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Preventive Detention Can’t Be Invoked For Law And Order Situation: SC

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Don’t compare Turban, Kirpan with Hijab: SC

While underscoring that the preventive detention law “strikes hard on the freedom and liberty of an individual, and cannot be exercised in a routine manner”, the Supreme Court in an extremely laudable, learned, landmark and latest judgment titled Shaik Nazneen vs The State of Telangana & Ors in Criminal Appeal No. 908 of 2022 (@ SLP (Crl.) No. 4260 of 2022) and cited in 2022 LiveLaw (SC) 559 has observed that “the powers to be exercised under this law are exceptional powers which have been given to the government for its exercise in an exceptional situation”. It must be noted that the Apex Court has once again clearly highlighted the distinction that while a law and order situation can be dealt with under the ordinary law of land, it is only when there is a public order situation that the invocation of the powers under the law of preventive detention is justified, absent which the preventive detention would be bad and would be in violation of Articles 21 and 22 of the Constitution as it encroaches upon the liberty and freedom of an individual. The Apex Court Bench of Justice CT Ravikumar and Justice Sudhanshu Dhulia were hearing an appeal against the March judgment of the Telangana High Court by which the Habeas Corpus Writ Petition of the petitioner-wife challenging the order of prevention of detention of her husband had been dismissed.

To start with, this brief, brilliant, bold and balanced judgment authored by Apex Court Bench comprising of Justice CT Ravikumar and Justice Sudhanshu Dhulia sets the ball rolling by first and foremost putting forth in para 1 that, “This appeal challenges the order dated 25.03.2022 passed by the High Court of Judicature for the State of Telangana at Hyderabad by which the Habeas Corpus Writ Petition bearing No. 35519 of 2021 of the petitioner-wife challenging the order of prevention of detention of her husband has been dismissed.”

To put things in perspective, the Bench then envisages in para 2 that, “The brief facts of the case are that the prevention detention order was passed against the husband of the petitioner on 28th October, 2021 by the Commissioner of Police, Rachakonda Commissionerate on grounds that the detenu was involved in gold chain snatching offences, where victims were mostly women. He has been doing this since the year 2020 in the States of Andhra Pradesh and Telangana. He was involved in as many as 36 gold chain snatching offences. Earlier, the detenu, along with three others, had formed a gang to commit these offences in order to make quick money. It was alleged that they had come to Hyderabad in a car bearing No. AP 39 TU 5033 and took shelter in a lodge. Their modus operandi was to first conduct recce of some residential areas and after selecting a suitable residential area, lift two wheelers and motor cycles which were then used in the chain snatching offences. Although according to the Authority the detenu was involved in more than 30 cases but only 4 cases of chain snatching were considered as ground for detention, as the other cases were reported to be behind the proximity period and out of the jurisdiction of Commissionerate. The four cases on which reliance has been placed are as under:

“(1) Crime No. 355 of 2021 for the offences under Sections 392, 411 read with 34 IPC of Medipally Police Station.

(2) Crime No. 358 of 2021 for the offences under Sections 392, 411 read with 34 IPC of Medipally Police Station.

(3) Crime No. 532 of 2021 for the offence under Section 392 read with 34 IPC of Medipally Police Station.

(4) Crime No. 533 of 2021 for the offences under Sections 392, 411 read with 34 IPC of Medipally Police Station.””

Briefly stated, the Bench then specifies in para 3 stating that, “In short, against the detenu the F.I.Rs primarily an offence of ‘robbery’ under section 392 of the Indian Penal Code. The detention order also says that the crimes were committed in broad day light and have thus resulted in creation of fear and panic in the minds of the general public, especially women and hence, the Government had to interfere in order to “maintain public order”.”

It must be noted that the Bench then discloses in para 4 that, “The said four cases were allegedly committed by the detenu within a span of two months between 06.05.2021 to 26.07.2021 and were committed within the jurisdiction of one police station i.e., Medipalli police station. In all these cases, the detenu had moved bail applications before the concerned Metropolitan Magistrate and was granted bail under Section 167 (2) Cr.P.C, which is commonly known as ‘default bail’ and the detenu was released on 16.10.2021. The detention order was later passed on 28.10.2021, which was subsequently confirmed by the Advisory Council on 13.01.2022, i.e., within the stipulated time. The detenu is under detention since 28.10.2021.”

