RBI declares SBI, ICICI Bank systemically important banks

The D-SIB framework requires the RBI to disclose the names of banks designated as D-SIBs every year in August starting from August 2015.

The Reserve Bank of India (RBI) on Monday declared State Bank of India and ICICI Bank as Domestic Systemically Important Banks (D-SIBs). The RBI had issued the framework for dealing with Domestic Systemically Important Banks (D-SIBs) on July 22, 2014.

The D-SIB framework requires the RBI to disclose the names of banks designated as D-SIBs every year in August starting from August 2015, said RBI in a press release.

“The framework also requires that D-SIBs may be placed in four buckets depending upon their Systemic Importance Scores (SISs). Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it, as mentioned in the D-SIB framework,” it added.

The D-SIB framework specifies a two-step process of identification of D-SIBs. In the first step, the sample of banks to be assessed for systemic importance has to be decided. The additional Common Equity Tier-1 (CET1) requirements applicable to D-SIBs will be applicable from April 1, 2016 in a phased manner and would become fully effective from April 1, 2019. The additional CET1 requirement will be in addition to the capital conservation buffer, said RBI.

RBI also said that in case a foreign bank having branch presence in India is a Global Systemically Important Bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its risk weighted assets (RWAs) in India.

“RBI has named State Bank of India as Domestic Systemically Important Bank as expected.  However, the additional capital requirement of Tier-I capital has been lowered by 20 basis points as compared to draft guidelines.  SBI currently has a much higher level of Tier-I at 9.62 per cent as opposed to 7 per cent required under the current guidelines,” said Arundhati Bhattacharya, Chairman, SBI.

“Given our size and significant presence across the financial sector, it was expected that ICICI Bank would be classified as systemically important, said Chanda Kochhar, MD and CEO, ICICI Bank. According to Ms. Kochhar, the bank’s capital adequacy is well in excess of regulatory requirements

The problem with Modi’s ‘Team India’

Not every Indian is equally involved in the Prime Minister’s project of ‘moving the country ahead’. And the real ‘Team India’ that is piloting the nation’s development does not see eye to eye on many issues with vast sections of India’s population.

Prime Minister Narendra Modi’s Independence Day address this year, though delivered in Hindi, was peppered with English words. Three kinds of English words.

The first kind was as follows — those that were already a part of spoken Hindi, though not quite the norm in formal speech; words such as ‘busy’, ‘injection’, ‘side-effect’, ‘request’, ‘fashion’, etc.

Then there were those that belong to a specific semantic cluster — the world of the market, business, management. To this category belong terms such as ‘work culture’, ‘financial inclusion’, ‘productivity’, ‘good governance’, ‘transparency’, ‘parameter’, ‘dimension’, ‘pyramid, ‘brand ambassador’, etc.

Closely allied to the linguistic milieu of the second is the third set of English usages: ‘Start-up India, Stand-up India’; ‘per drop, more crop’; and ‘Team India’.

In fact, ‘Team India’ occurred no less than 32 times in his speech of 85 minutes — more than any other catchphrase in either English or Hindi.

What is interesting is that, notwithstanding his Hindu-nativist, cultural nationalist pretensions, Mr. Modi settled on an English term to communicate his vision of the Indian nation as a team.

Why didn’t he use a Hindi equivalent for ‘Team India’? Is it because ‘Bharat Dal’ does not have the same ring as ‘Team India’? What’s more likely, it could be because the Hindi equivalents do not pack the same conceptual or ideological content that the English ‘team’ does.

Dynamics of a team

But what exactly is a team? What are the implications of imagining the nation as a team, as Mr. Modi did in his speech?

The dictionary defines a ‘team’ as “a set of people constituting one side in a competitive game”, or “a set of people working in combination.”

Three aspects stand out as integral to a team: competitiveness, being together, and work. Management textbooks typically add two more: a formal structure, and a purpose.

A team, then, is a group of people who work together in a structured way for a purpose that involves doing better than other teams. Armed with this understanding, we can try to answer the questions. Can a nation be a team? If yes, what then is the purpose of ‘Team India’?

In his speech, while introducing the concept of ‘Team India’, Mr. Modi made two points: one, that the country is “moving ahead” only because of ‘Team India’; two, that ‘Team India’ comprises our entire population of 125 crore people.

The two statements are patently untrue and mutually contradictory. Not every Indian is equally involved in Mr. Modi’s project of “moving the country ahead”. And the real ‘Team India’ that is piloting the nation’s development does not see eye to eye on many issues with vast sections of the 125 crore people that, as per Mr. Modi’s claim, comprise ‘Team India’.

