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Need to rein in Maoists
Budget imperatives |
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India does it!
The destiny of Punjab
Paradise regained
Growth and inflation
Juries show society at its fairest
Inside Pakistan
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Need to rein in Maoists
There is growing exasperation at the government’s failure to control Maoists. Days after they killed 24 policemen in West Bengal, Maoists have now claimed responsibility for killing 11 poor villagers in Bihar. In pamphlets left behind at the scene of the carnage, they justified the killing by describing the slain villagers as ‘police informers’. Significantly, both these places in the two states are close to Jharkhand, where also the Maoists abducted a Block Development Officer and held him hostage, demanding the release of seven of their comrades from prison. Even more alarming are reports of the state government’s admission that the seven are indeed ‘innocent’. It is precisely injustice and high handedness of this kind that gives a fillip to Maoists. The capitulation by the Jharkhand government will no doubt embolden the Maoists into staging more abductions. While there is no evidence to suggest that the three strikes in the three states were executed by the same group of Maoists, both West Bengal and Bihar have also been alleging that Maoists are following a hit-and-run strategy and finding a safe haven in Jharkhand. It is, therefore, high time for New Delhi to step in and make Shibu Soren, the Jharkhand Chief Minister, crack the whip. At the same time, it is disturbing that despite the government’s claim of having arrested several top-ranking Maoists in recent months, their ability to strike seems undiminished. Deployment of over 6,000 central forces also seems to have made little difference to the ground situation in West Bengal’s Maoist strongholds. Indeed, judging by the fresh spurt in Maoist violence in the region and the ease with which they melted away, there seems little or no coordination between the neighbouring states or between the security forces. Maoists are fewer in number, are as well or as inadequately trained as the security forces and are certainly less well armed. And yet if they regularly manage to strike and get away, the government certainly needs to review its flawed plan to combat them. In order to re-assert its authority and to carry some credibility with the people, the Union Government must display greater urgency in dealing with the Maoists. The Union Home Ministry must come up with more resolute action. A way out may be to make necessary changes in the law to enable central forces to pursue Maoists across inter-state borders. With states showing their inability to cope with Maoists, it is perhaps time for New Delhi to bite the bullet and go after them. |
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Budget imperatives
As the country prepares for Budget 2010 the Indian economy is characterised by a slow but sure recovery from the economic slowdown in terms of growth and employment and by an alarming level of inflation especially in food. Union Finance Minister Pranab Mukherjee has a job on his hands reining in the fiscal deficit which is running high and yet stimulating growth through meaningful incentives. That the mid-year review of the Union Government projected a growth rate of 7.75 for fiscal 2009-10 is an encouraging sign indeed. Industrial production too has picked up. The challenge is to not only cut inflation but also increase revenues for the government. That explains the new sense of urgency in trying to auction the 3G spectrum to raise resources to bridge the fiscal deficit. The budget will be watched with interest to see if subsidies on fuels — petrol, diesel, cooking gas and kerosene; fertilizers; and electricity to farmers are reduced. While this would be fiscally prudent, it would risk annoying an important section of voters. It is a fact that India uses 17 times more water for growing a ton of sugarcane than the world average because the electricity to pump water is free in most of India. The other way to bridge the gap between revenue and expenditure would be to slash spending on infrastructure projects. While this would be the easy way out, it would affect the momentum of growth in the long run and is, therefore, inadvisable. The Finance Minister could fall back upon higher taxes on personal incomes and on the corporate sector while holding out the carrot to some sectors of industry that need a demand stimulus. Reeling under high inflation, the middle class can hardly be expected to take kindly to any move to tax it further, but the choices before the government are limited. Ensuring better tax compliance and widening the tax net to include new categories may be an inevitable course. All in all, there are hard choices for the government and it would be interesting to see how the Finance Minister responds to the challenges before him. |
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India does it!
