P A G E
Thursday, August 6, 1998
today's calendar
|
E D I T O R I A L P A G E |
Thursday, August 6, 1998 |
| weather n
spotlight today's calendar |
||
|
No
first use
|
 |
Hindu-Muslim
Unity |
|
|
|||||
 |
INDIA has effectively silenced its nuclear-have critics, who had been shouting blue murder right since Pokhran-II, by enunciating its comprehensive no-first-use nuclear doctrine. This is one pledge which the USA, France and Britain have been refusing to take all along. India had offered this concept for any bilateral or collective agreement immediately after the tests in May but has now elevated it to a unilateral plane. Under this doctrine, India would never use nuclear weapons against non-nuclear weapon countries and would not be the FIRST to use nuclear weapons against nuclear-weapon countries. China had given a similar undertaking in 1964. Russia did so in the 1980s but later revised its stand. Thus India and China are the only two countries to have committed themselves. While throwing the ball back into the court of the USA and its friends, India has also reassured its non-nuclear neighbours and friends who were being brainwashed by the powers that be about the threat that a nuclear-capable big brother (India) posed. Here is an offer which Pakistan has refused to match and if the world community is keen to prove that it is non-partisan, it should take note of the varying commitments of the two countries. Not only that, the government has even made it bold to say that if every country is committed to non-proliferation of fissile material and if there is no different treatment for the existing stockpile of fissile material, India is also willing to sign the proposed FMCT. While informing the Lok Sabha of the doctrine on Tuesday, the Prime Minister, Mr Atal Behari Vajpayee, also assured the nation that its arsenal would be pegged at the lowest possible level required for credible deterrence. This arsenal is a necessary protection against blackmail by other nuclear powers, without in any way starting an arms race. When Mr Vajpayee said that
India, which had announced a "voluntary
moratorium" on further underground nuclear tests,
was now willing to "move towards a de jure
formalisation of our voluntary undertaking", he was
perhaps giving a signal that New Delhi was prepared to
eventually join the Comprehensive Test Ban Treaty (CTBT).
This candid announcement can be depended on to create a
furore within the country of the same intensity as the
May blasts had caused worldwide. There are two reasons
for this. One, New Delhi has been castigating the CTBT so
stridently that any "turn-around" is bound to
raise the hackles of those who are still opposed to it.
Two, the political climate in Delhi is such that
Opposition parties are bound to join issue just for the
sake of embarrassing the government. One wishes that this
vital foreign policy matter is not made an object of
political dribbling and a national consensus is quickly
evolved. The government has to take the lead in this
regard. The signals from Mrs Sonia Gandhi's statement on
Tuesday are positive. Everyone must appreciate that there
are several valid reasons for re-examining the treaty.
The most significant of them is that the situation has
changed substantially after the explosions. Scientists
have said categorically that they possess so much
baseline nuclear data that further tests are not
required. Second, the overall global situation for India
is such that not signing the treaty will do greater harm
than signing it. And third, the CTBT provisions provide
India the right to review this decision (of adhering to
the treaty) if in its judgement, extraordinary events
crop up to jeopardise its supreme national interests. It
should be noted that when India had conducted the tests,
China had threatened to go ahead with further tests
exactly on this provision. New Delhi ought to undertake a
comprehensive exercise to allay the domestic
apprehensions with regard to a possible change in tack.
