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Parliamentary Standing Committee raises concern about low investment on Healthcare Research
Sai Krishna Muthyanolla
December 2, 2020
Among the first reports on the government’s management of COVID-19, the parliamentary standing committee on Health & Family Welfare submitted a report recently to the Rajya Sabha chairman. Among other things, it highlighted the low investment on healthcare research, greater reliance of rapid antigen tests, high cost of COVID-19 treatment etc. It also appreciated the work of various agencies. Here is a review.
In the previous story, we highlighted few of the key observations made in the Parliamentary Standing Committee’s Report on COVID-19 pandemic in India. These were relating to the lack of health care facilities and the underutilization of the available resources, which could have resulted in the failure of containing the infection during the earlier stages.
In this story we take a look at few other key observations and recommendations made by the Parliamentary Standing Committee in its report submitted recently to the Rajya Sabha chairman.
Committee raises questions over the accuracy & reliability of COVID-19 testing
In the note submitted to the Committee, the Ministry of Health highlighted its success in expanding the network of laboratories to test COVID-19 samples to 2082 from just one  laboratory (National Institute of Virology) at the beginning of the pandemic.
The ministry further updated the different tests being conducted to detect COVID-19 infection in the country, which includes – RT-PCR, Rapid Antigen tests, TrueNat & CBNAAT techniques based tests. The testing strategy has evolved over the period of time. Initially, it was limited to international travellers from affected countries , which was later expanded to high risk contacts, health care workers and others.
The expansion of testing criteria was in line with the increase in the testing capabilities across the country. As per Ministry’s data, around 33 thousand tests were conducted in March, which increased to around 3.38 crores tests in October 2020.
While the committee appreciated the efforts of the Government in increasing the testing capability within a short period of time, it raised apprehensions about the accuracy of the tests being conducted, especially the Rapid Antigen tests
It reiterated its opinion that poor contact tracing and less testing in the initial stages could have contributed towards the increase in the number of COVID-19 cases. It stated that while Rapid Antigen test provides faster results, there are questions around the reliability of the same when compared to RT-PCR tests. It observed that large scale use of such tests with low specificity and sensitivity can result in false negatives and can have an impact on containment of COVID-19. Therefore, the committee recommended the Government to ramp up the capabilities to conduct more reliable tests like RT-PCR.
As mentioned by the ministry, available data indicates that the number of tests being conducted across the country has exponentially increased. In fact India ranks second only to USA in terms of the total number of tests conducted. Despite India recording the second highest number of COVID-19 cases, the Cumulative Positivity Rate is among the least in the world. Few of the developed countries like UK & Germany with better and reliable testing strategies have higher positivity rates. However, it has to be noted that the testing strategies vary across the countries with few of the countries following a more focussed strategy. The low positivity rate in India corroborates with the apprehension of the committee regarding the accuracy of the rapid tests and the scope of higher false negatives.
Affordability of COVID-19 treatment and access to Healthcare
In the earlier story, we highlighted the observation made by the Committee regarding the lack of Hospitals & Healthcare facilities in the country, which could have hampered the containment of the infection & treatment of COVID-19 patients.
The committee made multiple observations and recommendations regarding the monetary aspects relating to COVID-19 and Health Infrastructure in India.
Less spending on R&D
As per UIS data (UNESCO Institute of Statistical data), India invested only 0.65% of GDP on Research & Development in 2018. It was lesser than 2017, where in 0.67 % of GDP was invested. Comparatively, Gross Domestic Expenditure on R&D (GERD) of USA is 2.84% of GDP while that of China is 2.19%. India’s GERD is much lower than the World average which is at 1.72%. The Committee expressed concern on the apathy of the government in its low investment on R&D and recommended that  the ministry should try and increase it to at least the World average.
The committee has further observed , based on Budgetary allocation that among the various departments involved in scientific research, the allocation for Department of Health Research is among the lowest. Although the Budgetary Allocation for 2020-21 is increased to Rs. 2100 crores compared to Rs. 1900 crores in 2019-20, it is less than the projected demand of over Rs. 2,800 crores.
The committee observed that investment on R&D would help to develop better understanding on the spread of diseases and also to domestically develop diagnostic kits and other equipment which can reduce the reliance on imports. These in turn could help patients reduce their expenditure on treatment.
Exclusion of beneficiaries under AB-PMJAY and other health schemes
The Ministry appraised the Standing committee on Ayushman Bharat Scheme which consists of two components – (i) Creation of 1.5 lakh Health & Wellness Centres (ABHWCs) for providing Comprehensive Health Care (ii) AB-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) which provided health cover of Rs. 5 lakh per annum per family for secondary and tertiary care hospitalization.
As per update of the CEO of National Health Authority (NHA), free COVID testing and treatment was conducted for PMJAY beneficiaries. The ministry emphasized that access to private hospitals was provided for the beneficiaries of PMJAY at free of cost.
The committee acknowledged the initiatives under the Ayushman Bharat Scheme both in terms of identifying and empanelling Health care facilities as ABHWCs as well as providing comprehensive health care to beneficiaries. However, it raised apprehensions about the reach and inclusion under Ayushman Bharat.
The exclusion meant that many of the eligible from marginalised sections of the society were not able to get the benefit of Ayushman Bharat and hence had to pay out of their pocket for COVID-19 treatment. In few of the cases, they got the support from the schemes of respective state governments. However, this has further added to the burden of the State Governments.
The Committee also highlights the fact that, lack of suitable facilities in the Public Health Care centers and hospitals meant that many were forced to rely on Private hospitals for COVID-19 treatment. This adds to the financial burden of the effected families.
Need for Scientific approach to fix pricing of COVID-19 treatment
The Standing committee took cognizance of the affordability of COVID-19 treatment. It observed that many private healthcare facilities have charged higher prices  for COVID-19 treatment, which has created financial burden and made treatment inaccessible.
Meanwhile, the government’s efforts to cap the pricing of COVID-19 treatment had an impact on the hospitals who had to take up the additional burden of infrastructure for COVID-19 treatment and do not have scope to meet this expenditure with the capping limits set.
Hence the committee has recommended that the government come up with a more scientific approach in devising a sustainable cost model that is affordable to the people and also is not a burden on the private hospitals that are providing COVID-19 treatment.
Recommendations on AYUSH and other aspects
The Standing Committee dwelled into many areas regarding COVID-19 pandemic in the country. Few of the other key observations and recommendations include:
The committee has further highlighted the plight of women during COVID-19 and the assistance required to reduce the possibility of atrocities against women.
Overall, the Standing Committee has appreciated the efforts of Government, MOHFW and ICMR in their efforts to mitigate the impact of the unprecedented pandemic. However, it has also opined that a more proactive approach in the initial stages and better health care system could have helped control the pandemic in the early stage.
Featured Image: Investment on Healthcare Research

