CCE lesson for class 5 subject Hindi

CCE lesaon
Class- 5
Subject- Hindi
Chapter-1

For teachers who are making CCE lessons  of Hindi chapter 1.

Subsidies & National Income

Subsidies & National Income
Similar to the indirect taxes, the various subsidies which are forwarded by the governments need to
be adjusted while calculating national income. They are added to the national income at market cost,
in case of India9. Subsidies are added in the national income at the market cost to derive the national
income at factor cost . This is because the price at which the subsidised goods and services are made
available by the governments are not their real factor costs (subsidies are forwarded on the factor
costs of the goods and services) otherwise we will have a distorted value (which will be less than its
real value!). Thus the formula will be:
National Income at Factor Cost = NNP at Market Cost + Subsidies
If the national income is derived at the market cost and governments forward no subsidies there is no
need to adjustments for the subsidies – but after all there is not a single economy in the world today
which does not forward subsidies in one or the other form.
Putting ‘indirect taxes’ and the ‘subsidies’ both together India’s National Income will be derived with
the following formula (as India does it at the factor cost):
National Income at Factor Cost = NNP at Market Cost – Indirect Taxes + Subsidies

Taxes & National Income

Taxes & National Income
While accounting/calculating national income the taxes, direct taxes and indirect taxes collected by
the governments, needs to be considered. In case of India, to the extent the direct taxes (individual
income tax, corpoarate income tax i.e. the corporate tax, divident tax, interest tax, etc.) are concerned
there is no need of adjustment whether the national income is accounted at factor cost or market cost.
This is so because at both the ‘costs’ they have to be the same, besides these taxes are collected at the
incomes of the concerned person or group.
But the amount of indirect taxes (cenvat, customs, central sales tax, sales tax/vat, state excise, etc.)
needs to be taken care of if the national income is accounted at the ‘factor cost’ (which is the case
with India). If the national income is calculated at the factor cost then the corpus of the total indirect
taxes needs to be deducted from it. Why so? This is because, they have been added twice – once in
the hands of the people/group who pay them (because they pay for it from their ‘disposable income’
while puchasing things!) and other in the hands of the governments (as their income receipts).
Collection/source of the indirect taxes are the ‘disposable income’ (which individuals and
companies have with them after paying their direct taxes – from which they do any purchasing and
finally, the indirect taxes reach the various governments!). Thus, if the national income is calculated
at the factor cost, the formula to seek it will be:
National Income at Factor Cost = NNP at Market Cost – Indirect Taxes
However, if the national income is being derived at the ‘market cost’ the indirect taxes do not need to
be deducted from it. In this case, the governments need not add their income accruing from indirect
taxes to the national income either. It means, that the confusion in the case of national income
accounting at factor cost is only related with the indirect taxes.

Net National Product (NNP)

NNP
Net National Product (NNP) of an economy is the GNP after deducting the loss due to ‘depreciation’.
The formula to derive it may be written like:
NNP = GNP – Depreciation
or,
NNP = GDP + Income from Abroad – Depreciation.
The different uses of the concept NNP are as given below:
(a) This is the ‘National Income’ (NI) of an economy. Though, the GDP, NDP and GNP, all are
‘national income’ they are not written with capitalised ‘N’ and ‘I’.
(b) This is the purest form of the income of a nation.
(c) When we divide NNP by the total population of nation we get the ‘per capita income’ (PCI)
of that nation i.e. ‘income per head per year’. A very basic point should be noted here that this
is the point where the rates of dipreciation followed by the different nations make a
difference. Higher the rates of depreciation lower the PCI of the nation (whatever be the
reason for it- logical or artificial as in the case of depreciation being used as a tool of policymaking)!
Though, economies are free to fix any rate of depreciation for the different assets the
rates fixed by them make difference when the NI of the nations are compared by the
international financial institutions like the IMF, WB, ADB, etc.

Gross National Product (GNP

GNP
Gross National Product (GNP) is the GDP of a country added with its ‘income from abroad’. Here,
the trans-boundary economic activities of an economy is also taken into account. The items which are
counted in the segment ‘Income from Abroad’ are:
(i) Trade Balance: the net outcome at the year end of the total exports and imports of a country
may be positive or negative accordingly added with the GDP (in India’s case it has always
been negative except the three consecutive years 2000-03 when it was positive, due to high
levels of ‘services sector’ export during the years courtsey the booming BPO industry).
(ii) Interest of External Loans: the net outcome on the front of the interest payments i.e. balance
of the inflow (on the money lend out by the economy) and the outflow (on the money borrowed
by the economy) of the external interests. In India’s case it has been always negative as the
economy has been a ‘net borrower’ from the world economies.
(iii) Private Remittances: the net outcome of the money which inflows and outflows on account of
the ‘private transfers’ by the Indian nationals working outside India (to India) and the foreign
nationals working in India (to their home countries). On this front India has been always a
gainer- till early 1990s from the Gulf region (which fell down afterwards in the wake of the
heavy country-bound movements of the Indians working there due to the Gulf War) and
afterwards from the USA and the European nations. Basically, during the year 2012, India is
projected (as per the IMF) to be the highest receiver of this fund to the tune of $58 billion (it
was the second highest in 2011 at $55 billion, China was the top gainer with $57 billion).
Ultimately, the balance of all the three components of the ‘Income from Abroad’ segment may turn out
to be positive or negative. In India’s case it has been always negative (due to heavy outflows on
account of trade deficits and interest payments of the foreign loans). It means, the ‘Income from
Abroad’ is subtracted from India’s GDP to calculate its GNP.
The normal formula is GNP = GDP + Income from Abroad. But it becomes GNP = GDP + (– Income
from Abroad) = GDP – Income from Abroad, in the case of India. This means that India’s GNP is
always lower than its GDP.
The different uses of the concept GNP are as given below:
(a) This is the ‘national income’ according to which the IMF ranks the nations of the world in
terms of the volumes – at the Purchasing Power Parity (at PPP). For detailed discussion on the
PPP readers may search for it alphabetically in the Chapter- 24. India is ranked as the 4th
largest economy of the world (after the USA, Japan and China)- while as per the nominal/
prevailing exchange rate of rupee India is the 13th largest economy.
(b) It is the more exhaustive concept of national income than the GDP as it indicates about the
‘quantitative’ as well as the ‘qualitative’ aspect of the economy, i.e., the ‘internal’ as well
as the ‘external’ strength of the economy.
(c) It enables us to learn several facts about the production behaviour and pattern of an economy,
such as, how much the outside world is dependent on its product and how much it depends on
the world for the same (numerically shown by the size and net flow of its ‘trade balance’);
what is the standard of its human resource in international parlance (shown by the size and the
net flow of its ‘private remittances’); what position it holds regarding financial support from
and to the world economies (shown by the net flow of ‘interests’ on external
lending/borrowing).

