Undeclared Emergency: We are like that only

Voices for and against argument that there is an undeclared Emergency gets shriller every year

It is that time of the year — the last week of June — when the Emergency is remembered, various commentators lament the attempt to kill the spirit of the Constitution and others celebrate how the system fought back. Increasingly, the last week of June has also come to entail a discussion on a state of “undeclared Emergency”. The voices for and against the argument that there is an undeclared emergency gets shriller every year.
Some home truths are critical. First, no party in power is innocent of the charge of introducing elements of an “undeclared Emergency”. Be it the Congress-led United Progressive Alliance (UPA) or the Bharatiya Janata Party-led National Democratic Alliance (NDA), every successive government has contributed its share of draconian laws, subversion of Parliament, blasé violation of constitutional principles with law officers finding ingenious arguments to defend them in the courts. Each government builds on the foundation laid or fortified by the earlier government, regardless of political hue. Each Opposition screams against “undeclared Emergencies” and only builds on the foundation when voted into power.  
Examples will make this point clear. The UPA effected draconian amendments to the law governing foreign contributions to the social sector that have resulted in foreign-funded non-government organisations (NGOs) being barred from indulging in an ambiguously-and-widely defined “political activity” even while foreign-funded business enterprises face no such restrictions. Corporates with foreign shareholding are free to lobby for changes to law and lobby Members of Parliament and senior bureaucrats, while NGOs with foreign donations simply cannot meet these worthies to influence their thinking and express their points of view. The administration during the NDA government built on this well-laid foundation and started actually knocking NGOs hard.  
Likewise with interventions with media businesses or just crony capitalism. Bennett Coleman and Co, the owner of The Times of India, was hounded by the Enforcement Directorate during the United Front government comprising a bunch of 13-odd political parties led by Deve Gowda first and I K Gujral next, followed by the NDA. Tehelka and NDTV can write full primers on what can go wrong when you get on the wrong end of the state machinery. Tehelka’s substantial financier Shankar Sharma faced the music under both regimes — the NDA and the UPA (the allegations for which his broking firm had been punished in 2001 were levelled again to punish him personally, this time under the UPA). The Vedanta Group came in for serious stick under the UPA. Cairn India was forced to apply for approval for a change of ownership, and then given approval with the condition that substantive litigation against the government must be withdrawn. 
Second, a government in power has to be really very stupid to formally use the E-word and declare a state of emergency. It can now do so only if it were to entirely lose all faith in the democratic system to come to believe that it would get away with it. Indira Gandhi’s declaration of Emergency fell in the former category. Her termination of the Emergency showed that she too had not lost faith entirely and by the time she realised her cronies had gone too far, it was really late. Today, with the love and glory for the armed forces being felt so widely, as a society we may be heading towards a tipping point towards the latter — a loss of faith in democratic politics. However, no politician who has a decent career would have the capacity to come out the closet and declare an Emergency by design. 
The situation is much like the discourse and debate in Israel, where awareness of discrimination under Hitler’s Germany is always highlighted in the incessant debate over the “undeclared apartheid” against Palestinians. It would be stupid for Israel to embrace the epithet of “apartheid” and therefore, it would always highlight how apartheid in South Africa was different in vital features from the discrimination in Israel. Our social debate on “undeclared Emergency” is quite similar. One can keep pointing out that there is no official censor to review news reports, but others can point out that when the situation does not demand an official censor, you do not need to appoint one. The actions of the “Censor Board”, as the film certification board has come to be known, are adequate pointers to the social state.
Finally, as a society, Indians have always craved for a dictator they can elect. Ruthlessness has always been an admired trait in large sections of the Indian electorate and society. Indira Gandhi was popular in her day. The PM in office is as popular today. Their decisiveness and sense of direction is a matter of envy of the other politicians and pride for the layman. Therefore, it is not at all really necessary for a formal declaration of emergency. You can blame Indira’s indiscretion on being blinded by her cronies — astrologers and Sanjay Gandhi’s disjointed blokes and being cut off from ground realities. Let us remember that it was not the feeling of constitutional injury that led to her downfall right after Emergency — it was the forced nasbandi by population-control vigilantes that led to the disaffection of the masses. The government that succeeded her was as draconian — a simple example of trying to arrest a former PM without even a warrant should do to make the point. Morarji Desai had sought to put down the Maharashtra movement in the Bombay Presidency with a firm hand — directing firing on protestors.  
Perhaps a more honest way to handle this debate is or all to acknowledge by saying, “We are like that only.”
This column was published “Without Contempt” in the Business Standard edition dated June 29, 2017