created: December 2, 2020


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Review: Providing 100% reservation for local residents of Scheduled districts/areas violates Indian Constitution, says the SC
Sai Krishna Muthyanolla
August 10, 2022
In this week’s review of court judgements, we look at the Supreme Court’s observations on election freebies, reservations in scheduled areas, Delhi High Court’s order on evictions and the judicial limitations of the National Commission for Scheduled Castes, and the Madras High Court’s order regarding the domestic violence act.
SC: No political party would oppose freebies. These days everyone wants freebies. Constitutes expert body of stakeholders on issue of election ‘freebies.’
The Apex Court was hearing a public interest litigation filed by the petitioner on the issue of election freebies by political parties. It was filed by Ashwani Upadhyay, seeking the directions of the apex court to issue directions to deregister errant political parties.
In Ashwini Kumar Upadhyay vs. Union of India & Anr., the petitioner contended that irrational freebies violate the purity of electoral processes, and unduly influence voter behaviour thereby distorting the level playing field in the electoral process. The petition sought a ban on such political favour seeking populist measures to preserve democratic values and ethics.
The petitioner also pointed out that the Supreme Court’s Judgement in S. Subramaniam Balaji vs. The Government of Tamil Nadu and Ors. gave effect to the Election Commission’s guidelines on electoral freebies had no effect on the political parties.
The Chief Justice of India remarked that the issue of freebies has become more serious now, and the parties are going beyond their regular budgets to accommodate freebies. But the CJI was sceptical about the legality of the issue and the role of the judiciary in such issues.
After hearing the counsel, petitioners and Election Commission of India, the bench remarked that political parties would not oppose freebies, and thereby it feels appropriate for the judiciary to form an expert body with all the stakeholders to comprehensively consider the issue and make suitable recommendations. It also directed the parties to suggest names for the constitution of such an expert body.
SC: Providing 100% reservation for local residents of Scheduled districts/areas violates Indian Constitution, upholds the Judgement of High Court quashing the Government’s notification
In Satyajit Kumar & Ors. vs. The State of Jharkhand & Ors,  the Supreme Court declared that the notification for 100% local reservation in Scheduled Areas is unconstitutional and upheld the High Court’s judgement.
The bench comprising of Justice MR Shah and Justice BV Nagarathna was hearing the State Government’s appeal petitions against the judgement of the High Court. The State Government’s argument relied on the powers of the Governor, who can authorise the exemption of the application of any Parliament or State law.
The bench relied on the 5 judge constitution bench judgement of the apex court in Chebrolu Leela Prasad Rao & Ors. vs. State of Andhra Pradesh & Ors. , in which it struck down a government order that provided absolute reservations for ST teachers. In the same case, the court remarked that reservations are constitutionally valid as long as they do not cross 50%, and the idea of the reservation is not to be proportionate but adequate.
The constitution bench also remarked that no law prevents teachers from other categories to teach in the scheduled areas. The logic behind such an order considering the high absenteeism in primary schools is naïve.
The apex court in the Chebrolu Leela Prasad case also held that the power of Governors extended to only the parliamentary or State legislations, and not sub-ordinate legislations.
Applying the above case in the present case, the apex court reaffirmed the judgement of the High Court of Jharkhand and accordingly quashed the government’s notification of 100% reservations for locals in Scheduled areas.
Delhi HC: National Commission for Scheduled Castes is not equivalent to Civil Court
The Delhi High Court in National Small Industries Corporation Ltd. vs. National Commission for Scheduled Castes & Ors. held that the National Commission for Scheduled Castes is not equivalent to a civil court and cannot issue directions after deciding the rights of the parties.
The High Court was hearing a petition challenging the order of the National Commission for Scheduled Castes (NCSC), which directed that the respondents be promoted to the post of General Manager (Senior Grade) with a retrospective date, along with asking the petitioner to review the DPC.
The petitioner held that the commission had exceeded its authority in its orders while it has no such powers under the Articles 338 (5) and 338 (8) of the Indian Constitution. The petitioner relied on the judgement of the apex court in All India Indian Overseas Bank Scheduled Castes and Scheduled Tribes Employees’ Welfare Association and others vs. Union of India and others, where it held that the commission has no powers to grant injunctions, both permanent and temporary. The apex court also held that, the procedural powers of the commission in the capacity of civil court is for limited purposes only.
Relying on the above case, the Delhi HC held that merely because the commission possesses the powers of a civil court in investigating and receiving evidence on affidavits, it does not mean that the Commission is equivalent to the Civil Court, and it cannot issue directions after deciding the rights of the parties.
Delhi HC: A reasonable period has to be given to such persons and temporary location has to be provided before any demolition activities
In Shakarpur Slum Union vs. DDA & Ors, the Delhi High Court observed that any person cannot be evicted early in the morning or late in the evening with a bulldozer, without providing them notice and reasonable time, thereby rendering them completely homeless.
The court was hearing a petition filed by the Shakarpur Slum Union seeking directions to the Delhi Development Authority (DDA) to suspend further demolitions and maintain the status quo till the procedural requirements of the Delhi Urban Shelter Improvement Board (DUSIB) policy are met.
The court relied on the guidelines enshrined in the Sudhama Singh and Others vs. Government of Delhi and Anr., and Ajay Maken & Ors. vs. Government of India & Ors. regarding the rehabilitation of the slum dwellers. In Sudhama Singh case, the Court held that slum dwellers are entitled for rehabilitation and relocation and the state must ensure the basic amenities and dignity and rights of lives of citizens living in jhuggis. In Ajay Maken case, the HC held that the right to housing is a collection of rights that extends beyond the need for a simple roof over one’s head. In addition to the right to clean drinking water, sanitary sewers, and transportation facilities, it also covers the right to a means of subsistence, health, education, and food.  It further held that
Relying on the above judgements, the Delhi HC held that
Further, the court remarked that no demolition shall be carried out before and after regular day hours, prior notice, temporary location, and reasonable time must be provided to them. And the court also expected DDA not to carry out demolitions at the end of the academic year or during monsoons.
Madras HC: Domestic Violence Act proceedings are civil in nature, victim’s consent needed to transfer them to family court
In P.Ganesan vs. M.Revathy Prema Rubarani, the Madras High Court held that the proceedings under the Domestic violence act (DV act) are of civil nature, and the intent of the act is to make civil remedies available to the victims of domestic violence.
The division bench of the High Court was hearing review petitions and questions regarding the references made by other single judge benches. The references involved five questions.
For determining the nature of the proceedings, the High Court relied on the apex court’s decision in Kunapareddy  vs. Kunapareddy Swarna Kumari, where it affirmed that the DV act proceedings are civil in nature, relying on the intent and the statement of objects and reasons of the DV act.
On the question of applicability of Section 468 of Cr.P.C, the court looked at the Kamatchi vs. Lakshmi Narayanan judgement, it was held that
Regarding the period of limitation, the High Court held that
On the question of transferability of the proceedings to a civil court or family court, the High Court held that
On the question of whether the High Court can exercise its power under Section 482 Cr. P.C, the High Court held that Section 482 Cr. P.C petition is maintainable in domestic violence act proceedings, and the High Court can exercise its power under the above section.

source: news-factly

license: Creative Commons - Attribution - https://creativecommons.org/licenses/by/4.0/

author: Sai Krishna Muthyanolla


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Public Accounts Committee report once again highlights the issue of tax exemption to ‘Agricultural Income’
Sai Krishna Muthyanolla
April 21, 2022
The issue of tax exemption to ‘Agricultural Income’ has been contentious and debated for decades now. Multiple committees highlighted the misuse of exemption in their reports. Here is a review.
The exemption of agriculture income from tax without any limit has often been pointed out as being a conduit for avoiding taxes and money laundering, which hinders the growth of the agriculture sector on which a major chunk of the Indian population is dependent on. It has often been reported that rich farmers with large landholdings and companies making profits of crores of rupees are exempted from paying tax as per the existing legal provisions. Despite this being highlighted for many decades in government reports, by lawmakers, and research papers, successive governments have not taken any action to bring agricultural income into the tax net, making it a political issue.
What is Agriculture income as defined in the Income Tax Act?
‘Agricultural income’ in the Constitution refers to that as defined for the purpose of enactments relating to Indian Income Tax according to Section 366(1) of the Constitution.
Section 2(1A) of the Income Tax Act defines agriculture income as rent/revenue from agricultural land, agricultural operations, or farmhouse. Section 10(1) of the Act exempts agriculture income from tax.
Taxes on agricultural income falls under the ambit of the “State” as per the Constitution of India which means that enactment of legislations pertaining to taxing agriculture income is the responsibility of State Governments and not the Central Government. Taxes on agricultural income is part of the ‘State List’ under the seventh schedule of the constitution.  Nonetheless, agricultural income is used for rate purposes under certain conditions to determine income tax liabilities.
Numerous official reports have highlighted the misuse of agricultural income tax exemption for decades
Though the exemption was granted to support farmers improve their conditions, the provision is being misused widely as noted in multiple reports in the past. The same has been highlighted in numerous government reports as well.
The Taxation Enquiry Committee in 1924-25 has discussed the issue of tax exemption of agriculture income implying that the issue has been a subject of debate for about a century now. The report states that “there is no historical or theoretical justification for the continued exemption from the income tax of income derived from agriculture. There are, however, administrative, and political objections to the removal of the exemption at the present time.” The Taxation Enquiry Commission in 1953-54 has also recommended levying a surcharge on agriculture as regards to the non-agricultural income of the assessees.
The Wanchoo Committee of 1971 on Direct Taxes suggested that the total exemption of agriculture income should be done away with and be aggregated with other income liable to income tax as the provision was being used for evading tax. It suggested that agricultural income should also be subject to a uniform tax on par with other income.
Tax evasion, money laundering, and inequity in taxation have also been highlighted
The opportunities offered by the exemption ‘for camouflaging black money’ have been mentioned in the Raj Committee on Taxation of Agricultural Wealth and Income report published in 1972, which suggests partial integration of agriculture income for taxing.
In 1972, the Law Commission of India prepared a report on the ‘Proposal for inclusion of agricultural income in the total income for the purpose of determining the rate of tax under the Income Tax Act, 1961.’ While preparing the report, the evasion of income tax by assessees by showing their non-agricultural income as agricultural income has been stated as one of the deficiencies of the income tax system.
The Kelkar Committee Report on Tax Reforms in 2002 stated that the exemption to agriculture income is a distortion to both horizontal and vertical equity and encourages laundering of non-agricultural income as agricultural income.
Exemption has resulted in leakage to the tune of crores in revenues annually
The third Tax Administration Reform Commission (TARC) report of 2014 is among the recent reports that have detailed how the agricultural income of non-agriculturists is being increasingly used as a conduit to avoid tax and for laundering funds, resulting in leakage to the tune of crores in revenues annually. A solution suggested by the Commission was through taxing large farmers by setting income thresholds. It was on the basis of this report that the Comptroller and Auditor General of India (CAG) conducted an audit to ascertain the genuineness and correctness of the exemptions claimed for agricultural income in cases as granted by the Income Tax Department.
CAG Report brought to light the inefficiency in the IT Department’s functioning
The CAG report, published in 2019, studied a sample of 6,778 cases out of 22,195 scrutiny assessments carried out by the income tax department during 2014-15 to 2016-17, of those who had an agriculture income claim of more than Rs. 5 lakhs. The agricultural income of Rs. 3,656.25 crores were claimed in these 6,778 cases of which Rs. 2,544.21 crores were allowed. The CAG report observed that
The report noted that such lacunae in the system such as not verifying the expenditures would give way to bringing in black money/unaccounted money into the financial system under the garb of agricultural income. The CAG recommended that the income tax department should tighten its system in allowing exemption of income as agricultural income stating that the existing system is porous and open to misuse following its observations in the audit.
Corporates with hundreds of crores of profit are also exempted
Other private studies have noted how companies like Kaveri Seeds and Monsanto earned profits of Rs. 215.4 crores and Rs. 138.7 crores in 2014-15 were given exemptions for Rs. 186.6 crores and Rs. 94.4 crores respectively showing the inequity in the exemption. About 4 lakh people who declared agriculture income were granted exemption during 2013–14, with total agricultural income exempted from tax is Rs. 9,338 crores in the assessment period. Though the collection of tax on agriculture income is the state’s responsibility, even states have not considered this or failed to implement the legislations successfully. Uttar Pradesh introduced an agricultural income tax in 1948 which was repealed in 1957.
Public Accounts Committee stressed on strict compliance with procedures for verification of documents by IT Department
In April 2022, the Public Accounts Committee tabled a report in the Parliament on ‘Assessments relating to Agricultural Income’ in which the committee examined certain paragraphs of the CAG report which dealt with verification of documents for exemption, incorrect reflection in Income Tax Department’s database, and mistakes in assessments. The committee stressed on the need for strictly following the procedures for verification of documents for allowing exemptions.
The committee also recommended that all cases be individually checked where the agricultural income claim is above Rs. 10 lakhs noting that more than 21 lakh taxpayers claimed agricultural income in their 2020-21 returns and nearly 60,000 of them had reported agricultural income exceeding Rs. 10 lakhs. However, the Income Tax Department reported a shortage of manpower following which the committee asked the Ministry to come up with a mechanism for categorization of cases of agricultural income into three slabs- above Rs. 10 lakhs, Rs. 50 lakhs, and Rs. 1 crore in Computer Aided Scrutiny Selection (CASS) to target high evasion risk cases. The Committee also noted that a major chunk of agriculturists was reluctant to file income tax returns due to practical difficulties arising out of lack of awareness, frequency of going to IT offices and connectivity issues faced to travel to the Income Tax office.
Tax on Agricultural Income varies across countries
According to OECD, countries offer differential tax treatment for their agricultural sectors under their tax regimes. For instance, Finland and Denmark do not give any preferential treatment to farmers on personal income taxes whereas, in Korea, income from grains and other food crops are exempt from taxation while that from plant cultivation is tax-exempt if the revenue is less than KRW 1 billion. Countries like Latvia, Lithuania, and Norway have set income thresholds for granting exemptions.
Featured Image: Agricultural Income


