O P I N I O N S

EDITORIALS

V8’s victory lap
With a roar F1 arrives in India
Sebastian Vettel won it all – pole position, fastest lap, and race victory. As Sachin Tendulkar waved the chequered flag, it was apparent that India too was the winner by hosting the first Formula One grand prix. The Buddh International Circuit at Greater Noida won widespread approval, spectators turned up in large numbers, as did celebrities, both international and indigenous. The stray dog start notwithstanding, the track found approval among the drivers, and given the response from fans, it is a virtual certainty that India will now permanently be on the F1 circuit.

New manufacturing policy
Small step in positive direction
The National Manufacturing Policy (NMP) cleared by the Cabinet recently comes in the backdrop of falling business confidence, slowing investments and slowdown in manufacturing. The growth of the sector was at a 21 month low at 2.3 per cent in July this year.

Message from CHOGM
Fight against terrorism must continue
The 2011 Commonwealth Heads of Government Meeting that ended in Perth, Australia, on Sunday did well to highlight the issues related to security and hunger as these affect a vast section of humanity today. Terrorism continues to pose a major threat despite billions of rupees having been spent on eliminating the scourge. The CHOGM communiqué rightly expressed its commitment to prevent the use of its territory by any nation for promoting terrorism. It also called for suppressing funding sources for acts of terror.

• Thought for the Day

ARTICLE

Need for austerity measures
Difficulties in maintaining high growth
by Jayshree Sengupta
India’s economic growth seems to be slowing down from its previous high level because of global and domestic problems.  Rated as one of the fastest growing economies, India may now achieve around 7 or 8 per cent growth and not 9 per cent. On the domestic front, though there are no serious signs of recession, problems of managing state finances are slowly cropping up.

MIDDLE

Smoke-free Shimla
by Shriniwas Joshi
Shimla, like Chandigarh, is smoke-free. One cannot smoke here in public places which include The Ridge and The Mall. When it was not a smoke-free town, people used to smoke openly everywhere. Raaja Bhasin, the author of ‘Simla’, once narrated an old incident.

OPED document

A PARTNERSHIP OF PROFIT
Global problems require global solutions, coordinated action and joint consultations. India and France can achieve great things together
Alain Juppe
I have come with a message of confidence. Confidence in my country, which is extensively reforming and working harder than ever for peace and international cooperation; Confidence in your country, India, as a major democratic power that gains in strength every day; and confidence in what our two great nations can achieve together if we join forces to work for security, freedom and prosperity in the world.

EDITORIALS

V8’s victory lap
With a roar F1 arrives in India

Sebastian Vettel won it all – pole position, fastest lap, and race victory. As Sachin Tendulkar waved the chequered flag, it was apparent that India too was the winner by hosting the first Formula One grand prix. The Buddh International Circuit at Greater Noida won widespread approval, spectators turned up in large numbers, as did celebrities, both international and indigenous. The stray dog start notwithstanding, the track found approval among the drivers, and given the response from fans, it is a virtual certainty that India will now permanently be on the F1 circuit.

Limited largely to Europe in the 1950s and 1960s, the F1 circuit has spread over the years, moving to the US and Japan a decade later, and then to Mexico, Brazil and Singapore. The roar of the V8 engines and the squeal of the high-performance tyres, however, could not drown out the voices that pointed to the vast chasm between the privileged and the poor, the spectators who watched the event from the stands and those who heard it while trying to steal a glance at the fast-moving cars from vantage points away from the stadium.

The chequered flag that marked the successful culmination of the first F1 race in India also thus signals the start of a new era in Indian sports in which the Buddh International Circuit could provide an impetus for selecting and training young Indians and turning them into F1 drivers. Only then would a truly Indian team be able to compete in this event. F1 is a very expensive sport, and thus sponsors have a huge role to play in it. Indian sponsors now have a responsibility to spot talent and groom youngsters so that they can eventually make their mark. Holding an F1 event successfully is a mark of achievement for a host country, and India too can be proud of this victory.

