The Tribune, Chandigarh, India

EDITORIALS

An innovative budget

THE first General Budget presented by Finance Minister Jaswant Singh is an innovative exercise. Those who interpret it as being based on political realities can be countered with the argument that a budget is not merely a statement of the government receipts and expenditures. It is more than these basic facts. It is a mixed fare of politics and economics, an entirely different kettle of fish from the annual Economic Survey, which is considered an economist’s viewpoint. A budget must aim at the gross national contentment while, at the same time, helping raise the Gross Domestic Product (GDP) growth rate. Mr Jaswant Singh deserves to be commended for his efforts to take care of all aspects of the complex exercise, offering something to almost everybody. The maximum gainers are those whose annual salary income falls between Rs 3 lakh and Rs 5 lakh. If his critics see it as a populist budget, they will be justified in the sense that the much-talked about Kelkar recommendations have not influenced his thinking. But the BJP’s Rajnath Singh panel’s views too have not been implemented in their entirety. The salaried class is the most affected section when the budget proposals are announced. Its interests have been taken care of by retaining tax-exemption on the housing loan interest up to Rs 1.5 lakh. It has not been given any rise in the tax-free income limit, which remains at Rs 50,000, but the security surcharge has been removed. This means some gain, no doubt. There is substantial relief in the case of standard deduction, which has been raised to 40 per cent of the total salary or Rs 30,000, whichever is less, from Rs 20,000-Rs 25,000 fixed previously. There is another major sop to the salaried class in the form of income tax-free education expenses on two children with Rs 12,000 as the limit for each. Education has been getting costlier day by day. The relief provided by the Finance Minister should be welcomed by one and all. The government employees must be a happier lot with the LTC restored. It is a different matter that the facility will add considerably to the government’s financial burden.

Senior citizens constitute another class which has been at the receiving end in the process of reducing interest rates on savings. The public sector Life Insurance Corporation (LIC) has been asked to introduce a pension scheme for senior citizens with a 9 per cent annual guaranteed return. This is a good invention when interest rates cannot be increased on savings through banks because of the compulsions to boost industrial activity by making available cheaper credit to entrepreneurs. The senior citizens have benefited through another way — allowing tax exemption on their income up to Rs 1.83 lakh — which they genuinely deserved. In accordance with the continuing trend, those putting their funds under the PPF and various small savings schemes are going to suffer from March 1 with the interest rate reduced by 1 per cent. And those retiring have something surprising in store, though not entirely unexpected. The government is going to introduce a new pension scheme with the constitution of the Pension Fund Regulatory and Development Authority. For some time there has been a lot of hue and cry on this front. The Economic Survey too had advised the government to find a new mechanism for better financial management. Most state governments have a higher pension liability than that of the payment of the monthly salary to their employees with the pension bill continuously on the rise. The setting up of the Pension Fund Authority may be aimed at tackling this emerging crisis.

The budget may give filip to the activity on the stock exchanges with dividend income exemption limit increased to Rs 12,000 from Rs 9,000 and long-term capital gains tax totally removed for investments made from today. The capital market has been passing through a period of depression owing to the Iraq war fears and other factors. The investor enthusiasm has remained dampened in the run up to the budget with the Bombay Stock Exchange sensex showing a negligible .8 per cent gain, the most unusual performance during the past several years. Of course, more sops were expected for share and debenture holders. But what they have been given is not bad, as capital market experts feel. Since the existing shareholders will not benefit from the long-term capital gains tax withdrawal, at least some of them may resort to disposing of their holdings, leading to a spurt in a different kind of business activity at the bourses.

Care has been taken to protect the interests of inventors, artists and writers too. The budget makes their royalty income up to Rs 3 lakh free from any tax liability. This has been a neglected area so far. Mr Jaswant Singh deserves credit for coming to their rescue. Among the social sectors, health and education have received special attention from the Finance Minister. The people’s healthcare requirements have been addressed with the encouragement to the setting up of more and more private hospitals and a drastic reduction in the Customs duty on lifesaving equipment, from the present 25 per cent to just 5 per cent. This should revolutionise the health industry, transforming India into a major healthcare centre in Asia. Already encouraging developments are taking place in this area with the entry of the private sector in a big way.

