Editorial 1: The tussle over ‘services’ in Delhi
Context
- A Constitution Bench headed by the Chief Justice of India D.Y. Chandrachud on May 11 held that the Delhi government can make laws and administer civil services in the national capital.
Timeline of the Dispute
- 2017 Judgement: The Delhi High Court had, in its judgment 2017 held that for administration purposes of the National Capital Territory (NCT), the Lieutenant Governor (L-G) is not bound by the aid and advice of the Council of Ministers in every matter.
- 2018 Judgement: A five-judge Constitution bench had unanimously held that the L-G of Delhi is bound by the aid and advice of the elected government, and both needed to work harmoniously with each other.
- 2019 Judgement: A two-judge Bench of the SC delivered a split verdict on the question of powers of the Government of NCT of Delhi and Union government over services and referred the matter to a three-judge Bench.
- 2022 Case: The Centre on April 2022 sought a reference to a larger Bench, arguing that it needed the power to make transfers and postings of officers in Delhi on account of it being the national capital and the “face of nation”.
- 2023 case: The court held that the Delhi government can make laws and administer civil services in the national capital.
- Recent: On May the Centre turned the tables on the judgment by promulgating the Government of National Capital Territory of Delhi (Amendment) Ordinance, 2023 to make a fresh claim of power over the services in the capital.
Issues with the functioning of administrative services in Delhi
- Control over Administrative Services: One of the central issues has been the control over Indian Administrative Service (IAS). There has been a power tussle between the elected Delhi government and the Central government appointed LG over who holds the authority over these services. This tussle has often led to a deadlock in decision-making, affecting the smooth functioning of the administration..
- Division of Powers: The Delhi government does not have full statehood and thus does not have complete control over the police, land, and public order. This division of powers has created operational issues. The Delhi government has often complained that it has limited powers to execute its policies effectively.
- Legislative Ambiguity: The lack of clarity in the legislative text about the distribution of powers between the Delhi government and the LG has also created problems in the administration. The ambiguity in the reading of Article 239AA of the Constitution, which outlines the powers of the Delhi government, has often resulted in disagreements.
- Political Differences: Political differences between the elected Delhi government and the Central government have also been a cause for administrative issues. When the two are led by different political parties, as has often been the case, conflicts tend to arise.
- The National Capital Territory of Delhi (Amendment) Act, 2021: This Act passed by the Central government gave more powers to the LG, leading to power tussle and confusion over decision-making in Delhi’s administration.
Centre’s Viewpoint on Administrative Services in Delhi
- Control over administrative services.The Centre has consistently maintained that Delhi, being the national capital, holds a special status that necessitates the Union having control over administrative services. The Centre argues that the absence of this control would impede its ability to discharge its national and international responsibilities effectively.
- Delhi’s ministers have adequate powers: The Centre also argues that the Delhi government already has sufficient control over the bureaucracy through the Transaction of Business Rules, 1993, which grants Delhi’s ministers adequate powers to ensure supervisory and functional control over civil services.
- Delhi’s status as a Union Territory: The Centre further claims that the LG should retain considerable power due to Delhi’s status as a Union Territory. The 2021 National Capital Territory of Delhi (Amendment) Act supports this viewpoint by giving the L-G more powers.
Delhi Government’s Viewpoint on Administrative Services in Delhi
- Need power to implement their policies: The Delhi government, argue that as an elected government, they should have the power to implement their policies effectively and hold civil servants accountable.
- Article 239AA : They have contested the Centre’s interpretation of the Constitution, stating that Article 239AA gives the Delhi government legislative and executive powers similar to other states, excluding matters of public order, police, and land.
- 2021 Amendment Act- overreach by the Centre: The Delhi government has also contested the 2021 Amendment Act, viewing it as an overreach by the Centre into the administrative affairs of Delhi, and an attempt to undermine the powers of the democratically elected government.
- Limiting LG power: They believe that the LG should act on the ‘aid and advice’ of the Council of Ministers, as per the 2018 Supreme Court ruling, and that the L-G’s power should not extend to matters within the legislative assembly’s scope.
Conclusion
- Having a powerful local government in a national capital is not incompatible with the national interest. It is a question of political culture. What Delhi needs is more clarity.
- Its chief minister is a visible leader. It comes down to whether the national government and political parties have the maturity to be comfortable with federalism generally, and with strong local leadership in the national capital, in particular. The Delhi Government and the Centre must embrace a collaborative federalism and interdependence so as to avoid any disputes which will impact the welfare of common man.
Editorial 2: Slow withdrawal
Context
- The Reserve Bank of India’s May 19 announcement that ₹2,000 banknotes would be withdrawn from circulation, coming just over seven-and-a-half years since the economically deleterious demonetisation of ₹500 and ₹1,000 notes, has triggered a sense of déjà vu.
Reasons for the withdrawal
- With the fulfilment of the objective, the printing of Rs 2000 notes was stopped in 2018-19.
- The RBI issued the majority of the Rs 2000 denomination notes prior to March 2017 – now at the end of their estimated lifespan of 4-5 years.
- Therefore, in pursuance of the Clean Note Policy of the RBI, it has been decided to withdraw the Rs 2000 denomination banknotes from circulation.
Clean Note Policy
- The policy was introduced in 1999 by the then RBI Governor: Bimal Jalan.
- It seeks to give the public good-quality currency notes and coins with better security features, while soiled notes are withdrawn out of circulation.
- Under the policy, the RBI had earlier decided to withdraw from circulation all banknotes issued prior to 2005 as they have fewer security features.
Legal Tender Status
- Despite the withdrawal, the Rs 2000 banknotes will retain their legal tender status. Individuals can continue to use them for transactions and receive them in payments. However, the RBI encourages people to deposit or exchange these notes at bank branches on or before September 30, 2023.
Exchanging and Depositing
- To facilitate the exchange and deposit of Rs 2000 banknotes, individuals are advised to approach bank branches. There is a limit of Rs 20,000 for exchanging these notes at a time, applicable to both account holders and non-account holders. Deposits into bank accounts can be made without restrictions, subject to compliance with applicable Know Your Customer (KYC) norms and regulatory requirements.
Effects of the withdrawal
- Improve short term banking system liquidity: As the withdrawn notes are deposited with banks, they will have excess liquidity, which will go towards:
- Government securities: Banks resort to parking excess funds in government securities.
- Overnight money (Call money) market: Generally the overnight interbank (call rate) is more than the repo-rate. But this may change with sudden increase in short term fund availability.
- Reduce short term interest rates: The rates for government bonds will see a reduction, firstly for the t-bills and then later possibly for 3 and 5 year bonds also.
- Increased demand for Treasury bills: The increased demand in auctions will result in higher prices for government bonds.
- Decrease bond yield ie. increase bond prices: Bond yield is nothing but the implicit rate at which the face value of the bond is discounted to get today’s price.
- Dip in cash: Since all the 2000-rupee notes will come back in the banking system, we will see a reduction in cash in circulation and that will in turn help improve banking system liquidity.
Conclusion
- In conclusion, the Reserve Bank of India's decision to phase out 2000 rupee notes supports the objectives of the 'Clean Note Policy.' While the economy may experience temporary effects, the availability of smaller denominations and the growing digital transactions landscape are expected to mitigate disruptions caused by the reduction in cash circulation.