Every Test triumph is sweet. It is particularly so when it is as comprehensive as the one against South Africa at the fabled Eden Gardens in Kolkata on Thursday. The innings win was the biggest over Proteas. What made it all the more valuable was the fact that it secured India’s prime position in ICC Test ratings. The delirious reaction of the fans — as well as the players — was thus fully understandable. If Harbhajan Singh will remember it forever for his match-winning five-wicket haul, so will Sachin Tendulkar for his 47th century and Virender Sehwag for his 165-run blitzkrieg. Innings win it was, but the battle was not quite as one-sided as the result might indicate. In fact, at one stage it seemed quite possible that the visitors would force a draw. The tail wagged almost till the very end and if it had continued to do so for a few balls more, the entire story would have changed. It is necessary to focus on these hiccups even in this hour of victory, although nothing succeeds like success, because India cannot afford to be complacent. That the last pair could defy its might for so long should be a cause for concern. Obviously, the bowling department is not what it should be. A top-ranking team cannot afford to have such serious chinks in its armour. The same holds true of fielding as well. If Nagpur Test was lost because of that weakness, even Kolkata provided many anxious moments. All these gaps have to be filled on priority. One should not be too much at the mercy of favourable pitches. Also of concern is the fitness of players. Too many of them, especially fast bowlers, are injury prone. Accidents are bound to torment every player and every team, but there should be no compromise with conditioning of the players. If we have to win against the best, then we must train our hardest. |
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There is much risk in doing nothing as in doing something. — Trammell Crow |
The destiny of Punjab
Growth in the Gross Domestic Product is the basic measure of the health of the economy and its development. Other indicators and concerns such as income distribution, the level of disparities and the capacity to sustain welfare programmes emerge out of this measure. Unfortunately, Punjab through time has been losing the momentum on this front. If we take the period 2002-03 to 2006-07, when the previous government was in office, the primary sector (primarily agriculture) performed dismally at an average compound growth rate of only 2.28 per cent of the gross state domestic product (GSDP) compared with 2.74 per cent growth of this sector at the national level. The lowest growth was negative (-) 1.15 in 2003 when that government took over and the highest was 5.77 per cent in 2003-04 and again low at 2.78 when that government demitted office. This indicates that in spite of more than 95 per cent of the cultivated land under assured irrigation, this sector has been suffering stagnation due to technology fatigue, nutrient depletion, declining total factor productivity and also due to the vagaries of nature. The industrial sector (secondary sector) performed comparatively better. From a level of 3.02 per cent growth compared with 6.40 per cent growth of the country’s GDP from this sector, the secondary sector growth touched the level of 11.52 per cent compared with 11.19 per cent at the national level in 2006-07. The same way the tertiary sector growth improved from 6.25 per cent to 8.43 per cent. Thus, from an over all growth of 2.85 per cent in 2002-03, the GSDP recorded a growth of 7.32 per cent in 2006-07, the end year of the previous government. From there on, the GSDP started declining with growth rate at 6.54 in 2007-08 and 6.26 in 2008-09. Through all these years the rate of growth in GSDP remained substantially below that of the GDP of the country. Yet, whatever improvement the previous government brought about is on the path of a fade out. This situation has emerged due to the external factors as well as the internal ones that rest with the idiosyncrasies of the state level policy makers and the populist politics that does not get out of the mindset of our politicians. It is these policies that have landed the state into a virtual debt trap and dismal performance in economic growth and development. The resources being mobilised on capital account are being frittered away in meeting the deficits in revenue account. The revenue receipts are not enough to meet even the expenditure on salaries, interest and repayments due and other committed expenditure. In 2002-03, the revenue deficit of the state was Rs 3745 crore which was negative (-) 33.91 per cent. By 2006-07 the revenue deficit was brought down to Rs (-) 1749 crore i.e., 10.91 per cent. This deficit escalated again to Rs 3823 crore (-19.85 per cent in 2007-08, Rs 3856 crore (-18.62 per cent) and to estimated Rs 4234 crore (-16.24 percent) in 2009-10 budget estimates. This means whatever additional resources were mobiliszed, were eaten up by the committed expenditure and the revenue deficit kept increasing, though as percentage the deficit grew moderately. As a result, in spite of higher mobilisation of resources on capital account, the plan provision from state budget declined from 55.85 per cent in 2002-03 to 46.75 per cent in 2009-10 budget estimates. The expenditure from the state budget as per cent of total plan budget declined from 61.65 per cent in 2002-03 to 53.98 per cent in 2008-09. Since the situation