The public must be made aware that signing will not
compromise the country's position and would rather help
it "engage meaningfully" with the nuclear five,
a commitment which the USA has been seeking. The dialogue
in this regard has been continuing. Now that India has
steeled itself with the no-first-use pledge, perhaps Mr
Jaswant Singh will be bargaining from a position of
comparative strength when he goes to Washington for talks
with the US Deputy Secretary of State, Mr Strobe Talbott,
later this month. This will never be said officially but
it is very important to assess what we get in return from
the key interlocuters for the commitment to the dialogue
on the CTBT. The minimum that New Delhi has been
demanding is the lifting of restrictions on export of
high technology. The nuclear accommodation that it has
now shown should be adequately matched by Washington. |
|||||
Shadow Prime Minister ENTER India’s first shadow Prime Minister! Mrs Sonia Gandhi has emerged out of the shadows to take full advantage of the alarming political confusion. With her speech on Tuesday, she has set at rest the “Will she? Will she not?” conundrum and has positioned herself to mount a decisive assault when the lack of cohesion in the BJP-led ruling combine finally triggers a slow-motion collapse. Her biggest plus point is the distinct possibility of internal differences rendering the Vajpayee-led government an endangered species, close to being extinct. But she would still need a viable coalition and this she has to put together immediately. In the medium term she also needs a viable Congress party and she hopes to breathe fresh life into her organisation by criss-crossing the country and by persuading the party men to do so. It is thus evident that Mrs Sonia Gandhi is not so much calling her army into battle formation as proclaiming her intention to enter the fray if the rival grows weak enough. Her well-timed shot across the BJP-captained ship’s bow has already achieved two things. It has enthused the Congressmen into believing that power is within their grasp. And it has added a disturbing dimension to the open dissension within the ruling combine on such issues as the election of the Deputy Speaker and the reluctance to introduce the Prasar Bharati Bill in the Rajya Sabha, apart from the lacklustre performance in domestic (law and order), diplomatic, economic and other areas. Yesterday’s
indifference among alliance partners will jell into
tomorrow’s demoralisation and that is the unstated
objective of the Congress President. She is today playing
a deep psychological game and if she wins, she will turn
to the numbers game and wrest adequate support to expect
an invitation from the President. Many observers have
read into her valedictory speech an unambiguous intention
to immediately pull down the Vajpayee government and
supplant it with a Congress-led one. But that
interpretation ignores her style, which is one of
abundant caution. Two, Mrs Gandhi has also hastened to
ask party MPs to fan out and win over the alienated
support base. Finally, she went out of her way to
emphasise the need for, and her party’s readiness to
build, a national consensus (read a demonstration of
unity) on issues like the CTBT, Kashmir and security. And
true enough, she did not attack the government on any of
these issues even when she was unsparing in her criticism
of every other aspect of governance. There is a
contradiction here and it can be understood only if her
speech is taken to mean that she is ready to assume
power, but wants the ruling combine to crumble and pave
the way for her. |
Elusive industrial revival FOR the Union Finance Minister, Mr Yashwant Sinha, to claim, on the basis of marginal improvement in industrial production in April this year over the same month last year, the end of industrial recession was a case of wishful thinking. The figures for the subsequent months have belied his expectation. Industrial recession is likely to persist and even deepen this year and beyond. In most competition-intensive industries, investments are mainly from multinationals, according to the Centre for Monitoring Indian Economy, a competent and independent research body. Direct foreign investment in India, which was never on a large scale even after the launching of the programme for the globalisation of the Indian economy, is now being withheld after the sanctions against nuclear tests. There has been withdrawal too of the portfolio investment, though as yet on a moderate scale. The first quarter of 1998-99 has again recorded a low growth of only 0.6 per cent in the case of capital goods industry. There has also been a sharp decline on the import of capital goods. This shows that new investment proposals are not being implemented in spite of the increase in loans sanctioned by financial institutions for private investment in industry. Private enterprise is not able to attract funds for investment from the market either. Budgetary support for investment in the public sector too is niggardly. The most optimistic estimates do not hope for industrial production to be more than 4 per cent this year. It may even be less. There had been severe industrial recession for two years after the so-called economic reforms were initiated by the Congress government in the middle of 1991 to boost private investment, both Indian and foreign, in industry. This was explained away as a problem of transition from state-controlled to market-friendly