Keep official abuse of governance in check

Last week, India’s media was abuzz with reports of a meeting that did not take place — the one between officials of the Ministry of Finance and members of the Monetary Policy Committee (MPC) of the (RBI). Around the same time, the sacked chief of the United States’ Federal Bureau of Investigation deposed with candour about his interactions with US President Donald Trump, in the midst of a probe into whether the latter had obstructed justice.

 

Both the events point to one question: What level of intervention by the “government” is acceptable in the functioning of governmental institutions that have their own institutional governance mechanisms? For many, the point of discussion itself is meaningless: To their minds, once an institution is “governmental”, the government in office has every right to dictate terms on how to “govern”. If you believe in that approach, feel free to stop reading further. If not, remember this is an issue even more critical for India than for the United States. Here’s why.

 

Most Indian economic legislation — the Acts that led to setting up regulators for the capital markets, insurance sector, pension funds or telecommunications and airports, and so on — have specific provisions that enable the central government to issue directions on matters of policy to regulators. If more than one view is possible on what constitutes “policy”, the government’s view is final. For many policy wonks, such a legal position is adequate for the government to have an unconditional say in the running of a regulatory or investigative institution.

 

Indeed, when controversy over interference erupts, government servants usually point to these provisions. Worse, potentially diabolically, it is usually pointed out that in fact government records have no evidence of these provisions being actually put to use. Indeed, there is even a reluctance to use these powers formally. For example, when the finance ministry could have issued policy directions to the regulators of the capital markets and the insurance sector to resolve their differences over how to regulate unit-linked insurance plans that appeared to have features of both insurance policies and mutual funds, the finance ministry instead asked the regulators to litigate. Formal use of the policy-direction power requires taking a stance in writing and exposing the decision to accountability in the form of judicial and academic review. Informally, the clubby-chummy world of “moral suasion” enables unbridled intervention and “guidance” with no statutory accountability involved.

 

This is the context in which traditional central bankers were chafing at the very mention of the idea of setting up a MPC — where nominees of the finance ministry would engage in discussion with central bankers — although the central bank would have the last word thanks to a casting vote of the governor. The finance ministry’s thinking in wanting to meet the committee members points to the central problem with governance in India, whether it is corporate governance or statutory governance. When a governance system entails representation in the form of people trusted by the nominating authority being appointed to a forum, it would not follow that the nominee is a postman or a spokesman at the forum for the nominating authority. She is not meant to be a messenger or agent, who is to carry out instructions of the nominating authority.

 

For example, once a director is nominated by a shareholder to the board of directors of a company, the director has to play her statutory role in the governance of the company. If the fact that she is a shareholder-nominee were to be a licence for the nominating shareholder to dictate terms to her and to the board where she sits on how business must be conducted, not only the very office of the director but also the entire forum of governance, that is, the board of directors, stands eroded. They would be rendered as rubber stamps in reality and office-bearers only on paper.

 

It would be akin to the mob’s view in “people’s rule” (yes, that sounds Maoist) prevailing over the rule by those voted to power, because it is the people who voted them to power and the mob belongs to the people. It is this principle that led the United Kingdom’s Supreme Court’s ruling in the Brexit case, too. It was for Parliament to take a decision and pass a law on leaving the European Union and not say that it had no role on the premise that the people had spoken through a referendum. Identical is the case with a gay marriage plebiscite in Australia, where wary of popular reaction either way, members of parliament sought to wash their hands of the matter and sit on the fence by referring the question to a plebiscite.

 

Instituting the MPC with governmental representation does not mean the government can tell the committee what it must do. Having chosen them, it is for committee members to function and take independent decisions of their own volition. Indeed, there is one very important element in all this: Such a nuanced governance narrative could push underground, the influencing of the committee members by the government.  Instead of openly seeking meetings, these discussions would be pushed to the sidelines of think-tank discussions, the cocktail circuit and the drawing rooms of those influential in the lobby.