Net Domestic Product (NDP)

NDP
Net Domestic Product (NDP) is the GDP calculated after adjusting the weight of the value of
‘depreciation’. This is, basically, net form of the GDP, i.e. GDP minus the total value of the ‘wear
and tear’ (depreciation) that happened in the assets while the goods and services were being
produced. Every asset (except human beings) go for depreciation in the process of their uses, which
means they ‘wear and tear’. The governments of the economies decide and announce the rates by
which assets depreciate (done in India by the Ministry of Commerce and Industry) and a list is
published, which is used by the different sections of the economy to determine the real levels of
depreciations in different assets. For example, a residential house in India has a rate of 1 per cent per
annum depreciation, an electric fan has 10 per cent per annum, etc., calculated in terms of the asset’s
price. This is one way how depreciation is used in economics. The other way it is used in the
external sector while the domestic currency floats freely in front of the foreign currencies, If the value
of the domestic currency falls following market mechanism in front of a foreign currency, it is the
situation of ‘depreciation’ in the domestic currency, calculated in terms of loss in value of the
domestic currency.
Thus, NDP = GDP – Depreciation.
This way, NDP of an economy has to be always lower than its GDP for the same year, since there is
no way to cut the depreciation to zero. But mankind has achieved too much in this area by the
developments such as ‘ball-bearing’, ‘lubricants’, etc., all innovated to minimise the levels of
depreciation.
The different uses of the concept of NDP are as given below:
(a) For domestic use only – to understand the historical situation of the loss due to depreciation to
the economy. Also used to understand and analyse the sectoral situation of depreciation in
industry and trade in comparative periods.
(b) To show the achievements of the economy in the area of research and development which
have tried cutting the levels of depreciation in a historical time period.
However, NDP is not used in comparative economics, i.e., to compare the economies of the world.
Why this is so? This is due to different rates of depreciation which is set by the different economies
of the world. Rates of depreciation may be based on logic (as it is in the case of houses in India—the
cement, bricks, sand and iron rods which are used to build houses in India can sustain it for the
coming 100 years, thus the rate of depreciation is fixed at 1 per cent per annum). But it may not be
based on logic all the time - for example, upto Feb 2000 the rate of depreciation for the heavy
vehicles (vehicles with 6-wheels and above) was 20 per cent while it was done 40 per cent
afterwards - to boost the sales of the vehicles. There was no logic in doubling the rate! Basically,
depreciation and its rates are used by the modern governments as a tool of economic policy-making
also, which is the third way how depreciation is used in economics.

Gross Domestic Product (GDP)

GDP
Gross Domestic Product (GDP) is the value of the all final goods and services produced within the
boundary of a nation during one year. For India, this calendar year is from 1st April to 31st March.
It will be better to understand the terms used in the concept, ‘gross’ means same thing to Economics
and Commerce as ‘total’ means to Mathematics; ‘domestic’ means all the economic activities done
inside the boundary of the nation/country and by its own capital; ‘product’ is word to define ‘goods
and services’ together; and ‘final’ means the stage of a product after which there is no known chance
of value addition in it.].

The different uses of the concept GDP are as given below:
(i) Per annum percentage change in it is the ‘growth rate’ of an economy. For example, if a
country has a GDP of Rs. 107 which is 7 rupees higher than the last year, it has a growth rate
of 7 per cent. When we use the term ‘a growing’ economy, it means that the economy is adding
up its income i.e. in quantitative terms.
(ii) It is a ‘quantitative’ concept and its volume/size indicates the ‘internal’ strength of the
economy. But it does not say anything about the ‘qualitative’ aspects of the produced goods
and services by the economy.
(iii) It is used by the IMF/WB in the comaparative analyses of its member nations.

TYPES OF ECONOMIES

TYPES OF ECONOMIES
Depending upon the shares of the particular sectors in the total production of an economy and the ratio
of the dependent population on them for their livelihood, economies are given different names, such
as:
(i) Agrarian Economy
An economy is called agrarian if the share of its primary sector is 50 per cent or more in the total
output (the GDP) of the economy. At the time of independence, India was such an economy. But now
it shows the typical symptom of a service economy with primary sector’s contribution falling to
almost 18 per cent of its total produce while almost 60 per cent of its population depends on the
primary sector for its livelihood. Thus, in monetary terms India is no more an agrarian economy, the
dependency ratio makes it so—India being the first such example in the economic history of the
world.
(ii) Industrial Economy
If the secondary sector contributes 50 per cent or more to the total produce value of an economy, it is
an industrial economy. Higher the contribution, higher is the level of industrialisation. The western
economies who went for early industrialisation earning faster and enough income and developing
early were known as developed economies. Most of these economies have crossed this phase once
the process of industrialisation saturated.
(iii) Service Economy
The economy whose 50 per cent or more produce value comes from the tertiary sector is known as
the service economy. First lot of such economies in the world were the early industrialised
economies. The tertiary sector provides livelihood to the largest number of people in such
economies. In the last decade (2003-04 to 2012-13), growth has increasingly come from the services
sector*, whose contribution to overall growth of the economy has been 65 per cent, while that of the
industry and agriculture sectors has been 27 per cent and 8 per cent respectively.
By the end of the 19th century it was a well-established fact, at least in the western world, that
industrial activities were a faster way to earn income in comparison to agrarian activities. The
Second World War had established the fact for the whole world—and almost every country started
their preparation for the process of industrialisation. As country after country successfully
industrialised, a pattern of the population shift from one to another sector was established, which was
known as the stages of growth of an economy.7 With the intensification of industrialisation,
dependency on primary sector for livelihood decreased and dependency on secondary sector
increased consistently. Similarly, such economies saw a population shift from the secondary to the
tertiary sector—and these were known as the ‘post-industrial’ societies or the service societies.
Almost the whole Euro-America falls under this category—these economies are having over 50 per
cent of their total produce value being contributed by their tertiary sectors and over half of the
population depends on the sector for their livelihood. Many other countries which started
industrialisation in the post-war period did show abberations in this shift of the population and the
income—India being one among them.