To take an obvious example, Mr. Modi in his speech announced his intent to cure the “poison of casteism” with the “nectar of development”. But we are yet to hear the Prime Minister suggest that one Mr. Hardik Patel, agitating in Gujarat for reservations for his caste, should drop his demands in exchange for the ‘nectar of development’. After all, Mr. Patel and lakhs of his followers would be intimately familiar with the charms of this nectar, having tasted it in its purest form in the famed ‘Gujarat model’.

Given the extant fault lines of caste, ethnicity, language, region and religion that criss-cross the nation, Mr. Modi’s ‘Team India’ is clearly a project rather than a reality. Yet, even as a project, it is deeply problematic.

For instance, in the light of the recent events in Gujarat, are Patels and Dalits batting for the same team? Are indebted farmers contemplating suicide and billionaire investors seeking farmland part of the same team? Are Adivasis and mining companies equal members of ‘Team India’?

Furthermore, all teams are hierarchical, with a captain who calls the shots. In Mr. Modi’s re-imagining of the nation as a team, it is obvious who the captain is.

The logic of ‘Team India’

To understand the underlying logic of the Team India project, one must go back to the core ideas of a ‘team’: competition and purpose. Teams in the real world are typically time-bound — they come together for a task or activity, and disband once the task/activity is finished.

As the cementing element of a national identity, however, the team becomes an all-encompassing, permanent condition. Mr. Modi’s repeated invocation of ‘Team India’ communicates a vision of nationhood as a ‘team’ of 125 crore Indians that is in fierce competition for global supremacy with other nations. The task facing this team is nation-building (defined as strengthening the nation-state, not to be confused with the welfare of the poor). It is a task that can never end. Or end only at the level of the individual — with death.

Such a vision of ‘Team India’ demands a complete merger of the nation with the state, in which the citizen, instead of being a rights-bearing political entity with claims on the state, dwindles into a kind of glorified employee who, like any model employee of the 21st century, would put the interests of the team above self-interest (or any other interest). Here, the team’s interest, lest there be any doubt, means national interest.

The flip side of this idea of citizens as members of a national team is that any democratic dissent — or criticism of the captain — signifies ‘bad team player’. A bad team player sabotages the team’s interests, i.e., national interest. This follows naturally from the absolute subordination of citizenship — which entails rights vested in the individual — to the interests of the state. In other words, civil and democratic rights, such as privacy and freedom of expression, hold no importance from the perspective of the team.

If a media organisation was to report on human rights abuses perpetrated by the state, it could be viewed as harming the national interest. Ditto for non-governmental organisations (NGO). Not surprisingly, the Modi government has been far more draconian in its crackdown on rights-based NGOs compared to its predecessor.

From ‘Team India’ to ‘Team Modi’

The term ‘Team India’ first gained currency as a moniker for India’s national cricket team. Among Indian cricket fans, it was a mode of identification that evoked intense patriotic, and frequently jingoistic, passions. But ‘Team India’ in this case referred to a specific team of 11 skilled Indians who had come together to represent the country in a global competition. It did not comprise the entire population of India; 125 crore Indians might cheer for ‘Team India’, the cricket team. They might wear the team jersey, or paint their faces in the team colours. But they could not themselves participate in Team India’s World Cup campaign. They had no say in the team composition, or choice of captain, or match strategy, nor could they themselves go out and play — for they were not members of ‘Team India’ in reality. They were merely its cheerleaders, and had no illusions about it.

On the other hand, the nation recast as ‘Team India’ reproduces the same structure of patriotic identification but with an added bonus — the delusion of equal participation. Mr. Modi is the captain leading ‘Team India’. The actual ‘team’ here is the Indian state and those with access to, if not control over, its various levers.

All that the 125 crore ‘members’ of this so-called ‘Team India’ can do is cheer the captain and/or obey his instructions. When Mr. Modi asks 125 crore Indians to unite for the cause of ‘Team India’, he is effectively addressing them as their captain, instructing them to contribute their bit to make ‘Team India’ win — by offering it their lands, surrendering their rights, giving up their subsidies, all for the greater glory of ‘Team India’. It is essentially a top-down, anti-democratic project.

