According to the data of RBI, India’s foreign exchange reserve increased by 2.5 billion dollars to a record high of 457.46 billion dollars in the last week of December 2019 and recently it has crossed half trillion dollars for the first time in the week of June 5. Foreign exchange reserves are cash and reserve assets held by a Nation’s Central Bank. They can be used to influence the exchange rate of country’s currency or meet a current account deficit. Forex Reserves have four components, of which assets and gold are the biggest. The movement in foreign currency assets expressed in dollar or rupee terms in mainly due to exchange rate fluctuations of currencies in the basket. In this basket, other currencies like the rupee, yen and euro have let to the movement of currencies against the dollar. Which is manifesting itself in an increase in forex reserves.
Significance of this development
The Rising of forex reserve give a great comfort to the Indian Government and the RBI in managing India’s external and internal monetary issues at a time when the economic development is set to decrease by 1.5 percent in 2020-21. Forex reserve of the country plays a crucial or significant role in maintaining the value of the currency, to controlling of inflation, to regulating the current account deficit and also it plays a very important role in international trade in terms of import and export. Indian currency that is the rupee has also been strengthened because of this rising forex reserve against the dollar. It will also help to maintain reserves for emergencies or any natural disaster.
What is Forex Reserve?
The Forex reserves are also known as Foreign exchange reserve, Foreign currency reserves or Foreign reserves. These Foreign Reserves are the Foreign currencies held by a nation’s Central Bank (RBI). There are seven reasons why banks hold reserves but the most significant reason is to deal with their currencies’ values. Simply, we can say that the total amount of foreign currency held by the Nation’s Central Bank (RBI) is known as the forex reserve and these foreign reserves include foreign bank deposits, foreign banknotes, foreign treasury bills and short and long-term foreign government securities and etc. Such, forex reserve are also utilized by nations to reimburse their credits which they have taken from another nation. The foreign exchange reserves influences the foreign exchange rate of its currency and also maintains confidence in financial markets. The forex reserves allow the reserve bank of India (RBI) to purchase domestic currency which is a liability to the central bank.
Reasons for its rise
The rise is the foreign portfolio investors in Indian stocks and Foreign Direct Investment (FDI) is the main reason for the rise in forex reserve. In this pandemic all other countries economic growth has also slowed down and India’s higher growth as compared to other developed countries is attracting investors or foreign capital Several Indian companies had been acquired by foreign investors in the last two months. Oil import bill has been brought down as the oil prices have fallen which saves the precious foreign exchange. The forex reserves have grown by dollars 73 billion over the last nine months since, the announcement to cut corporate tax rates was started with the finance minster. The Indian markets have seen the foreign portfolio investment taking a turn around and bringing the stocks worth over dollar 2.75 billion. The reliance industries subsidiary, jio platforms has seen a serious of forex inflows which is said to be a rise in the forex investment.
India is the largest gold consuming country, than also it has much less share of gold in the total forex reserve than most developed countries. The foreign exchange reserves are correlated to the Indian rupee position very closely. When rupee value decreases, the reserves also go down. Financial assets which are denominated in the foreign currencies, bonds, gold, cash and bank deposits are included in the foreign exchange reserves of India. In the year of 2003, December the forex reserve of India crossed dollar 100 billion. The forex reserve of India have increased by 48% post 2008 global financial crises. The Reserve Bank Of India bought 200 tons of gold in 2009from the International Monetary Fund (IMF) under its forex reserve management program as stated by IMF’s official press release. In the year 2020 the India’s foreign exchange reserve have crossed dollar 500 billion on June 5th.
Over the past years the foreign exchange reserves have significantly changed as the analysis reveals. In the year 2020 as we said the foreign exchange reserve of India have crossed half billion dollars with dollar 463.630 billon dollar of foreign exchange assets components, around dollar 32. 352 billion gold reserves, around 1.442 billon of special drawing rights with the IMF and around dollar 4.278 billion reserve position. Overall, the research states that forex reserves have another names like foreign exchange reserves, foreign currency reserves and etc. It also noted that how it is important for the Indian Government to have a stable forex reserves like to pay the import bills, to maintain the confidence of investors in Indian market, it will also help to maintain reserves for emergencies as above said and Reserve bank of India also take necessary steps to make sure that there is proper balance of forex reserves in India.
