Background:-
There has been a hue and cry as far as demonetization is concerned since the night of November 8. Meanwhile, while we were observant of the various developments, we took a decision to wait until the whole story unfolds.Since November 9 , probably each newspaper had published more than 20 articles on the issue. Every erudite in the country , had an opinion about it, moreover every citizen of the country has an opinion about it.
The single move gave a rather “hungry media” a “giant meatloaf” and they have been chewing on it since then. Every day, and in every form of media, the story of demonetization is unfolding. Some analysis are vary personal and emotional in nature, while some are very rational in nature, some are individualistic and some have broader perspective.
But if you look closely, those who wanted to blame the move, they went on to sight and find cases where due to demonetization “someone” had suffered. Even a Bengali director made a movie about it named- “Shoonyata“, and of course as anticipated the movie shows the problems that unfold when a bride is about to get married and demonetization is announced. The movie is simply individualistic in nature, that means it tries to show the plight of a single bride, and through this the director wants to paint it as everybody’s plight.
So, before we delve into details of demonetization, it is certain that different corners of the society have different opinions about it as they endured the demonetization. To sum up, who are impacted and who are not, here is a rather simplified list :-
- Super rich/Rich with legitimate business- No impact or very little impact
- Upper-middle class- Not much impact
- Middle class-Not much impact beyond the obvious
- Neo-middle class- Probably hardest hit, mostly blue-collar workers who lost their job or were unable to be paid by their employer
- BPL household- Marginally hit
However, this is a historic move, because, there are no other such decisions which might impact each nook and corner of India and every citizen. Money after all is a basic necessity apart from the usual rhetoric of – “Roti,Kapda aur Makan” (“Food,Cloth and Shelter”)
Being a giant of a decision, it was necessary for us to not give into temptation and publish every article of the newspapers. So, we waited, watched, we observed and now is the time to publish.
History of demonetization:-
In 1971, the Wanchoo Committee had submitted an interim report in which it had recommended, among other reforms, the demonetisation of high-value currency notes. Y B Chavan was then finance minister. Retired civil servant, Madhav Godbole, in his book Unfinished Innings: Recollections and Reflections of a Civil Servant tells us that after many deliberations over the matter, demonetisation was accepted along with other reforms suggested by the committee.
However, “in view of the sensitive nature of the subject and the need for maintaining utmost secrecy”, the prime minister’s approval was needed. So Chavan went to meet Indira. And this is what he told Godbole about his meeting with Indira on the issue.
When Y.B. Chavan told Indira Gandhi about the proposal for demonetization and his view that it should be accepted and implemented forthwith, she asked Chavan only one question: “Chavanji, are no more elections to be fought by the Congress Party?” Chavan got the message and the recommendation was shelved.
Here is the Analysis:-
So, what exactly happened on 8 November?
Prime Minister addressed the nation and announced that effective from 9 November, all Rs 500 and Rs 1,000 notes of the current series (including pre-2005 ones) would cease to be legal tender. That means people could not use them to buy and sell goods and services. Technically, this was not demonetisation, but de-legalisation. The actual demonetisation happened with the proclamation, on 30 December, of the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, which reduced those notes to worthless bits of paper.
What does the ordinance do and why was it necessary?
Under Section 34 of the Reserve Bank of India (RBI) Act, 1934, the central bank has a liability to honour every currency note – anyone presenting that note has to get the value printed on it, whether Re 1 or Rs 2,000. As long as a note does not come back to the RBI, it continues to be a liability.
The only way this liability can end is for the government to expressly state that the old notes cannot be redeemed any more, which is what the ordinance does.
How much of old Rs 500 and Rs 1,000 notes were sloshing around before 8 November? How much has been returned or exchanged?
As of 9 November, the high denomination notes worth Rs 15.44 lakh crore was with the public.
There are various estimates of the money that has come in, based on data from the RBI, but it’s best to wait till the central bank puts out a figure. There could be double counting in the estimates that are going around right now.
Besides, though one will get a pretty accurate estimate in a few days or a week, an absolutely exact figure on notes returned will be known only after some months. Remember, that while the deadline for deposit of the old notes in banks ended on 30 December, resident Indians can still deposit these notes in the offices of the RBI till 31 March and non-resident Indians (NRIs) can do so till 30 June. These are the only two windows given by the ordinance. Resident Indians will have to give a declaration that they were outside the country between 9 November and 30 December.
In addition, people can declare their unaccounted wealth held in cash under the Pradhan Mantri Garib Kalyan Yojana, the second income declaration scheme that was announced on 16 December. The window for this too is open till 31 March. (Some of this could be in new notes, if black money holders have managed to launder the cash they held.)
But the amount returned by NRIs between 31 March and 30 June is not likely to be huge, so it is best to wait till mid-April to get a sense of how much of the demonetised currency has been returned.
Can the window given to NRIs be used to launder large sums of money?
Unlikely. A notification under the ordinance stipulates that the amount of demonetised currency returned by an NRI cannot exceed what is specified under the Foreign Exchange Management (Export and Import of Currency) Regulations, 2015, issued under the Foreign Exchange Management Act, 1999. That limit is Rs 25,000. That’s why the amount returned by NRIs is not likely to be huge.
What is this fuss about my not being able to even keep old notes with me?
