E D I T O R I A L   P A G E

EDITORIALS

Rathore must go
WHY does the process of law generally get delayed in favour of those occupying high positions of power and enjoying political patronage? No ready answers are available on this count, though the reasons for this can be easily guessed.

Ramzan ceasefire
IT was on July 24 that the Hizbul Mujahideen declared a unilateral ceasefire in Jammu and Kashmir only to withdraw it a fortnight later, under intense pressure from Pakistan. Since then it has been saying that it is now the turn of the Indian Government to make a gesture for peace in Kashmir. 

The Chinese threat
EARLY last week Finance Minister Yashwant Sinha challenged the chambers of commerce and industry to convince him of dumping by China and said he would produce results within 60 days. On Thursday FICCI presented its case and nervously said, "Your time starts now." Nervous because imports from the northern neighbour are threatening to wreak havoc in select industries. 

OPINION

POLARISATION IN U.S. POLITICS
New problems for the super power
by Sunanda K. Datta Ray
SINGAPORE'S veteran Senior Minister, Mr Lee Kuan Yew, is fond of saying that in any poll the Chinese in his country always vote on one side. So do the Malays. But the Indians "are divided right down the middle", he says, "because they love an argument." Well, so do the Americans, judging by their latest presidential election.

How Yeltsin chose his successor
by M.L. Madhu
MR BORIS YELTSIN resigned his post as President of Russia on December 31 last year, about six months before his term was to expire, and handed over his powers and duties to Mr Vladimir Putin. He was the Prime Minister at that time. Why did Mr Yeltsin do so and how was Mr Putin chosen his successor?

REALPOLITIK

by P. Raman
Economy: from ‘feel good’ to panic
MANY had described it as alarmist when Realpolitik had in September last warned against the worsening economic crisis. Some had even dismissed it as ‘anti-reform’ outbursts and asserted that everything was moving on the right track. It was argued that even if some stray indicators were erratic, targets would be more than met by the year-end.

SPIRITUAL NUGGETS

WHY does the process of law generally get delayed in favour of those occupying high positions of power and enjoying political patronage? No ready answers are available on this count, though the reasons for this can be easily guessed. It has taken 10 years for the law to move effectively in the case of the Haryana Director-General of Police, Mr S.P.S. Rathore, in what is known as the Ruchika molestation case. The CBI, of course, must be complimented for having taken a bold step by filing a chargesheet against him in the court of the Additional Chief Judicial Magistrate at Ambala, obviously against all odds and pressure tactics which normally come into play when VVIPs are involved. The molestation case dates back to 1990. Mr Rathore was then an Inspector-General of Police and the President of the Haryana Lawn Tennis Association. The 14-year-old school girl, Ruchika, was a promising tennis player. She reportedly committed suicide after she and her family were allegedly harassed. That dirty tricks do get activated in such situations is no secret.

How the court proceeds in the case is for it to decide. What is relevant right now are a couple of questions. How come the Haryana government has been dilly-dallying in the matter? Why hasn't it promptly suspended the DGPafter the filing of the chargesheet by the CBI? What is equally intriguing is that Mr Rathore could move upward on the professional ladder with the needle of suspicion pointing towards him in the molestation case. This shows to what extent the system has become sick. We all talk about morality and high standards in public life. But, regrettably, the standard of the police force is bound to go down if the law-makers themselves become law-breakers and play with the honour and lives of ordinary citizens. Unfortunately, the police force has often come to be used as personal musclemen of politicians. To say this is not to deny the fact that we have in our midst a number of outstanding police officers who enjoy high reputation of integrity and professional competence. But their number is dwindling fast.

