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The Hindu Notes for 2nd October 2018

Always a fine balance

The RBI-government tussle must prompt a debate on defining the RBI Governor’s position

Yaga Venugopal Reddy, a former Governor of the Reserve Bank of India, (RBI) known as much for his wit as his clever stewardship of the central bank, coined an interesting phrase, “open-mouth operation”, taking off from the Open Market Operation tool of the RBI.

That phrase best describes RBI Deputy Governor Viral Acharya’s A.D. Shroff Memorial Lecture in Mumbai last week. Dr. Reddy had coined the phrase to describe his speech in Goa on August 15, 1997 at a conference of the Foreign Exchange Dealers’ Association. Then a Deputy Governor, Dr. Reddy (with the full support of the then Governor, C. Rangarajan) tried to talk down the rupee which the central bank felt was over-valued.

Compelling correctives

The objective of an “open-mouth operation” is clear: influence a target audience to behave in a manner favourable to you or your objectives. If the target was the forex market in Dr. Reddy’s Goa speech, it was the Central government in Dr. Acharya’s speech. The “open-mouth operation” worked beautifully in both instances. The rupee corrected immediately after Dr. Reddy’s speech; after Dr. Acharya’s speech, the government has been forced to acknowledge, even if grudgingly, that the RBI’s autonomy is “within the framework of the RBI Act”.

Shorn of the personalities, what we are witnessing now is a fascinating tussle between an institution covered by an Act of Parliament and the executive, with one fighting for its autonomy and the other for its interests. Where does the fair balance lie?

Before trying to answer that question, we need to understand the ‘autonomy’ that the RBI enjoys and the limits to that. This is not the first time that the RBI’s autonomy has come under focus, and it will surely not be the last. Successive Governors have fought against what they felt were transgressions — formal and informal — on the central bank’s autonomy by powerful Finance Ministers.

Dr. Reddy once famously quipped to a journalist: “I’m very independent. The RBI has full autonomy. I have taken the permission of my Finance Minster to tell you that.” On a more serious note, he clarified that the RBI is independent, but within the limits set by the government.

In his book, Advice and Dissent: My Life in Public Service, he explains his understanding of this autonomy under three functions: operational issues, policy matters, and structural reforms. In the case of the first, he believed in total freedom; on the second, he preferred prior consultation with the mandarins in North Block; and on the third, he worked in “very close coordination” with the government.

Dr. Reddy describes the interactions with the government as “walking on a razor’s edge” and concedes that the sovereign is ultimately supreme. That is because the RBI Act allows the government to give written directives to the RBI in the public interest (the infamous Section 7 that is now in the news). On critical issues, often the choice for the Governor is to concede to the government with or without a written directive. But tradition has been that both the government and the RBI have avoided recourse to this provision.

That has been due only to the mature handling of differences behind closed doors, something that has been absent in the current tussle. Duvvuri Subbarao, another former Governor, argues along similar lines in his book, Who Moved My Interest Rate?

Handled with care, till now

The existence of Section 7 in the RBI Act, even if it has never been used till now, proves that the RBI is not fully autonomous, says Dr. Subbarao. He points out that the fact that it has never been used is testimony to the sense of responsibility that the government and the central bank have displayed.

The statement put out by the government on Wednesday underlines this message very clearly: the RBI is autonomous but within the framework of the RBI Act. It is thus clear that the central bank cannot claim absolute autonomy. It is autonomy within the limits set by the government and its extent depends on the subject and the context. There is a clear reason why, even while it is conceded that control of the nation’s currency should be with an independent authority removed from the sway of elected representatives, the RBI Act has the veto option in the form of Section 7.

And that’s because it is not the technocrats and economists sitting in Mumbai’s Mint Street who carry the can for the policies they frame; it is the rulers in Delhi who do. Ultimately, it is the elected representative ruling the country who is answerable to the citizen every five years. The representative cannot split hairs before the voter while explaining the economy’s performance — he has to own up for everything, including the RBI’s actions, as his own.

In a democracy, it is unthinkable that we will have an institution that is so autonomous that it is not answerable to the people. The risk of such an institution is that it will impose its preferences on society against the latter’s will, which is undemocratic.

Seen from this perspective, the limits to the RBI’s autonomy will be clear. It is autonomous and accountable to the people ultimately, through the government. The onus is thus on responsible behaviour by both sides. There is enough creative tension between the two built into the system. The Governor has to be conscious of the limits to his autonomy at all times, and the government has to consider the advice coming from Mint Street in all seriousness, as indeed Dr. Reddy and Dr. Subbarao have pointed out.