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Review: Punjab accounts for 14% of all NRI Marriage Grievances between 2016 & 2019
Sai Krishna Muthyanolla
August 11, 2020
The Standing Committee on External Affairs submitted its report about the NRI Marriage Registration bill. The committee approved the bill subject to the inclusion of certain recommendations made by the committee. Data in the committee report suggests that Punjab alone accounts for more than 14% of all NRI Marriage grievances.
India has the largest diaspora in the world. According to the UN’s data on international migration stock by origin, a total of 1.75 crore migrants have their country of origin as India. Overseas Indians not only include Indian citizens who have migrated to foreign countries seeking better employment and educational opportunities but also those who are born to Indian parents who migrated there.
According to the Standing Committee on External Affairs’ report in 2011, Indians settled abroad take Indian brides for their foreign-born sons with the hope to rejuvenate Indian culture and traditions in the foreign land and avoid infiltration of foreign brides. Alliances with Overseas Indians were seen as passages to greener pastures abroad not only for the bride/bridegroom but for their entire family. However, there are numerous victims to such attraction of the greener pasture.
‘Registration of Marriage of NRI Bill’ was introduced in parliament in 2019
Earlier, in March 2020, a parliamentary standing committee on External Affairs studied the Registration of Marriage of Non- Resident Indian Bill, 2019 and made a set of recommendations that need to be included. The bill’s objective is to offer greater protection to Indian citizens, especially women, married to Non-Resident Indians (NRIs) and thereby, act as a deterrent to NRIs against harassment of spouses. It was introduced in the Rajya Sabha in 2019 by the then External Affairs Minister, Late. Sushma Swaraj.
Source: Ministry of External Affairs, 2019
Indian brides fall prey to fraudulent NRI marriages
A few typical instances that have arrived out of NRI marriages according to MEA are –
The deserted Women face many challenges in the Indian legal system as well as in foreign courts
Besides the marriage related issues mentioned earlier, aggrieved women also face challenges in the Indian legal system, like the lack of response to summons by spouse, for trial on criminal charges filed by the Indian woman for issues relating to dowry and matrimonial cruelty in India. Another issue is that, post-divorce, the Indian national is denied maintenance in India by spouse who is abroad since marriage has been dissolved. Those women who approach court in India for maintenance or divorce, may face issues of order enforcement or retaliatory legal action by spouse. Even lawyers are not keen in taking up such issues against NRIs due to slim chances of winning or demand high fees.
Likewise, women face multiple challenges in the foreign courts. When the spouse files complaint against wife in foreign country, it results in rejection of her visa application leaving her stranded in India, or he threatens to do so to render her helpless. The wife’s lack of knowledge about divorce proceedings or financial constraints to fight in the court is exploited. Privacy laws in foreign countries may abstain her from getting her spouse’s contact information. Lenient divorce grounds in foreign countries are taken advantage of by NRI spouses.
An average of three cases of NRI marital disputes got registered daily between 2015 and 2019
In the period from 1 January 2015 up to 31 October 2019, a total of 6094 cases of NRI Marriage grievances have been reported and addressed. The year wise total number of complaints reported was 796 in 2015, 1510 in 2016, 1498 in 2017, and 1299 in 2018. In 2019, up to 31 October 2019, a total of 991 cases were reported. Majority of the cases had come from English-speaking western countries like USA, Canada, Australia, New Zealand and the UK.
Punjab alone accounted for more than 14% of the cases reported between 2016 & 2019
Between 2016 & 2019, Punjab reported the maximum number of such complaints every year. Between 2016 and October 2019, 14.4% of the total number of cases reported in India were from Punjab. Uttar Pradesh and Maharashtra follow Punjab in the number of cases reported. The seven states of Punjab, Uttar Pradesh, Maharashtra, Delhi, Rajasthan, Karnataka, and Tamil Nadu account for more than 60% of the cases registered between 2016 & 2019.
MEA supports aggrieved women by providing legal and financial assistance
The Ministry of External Affairs (MEA) helps the distressed women through counselling, guidance and providing information about procedures, etc. Further, it also provides financial assistance up to USD 4000 and legal assistance to the women. Comprehensive FAQs, legal provisions in various countries, details of organisations, NGOs, registered lawyers, and other information with respect to issues faced by aggrieved Indian women are available on the MEA website.
The MADAD portal was launched in 2015 by MEA. The portal provides online consular services for all grievances of Indians including distressed brides. An inter-ministerial body, Integrated Nodal Agency (INA), which is headed by Ministry for Women and Child Development was constituted to address the issues pertaining to NRI Marital disputes.
In 2018, the Supreme Court directed the Central Government to explore the possibility of formulating a policy that deals with grievances of women who have been abandoned by their NRI husbands. Later in 2019, the Registration of Marriage of NRI Bill was introduced.
The Bill proposes to amend two legislations- the Passport Act and CrPC
The Bill proposes to make it mandatory to register the marriage with an NRI partner within a period of 30 days from the date of marriage. In case any NRI fails to register the marriage within the stipulated time, the passport authority has been bestowed with the authority to impound his passport, by amending the Passport Act, 1967. The Bill also proposed to add a provision to the Code of Criminal Procedure, 1973 (CrPC) such that courts can issue summons and warrants through a designated website of MEA. It also provides for attachment of both movable and immovable properties of the proclaimed offender.
The Standing Committee made certain recommendations
The standing committee expressed its discontent for not considering the 15 report of the standing committee and not conducting public consultation while drafting the Bill. Some of the key recommendations of the committee regarding this bill are the following.
The standing committee approved this bill subject to the condition that the recommendations made by the committee are incorporated in the Bill.
Featured Image: NRI Marriage Grievances