The CBI, broadly speaking, has itself often given good examples of professionalism and integrity, notwithstanding occasional distortions and political interference on a selective basis. The CBI, after all, is not run by men from the mars. It draws its officers from the police force itself, but on the basis of their professional competence and a degree of integrity. If a minimum level of good working can be ensured in the case of the CBI, there is no reason why we cannot raise the standards of police functioning. This should be possible if the Home Ministry puts a stop to the current practice of political interference and reorganises the force on professional lines. But more than anything else, it is swift action against chargesheeted persons like Mr Rathore that can repose the people's confidence in the system. As it is, the Haryana government has dragged its feet in this crucial matter for reasons best known to those in power. Still, it is never too late. The least that the Chautala government must do is to suspend Mr Rathore and allow the process of law to be completed freely and fearlessly and without political interference. Much credibility has already been lost. Any further delay could only be suicidal. We cannot allow the Ruchikas to become victims of lust of those occupying high public offices.

IT was on July 24 that the Hizbul Mujahideen declared a unilateral ceasefire in Jammu and Kashmir only to withdraw it a fortnight later, under intense pressure from Pakistan. Since then it has been saying that it is now the turn of the Indian Government to make a gesture for peace in Kashmir. Well, the latter has finally responded offering a similar unilateral cessation of hostilities during the holy month of Ramzan commencing around November 27. The security forces have been instructed not to initiate combat operations against militants in Jammu and Kashmir during this most sacred month in the Islamic calendar. Where this offer differs radically from that made by the militants is that the government has not only the will but also the means to implement it. The Hizb offer was perfunctory to the extent that it was not endorsed by Pakistan, a pre-requisite for any meaningful implementation. The timing of the Indian offer is quite immaculate and Islamabad will apparently come under considerable pressure from the international community to reciprocate, but if the past bitter experience is any indicator, one cannot be too hopeful of the outcome. The military regime thinks - as did the previous regimes -- that for it to remain in the saddle, it must keep the Kashmir cauldron boiling. That is the only way it can keep the attention of its public away from the numerous internal problems. Its reaction has not been made public so far, but even if Pakistan welcomes it profusely, one should not be taken in by the sweet words. Just remember what happened during the Lahore bus yatra!

The Indian Government has to address itself to the Kashmiri militants instead. The time is ripe for a major policy change. Anger over innocent killings has started spilling over. Pak perfidy is becoming clearer every day. Both sides ought to realise that the bullet-for-bullet policy may work when one is dealing with an enemy, but not when handling your own people. The real danger is that the militants are divided into so many groups that even if some well-meaning groups do want to embrace peace, others may not let them. The initial reaction has been on expected lines. The JKLF has extended a cautious welcome. The Hizbul Mujahideen might even split if the Pakistan-based leaders do not join in. But the condition of tripartite talks remains. The Lashkar-e-Toiba may oppose it. The Hizbul Momineen has gone to the extent of saying that Islam does not enjoin the cessation of hostilities during Ramzan; rather the month was a period for the strengthening of resolve. It has pointed out that the battle of Badr was fought during Ramzan. Apparently, the ceasefire gesture will have to be embellished with many similar goodwill measures to win back the confidence of the population. The distrust that has accumulated over the past decade will take some time to dissolve. On the one hand, the government will have to put balm on the hurt psyche of the average Kashmiri. On the other, it will have to offer protection and a concrete package to those leaders who make it bold to come to the negotiating table with an open mind. Whether it is right or wrong, the prevalent feeling in the valley is that Delhi props up convenient politicians in the state and turns a blind eye to even their most serious faults. The government's off-the-record excuse has been that so and so are allowed a long rope because they are the only card it has. In the changing scenario, it may have to dump certain perennial favourites to win over the entire deck.