industrial growth. The revival of industrial production and the mobilisation of large funds from the market for investment in the subsequent year and a half was widely applauded by the self-styled reformers in the government and business circles as a great achievement of their reform programme. But the stock market boom as well as the acceleration of the industrial growth rate could not be sustained, and turned out to be a passing phenomenon. Industrial slowdown and stock market depression since the second half of 1995 can no longer be regarded as transitory. The danger looming large is a long-term decline of Indian industry, necessarily with some short-term but weak upward fluctuations. The performance of Indian corporates in the first quarter of 1998-99 is also disturbing as regards the content and direction of the overall economic growth process. They record a sharp decline in the profitability as well as deepening of demand recession for manufacturing activity. This is in sharp contrast to the surge in the high returns for financial services. At the present stage of socio-economic development of India, however, manufacturing goods and services in general and essential mass consumption in particular must enjoy the first priority in the scheme of industrial growth. Authentic private enterprise has failed to develop, and sustainable industrial growth has failed to materialise in India in response to the economic globalisation-liberalisation policy initiated in 1991. On the contrary, the lifting of controls on industrial activity and the end of meaningful development planning have led to a surge in speculation, racketeering and corruption in business circles. The fundamental contradiction of market-oriented business activity and the larger public interest has become stark. The assumption that
industrial growth leads to more employment and incomes
for the people is valid only if it is socially
broad-based. In an underdeveloped country such as India,
the state must not, therefore, relinquish the
responsibility directly to fashion orderly industrial
growth. The idea of influencing business activity through
regulatory bodies does not yield positive results. The
representatives of even business interests, including
large corporate business in India, have been obliged to
publicly admit that public investment must be stepped up
to help Indian industry get out of recession. But this
requires far-reaching policy correctives and fiscal
measures, which the entrenched vested interests in the
economy vigorously oppose. The shift of emphasis in 1991 from import substitution combined with gainful exports to opening the door for foreign capital, liberalised imports and exports at all costs in the name of structural adjustments to make the Indian economy globally competitive too has economic as well as social and political-strategic implications. Foreign influences on economic policy-making, in particular in respect of investment and production patterns, research and development, have gained enormous strength during the economic reform years. This has found sharp reflection in the industrial sector. The multinational corporations, which control global flows of investible capital, are forthright and blunt about the perks they must enjoy in a developing country market. India does not seem to be an attractive enough destination for them, and they are not making long-gestating investments except very selectively and on special terms. They have managed, once given the opportunity, to cultivate what may be called comprador business interests in India. Special concessions, incentives and guarantees to attract foreign investment, which even a World Bank report has characterised as perverse, indeed distort sound investment decisions and priorities. They also result in the setting up of inefficient and high-cost industrial projects. The problem is compounded when foreign investment tends to be regarded not as a complement or additive to, but as a substitute for the optimal utilisation of the available real resources in the domestic economy. This stands starkly in respect of the development of infrastructure, such as electricity generation and oil exploration. Indian suppliers of goods and services further suffer when they are denied freedom and opportunity to participate on competitive terms for supplies to industrial projects set up by foreign investors. The liberalisation-globalisation policy has promoted a step-by-step increase in the capital and import intensity of the Indian industrial growth process. The manipulation of the prices of inputs, raw material, technologies, and associated machinery has discouraged domestic investment in manufacturing and the optimum utilisation of even its installed capacity in the private as well as public sector. Trading in imported goods, especially finished goods of elitist interest, has, however, been thriving. There were expectations that the BJP-led government would take some meaningful measures in response to the clamour of some segments of Indian industry for a level-playing field for them at least in the domestic market. Curiously, however, the duty dispensation proposed in the Budget for 1998-99 has provided a bonanza for foreign exporters and Indian trading monopolies linked to transnational corporations. It will put an additional burden on Indian manufacturers and will cripple their ability to sell their goods at competitive prices in the domestic as well as foreign markets. The operations of multinational corporations directly or in collaboration with Indian big business houses in the Indian market are tuned essentially to subserve what may be characterised as the up-market which caters to the consumption demand of a thin crust of affluence in our society which, even by the most optimistic estimates, is potentially about 20 per cent of the population. The small and even medium industry cannot find easy access to this market. The capital-and-import-intensive growth of the Indian economy does not generate new employment opportunities and incomes on an adequate scale for the mass market to grow and provide the required impetus for investment and enterprise for a socially broad-based economic or industrial revival. For any meaningful
