The Supreme Court (SC) in a landmark judgment gave its verdict on the electoral bonds. This will go down as one of the most significant judgments handed down by the Supreme Court of India. This Bond scheme was unveiled as part of his speech when Arun Jaitley presented his Budget in the Lok Sabha in 2017. The Scheme was rolled out in 2018. A Public Interest Litigation (PIL) followed against the Scheme in 2019. Amendments made by the government to the respective laws removed some constraints while making donations to political parties. To get over the restrictions in making donations to political parties the government removed these restrictions by amending the Representation of the People Act, the Companies Act and the Income Tax Act. Funding of political parties in India had always been a thorny issue in India. The government thought it found a solution to the problem that in one sense threw the baby also out with the bathwater. The appeal was decided by a five judge Constitutional Bench. The verdict was a unanimous one with all judges finding that the Electoral Bond Scheme was simply unconstitutional. It violated the right to information and freedom of speech and was against the express provision of the Constitution itself. The Court also ruled that the amendments to the Companies Act that allowed blanket political funding was also unconstitutional. The SC observed that the fundamental right to privacy covers a person’s political affiliation. However, it said that there should be a balance between informational privacy and the voters’ right to information. Unfortunately, the State Bank of India who was tasked with the duty of issuing the Bonds and keeping the names of donors a secret was left holding the can when the lights came on. SBI tried its level best to hold on to a fig leaf till the very end; but couldn’t. This judgment of the SC left in its wake, so much destruction all around. The image of the largest bank in India and its top honcho had been sullied so badly. One of them in the past had famously told the then Finance Minister that a decision he was to implement was patently against law. The ruling party is looking for cover with its reputation of practicing clean politics lying tatters. As smart journalists starting to put together the parts of the puzzle, the very same quid pro quo that the SC alluded to are coming out for all to see now. For the apex Court the image of it doing only the right thing at the right time stand diminished as it could not find time to hear this (open and shut) case for eons allowing elections to take place in the interregnum. The Americans have a saying for this. When the shit hits the ceiling fan, no one in the room can hope to escape smelling of roses! This electoral bond scheme was intended to pre-empt the generation of black money in the economy and making election funding truly legitimate without at the same time not giving away information about which parties were benefited. People are routinely accused of failing institutions in India. When the institutions fail the people what do you do?
Kazuo Ueda, the Governor of Bank of Japan (BoJ) made a surprising announcement the other day that the Bank was ending eight years of negative interest rates. This announcement from Japan’s Central Bank was an unexpected one forcing us to think of the consequences of such negative interest rate regime itself. Negative Interest Rate Policies (NIRP) are unconventional monetary policies used by Central Banks to stimulate economic growth and inflation. Here are some of the potential consequences of this measure:
- NIRP aims to incentivise borrowing and spending by making it cheaper to borrow money. This can stimulate economic activity and investment.
- Banks may face reduced profitability as they are less able to earn interest on their reserves. This could potentially lead to a reluctance to lend, which could counteract the intended effects of the policy.
- NIRP can erode the value of savings and pension funds as individuals and institutions receive less interest incomes.
- NIRP can put downward pressure on a country’s currency, as investors seek higher returns elsewhere.
- NIRP can lead to inflated asset prices, as investors search for higher yields in riskier assets.
- Negative interest rates can be unpopular among the public, as they may feel the impact of reduced savings rates.
Though NIRP can be an effective tool to stimulate economic growth and inflation, it remains to be assessed as to how it has helped the country at large. All eyes would be open to see the consequences of such drastic monetary policies as assessed by the experts in Economics.
Just the other day there was a news item that Sovereign Gold Bond Scheme (SGB) helped save India $3.3 Billion in its gold import bill. This amount is no petty cash. I decided to do a bit of research on the subject as an Indian’s love gold is well known. In 2023-24 the RBI sold SGBs worth 44.3 tons, the highest ever response to this instrument since its introduction in November 2015. As a country we have an insatiable appetite for Gold. In the past any efforts taken by authorities to contain this propensity has had only limited success. This time it appears to be different for which one needs to look at the advantages that SGBs offer to both the investors and the economy:
- As the SGBs are issued by the government it makes them a safe and secure investment option compared to physical gold, which carries risks such as theft and storage costs.
- SGBs offer an additional interest income of up to 2.5% per annum, which is paid semi-annually. This makes them a more attractive investment compared to holding physical gold, which does not generate any income.
- Capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.
- SGBs are traded on stock exchanges, providing investors with liquidity and the ability to sell their holdings at prevailing market prices.
- SGBs have a tenure of 8 years with an option to exit after the 5th year. This makes them a suitable option for long-term investment planning.
- Unlike physical gold, there are no making charges or storage costs associated with SGBs, making them a cost-effective investment option.
- SGBs support the government’s efforts to monetise gold holdings by encouraging investors to hold gold in a financial form rather than in physical form.
- Gold has traditionally been seen as a hedge against inflation, and investing in SGBs allows investors to benefit from potential increases in the price of gold.
Overall, the Sovereign Gold Bond Scheme offers investors a safe, interest-bearing, and cost-effective way to invest in gold, while also supporting the government’s objectives of reducing the ever-increasing imports of gold for local consumption.