The ordinance gives a grace period (31 March and 30 June) for the return of the demonetised currency. So it is not as if you will be penalised for holding old Rs 500 and Rs 1,000 notes between 30 December and 31 March. Beyond this grace period, a person can hold only a total of 10 notes of both denominations (five Rs 500 and five Rs 1,000 or two Rs 1,000 and eight Rs 500, or all 10 of the same value etc) or only 25 notes for study, research or numismatics.
Anyone holding more than this (other than the RBI or anyone ordered to do so by a court in connection with a case) will have to pay a fine of Rs 10,000 or five times the amount of the value of currency found with him, whichever is higher.
Since these notes will be just worthless pieces of paper, what is wrong if I, say, decide to make a collage of 100 pieces and put it up in my drawing room? Or just keep it in my locker and periodically rue the day I decided to evade taxes or make money through crooked means?
Good question, this provision does defy logic. But, no answer. It’s also not clear how the authorities will come to know about people holding more than the specified number of notes beyond the grace period.
Fifty days on, has the inconvenience ended?
The short answer to this is, no, though the situation has improved since the first two weeks post 8 November. Finance Minister Arun Jaitley and RBI governor Urjit Patel have assured that there is enough supply of cash. But all of this is not making its way to banks. The curbs on cash withdrawal have not been rolled back entirely; though the limits for ATM withdrawals have been increased from Rs 2,500 to Rs 4,500 but the weekly withdrawal limit remains at Rs 24,000. There are still ATMs and bank branches with no cash, even in metros. For every story of no inconvenience, there is another of inconvenience and harassment.
Has demonetisation met the objectives it was supposed to achieve?
The jury is still out on this.
In his 8 November address, PM said the move was meant to “break the grip of corruption and black money”.
But black money is a consequence and not a cause of corruption. Merely demonetising high value notes will not eliminate corruption; discretionary power in the hands of the politicians and bureaucrats has to end. This needs a complete recast of governance systems.
The fact that through the past 50 days, there have been seizures of large volumes and value of new currency notes shows that the money-laundering industry has not been hit at all by the demonetisation move. All that happened was that the commission dropped from 40 per cent before the announcement of the Pradhan Mantri Garib Kalyan Yojana to 25 per cent.
Funding of political parties also needs a complete revamp. Political parties are a major conduit for unaccounted money and large cash donations are quite common. Cash donations up to Rs 20,000 need not be reported to the Election Commission and this is a major loophole that all political parties exploit. Nothing has happened to change this.
In his address, the PM also spoke about how fake notes of Rs 500 and Rs 1,000 have been used in terror financing. The new notes have extra security features and were supposed to deal a body blow to the counterfeiting industry. But the seizure of some counterfeiting machines in the past week has raised some doubts about this as well.
UPSCTREE’s understanding of the issue:-
Was it a “bold” move, is there any ethics involved ?
A simple example can clear whether it was a bold move or not. Following India’s demonetization , another country followed suit, i.e. Venezuela and it resulted in civil war and govt of that country had to roll back the decision.So, in sum, it was a a bold move, and given the size of the country and 87% transaction being carried out via cash, it was not only a bold but probably an audacious move.It could have been a political disaster and the PM would have no more been the PM- it was that big a risk to take on this “gamble”.The example of Venezuela is testament to it.
So, the next question is why there was no civil war, and this is purely a question of ethics, more specifically virtue ethics.
As per virtue ethics, an act seems ethical because it is carried out by an ethical person.In this case, people don’t judge the act but they judge the actor and form opinions according to it.Given the PM’s persona, people of India, took a leap of faith in the PM, majority were judging the PM than the act of PM.
This is because, there can not be a “Yes and No ” or “black and white” answer to this decision.Some benefits are visible and some benefits will never be visible and same goes for the “bad impacts” as well.It is a indeed a matter of “grey”, however most opinions emanating from different corners of society is either Yes or No.Economists themselves don’t have enough statistics of black economy, so it is worthwhile to ponder how general populace form their opinion and this is precisely the reason why we looked at it from an ethical angel and that gives us some clue of the popular psyche and the way they form the decisions.
Is there any benefit of this decision ?
The PM has a record of being an incremental reformer, but this is a “disruptive” move.The benefit , both short term and long-term are listed below :-
Economy
- Cost of real estate will come down- making housing affordable.It is indeed a recession like condition for real-estate mafias, and if accompanied by amendment to Benami Trasaction Act , it will have some real impact in this sector.
- Inflation is low
- Push for digital-economy
- Helps in curbing terror-financing and other threats to state such as Naxalism
- A fat deposit in banks may lead to cut in lending rates. It helped in debt-recovery and reduced NPA to some extent
Goveranance
In terms of governance, it helped establish the trust between people and state. For long, the many had the notion that they can get away with illegal means (tax evasion) etc, but this decision established the fact that govt. is willing to go any length to reward good-ones and punish the bad-ones. For long it was other way around, the bad-ones used to garner ill-gotten wealth and managed to get away with it (Just a recall of almost all movies of the last few decades may give the idea, where the good-ones are punished by the wicked , although the good-ones win at the end but that part of the movie was more of a fantasy than reality)
Consider this statistics – 24 lakh people have a declared income of more than 10lakh per annum (24 lakh in a country of more than 120 crore population- is this not tax-evasion?)-this statistics proves that many had such notion of getting away with their ill-gotten wealth. And the decision tries to bridge the gulf of trust deficit between the ruler and the ruled.
Socio-behavioral Impact
This is probably the hardest one to judge. Nevertheless, data shows that online transactions are on a up-swing and rise of more than 200% is evident of it. So this might be the trigger point for Indian economy to go cash-less or less-cash.
