MAINS Current Affairs includes Anti-Defection Law & India’s Rising Current Account Deficit (CAD) Amid Global Uncertainty

Polity and Governance

1. Anti-Defection Law

Context: More than two-thirds of MPs from the Aam Aadmi Party in the Rajya Sabha have reportedly decided to merge with the Bharatiya Janata Party, raising concerns about how the anti-defection law will apply in this case.

What is the Anti-Defection Law?

• The phrase “Aaya Ram Gaya Ram” became famous after a Haryana MLA, Gaya Lal, switched parties three times in a single day in 1967.
• To curb such political defections, the Anti-Defection Law was introduced through the Tenth Schedule by the 52nd Constitutional Amendment Act, 1985.

Constitutional Grounds for Disqualification (Articles 102(1) & 191(1))

A person can be disqualified if he/she:

• Holds an office of profit under the Union or State government;
• Is declared of unsound mind by a competent court;
• Is an undischarged insolvent;
• Is not an Indian citizen or has allegiance to a foreign state;
• Is disqualified under any law made by Parliament.

Key Features of the Law

• Grounds for Disqualification:
  A legislator is disqualified if:
  • He/she voluntarily gives up party membership; or
  • Votes or abstains from voting against party directions (whip).
• Exceptions to Disqualification:
  • If prior permission is taken from the party; or
  • If the party condones the action within 15 days.
• Special Cases:
  • Independent members lose membership if they join a party after election.
  • Nominated members are disqualified if they join a party after six months of nomination.
• Authority:
  • The Speaker/Chairman of the House decides on disqualification matters.

Exceptions under the Tenth Schedule

• Originally, two exemptions existed:
  • One-third members splitting to form a separate group;
  • Merger of a political party supported by at least two-thirds of its legislators.
• The one-third split provision was removed in 2003 to prevent misuse and strengthen the law.

Important Supreme Court Judgments

• Kihoto Hollohan v. Zachillhu (1992):
  • Speaker’s decision is subject to judicial review by High Courts and the Supreme Court.
• Keisham Meghachandra Singh v. Speaker, Manipur (2020):
  • The Court prescribed a time limit of three months for deciding disqualification petitions.

Key Issues and Challenges

• Delay in Decisions:
  • Speakers often take months or years to decide, affecting political stability.
• Possibility of Bias:
  • As presiding officers usually belong to ruling parties, neutrality is questioned.
• Limited Judicial Role:
  • Courts intervene mostly after the Speaker’s decision, not during proceedings.
• Curtailment of Legislative Freedom:
  • MPs/MLAs cannot freely vote based on their conscience.
• Rigid Whip System:
  • Whips are issued even on non-critical matters, discouraging debate.
• Scope for Mass Defections:
  • The two-thirds merger provision allows large-scale defections under legal cover.
• Committees like the Law Commission (170th Report) have highlighted the need for reforms.

Conclusion & Way Forward

• The Anti-Defection Law has contributed to reducing political instability but faces issues in implementation and interpretation.
• There is a need to:
  • Ensure time-bound and impartial decisions,
  • Limit whip usage to critical votes,
  • Promote intra-party democracy, and
  • Strike a balance between party discipline and individual freedom.

Economy

2. India’s Rising Current Account Deficit (CAD) Amid Global Uncertainty

Context: India is likely moving towards a third straight year of balance of payments (BoP) deficit, indicating pressure on its external sector.

About Current Account Deficit (CAD)

• The current account captures transactions related to goods, services, income, and transfers between a country and the rest of the world.
• A CAD arises when total imports and outward payments exceed exports and inward receipts.
• It reflects an external imbalance, implying the country is borrowing from the rest of the world.

Components of Current Account:

• Trade Balance: Difference between exports and imports of goods
• Services: IT, tourism, financial services, etc.
• Income: Interest, dividends, profits
• Transfers: Remittances and grants

Recent Trends in India’s CAD

• The IMF estimates India’s CAD at around $84.46 billion, among the highest in nearly two decades.
• This level is comparable to the 2012 balance of payments stress period (~$87.84 billion).
• India may witness a third consecutive BoP deficit.
• The widening deficit is largely due to external shocks (like oil prices) rather than internal economic weakness.

Reasons for Widening CAD

• Rising Crude Oil Prices:
  • India imports nearly 85% of its crude oil, making it highly vulnerable.
  • Higher global prices (around $82–85/barrel) significantly increase the import bill.
• Heavy Import Dependence:
  • High imports of energy, gold, and electronics.
  • Rapid growth boosts import demand faster than exports.
• Moderate Export Growth:
  • Global slowdown reduces demand for Indian exports.
  • Structural issues such as limited manufacturing competitiveness persist.
• Weak Capital Inflows:
  • CAD financing depends on FDI, FPI, and external borrowing.
  • Global uncertainty has made investors cautious, reducing inflows.
• Global Economic Uncertainty:
  • Factors like geopolitical tensions, inflation, and tight monetary policies in advanced economies affect trade and investment flows.
• Currency Depreciation:
  • A weaker rupee raises import costs (especially oil), worsening the trade deficit.
• Growth–Import Relationship:
  • As per Thirlwall’s Law, higher economic growth leads to increased imports.
  • If exports don’t grow proportionately, CAD expands.

CAD Sustainability

• CAD-to-GDP Ratio:
  • Earlier benchmark (Rangarajan Committee, 1993): 6% of GDP
  • Current acceptable range: 2–2.5% of GDP
  • India’s CAD (~2%) is within manageable limits
• Inter-temporal Borrowing:
  • CAD remains sustainable if borrowed funds contribute to future economic growth.
• External Debt Stability:
  • Sustainability depends on keeping foreign liabilities under control.
• Adjustment Risks:
  • Excessive CAD may trigger currency depreciation, higher interest rates, and slower growth.

Policy Measures & Way Forward

Short-Term Measures:

• Diversify energy sources and build strategic reserves
• Attract stable capital inflows (FDI over volatile FPI)
• Manage exchange rate volatility

Long-Term Measures:

• Enhance export competitiveness (PLI schemes, manufacturing boost)
• Reduce import dependence, especially in energy
• Strengthen services exports (IT, digital economy)

Conclusion

• India’s widening CAD is primarily driven by global factors rather than domestic vulnerabilities.
• While current levels remain manageable, sustained deficits could affect long-term growth unless exports improve and import dependence declines.

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