The Finance Minister has touched agriculture with utmost care owing to the sensitivity involved. He has sought crop diversification with a scheme to promote horticulture and floriculture. He has also tried to remove the agriculturists’ credit problem by encouraging private banks to open their branches in the rural areas. This is significant in view of the fact that bank loan interests are coming down but very few banks have been prepared to set up shop in the villages. However, these benefits may get eclipsed by the increase in the prices of chemical fertilisers — Rs 12 per 50 kg bag of urea and Rs 10 for DAP and MOP. This has already evoked protests from various quarters, including the ruling BJP. There is increasing pressure to reduce the hike to the extent possible. One believes the Finance Minister could not think of drastic measures to rationalise things in the farming sector because of 2003 being an election year. There may be notes of discontent from those engaged in protecting the country’s borders as the defence budget has been raised by merely Rs 9,300 crore from last year’s total of Rs 65,000 crore. This reflects pressure on the Finance Minister to prune the non-productive expenditure of the government. But it is difficult to justify the treatment keeping in view the tense situation at India’s western borders with our enemy number one always ready to create trouble.

Indo-Afghan ties

AFGHANISTAN President Hamid Karzai's visit to India this week should provide yet another opportunity to the Indian leadership to improve bilateral relations with the impoverished nation. The special bonds of trade between the two countries go back a long way. It was this special relationship that was so succinctly captured by Rabindra Nath Tagore in "Kabuliwala". After the liberation of the landlocked country from Al-Qaeda and Taliban activists the Indian leadership took the initiative of inviting Mr Karzai for restoring normal diplomatic ties. The gesture was meant to send out a clear signal that India was keen to build bridges of trust and mutual cooperation with elements that have been chosen to help the global community wage a focused and successful war against all forms of terrorism. Since the US-led liberation of Afghanistan the people have had the opportunity to experiment with democracy. Mr Karzai still represents a tentative arrangement that now has the seal of approval of the people. It has given his actions greater credence and credibility as the leader of the highly temperamental Afghan people. By next year the on-going process of reconstruction of a devastated country would hopefully have put into place a workable infrastructure for holding elections on a much wider scale than the one that allowed Mr Karzai to continue in office. The country needs hospitals, schools, colleges, medical facilities and a network of roads for kick-starting the process of economic regeneration. In short, everything that developed societies need has to be built from scratch.

This should provide the Indian entrepreneurs the opportunity to play a pivotal role in the reconstruction of the Afghan economy. Improved bilateral ties with Afghanistan would also serve the strategic purpose of sealing up at least one source of terrorism exported to Kashmir through Pakistan. An economically strong Afghanistan is less likely to allow Al-Qaeda and the Taliban to become active again than the country Mr Karzai is trying to pull out of the debris of repressive rule. If India plays a key role in helping Afghanistan become economically strong today, it can expect a grateful nation to play an equally important role in evolving a joint strategy for combating Pakistan-sponsored terrorism in the region. A sustained anti-terrorist action on two fronts may just be the mantra for weakening one form of global terrorism in the subcontinent.

OPINION

Efforts to tackle Kashmir crisis
The difficulties ahead and expectations
T.V. Rajeswar

THE appointment of Mr N.N. Vohra as the new interlocutor for holding discussions with the representatives of J and K is a positive development. As Home Secretary, Mr Vohra had first- hand knowledge of J and K affairs. Among the several things, periodically entrusted to him by the Centre was one relating to the review of internal security aspects and his recommendations had presumably helped the Centre in tightening up security in various spheres.

Kashmir stands at the crossroads today. The assembly elections were held amidst sustained hostile attacks by Pakistan-abetted terrorist groups and the targeting of electoral candidates. The Sheikh Abdullah dynasty which ruled J and K since 1948 came to an unexpected end much to the surprise and disbelief of the National Conference. However, the very fact that people were jubilantly celebrating the success of candidates who defeated the National Conference counterparts was an eloquent testimony to the fact that people wanted a change and they got it. It was acknowledged by major Western countries that the elections were fair and free and there was indeed a popular and democratically elected government in position in J and K. That indeed is a great step forward and has laid the foundation for a peaceful solution to the long-pending Kashmir problem.