EARLY last week Finance Minister Yashwant Sinha challenged the chambers of commerce and industry to convince him of dumping by China and said he would produce results within 60 days. On Thursday FICCI presented its case and nervously said, "Your time starts now." Nervous because imports from the northern neighbour are threatening to wreak havoc in select industries. It has already captured 1 per cent of the tyre market and nearly 3 per cent of the pencil battery segment. All without the mandatory loud and frenzied advertising campaign of multinational corporations. It is making a strong pitch purely on the basis of low prices. Take batteries. Pencil batteries made in China sell for less than Rs 2 while the locally made ones cost three times as much. FICCI says that Indian ones pack twice as much power, admitting that they are still a better buy. Direct dumping is only one of the multipronged threats. Petty traders in Nepal import several goods from the northern neighbour and transport them to this country taking advantage of the duty-free agreement under the SAARC umbrella. This has become possible because the new trade pact is silent on value addition for qualifying for duty-free export. Similar is the provision with Bangladesh. But with Sri Lanka there is a clear mention of 30 per cent of local goods or parts before anything can be re-exported without attracting import duty. This free trade is making it difficult for vanaspati units to stay afloat. Palmolein from Malaysia carries a customs duty of 16 per cent and manufacture of vanaspati also means excise duty. In Nepal there is no import or excise duty. Thus "made in Nepal" edible oil costs a lot less than that made in India. Some Indian producers have set up units in the tax-less haven, raising the uncalled for spectre of deindustrialisation of India. This is not all. Man-made yarn and fibre are passed off as those made by leading Indian mills like Reliance. Funnily Nepal does not have any units to make these. In addition, there is largescale smuggling across the border with both Nepal and Bangladesh since large stretches are unguarded or lightly policed. FICCI wants the government to step up vigilance, arm the customs men there with testing kits and impound any item that is suspiciously underpriced.

Surprisingly, neither the government nor the chambers have any precise information about the production and pricing structures in China. All they know is that in all labour-intensive fields it is able to make goods at stunningly low prices. Its exports are growing at nearly 15 per cent a year. Its trade surplus with the USA is more than $45 billion, which is the value of the total exports from this country. The competitive prices are edging out Indian products from several regions. From whatever little facts available, it seems that China has remarkable infrastructure, low cost but highly productive workforce, mass-scale production, total management autonomy and, finally, a complex and unconventional system of manufacture. Nobody knows what it is, says an expert with one of the leading chambers. Even under the watered down socialist system, China must have rigid price control and hence low wages and no inflation. With a high degree of literacy, the low wages will have a multiplier effect. Manpower cost must be very, very low compared to India, and hence primary, intermediate, and finished goods too must carry a small price tag. This comes out from that country outselling a high density plastic used in making television set shells. The raw material is imported and hence China does not enjoy any advantage there. But it is able to sell a form of carbonate at $ 275 a tonne less than any competitor. In other words, the processing cost is very low, meaning the wage structure is responsible for the low price. Here is the rub. If that country can prove that it is selling goods at its economic cost and is not subsidising exports, India’s case for invoking anti-dumping provisions of the World Trade Organisation will collapse. Will it also mean that the socialist system will triumph, in at least the foreign trade sector, over capitalism?

SINGAPORE'S veteran Senior Minister, Mr Lee Kuan Yew, is fond of saying that in any poll the Chinese in his country always vote on one side. So do the Malays. But the Indians "are divided right down the middle", he says, "because they love an argument." Well, so do the Americans, judging by their latest presidential election.

The division that emerged may make it additionally difficult for future Presidents to command national obedience and international respect. They will have to work particularly hard to be accepted as the supreme commander of the most powerful country on earth, the nation that aspires to set the global compass, and not just as the leader of one of its two warring factions. The likely continuing internal struggle between contending forces, with the White House as only one of several centres of power, can complicate matters for friends and foes alike. They will wonder about the ultimate decision and the forces that will shape it.

Of course, this does not mean the end of the bipartisan consensus on major issues that is one of the factors that makes the USA a great power. On questions like the China-Taiwan controversy, the Israel-Palestine conflict or even incipient rivalry with an emergent European Union over the North Atlantic Treaty Organisation’s scope and functions and the American role in Europe, the difference between Republicans and Democrats remains one of nuance. But that is because both have independently come to similar conclusions; not because they feel that the national interest obliges them to merge their differences like Delaware’s Democratic Governor Tom Carper and Republican Senator William Roth, whom he had defeated, did when they symbolically buried a hatchet in a box of sand.