Other impacts and harsities are well-known and requires no elaboration.
Was this good decision badly implemented ?
This is indeed the next line of argument put forth by different sections and it has some merit in it. But given the nature of decision and the level of secrecy it required, those who implemented it were probably well aware of it. After all decision of this nature looses steam when it looses secrecy.
However, it could have been better implemented and there should have been an ad-hoc grievance call center set up across the country, where if an organization denies accepting the old notes or a medical denies the treatment to the public deliberately then a complaint should have been registered immediately and action should be taken immediately. This is a giant task , but the Panchayats and block-development-offices should have been ideal nodal point to deal with this kind of matter and some form of authority should have been delegated to them with standards of protocol.
The essence is – the state should have to pull all its strings , so that the basic facilities and services are not denied to the general public which requires adequate planning, co-ordination and data-dissemination in real-time. In short, it could have been better implemented.
The next question is whether the black money will be eradicated ?
There can not be any conclusive evidence of it, simply because it is “black” – that means no one can certainly say how much of it is “black”. However, this decision, although will curb black-money in short term, what it aims essentially is to raise the cost of money-laundering. That acts as a deterrence. When the cost and pain of money laundering outweighs the benefit of it then money-laundering as an act looses relevance.
Moreover, this years budget and tax decision will have impact on this. If the tax is lowered and tax base in increased then govt. will have all the money it wants to run the state and citizens will be least bothered about paying a marginal tax. In short, the govt. has to make tax percentage attractive enough so that money-laundering looses its relevance.So, that is one of the reason why the decision of this nature can not be judged in short-term as many other decision are interlinked with it.
There was demonetization before, so why this one is historic ?
It is all about timing. Gandhi would not have been Gandhi if he entered India after 1940 or in 1900. Gandhi is Gandhi because of his timing. Same logic can be applied to this decision. The decision before it had no ecosystem of digital payment to support, that means people had not much of alternative. Hence the past decisions had less impact. But this one is perfectly timed. It is the era of digital economy and there is the ecosystem of digital payment and alternative methods to go cash-less , hence important and historic. This will have impact.
So to sum it up, it was good decision, but could have been better implemented. The benefits and demerits are has both short term and long term connotations. Hence, it is wise to wait a little longer and look at the data to see and judge the impact. And there is the budget announcements to be made as well. So , jumping to a conclusion is neither called for nor wise at this juncture.
We all understand certain parts of it, we all don’t understand certain parts of it and nobody knows the exact statistics. And that’s demonetization in a nut-shell thus far.
And yes, there is a last question that went through everyone’s mind though .
Why 2000 rupees notes ?
At first instance one might think this is a moronic move by the govt., but we urge you to think harder. If you look at the data, most of the high value day-to-day transactions lie between 500 to 1000 rupees and by releasing 2000 notes instead of 1000, govt. is deliberately pushing people to do cashless transactions. It is little harder to do retail shopping with 2000 rupees notes and this is precisely govt. is trying to achieve – to give you the note but make it little inconvenient for us to transact. This is much to do with human psychology and less to do with economy. A slight inconvenience leads us to look for alternatives and govt. is trying to tap into this socio-economic-behavior. We wonder, whether the govt. has hired any behavioral scientist to do this. After all there is a whole new world of behavioral economics as well.
Of course, the above one is our interpretation, but if this is what the govt., is trying to do then it is indeed a well-though out move which looks moronic on the face of it.
Conclusion:-
There are some merit in the decision, however this decision is not aimed at black money only. For the simple reason that the stock of black wealth held in currency form has been generally estimated at around 5 to 6 per cent of the total black economy.
The stock of black economy does not get affected much and only a small portion of black money is held in currency. Most of it is stashed abroad or held in real estate, gold or foreign currency. Moreover, black money generation is a continuing process that involves evading taxes, regulations and engaging in corrupt and criminal activities. These cannot be tackled with a one-time measure.
The claim that the demonetisation was aimed at immobilising counterfeit currency also lacks some credibility, because such currency is estimated to value no more than Rs 400 crore, a very small proportion of the value of the high-denomination notes that were in circulation.
There is bound to be arrested growth in economy for short term.
- The informal sector is largely cash-dependent and alone accounts for 40 per cent of the GDP and employs 80 per cent of the workforce.
- The NBFC are unable to provide loan to small farmers and MSME sectors.
- Rupee exchange rates have increased and there is a downward swirl of stock market.
- The state of the economy matters significantly here because that will primarily determine response capacities of each segment, sub-segment and interactions within to influence aggregate outcome.
Some economists put the above arguments to justify that the move was nothing but disastrous. so why did the government go for this move causing much hardship to the common man,the very safety and security of whom the government wants to protect? Did the government take a very myopic step?
A deeper analysis gives a big NO as the answer. Because the sole and underlying motive of the government was TO MOVE TOWARDS A DIGITAL ECONOMY. The subsequent actions of the government bring testimony to this fact:-
a. Discount in digital transactions.
b. Facilitating several methods of digital transaction
c. Circulation of 2000 rupees.
This paradigm shift in the economy will increase the transparency in transactions making the illegal activities difficult and riskier.It will lead to increase in tax base thus reducing tax rate and enhancing the revenue generation.
Note :- This analysis is exclusive to UPSCTREE, and if you have any other alternatives, please do let us know and we can debate and deliberate on this. It took us a while to write this , however we have a strong belief that it will help you enrich your understanding of this issue. And if you think it is enriching, please don’t hesitate to share.