industrial effort to put the Indian industry back on the
path of sustainable growth, there is need for radical
reforms. |
SAARC has to adopt new approach WHAT has the tenth summit of the South Asian Association for Regional Cooperation at Colombo achieved? Analysts around the world must be making their own respective judgements over this issue. A quick post-mortem analysis, however, reveals that the key issues remain the same, the problems remain the same, and there was no agreement over any innovative approach to give concrete shape to the evolution of the organisation in the aftermath of the nuclearisation of the subcontinent. It was largely a case of India proposed and Pakistan disposed and vice-versa. Ever since the nuclearisation of the Indian subcontinent with the Indian and the Pakistani nuclear tests of last May, the entire world has been keeping a watchful eye on these two countries. One of the strong concerns of several world leaders has been that Kashmir, being a flashpoint of conflict, has the potential to spark off a nuclear war in the region. For Indian as well as Pakistani analysts, such concerns are hogwash. The two countries, which have never fought a war in the last more than a quarter of a century, are unlikely to blow up each other with their nuclear capability. A sort of deterrence has already been working in the subcontinent since the mid-1980s, and the latest round of nuclear tests merely altered the covert nuclear status of both countries. However, Pakistan has sought to make the maximum capital out of the international fear about a potential nuclear exchange in the region. The Kashmir issue has been used as a strong bargaining chip by Pakistan. Islamabad recently said that it would not sign the CTBT unless the Kashmir issue is resolved. Earlier, it sought to link up Kashmir with the nuclear issue and justified its nuclear weapons programme. It has sought to internationalise this issue at every occasion, and SAARC meetings are no exception. There were expectations
that after overtly going nuclear and keeping in place the
doctrine of deterrence, India and Pakistan would move
forward to alter the status of mutual relationships. But
Pakistan’s insistence on internationalisation of the
Kashmir issue smells of bad Cold War odour and threatens
to undo any positive developments in SAARC. It is high time both India and Pakistan together realised the common external danger and came together to meet the emerging challenges. The minimum first step in this regard should be a complete thaw in the tense relationship. There has to be a regional detente without any conditionalities and total abandonment of adverse political propaganda. The second step requires a standstill approach to Kashmir. Both India and Pakistan have to postpone any sort of proactive policy and even any discussion of the issue. While the Line of Actual Control has the potential of becoming the acceptable boundary, neither New Delhi nor Islamabad can accept this proposal due to their domestic compulsions. But an agreement on peace and tranquillity along the Line of Control cannot be a bad idea. In the meantime, India and Pakistan should begin to cooperate on larger global issues and regional issues of non-political nature. Cooperation in such areas can serve as effective confidence-building measures. It is true that SAARC has made it a taboo to raise bilateral issues at its meetings. But at the same time it has facilitated bilateral dialogue in the corridors and sidelines of conference venues. Such facilitation should be made a regular practice. After all, most of the issues in South Asia are of bilateral nature. And the Heads of Government hardly find time to hold bilateral summits. SAARC can always provide this opportunity by evolving new approaches. But the Pakistani proposal to alter the SAARC charter to allow discussion on security issues was naughty and a negative approach. It was the surest way to negate any further positive evolution of SAARC. Bilateralism should never be the part of SAARC charter. The SAARC meetings, whether ministerial ones or summits, should only be allowed to facilitate bilateral exchanges between Indian and other leaders. Despite its failings and
shortcomings, SAARC has taken several bold steps,
including establishing a framework for SAPTA (South Asian
Preferential Trade Arrangement) and SAFTA (South Asian
Free Trade Area). India made a fine gesture at Colombo by
announcing that it would remove import restrictions on
over 2000 products to facilitate intra-regional trade.
With the solitary exception of Pakistan, all other
member-countries of SAARC also agreed on the need to
hasten the process by two years to realise SAFTA by 2001.