Underlying that tradition was the conviction that, once elected, the President was above politics. The roots of this paradox lie in the origin of the presidency which was modelled on how Americans perceived the British monarchy at the time of their War of Independence. They saw that George III ruled as well as reigned but did not realise that this violated the corpus of pacts, laws and conventions dating back to Magna Carta that is the British constitution.

George III, the first English-born Hanoverian monarch, had crushed opposition in the country and packed parliament with the representatives of "rotten" and "pocket" boroughs. Helped by these "King’s Friends", as they were called, he was able to rule as what would be called today a constitutional dictator. The Americans, who initially designated their chief executive "His Highness the President and Lord Protector", had in mind a similar functionary to exercise actual power while enveloped in something of the magic and mystique of monarchy.

The world’s First Democrat was also its First Autocrat. He chose the great officers of state not from men and women who were committed to a certain political philosophy and enjoyed a popular mandate but from among his own circle of friends. Ipso facto, they supported his party, but the whiff of nepotism is never far when a Secretary of State or a Defence Secretary — the equivalents of Foreign and Defence Minister in a parliamentary democracy — is nominated.

Americans might sniff disapprovingly about the "Friends of Bill" or FOB, but there was no constitutional impropriety in their appointment. They are the 20th century American version of 18th century England’s Friends of the King. People talk about the phenomenon only when they dislike a particular President. If the President is king, the first lady is queen. The Imperial Presidency presides over the royal court that is the White House.

The difference that the founding fathers intended between their infant republic and Britain was that instead of inheriting his job, the President was anointed by 270 electors chosen, in turn, by electoral colleges in the states. Though thrown up by the hurly-burly of politics, incumbents skilfully adjusted to the grand image of a position that, said Thomas Jefferson, the third President, was "splendid misery". When Mr Ronald Reagan was asked whether an actor could be the President, he shot back, "Show me one President who wasn’t!"

Gridlock made a difference, thwarting the President’s will. The Monica Lewinsky investigation made a further difference by tarnishing the President’s image. The Republican-dominated Congress and the media obviously misinterpreted the public mood in pressing for impeachment, but some 44 per cent of respondents told exit poll interviewers that the scandals surrounding Mr Bill Clinton were of importance to them, albeit in varying degrees, in this election.

These were the people who voted overwhelmingly for Governor George W. Bush, who ended every campaign speech with a promise to restore honour and dignity to the White House – a not so oblique reference to Mr Clinton’s sexual peccadilloes. Those who thought that these activities did not matter so much supported Vice-President Al Gore.

This was not the only divide. Reports suggest that more men voted for Mr Bush and more women for Mr Gore; more minority voters supported the latter and more whites the former. On the whole, urban areas were for the Democrats, and small towns and rural areas for the Republicans. The residential suburbs, often described as the buffer zone of politics, seem to have been evenly divided. There were some indications of age as another determining factor, especially among female voters.

Polarisation is not altogether new in American life and politics. Both were sharply divided over abolishing slavery in the 19th century and the welfare state after World War II. Segregation, gay rights, gun control and abortion are other issues on which people have taken sides, not necessarily on party lines. The Comprehensive Test Ban Treaty was a more modern example. For Mr Clinton it was the "longest sought, hardest fought prize in arms control history." But the Republicans rejected it as "inconsistent with American security interests."

In this battle, as well as in the earlier Republican closure of government by denying funds for administrative and cultural purposes, could be heard distant echoes of the struggles between another English monarch, Charles I, and parliament. Except that in this case the difference arose not over constitutional principle but party platform.

But though Congress is divided, there is surprising unanimity of views on the economy. That is one important point on which the two Americas can and must unite. The second is the global challenge. India has its reservations about the American assumption of the role of world policeman, especially in controversial situations like Kosovo. But it is undeniable that the country with the longest military reach, the strongest exchequer and the ability to sway the United Nations and the World Bank must discharge certain international responsibilities.