The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme introduced by the Government of India to ensure regular pension for the senior citizens. It was first launched in 2017 by the then Finance Minister, Arun Jaitley. It is a non-linked and non- participating pension scheme bankrolled by the Indian Government. However, it is the Life Corporation of India (LIC), a State-owned insurance group and investment corporation that operates the scheme. It was extended to 31 March 2020. But, as per a recent tweet by K. S. Dhatwalia, Principal Director General of the Press Information Bureau, this scheme has received another extension. According to his tweet, the Union Cabinet has further extended the PMVVY scheme for three years. Now, it will be available until 31 March 2023. Such a decision was taken for the welfare of senior citizens as well as to provide them with income security.
The PMVVY scheme falls in line not only with the provisions of the Indian Constitution but also with the provisions of the Universal Declaration of Human Rights.
What is the scheme?
The Pradhan Mantri Vaya Vandana Yojana is a pension scheme for senior citizens. It is subsidized by the Central Government and managed by LIC. This scheme provides a guaranteed and regular pension for 10 years at a specified rate. The frequency of the payout can be monthly, quarterly, or yearly. This scheme was launched after the success of previous pension schemes and aimed to provide senior citizens with a simplified and effective mechanism to protect their interests.
PMVVY also provides for a benefit to a nominee on the death of a pensioner. Such a benefit would be provided in the “form of the return of purchase price”. With the extension up to 31 March 2023, senior citizens over the age of 60 can purchase this scheme over the next three years.
Its salient features
The minimum age criteria for availing this scheme is 60 years. No maximum age limit criterion has been set. This means that everyone above the age of 60 years can benefit from this scheme.
Term of policy
This policy is available for a term of ten years at a rate of return of 7.4%.
This scheme can be purchased at a minimum price of Rs. 1,56,658 and at a maximum price of Rs. 14,49,086 for a yearly pension. For a monthly pension, the minimum price is Rs. 1,62,162 and maximum is 15,00,000.
Payment of Purchase Price
The scheme can be availed with the payment of a lump-sum purchase price and the pensioner has an option to choose the amount of pension, the purchase price as well as the frequency of receiving the pension.
This scheme provides for a minimum pension of Rs. 1,000 per month to a maximum of Rs. 10,000 per month. This amount would depend upon the amount invested in the scheme. Another thing to note is that the maximum pension received by a family as a whole under this policy shall not exceed the maximum amount allowed.
Mode of purchase
This scheme can be purchased through both online and offline modes.
Loans are available only after the completion of three years of the policy. The maximum amount available for taking up a loan is 75% of the purchase price.
This scheme also provides for a premature exit. Such a premature exit is only allowed in exceptional cases like the critical illness of the pensioner or their spouse. In such circumstances, 98% of the purchase price is payable as surrender value.
The returns received under this scheme are taxed according to the existing statutory tax laws. The PMVVY scheme is not covered by section 80C of the Income Tax Act, 1961. This means that a pensioner cannot claim a deduction of tax under this Act. However, this scheme gets exemption from Goods and Services Tax (GST).
Free look period
In case of dissatisfaction with the terms and conditions of the policy, it can be returned to the LIC within 15 days. It can be returned within 30 days if purchased online. Such a return must come along with a statement of reasons behind the return. The deposited purchase price would be returned after a deduction of the stamp duty and the amount of pension paid. This provision gives ample time for the senior citizens to decide upon the continuation/discontinuation of the policy.
In the case of suicide by a pensioner, there shall be no exclusion. In such a case, the full purchase price has to be paid.
Relevant legal provisions
Article 38 of the Constitution provides that the State must strive to promote the welfare of people by protecting the social order which bears social, economic, and political justice.
Article 41 directs the State to make effective provisions regarding public assistance in cases of old age.
Under Article 47, the State has the responsibility to raise the standard of living of its people.
Entry No. 47 of List I related to insurance. Entry No. 9 of List II talks of relief to disabled and unemployable. Entries 20 and 23 of List III relate to social planning and social security and insurance respectively.
The Insurance Act, 1938
Section 41 lays down provisions regarding the prohibition of rebates. It puts certain restrictions on rebates except for those allowed according to the published prospectus of the insurer. A person violating the provisions of this section is liable for a penalty exceeding up to ten lakh rupees.
Section 45 of this Act protects the policy from unnecessary legal actions if any. It provides that a policy of life insurance cannot be questioned on any ground after the expiry of three years from:
the date on which the policy was issued, or
the date on which risk commenced, or
the date on which policy was revived, or
the date of rider to the policy, whichever is later.
The policy can be challenged on the grounds of fraud according to the provisions of this section. This section also provides for some other cases where the policy can or cannot be called in question.