There are, no doubt, several hurdles to cross. The fears
and apprehensions among the neighbours that Indian goods
would flood their markets need to be addressed. After
all, trade is going to be a two-way process. — INFA |
DELHI: THE occasion of Gandhi Day was marked by a public meeting at Pataudi House which was largely attended, at which several speakers addressed the audience composed of Hindus and Muslims on the absolute necessity of strong cordial relations between the communities. Mr Asaf Ali, who has been released recently from jail, speaking on the same subject, attributed the ominous signs in the Punjab to unscrupulous journalists and malignant communal propaganda that found support in the religious zeal of the submissive masses. The protagonists of religion safeguarding or asserting real or imaginary communal rights were inflicting grievous injury to the nation in entombing its aspirations. He thought that unity was not an ideal but an imperative necessity, if India did not desire to be reduced to political nothingness. Recapitulating the various kinds of oppressions and exploitations to which Indians were subjected both at home and abroad, he exhorted those present to protect their large and more permanent interests by a sympathetic readjustment of mutual relations and conclusion of a strong alliance. He regarded all talks of
collision between Hindus and Mohammadans at the
approaching Bakra-id. |
Mental gardening IN addition, gardening inculcates many personality traits which help the individual in developing an overall balanced perspective about men and matters. One starts with sowing a seed or transplanting a seedling with the expectation of flowers, fruits, vegetables or simple greenery. Thus, beginning is made with the hope of getting these things from a seed or a seedling in the future. Hope for the future is a positive state of mind which, in turn, gives rise to a decent attitude in general. After sowing the seed or implanting a seedling one has to wait with patience for the seed to sprout or for the seedling to take root. The seed sprouts at its own pace and develops into a plant at its will, and the sower has to adjust to the scheme of nature and its time schedule. This adds to the personality of the gardener the character of patient wait and letting things happen at their natural pace. Once a plant or a tree has grown but its shape and size is not in proportion to the surrounding environment, one has to resort to careful trimming and pruning in a manner so that the plant or the tree fits in well with the surroundings. This process once again adds a crucial dimension to an individual’s personality, that of adjusting to the environment in a fitting manner. Writing a “middle” for a newspaper is an exercise that has certain features in common with gardening. One difference, of course, is that the process takes place in the mental soil. It would not be off the mark if the process of writing a “middle” is termed as mental gardening. The seed in the form of an idea, an episode or a personality trait comes flying from somewhere and takes root in the mental soil. Initial growth, in the form of evolution of starting sentences and possible titles, occurs instantly and at a fast pace. One builds up on these initial surges and starts with hope that the piece would be carried by a newspaper. But one has to control the tendency of finishing the piece in a hurry and send it quickly. This is likely to backfire, and the chances of the piece being returned with the same speed are very high. Obviously, the idea has to
be allowed to grow and develop beyond initial surges at
its own pace. Moreover, it has to be trimmed and
rewritten at places so that it gets a character of its
own and at the same time has a balance. After the piece
is sent for publication a long and patient wait for it to
appear in print sets in. The exercise of mental gardening
bears fruit on the day the piece, created and nurtured
with so much care, appears in the newspaper. |
Too much dependence on inputs,
borrowings CHANDIGARH: IT was a technological breakthrough which transformed Punjab agriculture from the “subsistence” to the “commercial” level. But because of several factors, both natural and man-made, the same agriculture cries for attention now. The air is thick with talk of working out solutions for “sustainable” agriculture. In agriculturally progressive states a new phenomenon is emerging — indebtedness leading to suicides. How come the same green revolution, which changed the political and economic development scenario, is today showing signs of going red? That it was slowly but certainly turning pale yellow has been visible for some time. From all available accounts, studies and surveys, it is confirmed that if agriculture is today termed as modernised it is because of the M-2 factor with mechanisation of farm operations and agriculture having been “monetised”. Growing dependence of farmers on market-supplied inputs used on the farms and market borrowings in the absence of cash savings from previous crops have caused indebtedness. Like any other business, agriculture also needs cash. And the single largest cash expenditure item in agriculture today is chemical fertiliser, followed by hired labour, rent from leased land, mechanisation, etc. No wonder expenditure on some of the major crops has increased. Data available from 1975-76 to 1996-97 shows that cost of cultivation of wheat is up six times, cotton seven times and paddy as much as 10 