Mixed Economy

Mixed Economy
The belief in the self-correcting quality of the market and the ‘invisible hand’ of Adam Smith got a
major setback in early 20th century during the Great Depression (1929). The impact of the depression
spread from the USA to the other economies of western Europe escalating large scale unemployment,
downfall in demand and economic activities and lockouts in industrial enterprises. The prevailing
Smithonian macro ideas failed to check the crisis. A new approach was needed which came in the
famous work, The General Theory of Employment, Interest and Money (1936) by the English
economist at Cambridge University, John Maynard Keynes (1883–1946).
Keynes questioned the very principles of ‘laissez-faire’ and the nature of the ‘invisible hand’. He
even opined that the invisible hand brings equilibirium to the economy but by ‘strangulating the poor’.
He suggested that prices and wages of the labour are not flexible enough to provide employment to
all. It means there will be some people unemployed when the economy will be at its full potential.
Ultimately, a fall in demand will be imminent resulting in recession and if unchecked, in depression
which happened in 1929. Questioning the limitations of the market mechanism, Keynes suggested
strong government intervention in the economy. To get the economy out of the depression, he
suggested and increase in the government expenditures, discretionary fiscal policy (fiscal deficit,
lower interest rates, cheap money supply, etc.) to boost the demand of goods and services as this was
the reason behind the depression. As Keynesian policies were followed, the concerned economies
were successfully pulled out of the Great Depression.
While Keynes was inquiring into the causes and cures of the Great Depression he questioned the
capitalist economic system being practised throughout Euro-America. He suggested the capitalistic
order to assimilate the goals of the socialistic economy (economic ideals of the socialists i.e. the ex-
USSR). In the capitalist economies of the time, all the basic goods and services were part of the
market mechanism i.e. being produced and supplied by the private sector. It meant that almost
everything the people required was supplied by the private enterprises via the market which was
ultimately an undimensional movement of money and wealth (from the mass of people to the few who
controlled the production and supply chain) and the masses were going through the process of
pauperisation every day, thereby weakening their purchasing power. In the end, it affected overall
demand and culminated in the Great Depression.
As a follow up to the Keynesian advices, many trendsetting economic policies were initiated
throughout the capitalist economies. One very important initiative which came out was the
government’s active role in the economy. The governments started producing and supplying some
basic goods and services which are known as ‘public goods’. These goods basically intended to
guarantee minimum level of nutrition to all, healthcare, sanitation, education, social security, etc. The
expenditure on the public goods were incurred on the public exchequer even if it required deficit
financing. Starting from 1930s upto 1950s, almost 50 per cent of the GDP in the Euro-America was
spent by the governments on the public goods which also become popular as the social sector. The
essential goods and services which were till date being purchased by the people as ‘private goods’
were soon made available by the state ‘free-of-cost’ giving people more spare money to create
demand for the goods and services which were part of the market.
The above instance has been cited here to just show the process as to how capitalism redefined itself
by including some useful traits of the non-market economy i.e. the state economy. The mixed
economy arrived in this way and the classical capitalistic economy was challenged by it.
On the margins of the developments given above, it is interesting to note the developments in the State
Economies of the time. It was Prof. Oscar Lange (1904–65), the Polish philosopher, who in 1950s
suggested the same thing for the socialist economy as Keynes had for the capitalist. Prof. Lange
praised the state economy for many of its good things but also suggested inclusion of some of the good
things of the capitalistic economy2. He advised the state economies to adopt ‘market socialism’ (the
term was coined by him). His suggestions were outrightly rejected by the state economies as such
compromises in socialistic economic order were blasphemous at that time (this was ultimately a
suggestion towards democracy from dictatorship).
A s Keynes has suggested the capitalist economy to move few steps towards socialistic economy,
Prof. Lange was asking just the same in the case of the state economies. Democracies are flexible thus
they were able to go for an experiment which paid them in coming times. But as the socialist and
communist political systems had been stubborn by nature, they did not go for any experiment and thus
started moving towards their economic decay.
It was the communist China under the leadership of Mao Tse Tung where the first opinion came
against the total state economic control. And the ultimate example of the state economy (i.e., China)
started its preparation towards a limited market economy under the political design of dictatorship. In
1985, China announced its ‘open door policy’, the first experiment in ‘market socialism’ — Prof.
Lange had the last laugh. Other state economies, though caught unprepared, followed the Chinese
experiment towards market socialism. However, switch over to market socialism has not been
smooth for most of the state economies. The efforts towards market socialism in the Soviet Union,
fuelled by the lofty ideas of ‘glasnost’ (openness) and ‘prestroika’ (restructuring), resulted in the very
disintegration of the nation-state. The experts consider it ‘a political fallout of an economic
mismanagement’. The other state economies experienced major economic breakdowns in their
transition phases to market socialism. Basically, for smooth transition to market socialism some
prerequisites were required to be put in place aforehand. China was well ahead doing this homework
since Mao’s time (specially since 1975 onwards) which emerged as a real winner—the ideal type
example of state economy getting smoothly (!) metamorphosed into giant market economy.
These two events spanning many decades were nothing but timely and rational selections of economic
traits from each other’s economic systems and experiences. The world by the late 1980s was having
neither a pure example of capitalistic economy nor a pure example of state economy.
There were many states of the world that opted for mixed economy in the post-Second World War
periods after coming out of the colonial rule such as India, Malaysia, Indonesia, etc. to name a few.
The leadership of these countries could be considered visionaries which was to be proved by mid-
1990!
Though at practical levels, the world looked flat for the mixed economy, a formal opinion on the
goodness, immediacy and the ultimate viability of the mixed economy was yet to emerge. The first
such authoritative opinion, in this direction, came from the World Bank which accepted the goodness
and the need of ‘state intervention’ in the economy3. This was a turning point in the world economic
thinking as the World Bank (WB) and the International Monetary Fund (IMF) were the ardent votaries
of the virtues of the free market economy.
The concluding consensus emerged with the publication of the World Development Report (1999)
titled Entering the 21st Century in which the WB said, “Governments play a vital role in
development, but there is no simple set of rules that tells them what to do.” The WB went on to
suggest in this important document that every country should determine the areas and the extent of the
market and the state intervention depending upon its own stage of economic development, sociopolitical
and other historical factors.
The last WB document had basically rejected both of the historically existing economic orders
namely the free-market economy and the state economy—which meant Adam Smith and Karl Marx
were cancelled and rejected outrightly, that too on the basis of the historical experiences of both the
worlds. Rather, the document advocates for the ‘mixture’ of both the economic orders i.e. the mixed
economy. The long-standing ideological dilemma as to whether the market economy or the state
economy was the better or the best way of organising the economy was solved for all time to come.
The document pin-pointed good things of both the systems and concluded that they don’t have the
relationship of dichotomy but that of complimentarity. The real issue is not whether to have market or
the state but having both of them together makes more sense. Market economy might suit one economy
while it might not suit another—due to the different socio-economic conditions of the economies in
reference. Similarly, the state economy model might serve one economy but might not serve the other.
The real answer seems going for neither market or state but a judicious combination of both. As the
state-market mix depends upon the socio-economic and political conditions of an economy, there can
never be a mechanical prototype of the mixed economy which could be applied upon every economy
universally. Every economy needs to explore its own mixture of market and state. Again, the same
state might need to redefine composition of the state-market mix in the coming times according to its
changed socio-eco-political scenario.
The process of economic reforms in India started in 1991. It was infact the search for a new ‘statemarket
mix’ while India had been a mixed economy since independence.
After independence, India opted for the mixed economy when the state-market dilemma was at its
peak in the world. In the process of organising the economy, some basic and important infrastructural
economic responsibilities were taken up by the State/Governments (centre and state) and rest of the
economic activities were left to private enterprise i.e. the market. The kind of state-market mix for
which India went was thought to be fit for the socio-economic and political conditions of the time.
Once the country started the process of economic reforms in early 1990s, the prevailing state-market
mix was redefined and a new form of mixed economy began to be practised. As the socioeconomic
conditions had changed the state-market mix also changed. The redefined mixed economy for India
had a declared favour for the market economy. Many economic roles which were under complete
government monopolies were now opened for participation by the private sector. Examples are many
—telecommunication, power, roads, oil and natural gas, etc. At the same time, the responsibilities
which were till date being shouldered by the state alone and which could be taken up by the state only
were given extra emphasis. In this category comes the whole social sector—education, healthcare,
drinking water, sanitation, nutrition, social security, etc.
The economic system of India was a mixed economy in pre-1991 years as it is in post-1991 years but
the composition of state-market mix has gone for a change. In future, as the socio-economic and
political factors will be changing, India will be redefining its mixed economy, accordingly.
The emergence and evolution of the mixed economy was thus able to settle the long-standing debate
as to what was the best way to organise an economy. Starting in 1776 with the Wealth of Nations of
Adam Smith, it continued till we had the World Development Report of 1999 by the WB4. The
dilemma continued for almost two and a quarter centuries (1776–2000). Today, once the World
Trade Organisation (WTO) has taken over the world economy, the brand of the mixed economy it
advocates, is more inclined towards the free market economy. But it does not propagate to make the
state an economic non-entity i.e., it leaves scope, for greater state intervention in the required areas if
need be.