That duty cannot be performed satisfactorily unless there is one America that speaks in a single voice. American foreign policy is complex enough with the White House, State Department, Pentagon, Congress and think-tanks interacting, and every legislator seeing himself as a supernumerary Secretary of State. Somewhere, all these streams must be united in a common purpose that is also of benefit to others.

In her first victory speech, Mrs Hillary Clinton made the point that yesterday they voted as Democrats and Republicans but tomorrow they would be only New Yorkers. Unless that principle is adhered to at the national level, the USA and the world are in for a very confusing time.

The writer is a former Editor of The Statesman.

MR BORIS YELTSIN resigned his post as President of Russia on December 31 last year, about six months before his term was to expire, and handed over his powers and duties to Mr Vladimir Putin. He was the Prime Minister at that time. Why did Mr Yeltsin do so and how was Mr Putin chosen his successor? An attentive, curious and searching reader can find fairly understandable and even convincing answers to these questions in Mr Yeltsin’s latest, third and probably the last volume of his memoirs published recently as "Presidentsky Marafon" in Russian, and "Midnight Diaries" in English, French, German and some other languages.

This volume of memoirs covers the last four years of Mr Yeltsin’s second term of office and differs considerably from the earlier two volumes in content and openness. It contains much more frank and even bold materials and confessions. Perhaps the reason lies in the fact that the earlier two volumes were written when he was still the President and could not disclose many secrets, could not express his views, ideas, thoughts and observations so freely as it was possible to do as a retired and independent citizen or individual. The book throws a good deal of light on many important events, on leading Russian and foreign politicians and dignitaries. Mr Yeltsin openly confesses his weakness for alcohol, frankly admits how on the eve of the 1996 presidential elections, when his rating was only 3 per cent, he had almost decided to scuttle democracy and establish his dictatorship in Russia and later felt ashamed of his thinking. There are some very touching pages of his decision to resign, his torture-some effort to keep it as a big secret for many days from his daughter Tatyana Dyachenko, who had been working with him for all four years as his image maker. He gave this information to his wife Naina only a few hours before his actual resignation.

While leaving for office on December 31, he told her, "Naina, I have made a decision. I am resigning... Watch television." The only person who knew about Mr Yeltsin’s decision to resign was Mr Valadimir Putin, with whom he had discussed this matter about two weeks before his resignation but had not disclosed the date. Mr Yeltsin has devoted many pages to Mr Putin, has admired his qualities, his ability to become a worthy successor to carry on the economic reforms and the democratic process, establish law and order and raise Russia’s international status.

Why and how did Mr Yeltsin chose Mr Putin?

According to the Russian constitution, the President of this country can be elected only for two terms — for a maximum period of eight years. As hinted earlier, Mr Yeltsin was elected for the second term with great difficulty and effort. So, he had started thinking of his successor immediately after his re-election. He had told his staff at that time, "In the year 2000, some such person must become the President of Russia who will continue the country’s democratic reforms, who will not return to past, to totalitarianism, who will guarantee Russia’s forward progress."

Mr Yeltsin was constantly trying to find such a person who could rise up to his expectations. It was probably because of this reason that he changed and tested a number of Prime Ministers — Mr Chernomyrdin, Mr Kiriyenko, Mr Primakov, Mr Stepashin and finally Mr Putin.

One reason for this choice was Mr Yeltsin’s realisation that Russia needed a younger face. Mr Putin was 47 at that time. When judged from this angle, Mr Kiriyenko was much younger. But the terrible financial crisis of August, 1998, when Mr Kiriyenko was Prime Minister, had wrecked his career as the President of Russia. But Mr Yeltsin’s conviction of a younger leader remained intact, although he admits that "youth is not a panacea. There are 40-year-olds with totalitarian natures." Still youth became one essential criterion and a favourable factor for Mr Putin’s choice.