times. Interestingly, despite there being higher agricultural production rate, the per capita income of a farmer is not commensurate with that rise. At the same time, there has been a faster growth rate of agriculture credit alongside high agricultural production rate. If that is so, indebtedness cannot be far behind. Moreover, the yield of major crops has shown a tendency to stagnate or even decline as is evident from the data for the period from 1985-86 to 1995-96. Simply put, the net value of all crops per acre (at constant 1980-81 prices) has stagnated over the past 10 years. Therefore, the dependence on cash borrowings has also increased in the past 10 years. Today a majority of the farmers depend on short-term loans for production of crops from different agencies. Following the “wake up” call given after suicides due to indebtedness, the government has commissioned a private institution in Chandigarh to study the cause and effect of the same. An earlier study on indebtedness was commissioned to determine the “nature, extent and burden” of indebtedness among Punjab farmers. The task was entrusted to Prof H.S. Shergill of Panjab University’s Economics Department, whose study “Rural Credit and Indebtedness in Punjab” gave a clear picture of where Punjab stood at the time. Nevertheless, this writer spoke to Dr S.S. Johl, a former chairman of the Commission on Agricultural Cost and Prices, who feels that the concept of a farmer committing suicide because of debt burden is alien to Punjabis. This is the last thing one can expect from a Punjabi peasant. In fact, when this issue was raised by some members in the Punjab Vidhan Sabha during the recently held Budget session, the Chief Minister, Mr Parkash Singh Badal, had listed “social tension” as one of the reasons. What has happened in
Punjab is, he observed, from a joint family farmers have
moved to “unitary” system of a family. This has
caused strain and stress on a single individual, who has
a small holding. To operate, he has to take loans. The
loan is for either crop production or for non-production
purposes. The belief that the “unitary” family
head indulges in drinking and uses drugs and other
intoxicants is not entirely unfounded. These social vices
often become a cause of death. Once the loan is diverted
from the intended purpose the trouble starts. Every loan is not a debt. Only if it is taken for a non-productive use does it become a debt. The holdings in Punjab are small — two-thirds of the holdings are of less than one hectare. What Dr Johl stated is empirically proved by Prof Shergill. His study, spread over 13 villages in five agro-climatic zones, involving 260 cultivating households, covered areas from Gurdaspur to Faridkot. Of the surveyed farmers (studying rabi and kharif 1997 crop yields and returns) nearly 90 per cent had availed of “short-term loans” from different credit agencies, notably commission agents (arhtiyas) followed by cooperative or commercial banks. “The amount borrowed per acre declined as the farm size increased”, noted Prof Shergill. The total debt calculated for Punjab is Rs 5,700 crore. The annual interest burden of debt worked out to Rs 1103 crore: 11 per cent of the net value of crop production. Among those who borrowed money nearly 35 per cent failed to return or repay the entire amount after harvesting the crop. In fact, nearly 47 per cent debt the farmers owed to commission agents. These agents were preferred because of “easy” availability of loans. A majority of farmers (over 50 per cent) took money from more than one source. Left to them or given some other choice the farmers would not opt for loans. High input costs, farmers said, was one reason they had to take loans. A good percentage, 21.5, said the loan money was used for domestic consumption or social ceremonies, particularly, marriage. Others took loans either because of crop failure or fluctuation in crop yields. All this caused indebtedness. Only a small percentage attributed indebtedness to low farm produce price or low and stagnant crop yields. Let the agriculture sector
not become a whipping boy of either the Punjab State
Electricity Board or the urban folk. Giving free power is
no big deal; it is just worth Rs 300 crore, which is too
small a sum when compared to the scams and scandals
involving bigwigs of politics and bureaucracy. It serves
no purpose to blame the agriculture sector for power
hike. The myth persists because PSEB uses it as a
“blind account” to hide its own inefficiency. |
Need for curbs to regulate chit
funds CHIT funds are a convenient vehicle of savings; a means of insurance against business or household contingencies and for raising money for investment or consumption. Chit fund operations are regulated by the All India Chit Fund Act, 1982. Most of these institutions or clubs are unregistered. Thousands of persons are lured by the prospects of getting rich quick. Chit funds are the Indian version of what is known world-wide as ROSCA (rotating savings and credit association). They have played a prominent role in the economic development of many countries, including Japan and Korea. India has seen the evolution of chit funds from small village and neighbourhood community organisation to large commercial and formal organisations run by companies and firms. About 10,000 such firms are registered with a minimum turnover of Rs 10,000 crore. The chit fund system
originated from small villages of Kerala and Tamil Nadu
long before the development of communications in India.