India has one-fifth of the world’s population and one-eighth of the world’s elderly population. Article 21 of the Constitution provides for the right to life. This right also takes within its ambit the right to live a dignified life. Such a right includes not only the basic human needs of food, clothing, and shelter but also health and security. The government introduces various social security schemes that often give priority only to income security. It is assumed that the basic needs of a vulnerable person in need of aid can be fully satisfied with adequate income.
In a joint family system, with multi-generational co-residence, the economic and emotional security of the elders is often taken care of. However, it is not always the case. When the families fail to provide for their elderly, irrespective of the reasons, it becomes the duty of the State to ensure their well-being. The State is the guardian of those who cannot provide for themselves. Thus, it aims to protect the lives of senior citizens through various social insurance as well as social assistance schemes.
Based on this perspective, the National Old Age Pension Scheme (NOAPS) was first introduced in 1996. It was later renamed as the Indira Gandhi National Old Age Pension Scheme in 2007. It is a non-contributory old-age pension scheme that covers people who are destitute and of 60 years of age and above. However, the monthly payment under this scheme has been very meager. For instance, in economically developed states like Tamil Nadu, the monthly pension for a senior citizen is Rs. 1000 whereas the cost of living is relatively high. In such a situation, this meager amount is not enough to meet the basic needs including nutrition and health.
The approach towards the social security of senior citizens has been very narrow in India. It often fails to cover the basic and minimum requirements. The policies by the government miss the right-based approach. This limits the scope of social security when it comes to senior citizens.
It was at this juncture that the PMVVY was introduced in 2017. It is a contributory pension scheme that covers all senior citizens of India. It provides for a simplified pension scheme which covers all senior citizens over the age of 60. This scheme aims to provide a pension pay-out for ten years at a specified interest rate. There is a minimum and maximum purchase value and the pensioner can choose any amount within this limit. They also have the choice of choosing the frequency of pension.
The PMVVY scheme resembles an insurance scheme. The terms and conditions laid in the scheme including the purchase policy and the rate of interest bear similarities to various insurance schemes. The interest rate of the scheme is fixed for the initial years and is subject to market fluctuations in the due course of time. The policy maturity calculation in PMVVY is also similar to fixed deposits and recurring deposits in the bank and post office. For example, the interest rate in IDFC bank for a fixed deposit of senior citizens is 7.75%, which is greater than the interest rate in PMVVY. Further, the operating agency of the scheme itself is an insurance corporation. Hence, it can be said that the mode of this scheme differs from all the other social security schemes in India.
However, it cannot be ignored that not every senior citizen would be able to afford the purchase price. This scheme is only suitable for those who have existing savings amount. So, despite its best efforts, there is a possibility that this scheme would not cover all senior citizens.
The PMVVY is the latest social security scheme for the senior citizens of India. It comes engraved on an investment mode to provide a pension including life coverage for senior citizens. There is a shift from welfare mode to business mode wherein no special classification was made for the economically backward sections. Since the terms and conditions and the benefits accruing from the scheme are similar to other investment schemes, it provides no special gain. Thus, senior citizens are in search of better investment options that come with a higher growth rate of money. To conclude, the PMVVY must be revised as such that it also includes senior citizens belonging to the economically backward sections. The need is to blend the business approach with the welfare approach.
Author: Valan. A from Tamil Nadu National Law University, Thiruchirappalli.
Editor: Shalu Bhati from Campus Law Centre, Faculty of Law, University of Delhi.
The pandemic COVID-19 has compelled the governments all around the world to keep on toes. Assessing the gravity of situation on daily basis, the Government of India has been taking various steps as mitigation measures.
Recently, in order to ensure the supply of essential goods during the period of lockdown, the government resorted to increase the monthly quota of subsidised food grains by 2 kg to all 80 Crore beneficiaries through Public Distribution Systems (PDS). Under the National Food Security Act (NFSA), the government was distributing 5kg per person already that has now been pegged at 7 kg.
Furthermore, the prices of staple grains have been zeroed to Rs. 2/Kg for wheat (against Rs. 27/Kg) and Rs.S 3/Kg for rice (against Rs. 32/Kg), a major step to provide relief to the poorest section of the population.
Those decisions were taken by Cabinet Committee on Economic Affairs (CCEA) under the leadership of Prime Minister Narendra Modi.
The supply is being distributed from the buffer stock of Food Corporation of India (FCI) that contains the food grains above the buffer stock norms. Buffer stock norms are the stipulated quantity that has to be at least maintained at the beginning of each quarter to ensure supply to PDS and other schemes of the government. These limits are set by CCEA. The Committee fixes the minimum buffer norms on quarterly basis: i.e. as on 1st April, 1st July, 1st October and 1st January of every financial year.
