Editorial 1 : A special right
Introduction: The Friday judgement of Supreme Court paved the way for Aligarh Muslim University to be called as minority institution in India. The 4:3 verdict finally gave a rest to long standing controversy around the minority institution status of AMU.
Aligarh Muslim University and interpretation of Article 30
- The Friday’s judgement reversed the 1967 SC decision in S Azeez Basha v Union of India — the SC had then relied on a technical interpretation of the guarantee to religious minorities, in Article 30, to establish and run educational institutions.
- It had ruled that AMU was neither “established nor administered” by Muslims.
- Though the university evolved from the Muhammadan Anglo-Oriental College founded by Syed Ahmed Khan in 1877, the Court had held that the institution’s legal status rested on the AMU Act 1920 — this legislation incorporated the social reformer’s college and another educational body into one university.
- The Azeez Basha verdict thus concluded that AMU was actually “established” by a colonial government Act, later amended by two pieces of legislation in independent India.
- In 1981, Parliament amended the AMU Act to negate the 1967 judgment.
- In 2005, the university drew on this legislation to reserve 50 per cent seats in postgraduate medical courses for Muslim students.
- The decision was challenged before the Allahabad High Court which relied on the Supreme Court’s 1967 verdict to rule that AMU was not a minority institution.
- The HC struck down the reservation.
- This verdict was immediately challenged by the then UPA government at the Centre and the university’s governing body, which later dropped by NDA government in 2016.
A more liberal interpretation of Article 30 by SC
- In the 1967 SC had ruled that “AMU had surrendered its minority status to the government”.
- This was reversed in Friday’s verdict, where SC upheld that mere conferring legal status to minority institution does not take away their minority characteristics.
- The judgement took a more expansive and inclusive interpretation of Article 30.
- The purpose of the Article is “to guarantee a ‘special right’ to religious and linguistic minorities that have established educational institutions.
- This special right is the guarantee of limited State regulation in the administration of the institution.
- The State must grant the minority institution sufficient autonomy to enable it to protect the essentials of its minority character,” CJI Chandrachud, who authored the majority verdict, said.
- Friday’s verdict should give AMU the autonomy to frame its recruitment and academic policies.
Conclusion: The Supreme Court’s reading of Article 30 is particularly timely, as momentum builds for standardizing civil laws across all communities. While both central and state governments advocate for a Uniform Civil Code (UCC), with one state already implementing it, the Court's stance offers important perspective. Given India's rich tapestry of diversity, government authorities should consider the Court's emphasis on providing enhanced safeguards to preserve the distinct cultural identity of religious and linguistic minority groups.
Editorial 2 : Unshackle the rupee
Introduction: While many observers have praised the rupee’s recent steady performance against the dollar, such stability masks a concerning reality. What appears on the surface as a favourable trend is actually the result of significant intervention by the Reserve Bank of India to control currency movements - a strategy that raises serious economic concerns.
Background on RBI’s Currency Intervention
- RBI has historically intervened in forex market to smooth rupee fluctuations.
- Current intervention levels are unprecedented since 1991.
- Average annual INR-USD volatility was 5% over two decades through 2020.
- Volatility dropped to 1.9% between April 2023 and August 2024, for such low volatility also RBI intervene in market.
- If stability comes from market forces, then it is a welcome step.
- Like Euro-dollar stability comes from market forces, not central bank intervention.
Recent Change in RBI’s Currency Policy
- Since late 2022, RBI actively intervenes on both sides of forex market
- Buys dollars to prevent rupee appreciation
- Sells dollars to prevent depreciation
- Effectively created an informal dollar peg without public announcement
Problems with the New Currency Policy
1. Economic Principles
- Contradicts free market principles
- Price determination should be market-driven, not state-controlled
- Market prices provide crucial supply-demand information
- State-set prices distort information systems
2.Historical Lessons
- Pre-1991 controlled prices led to widespread shortages
- Foreign exchange shortages due to pegged rates
- 1991 crisis resulted from these controls
- Many countries faced problems with pegged exchange rates (Argentina, Brazil, Mexico, Russia, South Korea, Thailand, Turkey)
3.Practical Issues
Previous flexible rate policy had two advantages:
- Helped smooth out business cycle fluctuations
- The exchange rate moved up or down over the business cycle which in turn helped smooth out output fluctuations.
- During periods of high growth when exports were growing and foreign capital was flowing in, the rupee appreciated which prevented the economy from overheating.
- When the economy was in a downturn, the rupee depreciated, making Indian goods and services more attractive to foreigners, and promoting an export-led recovery.
- Maintained long-term stability in real exchange rates
- Because these ups and downs balanced each other out, over long periods there was stability in the real exchange rate, that is the exchange rate adjusted for the difference in inflation between India and its trading partners.
- In contrast, the new inflexible system has already led to a significant real exchange rate appreciation, thereby making India’s exports more costly to foreigners, and potentially undermining the Make in India drive.
3.Transparency Concerns
- The central bank seldom communicates about its currency policy.
- As a result, it is not well understood why the RBI felt the need to break with a long-standing practice and bind the rupee so tightly to the dollar.
- It is also not clear whether this is a temporary policy or a more long-lasting change.
- Consequently, private sector participants in the foreign exchange market are confused.
Conclusion: The value of a currency relative to others serves as a fundamental economic indicator in a market-driven system. For India to achieve its ambition of becoming an advanced economy, its currency's worth must be determined by natural market dynamics, allowing it to provide accurate economic signals to investors and traders. Artificially controlling the rupee's value solely for stability could have adverse long-term economic consequences.