New manufacturing policy
Small step in positive direction

The National Manufacturing Policy (NMP) cleared by the Cabinet recently comes in the backdrop of falling business confidence, slowing investments and slowdown in manufacturing. The growth of the sector was at a 21 month low at 2.3 per cent in July this year.

It has been saddled with assorted problems including lack of infrastructure, multiple clearances and compliance issues, regulatory environment and multi-tier decision making, land acquisition problems, lack of skilled manpower, bad business sentiment, lack of labour reforms and delayed environmental clearances. Data compiled by the centre for monitoring Indian Economy reveals that investment has declined sharply in the manufacturing sector. Foreign Direct Investment too has shown a major decline. According to World Bank parameters for ease of doing business, out of 183 countries, India ranked at 134, way behind Bangladesh, Sri Lanka, Nepal and Pakistan.

The NMP has set a target of creating 100 million jobs by 2025. Manufacturing has a multiplier effect as each job creates 2-3 additional jobs in the ancilliary sectors. The sector contributes 12 per cent of the work force which compared to other developing and advanced countries is low. The creation of seven National Investment and Manufacturing Zones (NIMZ) on the Delhi-Mumbai Industrial Corridor is the first step in creating large scale China style industrial zones where compliance is easier and faster clearances are provided with softer labour and environmental clearances.

The policy is a positive initiative but only the actual results on the ground will prove its success. One will have to see how fast the seven NIMZs take off. Interestingly, some of the problems with manufacturing are already being addressed by some states which are able to attract huge investments. Entrepreneurs and capital go where there is opportunity to make money. If the NMP is one such game changer it will revive manufacturing projects at a time when few are in the mood to invest. 

Message from CHOGM
Fight against terrorism must continue

The 2011 Commonwealth Heads of Government Meeting that ended in Perth, Australia, on Sunday did well to highlight the issues related to security and hunger as these affect a vast section of humanity today. Terrorism continues to pose a major threat despite billions of rupees having been spent on eliminating the scourge. The CHOGM communiqué rightly expressed its commitment to prevent the use of its territory by any nation for promoting terrorism. It also called for suppressing funding sources for acts of terror.

How it goes about forcing certain countries like Pakistan to stop using terrorism for their geopolitical objectives remains to be seen. Terrorists may be down but they are not out. They continue to claim lives in Afghanistan, Pakistan and elsewhere. India’s maintenance of its tight vigil has paid dividends. But the problem cannot end forever so long as Pakistan and Afghanistan remain the breeding grounds for terrorists.

Whenever there is a discussion on terrorism, sea piracy is bound to figure prominently. Most sea pirates have been found to be Somalians. The participants at the CHOGM in Perth expressed the view that the world community must ensure stability in the poverty-stricken African nation. Poverty drove most Somalians to take to piracy. Thus, the cause of eliminating poverty wherever it exists, too, must get precedence along with the need for providing stability. The Commonwealth needs to highlight the issue of hunger at every available opportunity because most of the world’s 1 billion hungry people live in the countries which are its members.

The Perth meeting will be remembered for some other reasons too. The 16 countries for which Queen Elizabeth II of Britain is the constitutional monarch have given the girl child what was her due. Royal daughters now will also be eligible as royal sons to inherit the throne. The Perth CHOGM indirectly sent out the message that the grouping of 54 former British colonies would not allow any kind of discrimination on the basis of one’s sex. The call for reforms by the Eminent Persons’ Group led by former Malaysian Prime Minister Abdullah Ahmad Badawi needs to be given a serious thought. The grouping must think of introducing reforms to remain relevant. 

Thought for the Day

As long as you keep a person down, some part of you has to be down there to hold him down, so it means you cannot soar as you otherwise might. — Marian Anderson

ARTICLE

Need for austerity measures
Difficulties in maintaining high growth
by Jayshree Sengupta

India’s economic growth seems to be slowing down from its previous high level because of global and domestic problems.  Rated as one of the fastest growing economies, India may now achieve around 7 or 8 per cent growth and not 9 per cent. On the domestic front, though there are no serious signs of recession, problems of managing state finances are slowly cropping up.