Significance of this development
A household keeps a stock of essential resources untouched in a storage capacity that can be accessible in the situation of an emergency. Similarly, a nation has the obligation to keep some resources aside that can be used at the time of any exigency. The Government of India has given the task of procuring buffer stock of essential commodities to National Agricultural Cooperative Marketing Federation of India Limited (NAFED), Food Corporation of India (FCI) and Small Farmers Agri-business Consortium (SFAC).
On the outbreak of COVID-19, national lockdown was declared for 21 days which implied that the activities with regards to the production and supply of basic amenities can get ruptured.
Fortunately, the officials from FCI, state government agencies and NAFED have assured that there stays a huge stock of wheat, rice and pulses and that it will further ensure the supply and prices stable.
FCI and government agencies have 30.97 million tonne rice, 27.5 million tonne wheat and un-milled paddy that stand at 28.70 million metric tons, as on March 1. NAFED currently has 2.5-2.8 million tonne of pulses- chana, tur, urad and moong and another 0.7 million tonne groundnut and mustard. It can be deduced from the figures that the current stock of wheat and rice is higher than the buffer and strategic norms. It was recorded that stocking norm of rice is 13.6 million tonnes while for wheat it is 7.5 million tonnes as on April 1.
Besides increasing the monthly quota of subsidised food grains by 2kg, CCEA has permitted the poor households who are beneficiaries of PDS, to lift the stock of 6 months in one go.
Considering the series of decisions taken by CCEA and other authorities, the question that intrigues is: why are such changes being brought? The primary reason is that there is really an enormous stock of over flowing buffer norms. As on July 1, 2019, grain stocks were almost 81 per cent above the buffer stock and strategic reserve norms. The last time India had more than 70 million tonnes of wheat and rice stocks in July was in 2013. However, it can be considered a boon in the context of present situation. Had this not been under our control, the picture would have been a dismal one.
At the same time, as echoed by FCI Chairman D.V. Prasad, India will have enough food grain stock to feed for the next one and a half year since the stock is being anticipated to bloom after the harvest season this year. It was estimated that the warehouses in India will be filled with 100 million tonnes by the end of April while the annual requirement under welfare schemes is of 50 million to 60 million tonnes. Moreover, it should not be ignored that the storage needs to be emptied for the Kharif crops of the upcoming season, as well.
Amid all this, it is important to discuss about CCEA that has taken the responsibility to ensure sufficient supply of essential commodities in order to obliterate any chances of putting the public in distress. As at present the whole governmental machinery has been working day and night to not to let any other problem rise so as to sabotage the very purpose of lockdown i.e. saving lives of Indians at whatever cost. Therefore, taking measures to provide the food supply to the last person belonging to the marginalised section of the society, becomes the aim of the government. Let no one die of Covid-19 or hunger.
Salient features of CCEA
The subjects in India are managed by three organs of the government, namely- Legislature, Executive and Judiciary. India having federal features, divides its Executives into State and Union. The executive power of the Union finds its constitutionality from Article 53. Besides that, the Article vests the executive power in the hands of President of India. However, the work is not done by the President in-person but de-facto is done by the Prime Minister and its Council of Ministers. That does not infer that President is a redundant entity. Article 77(3) provides that to make the executive business efficient and convenient, the President is authorized to make the rules. Thus, in 1961, Government of India Transaction of Business Rules, 1961 came into existence for disposal of Government Business, inter-alia and it finds its constitutionality from the said Article.
The rules brought by then President Dr. Rajendra Prasad, specify everything about the Cabinet Committees. They mention about two sorts of committees- standing and ad-hoc. While, former is of permanent nature, latter is temporary. The rules enumerate various Cabinet Committees for different work areas and Cabinet Committee on Economic Affairs (CCEA) is one among them.
The CCEA is not a constitutional body. It does not find its genesis from the Constitution for there is no mention about it, there. Thus, CCEA is considered as extra-constitutional in nature.
Composition of the committee
The composition of the committee varies from time to time. As per TBR 1961, it can constitute members ranging from 3 to 8. However, the strength of the members entirely relies on the Appointments Committee of the Cabinet. In usual business, the members are from the Cabinet who constitute the committee. They add members from different ministries, apart from whom, non-cabinet members as ‘special invitees’ can be added, too.