Finally, the very nature of team-centric discourse is such that the captain, sooner or later, becomes a metonym for the team. It remains to be seen whether this invocation of nationhood as a team catches on in public discourse. If it does, and the term ‘Team India’ as used by Mr. Modi achieves popular currency, it would be natural for it become interchangeable with Team Modi.

India must encourage entry of Renminbi into IMF’s SDR: Arvind Subramanian

India should encourage the entry of China’s currency into the International Monetary Fund’s basket of Special Drawing Rights (SDR), and support the internationalisation of the Renminbi, Chief Economic Advisor Arvind Subramanian said on Monday.

“India must support the entry of the Renminbi into the IMF’s basket of SDRs. As the currency becomes more international, the more open it will become to the world. At the same time, the less China will be able to manipulate it, which is to India's advantage,” Mr. Subramanian said during a lecture titled “Reassessing ‘Eclipse: Living in the Shadow of China’s Economic Dominance”.

In addition, India’s strategic objective should be to strengthen multilateral institutions and use them to pressure China, Mr. Subramanian said. In particular, he added, India should try to make the Asian Infrastructure Bank as universal as possible - especially convincing the US to join - to counter China’s regional interests through the bank. He termed the US' refusal to join the Bank a “huge mistake”.

Regarding any common ground between India and China, the CEA said that the two countries shared an interest in pushing a global agenda for the cleaning of coal. “Both countries predominantly use coal, and should push for a global initiative to clean coal,” he said.

He added that India has some things to learn from China. “India should seek to emulate the Chinese model of development that is based on exports and building reserves. The power of $3.5-4 trillion of reserves is not to be sneezed at,” he said.

Against the background of the speculation, sparked by the recent crash in Chinese stock markets, that China’s ascendancy is at an end, Mr. Subramanian said that his view is that the country will pull out of the current trend and return to an upswing. “China has the resources, the political will, and a desire for wealth, power and stability deep rooted in its DNA to enable it to cushion this transition to the best of its abilities. If you take a long view of Chinese history, the exception has been a Chinese decline, the rule has been of a Chinese ascendancy in global markets,” he said.

The Chinese transition, he said, was one of a huge shifting of resources from manufacturing to services. “The Chinese model based on manufacturing and exports is running out of steam and the Chinese leadership knows that. There is a shift to services. However, they have such a large surplus of manufacturing capacity that the resource reallocation will be very painful,” he said.

The question, the CEA said, was if China will be able to politically withstand the pain caused by this turmoil.

IAS -2016 FOUNDATION BATCH

IAS -2016 FOUNDATION BATCH

STARTING @ 10th september.
best guidance at minimum reasonable fees.4 free demo class.call for appointment @8475904943

A transformed global economic landscape

The investment and export-led growth model that marked the emergence, successively, of the east Asian, south-east Asian and Chinese economies, is being questioned in the light of developments since the global financial and economic crisis (hereafter called the Crisis) that erupted in 2007-08 but whose consequences continue to alter the international economic landscape. This crisis was unprecedented in that it arose at the very epicentre of the world market, the nerve centre of the world financial networks and comprising the most advanced, affluent and influential countries. These countries, had collectively evolved the legal infrastructure, set the standards and norms underlying international trade and investment and dominated the global economic architecture over the past two centuries or more. Such entrenched systems take a long time to change but change may be accelerated by unexpected and far-reaching crises.

The emergence of east Asian, south-east Asian and Chinese economies, took place in a global economic landscape dominated by the mature economies of the trans-Atlantic zone. It is also the post-World War II expanding markets in this zone, joined subsequently by Japan, and the flow of capital and technology from the zone which made the investment and export-led growth model a viable choice for the emerging economies. These countries also enjoyed a high rate of domestic savings, relatively cheap but increasingly skilled labour and local entrepreneurship supported by the state. Although this is debatable, some analysts argue that having relatively authoritarian regimes in these emerging countries at least during the initial period of high growth would have also helped. For most of the post World War II period, world trade has risen at a rate twice as fast as global gross domestic product (GDP) growth, as barriers to trade flows have progressively diminished. There has also been a remarkable increase in capital flows emanating from the developed countries, which have promoted and enabled export-led growth in developing countries. Typically, foreign investment has involved the setting up of local processing or manufacturing units for generating exports back to the home country or other markets. The setting up of complex regional and global supply chains by international multinational companies, has reinforced this trend.

Although a latecomer, India has, since its economic reform and liberalisation programme began in the early 1990s, shifted its stress to investment and exports as key drivers of growth. This enabled the Indian economy to gravitate to a much higher growth trajectory almost double of the pre-reform years. The country has been less successful in integrating itself into value supply chains and this has become a major constraint on its exports. It remains a mostly domestic demand-driven economy.