While referring to the relevant law in this regard, the Bench then lays bare in para 5 stating that, “The Preventive Detention Law, under which the powers have been exercised is a long winded statute called the “Telangana Prevention of Dangerous Activities of Boot-Leggers, Dacoits, Drug-Offenders, Goondas, Immoral Traffic Offenders Land-Grabbers, Spurious Seed Offenders, Insecticide Offenders, Fertiliser Offenders, Food Adulteration Offenders, Fake Document Offenders, Scheduled Commodities Offenders, Forest Offenders, Gaming Offenders, Sexual Offenders, Explosive Substances Offenders, Arms Offenders, Cyber Crime Offenders and White Collar or Financial Offenders Act, 1986”(hereinafter referred to as `the Act’). Powers have been exercised under Section 3 of the Act which reads as under:

“3. (1) The Government may, if satisfied with respect to any boot-legger, dacoit, drugoffender, goonda, immoral traffic offender [Land-Grabber, Spurious Seed Offender, Insecticide Offender, Fertilizer Offender, Food Adulteration Offender, Fake Document Offender, Scheduled Commodities Offender, Forest Offender, Gaming Offender, Sexual Offender, Explosive Substances Offender, Arms Offender, Cyber Crime Offender and White Collar or Financial Offender] that with a view to preventing him from acting in any manner prejudicial to the maintenance of public order it is necessary so to do, make an order directing that such person be detained.

(2) If, having regard to the circumstances prevailing or likely to prevail in any area within the local limits of the jurisdiction of a District Magistrate or a Commissioner of Police, the Government are satisfied that it is necessary so to do, they may, by order in writing, direct that during such period as may be specified in the order, such District Magistrate or Commissioner of Police may also, if satisfied as provided in sub-section (1), exercise the powers conferred by the said subsection:

Provided that the period specified in the order made by the Government under this sub-section shall not in the first instance, exceed three months, but the Government may, if satisfied as aforesaid that it is necessary so to do, amend such order to extend such period from time to time by any period not exceeding three months at any one time.

(3) When any order is made under this section by an officer mentioned in sub-section (2), he shall forthwith report the fact to the Government together with the grounds on which the order has been made and such other particulars as in his opinion, have a bearing on the matter, and no such order shall remain in force for more than twelve days after the making thereof, unless, in the mean time, it has been approved by the Government.””

To be sure, the Bench then points out in para 6 that, “The powers have been exercised in the present case under section 3(1) of the Act. Under the aforesaid provision, inter alia, a detention order can be passed against a “goonda”. A “goonda” has been defined under Section 2 (g) of the Act, which reads as under:

“2. g) “goonda” means a person, who either by himself or as a member of or leader of a gang, habitually commits, or attempts to commit or abets the commission of offences punishable under Chapter XVI or Chapter XVII or Chapter XXII of the Indian Penal Code.”

It deserves mentioning that the Bench then notes in para 7 that, “Since the allegation is that the detenu is involved in four cases of chain snatching i.e., robbery, which comes under offences given under Chapter XVII of the Indian Penal Code, he has been declared a habitual offender and thus a “goonda” vide the detention order dated 28.10.2021.”

As we see, the Bench then observes in para 8 that, “Now under section 3(1) of the Act, detention order can be passed, inter alia, against a “goonda”, “with a view to prevent him from acting in any manner prejudicial to the maintenance of public order…”. Due to the detenu’s alleged involvement in four criminal cases relating to “robbery” he has been declared a “goonda” and it is said that this is acting in a manner which is “prejudicial to the maintenance of public order”.”

Be it noted, the Bench then mandates in para 9 that, “A bare reading of the aforesaid provision shows that the “maintenance of public order” has a crucial bearing here and unless the Government is justified in holding that the act of the detenu is prejudicial to the maintenance of public order, the preventive detention would be bad and would be in violation of Articles 21 and 22 of the Constitution of India as it encroaches upon the liberty and freedom of an individual.”