The CCEA was reconstituted after the India’s General Elections in 2019. Presently, the members consist of-
Prime Minister, Shri Narendra Modi who chairs the committee;
Minister of Defence, Shri Rajnath Singh;
Minister of Home Affairs, Shri Amit Shah;
Minister of Road Transport and Highways; Minister of Micro, Small & Medium Enterprises, Shri Nitin Gadkari;
Minister of Chemicals & Fertilizers, Shri DV Sadananda Gowda;
Minister of Finance; Minister of Corporate Affairs, Smt. Nirmala Sitharaman;
Minister of Agriculture &Farmer Welfare, Minister of Rural Development and Minister of Panchayati Raj, Shri Narendra Singh Tomar;
Minister of Communications and Information Technology; and Minister of Law and Justice, Shri Ravi Shankar Prasad;
Minister of Food Processing Industries, Smt. Harsimrat Kaur Badal;
Minister of External Affairs, Dr. Subrahamanayam Jaishankar;
Minister of Railways, Minister of Commerce &Industry, Shri Piyush Goyal;
Minister of State (Independent Charge) of the Ministry of Petroleum and Natural Gas and Minister of Steel, Shri Dharmendra Pradhan.
The members of not only CCEA but other Cabinet Committees are appointed by Appointments Committee of the Cabinet. At present, Prime Minister Narendra Modi and Minister of Home Affairs Amit Shah hold the positions.
Nature of work handled
The members in CCEA work on all the matters that come under the ambit of economic field. The mandate to formulate, analyse and review the activities concerned with economic policies stretches out in expansive way. The work ranges from as grass-rooted as rural level to foreign investments that require policy making at the highest level.
Aims and objectives
The sound rationale as to why committees like CCEA were made can be rooted back to why the Cabinet Committees were formed, in the first place. They are instrumental in reducing the workload over the cabinet. The Committees frame proposals for the Cabinet and make decisions that can certainly be reviewed by the Cabinet. Likewise, there are a number of factors that can amount to inefficiency in the working of cabinet members. For instance, differences in views, ineffective co-ordination between departments, just to name a few, can bring the machinery at halt. Thus, the Cabinet Committees comes to the rescue and balm the working of the business. Besides how the machinery works, they also guarantee qualitative policies. They provide an in-depth examination of the policies for departments since ministers from varied areas get to evaluate the same situation.
Therefore, it can be easily inferred that CCEA was made with an aim of reducing the workload from the departments dealing with economic policies. In addition to that, it is meant to smoothen the functioning and furthermore provide for an in-depth examination of policies.
Powers and responsibility
The CCEA is authorised to work in varied spaces in the field of economics. It keeps a check on prices of agricultural products. The activities related to small and marginal farmers that may give an impetus to the rural development, are looked upon by the said committee, too.
The domain concerned with industrial growth is within the competence of CCEA. In addition to that industrial licensing including licensing for establishment of Joint Sector Undertakings are also within the purview of CCEA.
The work does not end, here. It also evaluates the performance of Public Sector Undertakings (PSU) that may include their structural and functional restructuring. As known, if a PSU underperforms, the task of disinvestment including strategic sale and pricing of PSU, are taken up by none other than, CCEA (except to the extent entrusted to an Empowered Group of Ministers). It is important to note that the CCEA also priorities public sector investment and considers only specific proposals for investment, the limit of which is revised from time to time.
The price behaviour, decisions on supply and exports and imports, inter alia, of essential goods are scrutinised by the committee. The price for distributing essential goods in Public Distribution Systems is monitored by CCEA, as well.
Lastly, review of the factual reports from different Departments, Ministries and Agencies is considered in respect of the business allocated to the CCEA.
India, a big country ready to take a giant leap, to meet its aspiration of being one of the robust economies in the global arena, has been trying hard to emerge winner on home turf as well. In order to meet the basic needs of her vast population CCEA came into its existence within a short duration of time after India became an independent republic.
During the lockdown, it can be witnessed that CCEA not only takes care of purchase, procurement and storage of grain in large quantities, it also keeps a check on prices of the food grains. Secondly, it also puts agencies such as NAFED, FCI under observation and PDS also falls under its ambit. Present scenario has compelled every Indian to appreciate the measures taken by CCEA i.e. to amass food grain in surplus quantities (in routine for years) which has come in good stead when a large population of poor people, has to be fed by the government, for they have no source of income or food due to Lockdown to combat Corona outbreak.
Newspapers and Electronic media is rampant with news about rotting grain for want of proper storage or poor sleeping without food due to no supply, but the relentless efforts by the workers and officials deserve appreciation for keeping the problem to a minimum in the present unprecedented scenario.
Author: Samriddhi Sanga from Vivekananda Institute of Professional Studies, Pitampura, New Delhi.