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Recent Posts
- Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition, a collective of the United States, United Kingdom and Norway governments, came up with a $1 billion fund.
- LEAF is supported by transnational corporations (TNCs) like Unilever plc, Amazon.com, Inc, Nestle, Airbnb, Inc as well as Emergent, a US-based non-profit.
- The world lost more than 10 million hectares of primary tropical forest cover last year, an area roughly the size of Switzerland.
- Ending tropical and subtropical forest loss by 2030 is a crucial part of meeting global climate, biodiversity and sustainable development goals. Protecting tropical forests offers one of the biggest opportunities for climate action in the coming decade.
- Tropical forests are massive carbon sinks and by investing in their protection, public and private players are likely to stock up on their carbon credits.
- The LEAF coalition initiative is a step towards concretising the aims and objectives of the Reducing Emissions from Deforestation and Forest Degradation (REDD+) mechanism.
- REDD+ was created by the United Nations Framework Convention on Climate Change (UNFCCC). It monetised the value of carbon locked up in the tropical forests of most developing countries, thereby propelling these countries to help mitigate climate change.
- It is a unique initiative as it seeks to help developing countries in battling the double-edged sword of development versus ecological commitment.
- The initiative comes at a crucial time. The tropics have lost close to 12.2 million hectares (mha) of tree cover last year according to global estimates released by Global Forest Watch.
- Of this, a loss of 4.2 mha occurred within humid tropical primary forests alone. It should come as no surprise that most of these lost forests were located in the developing countries of Latin America, Africa and South Asia.
- Brazil has fared dismally on the parameter of ‘annual primary forest loss’ among all countries. It has lost 1.7 mha of primary forests that are rich storehouse of carbon. India’s estimated loss in 2020 stands at 20.8 kilo hectares.
- Between 2002-2020, Brazil’s total area of humid primary forest reduced by 7.7 per cent while India’s reduced by 3.4 per cent.
- Although the loss in India is not as drastic as in Brazil, its position is nevertheless precarious. For India, this loss is equivalent to 951 metric tonnes worth carbon dioxide emissions released in the atmosphere.
- It is important to draw comparisons between Brazil and India as both countries have adopted a rather lackadaisical attitude towards deforestation-induced climate change. The Brazilian government hardly did anything to control the massive fires that gutted the Amazon rainforest in 2019.
- It is mostly around May that forest fires peak in India. However, this year India, witnessed massive forest fires in early March in states like Odisha, Uttarakhand, Madhya Pradesh and Mizoram among others.
- The European Union’s Copernicus Atmospheric Monitoring Service claimed that 0.2 metric tonnes of carbon was emitted in the Uttarakhand forest fires.
- Implementation of the LEAF Coalition plan will help pump in fresh rigour among developing countries like India, that are reluctant to recognise the contributions of their forest dwelling populations in mitigating climate change.
- With the deadline for proposal submission fast approaching, India needs to act swiftly on a revised strategy.
- Although India has pledged to carry out its REDD+ commitments, it is impossible to do so without seeking knowledge from its forest dwelling population.
- providing Dominion Status to India, i.e., equal partnership of the British Commonwealth of Nations;
- all Provinces (ruled by the British India government) and Indian States (ruled by Indian princes) should constitute one Indian Union by the British Constitution;
- the Constitution of India should be framed by an elected Constituent Assembly of Indian people but if any province (or Indian State) which was not prepared to accept the Constitution was to be free to retain its constitutional position which had existed at that time.
- Such provinces were to be free to enter separate constitutional arrangements.
- there should a Union of India consisting of British India and the States, which would have jurisdiction over subjects of Foreign Affairs, Defense and Communication;
- all residuary powers would belong to the Provinces and the States;
- the Union would have Executive and Legislature consisting of the representatives from the Provinces and the States but for decision relating to a major communal issue in the legislature a majority of representatives of two major communities would be present, and voting along with the majority of all members present and voting would be required;
- the provinces would be free to form Groups with executives and legislatures;
- and each group would be free to determine the Provincial Subjects which would be taken up by the Group organisation.
Context:-
At the recently concluded Leaders’ Summit on Climate in April 2021, Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition, a collective of the United States, United Kingdom and Norway governments, came up with a $1 billion fund plan that shall be offered to countries committed to arrest the decline of their tropical forests by 2030.
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]What is LEAF Coalition?
Why LEAF Coalition?
Brazil & India
According to the UN-REDD programme, after the energy sector, deforestation accounts for massive carbon emissions — close to 11 per cent — in the atmosphere. Rapid urbanisation and commercialisation of forest produce are the main causes behind rampant deforestation across tropical forests.
Tribes, Forests and Government
Disregarding climate change as a valid excuse for the fires, Indian government officials were quick to lay the blame for deforestation on activities of forest dwellers and even labelled them “mischievous elements” and “unwanted elements”.
Policy makers around the world have emphasised the role of indigenous tribes and local communities in checking deforestation. These communities depend on forests for their survival as well as livelihood. Hence, they understand the need to protect forests. However, by posing legitimate environmental concerns as obstacles to real development, governments of developing countries swiftly avoid protection of forests and rights of forest dwellers.
For instance, the Government of India has not been forthcoming in recognising the socio-economic, civil, political or even cultural rights of forest dwellers. According to data from the Union Ministry of Tribal Affairs in December, 2020 over 55 per cent of this population has still not been granted either individual or community ownership of their lands.
