September 2018


This month, the Indian media analysed key developments across political and corporate news.  Events which received extensive news coverage include – a landmark judgment by the Supreme Court in favour of the LGBTQ community, a controversy surrounding the government’s purchase of 36 fighter aircraft from Dassault, a French defense contractor, and an emerging credit default crisis at IL&FS Group, one of India’s leading infrastructure funding companies.

Decriminalization of same-sex intercourse by the Supreme Court

This month, the Indian Supreme Court unanimously ruled to decriminalize homosexual intercourse in a landmark judgment for gay rights.  The ruling came at the back of a long and delayed process where the case was passed between courts that were reluctant to rule on the issue.  Indian news media unanimously lauded the judgment and commented on the significance of the decision.

An article in Livemint praised the judgment and criticised the government for its lack of support for the issue.  “The Supreme Court of India’s decriminalization of homosexuality is a humanistic triumph.  It is a redemption of judicial logic…  [The BJP government] declining to contest the current case is a half-step at best, for which [the judges] have chided it in their judgments. The credit for pushing it to do that much at least goes to the LGBTQ community and its supporters who have waged a long, brave campaign.  When Parliament fails its job, the judiciary must step up. It has often been accused of overreach in recent decades… [The Supreme Court] has corrected a grave injustice against the LGBTQ community and shown what the proper balance between the government and the governed can be.”

The Indian Express also lauded the judgment and expected the ruling to have implications on other social reforms presently being debated by the courts.  “Justice Indu Malhotra rightly said that history owes an apology to the homosexual community.  It is a different story that we have been unjust to so many sections of our society that an apology is due almost every day… The Supreme Court’s observations in the case on Section 377 will have an impact on the laws in 25 states that ban the sale and consumption of beef… Similarly, there is now a question mark on the constitutionality of half a dozen anti-conversion laws in different states in the country.  Changing religion is a private matter and the state cannot have a say in it… [The rationale used by the court] will have an impact on the Triple Talaq (A divorce practice skewed in favour of the husband) that is pending in the Rajya Sabha.  This is because after the apex court’s Shayra Bano (2017) judgment, the triple divorce neither dissolves a marriage nor causes any “harm” to anyone.  Thus its criminalisation is not tenable.”

A column in the Deccan Chronicle also commended the judgment but also cautioned against the precedent set by the Supreme Court in getting involved in culture wars.  “The Supreme Court’s epochal judgment… decriminalising homosexuality between consenting adults has been correctly lauded for producing a just outcome… [However,] there are reasons for caution.  First, judges are unelected. If Parliament gets it wrong on issues where the popular opinion is divided, they are accountable at the voting booth. Judges are not.  Second, Parliament has access to technical expertise on topics such as pollution standards, telecom regulation, cricket administration, etc., in a way that the court does not.  Third, Parliament can tailor legislation to cover a broader swathe of situations than a court, which is only authorised to decide the dispute before it.  Fourth, Parliament can amend legislation as required.  The court can only decide cases brought before it and cannot amend judgments to fit changed circumstances…  Fifth, activism allows the legislative and legislature branches to [dump] unpopular issues on judges, politicians can dodge blame for divisive social changes…Sixth, the organic evolution of social consensus through education and norms entrepreneurship is hindered by judges imposing solutions.  Finally, activism cuts both ways what happens when extremely conservative judges use activism to issue judgments that favour religious rights?  What if a future court rules that religious rights trump gender equality in temples?  Or that restaurants don’t have to serve gays due to religious reasons?”

Controversy surrounding the government’s arms purchase

The leading opposition party accused the ruling BJP of corruption and crony capitalism over a deal to buy 36 Dassault Rafale fighter planes.  The allegations levelled against the BJP include undue preference given to the Anil Ambani Reliance Group – a leading Indian conglomerate that was picked to be the French firm’s Indian partner.

Telegraph India highlighted concerns surrounding the Rafale deal process and criticized the government for not being forthcoming with evidence.  “In spite of the government’s stonewalling, questions on the Rafale deal have only become louder in recent months.  The Opposition has accused the prime minister of bypassing due process to strike a deal with France which involved a much higher price per aircraft than the price that was negotiated by the previous United Progressive Alliance government, far fewer aircraft, and a huge bonanza to Anil Ambani, whose firm — with zero experience in defence equipment manufacture — has replaced the public sector company, Hindustan Aeronautics Limited, which was earlier chosen to build the Rafale jets in India.  The government could have quelled the controversy and stopped it from becoming a mega scandal by taking Opposition leaders into confidence about the details of the agreement or appointing a joint parliamentary committee to study it.  Instead, it has used a combination of silence — a dogged refusal to reveal the price of the aircraft, for instance — and bluster to counter the charge of wrong-doing.  This tactic of obfuscation has begun to unravel.  If the ex-president of France has forcefully contradicted the government’s claim that it had nothing to do with the choice of Anil Ambani, the ex-chairman of HAL has refuted Nirmala Sitharaman’s charge that the public sector company’s poor health was partly responsible for the failure to clinch the Rafale deal during the UPA regime.”