Capitalistic Economy

Capitalistic Economy
The capitalistic form of economy has its origin in the famous work of Adam Smith—Wealth of
Nations (1776). Adam Smith (1723–1790), the Scottish philosopher-economist professor at Glasgow
University whose writings formed the basis of classical economics had stressed certain fine ideas
which were to take fancy among some of the western countries and finally capitalism took birth. He
raised his voice against the heavy-handed government regulation of commerce and industry of the
time which did not allow the economy to tap its full economic worth and reach the level of wellbeing.
Stressing ‘division of labour’, an environment of ‘laissez faire’ (non-interference by the
government) he proposed that the ‘invisible hand’ of the ‘market forces’ (price mechanism) will bring
a state of equilibrium to the economy and a general well-being to the countrymen. For such an
economy to function for public well-being, he has acknowledged the need of competition in the
market.
Once the USA attained Independence the ideas of Adam Smith were made part of its public policy –
just one year after Wealth of Nations was published. From here the idea spread to other parts of
Euro-America—by 1800 the economic system ‘capitalism’ was established which was later known
by different names—Private Enterprise System, Free Enterprise System, Market Economy.
The decisions of what to produce, how much to produce and at what price to sell are taken by the
market, by the private enterprises in this system, with the state having no economic role.

Know more about Economy and its types
https://dsdedu.blogspot.com/2019/01/types-of-economies.html

Economics and Economy

Economics and Economy
The relation between economics and the economy, simply saying, is that of theory and practice. While
the former is a discipline studying economic behaviour of human beings, the latter is a still-frame
picture of it. Economics will come out with theories of market, employment, etc. and an economy is
the real picture of the things which emerge after the follow-up to the same theories in certain areas.
Economy is economics at play in a certain region. This region is best defined today as a country, a
nation—the Indian Economy, the Russian Economy, the French Economy, etc. Economy as such means
nothing. It gets meaning once it is preceded by the name of a country, a region, a block, etc. When we
say developed economies, we mean economies of the developed countries.
Countries of the world might be facing some common economic challenges. At the same time, they
might be facing some highly specific challenges. Economists, during the period of evolution of
economics, have suggested some fixed number of theories and methods of solving those economic
challenges. Now it depends upon the choice of the countries as to which set of principles and theories
they select for solving their economic challenges. Now many countries selecting same remedy and
tools to fight the same problems might have similar or dissimilar results during a given period. At the
same time, two economies selecting different tools to solve the same economic problems might
experience the same results or completely different results. Why this is so?
Basically, economic theories are expectations of human behaviour about their economic activities and
as human behaviour depends greatly on many internal and external factors, the results are likely to
show diversities. The level and quality of natural resources, the quantity and quality of human
resources, the socio-political milieu, the historical background, the psychic make of the human
resource, etc. are some of the factors which individually as well as collectively impact an economy
while carrying out economic activities. These things make it highly difficult for economists to say and
forecast the kind of impact a particular economic policy will have on a particular economic setting.
Ultimately, implementation and delivery system, all play a highly vital role in solving economic
challenges in a country, which economists started studying after the 1960s. Therefore, it is correct to
say that economics has less diversity than the economies. There will not be any exaggeration if we
say that no two economies of the world are exactly the same, though we might classify them into
broader terms like developed and developing, agrarian and industrial, etc.
This diversity makes economics a highly interesting discipline. And via the diverse faces of the
economies the economists have been able to modify and remodify their ideas on the subject of
economics. The evolutionary history of economics is nothing but modifications in the past theories on
the basis of contemporary results and experiences of the economies. It is right to say that economics
has developed out of real life practices and it is from the practice to theory. As the practices will be
having newer dimensions, the theories of economics will also have newer and more imaginative
dimensions.