To make matters worse, the government has undertaken systematic and sustained measures to render the landmark Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 ineffective in its implementation. The Act had sought to legitimise claims of forest dwellers on occupied forest land.
Various government decisions have seriously undermined the position of indigenous people within India. These include proposing amendments to the obsolete Indian Forest Act, 1927 that give forest officials the power to take away forest dwellers’ rights and to even use firearms with impunity.
There is also the Supreme Court’s order of February, 2019 directing state governments to evict illegal encroachers of forest land or millions of forest dwellers inhabiting forests since generations as a measure to conserve wildlife. Finally, there is the lack of data on novel coronavirus disease (COVID-19) deaths among the forest dwelling population;
Tardy administration, insufficient supervision, apathetic attitude and a lack of political intent defeat the cause of forest dwelling populations in India, thereby directly affecting efforts at arresting deforestation.
Way Forward
Tuntiak Katan, a global indigenous leader from Ecuador and general coordinator of the Global Alliance of Territorial Communities, aptly indicated the next steps at the Climate Summit:
“The first step is recognition of land rights. The second step is the recognition of the contributions of local communities and indigenous communities, meaning the contributions of indigenous peoples.We also need recognition of traditional knowledge practices in order to fight climate change”
Perhaps India can begin by taking the first step.
INTRODUCTION:-
The Constitution of India was adopted on 26 November 1949, which means it was finalised by the Constituent Assembly on that day. But it became operative two months after its adoption, i.e., on 26 January 1950, which is also known as the date of its “commencement”.
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]However, some provisions of it, i.e., those relating to citizenship, elections, provisional Parliament, temporary and transitional provisions had become operative on 26 November 1949 itself. The reason for its commencement after two months of its adoption was to signify the January 26 as the original date of achievement of Independence.
It was this day, i.e. 26th January, in 1930 which the Indian National Congress (INC) had first celebrated as the Independence Day of India. It is important to note that the Constitution of India is product of a longdrawn process and deliberations.
EVOLUTION OF THE INDIAN CONSTITUTION 1858-1935
The Constitution of India embodies provisions providing basic democratic rights of human beings including the persons who are not Indian citizens. It also embodies provisions for the availability of institutions for legislation, execution and jurisdiction for the fulfilment these rights.
It presents a vision for social transformation and deepening of democracy in India. The process of evolution of democratic institutions and rights had started much before the Constituent Assembly really made the Constitution of India.
It, however, must be underlined that the features of democratic institutions and values which were introduced during the colonial period were meant to serve the colonial interests in contrast to the purpose of the provisions of the Constitution made by the Constituent Assembly of India.
Although the Indian Constitution was result of the deliberations (from December 9, 1947 to November 26, 1949) of the Constituent Assembly, some of its features had evolved over three quarters of a century through various Acts, i.e., from 1858 to 1935.
The Government of India Act, 1935, and Other Acts
With the transfer of power from the East India Company to the British Crown, the British Parliament got involved in managing affairs of India. For achieving this purpose, from 1858 till 1935, the colonial government introduced certain features of constitution or rules of governance through different Acts. The Government of India Act, 1935 was the most important among these Acts.
First of these other Acts was Government of India Act, 1858. It provided for a combination of centralised and decetralised power structure to govern India. The centralised structure was introduced in the areas which were under the direct control of the Crown. These areas were known as British India provinces or provinces. The decentralized structure was introduced in the areas which were not under the direct control of the Crown. These areas were ruled by the Indian princes, and were known as princely states or states.
Under this system, the princes had freedom to govern in all internal matters of their princely states, but they were subject to the British control. In the centralized structure of power which was introduced in the provinces, all powers to govern India vested in the Secretary of State for India (and through him in the Crown). He acted on behalf of the Crown.
He was assisted by a fifteen-member council of ministers.There did not exist separation of executive, legislative and judicial functions of government; these all were concentrated in the hands of the Secretary of State for India. In British India, the Secretary of State of India was assisted by the Viceroy, who was assisted by an executive council.
At the district level, the viceroy was assisted by a small number of British administrators. The provincial government did not have financial autonomy. In 1870 viceroy Lord Mayo ensured that all parts of provincial administration received due share of revenue to meet their needs.
The scope of political institutions in the provinces was expanded a little further following the introduction of Council of India Act, 1909. This Act introduced for the first time a “representative element” in British India, which included elected non-official members.This Act also introduced separate representation to Muslim community.
The Government of India Act 1919 devolved some authority to the provincial governments, retaining the control of the central government (unitary government) on them.It relaxed the control of the central government in a limited way. It divided the subjects for jurisdiction of administration and sources of revenue between centre and provinces.
Under this arrangement, the provincial government was given control on resources of revenue such as land, irrigation and judicial stamps. The provincial subjects were divided into “transferred’ and “reserved” categories.
The “transferred” subjects were governed by the governor, and “reserved” subjects were governed by the legislature. The governor (executive head) was not accountable to the legislature.
The Government of India Act, 1935 was different from the earlier Government of India Acts. Unlike the earlier Acts, the Government of India Act, 1935 also provided for provincial government enjoying provincial autonomy. It provided “safeguards” for minorities.
Such “safeguards” included provisions for separate representations to Muslims, Sikhs, the Europeans, Indian Christians and Anglo-Indians. This Act also provided for three lists of divisions of power between the federation (central government) and provinces: federal (central), concurrent and provincial.