Government’s failure

But what if they do have fundamental disagreements, as they seem to be having now, and are unable to arrive at a common ground? Well, the brahmastra of Section 7 is certainly available to the more powerful side; but just as the weapon is a deterrent never to be used, so is Section 7. The cleverness of the politician in Delhi lies in negotiating with the RBI and having his way without ever threatening to unleash the brahmastra — the other side knows it exists anyway. This is where the present dispensation in Delhi seems to have failed.

It is to avoid situations such as the one we are seeing now that former RBI Governor Raghuram Rajan argued for a clear enunciation of the RBI’s responsibilities. In his book I Do What I Do, he points out that the position of the RBI Governor in the government hierarchy is not defined. The Governor draws the salary of a Cabinet Secretary, and it is generally understood that he will explain his decisions only to the Prime Minister and the Finance Minister. Argues Dr. Rajan: “There is a danger in keeping the position ill-defined because the constant effort of the bureaucracy is to whittle down its power.”

The latest tussle between the executive and the central bank will eventually end, in all probability with a compromise. However, its purpose would have been served if the debate leads to greater awareness on both sides of the other’s compulsions. Better still, if it leads to a clear definition of the RBI’s responsibilities that would, to borrow Governor Urjit Patel’s words, be the pot of nectar coming out of this Samudra Manthan.

A catalogue of all that’s valuable

State and public initiatives to compile registers of antiquities must be closely coordinated

Over the last two years, the Madras High Court has become the site of high drama in the most unlikely of ways. Binding spirited advocates, a famed industrialist, a gritty police force, and various other state agencies is the somewhat overlooked question of antiquities conservation. Tasked with the onerous mandate of investigating theft of idols and antiquities, Tamil Nadu Police’s Idol Wing has been engaged in a tense confrontation with the State’s Hindu Religious and Charitable Endowments (HR&CE) Department, a body charged with, among other things, the upkeep and safety of a vast collection of invaluable temple artefacts.

A feeding ground

Tamil Nadu is rich feeding ground for idol thieves and smugglers because of the sheer number of temples within its borders. It is not surprising that the State should then have a court designated specifically to deal with such matters. Earlier this year, the then Chief Justice of the Madras High Court constituted a special bench consisting of Justices R. Mahadevan and P.D. Audikesavalu to hear cases relating to idol theft.

But it was in July last year that a remarkable development took place in this area of law. Justice Mahadevan passed a momentous order as far as the legal framework on antiquities is concerned. Noting the lack of coordination between departments responsible for custodianship of our cultural heritage and law enforcement agencies, the court observed: “It is their [the HR&CE Department’s] primary duty to protect the temples and safeguard the valuable idols/antiques, which, this Court with great anguish expresses that the department has failed to do…One more important point to be noted is that the department has not computerised the stock, provided adequate ICON Centres with surveillance to keep safe custody of the valuable idols in the Centre and in the temples… It also appears that the Idol wing is interacting with the respective departments of the Central Government only to recover the stolen Idols and antiques, but there seems to be no-coordination between them to curb the crime.”

The court also passed detailed directions to be followed by the respondent State actors, including the following: “The stock of Idols maintained in the manual books in the State must be computerised within a period of four weeks, if not already computerised. Similarly, a list of stock of Idols in the temples must be computerised and the same must be reported to this court.”

Significantly, this did not come in the course of interpretation of the statute that occupies the field (the Antiquities and Art Treasures Act, 1972), but despite it.

Records do not indicate that a complete and computerised record of temple idols in Tamil Nadu has been submitted to the court so far. This is not to say such a record may or may not exist — but its inaccessibility to the layman, the scholar or the police brings into perspective the larger issue of creating an efficient and comprehensive database of antiquities.

A vital resource

In the absence of such a searchable catalogue, the risk of antiquities theft and loss of cultural property is multiplied enormously because it becomes that much easier for art criminals to manufacture the provenance of a certain artefact. Without a reliable reference point to confirm the origins and the trail of ownership of a certain antiquity, its sale abroad becomes relatively harder to track. This concern has been voiced by academics and art enthusiasts alike, and was abated to a certain degree by the creation of the National Register on Antiquities.

Established in 2007 under the aegis of the National Mission on Monuments and Antiquities (now under the administration of the ASI), the Register is a publicly accessible repository of documented and registered Indian antiquities. There is also the India Pride Project, a volunteer-network of private individuals interested in protecting Indian antiquities, that has been instrumental in the repatriation of several works of incalculable archaeological and aesthetic value.