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Review: Punjab And Haryana HC Says that Live-In Relationship Without Obtaining Divorce is Punishable Under Sections 494/495 of IPC.
Sai Krishna Muthyanolla
November 22, 2023
In this edition of Court judgements review, we look at the Supreme Court’s judgement on relaxation of eligibility conditions, Punjab and Haryana High Court’s judgement on live-in relationships, Jammu and Kashmir High Court’s judgement on Preventive Detention Law, Orissa High Court’s judgements on ‘Dowry Demand’ and denial of service benefits during pendency of criminal trial.
Supreme Court: Though the state has power to relax the eligibility criteria, the same cannot be done mid-stream without giving wide publicity of such change.
The Apex Court, in Ankita Thakur & Ors vs. The HP Staff Selection Commission, remarked that the state must give enough publicity if the recruitment rules are modified. These are valid only if such alterations are specified in the rules or job advertisement.
The two-judge bench comprising of Justice Hrishikesh Roy and Justice Manoj Misra was hearing a batch of appeals against the judgement of the Himachal Pradesh High Court that upheld the State Government’s decision to relax eligibility requirements for the post of Junior Office Assistant (JOA). The reasoning by the High Court while upholding the said relaxation is that the earlier prescribed qualifications were vague and unclear.
As a result of the tweak in relaxations, the candidates initially deemed ineligible under the original rules were now considered eligible. This also resulted in candidates who, although lower in merit but eligible based on the original rules, being removed from the merit list.
Upon hearing the arguments from both parties, the apex court framed seven key issues.
The court noted that there was no dispute on the below facts.
On the issue of whether the relaxation order could be made post the last date of receipt applications, the court held that if the existing Rules allow for the possibility of relaxing eligibility criteria, this authority can only be utilized if explicitly mentioned in the advertisement. Additionally, when this authority is exercised, there should be extensive publicity to ensure that individuals who might benefit from this relaxation are aware and can take the opportunity to apply and compete. This was not done in this case.
On issues (ii), (iii),(iv) – relating to the ambiguity in earlier eligibility qualifications, and prior consultation of the commission, the apex court relied on Bank of India vs. Aarya K Babu, where it was held that it was incumbent on the employer to issue a corrigendum incorporating the changes to the notification and invite application from those qualified as per the changed criteria and consider the same along with the applications received in response to the initial notification. It was not followed in this case.
Further, on issues (v,) (vi), and (vii), the apex court held that the High Court rightly rejected the claim of such candidates, who could not demonstrate that they held the prescribed essential qualifications since there was no such provision in the rules earlier. Further, the apex court held that even a candidate included in the merit list has no indefeasible right to the appointment even if the vacancy exists.
Accordingly, the appeals are disposed of.
Punjab and Haryana HC: Live-in relationship without obtaining divorce is punishable under sections 494/495 of the IPC.
The Punjab and Haryana High Court, in Reena Devi & And. vs. State of Punjab & Ors, held that staying in a live-in relationship without obtaining any valid decree of divorce from his earlier spouse and during subsistence of his earlier marriage is a punishable offence under sections 494 and 495 of the IPC.
The single-judge bench of Justice Kuldeep Tiwari was hearing a writ petition to protect the lives and liberty of the petitioners. The petitioners claimed that they were both major adults and they both were living in a live-in relationship, which was accepted by the family members of one of the petitioners, while the other family did not approve of this. They further threatened to kill the petitioners, hence this petition to seek the protection of lives and liberty.
Looking at the facts of the case, the court found that one of the petitioners is unmarried while the other is married and has a daughter who is 2 years old. The married petitioner applied for a divorce in the family court and the matter is sub-judice. The court further held that without having a valid decree of divorce from an earlier marriage, the present relationship cannot be termed as ‘live-in relationship’ or relationship’ in the nature of marriage. Such acts are punishable under section 494 and 495 of the IPC, that deal with marrying again during a lifetime and concealment of a former marriage from the person with whom the subsequent marriage is contracted.
Further, the court remarked that the petitioners failed to provide any evidence to corroborate their allegations. Hence, such bald and vague allegations cannot be accepted by the court.
The court also pointed out that this petition is a trick to avoid any criminal prosecution in case of adultery, and the hidden intent of the petitioners is just to obliquely obtain the seal of this Court on their conduct, which is unacceptable. Accordingly, the petition is dismissed.
Jammu and Kashmir and Ladakh HC: Tendency of detaining authority to detain critics of government machinery is an abuse of preventive detention law.
The Jammu and Kashmir and Ladakh High Court, in Sajad Ahmad Dar vs. Union Territory of Jammu & Kashmir, criticized the authorities for misusing the preventive detention law to detain critics of policies of government machinery. Being a critic cannot be a ground for detention.
The two-judge bench comprising Chief Justice of the High Court and Justice M.A. Chowdhary was hearing a petition seeking the quashing of the detention order against the petitioner. The facts of the case are as follows. Dar, known by the pseudonym Sajad Gul, has been held in custody under the Jammu and Kashmir Public Safety Act since 16 January 2022. This detention was based on allegations from the detaining authorities asserting that his tweets and statements incited hostility and posed a threat to public order and the state’s security. It was argued that the detainee was apprehended by the police authorities without valid cause and unlawfully confined for an extended period. The respondents claimed that the petitioner utilized social media to agitate against government institutions, posted contentious tweets/statements, and, in their capacity as a journalist, stirred animosity through the Twitter account @SajadGul_ for malicious intentions.
Upon hearing both parties, the High Court held that the detention order, founded on such vague reasons, cannot be upheld. The detaining authority, prior to issuing the order, did not thoroughly consider the situation to form a personal judgment justifying the preventive detention of the individual, thus infringing upon their valuable and fundamental right to liberty, safeguarded under Article 21 of the Constitution of India.
The court further found fault with the detention order, where no reason was specified, and such records on which the reliance was placed are not supplied. This effectively made the effective and meaningful representation unsustainable and is in contravention of the statutory provision of the J&K Public Safety Act as well as constitutional guarantees provided under Article 22 (5) of the Constitution of India.
Accordingly, the detention order is quashed.
Orissa HC: A demand for money on account of some financial stringency or for meeting some urgent domestic expenses cannot be termed as a demand for dowry as the said word is normally understood.
The Orissa High Court, in Bhanu Charan Pradhan vs. State of Odisha, remarked that a request for a sum by a husband with an assurance to repay does not amount to ‘dowry demand’ as per the definition of ‘dowry’ in Section 2 of the Dowry Prohibition Act, 1961.
The single-judge bench of Justice Sangam Kumar Sahoo was hearing an appeal concerning a person accused of murdering his wife related to a dowry demand. The charges against him included Sections 302/498A/304B of the IPC and Section 4 of the Dowry Prohibition Act. The trial Court convicted the appellant under Sections 498A/304B but acquitted him of the murder charge under Section 302 of the IPC. Unhappy with the conviction, the appellant appealed to the High Court.
The petitioner submitted that the basic ingredients to be proved to attract the offence under section 304-B of I.P.C. was absent in this case and since the relationship between the marital partners was cordial, it would also not attract 498A of the IPC.
Looking at the contentions of both parties, the High Court sought to know whether the ingredients of offence under section 304-B of the I.P.C. are fulfilled.
From the materials on the record, the court observed that the death took place within the stipulated seven years of marriage, and it agreed with the view of the trial court that the death of the deceased was otherwise than under normal circumstances. Furthermore, the court also finds that there is a cordial relationship between the marital partners.
It also further noted that there is no clinching evidence on record that soon before the death of the deceased, she was subjected to cruelty and harassment by the appellant in connection with any demand for dowry. Further, the demand for money with an assurance of repayment was not a dowry demand within section 2 of the dowry prohibition act.
On whether the case had ingredients of section 498A, the court relied on the witnesses and the letter written by the deceased one week before the death. Accordingly, the court held that the appellant is liable to be punished under section 498A.
Accordingly, the conviction under section 304B is set aside and the conviction under section 498A is upheld.
Orissa HC: Unexplained prolongation of criminal trial violates the constitutional rights of an accused and denial of statutory or any other rights for a delinquent officer/government servant impending such delayed trial is indeed a case of double jeopardy.
The Orissa High Court, in Nihar Ranjan Choudhury vs. State of Odisha & Anr., held that the refusal to grant promotion and other lawful entitlements and work benefits solely due to the prolonged duration of a criminal trial constitutes a form of ‘double jeopardy’ and breaches the constitutional rights of the employee in question.
The Single Judge Bench of Justice Sibo Sankar Mishra was hearing a writ petition under Article 226 of the Constitution of India, among other things, seeking a writ against the Opposite Parties to be promoted to the positions of Deputy Executive Engineer, Executive Engineer, and Superintendent Engineer, retroactively from the time their immediate juniors received such promotions, and to receive all consequent service benefits. The Petitioner has been facing a criminal prosecution initiated in 2001, and despite the Departmental Promotion Committee (DPC) recommending their case for promotion, a sealed cover procedure has been enforced due to the ongoing criminal prosecution. Notably, no disciplinary proceedings have been initiated against the Petitioner by the department.
Following the initial decision by a Single Bench of the Court in response to the writ petition, which granted the petitioner’s requests for promotion while specifying that the promotion would be contingent upon the outcome of the ongoing criminal case, an intra-court writ appeal was filed. The Division Bench upheld the appeal, sending the matter back to the Single Bench and establishing specific deadlines for the submission of counter affidavits by the opposing parties and a rejoinder affidavit by the petitioner.
The State argued, citing the judgment in State of Odisha & Anr. vs. Joseph Barik, that the petitioner couldn’t be promoted with the outcome of the criminal case pending against them.
Upon hearing both parties, the single judge bench remarked that the judgement in Joseph Barik is different from the present case. In that case, the petitioners urged that at least they should have been granted ad hoc promotion awaiting the outcome of the criminal prosecution, however, in this case, the Petitioner is claiming promotion for which DPC has already recommended his case for promotion. However, it’s not given effect, and a sealed cover procedure has been adopted owing to the pendency of the criminal proceedings. It relied on Union of India and others vs. K.V. Jankiraman and others, where it was held that mere pendency of criminal case cannot be taken as a ground to delay promotion.
Accordingly, the court instructed the respondent authorities to promote the petitioner to the respective positions from the time their immediate juniors received promotions.