Right to Equality

Right to Equality
1. Equality before Law and Equal Protection of Laws
Article 14 says that the State shall not deny to any person equality before the law or the equal
protection of the laws within the territory of India. This provision confers rights on all persons
whether citizens or foreigners. Moreover, the word ‘person’ includes legal persons, viz, statutory
corporations, companies, registered societies or any other type of legal person.
The concept of ‘equality before law’ is of British origin while the concept of ‘equal protection of
laws’ has been taken from the American Constitution. The first concept connotes: (a) the absence of
any special privileges in favour of any person, (b) the equal subjection of all persons to the ordinary
law of the land administered by ordinary law courts, and (c) no person (whether rich or poor, high or
low, official or non-official) is above the law.
The second concept, on the other hand, connotes: (a) the equality of treatment under equal
circumstances, both in the privileges conferred and liabilities imposed by the laws, (b) the similar
application of the same laws to all persons who are similarly situated, and (c) the like should be
treated alike without any discrimination. Thus, the former is a negative concept while the latter is a
positive concept. However, both of them aim at establishing equality of legal status, opportunity and
justice.
The Supreme Court held that where equals and unequals are treated differently, Article 14 does not
apply. While Article 14 forbids class legislation, it permits reasonable classification of persons,
objects and transactions by the law. But the classification should not be arbitrary, artificial or
evasive. Rather, it should be based on an intelligible differential and substantial distinction.
Rule of Law The concept of ‘equality before law’ is an element of the concept of ‘Rule of Law’,
propounded by A.V. Dicey, the British jurist. His concept has the following three elements or
aspects:
(i) Absence of arbitrary power, that is, no man can be punished except for a breach of law.
(ii) Equality before the law, that is, equal subjection of all citizens (rich or poor, high or low,
official or non-official) to the ordinary law of the land administered by the ordinary law
courts3.
(iii) The primacy of the rights of the individual, that is, the constitution is the result of the rights of
the individual as defined and enforced by the courts of law rather than the constitution being
the source of the individual rights.
The first and the second elements are applicable to the Indian System and not the third one. In the
Indian System, the constitution is the source of the individual rights.
The Supreme Court held that the ‘Rule of Law’ as embodied in Article 14 is a ‘basic feature’ of the
constitution. Hence, it cannot be destroyed even by an amendment.
Exceptions to Equality The rule of equality before law is not absolute and there are constitutional
and other exceptions to it. These are mentioned below:
1. The President of India and the Governor of States enjoy the following immunities (Article
361):
(i) The President or the Governor is not answerable to any court for the exercise and
performance of the powers and duties of his office.
(ii) No criminal proceedings shall be instituted or continued against the President or the
Governor in any court during his term of office.
(iii) No process for the arrest or imprisonment of the President or the Governor shall be
issued from any court during his term of office.
(iv) No civil proceedings against the President or the Governor shall be instituted during his
term of office in any court in respect of any act done by him in his personal capacity,
whether before or after he entered upon his office, until the expiration of two months next
after notice has been delivered to him.
2. No person shall be liable to any civil or criminal proceedings in any court in respect of the
publication in a newspaper (or by radio or television) of a substantially true report of any
proceedings of either House of Parliament or either House of the Legislature of a State
(Article 361-A).
3. No member of Parliament shall be liable to any proceedings in any court in respect of
anything said or any vote given by him in Parliament or any committee thereof (Article 105).
4. No member of the Legislature of a state shall be liable to any proceedings in any court in
respect of anything said or any vote given by him in the Legislature or any committee thereof
(Article 194).
5. Article 31-C is an exception to Article 14. It provides that the laws made by the state for
implementing the Directive Principles contained in clause (b) or clause (c) of Article 39
cannot be challenged on the ground that they are violative of Article 14. The Supreme Court
held that “where Article 31-C comes in, Article 14 goes out”.
6. The foreign sovereigns (rulers), ambassadors and diplomats enjoy immunity from criminal
and civil proceedings.
7. The UNO and its agencies enjoy the diplomatic immunity.

Features of Fundamental Rights of Indian Citizen

Features of Fundamental Rights
The Fundamental Rights guaranteed by the Constitution are characterised by the following:
1. Some of them are available only to the citizens while others are available to all persons
whether citizens, foreigners or legal persons like corporations or companies.
2. They are not absolute but qualified. The state can impose reasonable restrictions on them.
However, whether such res-trictions are reasonable or not is to be decided by the courts.
Thus, they strike a balance between the rights of the individual and those of the society as a
whole, between individual liberty and social control.
3. Most of them are available against the arbitrary action of the State, with a few exceptions like
those against the State’s action and against the action of private individuals. When the rights
that are available against the State’s action only are violated by the private individuals, there
are no constitutional remedies but only ordinary legal remedies.
4. Some of them are negative in character, that is, place limitations on the authority of the State,
while others are positive in nature, conferring certain privileges on the persons.
5. They are justiciable, allowing persons to move the courts for their enforcement, if and when
they are violated.
6. They are defended and guaranteed by the Supreme Court. Hence, the aggrieved person can
directly go to the Supreme Court, not necessarily by way of appeal against the judgement of
the high courts.
7. They are not sacrosanct or permanent. The Parliament can curtail or repeal them but only by a
constitutional amendment act and not by an ordinary act. Moreover, this can be done without
affecting the ‘basic structure’ of the Constitution. (The amendability of fundamental rights is
explained in detail in Chapter 11).
8. They can be suspended during the operation of a National Emergency except the rights
guaranteed by Articles 20 and 21. Further, the six rights guaranteed by Article 19 can be
suspended only when emergency is declared on the grounds of war or external aggression
(i.e., external emergency) and not on the ground of armed rebellion (i.e., internal emergency).
(The suspension of fundamental rights during a national Emergency is explained in detail in
Chapter 16).
9. Their scope of operation is limited by Article 31A (saving of laws providing for acquisition
of estates, etc.), Article 31B (validation of certain acts and regulations included in the 9th
Schedule) and Article 31C (saving of laws giving effect to certain directive principles).
10. Their application to the members of armed forces, para-military forces, police forces,
intelligence agencies and analogous services can be restricted or abrogated by the Parliament
(Article 33).
11. Their application can be restricted while martial law is in force in any area. Martial law
means ‘military rule’ imposed under abnormal circumstances to restore order (Article 34). It
is different from the imposition of national emergency.
12. Most of them are directly enforceable (self-executory) while a few of them can be enforced
on the basis of a law made for giving effect to them. Such a law can be made only by the
Parliament and not by state legislatures so that uniformity throughout the country is maintained
(Article 35).