Of course, the Bench then mentions in para 10 that, “The detention order was challenged by the wife of the detenu in a Habeas Corpus petition before the Division Bench of the Telangana High Court. The ground taken by the petitioner before the High Court was that reliance has been taken by the Authority of four cases of chain snatching, as already mentioned above. The admitted position is that in all these four cases the detenu has been released on bail by the Magistrate. Moreover, in any case, the nature of crime as alleged against the petitioner can at best be said to be a law and order situation and not the public order situation, which would have justified invoking the powers under the Preventive Detention Law. This, however did not find favour with the Division Bench of the High Court, which dismissed the petition, upholding the validity of the detention order.”

Simply put, the Bench then specifies in para 11 that, “Shri Rahul Gupta, learned counsel for the Petitioner before this Court has confined his arguments on two aspects. Firstly, the detenu is allegedly involved in four criminal cases where he has been granted bail, and that too has been granted as the prosecution, in all four cases, failed to file its charge sheet in time. Now they cannot resort to the law of Preventive Detention. Secondly, even assuming the allegations of the prosecution to be correct, then too it only reflects a “law and order” problem and not a “public order” problem as mentioned under the Act.”

Quite forthrightly, the Bench then candidly concedes in para 13 that, “The reason why bail was granted in all four cases, however, has not been given. Bail was granted in all the four cases due to the inability of the prosecution, which did not complete its investigation in time. The bail had to be given as the charge sheet was not filed by the police in all the cases within the stipulated period of 60 days. The fault thus lies with the prosecution.”

While setting the record straight, the Bench then also pointed out aptly in para 14 that, “The other reason assigned is that the Trial Court while granting bail did not lay down any conditions. This is again a wrong presentation of the case. Conditions were not imposed simply as it was a default bail, and in bail of this nature conditions are not liable to be imposed.”

Most significantly, the Bench then minces no words to hold in para 15 that, “Having heard the learned counsel for the petitioner and learned counsel for the State of Telangana, we are of the considered view that in the present case invocation of the Preventive Detention Law against the petitioner was not justified. The powers to be exercised under the Preventive Detention Law are exceptional powers which have been given to the Government for its exercise in an exceptional situation as it strikes hard on the freedom and liberty of an individual, and thus cannot be exercised in a routine manner. The distinction between law and order situation and a public order situation has been dealt with by the Supreme Court in a catena of decisions. In the case of Ram Manohar Lohia Vs. State of Bihar, it has been held as under:

51. “We have here a case of detention under Rule 30 of the Defence of India Rules which permits apprehension and detention of a person likely to act in a manner prejudicial to the maintenance of public order. It follows that if such a person is not detained public disorder is the apprehended result. Disorder is no doubt prevented by the maintenance of law and order also but disorder is a broad spectrum which includes at one end small disturbances and at the other the most serious and cataclysmic happenings. Does the expression “public order” take in every kind of disorders or only some of them? The answer to this serves to distinguish “public order” from “law and order” because the latter undoubtedly takes in all of them. Public order if disturbed, must lead to public disorder. Every breach of the peace does not lead to public disorder. When two drunkards quarrel and fight there is disorder but not public disorder. They can be dealt with under the powers to maintain law and order but cannot be detained on the ground that they were disturbing public order. Suppose that the two fighters were of rival communities and one of them tried to raise communal passions. The problem is still one of law and order but it raises the apprehension of public disorder. Other examples can be imagined. The contravention of law always affects order but before it can be said to affect public order, it must affect the community or the public at large. A mere disturbance of law and order leading to disorder is thus not necessarily sufficient for action under the Defence of India Act but disturbances which subvert the public order are. A District Magistrate is entitled to take action under Rule 30(1) (b) to prevent subversion of public order but not in aid of maintenance of law and order under ordinary circumstances.

52. It will thus appear that just as “public order” in the rulings of this Court (earlier cited) was said to comprehend disorders of less gravity than those affecting “security of State”, “law and order” also comprehends disorders of less gravity than those affecting “public order”. One has to imagine three concentric circles. Law and order represents the largest circle within which is the next circle representing public order and the smallest circle represents security of State. It is then easy to see that an act may affect law and order but not public order just as an act may affect public order but not security of the State. By using the expression “maintenance of law and order” the District Magistrate was widening his own field of action and was adding a clause to the Defence of India Rules.””