has not changed much, there is no reason to believe that performance will be any better in 2009-10. This financial debilitation has adversely affected the investment expenditure, specially on education, health and infrastructure which has lent a sort of morbidity to the economy and is destroying the social fabric of the society. The public debt that was Rs 13630 crore only in 1995-96 with interest liability of Rs 1490 crore, has risen to 63217 crore with interest liability of estimated Rs 5349 crore in 2009-10 financial year. It can be easily estimated that with the present fiscal policies remaining in place as they are, the public debt of the state will mount fast to about Rs 75,000 crore by the time this government demits office in next two years. Now that the state has been permitted to obtain market loan up to 4 percent of its GSDP, a raise from 3.5 percent as at present, there is possibility of the public debt exceeding these estimates substantially. This public debt does not include the debts of the public sector loss making, insolvent corporations, for which the state has given guarantees. The interest liability on public debt will escalate to over Rs 6500 crore by the time this government demits office. Add to this the burden of ever increasing subsidies of Rs 5500 crore, the state government will have to incur an expenditure of Rs12000 on these unproductive liabilities, which will be highly debilitating drain on the state budget. There are and will be no funds of its own, available to the state, for making capital investment. No doubt, there is no harm mobilizing the resources on capital account through public borrowings provided these resources are utilized for capital expenditure (investments). If these resources are diverted to meet the revenue expenditure, specially interest payment, salaries and the unproductive expenditure, the economy moves to the situation of debt trap. Economy of the Punjab is moving fast on this track and is leaving behind in its trail sure sign of approaching financial insolvency with its disastrous economic, social and political consequences. The recently submitted Sukhbir-Kalia report that envisages mobilization of additional resources amounting to Rs. 4000 crore is direct charge on the consumers. Incidence of increase in VAT will directly fall on consumers that are already being mauled by the sky rocketing prices, specially the daily wagers, fixed income groups, poor farmers and rural population. Increase in bus fares will also impact the pockets of the relatively poorer sections of the society, that travels by buses. Unfortunately, major share of this increase in fares will be pocketed by the transport operators, most of whom are the ministers and other high up in the society, because large proportion of buses operate without permit. Not more than one fifth of the increase fare will land into the hands of government. Rest of the money will be pocketed by the transport operators. The major problem in society is that of the all-pervasive tax evasion, which is not catching the attention of our policymakers or most probably they are finding themselves helpless in moving in this direction due the existing political dispensations. Unless bold decisions are made to check and public expenditure is rationalised shedding the populist political stances, there can be no hope of the economy of the state getting revitalised and there is no possibility of its being retrieved from the brink of
disaster. |
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Paradise regained
When we made our house a few years back children were young. So we decided not to extend the staircase to the second roof that happens to be the only rooftop in the duplex house. Then a few days back, my son, now 11, who had been assigned a northern room in the house, inspired by sunroof in cars, asked, wouldn’t it be a good idea to have a skylight in his room as the sun never enters there. It triggered a thought process that over the next two weeks bore the fruit of a 2 ½ by 4 feet skylight in the room with a half inch thick glass cover, transforming the cold room into one full of life with rare luxury of a panoramic view of rising sun in morning, a blue sky interspersed with clouds in the day and a shaft of moonlight falling at different places on the floor on different dates of month, during night. It also encouraged us to make another cutout in the dressing room making the rooftop easily accessible with a ladder. Wife and daughter climbed the roof for the first time in six years since the house came into existence. A 30-ft abandoned telephone cable and a 1½ by 2 ft piece of polycarbonate sheet lying on the roof were married to form a winch that successfully lifted hot food above two floors in its maiden attempt. The rooftop was thus inaugurated over lunch last Sunday by the four in the family with palpable blessings of Southern Sun. Sitting under the sky all stress vanished. Conviction was reinforced that nothing can make up for sun. Thoughts sprang and trundled down that perhaps it is lack of sunlight that made inhabitants of cold countries industrious, its adequacy us Indians ‘believers’ and complacent and its abundance, the African souls merry and musical. Suddenly three trusting pigeons fluttered down near us and a pack of parrots flew past delivering a crescendo of parrot sounds. Aided by air currents, a group of eagles spiralled towards oblivion as a jetliner’s white trail diffused and drifted