Single Citizenship in India

Single Citizenship
Though the Indian Constitution is federal and envisages a dual polity (Centre and states), it provides
for only a single citizenship, that is, the Indian citizenship. The citizens in India owe allegiance only
to the Union. There is no separate state citizenship. The other federal states like USA and
Switzerland, on the other hand, adopted the system of double citizenship.
In USA, each person is not only a citizen of USA but also of the particular state to which he belongs.
Thus, he owes allegiance to both and enjoys dual sets of rights—one set conferred by the national
government and another by the state government. This system creates the problem of discrimination,
that is, a state may discriminate in favour of its citizens in matters like right to vote, right to hold
public offices, right to practice professions and so on. This problem is avoided in the system of single
citizenship prevalent in India.
In India, all citizens irrespective of the state in which they are born or reside enjoy the same political
and civil rights of citizenship all over the country and no discrimination is made between them.
However, this general rule of absence of discrimination is subject to some exceptions, viz,
1. The Parliament (under Article 16) can prescribe residence within a state or union territory as
a condition for certain employments or appointments in that state or union territory, or local
authority or other authority within that state or union territory. Accordingly, the Parliament
enacted the Public Employment (Requirement as to Residence) Act, 1957 and thereby
authorised the Government of India to prescribe residential qualification only for appointment
to non-Gazetted posts in Andhra Pradesh, Himachal Pradesh, Manipur and Tripura. As this
Act expired in 1974, there is no such provision for any state except Andhra Pradesh.5
2. The Constitution (under Article 15) prohibits discrimination against any citizen on grounds of
religion, race, caste, sex or place of birth and not on the ground of residence. This means that
the state can provide special benefits or give preference to its residents in matters that do not
come within the purview of the rights given by the Constitution to the Indian citizens. For
example, a state may offer concession in fees for education to its residents.
3. The freedom of movement and residence (under Article 19) is subjected to the protection of
interests of any schedule tribe. In other words, the right of outsiders to enter, reside and settle
in tribal areas is restricted. Of course, this is done to protect the distinctive culture, language,
customs and manners of schedule tribes and to safeguard their traditional vocation and
property against exploitation.
4. In the case of Jammu and Kashmir, the state legislature is empowered to define the persons
who are permanent residents of the state and confer any special rights and privileges in
matters of employment under the state government, acquisition of immovable property in the
state, settlement in the state and scholarships and such other forms of aid provided by the state
government.6
The Constitution of India, like that of Canada, has introduced the system of single citi-zenship and
provided uniform rights (except in few cases) for the people of India to promote the feeling of
fraternity and unity among them and to build an integrated Indian nation. Despite this, India has been
witnessing the communal riots, class conflicts, caste wars, linguistic clashes and ethnic disputes.
Thus, the cherished goal of the founding fathers and the Constitution-makers to build an united and
integrated Indian nation has not been fully realised.

Loss of Citizenship of India

Loss of Citizenship
The Citizenship Act, 1955, prescribes three ways of losing citizenship whether acquired under the
Act or prior to it under the Constitution, viz, renunciation, termination and deprivation:
1. By Renunciation Any citizen of India of full age and capacity can make a declaration renouncing
his Indian citizenship. Upon the registration of that declaration, that person ceases to be a citizen of
India. However, if such a declaration is made during a war in which India is engaged, its registration
shall be withheld by the Central Government.
Further, when a person renounces his Indian citizenship, every minor child of that person also loses
Indian citizenship. However, when such a child attains the age of eighteen, he may resume Indian
citizenship.
2. By Termination When an Indian citizen voluntarily (consciously, knowingly and without duress,
undue influence or compulsion) acquires the citizenship of another country, his Indian citizenship
automatically terminates. This provision, however, does not apply during a war in which India is
engaged.
3. By Deprivation It is a compulsory termination of Indian citizenship by the Central government, if:
(a) the citizen has obtained the citizenship by fraud:
(b) the citizen has shown disloyalty to the Constitution of India:
(c) the citizen has unlawfully traded or communicated with the enemy during a war;
(d) the citizen has, within five years after registration or naturalisation, been imprisoned in any
country for two years; and
(e) the citizen has been ordinarily resident out of India for seven years continuously

Citizenship Act, 1955 in India

Citizenship Act, 1955
The Citizenship Act (1955) provides for acquisition and loss of citizenship after the commencement
of the Constitution. This Act has been amended so far four times by the following Acts:
1. The Citizenship (Amendment) Act, 1986.
2. The Citizenship (Amendment) Act, 1992.
3. The Citizenship (Amendment) Act, 2003.
4. The Citizenship (Amendment) Act, 2005.
Originally, the Citizenship Act (1955) also provided for the Commonwealth Citizenship. But, this
provision was repealed by the Citizenship (Amendment) Act, 2003.
Acquisition of Citizenship
The Citizenship Act of 1955 prescribes five ways of acquiring citizenship, viz, birth, descent,
registration, naturalisation and incorporation of territory:
1. By Birth A person born in India on or after 26th January 1950 but before 1st July 1987 is a citizen
of India by birth irrespective of the nationality of his parents.
A person born in India on or after 1st July 1987 is considered as a citizen of India only if either of his
parents is a citizen of India at the time of his birth.
Further, those born in India on or after 3rd December 2004 are considered citizens of India only if
both of their parents are citizens of India or one of whose parents is a citizen of India and the other is
not an illegal migrant at the time of their birth.
The children of foreign diplomats posted in India and enemy aliens cannot acquire Indian citizenship
by birth.
2. By Descent A person born outside India on or after 26th January 1950 but before 10th December
1992 is a citizen of India by descent, if his father was a citizen of India at the time of his birth.
A person born outside India on or after 10th December 1992 is considered as a citizen of India if
either of his parents is a citizen of India at the time of his birth.
From 3rd December 2004 onwards, a person born outside India shall not be a citizen of India by
descent, unless his birth is registered at an Indian consulate within one year of the date of birth or
with the permission of the Central Government, after the expiry of the said period. An application, for
registration of the birth of a minor child, to an Indian consulate shall be accompanied by an
undertaking in writing from the parents of such minor child that he or she does not hold the passport of
another country.
3. By Registration The Central Government may, on an application, register as a citizen of India any
person (not being an illegal migrant) if he belongs to any of the following categories, namely:-
(a) a person of Indian origin who is ordinarily resident in India for seven years before making an
application for registration;
(b) a person of Indian origin who is ordinarily resident in any country or place outside undivided
India;
(c) a person who is married to a citizen of India and is ordinarily resident in India for seven years
before making an application for registration;
(d) minor children of persons who are citizens of India;
(e) a person of full age and capacity whose parents are registered as citizens of India;
(f) a person of full age and capacity who, or either of his parents, was earlier citizen of
independent India, and has been residing in India for one year immediately before making an
application for registration;
(g) a person of full age and capacity who has been registered as an overseas citizen of India for
five years, and who has been residing in India for one year before making an application for
registration.
An applicant shall be deemed to be ordinarily resident in India if –
(i) he has resided in India throughout the period of twelve months immediately before
making an application for registration; and
(ii) he has resided in India during the eight years immediately preceding the said period of
twelve months for a period of not less than six years.
A person shall be deemed to be of Indian origin if he, or either of his parents, was born in undivided
India or in such other territory which became part of India after the 15th August, 1947.
All the above categories of persons must take an oath of allegiance before they are registered as
citizens of India. The form of the oath is as follows:
I, A/B………………. do solemnly affirm (or swear) that I will bear true faith and allegiance to the
Constitution of India as by law established, and that I will faithfully observe the laws of India and
fulfill my duties as a citizen of India.
4. By Naturalisation The Central Government may, on an application, grant a certificate of
naturalisation to any person (not being an illegal migrant) if he possesses the following qualifications:
(a) that he is not a subject or citizen of any country where citizens of India are prevented from
becoming subjects or citizens of that country by naturalisation;
(b) that, if he is a citizen of any country, he undertakes to renounce the citizenship of that country
in the event of his application for Indian citizenship being accepted;
(c) that he has either resided in India or been in the service of a Government in India or partly the
one and partly the other, throughout the period of twelve months immediately preceding the
date of the application;
(d) that during the fourteen years immediately preceding the said period of twelve months, he has
either resided in India or been in the service of a Government in India, or partly the one and
partly the other, for periods amounting in the aggregate to not less than eleven years;
(e) that he is of good character;
(f) that he has an adequate knowledge of a language specified in the Eighth Schedule to the
Constitution3, and
(g) that in the event of a certificate of naturalisation being granted to him, he intends to reside in
India, or to enter into or continue in, service under a Government in India or under an
international organisation of which India is a member or under a society, company or body of
persons established in India.
However, the Government of India may waive all or any of the above conditions for naturalisation in
the case of a person who has rendered distinguished service to the science, philosophy, art, literature,
world peace or human progress. Every naturalised citizen must take an oath of allegiance to the
Constitution of India.
5. By Incorporation of Territory If any foreign territory becomes a part of India, the Government of
India specifies the persons who among the people of the territory shall be the citizens of India. Such
persons become the citizens of India from the notified date. For example, when Pondicherry became a
part of India, the Government of India issued the Citizenship (Pondicherry) Order, 1962, under the
Citizenship Act, 1955.