The Act also provided for establishment of a federal court to adjudicate disputes between federation and provinces. The executive head of the provincial government was Governor, who enjoyed special power. Under the special power the Governor could veto the decisions of the provincial legislature.
He acted on behalf of the Crown, and was not a subordinate of the Governor-General (the changed designation of Viceroy). He enjoyed discretionary powers to exercise his “individual judgments” in certain matters. In such matters, he did not need to work under the advice of ministers: he was to act under the control of the Governor-General, and indeed the Secretary of the State.
He was also not accountable to the legislature but he was required to act on the advice of ministers, who were accountable to the legislature.
Government of India Act, 1935 also had provisions for setting up a central government consisting of representatives from the provinces(areas ruled by the British India government) and the states (the areas covered under princely states).Such government was supposed to be known as federal government because of composition with members both from provinces and the states.
However, the federal government could not be formed because there was no unanimity among the princes to join the federation; consent of all princes was essential for the formation of federation. Thus, only the provincial governments could be formed as per this Act.
And election to the provincial legislature as per the Government of India Act, 1935 was held in 1937. Following the election of 1937, provincial governments headed by the Indian National Congresswere formed in eight provinces. The Indian National Congress government resigned in 1937. Nevertheless, according to M. Govinda Rao and Nirvikar Singh (2005), the Government of India Act, 1935 provided a basis to the Constituent Assembly to make the Constitution.
The Nehru Report(1928): First Indian Initiative to Draft Constitution
As you have read above, attempts to introduce elements of constitution in British India through different Act since 1858 were made by the British rulers. Indians had no role in it.
The first attempt by Indians themselves to prepare a Constitution of India was made in the Nehru Report(1928).Earlier, effort by Indians was made in the name of the swaraj (self-rule) by leaders of Indian national movement during the non-cooperation movement in 1921-22.
The Nehru Report was known as such because it was named after the chairman of its drafting committee, Motilal Nehru. The decision to constitute the drafting committee was taken in the conference of the established All India parties. The principal among these parties included Indian National Congress, Swaraj Party and Muslim League. The Justice Party of Madras and Unionist Party of Punjab did not participate in this meeting.
The Nehru Report demanded universal suffrage for adults and responsible government both in the centre and in the provinces. It, however, supported the Dominion Status, not complete independence for India.
It meant that Indians would have freedom to legislate on certain limited matters under the control of the British India government. For this, the Nehru Report prepared list of central and provincial subjects, and fundamental rights. It also raised demands for universal suffrage for men and women adults.
Indeed, it was in 1934, a few years after the preparation of the Nehru report, that the Indian National Congress officially demanded a constitution of Indian people, without the interference of outsiders.
FORMATION OF THE CONSTITUENT ASSEMBLY
The Cripps Mission
Initially, the colonial authorities resisted the demand for creation of a Constitution of India. But with the change in the circumstances – the outbreak of the World War II and formation of the new Coalition (Labour-led) government in Britain, the British government was forced to acknowledge the urgency to solve the problem related to Constitution of Indians.
In 1942, the British government sent its cabinet member – Sir Stafford Cripps with the draft declaration on proposals (regarding formation of constitution for Indians) to be implemented at the end of the WW II provided both the Muslim League and the Indian National Congress had agreed to accept them.
The draft proposals of the Cripps Mission recommended the following:
Both the Indian National Congress and the Muslim League did not accept the proposals of the Cripps Mission. The Muslim League demanded that India should be divided on the communal lines and some provinces should form an independent state of Pakistan; and, there should be two Constituent Assemblies, one for Pakistan and another for India.
The Cabinet Mission
The British Indian government made several attempts to bridge the differences between the Indian National Congress and the Muslim League. But it was unsuccessful.
The British government sent another delegation of the Cabinet members, known as the Cabinet Delegation, which came to be known as the Cabinet Mission Plan. It consisted of three cabinet members – Lord Pathic Lawrence, Sir Stafford Cripps and Mr. A.V. Alexander.
The Cabinet Delegation also failed to bring the Indian National Congress and the Muslim League to an agreement. It, however, made its own proposal which was announced simultaneously on 16 May, 1946 in England as well as in India.
The Cabinet delegation made the following recommendations:
Election to the Constituent Assembly
Meanwhile, according to the proposals of the Cabinet Mission, the election to the Constituent Assembly was held in which members of both the Indian National Congress and the Muslim League were returned. The members of the Constituent Assembly were elected by the Provincial Legislative Assemblies.
However, differences between the Indian National Congress and the Muslim League arose on interpretation of “Group Clauses” of the Cabinet Mission.
The British government intervened at this stage and explained to the leaders in London that the contention of the Muslim League was correct. And on December 6, 1946, the British Government published a statement, which for the first time acknowledged the possibility of two Constituent Assemblies and two States.
As a result, when the Constituent Assembly first met on December 9, 1946, it was boycotted by the Muslim League, and it functioned without the participation of the Muslim League.
NATURE OF THE CONSTITUENT ASSEMBLY’S REPRESENTATION
It is often argued that the Constituent Assembly of India did not represent the masses of India because its representatives were not elected through the universal adult franchise. Rather they were indirectly elected by the restricted adult franchise confined to the elite sections of society – the educated and tax payers.
According to Granville Austin the reasons for the restricted franchise and indirect election to the Constituent Assembly members were spelled by the Cabinet Mission Plan. These were to avoid the cumbersome and slow progress in the process of Constitution making.