The image of an Indian is that of an eternal pacifist. According to the dictionary, a pacifist is one who opposes war or violence as a means of settling disputes. The most famous Indian in the entire world without doubt is that man in a two-piece-suit, sorry two-piece- cloth, a man known as the Mahatma for all of us. He abhorred violence of all kinds. We do not have mercenary outfits like the Wagnor Group, Consequently, it is indeed difficult to see an Indian making a name or acquiring fame in armed conflicts barring in the military. Of late, we find that the Indian Navy’s name is being bandied about not just inside the country but elsewhere around the world. Indian Navy has always maintained that they are one of the best in the business and that they have done quite well for themselves whenever they have been called upon. There have been few takers to this claim up until now. Now Indian Navy is the toast of the town and for good reason. As per reports the Indian Navy’s rescue of a commercial ship from the pirates off the Somalia’s coast recently shows how our military has developed special capabilities on par with some of the world’s best. The navy rescued seventeen crew members of the vessel MV Ruen during an anti-piracy operation lasting two days, according to an Indian Navy news release, with no casualties reported. Dozens of pirates were taken into custody. “The success of the operation marks the Indian Navy as a top-class force in terms of training, command and control and other capabilities,” according to John Bradford, the US Council on Foreign Relations. Just the other day on 29th Marc2024 the Indian Navy rescued again a hijacked Iranian fishing vessel FV Al-Kambar after it was attacked by pirates southwest of Socotra in the Indian Ocean. The Indian Navy in a statement said that it rescued its crew of 23 Pakistani nationals after more than 12 hours of “intense coercive tactical measures” as part of its anti-piracy operations at sea. The navy informs us that INS Sumedha intercepted an Iranian vessel during the early hours of March 29, 2024, and was joined subsequently by guided missile frigate INS Trishul. These are only some of the recent adventures of our Naval forces. It looks that the Indians, the quintessential peaceniks cannot stand the pirates. More power to our Navy.
Arvind Kejriwal, the Chief Minister of Delhi is in jail, and he has not so far been able to manage to get bail. Having been arrested for an offence under the Prevention of Corruption Act, it is not surprising either. With the impending elections around the corner, this could be quite uncomfortable for leader of a political party and Kejriwal is no exception. When Kejriwal came on the scene as a crusader against corruption along with Gandhian Anna Hazare, middle class citizens like me had lots of hopes running on him. Kejriwal had he right background and the right credentials and be seemed to have an impeccable background. Many, particularly from the middle class had lots of hope on him. He was more like a messiah than a run of the mill politician in a corrupt society. The platform on which he rose to fame was his fight against corruption in high places. Those were the times when the middle class desperately wanted someone to champion the cause of eliminating the scourge corruption. Today, a few summers later, his moral authority of fighting corruption lies in tatters. When Kejriwal was summoned by the Enforcement Directorate (ED) a couple of months back his first reaction was to avoid being interrogated. That ended up in a situation when ED had no option but to arrest him. Be that as it may. He was an idea whose time had come, for me as well as many like me. But today, he has flattered to deceive. For me, like many others, he was an idea whose time had come. But like many, I am also disappointed person. Without wanting to sit on judgment on the culpability of Kejriwal, I would only say this much. I, as an average voter in the largest democracy feel cheated. End of it all, he may come out squeaky clean in the not distant future. So be it. But he has lost my vote, at least. Mind you, his arrest is not the only reason.
There is this small country in the African continent called El Salvador. All of us have heard of this country; but never had time to bother about it. This country has an elected President who goes by the name Nayib Bukele. In his country’s last elections Bukele got a majority of 83% voting for him far ahead of his nearest competitor’s 7%. He seems to have provided his country with something remarkable like basic security and stability despite being a self-proclaimed autocrat. That battered country needed such qualities from their leader badly in an unstable world. No wonder, he has today come to acquire the sobriquet “the coolest dictator” around world. “Bukele’s popularity has also drawn attention from across the region, and he and party are increasingly looked up to as a case study for a wider global rise in authoritarianism. The charismatic leader that Bukele is, has learnt to harness social media to his advantage in a way few other leaders in the region have, using it as a tool to pump out propaganda, bolstered by an elaborate communications machine. Not appearing at a single campaign event before the election, he instead plastered videos taped from his couch on social media urging Salvadorans to vote for him, so the opposition doesn’t “free the gang members and use them to return to power.” This is as per Time magazine.
Daniel Kahneman, who was a giant in the field of Behavioral Economics passed away the other day at the age of 90. He was no ordinary economist. He was a pioneer in his field and a Nobel laureate, a distinction that he achieved for his phenomenal work in his chosen field. He was also the author of a seminal book on the subject “Thinking Fast and Slow” that was published in 2011. In today’s world this book is a must read for anyone even those who hate the subject of economics and human behavior. Kahneman divides our thinking into two systems, one System 1, a fast, intuitive and emotional one and the other System 2, a slow, deliberate and analytical one overseeing more complex and conscious reasoning tasks. Another area where he excelled was the area of heuristics and biases. System 1 uses these biases for making quick decisions. Apart from this we use the Prospect Theory sub consciously in behavioral economics. This theory suggests that people value gains and losses differently leading to inconsistent decision making. This means people fear losses more than they value equivalent gains. In the book Kahneman discusses the tendency of people to be overly confident in their own abilities and judgments even when available evidence suggests otherwise. This overconfidence can lead to poor decision making. Up there it should be interesting to watch a conversation between him and Him. I consider this book the most outstanding one ever written. For once, God would indeed be proud of creating a man like Kahneman who perhaps would prove to the former that he knows a thing or two more than the Lord himself. By virtue of the accomplishments that he had achieved he indeed had a wonderful time on earth. We wish Kahneman the same intellectual space wherever he is. May his soul rest in peace.
Thank you.
Venkat R Venkitachalam