created: November 22, 2023


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Review: Rajasthan HC Rules That Retiral Benefits Cannot be Withheld for Proceedings Related to Non-Official Duties. - FACTLY
Sai Krishna Muthyanolla
April 3, 2024
In this edition of Court Judgements, we look at the Supreme Court’s decisions of misuse of Preventive detention laws, and imposition of conditions while granting bail, Delhi High Court’s judgement on cruelty to wife by husband, Madhya Pradesh High Court’s judgement on Live-in relationships, and Rajasthan High Court’s judgement on withholding of retirement benefits.
Supreme Court: Inability to address the law-and-order issues should not serve as a justification for resorting to preventive detention measures.
In Nenavath Bujji etc., vs. The State of Telangana and Ors., the apex court took a note of series of cases emerging from the State of Telangana on the invocation of Preventive Detention measures and noted that the inability of the police machinery to tackle the law-and-order situations should not be a justification for resorting to preventive detention measures.
The three-judge bench of the apex court comprising Chief Justice of India, Justice JB Pardiwala and Justice Manoj Misra, was hearing an appeal against the judgement of the Telangana High Court, which declined to interfere with the order of preventive detention on the appellant passed by the Commissioner of Police, Rachakonda Commissionerate, State of Telangana. The brief facts of the case are as follows: the appellant was termed as ‘Goonda’ under section 2(g) of the Telangana Prevention of Dangerous Activities Act, 1986. The allegations were that the appellant was involved in multiple property theft offences in quick succession, thereby creating an atmosphere of panic and fear in the people’s minds. The Detention authority and the Telangana High Court were satisfied that the activities of the appellant detenu were prejudicial to the maintenance of public order, hence it was felt necessary that the appellant be preventively detained.
The counsel for the appellant contended that the cases in which the appellant was involved were typical “law and order” scenarios, and that bail was granted in each of them. The appellant’s right to liberty under Article 21 is restricted when preventive detention is used, and it is neither the most appropriate nor the least restrictive way to stop the appellant from committing new crimes. The respondent’s counsel contended that the contested rulings were error-free.
Upon hearing both sides, the apex Court stated that the power under any statute relating to preventative detention must be applied with extreme care, caution, and restraint. Preventive detention is a preventative power that is applied with reasonable foresight. Failure on the part of police machinery to address ‘law and order’ situations should not be a reason for invoking preventive detention.
Further, the court distinguishes ‘law and order’ and ‘public order’. It stated that the fundamental difference between the realms of law and order and public order is not solely defined by the nature or quality of the act, but rather by the magnitude and scope of its impact on society. Additionally, the court also relied on Ameena Begum vs. State of Telangana and Others, wherein it looked at whether there was a proper application of mind while ordering detention.
The apex court also issued several measures that must be followed when passing a detention order. Taking an exception to the series of cases of preventive detention from Telangana, the apex court expects that the State of Telangana considers these directives seriously and ensures that orders for preventive detention are not issued routinely without careful consideration. Accordingly, the detention order is set aside.
Supreme Court: Bail conditions breaching fundamental rights can’t be imposed.
In Siba Shankar Das vs. State of Odisha and another, the apex court held that any imposition of bail conditions that breach fundamental rights should not be imposed.
The two-judge bench of the apex court comprising Justice B.R. Gavai and Justice Sandeep Mehta was hearing an appeal against the order passed by the High Court of Orissa that imposed conditions on bail. The order prohibited the appellant, who is a politician, from engaging in political activities. This was appealed by the appellant.
The apex court agreed with the reasoning of the appellant and held that any condition imposing fundamental rights cannot be imposed.
Accordingly, the condition is quashed and set aside.
Delhi HC: Forcefully asking the wife to do household chores if health and any other circumstances does not permit, amounts to cruelty.
In X vs. Y, the Delhi High Court held that allegations which assassinate the character of the spouse amount to the highest level of cruelty, and forcing the wife to do household chores even if her health or any other circumstances do not permit amounts to cruelty.
The division bench of Delhi High Court comprising Justice Suresh Kumar Kait and Justice Neena Bansal Krishna was hearing an appeal against the judgement of the Family Court that dismissed the husband’s petition seeking divorce. The brief facts of the case are as follows: The appellant-husband and respondent-wife married on 6 May 2011, according to Hindu rituals and a boy was born out of wedlock. His marriage has been troubled since its inception due to the respondent’s disregard for him and his family. He said that the responder was quarrelsome and uncooperative, as she did not participate in daily duties or contribute financially to household expenses while being employed. Their marriage bond deteriorated more following the birth of their kid due to respondents’ strong possessiveness about their child and her frequent visits to her mother’s residence. Despite the best efforts, the respondent was reluctant to cohabitate, and disrespectful, thereby inflicting mental cruelty. The respondent, however, asserted that it was she, who was subjected to cruelty by mistreatment, persistent dowry demands and humiliation. The respondent further claimed that she was forced to do household chores immediately after the delivery of the child, which however, fell flat during cross-examination, as there was a maid servant hired.
Further, there was no evidence on record for the allegations of the wife about the husband having extramarital affair. The hue and cry made by the wife at the husband’s workplace tarnished the image of the husband.
Considering the facts of the case, the Delhi High Court set aside the order of the Family Court, and the union between the parties is legally dissolved in accordance with the provisions outlined in Section 13(1)(ia) of the Hindu Marriage Act, 1955.
Madhya Pradesh HC: Youngsters must exercise caution on getting into live-in relationships.
In a recent judgement, the Madhya Pradesh High Court, though granted protection to a young live-in pair – both the boy and the girl were 19 years old – cautioned against young people entering into partnerships and abandoning their families at such a young age.
The single judge bench of Justice Subodh Abhyankar was considering a petition filed seeking protection as they were residing together against the wishes of their parents and were anticipating untoward actions by the parents. They had relied on the apex court judgement in Nandakumar vs. State of Kerala, wherein the apex court held that even though the petitioners were not competent enough to enter into wedlock, they had the right to live together outside the wedlock. However, the counsel for the state argued that granting such protection would not be in the larger interest of society and may encourage promiscuousness.
Having heard both sides, the court was inclined to grant protection from external forces. At the same time, the court also recorded its caution against the choices youngsters are making these days. Though some rights are guaranteed by the Constitution of India, it is not necessary to enjoy them.
Accordingly, the court granted protection to the petitioners.
Rajasthan HC: Withholding retiral benefits amounts to depriving the right to life; cannot be withheld for proceedings related to non-official duties.
In Mahesh Chandra Soni vs. State of Rajasthan & Ors., the Rajasthan High Court held that retirement benefits cannot be withheld due to processes unrelated to official duties, such as family disputes. Depriving them amounts to depriving the right to life.
The single-judge bench of the Rajasthan High Court headed by Justice Ganesh Ram Meena was hearing a petition against the order of the Assistant Director, Pension and Pensions Welfare Department, that withheld the payment of pension of the petitioner. The basic facts of the case are as follows: the petitioner was appointed to the post of Male Nurse Grade-II in January 1985. The petitioner was promoted to the post of Male Nurse Grade-I in 2008. The petitioner was retired from service in 2023. During the service, the petitioner was charge-sheeted under offences under sections 498A and 406 of the IPC and sections 4 & 6 of the Dowry Prohibition Act, 1961, and the trial is pending before the trial court. Further, on allegations of misconduct, the Director, Medical and Health Services, Rajasthan initiated departmental enquiry and closed the case based on the recommendations of the enquiry committee. Post this, the Assistant Director directed the treasury to stop the retirement benefits payments.
The counsel for the petitioner argued that the petitioner is facing financial hardships. The criminal cases are on fabricated facts and denying retirement benefits is violative of the right to life. The counsel for the state argued that withholding of retirement benefits is in accordance with Rule 90 of the Rajasthan Pension Rules, 1996.
Upon hearing both sides, the Rajasthan High Court held that the pension rules clearly provide that the payment of pension and gratuity are on the basis of service rendered and they cannot be withheld because of proceedings that do not relate to official duties. It is not a bounty but constitutes a right to property.
The court further relied on multiple judgements, wherein the courts have reiterated to consider whether the charges levelled are related to the performance of official duties.
Accordingly, the order passed by the Assistant Director is set aside and the respondents are directed to allow the payment of retiral benefits.