eastwards. A pair of small sparrows shimmering in rainbow colors perched and squeaked in celebration atop trees that rise a few feet above roof. Clarity flashed that happiness is, food and sunlight and company of living beings, animals and birds included. I was reminded of childhood when the boon of a rooftop was taken for granted; when rooms used to be cold in winters and hot in summers. When playing on roofs, enough sun was soaked in winter days to face the cold nights. When in summers one had routinely dozed off facing the night-sky crowded with stars, some dim, some twinkling bright, some densely packed, some dispersed, half conscious of the cool and sometimes not so cool air of the table fan. As I took a silent vow to restart life on the rooftop, and contribute my bit towards the cause of global warming, children were excited at the prospect of sleeping under the stars during summers. For the time being, it is picnic at the rooftop on
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Growth and inflation
The mixed signals being sent out on the future of the stimulus plan are easily explained by the conflict between addressing inflation and keeping the momentum of growth process. It is possible that the economy is getting caught in an inflationary spiral and on that basis alone it would be grossly unrealistic to rule out a return to a contractionary monetary policy, which the RBI had pursued during 2007-08 partially to contain demand pressures in the economy. It would be simplistic to overstress on selected commodities like sugar and ignore the wider aspects of price stability. The RBI has to do its job and North Block should not dictate on monetary policy as had been done under the stewardship of P. Chidambaram, who had in fact sought to arm-twist the central bank at one time on interest rates and on prudential banking alike. Let the Government respect the autonomy of Mint Street as a monetary regulator. True, globally central banks have in recent years consistently given primacy to containment of inflation. But for policymakers and administrators to blame them for neglect of the demands of economic growth was part of the game of passing the buck. In the Indian context, Dr Y.V. Reddy’s somewhat inflexible pursuit of a tight credit policy during the tumultuous years of the world meltdown was duly vindicated and won wide appreciation, notwithstanding the Finance Minister’s cold shouldering of that functionary. The connection between the stimulus effort and inflation is easily explained. Simply put, if large funds continued to be poured into the system the movement in prices will be harder to control. The government is in the horns of a dilemma precisely because the growth momentum of recent weeks can get weakened with a reduction in stimulus expenditure even as RBI applies a liquidity squeeze. It is a fact that the disciplinary mechanism of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 (duly replicated by all but a few state governments as part of a deal brokered by the Twelfth Finance Commission – with which this writer was associated through his report on subsidies) was thrown out of the window, with the Centre running up a staggering fiscal deficit of 6.8 per cent of GDP during 2008-09. It is difficult to ignore such an order of fiscal expansion in today’s disturbing price movements. While it is required of the RBI to address the end result, it had no role whatsoever in the cause – the massive pump priming. Now, North Block recognises that a return to the essential regimen of the FRBM Act is necessary, even inevitable. But it also knows that the economy must stick to the high growth agenda of the Eleventh Plan, to provide the broad base for inclusive development. It would be naïve on the part of North Block to assume that its priority should be to limit the level of deficit financing on paper while supply management will take care of concerns over inflation. But such naiveté seems obvious with senior members of the government openly debating on a phased pull out of stimulus spending and talking ambitiously about the fiscal deficit being brought down below five percent of GDP during the current fiscal year through larger than expected revenue mobilisation. The pressure being mounted by Finance Minister Pranab Mukherjee on the Ministry of Telecom to stick to the 3G schedule specifically to make available a substantial revenue to the Centre is hardly unrelated to the strategy at work. At the same time, the usual tug of war between Yojana Bhawan and North Block has assumed more than traditional dimensions because of the problems related to fulfilment of the FRBM Act, keeping the stimulus programme alive and preventing a runaway inflation. In this debate, a casualty has been expenditure management. True, we have an outcomes budget, but it really means little. Yojana Bhawan has never been very keen on the fulfilment of the FRBM Act in respect of the revenue deficit being wiped out. Under the Act, the schedule was that there should be no revenue deficit from April 1, 2008. Mr Chidambaram postponed it but only for a year in the face of suggestions from the Planning Commission that this goal should not come in the way of plan allocations. Mr Mukherjee did not even mention a new deadline. Yet, nobody is asking why the Planning Commission had allowed a critical parameter of efficiency of capital, the incremental capital output ratio (ICOR) being allowed to move up from 3.7 as targeted in the Tenth