The Centre had initiated discussions with Kashmiri representatives, including the Hurriyat leaders, even before the elections were held. Mr K.C. Pant, a senior experienced politician who holds Cabinet rank as Deputy Chairman of the Planning Commission, was designated for the purpose. He had visited Kashmir and met some of the representatives of political parties but the response was not adequate. Mr Arun Jaitley was subsequently designated as the negotiator. While the National Conference spoke in terms of “devolution” Mr Jaitley stuck to the nomenclature of “autonomy” and Mr Omar Abdullah had once stated that the actual nomenclature did not matter, whether it was devolution or autonomy. However, the defeat of the National Conference in the assembly elections and the PDP government taking over in Kashmir ushered in a new atmosphere in Kashmir. There was a lull in the negotiations which was, quite justifiably, criticised by the Chief Minister of J and K who pointedly asked why the Centre was not resuming the negotiations with Kashmir when they could find time for holding discussions with NSCN leaders of Nagaland. The appointment of Mr N.N. Vohra, after consulting the Chief Minister of J and K, should put an end to the impasse.

After the National Conference returned to power with a two-thirds majority in the assembly elections of 1996, Chief Minister Farooq Abdullah had appointed a State Autonomy Committee and a Regional Autonomy Committee to go into the issues of devolution of power from the Government of India to J and K and also the regional issues within J and K. The State Autonomy Committee’s report wanted to define the relations between J and K and India on the basis of the 1953 Agreement and visualised repeal of all matters in the Union List except Defence, External Affairs and Communications. It also wanted to exclude the jurisdiction of the Election Commission and the Comptroller and Auditor-General of India and wanted the restoration of the nomenclature of Sadar-e-Riyasat and Wazir-e-Azam in place of Governor and Chief Minister, respectively. The committee wanted Article 370 in the Indian Constitution retained permanently while the Constitutional Order of 1954 and the subsequent extension of various provisions of the Constitution to J and K be abolished. The committee ignored the Delhi Agreement of 1975 between Indira Gandhi and Sheikh Abdullah which upheld most of the provisions of the 1954 Constitutional Order. As for the second committee, and its recommendations on the future of Jammu and Ladakh, the less said the better. Its report read more like a proposal for division of J and K, with overtones not in keeping with the integrity of J and K as a state.

The J and K Assembly adopted a resolution accepting the reports of the committees and this was done by Chief Minister Farooq Abdullah despite the advice of leaders of various political parties and the NDA government. The Centre and the various political parties were surprised at the direction in which J and K was being taken by Mr Farooq Abdullah. The Union Cabinet categorically rejected the J and K Assembly resolutions and the contents of the committee reports. Mr Farooq Abduallah apparently realised that things had gone too far and he quietly withdrew from that point and stopped talking about the reports and their recommendations.

Any observer visiting Kashmir now will find the situation vastly changed. After the PDP-Congress alliance came to power Mr Mufti Mohammad Syeed successfully and admirably followed a “healing touch” policy and had released several persons against whom there were no serious charges. The Mufti had visited the remote areas of the state and consoled the families affected by militant attacks. He had also promised employment opportunities to a large number of unemployed young men in the valley. The BJP and the Home Ministry had raised certain unsubstantiated objections to the implementation of the healing touch policy of the Mufti but soon it was realised by all concerned that such criticism was only helping the militants and Pakistan and certainly not the PDP-Congress government which deserved all encouragement. Fortunately the criticism has died down and there is now a genuine desire to help the popularly elected government in J and K.

The militancy in the Valley and Jammu has come down quite considerably. There is a qualitative change in the composition of militant groups in the sense the Pakistanis and foreigners such as Afghans and West Asians are committing atrocities while the Kashmiri militant groups have a different approach. The recent dictates against women moving without burqas, girls studying in schools, serving in jobs etc., were all the handiwork of fundamentalist Islamist elements from Pakistan. They are being increasingly isolated and repudiated even by their Kashmiri counterparts. Many of these Islamic dictates had been since withdrawn but their ruthless murderous activities against suspected informers etc, are continuing. Their attacks against armed forces and the paramilitary forces and their families had taken a heavy toll in the past and they are likely to occur again where vigilance is slackened. These attacks have to be taken in the stride and the overall situation in Kashmir has to be dealt with suitably.

Where does Mr Vohra begin and how far back in the Kashmir negotiations does he have to go? Mr Vohra may have to begin with the J and K government. However he has to discuss with all political groups, including the Hurriyat, and if some of them do not wish to meet him, they should be ignored. He has to hear out all the political groups and parties patiently. Sooner or later some of the local militant groups may also make an approach. There should be no hesitation in meeting any party or group who wishes to come forth and discuss. There will be the unavoidable Think Tank and Track II elements whose ultimate interests are unknown and sometimes suspect. They have to be given a hearing nevertheless.