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Review: RBI paper highlights the risk in the Finances of 10 States
Sai Krishna Muthyanolla
July 14, 2022
The RBI recently published an article State finances and the Risk Analysis. The article aims to look at the fiscal vulnerability of Indian States & emphasises on ten heavily debt-burdened states in India based on the debt-GSDP ratio in 2020-21. These ten states also account for around half of the total expenditure by all state governments in India. Here is a review.
Effective and efficient public finance management is said to be a harbinger of good governance. In the wake of the scarcity of resources and the demand-supply mismatches, having a proper public financial management system becomes paramount. A sound public finance management system aids in delivering social and economic development goals. Having a proper flow and scheme for resource generation, allocation of the resources in an optimal manner, and utilizing these resources in an efficient and effective manner form the backbone of good public finance management.
It is therefore important to timely scrutinize and evaluate the state finances and identify the inherent risks in the system. Analysing the risks and chalking out strategies to minimize and mitigate them should be of primary concern to both, states as well as the Union Government. Considering the crisis in our neighbouring country Sri Lanka, this has assumed greater importance. In this regard, we look at the article on State finances and the Risk Analysis published by the Reserve Bank of India (RBI) and note the important observation. The article aims to look at the fiscal vulnerability of Indian States. The article emphasises on ten heavily debt-burdened states in India based on the debt-GSDP ratio in 2020-21. These ten states also account for around half of the total expenditure by all state governments in India.
The major motivation for undertaking such kind of assessment is the unfolding of the crisis in Sri Lanka and the COVID-19 pandemic. Apart from these two, the enactment of different kinds of public policies in terms of cash subsidies, provision of free utility services and so on, call for effective scrutiny of states’ financial health.
Central transfers are the saviours
The selected ten states comprise half of the total expenditure by all states and union territories, and also half of the total revenue receipts (including tax devolution, central transfers like grants-in-aid, etc.) For eight out of these ten states, the central transfers account for nearly half of the states’ total revenue receipts. The rest of the revenue is dominated by States’ GST, excise duties and sales taxes.
It is also reported that the state’s own tax revenues (SOTR) for states like Madhya Pradesh, Kerala and Punjab have been declining considerably, thereby increasing the fiscal vulnerability of these states. The major drawback of such a decline in own revenues for the state is the negative effect on the expenditure and planning for the states.
State GST and sales tax are major sources of SOTR
Among the revenue generation, state GST and sales tax form a major chunk of the total tax revenues generated by these states on their own. This is followed by Stamps and Registration fees, taxes on vehicles and excise tax. Uttar Pradesh’s SGST collections are the highest among these ten states, while Punjab and Rajasthan dominate in the taxes and duties on electricity. The stamps and registration fee component are higher in states like Uttar Pradesh, Andhra Pradesh, Haryana, and West Bengal. For Andhra Pradesh, the revenue generation from state excise grew from Rs. 5,460 Crores in 2017-18 to Rs. 11,575 Crores in 2020-21. Whether this increase is due to an increase in volume or an increase in alcohol charges is not clear, given the fact that the government is looking to minimize consumption. Almost all of these ten states witnessed a decline in sales tax from 2017-18 to 2020-21, (because of the introduction of GST) which is compensated by an increase in SGST, and state excise. The cumulative state-owned total revenue (SOTR) has been declining for states like Kerala, West Bengal, and to some extent Haryana. This declining own tax revenues, coupled with volatile non-tax revenues could make the states more financially vulnerable to crises and shocks.
High on Revenue expenditure, low on Capital outlay
The expenditure trend of these states indicates the huge spending on revenue expenditure leaving minimal fiscal space for capital expenditure. The higher revenue expenditure to capital outlay ratio validates this. While there is no ideal limit of revenue expenditure, it is to be kept in mind that the impact of revenue expenditure lasts shorter than the impact of the capital expenditure. Higher revenue expenditure, with low capital outlay, could result in lower growth and higher interest for the future.
Borrowing requirements and debts
The debt-GSDP ratio of these ten states indicates the high debt burden on them, making them stressed. Among them, Bihar, Kerala, Punjab, Rajasthan, and West Bengal are highly stressed. Additionally, the interests’ payments to revenue receipts ratio is more than 10 percent for eight out of these ten states. The debt-GSDP ratio is estimated for 2026-27 using the base case scenario. It is found that many states exceed their target of 30 percent by 2026-27, with Punjab being the worst at 45 percent, followed by Rajasthan, West Bengal, and Kerala at more than 35 percent. Only two among these ten states – Bihar, and Uttar Pradesh showed a decline in their debt-GSDP ratio in 2026-27 as compared to 2021-22.
The average gross borrowing requirement as a percentage of GSDP for four states is higher than five percent, with Punjab being at the top at 9.60 percent, followed by Andhra Pradesh at 6.1 percent, West Bengal at 6.0 percent, Haryana at 5.3 percent, and Kerala at 5.1 percent.
Growing Freebies by the states
Lately, there is a growing tendency towards the adoption of free or subsidized schemes ostensibly to gain the mandate of the people. However, states must be careful while announcing the freebies or any cross-subsidies. Only states that have the fiscal space to allocate expenditure for these schemes without any impact on the overall financial health of the states would be able to bear the effects in the long term.
Even if there is no clear definition for what they exactly are, freebies must be distinguished from public/merit goods, which are expenses that result in economic advantages, such as the public distribution system, employment guarantee programs, and state assistance for health and education. Freebies have the potential to undermine the credit culture, disincentivizes work culture and private investments through market distortions. While not all freebies are bad, a fine balance must be achieved in terms of financial costs involved and the overarching goals.
The share of subsidies in total revenue expenditure has increased from 7.8 percent to 8.2 percent during 2019-20 and 2021-22 for 19 states. Huge asymmetry between the states can be observed in the share of subsidies, with states like Punjab, Rajasthan, and Chhattisgarh spending more than 10 percent of their total revenue expenditure. States like Kerala, Odisha, Jharkhand, Uttar Pradesh, and Telangana have seen a huge increase in expenditure on subsidies in the last three years.
DISCOMs Bailouts
As seen in the earlier section, cross-subsidies and freebies significantly impact the financial health of the state. Among the cross-subsidies, power sector subsidies account for much of the financial burden on the state governments. Electricity for farm sectors is heavily subsidized in many states, and state governments provide subsidies by depressing the costs. To help electricity distribution firms (DISCOMs) make profitable projects, state governments also inject funds into them through stock and loans. Additionally, recurring bailouts, when governments assume the DISCOMs’ losses or debt burdens, have a significant impact on state budgets (3 DISCOM bailouts in the previous 20 years).
The performance of the DISCOMs has remained poor despite several financial restructuring initiatives, with their losses exceeding the pre-UDAY level of 0.4% of GDP in 2018–19. Their long-term debt also began to rise starting in 2017–18, reaching the pre–UDAY level by 2018–19, and continuing to rise in 2019–20. Additionally, since March 2018, the amount of money that DISCOMs owe power companies (GENCOs) has increased which may require fresh liquidity injections to ensure an uninterrupted power supply.
In 2019–20, the combined losses of the five states with the highest levels of debt—Bihar, Kerala, Punjab, Rajasthan, and West Bengal—accounted for 24.7 percent of all DISCOM losses, while their combined long-term debt was 22.9 percent of all DISCOM debt. Despite substantial variations across states, the cost of the bailout will be 2.3% of the GSDP for the 18 largest states. The states most in danger from a potential bailout are Tamil Nadu, Madhya Pradesh, Rajasthan, and Punjab, while Gujarat, Assam, Haryana, and Odisha are comparatively at lower risk.
Observations of the 15th Finance Commission on these states
Finance Commission studies each State’s economy. The studies concentrated on the states’ tax-gathering capacities, actions made to increase them, a study of their own non-tax revenues, examinations of their spending habits, and analyses of their deficits, financing methods, and debt. These studies focused on the States’ performance on several metrics, including their efforts to consolidate their budgets, their potential to mobilize additional resources, their performance as public sector enterprises, and their performance in the power sector, among other topics covered in the Terms of Reference (ToR). Some of the abbreviations used in the observations are:
Andhra Pradesh
Bihar
Haryana
Jharkhand
Kerala
Madhya Pradesh
Punjab
Rajasthan
Uttar Pradesh
West Bengal
The alarming fiscal indicators provide for an immediate course correction. It is imperative for these states to take measures in that regard.
Featured Image: State finances and the Risk Analysis


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Review: RBI Survey indicates that the ‘Current Situation Index’ at all-time low
Sai Krishna Muthyanolla
August 10, 2020
The results of five different surveys released by the RBI recently paint a very grim picture of the consumer confidence and industrial activity. The ‘Current Situation Index (CSI)’ for July 2020 is at an all-time low while the ‘Future Expectation Index (FEI)’ has shown a slight improvement compared to May 2020.
Recently, on 06 August 2020, the Reserve Bank of India (RBI) released the results of its forward looking surveys. Being India’s Central bank and the entity setting the nation’s monetary policy, RBI’s policy decisions have an immense impact on nation’s economy.  However, to formulate any policy it needs to have an understanding of the ground reality and it is for this reason the RBI conducts certain surveys periodically (generally every quarter) on various aspects such as consumer confidence, industrial production, inflation expectations etc.
As is the case with most of the surveys, the results are dependent of varying factors like sample size, quality of the samples, background and preferences of the respondents etc. However, they provide a general understanding of the prevailing conditions, which in turn help RBI make relevant policy decisions.
On 06 August 2020, the RBI released the results of five surveys. In this story, we take a look at few of the critical observations from these surveys and explore the trends over the period of time.
‘Current Situation Index’ at its lowest in July 2020
As per the results released for July 2020 of Consumer Confidence survey, the Current Situation Index (CSI) for Economic Situation is at 53.8, which is an all-time low. The impact of lockdown due to COVID-19 and the general uncertainty all around is clearly visible in the low number for the index.
The survey was conducted based on the perceptions and expectations on – general economic situation, employment scenario, overall price situation, own income & spending etc. of 5,342 households across 13 major cities. Factly has earlier written a detailed story on Consumer Confidence Survey, how is it conducted and what it indicates.
While the current COVID-19 situation in the country has an impact on CSI, the lower index is a continuation of a downward trend which is observed for over a year now, which was preceded by phases of increase and decrease in CSI. Of course, the fall is quiet sharp since March 2020.
Meanwhile, the Future Expectation Index (FEI) which reflects how the consumers feel for the upcoming period has shown an improvement over May 2020, at 105.4. This is the first time since May 2019 that FEI has increased compared to the earlier round of survey.
Consumer perception on Income and Employment in July 2020 significantly lower than in May 2020
Consumer confidence indices are based the consumers perception and expectation on 5 different variables – Economic Situation, Employment, Price Level, Income & Spending. In the July 2020 round of survey, significant fall in Consumers current perception on Employment and income was observed.
Sharp fall in the Business Assessment Index for Q1’FY 20-21
The 90 round of Industrial Outlook Survey of Manufacturing Sector was also conducted during April-June’2020. The survey assesses the business climate of Indian manufacturing companies. A total of 802 companies responded in this round of survey.
As per the survey, Business Assessment Index (BAI), which is based on the current assessment of the respondents fell to 55.3 for Q1 of 2020-21, a sharp fall from 102.2 in the previous quarter i.e. Q4 of 2019-20. This is also the all-time low. This is based on various parameters.
Apart from BAI, there is another index calculated with the responses of the survey i.e. Business Expectation Index (BEI) , which is based on the expectation of the respondents for the next quarter for each of the parameter.  The positive expectations across most of the parameters are less when compared to the previous quarter, resulting in BEI falling to 99.5 for Q2 of 2020-21, compared to the expectation they had for the current quarter, which stood at 108.8.
The Demand conditions in manufacturing sector as per OBICUS (Order Books, Inventories and Capacity Utilization Survey) also does not show a positive trend. Although the capacity utilization for Q4 of 2019-20 had increased compared to previous quarter, it is significantly lower compared to the same quarter of 2018-19. Meanwhile, Manufacturing companies have received fewer orders in Q4 of 2019-20 compared to previous quarter. While there is an increase in Raw materials to Sales Ratio (RMI) (indicating lesser production), the Finished goods to Sales Ratio (FGI) has come down.
The assessment and expectation point to further decline of an already ailing economy
The Consumer Confidence survey points to  the declining confidence of the consumers across various parameters. Their assessment of the economic situation, Income levels and employment show a decline compared to earlier round of survey. Meanwhile, their perception of inflation and spending indicate a more pragmatic approach in view of the uncertainty.
While the lockdown imposed across the country and the prevailing COVID-19 situation can be cited as the major reasons for the drastic fall in the indices of customer confidence, it has to be noted that the declining trend has been observed for over an year, even before the onset of COVID-19.
The Industrial situation also does not present a positive picture, with most of the respondents from the industry expressing a negative response on various parameters. Even in this case, a review of the data indicates that the slowdown has been there for some time now and is magnified because of COVID-19.
As per the Survey of Professional Forecasters on macro-Economic Indicators, the real GDP is likely to contract by 5.8 % for 2020-21. While the respondents expect a positive turn-around in the next one year, the continuing uncertainty might dampen these expectations unless structural changes are made to address the issues that are continuing for more than a year now.