The second factor which influenced Mr Yeltsin’s decision in favour of Mr Putin was that as Director of the FSB (formerly KGB), Mr Putin took a very firm political position. Mr Yeltsin writes, "The constant clashes with the Prime Minister, (i.e. Mr Primakov), who wanted to include the FSB in his sphere of influence, did not trouble Mr Putin. He did not let himself be used in political games." This firmness of Mr Putin’s character was liked and appreciated by Mr Yeltsin.

Thirdly, Mr Putin’s strong stand to deal with Chechen rebels and separatists was also taken into consideration by Mr Yeltsin, who himself had failed to resolve this problem and often felt humiliated and helpless against the Chechens both from the military and political angles.

Fourthly and probably the most important factor that led to the rise of Mr Putin’s star in Mr Yeltsin’s eyes was Mr Anatoly Sobchak’s incident. Mr Sobchak was a brilliant orator, democrat, professor of law at Leningrad (St Petersburg) University and later St Petersburg mayor. Mr Putin had worked under him.

In 1998, Mr Sobchak was accused by his opponents of misusing his position when he was the mayor. He was under criminal investigation. Mr Putin was convinced that the case against Mr Sobchak was politically motivated. He, therefore, helped Mr Sobchak to leave St Petersburg and go to Paris to avoid imprisonment or any other such punishment. While doing so, Mr Putin risked his own position and career. But he did it for a just cause. Mr Yeltsin was highly impressed by this act. He writes, "When I learnt of how Putin had managed to send Anatoly Sobchak abroad, my reaction was ambivalent. Putin was risking not just himself. On the other hand, this act called for profound human respect. Understanding the necessity for Primakov’s resignation, I gradually and painfully thought over the question — who will support me? Who will realistically stand behind me? And at the same moment I understood — Putin?"

It may be mentioned here that at this time Mr Yeltsin himself was being accused of some irregularities and misuse of his high office by his political opponents. Much was being talked and written about "Kremlin’s inner circle" or the so-called "family" and his close connections with oligarch Boris Berezovsky — a highly controversial figure in Russian politics. It was being hinted in media circles as if Mr Yeltsin or certain members of his family — his daughters Tatyana Dyachenko and Yelena — had taken bribes or kickbacks from Swiss construction company Mabetex, which was given the contract for renovating Kremlin. Mr Yeltsin strongly refutes such charges and lists his assets at little more than $ 300,000 in cash, one apartment and a country house on four hectares of land outside Moscow. He particularly refers to those media circles which hurt his feelings badly for "stabbing him in the back" by raising the bogey of corruption against him and his daughters and the so-called "family" or Kremlin’s inner circle.

So, one may say that Mr Yeltsin’s choice of Mr Putin as his successor, besides some other reasons and factors mentioned above, was influenced to some extent by his and his family’s future security. He saw in Mr Putin his protector or defender. He was not mistaken, because the very first decree which Mr Putin issued as Acting President was guarantee of immunity from prosecution after he left his office as President. How the changeover took place? In his memoirs, Mr Yeltsin writes that as early as March, 1999, he had come to the conclusion that Mr Vladimir Putin was the best candidate to succeed him. But the finally decided to resign on December 31 last year. He first opened his mind to Mr Putin on December 14, but found the latter quite hesitant to accept this responsibility. Mr Putin said, "I think I am not prepared for this. You understand that what a miserable fate it is." Mr Putin continued further on a different note, you are very much needed by Russia, you help me a good deal. (Mr Putin was Prime Minister at that time)... It is very important that we both work together. Probably, it would be better that you leave your office on the completion of your term."