The Cabinet Mission provided for the indirect election to the Constituent Assembly by the elected members of the provincial legislature. The Indian National Congress agreed to this proposal of the Cabinet Mission forsaking the claim of adult franchise to hold election to the Constituent Assembly.
Despite having been elected through the restricted adult franchise, the Constituent Assembly represented different shades of opinions and religious communities of India. Austin observed that though there was a majority of the Indian National Congress in the Constituent Assembly, it had an “unwritten and unquestioned belief” that the Indian National Congress should represent social and ideological diversity.
There was also its “deliberate policy” that the representatives of various minority communities and viewpoints should be represented in the Constituent Assembly. The Constituent Assembly consisted of members with different ideological orientations, and three religious communities -Sikhs, Muslims and General (Hindus and all other communities like the Anglo-Indians, Parsis, etc).
In words of K. Santaram “There was hardly any shade of opinion not represented in the Assembly”. Majority of the Constituent Assembly members belonged to the Indian National Congress. It also included more than a dozen non-Indian National Congress members.
Some of these were A.K. Ayyer, H.N. Kunjru, N.G. Ayyanger, S.P. Mukherjee and Dr. B.R. Ambedkar. S.P. Mookerji represented the Hindu Mahasabha.
The Constituent Assembly included representatives from the Princely States as well. It needs to be underscored that Dr. Ambedkar was initially elected to the Constituent Assembly from Bengal as member of the Scheduled Caste Federation. But he lost this seat due to the partition of Bengal and was re-elected by the Bombay Indian National Congress (as a non-Indian National Congress candidate) at the request of the Indian National Congress High Command.
The Constituent Assembly sought to address concerns of every person irrespective of their social and cultural orientations. Before incorporating a provision in the constitution, it held elaborate deliberations. Thus, the members of the Constituent Assembly could overcome the limitations of having been elected by the restricted franchise.
The Constituent Assembly sought to accommodate universal values of democracy. The Constituent Assembly adopted several provisions from different constitutions of world and adapted them to the needs of India. In fact, Austin argues that while incorporating different provisions in the Constitution including those which were borrowed from other countries the Constituent Assembly adopted “two wholly Indian concepts” of resolving differences among its members, i.e., consensus and accommodation.
Most members of the Constituent Assembly participated in its proceedings. But these were twenty individuals who played the most influential role in the Assembly.
Some of them were Rajendra Prasad, Maulan Azad, Vallabhbhai Patel, Jawaharlal Nehru, Govind Ballabh Pant, P. Sitaramayya, A.K. Ayyar, N.G. Ayyangar, K.M. Munshi, Dr. B.R. Ambedkar and Satyanarayan Sinha. Though the Constituent Assembly was the sole forum where deliberations took place, yet the deliberations took place in coordination of three bodies – the Constituent Assembly, the Indian National Congress Party, and the interim government.
Some members of the Constituent Assembly were also members of other bodies at the same time. Austin said that “an oligarchy” of four – Nehru, Patel, Prasad and Azad had enjoyed unquestioned honour and prestige in the Assembly. They dominated the proceedings of the Constituent Assembly.Some of these were simultaneously in the government, Indian National Congress Party and the Constituent Assembly.
Prasad was President of Indian National Congress before becoming the President of the Constituent Assembly. Patel and Nehru were Prime Minister and Deputy Prime Minister respectively at the same time. They were part of the inner circles of the committees of the Constituent Assembly.
The Constitution Drafting Committee meticulously incorporated in the draft constitution the decisions of the Constituent Assembly. Dr. B.R. Ambedkar, chairman of the Drafting Committee played the leading role in drafting of the Constitution.
Acknowledging the pivotal role of Dr. Ambedkar, T.T. Krishnamachari, a member of the Drafting Committee, said in one of his speeches: “The House is perhaps aware that out of the seven members nominated by you, one had resigned from the house and was replaced. One had died and was not replaced. One was away in America and his place was not filled up, and another person was engaged in State Affairs, and there was a void to that extent. One or two people were far away from Delhi and perhaps reasons of health did not permit them to attend. So it happened ultimately that the burden of drafting this constitution fell upon Dr. Ambedkar and I have no doubt that we are grateful to him for having achieved this task in a manner which is undoubtedly commendable.”
Dr. Ambedkar on his part “gave much of credit” to S.N. Mukerjee – B.N. Rau’s and Ambedkar’s assistant, the Drafting Officer of the Assembly, “for the careful wording of the Constitution”.
THE ROLE OF THE CONSTITUENT ASSEMBLY IN THE MAKING OF INDIAN CONSTITUTION 1946-1949
The inaugural session of the Constituent Assembly was held on 9 December 1946. It was supposed to be attended by all 296 members but only 207 members could attend it because the Muslim League members absented from it.
As stated earlier, they had boycotted the Constituent Assembly. In this meeting, Acharya J.B. Kripalani requested Dr. Sachchidananda Sinha to be the temporary chairman of the House. The members passed a resolution on 10 December 1946 for election of a permanent chairman, and on 11 December 1946, Dr. Rajendra Prasad was elected as the permanent Chairman of the Constituent Assembly.
The Constituent Assembly divided its work among different committees for its smooth functioning. Some of the important committees were:
(a) Union Power Committee. It was chaired by Jawaharlal Nehru and had nine members;
(b) Committee on Fundamental Rights and Minorities. It had 54 members and Sardar Ballabh bhai Patel was its chairman;
(c) Steering Committee and its 3 members which included Dr. K.M. Munshi (chairman), Gopalaswami Iyangar and Bhagwan Das;
(d) Provincial Constitution Committee. It had 25 members with Sardar Patel as its chairman;
(e) Committee on Union Constitution. It had 15 members with Jawahalal Nehru as its chairman.