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Review: RBI’s Annual ‘State Finances’ Report Highlights The Nature of Capital Outlay & Expenditure of States
Sai Krishna Muthyanolla
February 6, 2023
The RBI recently released the annual ‘State Finances – A Study of Budgets’ report for 2022-23. The focus of this report is ‘Capital Formation in India – The Role of States’. The report highlights that the States have been spending a greater share of their GSDP on capital expenditure compared to the Centre.
The Reserve Bank of India’s (RBI) annual ‘State Finances – A Study of Budgets’ provides data and analysis of the fiscal position of the State governments of India. The theme for the latest report for 2022-23 is ‘Capital Formation in India – The Role of States’. The theme is in line with the emphasis of the Union government towards Capital Expenditure as evident from the recently presented Union Budget 2023-24.
In this budget, the Government of India envisaged a Capital Expenditure outlay of Rs. 10 lakh crores as per Budget Estimates (BE). This is around 3.3% of the GDP and 37.4% more than the Revised Estimates (RE) for 2022-23 which is Rs. 7.28 Lakh crores. Furthermore, as per the budget documents, there would be a further Rs.3.7 lakh crores of Direct Capital investment by the Centre through the provisions made for the creation of Capital assets through Grants-in-Aid to States, taking the estimates for total Effective Capital Expenditure to be Rs.13.7 lakh crores i.e., 4.5% of GDP.
While the Centre announced an increase for 2023-23 on Capital Expenditure, it ought to be noted that the RE for 2022-23 is less than the BE for the year. While presenting the Budget for 2022-23, the BE for Capital Expenditure was Rs. 7.5 lakh crores, while the RE 2022-23 was reduced to Rs. 7.28 lakh crores.
Furthermore, the Union Government has also announced the continuation of its 50-year interest-free loans to state governments for an additional 12 months to aid infrastructure investment with an outlay of Rs.1.3 lakh crores. In this context, this latest report from RBI on State Finances provides insights into not only the fiscal position of the states but also the trend relating to capital formation in the states.
What is Capital Formation & Expenditure?
Capital formation is referred to the process by which the resources are invested in assets, equipment, machinery, transportation assets and other physical assets. This also includes investments made in improving Human capital & technology including skill development, research etc.
The expenditure incurred towards these investments is referred to as Capital Expenditure (CapEx). Such expenditure helps to increase the productive capacity of the economy, ensure fuller absorption of human & natural resources, promote efficiency & innovation etc. among others.  The Union government in its budget document envisages a large multiplier impact on growth and employment and the creation of a virtuous cycle through the increase in Capital Expenditure in the form of investments into infrastructure and job creation.
States have a higher Capex to GDP ratio compared to Centre
Data indicates that the Capital Expenditure as a share of GDP is higher for the States (all States) compared to the Centre’s Capital Outlay (CO).  In 2022-23, the average Capital Outplay of States is 2.7% of GDP compared to 2.4% of the Centre. In recent years, there has been a higher proportionate increase in the Centre’s CO as a share of GDP but is still lower than that of States’.
If the Central Defence CO is excluded, the gap widens further.
The individual state’s share of CO out of the total share of CO is provided in the report. Uttar Pradesh has the highest share, followed by Maharashtra, Madhya Pradesh, Karnataka, and Tamil Nadu. Also provided in the report is the ratio of each state’s share of CO and the respective states’ share of GSDP.
Trends over the five-year period 2017-18 to 2021-22 indicate skewed spending in the monthly timeline. A major portion i.e., more than a quarter of the total outlay in the year is during the last month of the financial year i.e., in March.  This trend is consistent across the five-year period. The trend across the year indicates a month-on-month increase in the capital outlay.
Decreasing trend in proportion of Actual CapEx of States compared to Budget Estimates
While the data indicates that the States do have a longer trend of higher allocation towards capital outlay compared to the Centre, the actual expenditure is less than the initial budget estimates. Trends indicate there the proportion of Actuals compared to the estimates (both Budget & Revised) is decreasing.
During 2015-16, the Actual Capital outlay was 90.6% of the BE. However, in the following years, there has been a steady decline. In 2019-20, the Actuals were only about 72% of the BE. In the pandemic year of 2020-21, it fell further to 69.2%. The actuals for 2021-22 would be provided by the states in the budget for 2023-24, to be presented in the following days to weeks. The budget for 2023-24 would tell us if this trend has reversed following the pandemic year.
Comparatively, the proportion of Actual Revenue spending compared to the BE is higher, although there is a declining trend even in this case.
Large variation exists between the states with respect to Actual vs Budgetary capital outlay. Among the large States, Punjab and Andhra Pradesh have cut down their actual Capex compared to the BE by about 40%. Bihar & Chhattisgarh are the other states which have on average reduced their actual capital outlay compared to their estimates. Meanwhile, Haryana, Madhya Pradesh and Karnataka have managed to spend better on capital outlays in proportion to their initial estimates.
Increase in CapEx towards Health post-pandemic
The COVID-19 pandemic highlighted the importance of investing in Health Infrastructure. The alignment of states’ spending towards this can be seen with an increased Capital outlay for Health. Out of the total CapEx of the states, Economic services constitute the major portion with about 61%.  Expenditure on Social Services, of which Health constitute a part, is about a quarter of the total capital spending.
There is an increased allocation towards Health as a proportion of GDP in recent years. There is a 79% y-o-y increase in CO to GSDP ratio in 2021-22 compared to the earlier year.
Although not at the same proportion, there is also an increase in the capital outlay towards another important Social Service i.e., Education.
While the overall capital outlay of States shows an encouraging trend, there exists a large variation among the states. Among the large states, Haryana, Punjab, and Madhya Pradesh have a higher CO to GSDP ratio towards health. These states also have a higher share of outlay on Health out of the total capital outlay, compared to other major states.
With an improved Fiscal position, need for the states to improve their CapEx
The Study of State Budgets report indicates an improved fiscal position of the States after the pandemic-induced stress. It reports increased revenues and more prudent expenditure by the states. The Gross Fiscal Deficit (GFD) was 4.1% of GSDP in 2020-21. The RE indicates a fall in GFD to 3.7% in 2021-22, with a further estimated fall in 2022-23. As indicated earlier, the actuals for 2021-22 of the States would be known once the budgets for 2023-24 are presented by all the states.
The report highlights that with the States’ capital expenditure having a higher share of the total country’s capital expenditure (Centre + States), there is more emphasis on the States having a larger contribution to the Capital formation.  Education, health, Infrastructure and Green Energy are a few of the sectors in which increased allocation of capital expenditure can be made to help expand productive capacities as well as create a broader development agenda for the States.
Featured Image: RBI’s State Finances – A Study of Budgets 2022-23