Concerns remain

But cause for concern still remains. Though the Register on Antiquities gets diligently populated on the basis of already registered antiquities and objects catalogued in public collections of museums or universities, there are still artefacts yet to be registered or documented. And the problem of non-coordination and lack of information highlighted by the Madras High Court still looms large. One easily identifiable example is that of the quantities of registered antiquities that have found their way into the NMMA’s Register. While the Ministry of Culture’s annual report for 2017-18 states that a mammoth 15.2 lakh registered antiquities have been documented through the NMMA, the Register only provides information for about 4.7 lakh of these. Similarly, if there indeed has been sharing data problem between two state agencies (HR&CE Department and the Idol Wing), what might be scale of this data asymmetry between a local body and the National Mission? Related to this are also the questions of how secure these heritage repositories are; whether the public at large can contribute to them or even use them to assist understaffed and underfunded state actors in foiling antiquity thefts.

The NMMA fortunately does have a mandate to cultivate public engagement and awareness for the protection of India’s cultural heritage. Its progress towards that realisation seems slower than planned, and much remains to be completed. In the meanwhile, citizen-led initiatives and timely judicial interventions are making up for what already ought to be higher on the list of national priorities.

Has the CBI’s credibility been compromised?

Maybe there is need for a second public agitation to get a Lokpal appointed

With the public antagonism between the top two officers of the Central Bureau of Investigation (CBI) followed by the outrageous midnight reshuffle done at the behest of a visibly edgy Narendra Modi government, it appears like we are living in a parallel universe. CBI Director Alok Verma was not just at loggerheads with Special Director Rakesh Asthana; he was also convinced that Mr. Asthana was involved in a murky extortion mafia operation.

The Central Vigilance Commission (CVC) and the government seemed mysteriously unconvinced by this. Mr. Asthana’s earlier assignments in Gujarat pointed to a close proximity between him and Mr. Modi and BJP president Amit Shah. Mr. Asthana predictably launched a counteroffensive and made damaging accusations against Mr. Verma. This was a bitter internecine warfare within the CBI, and the government’s discomfiture was clear. A Kafkaesque twist arrived with the hurried appointment of interim director Mr. Nageswara Rao. It has been revealed that Mr. Rao has questionable credentials. He allegedly has serious accusations of graft against him and is a proponent of aggressive Hindutva nationalism that would please a certain NGO in Nagpur. If the CBI was a caged parrot before, it is a roasted turkey now.

Attacking institutions

India’s democratic institutions are experiencing a serious atrophy; political interventions are assuming a brazen form under Mr. Modi. The CBI may be the most infamous casualty, but the Election Commission, the CVC, the Enforcement Directorate, the Income Tax Department and the National Investigation Agency all appear immobilised under an authoritarian regime whose political motivations to subsume institutions of governance are crystal clear. Anyone opposing the government’s insidious agenda is summarily dumped. Mr. Verma appears to be the latest victim. Even the Supreme Court faced a litmus test when four judges of the collegium talked publicly of the precarious state of India’s democracy. The Emergency lasted 21 months, the undeclared Emergency has already lasted more than 53 months. India has become a democratically elected dictatorship. The sordid CBI saga is a manifestation of a banana republic.

There are three fundamental questions that only Mr. Modi can answer, as the buck stops with him. One, why did they impose Mr. Asthana on Mr. Verma when Mr. Verma had written a dissent note against his appointment to the CVC? Two, why did the government mislead the Supreme Court that Mr. Asthana had Mr. Verma’s full endorsement, which has been contradicted by Mr. Verma in his petition to the SC? Three, why was there a 1.45 a.m. coup against a police chief who was selected less than two years ago, with the Prime Minister being one of the three selectors? Why the trepidation? The Congress is convinced that a paranoid Modi government apprehended that Mr. Verma was about to initiate a preliminary inquiry into the Rafale scam.

On November 12, the SC will perhaps pass its final order on the indelicate mess. But the CBI has been irretrievably damaged; its reputation is sullied. The only silver lining is that future governments will think a thousand times before interfering with its operations. India needs a robust independent entity to investigate big-ticket corruption.

There is some hope

The CBI must be restored to its foundational objectives. Maybe there is need for a second public agitation to get a Lokpal appointed; Mr. Modi has craftily sabotaged it by using some apocryphal spin or the other.

Fortunately, the Supreme Court is doing all the heavy lifting to protect our constitutional morality. There is hope.

The CBI’s decline has been gradual. There needs to be a comprehensive CBI Act

Founded by Lal Bahadur Shastri on April 1, 1963, the CBI had acquired a high reputation and won the confidence of the people for its motto: Industry, Impartiality, Integrity. That agency seems to be in a shambles today.

The CBI has had its ups and down. It faced challenges in the past, particularly in the years preceding and during the Emergency when Sanjay Gandhi called the shots. But never before has any major rift — this time between the top two in the agency, the Director and the Special Director — played out in the open. And never before has the agency registered a serious case of corruption against its own Special Director, for allegedly accepting bribes amounting to crores from someone under investigation. The accused dashed off a letter to the Cabinet Secretary, levelling allegations of corruption and conspiracy against the Director. One does not know where this will end and what ultimately will be left of the organisation.