Plan to 4.1 at the end of the Plan period. The Eleventh Plan has started with a higher base of ICOR and Yojana Bhawan may really not bother about a possible deterioration. The battle against inflation and a possible slowing down of growth calls for a serious effort to get the best out of capital created during the plan period, past as well as present. The Eleventh Plan has its focus on inclusive development and the ICOR is treated largely as a notion which though it should not be. For long years, this norm has been used mainly for finalising allocations. At no time did anybody think of using it as a boost to efficiency. The Planning Commission has been boasting of India having a better ICOR than China glossing over the fact the China spends a great deal more on investment, which inevitably pushes up the cost of capital. Worse, we overlook the fact that China is able to sell virtually everything it produces cheap in the international market. We can have a stimulus programme going and also keep inflation in check, provided we begin to use ICOR more as a measure to boost efficiency of capital and less as a parameter for finalisation of outlay, aggregate as well as sectoral. ICOR had received strong advocacy from the K.N. Raj Working Group on saving and capital formation, 1982, and also by the next working group. We also had an Expenditure Reform Commission, which lent support to systematic expenditure management. However, while states are in the dark about the working of ICOR, the Centre assumes that it is a matter concerning only Yojana Bhawan. Such cursoriness must stop and planners and administrators alike have to emulate the record of corporate sector, which, according to CMIE data, boasts of negative ratios which essentially means creating more output out of
nothing. The writer is Professor and Head, Research & Publications, JK Business School,
Gurgaon |
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Juries show society at its fairest What an unusual pleasure it is to find something important organised by the state that is working well – trials by jury. Opinion polls consistently research, which involved among other techniques the quantitative analysis of the outcomes of half a million charges against defendants in all Crown Courts in England and Wales, shows that the system passes every test. That is a rare double: we value jury trials and they do their job. We revere Parliament, too, but we don't think it is particularly effective any longer. We strongly support the NHS but it lets us down a bit too often. We don't mind paying for the BBC, though we have our complaints. Probably only the monarchy is up there with jury trials, good in principle and good in practice. Professor Cheryl Thomas's report, “Are Juries Fair?”, commissioned by the Ministry of Justice, has a wealth of new information. It turns out that juries return guilty verdicts on almost two-thirds (64 per cent) of all charges. Of course it is hard to decide what the right proportion would be – not so high that juries give the impression of being too easily swayed by the prosecution’s arguments, nor so low that they appear unduly lenient. But the figure quoted above becomes the more satisfactory the more it is analysed. The highest jury conviction rates are achieved where strong physical evidence is presented against the defendant as in cases of theft, drugs, falsification and deception. It is much more difficult to secure convictions, for instance, in cases where the state of mind of either the victim or defendant is an issue. The offence of threatening to kill requires the jury to be sure of what the alleged victim plausibly thought was going on. In cases of attempted murder the jury must similarly be convinced that the defendant intended to kill someone, not just cause harm or injury. These are often difficult calls for juries, faced as they may be with conflicting testimony. So it is perfectly rational for the conviction rate to be lower. The crucial test for the jury system is rape. It is widely assumed that the result is too often “not guilty”. But this is incorrect. Juries find the defendant guilty in 54 per cent of cases, a higher rate of conviction than for other serious offences such as attempted murder, manslaughter, grievous bodily harm and threatening to kill. But the question, “Are juries fair?” cannot be left just there. For these figures may disguise variations caused either by the ethnic composition of juries or the ethnic backgrounds of defendants or victims. This is obviously a difficult matter to appraise. To cut through to reality, Prof Thomas’ team used simulations. Trials were filmed and edited so that only a specific factor (such as the race of the defendant) was altered in different versions of the case. Each version of the case was then shown to a large number of “juries” to decide. This is an artificial procedure but it is hard to imagine how else the team could have got near the truth. Before coming to the results of the work on racial factors, there is a further consideration. Black and minority ethnic people are arrested and charged more often than other groups. Some 29 per cent of all jury trials feature black and minority ethnic defendants, a proportion that is three-and-a-half times their share of the general population. In particular, black defendants appear five times more often than their share of the population. So if racial prejudice were a factor, it would undermine the system in a very