created: February 6, 2023


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Review: RBI’s FSR Report Says India’s Economy Has Sustained Momentum and Resilience While Global Risks Remain - FACTLY
Sai Krishna Muthyanolla
March 11, 2024
The Reserve Bank of India publishes half-yearly reports titled ‘Financial Stability Reports (FSR)’ covering various domestic economic issues along with an overview of the global economic situation. Here is a review of the December 2023 edition of the FSR report.
The global and national economies and their sustainability, stability and growth have been much-debated topics in the 21 century, so much so that the 2030 Sustainable Development Goals urges its signatory nations to aim to achieve higher levels of economic productivity and sustain per capita economic growth. Since the onset of the industrial era, economic security, independence and growth of every individual and the nation have not only been perceived as one of the utmost prioritized aims to be achieved but also as an end in itself.
However, history shows us that the global economy has always gone through upward and downward trends and vice-versa, due to various factors such as geo-political and financial conditions, fragmentation, etc., which have kept economies volatile. This is more so in the recent past with the disruption caused by the COVID-19 pandemic, which according to a 2021 study, has affected the global economy beyond anything in nearly a century. With the restoration of normalcy post-pandemic, the global economies started to grow again and are continuing to do so. However, nations continue to confront numerous economic challenges of both pre- and post-pandemic period. In such a scenario, the assessment of the economic stability of nations on the current date and with future projections becomes vital to formulate various measures necessary to ensure economic sustainability, security, and growth.
The Reserve Bank of India (RBI) publishes half-yearly reports titled ‘Financial Stability Reports (FSR)’ covering various domicile economic issues that are prevalent on the current day, with the details showcasing the trends and various economic prospects, along with an overview of the global economic situation.
In this story, we look at the global and national economic scenarios, the economic stability and the challenges which are currently faced by India, as highlighted in the recent December 2023 FSR report.
FSR highlights increasing Global Debt to GDP Ratio and Volatility of Global Economy
In its overview of the Global Macro Financial Outlook, the FSR notes that the global economy is faced with headwind issues such as geopolitical conflicts in the world’s biggest grain and oil supplying regions, geo-economic fragmentation, relatively tighter financial conditions, large fiscal imbalances and elevated public debt, and heightened uncertainty on the evolving economic outlook. Owning to these, the report notes that the volatility has increased in certain segments of financial markets and thus the financial stability challenges have become accentuated. Some of the important global challenges noted in the FSR are as below:
Slowing Growth Rates: The FSR highlighted that as per the International Monetary Fund (IMF), the overall economic growth rate would decline from 3% in 2023 to 2.9% in 2024, which is below the average of 3.8% during the pre-pandemic period (2000-19). Along with this, the growth in World Trade is projected to fall from 5.1% in 2022 to 0.9% in 2023. Though it is projected to increase to 3.5% in 2024, it will be below the pre-pandemic (2000-19) average of 4.9%.
Increasing Inflation Rates: The inflation rates across the Advanced Economy (AEs) Countries and Emerging Market Economy (EMEs) Countries were found to be above the targeted levels of December 2023, on a year-on-year (y-o-y) basis.
The above graph shows that in some of the AE and EME countries, both core and headline inflation rates were above the targeted levels of inflation rates. Only Switzerland among AEs and China among EMEs had both headline and core inflation rates below the targeted levels, while the AEs like Italy and Denmark had headline inflation rates below the targeted levels. India, the EME country, had both core and headline inflation rates above the targeted levels.
Mounting Public Debt: Mostly importantly, the FSR highlighted the steeping levels of outstanding public debt of both AEs and Emerging Markets and Developing Economies (EMDEs). In the year 2008, the overall Public Debt to GDP ratio was about 72% and 35% respectively for AEs and EMEDs. But it has increased steeply over the years and is projected to be about 93% and 65% respectively for AEs and EMDEs by the end of 2023. By 2028, it is further projected to increase to 116.3% and 78.1% for AEs and EMDEs, respectively.
Geo-economic Fragmentation: The FSR also highlighted that certain historical events such as the US-China trade war, COVID-19 and the Ukraine war have caused higher geo-economic fragmentation, and the ‘Fragmentation Keywords Index’ for all sectors has tripled from a base value of 100 in 2013 to about 400 in 2023. Such fragmentation poses macro-financial risks in different forms such as trade barriers, disruption in capital flows, ruptures in commodity markets, technological decoupling, and migration restrictions, which threaten to reverse the benefits of global integration.
Along with these issues, the FSR also mentioned other issues such as the vulnerability of AEs in bond markets, cyber security, climate finance, etc. Specifically on the issue of bond markets, the report highlighted that globally, the number of corporates that have defaulted in bond payments has increased to 118 in September 2023, almost double the amount on a y-o-y basis.
Summing up these global issues, the FSR stated that these numerous global economic challenges and issues are projected to further increase further in the near future. Therefore, it states that the global economy’s sustainability and growth remain volatile and unpredictable.
India Economy is Resilient, though some challenges persist
The FSR also stated that though the global economy is faced with multiple challenges which render it volatile and susceptible to macro-economic shocks, the Indian economy is resilient to such shocks as it is characterized by strong balance sheets derived from various positive economic factors and prudent policies.
At the same time, the FSR also states that though the Indian economy is resilient, the global external factors and spillover effects such as a slowdown in world trade, tighter global financial conditions, increasing fragmentation and geopolitical strife remain contingent risks to external demand.
Some of the salient aspects highlighted about the Indian economy in the FSR are as below:
Decline in Inflation Rates: The headline inflation which was at its peak at 7.4% in July 2023 has come down to 5.6% in November 2023. However, it remains susceptible to food shocks. The core inflation has eased up to 4.1%, the lowest since 2020.
Improvement in Capital Inflows: Though the global economic atmosphere is volatile, the capital inflows have increased and the net inflows of foreign portfolio investments (FPI) in the year 2023-24 (up to 20 December 2023) was US$ 30.6 billion, as against net outflows of US$ 3.3 billion during the same period in the previous year.
Decline in Gross Fiscal Deficit (GFD): The GFDs of both central and state governments have comparatively declined. While the central government’s GFD has decreased from 9.2% during the pandemic period of 2020-21 to 5.9% in 2023-24 (as per budget estimates), the overall state governments’ GFD has decreased from 4.1% to 3.1% during the same period.
Decline in Debt-to-GDP ratio: Together with GFD, the ratio of Debt to Gross Domestic Product (GDP) of both Central and State governments has also decreased during the pandemic period. The central government debt-to-GDP ratio is projected to fall from 62.8% during the pandemic-period to 57.4% in the year 2023-24 (as per budget estimates), while the state debt-to-GDP fell from 31% during pandemic-period to 27.5% by March 2023.
Banking Sector Soundness: The report notes that the domestic banking system remains resilient, bolstered by strong buffers, robust earnings, and the ongoing strengthening of balance sheets. To demonstrate this, the FSR has also presented figures of growth in various factors which show the soundness of the banking sector in India. These include a decline in the ratio of Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA), strengthened earnings as reflected in Return of Asset, Return of Equity (RoE), etc.
Together with these, the FSR also highlights the growth in the economy can be witnessed in the growth of other sectors such as Non-Banking Financial Companies (NBFCs), microfinance, increased lending of banks to Micro, Small and Medium Enterprises (MSME), etc.
Analysing all these factors and trends in the growth of pertinent sectors, the FSR stated that the Indian financial system has seen an easing of stress during the first two quarters of 2023-24, as indicated by the Financial System Stress Indicator (FSSI). In summary, the FSR states that the Indian economy has sustained momentum and resilience.
Higher Debts and Guarantees Remain Continent Challenges to India
Though the FSR highlights positive trends in the Indian economy, its growth and resilience, it also states that “Global spillovers, rising interconnectedness in the domestic financial sector and the increasing role of NBFCs in the provision of financial services remain contingent risks. Banking capital, regulatory prudence, and strong balance sheets, however, should ensure that the domestic banking system is well positioned to withstand shocks and support the productive needs of the economy.”
One of the key issues highlighted in the report is the issue of prevailing debts of both central and state governments. The data presented in the FSR shows that the ratio of debt to the total GDP of both centre and all states stands at an average of over 50% and 30%, respectively.
The above data shows that the Debt to GDP ratio has never been under 50% for central government during the period of 2011-12 to 2023-24 and below 30% for state governments during the period of 2003-04 to 2023-24. Along with these, the report also highlights that when compared to the median average of global countries, including the EME countries, India’s debt, fiscal deficit, and interest payment ratios to the total GDP are way above the global average median figures.
It is important to note that the Fiscal Responsibility and Budget Management Act (FRBMA) passed in the year 2003 mandated the Indian government to limit the overall debt of the central government to below 40% of the GDP and the overall debt of the general government (both state and central governments) to 60% of the GDP by 2024-25. However, the above data shows general government’s debt is about 80% from the year 2001 to the current year, and it is projected to be about the same figure even by the year 2028. Therefore, the higher debt is one of the major issues despite considerable progress that has been witnessed in GDP growth y-o-y.
Along with these, the increasing amounts of guarantees that are given by the state governments are another potential fiscal contingent liability in addition to the outstanding debt. The recent RBI working group report highlighted several issues about the increasing trend in the total sum of the guarantees (as a percentage of GDP) given by the state governments.
Factly’s stories on state governments’ debts, guarantees and previous FSR of RBI can be accessed here, here & here
At present, India has to deal with these pressing issues of rising government debt and guarantees of central and state governments, though the progress in economy, GDP and other economic aspects are evident. In addition, as highlighted in the FSR, the changing climate and its consequential economic impacts, the global economy’s volatility, etc. remain impeding challenges to India.