 

However, the potential abuse of rightful conduct of governance does not mean that right governance systems should themselves get shunned. It is for transparency systems such as the law on right to information, or parliamentary oversight (indeed that is what led to the deposition in the United States) to keep in check abusive underground activity in governing a nation.

 

This column was published in the Business Standard’s edition dated June 15, 2017 under the title Without Contempt

A chance to score a judicial point

In the Justice Karnan row, the judiciary can demonstrate that they will not flinch on accountability

The controversy is entering unseemly territory. Yet, it has presented a never-before opportunity for the judiciary to score an important point in the scheme of constitutional

 

At every stage of being disciplined, Justice C S Karnan has made society suspend disbelief. He has been purporting to pass unprecedented ex parte orders against of the Supreme Court, among others, directing the Chief Justice of India and other not to travel out of India so as to “prevent them from infecting” territories outside India with their anti-Dalit attitude. Whether Justice Karnan’s conduct is contemptuous of the judiciary, whether he is at all of sound mind, and what, if any, the punishment for contempt should be, may eventually be determined judicially. However, there can be no doubt about one fact — his behaviour is eminently impeachable.

 

At the time of this column going to press, no one in authority has used the i-word. The very thought appears to be far removed from serious consideration.  Reasons vary. Some believe that it would be meaningless to do so with the judge having just weeks left in office. Others feel that a judge being impeached would tarnish the history book. Leaving aside what reasons compete for keeping away from impeachment, here is a simple political thought.

 

Impeaching a judge of a high court or the Supreme Court is, for all the right reasons, a tough task. Misconduct by a judge can be lightly alleged by any party unhappy with a judge’s decision. In every litigation, there is at least one party unhappy with the outcome (at times, all parties can be unhappy, but such is life when differences cannot be resolved mutually). Arms of the state, in particular, governments, government agencies and the bureaucracy are the biggest contributor of litigation in the country. This renders vulnerable, and unless effectively protected under the Constitution, it would be impossible to have a credible and respected judicial arm of the state.

 

The constitutional tension and between the executive arm and the judicial arm of the Indian state has been typically informed in recent times, by the debate on It is no judge’s case that must not be accountable at all for misconduct, but it is vitally important to ensure that misconduct is not lightly alleged. The constitutional amendment to change the manner in which are selected and tested for accountability, and the amendment being struck down, has been the high point of this constitutional political tension in the past two years.

 

Now, presents a fantastic opportunity to the judiciary. No judge in the higher judiciary has presented a stronger case for being impeached. Impeachment requires elected members of Parliament to speak up and act. To impeach a judge, misbehaviour or incapacity has to be proven as grounds for tabling an impeachment resolution in any House of Parliament.  In the Lok Sabha, 100 members have to come together to set the ball in motion while in the Rajya Sabha, 50 members would do.  The Speaker in the Lok Sabha and the Vice-president who chairs the Rajya Sabha have to accept that a motion to impeach a judge may be tabled. Each House of Parliament is required to vote with a majority of not less than two-thirds of the members present and voting.

 

At every stage of being disciplined, Justice C S Karnan has made society suspend disbelief. There can be no doubt about one fact - his behaviour is eminently impeachable

At every stage of being disciplined, Justice C S Karnan has made society suspend disbelief. There can be no doubt about one fact — his behaviour is eminently impeachable

If our politicians are serious about judicial and the need to bring to account, an impeachment motion for should be a sitter. Reality is different. The political system will bring into motion the conventional political dynamics for the vote. Justice Karnan’s defence of the indefensible is largely based on one single point — that he is being targeted on caste-based lines because he is a Dalit. Dalit Members of Parliament could call his bluff if they so desire. A government that is said to be committed to finishing off caste-based — with a beginning having been made in the Uttar Pradesh elections —and indeed, said to be committed to bringing in an era of judicial accountability, should easily find 100 members in the treasury benches of the Lok Sabha or 50 members in the treasury benches of the Rajya Sabha to do the task of setting the ball in motion.