While referring to recent case laws, the Bench then states in para 16 that, “In two recent decisions [Banka Sneha Sheela Vs. State of Telangana (Crl.A.No.733/2021) ; Mallada K. Sri Ram Vs. State of Telangana (Crl.A. No. 561/2021)], this Court had set aside the detention orders which were passed, under the same Act, i.e., the present Telangana Act, primarily relying upon the decision in Dr. Ram Manohar Lohia case (supra) and holding that the detention orders were not justified as it was dealing with a law and order situation and not a public order situation.”

It cannot be glossed over that the Bench then holds in para 17 that, “In any case, the State is not without a remedy, as in case the detenu is much a menace to the society as is being alleged, then the prosecution should seek for the cancellation of his bail and/or move an appeal to the Higher Court. But definitely seeking shelter under the preventive detention law is not the proper remedy under the facts and circumstances of the case.”

Most commendably, the Bench then while referring to latest case law remarks in para 18 that, “In fact, in a recent decision of this Court, the Court had to make an observation regarding the routine and unjustified use of the Preventive Detention Law in the State of Telangana. This has been done in the case of Mallada K. Sri Ram Vs. The State of Telangana & Ors. 2022 6 SCALE 50, it was stated as under:

“17. It is also relevant to note, that in the last five years, this Court has quashed over five detention orders under the Telangana Act of 1986 for inter alia incorrectly applying the standard for maintenance of public order and relying on stale materials while passing the orders of detention. At least ten detention orders under the Telangana Act of 1986 have been set aside by the High Court of Telangana in the last one year itself. These numbers evince a callous exercise of the exceptional power of preventive detention by the detaining authorities and the respondent-state. We direct the respondents to take stock of challenges to detention orders pending before the Advisory Board, High Court and Supreme Court and evaluate the fairness of the detention order against lawful standards.”

Finally, the Bench then concludes by holding in para 19 that, “In view of the above, the appeal stands allowed. The order of detention dated 28.10.2021 and order dated 25.03.2022 of the Division Bench of the High Court of Telangana are set aside. The detenu shall be released forthwith, in case he is not required in any other case.”

All told, the Apex Court has thus made it indubitably clear that preventive detention can’t be invoked for ordinary law and order situations. It has also voiced its utmost concern on routine and unjustified use of preventive detention laws which cannot be allowed to go unchecked and unabated as such preventive detention would be bad and in violation of Articles 21 and 22 of the Constitution as it clearly encroaches on the liberty and freedom of an individual. Very rightly so!

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Policy&Politics

Govt extends date for submission of R&D proposals

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The Government has extended the deadline for submission of proposals related to R&D scheme under the National Green Hydrogen Mission. The R&D scheme seeks to make the production, storage, transportation and utilisation of green hydrogen more affordable. It also aims to improve the efficiency, safety and reliability of the relevant processes and technologies involved in the green hydrogen value chain. Subsequent to the issue of the guidelines, the Ministry of New & Renewable Energy issued a call for proposals on 16 March, 2024.

While the Call for Proposals is receiving encouraging response, some stakeholders have requested more time for submission of R&D proposals. In view of such requests and to allow sufficient time to the institutions for submitting good-quality proposals, the Ministry has extended the deadline for submission of proposals to 27th April, 2024.

The scheme also aims to foster partnerships among industry, academia and government in order to establish an innovation ecosystem for green hydrogen technologies. The scheme will also help the scaling up and commercialisation of green hydrogen technologies by providing the necessary policy and regulatory support.

The R&D scheme will be implemented with a total budgetary outlay of Rs 400 crore till the financial year 2025-26. The support under the R&D programme includes all components of the green hydrogen value chain, namely, production, storage, compression, transportation, and utilisation.

The R&D projects supported under the mission will be goal-oriented, time bound, and suitable to be scaled up. In addition to industrial and institutional research, innovative MSMEs and start-ups working on indigenous technology development will also be encouraged under the Scheme.

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Policy&Politics

India, Brazil, South Africa to press for labour & social issues, sustainability

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The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment.

India, on Thursday, joined the G20’s two-day 2nd Employment Working Group (EWG) meeting under the Brazilian Presidency which is all set to address labour, employment and social issues for strong, sustainable, balanced and job-rich growth for all. India is co-chairing the 2nd EWG meeting, along with Brazil and South Africa, and is represented by Sumita Dawra, Secretary, Labour & Employment.

