REDISTRIBUTION OF WEALTH
- POLITY
News: Constitution and the
redistribution of wealth
What's in the news?
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A 9-judge Constitution Bench is hearing a reference
to Article 39 (b) of the Constitution's Directive Principles of State Policy
(DPSP), including whether privately-owned resources could be considered as
‘material resources of the community’.
Constitutional
Provisions about Property Rights:
●
When the Constitution was enacted in 1950, it
provided the Right to Property under
Article 19 (f).
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Article 31 of the Constitution states that if a state is
going to acquire property, the person shall be adequately compensated.
DPSP and Redistribution
of Wealth:
●
Article 38 directs the state to minimize inequality and Article 39 for the equitable
distribution of wealth and property.
Implementation of DPSP:
To implement the above two Articles (DPSP), the government of India
implemented the 1st Constitutional Amendment Act in 1951 and inserted Articles
31A and 31B in the Constitution.
1. 1st Constitutional
Amendment Act, 1951:
●
Article 31A: any law that is made for the acquisition of
property shall not be void on the ground that it violated fundamental rights
including the right to property.
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Article 31B: if any such law is placed under the 9th Schedule it is completely immune
from the judicial review on the ground that it is violating the fundamental
right.
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This blanket was removed by the Supreme Court in
the IR Coelho Case 2007.
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The Acts which are kept in the 9th Schedule after
1973 will be under judicial review.
2. 25th Constitutional
Amendment Act, 1971:
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The 25th Constitutional Amendment Act of 1971
inserted Article 31C.
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The act provided that the Fundamental Rights (Articles 14 & 19) are subordinate to the DPSP
[39(b) & (c)]. If the government is making any such law to implement
the DPSP, it cannot be considered void on the ground that it violates
Fundamental Rights.
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This provision of Article 31C was reviewed by the
Supreme Court in the Kesavananda Bharati Case 1973. The SC upheld the validity
of the Article 31C. But it has been put under judicial review.
44th Constitutional
Amendment Act, 1978:
●
The Act made
the Right to Property as a ‘Legal & Constitutional Right’ (not Fundamental
Right) under Article 300A.
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This Act also abolished Article 19 (1) (f) and Article 31.
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This Article states that no person can be deprived
of their property except by the authority of law. This means that a person can
only be deprived of their property through an Act passed by the Parliament or
State Legislature, and not by executive order.
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Further in the Minerva
Mills Case of 1980, the SC held that the Constitution exists on the
harmonious balance between Fundamental Rights and DPSP.
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The government can bring the Acts to implement the
DPSP but at the same time, it shall not conflict with the Fundamental Rights.
Can the government
acquire property?
Yes, the government can acquire property but under three conditions:
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Such acquiring of the property shall be for any public purpose.
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The government shall provide you with the compensation on the land rate of time.
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One can go
to the court to challenge such enactment of the Act under the judicial
review power of the SC provided under Articles 13 and 32 of the Constitution.
Socialist Model of
Governance (1951-1991):
1. Redistribution of
Property (Land Reforms):
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Zamindari Abolition Act of 1951.
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Tenancy Act - land is provided to farmers and
cultivators who do not have land.
2. Land Ceiling Act,
1961:
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It identified the family as a unit of 5 members. A
family can own
○
10-27 acres of irrigated land
○
35-54 acres of dry land.
3. To enhance financial inclusion, the
nationalisation of bank and insurance sectors was undertaken on a large
scale. So, that even the marginalised sections of society can avail of loans
and advances.
4. To overcome income inequality, a high
rate of direct taxes has been introduced as an inheritance tax on wealth.
5. Inheritance Tax on Wealth -
if a father has bought 1 acre land five years back. Now the National Highway is
being constructed on nearby land which increased the price of that land. Father
has given this land under his will to his son, this wealth which originally
belonged to his father was inherited by his son. Hence, the son needs to pay
taxes to the government.
6. To prevent the privatisation of the larger sector there existed the Monopolies & Restrictive Trade
Practices (MRTP) Act 1969. The Act ensures that one company does not
excessively grow and monopolise the market.
Issues in Socialistic
Model:
●
High intervention by the government restricted the
growth of an economy. This was observed after the economic reforms of 1991 when
the GDP was boosted in India.
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High taxes led to tax evasion which further
increased the issue of black money in the economy.
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There was a high administrative cost (more than
revenue) to collect and maintain the high Estate Duty and Wealth Tax.
Reforms from 1991:
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The government moved towards a mixed economy
(socialist & capitalist) after 1991 and adopted the LPG Reforms of 1991.
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Under the New
Industrial Policy of 1991, the MRTP Act was abolished and replaced with the
Competition Act of 2002.
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Huge reduction in direct taxes (corporate tax has
been reduced from 70% to 22%, no tax on buybacks and no enhanced surcharge).
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Estate duty and Wealth tax were abolished in 1985
and 2016 respectively.