The question will arise, sooner or later, about the role of Pakistan in the discussions and the Hurriyat leaders are bound to raise this issue. It has to be made clear that the settlement between Pakistan and India is one thing while the settlement between the Government of India and the Government of J and K and other spokesmen on the autonomy issue is another. There is nothing like an overall settlement of the Kashmir issue in which Pakistan has a role, much less any foreign interlocutor or mediator. The settlement between India and Pakistan, as and when it happens, will be governed by the Simla Agreement and the Lahore Declaration. It has been made amply clear that the days of redrawing the international boundary between India and Pakistan are over and this has been more or less concurred in by the USA, UK and the European Union. The discussions by Mr Vohra will be on the autonomy issue only, and not on the future of the LoC or relations between India and Pakistan. Ipso facto, Pakistan has no role to play in the discussions between Mr Vohra and the Kashmir representatives.

Moving to another area of concern, Nagaland comes into focus. Negotiations are due to begin with the Naga representatives, especially after the assembly elections are over, and a new government takes over. The negotiations, as and when they start, may have to include all representatives from Nagaland and not confined to NSCN(IM). Whatever the eventual outcome of the negotiations, they cannot be qualitatively or substantively different from whatever may be agreed to between the Centre and the J and K. Keeping this important aspect in view, it may perhaps be advisable to designate Mr N.N. Vohra as the future interlocutor with the Nagas as well.

The writer is a former Governor of West Bengal and Sikkim.

MIDDLE

Hobbies and hobbyists
Raj Chatterjee

I have never held with those who catch and kill gorgeously coloured butterflies to pin them down, spreadeagled, in a glass case. But I admire the patience and persistence of others who spend a lifetime, and often a small fortune, collecting rare stamps.

There are also those, with no fortunes to spend, who take a great deal of trouble getting together matchboxes from all over the country or abroad. If I had the inclination and the energy I would take up an inexpensive and innocuous hobby like this. In fact, I once did collect cigarette packets but as I worked for a company selling them this was more in the line of duty than a relaxation.

I once had a neighbour, an old Englishman who had decided to “stay on” after the country gained independence, who collected snakes. The more poisonous they were the more he caught them. He once acquired a pair of white cobras from the Old Delhi Ridge. For the peace of my mind he later presented them to the Alipore Zoo in Kolkata.

Another remarkable thing about the man, who died peacefully when he was in his 80s, was that he neither drank nor smoked and right through the Delhi winter he slept on the terrace of his house covered with a single rezai. Talk about mad dogs and Englishmen!

I too was a collector of sorts in the days of my extreme youth. I had several albums filled with photographs of the great lovers of the silent screen. I still remember their names but not the faces of all of them. The names will mean nothing to the present generation of young people but as a test of my memory here are some of them — Rudolph Valentino, Pola Negri, Ivor Novello, Douglas Fairbanks, Mary Pickford, Tallulah Bankhead, Ramon Novarro and Buster Keaton (more a comedian than a lover).

I outgrew the hobby by the time I went to college. I then had other things to collect like rejection notes from girls I had asked out for a cinema show which, I can assure you, were only a shade less painful than those I now receive from newspaper editors!

What set me writing this piece was an article I read a short while ago. It was about a Frenchman, Jean-Moel Kapferer, a 35-year-old professor at the School of Advanced Business Studies in Paris.

M. Kapferer wants to start a “rumour clinic” and to create a “task force” for collecting rumours from all over the world. And the sort of rumours he has in mind are those that can cause havoc in the share market and international crises. According to him, people believe more in rumours than in official hand-outs.

I sincerely hope that this rather odd young man will not try and recruit members for his task force in our country. We have enough rumour-mongers of our own than we know what to do with except, perhaps, to ship them out to some remote island in the Indian Ocean where they will have only palm trees for their listeners. Over the years they have done us sufficient harm by wagging their irresponsible tongues.

ANALYSIS

Is India preparing for global competition?
Vinod Mehta

THE economic reforms have been going on for the last more than 10 years and yet there is a feeling that we are not seriously preparing ourselves to face the international competition. It is time now to start making a conscious effort to prepare the country to face global competition.