The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment. India has pointed out that the priority areas of the 2nd EWG at Brasilia align with the priority areas and outcomes of previous G20 presidencies including Indian presidency, and commended the continuity in the multi-year agenda to create lasting positive change in the world of work. This not only sustains but also elevates the work initiated by the EWG during the Indian Presidency.

The focus areas for the 2nd EWG meeting are — creating quality employment and promoting decent labour, addressing a just transition amidst digital and energy transformations, leveraging technologies to enhance the quality of life for al and the emphasis on gender equity and promoting diversity in the world of employment for inclusivity, driving innovation and growth. On the first day of the meeting, deliberations were held on the over-arching theme of promotion of gender equality and promoting diversity in the workplace.

The Indian delegation emphasized the need for creating inclusive environments by ensuring equal representation and empowerment for all, irrespective of race, gender, ethnicity, or socio-economic background. To increase female labour force participation, India has enacted occupational safety health and working conditions code, 2020 which entitles women to be employed in all establishments for all types of work with their consent at night time. This provision has already been implemented in underground mines.

In 2017, the Government amended the Maternity Benefit Act of 1961, which increased the ‘maternity leave with pay protection’ from 12 weeks to 26 weeks for all women working in establishments employing 10 or more workers. This is expected to reduce the motherhood pay gap among the working mothers. To aid migrant workers, India’s innovative policy ‘One Nation, One Ration Card’ allows migrants to access their entitled food grains from anywhere in the Public Distribution System network in the country.

A landmark step in fostering inclusion in the workforce is the e-Shram portal, launched to create a national database of unorganized workers, especially migrant and construction workers. This initiative, providing the e-Shram card, enables access to benefits under various social security schemes.

The portal allows an unorganized worker to register himself or herself on the portal on self-declaration basis, under 400 occupations in 30 broad occupation sectors. More than 290 million unorganized workers have been registered on this portal so far.

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Policy&Politics

India to spend USD 3.7 billion to fence Myanmar border

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India plans to spend nearly $3.7 billion to fence its 1,610-km (1,000-mile) porous border with Myanmar within about a decade, said a source with direct knowledge of the matter, to prevent smuggling and other illegal activities. New Delhi said earlier this year it would fence the border and end a decades-old visa-free movement policy with coup-hit Myanmar for border citizens for reasons of national security and to maintain the demographic structure of its northeastern region.

A government committee earlier this month approved the cost for the fencing, which needs to be approved by Prime Minister Narendra Modi’s cabinet, said the source who declined to be named as they were not authorised to talk to the media. The prime minister’s office and the ministries of home, finance, foreign affairs and information and broadcasting did not immediately respond to an email seeking comment.

Myanmar has so far not commented on India’s fencing plans. Since a military coup in Myanmar in 2021, thousands of civilians and hundreds of troops have fled from there to Indian states where people on both sides share ethnic and familial ties. This has worried New Delhi because of risk of communal tensions spreading to India. Some members of the Indian government have also blamed the porous border for abetting the tense situation in the restive north-eastern Indian state of Manipur, abutting Myanmar.

For nearly a year, Manipur has been engulfed by a civil war-like situation between two ethnic groups, one of which shares lineage with Myanmar’s Chin tribe. The committee of senior Indian officials also agreed to build parallel roads along the fence and 1,700 km (1,050 miles) of feeder roads connecting military bases to the border, the source said.

The fence and the adjoining road will cost nearly 125 million rupees per km, more than double that of the 55 million per km cost for the border fence with Bangladesh built in 2020, the source said, because of the difficult hilly terrain and the use of technology to prevent intrusion and corrosion.

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Policy&Politics

ONLY 2-3% RECOVERED FROM $2-3 TN ANNUAL ILLEGAL TRADE THROUGH BANKING: INTERPOL

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However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity.

In a press briefing held on Wednesday, Interpol Secretary General Jurgen Stock unveiled alarming statistics regarding the extent of undetected money laundering and illegal trade transactions plaguing the global banking network. Stock revealed that over 96% of the money transacted through this network remains undetected, with only 2-3% of the estimated USD 2-3 trillion from illegal trade being tracked and returned to victims.

