Seeing tribunals as ‘barriers’ may set their reform on a wrong path — repeating a history of hasty and shallow responses.
• It is known that the inefficiency in interstate water dispute resolutions extends to factors beyond the functioning of the tribunals. These are linked to legal ambiguities, an institutional vacuum for implementing awards, noncompliant States, politicisation and so on. Yet, at the core of the entanglement is the Gordian knot of the constitutional anomaly, or the exception to the Supreme Court’s jurisdiction. The inquest has to begin from here. But the immediate question is that of the tribunal’s arrangement, which, of course, cannot be detached from the bar.
• The permanent tribunal, while complying with this bar on the Supreme Court’s jurisdiction, will primarily act as a circuitous route to address the problem of disputes, as they will recur even after the ad hoc and temporary tribunals are disbanded.

Dating to Colonial times

• The arrangement of having ad hoc, exclusive, temporary tribunals for interstate water dispute resolution has its roots in similar provisions during the colonial rule (including a bar on the Federal Court’s jurisdiction). The Interstate Water Disputes Act, 1956, is essentially a reworked arrangement proposed in the draft Constitution, which in turn derived from Articles 130-134 of the Government of India Act 1935. The Constituent Assembly rejected these arrangements, calling for a more permanent arrangement for dispute resolution. B.R. Ambedkar felt there would be ‘very many’ disputes, and the proposed arrangements were too ‘hidebound’ to respond to the evolving context of independent India.
• Thus, the Constituent Assembly deferred the responsibility of an appropriate legislation to Parliament via Article 262(1), while providing for the jurisdictional bar via Article 262(2). When Parliament took up the task, the proponents of the Interstate Water Disputes Bill 1955, Gulzarilal Nanda, Minister for Planning, Irrigation and Power, and his deputy, Jaisukhlal Hathi, chose to contradict the Constituent Assembly’s premises and resurrect these tribunal arrangements. They argued that it was unlikely that there would be many disputes, relying on the seven or eight years of experience after independence. This debatable premise, certainly ill-informed in hindsight, was the reason why tribunals were resurrected.
• However, Nanda and Hathi’s intentions were clear and their objectives valid: to ensure swift and definitive decision-making in interstate water disputes. The parliamentarians debated over these arrangements and agreed that tribunals suit water disputes best. They believed that tribunal arrangements would help speedy resolution, with the Supreme Court’s jurisdictional bar providing finality to their decisions. They wanted to avoid States litigating amongst themselves, leading to protracted court proceedings. They believed tribunal arrangements would also enable deliberative and discretionary decision-making for ‘mutually negotiated settlements’.

Good intentions, bad results

• This was the fairly well-intentioned rationale for favouring tribunals over courts, contingent to a particular historical moment. It translated well in the functioning of the first generation tribunals of Krishna, Narmada and Godavari. However, these functional arrangements unfortunately degenerated into the present form, with all the trappings that the parliamentarians wanted to avoid. They turned out to be litigatory and adversarial proceedings with protracted delays. Fali Nariman pointed to this degeneration in an incisive note to the Punchhi Commission on Centre-State relations.
• The degeneration was aided by rather poor records of subsequent parliamentarians in allowing several amendments to the 1956 act. The amendments, reactionary in nature, diluted the spirit and rationale of the tribunal arrangements. The history of the Act is filled with short-sighted and sutured responses to the symptoms of the degeneration and have avoided a comprehensive engagement with the problem of interstate water disputes.
• Reforming interstate water dispute tribunals cannot be approached without considering their historical exception and the associated pitfalls. The discourse on ‘barriers’ and the drive for hasty reforms can set us on a wrong path, eclipsing the actual barriers that lie beyond the tribunal arrangement itself. After all, the present arrangement was driven by precisely the same concern for swift and definitive outcomes as the objections are. It is imperative to have a comprehensive review of interstate water dispute resolution, and also reconsider the Supreme Court’s jurisdictional bar.