So what has changed since the Crisis and what are some of the enduring features of the emerging global economic landscape?

The Crisis has transformed and is still transforming the global economic architecture. Some of the earlier trends are being reinforced, such as the shift of global economic activity from the trans-Atlantic to the trans-Pacific, both in terms of proportion of global trade but also investment flows. What has not changed much is the continuing domination of the global financial markets by the West, which continues to mediate even the flows generated by emerging countries. Neither has there been much change in the West determining the legal norms, standards and regulatory frameworks, which govern inter-state economic activity. More importantly, the West, but in particular the United States, continues to be the chief source and repository of innovative technologies. As growth becomes increasingly driven by technology and knowledge in general, the West will continue to enjoy pole position in the global economy. These factors will change at a slower pace unless there is a virtual collapse of Western economies but this is unlikely. These enduring factors need to be kept in mind as we try and fashion an appropriate economic strategy for India.

There are several changes that are apparent and will have significant impact on India. According to the World Trade Organization (WTO), trade grew by six per cent per annum between 1990-2008 while world GDP grew by about three per cent per annum. Since 2008, this long-term trend has been broken as global trade has been rising at the same rate or even slower than global GDP. The trade slowdown is visible even in China. The recent devaluation of the Chinese yuan has been triggered by the fear of losing markets in a diminishing market. India's exports have declined over seven consecutive months. They have remained flat at about $300 billion a year over the past four years. Even services' exports have remained sluggish. It is unlikely that the target of $900 billion for goods and services exports will be reached by 2019, since it would require 15 per cent growth year-on-year from now. Rising exports are not likely to emerge as a significant growth driver in the near future without major policy interventions. The importance of the domestic market as a growth driver may even increase in salience.

The story is similar with respect to cross-border capital flows, which have yet to pick up from the steep decline in the post-Crisis period. While India has been a modest recipient of foreign direct investment and international portfolio investment, we are witnessing more Indian firms investing outside the country than foreign firms investing in India. This, too, goes against the east Asian model.

China's emergence as a top-ranking exporter of goods in the past three decades and more was associated with a remarkably favourable international economic environment up until the Crisis. There was an open and expanding market for its goods in the major advanced markets and a sustained flow of external capital to enable investment-led growth. The international economic environment post-Crisis is no longer as benign and India today confronts a relatively stagnant but much more competitive global market.

In the post World War II period, the overall trend was towards creating an open, transparent and rule-based multilateral trade regime. In the early years, the differentiation between developed and developing countries was taken as a basic principle, with relatively greater responsibilities and commitments falling on the former. However, since at least the Uruguay Round in the early 1990s, the focus began to shift towards reciprocity as the guiding principle and the exclusive focus on goods trade and tariff regimes also began to give way to, including services and some non-tariff provisions, as part of what is now the WTO regime. Furthermore, the basic principle of Single Undertaking, that is, all parts of the trade regime must be accepted by WTO members with no partial agreements, has also been diluted. Even among WTO members there are plurilateral initiatives underway such as the Trade in Services Agreement (TISA) and the Information Technology Agreement-2 . India's non-participation in these sectoral regimes requires a careful rethink. The WTO permits limited bilateral and regional free trade arrangements despite the latter diminishing its role as the premier multilateral forum for universal rule setting . It is becoming increasingly a forum for settling trade disputes. This trend began before the Crisis. It is being reinforced post-Crisis. Despite its commitment to the WTO and multilateral processes, India itself has concluded bilateral and regional trade agreements. It has also conceded the inclusion of services and a few other areas in its Comprehensive Partnership agreements with a select group of countries. Acknowledging this trend and evolving a coordinated strategy to deal with it has become an urgent necessity.

The global trade regime has been moving away from a focus on tariffs and border measures to behind the border issues, in particular, standards, regulations and norms relating to labour, health, intellectual property rights and the environment. Keeping some of these issues out of the WTO has not led to their exclusion from bilateral and regional trade agreements. It is the tariff prism through which India continues to frame trade related issues and this influences its negotiating strategies. India has joined bilateral or regional trade agreements for defensive objectives, mainly to defend market share or to preventing trade diversion rather than as instruments to promote trade and investment. Business in India has itself not been an active player in shaping negotiations on Free Trade Agreements (FTA) because of this defensive mindset. Indian negotiators achieved success in phasing out textile quotas in a 10-year time frame, but the textile industry in India made no effort to use the transition period to upgrade the technological standards and scale of operations to be able to compete in a highly competitive market. An opportunity created by negotiators was lost by lack of follow-up.