Interpol, working in conjunction with law enforcement agencies and private financial sectors across its 196 member countries, is committed to combating the rising tide of fraud perpetrated by illicit traders. These criminal activities encompass a wide spectrum, including drug trafficking, human trafficking, arms dealing, and the illicit movement of financial assets.

Stock emphasized the urgent need to establish mechanisms for monitoring transactions within the global banking network. Currently, efforts are underway to engage banking associations worldwide in setting up such a framework. However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity. The lack of real-time information sharing poses a significant obstacle to law enforcement agencies in their efforts to combat money laundering and illegal trade.

Stock underscored the role of Artificial Intelligence (AI) in exacerbating this problem, citing its use in voice cloning and other fraudulent activities. Criminal organizations are leveraging AI technologies to expand their operations and evade detection on a global scale. Stock emphasized the importance of enhanced cooperation between law enforcement agencies and private sector banking groups. Realtime information sharing is crucial in the fight against illegal wealth accumulation.

Drawing inspiration from initiatives such as the “Singapore Anti-Scam Centre,” Stock called for the adoption of similar models in other countries to strengthen the collective response to financial crimes. In conclusion, Stock’s revelations underscore the pressing need for concerted action to combat global financial crimes. Enhanced cooperation between public and private sectors, coupled with innovative strategies for monitoring and combating illicit transactions, is essential to safeguarding the integrity of the global financial system.

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Policy&Politics

FM defends Atal Pension Scheme, highlights guaranteed returns

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Finance Minister Nirmala Sitharaman defended the Atal Pension Yojana (APY) against Congress criticism, asserting its design based on choice architecture and a guaranteed minimum 8% return. She emphasized the scheme’s opt-out feature, facilitating automatic premium continuation unless subscribers choose otherwise, promoting retirement savings. Sitharaman countered Congress allegations of coercion, stating the APY’s guaranteed returns irrespective of market conditions, supplemented by government subsidies.

Responding to Congress’s claim of scheme misuse, Sitharaman highlighted its intended beneficiaries – the lower-income groups. She criticized Congress for its alleged elitist mindset and emphasized the scheme’s success in targeting the needy. Sitharaman accused Congress of exploiting vote bank politics and coercive tactics, contrasting it with the APY’s transparent framework. The exchange underscores the political debate surrounding social welfare schemes, with the government defending its approach while opposition parties raise concerns about implementation and efficacy.

Finance Minister Nirmala Sitharaman’s robust defense of the Atal Pension Yojana (APY) against Congress criticism highlights the ongoing debate over social welfare schemes in India. Sitharaman’s assertion of the APY’s design principles, including its opt-out feature and guaranteed minimum return, underscores the government’s commitment to promoting retirement savings among lower-income groups. The Atal Pension Yojana, named after former Prime Minister Atal Bihari Vajpayee, was launched in 2015 to provide pension benefits to workers in the unorganized sector. It aims to address the significant gap in pension coverage among India’s workforce, particularly those employed in informal and low-income sectors. The scheme offers subscribers fixed pension amounts ranging from Rs. 1,000 to Rs. 5,000 per month, depending on their contribution and age at entry, after attaining the age of 60. Sitharaman’s response comes after Congress criticism alleging the APY’s inefficacy and coercive tactics in enrolment.

Congress General Secretary Jairam Ramesh described the scheme as poorly designed, citing instances of subscribers dropping out due to unauthorized account openings. However, Sitharaman refuted these claims, emphasizing the APY’s transparent and beneficiary-oriented approach. The finance minister’s defense focuses on three key aspects of the APY: Choice Architecture: Sitharaman highlights the opt-out feature of the APY, which automatically continues premium payments unless subscribers choose to discontinue.

This design element aims to encourage long-term participation and ensure consistent retirement savings among subscribers. By simplifying the decision-making process, the scheme seeks to overcome inertia and promote financial discipline among participants. Guaranteed Minimum Return: Sitharaman underscores the APY’s guarantee of a minimum 8% return, irrespective of prevailing interest rates. This assurance provides subscribers with confidence in the scheme’s financial viability and incentivizes long-term savings.