India is the largest producer of milk in the world or an important producer of fruit in the world. It is also self-sufficient in the production of foodgrains today. India can do without foreign milk products and foreign foodgrains, but under the liberal trade regime it cannot stop other countries from exporting those very products to this country in the same way as other nations would not be able to stop Indian products being exported to their markets.

Therefore, unless India prepares itself to face foreign competition it will lose out if its goods are not competitive. If Australia, New Zealand and Denmark can sell butter and liquid milk in India, after paying freight charges, at a price which is less than the price being charged by Indian suppliers, then which Indian will buy Indian milk and butter? Similarly, if another country can sell steel to India at a rate cheaper than what Indian steel producers can offer, there would be no buyers for Indian steel in India itself.

The important question we Indians then have to ask ourselves is: what are our political leaders, our government, our policy makers, our industrialists, our trade unions, etc, doing to tackle this situation? The simple answer is that we are behaving like an ostrich, thinking that this kind of situation will wither away. Our political leaders are too preoccupied with political chicanery and political wheeling-dealing to bother about the economy and the impact of the WTO on our economy. Our industrialists with a few exceptions are still longing for a protected domestic market. Our trade unions are averse to the use of the term “efficiency”. Our bureaucrats are not willing to make public what they have signed, what negotiation they are having with other countries on trade matters and so on.

The massive secrecy of the state and the refusal of the concerned people to look to the immediate economic future can cost the country social, economic and political upheavals in the near future. We have a few years to set our economic house in order, otherwise we will be reduced to a fourth rate economic power.

Mauritius, a tiny island in the Indian Ocean, which is comparable to Faridabad district in Haryana, both in terms of land area and population, is seriously visualising the coming trade regime and coming out with appropriate policies to remain competitive in the world economy. Earlier, it was totally dependent on sugar exports, but today it is the largest exporter of garments and the second largest exporter of knitwear in the world even though it does not produce cotton. It realises that if its goods become uncompetitive it will be wiped out from the international market. Therefore, Mauritius is not only concerned with just raw materials for garment manufacture but also with freight charges, the capacity of its harbours and airports to handle exports at competitive prices, the technology for making garments, the payment mechanisms of its banks and so on.

What does all this mean is that the tiny Island of Mauritius understands that its business can survive only on thin margins and possibly large volumes and that these thin margins will be everywhere — at the technological level, manufacturing level, banking level and so on. Otherwise, Mauritius very well knows that its business will be wiped out.

We have not yet started thinking on these lines. India’s stake in its economy and in world trade is proportionately much higher than that of Mauritius, given India’s physical and population size. It may be surprising to note that after the USA, Mauritius is the second largest investor in India. In the past 10 years the USA has made investments worth Rs 7,555 million while Mauritius worth Rs 4,799 million.

As a first measure, the domestic economy should be fully liberalised and domestic competition fully endorsed. Let inefficient companies be taken over by efficient ones, and in case they do not want to merge or improve their management, allow them to wither away. At the same time allow the companies to grow as big as they can, taking care that they do not develop into monopolies.

This is especially true of the agricultural sector. All the restrictions on the movement of agricultural products within the country must be removed within the next one year. The food processing industry, especially in the cooperative sector, needs to be developed on a priority basis. The Amul experiment in milk and milk products needs to be extended to the production and marketing of processed foodstuffs like canned juices and canned soups, jams and jellies, honey, vegetable and fruit puree and pastes, and so on. If all these processed food products adhere to international standards, they will find not only a vast domestic market but also a vast international market.

The competition is going to be very tough in the agricultural sector. Therefore, it is high time we started preparing our farmers to face the international competition. The emphasis should now shift from providing subsidies to helping them to adopt newer agricultural technologies so that productivity of their crops reaches international standards, extend assistance in the setting up of production and marketing cooperatives, warehouses, assistance in the adoption of up-to-date food processing technologies, including packaging, modernisation of ports and airports to handle bulk cargo and so on.

Secondly, encourage industry — big, medium and small — to adopt latest technologies and processes. They should psychologically be prepared to face competition, work on thin margins and try to increase their earnings through large volume sales. It must be instilled in their mind that the international market is only an extension of the domestic market. If the quality of their products is consistently good and these are rightly priced, there would be many international buyers for their products.

Finally, the financial sector, especially the banking and insurance, must restructure itself in the next one to two years, otherwise it will be in for shocks. INFA