The above conversation took place in Mr Yeltsin’s Kremlin office. He writes that he felt slightly discouraged, kept quiet and, lost in thoughts, looked out from the window. He writes that he did not want to persuade Mr Putin to accept the proposal. The silence continued for some time and after a pause of hesitation, Mr Putin ultimately agreed. On that day Mr Yeltsin did not disclose to him the date of his planned resignation.It happened later, on December 29. He told him about his decision to resign on December 31, and then both worked together to prepare all the necessary documents very carefully so that no detail was left out. After all, it was being done for the first time — a President was retiring voluntarily.

Mr Yeltsin writes: "At last this work was completed. I was in this Kremlin office for the last time as President and he (Putin) still not the first person of the country. I wanted to say a lot to him and probably he too. But we did not say anything. We shook hands and embraced each other while parting."

The writer is based in Moscow.

MANY had described it as alarmist when Realpolitik had in September last warned against the worsening economic crisis. Some had even dismissed it as ‘anti-reform’ outbursts and asserted that everything was moving on the right track. It was argued that even if some stray indicators were erratic, targets would be more than met by the year-end. Now none other than Finance Minister Yashwant Sinha has admitted that things are really bad and there would be serious shortfalls in most sectors.

The routine’more-reform’ mantra as a solution to all maladies no more impresses the domestic industry which has been reeling under the impact of a steady fall in industrial production this year. In the hey days of reform, they had every thing to gain. Now they are facing the real challenge from foreign business. Free imports of every item at rockbottom prices — in some cases just one-third — under the WTO regime has caused panic everywhere. Few had bothered when the axe first fell on the small units. Now the entire manufacturing sector has come under challenge of the foreign dumpers.

Instead of girding the loins, the whole manufacturing industry is gripped in acute pessimism and lack of will to fight. The fall in both investment and growth of production of manufactured items during the year reveals this pessimism. Investments in textiles alone has come down to 50 per cent, chemicals 40 per cent and cement 35 per cent. Every one is waiting and watching for the impact of the dreaded foreign ‘invasion’ on each sector. Many have frozen further expansion plans and have slowed down on new projects.

Growth of industrial production in the first half of the current year has come down to 5.5 per cent as against 6.4 per cent the same period last year. Within industry, the fall in manufacturing was more alarming. There has been a decline of 1.1 per cent in capital goods against a robust growth of 9.7 per cent earlier. This is indicative of the all-encompassing industrial pessimism. Still worse, even the prices of the manufacturers have gone down by 5 per cent, apparently due to dumping. This is only the beginning of a deadly import blow. As a result, prices of the manufacturers are now at an all-time low since 1993-94.

Corporates in these sectors are facing a serious decline in terms of production, value in output, total order position and employment and retail sales, according to the CII survey for the first half. As many as 72 per cent of the industry has been languishing with a growth of less than 5 per cent. More startling has been the steep fall in profits of ‘corporate India’ during the first half. A CMIE survey of over 1,700 results reveals that the profit growth is down by more than half. The spreading malaise has bit many corporate giants.

Officially, the reasons for the slowdown are lack of funds and hike in interest rates. This, it is claimed, robbed the domestic business of a level playing ground with the foreigners. Some have suggested a reduction in the tax on dividends as a measure to boost investment and industrial production. Indian industrialists have been raising the issue of unequal competition with the government. But in the present globalisation atmosphere they simply cannot go beyond certain limits to air their ire as they themselves had acted as its champions.

Yet on a couple of occasions — as at the annual session of the PHD Chamber of Commerce and Industry — they did complain about the pressures from the MNCs to Yashwant Sinha. But the latter made it clear that the government could not do anything in this regard. Instead, he advised the business to improve productivity and use legal steps under the WTO. In any case, in the new atmosphere of industrial mergers and acquisitions they have to be part of the global system. The desperation in the domestic business is so deep that some have even suggested the Indians should now shift the emphasis from manufacturing to servicing industries.