Unlike in North India where money lending business is run
mainly by Marwari; Sindhi and Baniya communities there is
no such communal divide in the southern states. In
Maharashtra informal finance business is run by
‘bishi’. Bishis are indigenous credit unions.
They differ from chit funds in not being rotating.
Members can take positions as savers without necessarily
borrowing. In a chit fund every member contributes the
same amount in each round and has to take the full chit
amount when his or her turn comes; the sequence of
rotating being decided by consensus, draw of lots or
bidding. In one type of chit fund money is collected for the purchase of consumer durables. Each month a winner is decided by draw of lots and he receives goods worth the face value of the chit group and discontinues payment of the monthly instalments after being declared a successful prize winner. This type of business is banned by the Prize Chits and Money Circulations Schemes Banking (Central) Act 43 of 1978. The Chit Fund Act has many impractical and harsh provisions. It does not allow chit funds to start any other business even out of its profits. Every chit fund with a kitty in each round of over Rs 100 is required to get registration with the state registrar of chit funds. This limit of Rs 100 is a quirk of history borrowed from the Kerala Chitties Act of 1975 which is very restrictive. The limit should be raised to Rs 5,000 for all community chit funds and peg it to inflation thereafter. This will be the maximum amount that any single participant could lose. As per the norms laid down in the Act 100 per cent chit security is to be given to the government before conducting any chit group whereas in many state acts the security amount is 50 per cent. The maximum bidding is restricted to 30 per cent whereas there is no ceiling in many state acts. Under the Central Act all disputes will be settled by the Registrar of Chits whereas such disputes are to be referred to civil courts which takes a very long time to settle. The organiser of the community chit fund is usually compensated by being allowed to take the first round without bidding or getting interest-free loan. However, in commercial chit funds the organiser is entitled under the act to a commission of 5 per cent of the amount in each round. This ceiling is low keeping in view the cost of operations and needs to be raised to 10 per cent. The Central Act empowers the state governments to exempt any type of chit fund from the purview of the Act in consultation with the RBI. However the RBI is also empowered to take the initiative by advising the state governments on its own. All states, except J & K have banned or heavily regulated the working of chit funds due to the high rate of failure among chit fund companies. Many such companies are floated primarily to swindle the gullible public of their small savings. The failure rate of chit funds is higher than any other business of a comparable type and risk. On the other hand such para-banking institutions are the need of the day to meet the growing credit needs. Private individual lending has many pitfalls. Delhi has enacted chit fund to promote this business. Strict regulations are required to regulate community chit funds operating in every street. Only such organisers should be allowed to operate whose antecedents are established and provision for security is ensured. All northern states should
have a fresh look on this important social issue.
Outdated provisions of the relevant act should be
updated. |
 |
 |
| Nation
| Punjab | Haryana | Himachal Pradesh | Jammu & Kashmir | | Chandigarh | Business | Stocks | Sport | | Mailbag | Spotlight | World | 50 years of Independence | Weather | | Search | Subscribe | Archive | Suggestion | Home | E-mail | |
