14 Jan 2023 : The Indian Express

Editorial 1: 4% inflation target provides flexibility, no need to change it:  RBI Governor

Recent context:

• Recently, Reserve Bank of India Governor Shaktikanta Das Friday said that there is no need to revisit the current inflation target of 4 per cent (with a leeway of 2 percentage points on either side) as it gives flexibility to Monetary Policy Committee (MPC)in taking monetary policy decisions..
• With the help of monetary tools RBI control the liquidity flow in the market and flexibility mechanism provides band width to maintain the targeted inflation while considering the economic growth.
•  As, it was observed during stress of Covid, slightly higher inflation had to be tolerated because the economy required help and support. RBI had to do a substantial reduction in policy rates and infuse a lot of liquidity
• While highlighting the current situation, RBI governor said that country’s economy has not only landed safely but has remained resilient amid huge global spillovers because of the
  • Russia-Ukraine warand geopolitics and
  • synchronised monetary policy tightening, especially by the US Federal Reserve and other advanced economies.

Role and Responsibilities of RBI in controlling in the Inflation:

1. Under the Reserve Bank of India, Act,1934 (RBI Act,1934) (as amended in 2016, 2021), RBI is entrusted with the responsibility of conducting monetary policy in India with the primary objective of maintaining price stability (Inflation) while keeping in mind the objective of growth.

Note: Consumer Price Index (CPI) (combined) is used as the key measure of inflation by RBIs.

What is the Inflation target?

• Under the Under Section 45ZA of RBI act1934, the Central Government, in consultation with the RBI, determines the inflation target in terms of the Consumer Price Index (CPI), once in five years and notifies it in the Official Gazette
• Under which Central Government notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
• On March 31, 2021, the Central Government retained the inflation target and the tolerance band for the next 5-year period – April 1, 2021 to March 31, 2026.
• Section 45ZB of the RBI Act provides for the constitution of a six-member Monetary Policy Committee (MPC) (which is headed by RBI governor) determine the policy rate required to achieve the inflation target.

Therefore, Inflation target is set by central government and it is maintained by RBI through monetary policy tools.

What is MPC fails to achieve the inflation target: or CPI limit (upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent) :

Way forward:

• A flexible inflation targets provides the opportunity to Monetary policy committee to maintain the inflation  along with economic growth  in give bandwidth as inflation of nation is influenced by national and international factors. Along with it, MPC is also held accountable if it fails to achieve the inflation target.
• Therefore, while providing the flexibility, it also upholds the accountability of MPC. In such as inflation and economic growth in maintained which is necessary for economic development of a nation.

Editorial 2: Centre vs Delhi Govt on control over services: timeline of a dispute

Recent Context: 

• Recently, A five-judge Constitution Bench of the Supreme Court is hearing a dispute between the Delhi government and the Centre over the control of services.
•  Almost five years ago, another Constitution Bench had ruled in favour of the Aam Aadmi Party-led state government in a similar tussle

The present case

• On May 2022, a three-judge Bench headed by former CJI N V Ramana had referred this case to a larger Bench on the Centre’s plea. The three-judge Bench had decided that the question of control over administrative services required “further examination”.
• As a result, A Bench headed by Chief Justice of India (CJI) D Y Chandrachud is constituted to hear the dispute between the Centre and the Delhi government over matters pertaining to control over the transfers and the overall functioning of administrative services in the National Capital Territory (NCT) of Delhi.

The constitutional provisions related to current situation:

• The Centre on April 27, 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”.
• The court agreed that the limited question relating to the scope of the legislative and executive powers of the Centre and NCT of Delhi, with respect to the term “services”, would need an authoritative pronouncement by a Constitution Bench in terms of Article 145(3) of the Constitution.
• The court noted that the primary contention related to the interpretation of                         Article 239 AA(3)(a) of the Constitution, which deals with special provisions for the NCT of Delhi.
  • In its order of May 6, the court said: “The Constitution Bench of this Court, while interpreting Article 239AA(3)(a) of the Constitution, did not find any occasion to specifically interpret the impact of the wordings of the same with respect to Entry 41 in the State List (State public services; State Public Service Commission).”
• Article 145(3) deals with the setting up of a Constitution Bench comprising at least five judges “for the purpose of deciding any case involving a substantial question of law as to the interpretation” of the Constitution.
• Earlier, The case had come before the three-judge Bench because a two-judge Bench had earlier delivered a split verdict on the issue of services. 

Earlier verdicts related to such case:

• After the 2019 split verdict, the case came up before the CJI for listing so that the case could be heard afresh. Split verdicts are rare but not uncommon. When a split verdict is delivered, the case is heard afresh by a larger Bench assigned by the CJI.
• Justice Bhushan had held that the
  •  Delhi government has no power over administrative services at all, whereas Justice Sikri was of the view that “transfers and postings of Secretaries, HODs and other officers in the scale of Joint Secretary to the Government of India and above can be done by the Lieutenant Governor and the file submitted to him directly”,
  •  but “for other levels, including DANICS (Delhi, Andaman and Nicobar Islands Civil Service) officers, the files can be routed through the Chief Minister to LG”.
• The 2019 verdict also dealt with five other issues arising from the power tussle, relating to the power of the Anti-Corruption Branch of the Delhi government to investigate corruption cases against central government officials and appoint commissions of inquiry.

The 2018 verdict

• In 2018, a five-judge Bench comprising then CJI Dipak Misra and Justices Sikri, Bhushan, A M Khanwilkar, and (now CJI) Chandrachud interpreted Article 239AA of the Constitution which contains special provisions for the national capital.
• The court laid down broad parameters for the governance of Delhi; it held that
  •  although Delhi cannot be given the status of a state, the powers of the LG can be curtailed as he has no “independent decision-making power” and has to act on the aid and advice of the elected government.

• “Constitution Bench has also accepted that the Lieutenant Governor is to act on the aid and advice of the Council of Ministers in all his acts, except those functions where the Lieutenant Governor is permitted to exercise his own discretion,”
• The court also restricted the jurisdiction of the LG to matters involving land, police, and public order, while holding that for all other matters, he will have to act on the aid and advice of the council of ministers.