After discussing the reports of these committees, the Constituent Assembly appointed a Drafting Committee on 29 August 1947 under the chairmanship of Dr. B.R. Ambedakar. The draft was prepared by Sir B.N. Rau, Advisor to the Constituent Assembly.
A 7-member Committee was constituted to examine the draft. Dr. B.R. Ambedkar, who was Law Minister as well as chairman of the Drafting Committee piloted the draft in the Assembly. Dr. Ambedkar presented “Draft Constitution of India”. The “Draft Constitution” was published in February, 1948.
It was discussed by the Constituent Assembly clause by in its several sessions and was completed by October 17, 1949. This discussion was known as the second reading. The Constituent Assembly again met on 14 November 1949 to discuss the draft further or to give it a third reading.
It was finalised on 26 November 1949 after receiving the signature of the President of the Constituent Assembly. But it was January 26, 1950 which became the date of commencement of the Constitution.
SALIENT FEATURES OF THE CONSTITUION
The Indian Constitution has some salient features. These features give Indian Constitution a distinct identity. It is based on the features of different constitutions of the world. In the words of Dr. Ambedkar, The Indian constitution was prepared “after ransacking all the known Constitutions of the world”.
The chapter on Fundamental Rights is based on the American Constitution; the Parliamentary System has been adopted from the British Constitution; the Directive Principles of State Policy have been adopted from the constitution of Ireland; the Emergency provisions are based on the Constitution of Weimar (Germany) and Government of India Act, 1935.
The features which have been borrowed from other Constitutions have been modified in the light of the needs of our country. It is the longest written constitution. At the time of its formation, the constitution of India had 395 Articles and 8 Schedules. It ensures both Justiciable and Non-Justiciable Rights: Fundamental Rights and the Directive Principles of the State Policy.The constituent makers preferred universal adult franchise over the separate electorates.
Universal Adult Suffrage and Abolition of the Separate Electorate
After debating its draft list of Fundamental rights the Sub-Committee on Fundamental Rights did not recommend inclusion of all of them in the section III of the Constitution as the Fundamental Rights. Instead, it suggested that these should be incorporated in other places in the Constitution.
One such example is that of the Universal suffrage, and Secrete and periodic elections. The sub Committee agreed unanimously in favour of the Universal suffrage but suggested that it should not be part of the Fundamental Rights.
Accordingly, it was placed in the Article 326 of the Part XV on election.The word “universal”, however, is missing from the Article 326. But the fact that every adult citizen of the country is entitled to vote makes it practically a universal adult franchise.
In fact, before Indians really got the right to universal adult franchise, the prominent leaders of the Indian National movement strove for the abolition of the separate electorate in favour of the joint electorate.
The British had sought to continue separate electorate in India since the Morley-Minto reforms, 1909 till the Communal Award of 1932 in the Constitution.
The Communal Award aimed to accord separate electorate for Muslims, Europeans, Sikhs, Indian Christians and Anglo-Indians. It also provided for seats for the Depressed Classes which were to be filled in elections from special constituencies. In such constituencies only the depressed classes could vote.
In addition, the depressed classes were also entitled to vote in general constituencies. Gandhi opposed the recommendation of the notion of separate electorate for the depressed classes. In opposition to the proposal for separate electorate, he set on fast unto death in September 1932. Gandhi’s fast evoked opposition from Ambedkar. However, both Gandhi and Ambedkar reached compromise in Poona Pact.
According to the Poona Pact, seats were reserved for the depressed classes in the general constituencies. This resulted in the abolition of the separate electorate.The abolition of separate electorate got reflected in the reservation of seats in the legislative bodies Constitution.
CONCLUSION
The making of Indian Constitution largely consisted of two phases – 1858 to 1935 and 1946 to 1949. With the transfer of power from the East India Company to the British Crown, the British government introduced different elements of governance through different Acts.
These also included the elements of representation of Indians in the institutions of governance. The motive of the British to introduce them was to serve their colonial interests rather than to provide democratic rights to them. The provision for communal representation introduced through the Morley-Minto Reforms in 1909 and through the Communal Award in 1932 was opposed by the leaders of the Indian National Movement.
Gandhi’s fast resulted in the Poona Pact abolishing the separate electorate and in giving the reservation to the depressed classes in the provincial legislature. After the Indian National Congress emphasized the need for making of a Constitution of India by their own Constitient Assembly, the changed political situation following the Second World War and change of government in Britain, the British reluctantly realized the urgency for establishment of the Constituent Assembly of India for Indians.
The Constituent Assembly which was set up following the recommendations of the Cabinet Mission Plan was elected through the restricted adult franchise by the provincial assemblies. Despite having elected by the privileged sections of the society, the Constituent Assembly represented different shades of opinions and ideologies.
It also represented different social groups of India. The Constituent Assembly discussed all issues thoroughly before reaching decision on them. The decision and suggestions of different sub-Committees of the Constituent Assembly were finally incorporated in the Constitution of India.
The Constitution of India is a document which provides a vision for social change. The Constitution is an embodiment of principles of liberal democracy and secularism, with some elements of social democracy. It ensures protection of cultural, linguistic and religious rights of individuals and communities.