New States and Union Territories Created After 1956 in India

New States and Union Territories Created After 1956
Even after the large-scale reorganisation of the states in 1956, the political map of India underwent
continuous change due to the pressure of popular agitations and political conditions. The demand for
the creation of some more states on the basis of language or cultural homogeneity resulted in the
bifurcation of existing states.
Maharashtra and Gujarat In 1960, the bilingual state of Bombay was divided8 into two separate
states—Maharashtra for Marathi-speaking people and Gujarat for Gujarati-speaking people. Gujarat
was established as the 15th state of the Indian Union.
Dadra and Nagar Haveli The Portuguese ruled this territory until its liberation in 1954.
Subsequently, the administration was carried on till 1961 by an administrator chosen by the people
themselves. It was converted into a union territory of India by the 10th Constitutional Amendment Act,
1961.
Goa, Daman and Diu India acquired these three territories from the Portuguese by means of a police
action in 1961. They were constituted as a union territory by the 12th Constitutional Amendment Act,
1962. Later, in 1987, Goa was conferred a statehood.9 Consequently, Daman and Diu was made a
separate union territory.
Puducherry The territory of Puducherry comprises the former French establishments in India known
as Puducherry, Karaikal, Mahe and Yanam. The French handed over this territory to India in 1954.
Subsequently, it was administered as an ‘acquired territory’, till 1962 when it was made a union
territory by the 14th Constitutional Amendment Act.
Nagaland In 1963, the State of Nagaland was formed10 by taking the Naga Hills and Tuensang area
out of the state of Assam. This was done to satisfy the movement of the hostile Nagas. However,
before giving Nagaland the status of the 16th state of the Indian Union, it was placed under the control
of governor of Assam in 1961.
Haryana, Chandigarh and Himachal Pradesh In 1966, the State of Punjab was bifurcated11 to create
Haryana, the 17th state of the Indian Union, and the union territory of Chandigarh. This followed the
demand for a separate ‘Sikh Homeland’ (Punjabi Subha) raised by the Akali Dal under the
leadership of Master Tara Singh. On the recommendation of the Shah Commission (1966), the
punjabi- speaking areas were constituted into the unilingual state of Punjab, the Hindi-speaking areas
were constituted into the State of Haryana and the hill areas were merged with the adjoining union
territory of Himachal Pradesh. In 1971, the union territory of Himachal Pradesh was elevated12 to the
status of a state (18th state of the Indian Union).
Manipur, Tripura and Meghalaya In 1972, the political map of Northeast India underwent a major
change.13 Thus, the two Union Territories of Manipur and Tripura and the Sub-State of Meghalaya got
statehood and the two union territories of Mizoram and Arunachal Pradesh (originally known as
North-East Frontier Agency—NEFA) came into being. With this, the number of states of the Indian
Union increased to 21 (Manipur 19th, Tripura 20th and Meghalaya 21st). Initially, the 22nd
Constitutional Amendment Act (1969) created Meghalaya as an ‘autonomous state’ or ‘sub-state’
within the state of Assam with its own legislature and council of ministers. However, this did not
satisfy the aspirations of the people of Meghalaya. The union territories of Mizoram and Arunachal
Pradesh were also formed out of the territories of Assam.
Sikkim Till 1947, Sikkim was an Indian princely state ruled by Chogyal. In 1947, after the lapse of
British paramountcy, Sikkim became a ‘protectorate’ of India, whereby the Indian Government
assumed responsibility for the defence, external affairs and communications of Sikkim. In 1974,
Sikkim expressed its desire for greater association with India. Accordingly, the 35th Constitutional
Amendment Act (1974) was enacted by the parliament. This amendment introduced a new class of
statehood under the constitution by conferring on Sikkim the status of an ‘associate state’ of the Indian
Union. For this purpose, a new Article 2A and a new schedule (Tenth Schedule conseriving the terms
and conditions of association) were inserted in the Constitution. This experiment, however, did not
last long as it could not fully satisfy the aspirations of the people of Sikkim. In a referendum held in
1975, they voted for the abolition of the institution of Chogyal and Sikkim becoming an integral part
of India. Consequently, the 36th Constitutional Amendment Act (1975) was enacted to make Sikkim a
full-fledged state of the Indian Union (the 22nd state). This amendment amended the First and the
Fourth Schedules to the Constitution and added a new Article 371-F to provide for certain special
provisions with respect to the administration of Sikkim. It also repealed Article 2A and the Tenth
Schedule that were added by the 35th Amendment Act of 1974.
Mizoram, Arunachal Pradesh and Goa In 1987, three new States of Mizoram,14 Arunachal
Pradesh15 and Goa16 came into being as the 23rd, 24th and 25th states of the Indian Union
respectively. The Union Territory of Mizoram was conferred the status of a full state as a sequel to
the signing of a memorandum of settlement (Mizoram Peace Accord) in 1986 between the Central
government and the Mizo National Front, ending the two-decade-old insurgency. Arunachal Pradesh
had also been a union territory from 1972. The State of Goa was created by separating the territory of
Goa from the Union Territory of Goa, Daman and Diu.
Chhattisgarh, Uttarakhand and Jharkhand In 2000, three more new States of Chhattisgarh,17
Uttarakhand18 and Jharkhand19 were created out of the territories of Madhya Pradesh, Uttar Pradesh
and Bihar respectively. These became the 26th, 27th and 28th states of the Indian Union respectively.
Thus, the number of states and union territories increased from 14 and 6 in 1956 to 28 and 7 in 2000
respectively.20
Change of Names The names of some states and union territories have also been changed. The
United Provinces was the first state to have a new name. It was renamed ‘Uttar Pradesh’ in 1950. In
1969, Madras was renamed21 ‘Tamil Nadu’. Similarly, in 1973, Mysore was renamed22 ‘Karnataka’.
In the same year, Laccadive, Minicoy and Amindivi Islands were renamed23 ‘Lakshadweep’. In 1992,
the Union Territory of Delhi was redesignated as the National Capital Territory of Delhi (without
being conferred the status of a full-fledged state) by the 69th Constitutional Amendment Act, 1991.24
In 2006, Uttaranchal was renamed25 as ‘Uttarakhand’. In the same year, Pondicherry was renamed26
as ‘Puducherry’