Trai’s net neutrality challenge

Ram Sewak Sharma, the new chairperson of the Telecom Regulatory Authority of India (Trai), assumed office on August 10. He comes to lead the statutory body at a key moment in India’s telecommunications sector. The issues that confront him—net neutrality, Voice over Internet Protocol (VoIP) services, call drops, spectrum and licensing—are nuanced and linked, and the choices neither binary nor trivial. They will affect current and future users of voice and data services as well as mobile telecom operators, who are India’s main internet service providers (ISPs). Sharma’s success will depend on his ability to steer Trai to adopt a robust and yet open approach on contentious issues.

Net neutrality has been in the headlines and will be Trai’s priority. Its ongoing consultations on the subject have attracted widespread comment and criticism. There have been heated discussions about the fate of ‘free’ telephony and messaging services like Skype and WhatsApp, respectively. There is raging controversy over Zero Rating, the practice of ISPs allowing their subscribers to access selected websites without incurring data charges. These include Airtel Zero and Facebook’s Internet.org. In the former, Airtel teams up with other companies, typically e-commerce, to offer toll-free access to their web services. In the latter, Facebook partners operators to provide similarly ‘free’ access to over 100 websites—sometimes customised for low bandwidth networks.

The new chairperson faces an unenviable task of protecting Trai’s credibility and stature, as it finalises its recommendations on the subject to the Department of Telecommunications (DoT). In an unprecedented move, DoT has sought and obtained an additional set of recommendations from a specially constituted internal committee. This committee’s report curiously proposes different rules for domestic and international Skype calls. It finds Airtel Zero acceptable, but is concerned about Internet.org. The government says it will take a final call after if receives recommendations. Trai will need to provide a more consistent approach based on its own mandate.

Trai’s primary responsibility is telecom infrastructure, not content (whether on the internet or elsewhere). Importantly, its counterparts in the UK, the US and several other countries deal with both content and carriage. A key purpose of the Trai Act is to “protect the interests of service providers and consumers of the telecom sector, to promote and ensure orderly growth of the telecom sector.” Trai has a mandate to “take measures to facilitate competition and promote efficiency in the operation of telecommunication services” and ensure “efficient management of available spectrum.” It cannot carry out its responsibilities effectively without sound economic analysis.

Freedom of communications, or expression, is a precious right, but it is not, however, Trai’s remit.

Trai does not have the luxury of looking at net neutrality in a standalone fashion. It can only do so within its own legal mandate. For example, it can address the broad goals of net neutrality by preventing market abuse and by promoting robust competition at every level—between players, technologies, platforms, services, business models, etc. It can also prevent exploitative tariffs for access to any web content through its comprehensive powers on tariffs. However, the mandate to help expand access and to promote efficient use of spectrum can sometimes clash with the goal of strict net neutrality.

In India, net neutrality is inextricably linked to the availability of spectrum since the network is predominantly wireless. Operators in India lack spectrum to support the increasing use of VoIP which consumes higher bandwidth than voice calls. They have a fraction of spectrum holdings of their international counterparts. The problem is exacerbated by ad hoc allocation of spectrum leading to its widespread fragmentation in 3G, 4G in bands (e.g. 1800). As Parag Kar has shown (goo.gl/UbgeB0), you cannot solve the problem by simply deploying 3G/4G networks and abandoning 2G, since majority of users depend on 2G for voice services. VoIP on wireless networks, therefore, poses a major technical challenge. Indeed, even the US and EU rules on net neutrality require that ISPs do not allow their own VoIP services to affect general broadband access. In the circumstances, Trai could be better off identifying which kind of prioritisation is acceptable and which is not.

It would be counterproductive to bar VoIP services or to impose levies on them. The services are widely popular and a veritable incentive to access the internet and subscribe to an ISP. Trai with a mandate to expand access cannot justify steps to discourage internet usage when there is a desperate need to encourage it.