 

If Supreme Court were to transparently (read, publicly) ask for such a motion to be passed, it would set the cat among the pigeons.  Parliamentarians would have to deal with having been called upon to play their constitutional role — something they say they are keen to see do properly. And, if Parliament flounders, whether on caste lines, linguistic lines, or indeed any political lines (the nuanced and intense floor management in the 1990s when Justice Ramaswami’s impeachment motion was considered by Parliament comes to mind), the judiciary would have proven its point — that the judiciary will not flinch from taking to the logical and ultimate end, and it is the political system that is unable to handle it. It would prove to Indian society that the legislative obsession with how are appointed, while important, is not founded on outcomes but on the of who may occupy high judicial office.

 

On the other hand, if Parliament indeed acts to impeach Justice Karnan, that would in itself be a milestone in India’s constitutional history. Not one judge having been impeached in the Republic’s seven-decade history is not a nice sign. It is a pointer to the checks and balances built in by the founding fathers of the nation not having been put to use at all. If politicians play the usual card of convincing the judge to resign midway during impeachment proceedings, the judiciary would have still made its point that it is unflinching in calling upon the system to work towards So, the situation presents a win-win opportunity that is waiting to be seized.
This piece appeared in the column titled Without Contempt in the editions dated May 25, 2017 of the Business Standard

A tighrope walk for Sebi

If news reports are right, the Securities and Exchange Board of India (Sebi) is coming full circle with (CIS) and is seeking to “relinquish” the statutory mandate to regulate such schemes.

 

It was only in 1995 that the term found its way into the Act through an amendment to the list of intermediaries that ought to be registered with to be able to carry on business in India. Then, too, had been a reluctant regulator. Schemes promising returns on the basis of plantations, animal farming, chain-marketing and the like mushroomed in the 1990s. The term “collective investment scheme” was not even defined in the Act. Therefore, despite the amendment to the Act, did not want to hold the baby.

 

Public interest litigation, a plethora of complaints and a lot of angst later, the term got defined for the first time through an amendment in the Act in 1999. also made regulations in 1999, which, if reduced to one sentence, would have read: “No one shall operate a collective investment scheme”. The terms on which one could legitimately register and operate a was akin to Christian states in the US stipulating norms for abortion agencies — keep the standards so rigid and tough that they pose an entry barrier and cannot be complied with. Not surprisingly, right since 1999, there has been only one reported registered in the history of

 

The problem with such an approach to regulation is fundamental — pretending that making it illegal to carry out an activity would put an end to it. The activity continued, the monies raised grew even faster, some of which are even feared to be from non-existent investors — read: money laundering schemes. An even more bizarre amendment sailed into the Act in 2013. The 1999 amendment had set out four ingredients to be met for any scheme or arrangement of affairs to be regarded as a — essentially, schemes entailing a contribution of funds for earning of profits, management of the funds pooled by someone on behalf of the contributors and the contributors not having day-to-day control over managing the pool. Now, in 2013, the law was amended to say that even if these ingredients were absent, if the corpus of any arrangement of affairs was of Rs 100 crore or more, it would be “deemed to be” a

 

This set the cat among the pigeons. Any and every pooling of funds that would have a corpus value of Rs 100 crore would be a CIS, which meant that a registration with would be necessary for the activity to be legitimate. A pooling of resources by neighbours owning apartments in an expensive city like Mumbai to rebuild and redevelop their building would arguably be a The provision of holiday schemes where the contribution by guests would give them the right to use a property from the pool of properties built or rented with the contributions would arguably be a Provision of valuables such as gold coins with contributions in instalments would arguably be a

 

None of these would involve issuing securities and therefore, none of these can ever comply with the regulations governing that had made in 1999. Therefore, all of it would be illegal. Those who cared for the law, shut down such activity or moulded them. Those who did not care, kept at it — eroding the majesty of the law even further by reason of formulation of law not properly thought through.
Meanwhile, with public furore over some that failed led to some judicial comments about sleeping on its job, which got reported in the media and then led to crack down by ordering that monies collected be refunded within a few weeks or months. Now, this would spur asset-liability mismatches further and lead to either a run on the schemes that could not be met, or worse, led to operators starting newer schemes underground to fund repayment of schemes ordered to be closed. In a nutshell, a royal mess is on the regulator’s hands.
It is in this context that reports of wanting to relinquish this statutory role is interesting. Around the time piloted legislative amendments to treat any corpus of Rs 100 crore or more as a CIS, it had a muscular tone about how anyone speaking about the need for a predictable framework for running a compliant could only have been aligned with the bad guys. Now, it seems, is conscious that pushing an entire industry underground is actually counterproductive and brings about worse outcomes. Whether it would at all be politically possible to amend the Act yet again to remove of this kind from Sebi’s ambit is doubtful. But one must assume that it the mind is set on an outcome, the government will find ways to get that done — whether through a Presidential Ordinance, a or blanket provisions in the Finance Act.
If pulls off this one, the would have come full circle back to the 1990s. Who then, would bell the cat?
This column was first published as Without Contempt in all editions of Business Standard edition dated May 5, 2017

