RBI NEW SCHEME :

NEW SCHEMEN LAUNCHED BY RBI-

The new series of consumer price index-linked savings bonds is unlikely to enthuse most of the individuals for whom it is intended. The Inflation Indexed National Savings Securities-Cumulative (IINSS-C) launched by the Reserve Bank of India opened for subscription on December 23 and will close a week thereafter.

The bonds have been designed to give investors a return that is 1.5 per cent above the reference consumer price index calculated according to a set formula. Thus there are two components of interest — a fixed 1.5 per cent and a variable return based on the CPI.

Why do not people invest in bonds ?

Most of the available savings channels do not give returns that offset inflation. The prospect of getting a negative real return is forcing investors away from conventional financial savings instruments such as bank fixed deposits, to gold, real estate and other physical assets.

Why do RBI created such type of bonds?

The country needs to boost its financial savings especially from households to step up the overall investment rate. Besides, the seemingly insatiable demand for gold — from investors and from the jewellery industry — has very recently created serious macroeconomic problems in the form of high current account deficits. Although the threat of an imbalance has receded somewhat, ongoing attempts to channel the demand into productive channels need to be encouraged.

Is this bond safe?

Yes because investors will not have a negative returns.

Was any earlier attempt made to protect the investors?

An earlier attempt to protect savers by offering an instrument that pegged return above wholesale price index (WPI) inflation was not really for ordinary individuals.

Was there any drawbacks?

The new series, though offering inflation-beating returns, might still falter for a variety of reasons.

1)       Their complexity — a 10-year tenure, lock-in periods of one year for senior citizens and three years for others, compounding of interest every six months but paid only after the full tenure — might drive away many would-be investors.

2)      The penalty for foreclosure — 50 per cent of the interest earned in the year before — is stiff.

3)      For senior citizens — only those above 65 years qualify for this scheme — as well as the retired, the new bonds are not particularly attractive.

4)      Unlike some bank deposit schemes, there is no provision for quarterly or even annual interest payment. For them, getting their principal and compounded interest back after 10 years might make no sense.

5)      There are no special tax benefits for investing in the new bonds either. The well-off might find the investment cap at Rs.5 lakh a year too restrictive. It is hoped that the authorities learn by experience and refashion the inflation-linked bonds to give them a wider appeal.

AR 370 A SUMMARY- QUESTION AREA FOR 2014 PRELIMS AND MAINS

A brief of Ar 370

Why it was incorporated

First,

-why was Article 370 inserted in the Constitution?

 -Or as the great poet and thinker, Maulana Hasrat Mohini, asked in the Constituent Assembly on October 17, 1949: “Why this discrimination please?”

(two question was posted during the insertion of ar 370)

-The answer was given by Nehru’s confidant, -Thanjavur Brahmin, Gopalaswami Ayyangar (Minister without portfolio in the first Union Cabinet, a former Diwan to Maharajah Hari Singh of Jammu and Kashmir, and the principal drafter of Article 370). Ayyangar argued that for a variety of reasons Kashmir,

1) unlike other princely states, was not yet ripe fr integration. India had been at war with Pakistan over Jammu and Kashmir and while there was a ceasefire, the conditions were still “unusual and abnormal.” Part of the State’s territory was in the hands of “rebels and enemies.”

2)The involvement of the United Nations brought an international dimension to this conflict, an “entanglement” which would end only when the “Kashmir problem is satisfactorily resolved.”

3), Ayyangar argued that the “will of the people through the instrument of the [J&K] Constituent Assembly will determine the constitution of the State as well as the sphere of Union jurisdiction over the State.”

[ In sum, there was hope that J&K would one day integrate like other States of the Union (hence the use of the term “temporary provisions” in the title of the Article), but this could happen only when there was real peace and only when the people of the State acquiesced to such an arrangement.]

-Th is Article 370 still intact in its original form?

One of the biggest myths is the belief that the “autonomy” as envisaged in the Constituent Assembly is intact. A series of Presidential Orders has eroded Article 370 substantially. While the 1950 Presidential Order and the Delhi Agreement of 1952 defined the scope and substance of the relationship between the Centre and the State with the support of the Sheikh, the subsequent series of Presidential Orders have made most Union laws applicable to the State.

In fact today the autonomy enjoyed by the State is a shadow of its former self, and there is virtually no institution of the Republic of India that does not include J&K within its scope and jurisdiction. The only substantial differences from many other States relate to permanent residents and their rights; the non-applicability of Emergency provisions on the grounds of “internal disturbance” without the concurrence of the State; and the name and boundaries of the State, which cannot be altered without the consent of its legislature. Remember J&K is not unique; there are special provisions for several States which are listed in Article 371 and Articles 371-A to 371-I.

- can Article 370 be revoked unilaterally?

[  Clause 3 of Article 370 is clear. The President may, by public notification, declare that this Article shall cease to be operative but only on the recommendation of the Constituent Assembly of the State. In other words, Article 370 can be revoked only if a new Constituent Assembly of Jammu and Kashmir is convened and is willing to recommend its revocation.]

Note:this provision is very important because parliament has limited power in this ar 370.

 Of course, Parliament has the power to amend the Constitution to change this provision. But this could be subject to a judicial review which may find that this clause is a basic feature of the relationship between the State and the Centre and cannot, therefore, be amended.

Gender bias?

 Article 370 a source of gender bias in disqualifying women from the State of property rights? Article 370 itself is gender neutral, but the definition of Permanent Residents in the State Constitution — based on the notifications issued in April 1927 and June 1932 during the Maharajah’s rule — was thought to be discriminatory.

The 1927 notification included an explanatory note which said: “The wife or a widow of the State Subject … shall acquire the status of her husband as State Subject of the same Class as her Husband, so long as she resides in the State and does not leave the State for permanent residence outside the State.”

This was widely interpreted as suggesting also that a woman from the State who marries outside the State would lose her status as a State subject.

However, in a landmark judgement, in October 2002, the full bench of J&K High Court, with one judge dissenting, held that the daughter of a permanent resident of the State will not lose her permanent resident status on marrying a person who is not a permanent resident, and will enjoy all rights, including property rights.

has Article 370 strengthened separatist tendencies in J&K?

 Article 370 was and is about providing space, in matters of governance, to the people of a State who felt deeply vulnerable about their identity and insecure about the future. It was about empowering people, making people feel that they belong, and about increasing the accountability of public institutions and services. Article 370 is synonymous with decentralisation and devolution of power, phrases that have been on the charter of virtually every political party in India. There is no contradiction between wanting J&K to be part of the national mainstream and the State’s desire for self-governance as envisioned in the Article.