Dhar Commission and JVP Committee

Dhar Commission and JVP Committee
The integration of princely states with the rest of India has purely an ad hoc arrangement. There has
been a demand from different regions, particularly South India, for reorgani-sation of states on
linguistic basis. Accordingly, in June 1948, the Government of India appointed the Linguistic
Provinces Commission under the chairmanship of S K Dhar to examine the feasibility of this. The
commission submitted its report in December 1948 and recommended the reorganisation of states on
the basis of administrative convenience rather than linguistic factor. This created much resentment
and led to the appointment of another Linguistic Provinces Committee by the Congress in December
1948 itself to examine the whole question afresh. It consisted of Jawaharlal Nehru, Vallahbhai Patel
and Pattabhi Sitaramayya and hence, was popularly known as JVP Committee6. It submitted its report
in April 1949 and formally rejected language as the basis for reorganisation of states.
However, in October 1953, the Government of India was forced to create the first linguistic state,
known as Andhra state, by separating the Telugu speaking areas from the Madras state. This followed
a prolonged popular agitation and the death of Potti Sriramulu, a Congress person of standing, after a
56-day hunger strike for the cause

Indian Parliament’s Power to Reorganize the States

Parliament’s Power to Reorganise the States
Article 3 authorises the Parliament to:
(a) form a new state by separation of territory from any state or by uniting two or more states or
parts of states or by uniting any territory to a part of any state,
(b) increase the area of any state,
(c) diminish the area of any state,
(d) alter the boundaries of any state, and
(e) alter the name of any state.
However, Article 3 lays down two conditions in this regard: one, a bill contemplating the above
changes can be introduced in the Parliament only with the prior recommendation of the President; and
two, before recommending the bill, the President has to refer the same to the state legistature
concerned for expressing its views within a specified period.
Further, the power of Parliament to form new states includes the power to form a new state or union
territory by uniting a part of any state or union territory to any other state or union territory3.
The President (or Parliament) is not bound by the views of the state legislature and may either accept
or reject them, even if the views are received in time. Further, it is not necessary to make a fresh
reference to the state legislature every time an amendment to the bill is moved and accepted in
Parliament4. In case of a union territory, no reference need be made to the concerned legislature to
ascertain its views and the Parliament can itself take any action as it deems fit.
It is thus clear that the Constitution authori-ses the Parliament to form new states or alter the areas,
boundaries or names of the existing states without their consent. In other words, the Parliament can
redraw the political map of India according to its will. Hence, the territorial integrity or continued
existence of any state is not guaranteed by the Constitution. Therefore, India is rightly described as
‘an indestructible union of destructible states’. The Union government can destroy the states whereas
the state governments cannot destroy the Union. In USA, on the other hand, the territorial integrity or
continued existence of a state is guaranteed by the Constitution. The American Federal government
cannot form new states or alter the borders of existing states without the consent of the states
concerned. That is why the USA is described as ‘an indestructible union of indestructible states.’
Moreover, the Constitution (Article 4) itself declares that laws made for admission or establishment
of new states (under Article 2) and formation of new states and alteration of areas, boundaries or
names of existing states (under Articles 3) are not to be considered as amendments of the Constitution
under Article 368. This means that such laws can be passed by a simple majority and by the ordinary
legislative process.
Does the power of Parliament to diminish the areas of a state (under Article 3) include also the
power to cede Indian territory to a foreign country? This question came up for examination before the
Supreme Court in a reference made by the President in 1960. The decision of the Central government
to cede part of a territory known as Berubari Union (West Bengal) to Pakistan led to political
agitation and controversy and thereby necessitated the Presidential reference. The Supreme Court
held that the power of Parliament to diminish the area of a state (under Article 3) does not cover
cession of Indian territory to a foreign country. Hence, Indian territory can be ceded to a foreign state
only by amending the Constitution under Article 368. Consequently, the 9th Constitutional Amendment
Act (1960) was enacted to transfer the said territory to Pakistan.
On the other hand, the Supreme Court in 1969 ruled that, settlement of a boundary dispute between
India and another country does not require a constitutional amendment. It can be done by executive
action as it does not involve cession of Indian territory to a foreign country.

Significance of the Preamble

Significance of the Preamble
The Preamble embodies the basic philosophy and fundamental values—political, moral and religious
—on which the Constitution is based. It contains the grand and noble vision of the Constituent
Assembly, and reflects the dreams and aspirations of the founding fathers of the Constitution. In the
words of Sir Alladi Krishnaswami Iyer, a member of the Constituent Assembly who played a
significant role in making the Constitution, ‘The Preamble to our Constitution expresses what we had
thought or dreamt so long’.
According to K M Munshi, a member of the Drafting Committee of the Constituent Assembly, the
Preamble is the ‘horoscope of our sovereign democratic republic’.
Pandit Thakur Das Bhargava, another member of the Constituent Assembly, summed up the
importance of the Preamble in the following words: ‘The Preamble is the most precious part of the
Constitution. It is the soul of the Constitution. It is a key to the Constitution. It is a jewel set in the
Constitution. It is a proper yardstick with which one can measure the worth of the Constitution’.
Sir Ernest Barker, a distinguished English political scientist, paid a glowing tribute to the political
wisdom of the authors of the Preamble. He described the Preamble as the ‘key-note’13 to the
Constitution. He was so moved by the text of the preamble that he quoted14 it at the opening of his
popular book, Principles of Social and Political Theory (1951).
M Hidayatullah, a former Chief Justice of India, observed, ‘Preamble resembles the Declaration of
Independence of the United States of America, but is more than a declaration. It is the soul of our
Constitution, which lays down the pattern of our political society. It contains a solemn resolve, which
nothing but a revolution can alter