What if Kashmir’s AFSPA was applied to India Inc

The folks in corporate India have strong views about their own perceptions of ‘ground realities’

Almost everyone in the Indian corporate world has a view on the ongoing tragedy in Kashmir. A view informed by the ruthlessness in punishing dissent, that is the norm in corporate politics. A war is being waged on social media, infected with the virus of videos extolling the virtues of uniformed Indian military men slapping and poking bleeding Kashmiri boys, forcing them to chant slogans against Pakistan, with greater threats leading to louder forced abusive slogans. “Ideal treatment for stone pelters,” said a friend in a WhatsApp group. A bunch of others chimed in, in agreement.

This column is not going to be about how those pelting stones are civilians in unrest, who could in fact turn to pelting grenades. Nor will this column purport to explain why atrocities on the Pundits inflicted in the 1990s cannot justify atrocities on kids in Kashmir today. For now, I am not even getting into the issue of some popular singer whose claim to fame is singing on television, abusing retired Indian military men who have actually served in war, for speaking up against military brutality on civilians.  

Since the folks in corporate India have strong views about their own perceptions of “ground realities” in Kashmir (it matters not if social media warriors had even considered volunteering for basic National Cadet Corps service as students), this column will simply seek to translate what living in Kashmir can feel like if the legal framework applicable there were to be made applicable to an Indian corporate.

Let’s take the simplest and the most obvious cause of state high-handedness in areas like Kashmir (as indeed large parts of the North East) and see how it would feel to work in corporate India if the same cause were replicated. Essentially, let’s adapt the law applicable in Kashmir to the law governing running business in corporate India. This is necessary since most people with the strongest views on Article 370, which reflects the contract by which Kashmir joined the Indian Union, have never read the Armed Forces (Jammu & Kashmir) Special Power Act, 1990 (the dreaded “AFSPA”), which governs life on the street in Kashmir.  

It is easy to read, however uneasy the reading can be for the reader. It has barely eight effective provisions. In a nutshell, any government officer can do anything with your life and property, and never be called to account. Forget having checks and balances in the form of tribunals such as the National Company Law Tribunal or the Securities Appellate Tribunal. Forget bringing errant public servants to book through anti-corruption measures in courts of law. Read on for what would govern life under AFSPA in the corporate or industrial world:

  
1. If the government is of the opinion that any industry poses danger that use of severe measures is necessary to prevent violations of law, the government may declare the whole or any part of such industry to be a “disturbed industry”.

2. Any government officer may, if he is of the opinion that it is necessary, fire upon or otherwise use force, even to the causing of death, against any person, who is acting in contravention of any law or order, do so in a disturbed industry.

3. Any government officer may, in a disturbed industry, destroy any place from which violation of law is likely to be made or attempted to be made.

4. Any government officer may arrest without warrant any person against whom a reasonable suspicion exists that he is about to commit an offence and may use such force as may be necessary to arrest.

5. Any government officer may enter and search, without warrant, any premises to effect such arrest or to recover any person believed to be wrongfully restrained or confined or any property reasonably suspected to be stolen property, and may for that purpose use such force as may be necessary, and seize any such property.

6. Any government officer may stop, search and seize any vehicle reasonably suspected to be carrying any person against whom a reasonable suspicion exists that he has committed or is about to commit an offence, and may, for that purpose, use such force as may be necessary to effect such stoppage, search or seizure.

7. Every person making a search under this Act shall have the power to break open the lock of any door, almirah, safe, box, cupboard, drawer, package or other thing, if the key is withheld.