The shortfall is not confined to industrial output alone. Despite all the liberalisation and opening up, we are helplessly sliding into a steady overall economic slowdown. After what we had anticipated in these columns, it is now officially admitted that the GDP is not going to cross the 6 per cent mark this fiscal year as against the ambitious growth target of 10 per cent set by Prime Minister Atal Behari Vajpayee. It will most probably end up at 5.8 per cent — a fall of 1 per cent from last year’s. The Finance Ministry has now told the visiting World Bank chief that even the earlier target of 7 per cent GDP growth rate could not be met.

Similarly, inflation management also seems getting out of control. All earlier optimism has given way to sheer desperation. The Finance Ministry is now convinced that the current fiscal will end up with an inflation rate as high as 7 per cent. Since 1995-96 inflation rate has been at a much lower level. After last year’s drought, the agricultural scene this year too does not hold much hope for a bumper crop. Ticklings of figures from North Block indicate the country’s finances are not in good shape. Even if the revenue collection picks up substantially in the last quarter, we are going to end up in a much larger deficit. Apart from the additional commitments due to rising crude prices, there have been many additional ‘burdens’ on the Finance Minister.

With concessions to Punjab farmers extending to other states, commitment on this count alone is expected to be over Rs 500 crore. There is already a tug-of-war between the Finance Minister and the Food Minister on the issue of unloading the huge stocks of foodgrains at concessional rates to the poor. This, the former argues, will raise the subsidy ‘burden’ to about Rs 10,000 crore. We still don’t know how much will it lose by way of massive exports of foodgrains at lower rates.

The panic over the losing control over fiscal and monetary management is better reflected in the manner in which the BJP government resorted to foreign borrowings. Apparently, the steady fall of the rupee is a dire warning about the inflation at home. The RBI first tried to push up the rupee by a cut in interest rates. When this failed, it floated a highly questionable NRI bond at a very heavy cost to the exchequer. In the first place, dependence on the predatory foreign institutional investers (FIIs), borrowings from abroad or reliance on multilateral loans can only postpone a currency crisis. It is never a durable solution because any time-bound borrowings will have to be returned with interest.

In the case of the BJP government’s high-cost India Millennium Bond, it could not attain even its short-term aim of pushing up the rupee. Much against the expectations, even the forex position did not improve during the week the IMD collection ended. Three aspects of IMD has made it highly dubious.

First, it has been the most costly scheme of its kind and has placed an avoidable heavy burden on the exchequer. With an interest rate of 8.5 per cent, guarantees against depreciation, etc, and collecting charges, the gross interest will be about 15 per cent to the subscribing NRI. This is about three times the US banks offer to the investers. For the same reason, IMD was not allowed in the USA. Already, there is criticism about inability of the government to effectively put to use the earlier Resurgent India Bond for intented purposes.

Second, the RIB was aimed at offsetting the impact of the US sanctions. The earlier bond was to meet the Iraq war damage. But the IMD does not serve any such purpose.

Third, there are strong indications that Indians have used the IMD to whitewash black money, and at least part of it had gone from Indian to return as NRI bond. Also, IMD had drained the NRI money which even otherwise would have reached the country through the normal channels. As the maturity time for debt repayment nears, the IMD is going to be a heavy burden on the government.

The BJP government’s financial management reveals its total lack of new ideas and remedial measures. Watch Yashwant Sinha’s four-point plan for economic revival. Each remedy is a repetition of the old measures which are already being tried. These are more stringent measures for financial discipline and to contain fiscal deficit, accelerated reforms, transparent public administration and increase in exports.

Financial discipline is an old slogan which has always been elusive. Aside the reform enthusiasts, few subscribes to the theory that accelerated reform will automatically lead to growth.

The PSU sales may bring quick cash to meet the budget deficit. But it is not the sure way to an economic recovery. With domestic industry in distress, even the apex business bodies have got upset. Perplexed, the reform pundits are looking out for packaged remedies. As things go worse. even the advisers turn bitter critics. This is what seems to be happening to the finance minister. Clueless and isolated from his own Cabinet colleagues, every one puts the blame on him.

Spiritual Nuggets

They read and read,

— The Panchatantra, Book 1