serious way. Remarkably, however, there is no evidence of racial stereotyping in the courtroom. Jury verdicts showed insignificant differences based on defendant ethnicity. The analysis found an overall jury conviction rate of 65 per cent for black and minority ethnic defendants and 63 per cent for white defendants. Black defendants had a 67 per cent conviction rate compared to 63 per cent for Asian and white defendants. The report takes this test further. Suppose that a particular Crown Court is situated in an area where there is little ethnic diversity but yet hears a large number of cases involving black and minority ethnic defendants. It is likely that juries at courts like this, selected randomly as they are from local people, will be predominantly white. But still no meaningful differences in conviction rates show up. But suppose, to go a step further, the charge concerns a racially motivated crime. Even in these cases, white defendants are no more likely to be acquitted by all-white juries than by racially mixed juries. This colour blindness in jury trials is an extraordinary
discovery. — By arrangement with The Independent |
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Inside Pakistan The tug of war over judicial appointments between the executive and the judiciary in Pakistan that began on Saturday ended on Wednesday. Prime Minister Yousuf Raza Gilani’s far-sighted approach has led to Islamabad averting a major crisis. Mr Gilani, who was till Monday trying to scare the judiciary by saying that the restoration of the judges sacked by former President Gen Pervez Musharraf, including Supreme Court Chief Justice Iftikhar Mohammad Chaudhry, was yet to be ratified by parliament, had a change of heart by Tuesday evening. One of his advisers, former Supreme Court Bar Association President Aitzaz Ahsan, played a key role, according to a Dawn report. Mr Gilani, who was assigned the role of the firefighter by the Establishment, which comprises the Army, used the opportunity of a farewell party at the Pakistan Supreme Court complex being held in honour of Justice Khalilur Rehman Ramday, who had retired as a judge of the Supreme Court on January 12, to begin a patch-up process with Chief Justice Iftikhar Chaudhry. The Prime Minister went to the farewell dinner “uninvited” and offered to the Chief Justice a climb-down by President Zardari. Then he invited the Chief Justice to his office on Wednesday to end the tussle that began with Mr Zardari notifying certain judicial appointments and promotions contrary to what the Chief Justice of Pakistan had recommended earlier. Mr Zardari’s claim that his controversial notifications followed “consultations” with the Chief Justice was proved hollow. Wednesday’s meeting between Mr Gilani and Chief Justice Chaudhry finally resulted in the withdrawal of Mr Zardari’s two notifications and acceptance of the Chief Justice’s recommendations, sending across the message that under the circumstances no one could dare challenge the judiciary.
Praise for Gilani Daily Times commented: “Prime Minister Gilani deserves tribute.... Having said this, the very matrix of the crisis, just swerved by, shows the brittle structure of our political paradigm and an all too apparent lack of seriousness required to handle the affairs of the state.” The Pakistan President – who has already been under tremendous pressure to quit following the landmark apex court verdict quashing General Musharraf’s National Reconciliation Order (NRO) reviving the corruption cases instituted against him during Mr Nawaz Sharif’s Prime Ministership which were dropped under the NRO – has suffered a further loss of face. He is likely to come under greater pressure to resign as the top NRO beneficiary. The News editorial on the defused crisis should be read against this backdrop. It says, “What is required here is not cunning creation and then ‘prudent’ handling of matters on a case-to-case basis, but a paradigm shift in the individual and institutional approaches towards the ideal of the independence of the judiciary. And this should not be compromised to benefit individuals who may have ‘something to hide’.”
Mullah Baradar The arrest of Mullah Abdul Ghani Baradar, the second most important Taliban leader after Mullah Omar, in Karachi on February 11 has brought to light the fact that the famous Quetta Shura comprising the top-shots of the militant movement has shifted to the Sindh capital. Reports say they consider Karachi as safe for them as was the Balochistan capital sometime ago because of the 3.5 million Pashtuns living in the Sindh capital. A key strategist of the Taliban which he had founded along with 29 others, Mullah Baradar led the “Taliban militia’s winter offensive against the Allied Forces in 2008 and 2009 which literally surprised the military commanders”, according to a report in The News. Mullah Baradar was taken in custody following a tip-off believed to have been provided by those in the Taliban who did not agree with him on holding talks with the Hamid Karzai government in Kabul and the Americans. He has been in favour of negotiations. His arrest, which has come in the wake of the US-led NATO forces’ Operation Mushtarak in the Marjeh area of Afghanistan’s Helmand province, indicates close cooperation between the CIA and Pakistan’s ISI. This also means a shift in Islamabad’s policy on the Afghan Taliban, as some newspapers have
commented. |
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