8. Without approval of the government, no person who has used or claims to have used powers under this law can be prosecuted or sued.

Not too long ago, the Securities and Exchange Board of India Act was sought to be amended to permit search and seizures without the need for even a warrant. In fact, a Presidential Ordinance contained such provisions. A Parliamentary Standing Committee met various stakeholders and representatives of industry and rightly killed the provision although it was believed that “war like” powers were necessary to combat securities market abuse.  

The Finance Act, 2017, has indeed brought in a provision protecting the tax department from having to explain how it had “reason to believe” or “reason to suspect” that led to a search and seizure operation. When such powers begin to get mildly used, fellow Indians living in the corporate bubble will get a faint whiff of what life can be like when you run a grocery store in the streets of Kashmir or the North East. Until then, there will be no let up in the enthusiasm to wage war on social media against civilians being punished for protesting against excesses encouraged by incentives embedded in the legal policy governing these regions.

This column was published Without Contempt in the editions of Business Standard published on April 20, 2017  

It’s a tug-of-war out there

By Somasekhar Sundaresan
It is by far the boldest move in executive governments pushing the envelope in breaking the law with the very process of law-making. The current government has piloted the Finance Act, 2017, through to get substantial legal provisions passed without the scrutiny of the

 

Many appellate tribunals that hear appeals against orders by regulatory authorities have been wound up for being merged with other tribunals —essentially, changes in institutions that were set up in the first place, with the approval of both the and the Constitutional courts may be visited with challenges to the abuse.  But not much may happen there. The has an inbuilt check and balance in the office of the Speaker of the She has the last word on whether or not a proposed law is a Money Bill, that is, a law that deals with matters of finance and tax, as set out in the

 

The approach of the government is legally wrong. However, every wrong is not justiciable. If the set much store by the judgement of an occupant of high office, it was arguably intended that the occupant of that office must be trusted. If that trust is belied, it would only follow that we have a loophole in the that can only be corrected by a constitutional amendment.

 

It is equally true that courts have not always steered clear of every wrong that is not justiciable. Constitutional courts have happily legislated. Either entire legislation (for example, environmental charge for entry of vehicles into Delhi) including de facto contents of the (for example, the judges’ collegium for judicial appointments) have been created in the past by judge-made law. When facts are provocative enough, intervention may indeed follow.

 

In a challenge to the replacement of governors of states as political decisions, courts have ruled that no decision of the government, including a decision to replace a governor can be arbitrary, yet ruling that the decision cannot be interfered with. It is likely that the pending litigation over whether legislation that are nowhere near Money Bills can be passed by as if they were Money Bills, would meet the same fate.

This contrivance aimed at simply circumventing the has been resorted to in the past. The Foreign Exchange Management Act, 1999, had been passed by both Houses of as a non-criminal law to replace the dreaded criminal law contained in the Foreign Exchange Regulation Act, 1974. That was not a That had been a major milestone in India’s legislative and economic policy history. Two years ago, provisions criminalising exchange controls were brought into through a No consent of the was taken.

These infractions of law were not challenged since they were not politically correct for challenge. Now that a bigger gauntlet has been thrown, it is possible that some may challenge it.  The history of constitutional challenges to the creation of tribunals has itself had a chequered history at the hands of courts. The National Tax Tribunal could not be set up due to such a challenge.  The National Company Law Tribunal could indeed be set up although in its new form it is in conflict with earlier rulings of the Supreme Court rendered when dealing with earlier attempts to set up the Tribunal. There are as many views on interpreting the as there can be benches of the Supreme Court and of multiple high courts.

All of this is not to say that all the changes sought to be brought in are bad. There are some laudatory amendments — one is the retirement age of the presiding officer has been extended to 70 years. Some changes are horrible.  The tribunals listed in the Finance Act, 2017, are not the only ones whose has been disturbed. A provision entitling government to similarly merge other tribunals not named for now, by a simple executive fiat has also been passed as a part of the

 

The Finance Act, 2017, is a quiet power-grab in the conflict between arms of the state.  If the judiciary wrested control back by striking down the National Judicial Appointments Commission, the executive has sought to strike back by giving itself powers over vast areas of quasi-judicial territory.