A gradual decline

The CBI’s decline has been gradual. The first setback came in the Rajiv Gandhi era, with the Single Directive requiring the CBI to take prior permission of the government before initiating an inquiry against “decision-making-level officers”. The Supreme Court, in Vineet Narain and Others v. Union of India (1997), apart from passing several orders to uphold the integrity of the CBI, the CVC and the Enforcement Directorate, quashed the Single Directive as unconstitutional. But the political class brought the directive back in the CVC Act of 2003, which was again set aside by the court. The government got the corruption law amended in the last monsoon session of Parliament, requiring the CBI to take prior approval for initiating investigation against all categories of government servants. In legal terms, this has been a deadly blow to the agency in its work. The earlier it is done away with, the better it would be.

Give statutory status to the CBI

The challenge to restore the credibility of the organisation needs some deeper thought. The CBI came into existence through a Government of India resolution. Even today, the agency continues to function under the archaic Delhi Special Police Establishment Act of 1946, for its powers of investigation and jurisdiction. In pursuance of the orders passed by the court in the Vineet Narain case, the CVC Act of 2003 was passed, and later, the Lokpal Act. Both these Acts partly deal with the powers and functions of the CBI, including providing some much-needed safeguards. But till date, the CBI does not have an Act of its own, although the need for a comprehensive Act has been felt for a long time now. The Estimates Committee of Parliament, under Jaswant Singh, had recommended that the CBI should be given statutory status and have legal powers to investigate cases with inter-State ramifications.

Yet, while providing some safeguards to the CBI, the CVC Act also created impediments. It vested in the CVC the “superintendence” of the Delhi Special Police Establishment (and thus the CBI) in relation to investigation under the Prevention of Corruption Act, 1988. For the remaining areas, the Act left the “superintendence” to the government. So, the “superintendence” over the CBI is something which is shared today between the CVC and the government. Thus, while the answerability for the CBI’s functioning is with the government, the power of “superintendence” in corruption cases lies with the CVC. The present crisis owes a lot to this diarchic arrangement in the CVC Act.

The reputation of the CBI would have been destroyed if the government had not taken action

The recent developments in the CBI are extremely unfortunate. The war between the two highest officials is not only unfortunate but also unprecedented. It needs to be resolved immediately so that the CBI does not suffer a trust deficit among the masses.

Details of the crisis

The fight between CBI Director Alok Verma and Special Director Rakesh Asthana spilled into the public domain last week when the CBI registered an FIR against Mr. Asthana and others, including Deputy Superintendent of Police Devender Kumar, on charges of accepting bribe from a person related to the meat exporter, Moin Qureshi, whose case Mr. Asthana was probing. After the registration of the FIR against him, Mr. Asthana rushed to the Delhi High Court for quashing the FIR and obtained a temporary respite from action against him until the next hearing.

Mr. Asthana had earlier accused Mr. Verma of “interference” in an IRCTC corruption case involving Rashtriya Janata Dal president Lalu Prasad. As per his allegation, Mr. Verma had tried to stall raids against Mr. Prasad last year. Mr. Asthana said he also gave a formal complaint in this regard to the Cabinet Secretary, Pradeep Sinha, who, in turn, sent the complaint to the CVC, which has supervisory powers over the CBI. The CVC took cognisance of the matter and began a probe.

This is a grim scenario. In the face of this unprecedented crisis, the government acted swiftly and took the decision to send both the warring officers on leave till an independent inquiry is concluded in their respective cases. To keep the organisation running, M. Nageswara Rao, who had been working as Joint Director in the Bureau, was appointed as the interim Director of the CBI.

An appropriate decision

Many people from the opposition camp are questioning the decision, but given the level and reach of the crisis in the CBI, nothing could have been more appropriate and rational than the government’s decision. Since both officers have accused each other of misconduct, sending them away was a necessary prerequisite for a fair investigation into the allegations.

The government has acted in a neutral manner. It has given a free hand to the authorised agency, the CVC, to investigate the matter in a fair and transparent manner, giving equal opportunity to both officers without presumptions. The government, committed to its policy of non-interference in the matters of the CBI, is only interested in maintaining the prestige, professionalism and image of the CBI.

Those claiming that the government cannot send the CBI Director on leave cite the Jain Hawala case, where the Supreme Court had said that the CBI Director has a fixed tenure of two years. They need to be reminded that the Director has been neither removed nor transferred; he has only been sent on leave in the interest of fair play following the principle of natural justice. It’s only logical that no one should sit in judgment when any high-ranking officer is under investigation.

Therefore, the action of the government is thoroughly justified. It is in terms of the law of natural justice and has been taken to restore the reputation of the institution, which would have been sullied if no action or any other action had been taken.