The Asian Age similarly criticized the government for being on the defensive.  “This was explosive and Congress president Rahul Gandhi’s attack on the government and the PM grew sharper…  The thrust and parry from both sides look to be thoroughly political in nature, and the facts being brought out in the public domain can make sense only if subjected to impartial scrutiny.  In the ordinary way, even in a half-functioning democracy, the public would be discussing a probe and the political class, no matter how self-seeking, would have no choice but to structure a debate around the kind of probe that may be acceptable to the country…  Unfortunately, the Union law minister Ravi Shankar Prasad, presumably speaking for the government, has ruled out an investigation.  His logic is that an inquiry cannot be held just to “satisfy the ego” of Mr Gandhi.  This is an unusual argument to put forward.  This country has better traditions than this and can do better.”

The Hindu raises similar concerns and advocates greater transparency to address the concerns raised by the opposition parties.  “The Rafale deal has been the subject of heated claims and counter-claims on two broad issues — that the contract to purchase 36 French multi-role fighter aircraft was grossly overvalued and that it was tainted by crony capitalism…  As things stand, greater transparency is the only way to clear the air.  Private briefings to Opposition leaders and the disclosure of all information that doesn’t jeopardise national security or impact the aircrafts’ operational capability are good starting points.  The decision to reject the formation of a Joint Parliamentary Committee to examine the deal should be reconsidered.  If the political war over Rafale continues, it is defence modernisation that will become the real victim.”

Emerging credit default crisis at the IL&FS Group

Earlier this month, one of India’s leading and highly reputed infrastructure financing company, IL&FS, defaulted on its debt payments.  The news resulted in a fall in stock prices as investors feared domino effects to other lenders.  News media analysed the reasons for the default and the potential implications for the broader financial market.

Moneycontrol.com, a leading financial news publication, pointed to poor management and red tapism as key issues that led to the liquidity crunch at IL&FS.  “IL&FS is a case study of all that is wrong with infrastructure financing in India.  The company that was at the forefront of infrastructure funding has been crushed under its weight.  Poor management, a slowing economy and red tape have all played a role in its downfall…  It does not have the most transparent annual report and few analysts track the company closely.  Under the umbrella of the parent, there are 24 direct subsidiaries, 135 in-direct subsidiaries, six joint ventures, and four associate companies…  A question worth asking is – how did a company in the business of financial advisory in the infrastructure space not heed its own advice?  Probably, the company did not want to let go of the growth opportunity that presented itself over the last four years.  Thankfully, IL&FS has enough assets in its books, including a posh office, to reduce debt levels and continue with its business. Experts have called for heads to roll and rightly so.”

News18 highlighted the need for the government to bail out the company to avoid risking an impact on the country’s debt and equity markets.  “The government is tying itself in knots over whether it will step in, in the eventuality that the Infrastructure Leasing & Finance Corporation (IL&FS) collapses.  IL&FS is not a government owned entity, we are told repeatedly.  It has been functioning through a board of directors, which comprises independent directors and others, and it must manage its own problems.  But despite the government’s calculated show of apathy over what is threatening to not just take down IL&FS but also have deep impact over the country’s equity and debt markets, it is clear that the government cannot shrug away a role in this crisis.  The government could bail out IL&FS by other means or by nudging state insurer LIC and state-run banks to do the needful.  But what matters is IL&FS is too big to fail and it needs rescuing.  And the government cannot be a silent spectator, waiting on the side-lines for things to begin falling apart.”

Business Today downplayed the impact of the crisis on India’s financial system and advocated caution against irresponsible commentary on the crisis.  “An unbelievable cacophony is growing around the so-called ‘collapse’ of IL&FS (Infrastructure Leasing & Financial Services Limited).  Repetitive fear-mongering has only added to the confusion and obfuscated the crisis to such an extent that the focus has shifted dramatically to how grave the crisis could possibly be rather than what it is on the ground…  Outrageous comparisons are being drawn likening the puny IL&FS with Lehman.  For comparison’s sake, IL&FS’s total liabilities are between $13-14 billion as against Lehman’s $680 billion plus.  That made Lehman 52 times IL&FS’s size and scale.  It’s as ludicrous as it can get.”