This is the most vulnerable part of the Finance Act, 2017, since it could be struck down as being arbitrary as it is a matter of “excessive delegation” of powers by the legislature to the executive. A constitutional challenge to such delegation is not about whether it is a Even if it were to be regarded as a provision in a Money Bill, it would be liable to be attacked as an arbitrary delegation of power to the government.
A version of this post was published as my Without Contempt column in the Business Standard in its editions dated April 6, 2017

Good Politics is not the same Good Policy

Outcomes of elections cannot be a barometer of the wisdom of economic policy

By Somasekhar Sundaresan

An election result is upon   India’s most populous state and her neighbour have emphatically voted the party in power at the Centre into government. Two tiny states have returned fractured verdicts and coalition governments led by the party in power at the Centre have been installed.  The single-largest winner in these two states is having to sit in the   Another state elected the principal party to power.

The polls were seen as a referendum on whether demonetisation, announced in November, met with approval by the people of India. Shortcoming in psephology skills is now equated with shortcoming in appreciation of public policy. The outcome of the polls, it is widely believed — even among critics of now mired in serious self-doubt — underlines that was for the larger good and the common man could see what policy wonks failed to see.

Outcomes of elections cannot be a of the wisdom of economic policy. The merits of public policy choices are quite different from the merits of assessing the capacity to sell evidently unpopular choices at the hustings. The latter is reflective of political acumen. The former requires the capacity to take hard decisions for the right reasons. The inability to gauge the intensity of anger of the man on the street is not the same as the inability to think clearly about what is good policy.

inflicted serious hardship on the common man. The costs it imposed evidently outweigh the benefits — mind you, computation costs and benefits can itself be quite controversial. The courts had refrained from restraining the government although judges are said to have expressed fear of riots on the streets.  There were no serious riots despite acute hardship. The reasons that were said to have motivated the measure appear to have been belied — stashes of slush money in crisp newly printed Rs 2,000 notes are already being unearthed; in crisp Rs 2,000 notes are being apprehended; and most of the corrupt rich seem to have tided over the crisis with some bearable cost being borne.

did not hurt the electoral prospects to the extent it would rationally have. Nor for that matter have laws that imposed a near-100 per cent tax on income. If winning elections were a relevant of what constitutes good public policy, and the Congress’ consistent wins for decades would place all their measures in a great position — it is another matter that today they are being pilloried.  Despite (or perhaps, thanks to) ridiculous tax rates, black money got built up.  The narrative of electoral wins making policy immune from critique was a well-honed model.  leaders saw her as Durga, commentators said she was “the only one wearing the pants in the Cabinet” and yet, India kept slipping in governance, and institutions kept getting weakened to stay “committed” to her approach to policy.

Perhaps, politics’ dependence on cash led to materially impacting the outcome. Count that among the benefits of if it evenly impacted all in the fray. Perhaps, the choice of chief minister after the win is a pointer to what issues really mattered at the polls. Perhaps, was an electoral side-issue — a reflection of the disconnect between commentators in the cities and the realities on the ground.

None of this can dilute the need for a clear-headed empirical approach to policymaking, with costs and benefits being weighed and a cogent case for a policy intervention being necessary. In the and the UK, policy thinking is currently on the lines of having to remove more than one past regulatory measure if a new regulatory measure is sought to be introduced. Akin to “carbon offsets” where reduction in emissions of carbon dioxide or in one process is necessary to enable initiating new emissions elsewhere, regulatory offsets are part of current policy-thinking in other parts of the world. Computing of costs and benefits to show that costs that would get imposed by a proposed regulatory measure is not only counterbalanced by the benefits from that measure but are also compensated for by the removal of costs imposed under past regulatory measures, is a controversial but integral part of governance.

Brushing all policy arguments about aside with a people-have-spoken argument is a reminder of Nani Palkhivala’s favourite quip about how majority decisions need not be the right decisions. His favourite examples: Christ’s crucifixion, and of course, the quality of elected governments during most of his lifetime.

This column was published Without Contempt in the March 23, 2017 edition of Business Standard at: http://www.business-standard.com/article/opinion/don-t-mistake-good-psephology-for-good-policy-117032201432_1.html