On the other hand, a regulatory regime that professes to be technology-neutral cannot justify imposing different burdens on functionally similar services such as fixed, mobile or IP telephony. For instance, telecom operators paid over $3 billion in levies to the government last year. This excludes the cost of spectrum, equipment and operating expenses. No mature regulatory regime has such differential levies. Note that internet telephony has hardly featured in international debates about net neutrality. Trai must recognise that unorthodox regulatory and licensing regime has complicated net neutrality in India. The only consistent approach is to remove existing regulatory burdens on all telephony services. Trai will need to recommend—suo motu if necessary—effective ways to remove such anomalies and manage broadband spectrum better.

Fortunately, Zero Rating sits well within Trai’s mandate as well as current practices relating to consumer tariffs. It promotes internet usage, allows companies to innovate service offerings and encourages investment in networks. It is also in line with Trai’s 15-year-old practice of holding back or forbearing from exercising its powers to set consumer tariffs and relying on markets to prevent abuse. Zero Rating, as the former Trai chairperson pointed out, is not illegal. An economic regulator has little basis to treat Zero Rating as market abuse when none of the over 10 active ISPs has even 25% market share, unlike, say, in the US or the UK where some companies dominate the ISP market. A doctrinaire approach to Zero Rating, therefore, risks missing several aspects of direct relevance and value to India’s users.

Trai is an expert sector-specific regulatory body. It should resist attempts to trivialise its role into bland yes/no decisions. Its challenge is to recommend a sound, nuanced and credible approach to net neutrality.

Death penalty 'constitutionally unsustainable': Law Commission

Death penalty, even in rarest of rare cases, is "constitutionally unsustainable", the Law Commission said today as it recommended "swift" abolition of capital punishment except in terror cases, noting it does not serve as a deterrent any more than life imprisonment.

"After many lengthy and detailed deliberations, it is the view of the Law Commission that the administration of death penalty even within the restrictive environment of 'rarest of rare' doctrine is constitutionally unsustainable.

"Continued administration of death penalty asks very difficult constitutional questions...these questions relate to the miscarriage of justice, errors, as well as the plight of the poor and disenfranchised in the criminal justice system," a report by the Law Commission said.

The recommendation by the 9-member panel was, however, not unanimous, with one full-time member and two government representatives dissenting and supporting retention of capital punishment.

In its last report, the 20th Law Commission said there is a need to debate as to how to bring about the "abolition of death penalty in all respects in the very near future, soonest."

While supporting death for those convicted in terror cases and for waging war against the country, the report, 'The death Penalty' said that although there is no valid penological justification for treating terrorism differently from other crimes, concern is often raised that abolition of capital punishment for terror-related offences and waging war will affect national security.

One of three full-time members Justice (retd) Usha Mehra and both the ex-officio members -- Law secretary P K Malhotra and Legislative Secretary Sanjay Singh gave their dissenting notes.

The Law Commission comprises a Chairman, three full-time members, two ex-officio members who represent the government, and three part-time members. The panel, while refusing to recommend any single model for abolishing death penalty, said "the options are many -- from moratorium to a full-fledged abolition bill. The Law Commission does not wish to commit to a particular approach in abolition. All it says is that such a method for abolition should be compatible with the fundamental value of achieving swift and irreversible, absolute abolition."

Justice Mehra said, "Recommending blanket abolition of death sentence or moratorium on death penalty in heinous crimes is not an appropriate course particularly keeping in view the circumstances prevailing in our country."

Registering his dissent, Law Secretary Malhotra said Parliament in its wisdom has prescribed death penalty only in heinous crimes. "The need of the hour is to retain it...We have a vibrant judiciary which is respected world-over. We should have faith in the wisdom of our judges that they will exercise this power only in deserving cases for which the law is well laid down in various judgments..."

Legislative Secretary Sanjay Singh maintained the panel should not recommend something which has the effect of preventing the state from making any law in the interest of the sovereignty and integrity of the country.

However, supporting abolition of capital punishment by a majority, the panel said in the last decade, the Supreme Court has on numerous occasions expressed concern over arbitrary handing down of death sentence.

"The Court has noted that it is difficult to distinguish cases where death penalty has been imposed from those where the alternative of life imprisonment has been applied."
Dwelling on the issue of clemency, the report said the exercise of mercy powers under Articles 72 and 161 of the Constitution "have failed in acting as the final safeguard against miscarriage of justice in the imposition of the death sentence."

It said the apex court has repeatedly pointed out gaps and illegalities in how the executive has discharged its mercy powers. "When even exercise of mercy powers is sometimes vitiated by gross procedural violations and non-application of mind, capital punishment becomes indefensible.

"Safeguards in the law have failed in providing a constitutionally secure environment for administration of this irrevocable punishment," the report said.