The government’s commitment to subsidizing any shortfall in actual returns further strengthens the attractiveness of the APY as a retirement planning tool. Targeting the Needy: Sitharaman defends the predominance of pension accounts in lower income slabs, arguing that it reflects the scheme’s successful targeting of its intended beneficiaries – the poor and lower-middle class. She criticizes Congress for its alleged elitist mindset and suggests that the party’s opposition to welfare schemes like the APY stems from a disconnect with the needs of marginalized communities. Sitharaman’s rebuttal also addresses broader political narratives surrounding social welfare policies in India.

She accuses Congress of exploiting vote bank politics and coercive tactics, contrasting it with the transparent and inclusive framework of the APY. The exchange underscores the ideological differences between the ruling Bharatiya Janata Party (BJP) and the opposition Congress, with each side advocating for their vision of social welfare and economic development. In addition to defending the APY, Sitharaman’s remarks shed light on the broader challenges and opportunities facing India’s pension sector.

Despite significant progress in expanding pension coverage through schemes like the APY, the country still grapples with issues such as financial literacy, informal employment, and pension portability. Addressing these challenges requires a multifaceted approach involving government intervention, private sector participation, and civil society engagement.

As India strives to achieve its vision of inclusive and sustainable development, initiatives like the APY play a crucial role in promoting economic security and social equity. Sitharaman’s defense of the scheme underscores the government’s commitment to addressing the needs of vulnerable populations and ensuring their financial well-being in the long run.

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Economic

Regulatory steps will make financial sector strong, but raise cost of capital

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India’s financial system regulator, the Reserve Bank of India (RBI), is demonstrating a serious commitment to improving governance and transparency at finance companies and banks, with the RBI’s recent measures aimed at curtailing lenders’ overexuberance, enhancing compliance culture and safeguarding customers.

While the global ratings firm has appreciated the RBI’s “diminishing tolerance for non-compliance, customer complaints, data privacy, governance, know-your-customer (KYC), and anti-money laundering issues”, it has cautioned that increased regulatory risk could impede growth and raise the cost of capital for financial institutions. “Governance and transparency are key weaknesses for the Indian financial sector and weigh on our analysis. The RBI’s new measures are creating a more robust and transparent financial system,” says S&P Global Credit Analyst, Geeta Chugh. “India’s regulator has underscored its commitment to strengthening the financial sector. The drawback will be higher capital costs for institutions,” Chugh cautions.

The RBI measures include restraining IIFL Finance and JM Financial Products from disbursing gold loan and loans against shares respectively and asking Paytm Payments Bank (PPBL) to stop onboarding of new customers. Earlier in December 2020, the RBI suspended HDFC Bank from sourcing new credit card customers after repeated technological outages. These actions are a departure from the historically nominal financial penalties imposed for breaches, S&P Global notes.

Besides, as the global agency points out, the RBI has decided to publicly disclose the key issues that lead to suspensions or other strict actions against concerned entities and become more vocal in calling out conduct that it deems detrimental to the interests of customers and investors. “We believe that increased transparency will create additional pressure on the entire financial sector to enhance compliance and governance practices,” adds Chugh. The global agency has also lauded the RBI’s recent actions demonstrating scant tolerance for any potential window-dressing of accounts.

These actions include the provisioning requirement on alternative investment funds that lend to the same borrower as the bank finance company. Amidst the possibility of some retail loans, such as personal loans, loans against property, and gold loans getting diverted to invest in stock markets and difficulty of ascertaining the end-use of money in these products, S&P Global underlines the faith of market participants that the RBI and market regulator, the Securities and Exchange Board of India, want to protect small investors by scrutinizing these activities more cautiously.

On the flip side, at a time of tight liquidity, the RBI’s new measures are likely to limit credit growth in fiscal 2025 (year ending March 2025). “We expect loan growth to decline to 14 per cent in fiscal 2025 from 16 per cent in fiscal 2024, reflecting the cumulative impact of all these actions,” says Chugh. The other side of the story is that stricter rules may disrupt affected entities and increase caution among fintechs and other regulated entities and the RBI’s decision to raise risk weights on unsecured personal loans and credit cards may constrain growth. Household debt to GDP in India (excluding agriculture and small and midsize enterprises) increased to an estimated 24 per cent in March 2024 from 19 per cent in March 2019. Growth in unsecured loans has also been excessive and now forms close to 10 per cent of total banking sector loans.

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