Even for ordinary people, managing personal finances is becoming difficult since inflation seems to be up and down the same high range of 9 per cent. It is making people feel reluctant to spend on extras like consumer durables, cars, travel and entertainment as the monthly food and fuel bill is getting higher. This is affecting the demand for goods and services and will hit business sentiments.

The stock market is also going up and down frequently because huge sums (Rs 2000 crore) had been withdrawn by the FIIs in September due to  global uncertainties.  India is still attractive as an investment destination but slowdown in industrial growth and a falling corporate profit profile are taking away some of the shine. There are many other markets which are doing better and FIIs are moving their money to such markets and people are even investing in gold and silver once again.

Apart from high food inflation, the fiscal deficit seems to be getting out of control and in the first five months of the current fiscal year, 66 per cent of government expenditure has already been recorded which means that the government will have to go in for big market borrowing of Rs 280 billion during the rest of the financial year to meet its dues.  Apparently, the huge public spend has been on account of oil and other subsidies. This is because while oil prices have been going up, domestic prices have been maintained at nearly the same level through subsidies.  Clearly, the government is going to cut some subsidies, and it is likely that fuel subsidies will be axed further. There is already a talk of linking domestic fuel prices with international prices. Inflation will be stoked when diesel and cooking gas prices are raised next.

Government borrowings too could be inflationary because the government will borrow from the public and the market by issuing bonds which will enable it to spend money on its various programmes. This will release money into the financial system which will end up stoking inflation. The credit rating agencies like Moody’s and Standard & Poor’s will be watching how the government manages its finances in the next few months. Moody’s has already downgraded the State Bank of India from C grade to D+ because of its growing non-performing assets. The government has already promised infusion of Rs 8000 crore for its recapitalisation.  Similarly, another hole in the exchequer’s pocket will be the bailout of Air India, ailing for a long time. There may be more such expenditure in the future, making it all the more difficult to control overshooting the targeted fiscal deficit.

Moody’s downgrade of the State Bank of India is probably going to shake the confidence of the people in India’s premier bank. The problem seems to be mounting NPAs and among various reasons given, the behaviour of its top brass and political patronage seemed to be behind it. In the case of Air India, its current malaise has been not being able to cut losses. So many seats are blocked for VIP travel in every flight abroad for which no revenue is earned. But not all public sector enterprises are loss-making and we have some of the best examples in the oil sector.  

All over Europe the new mantra is austerity. Though India’s exports have been doing well since last month with a surprisingly high growth rate of 40 per cent, this may not be sustained in the future if our big trade partners are busy tightening their belts and trade credits dry up. There is also the rather disappointing news of manufacturing and service sectors contracting in India which cannot isolate itself from the global happenings. The revenue collection too has not been high enough to cover the extra expenditure of the government.  Clearly, India will have to go in for austerity measures or a “hair-cut”.

Recently the Greek government has announced a number of austerity measures, including scaling back the public sector to cutting down pensions as part of the condition for releasing the next installment of $11 billion in aid from its “troika” of foreign lenders — the European Central Bank, the European Commission and the IMF. Earlier it went for an increase in taxes and wage freezes. These measures have increased the misery of the already unemployed and have been met with huge resistance, strikes and violence in the streets.

India still has an option because its situation is not as bad. Instead of cutting subsidies and raising prices of petrol, diesel and gas, other austerity measures can be implemented. The Prime Minister is already vetting VVIP  trips abroad. Every time a minister and his entourage travels, millions of rupees are spent.  There are many other ways in which austerity measures can be undertaken by the government instead of burdening the common man or woman by raising fuel and food prices. Many of the public sector enterprises need trimming and are made more manageable. Much flab can be cut from government activities that have failed to benefit the poor.

If austerity measures take the form of cutting expenditure on essentials like infrastructure development, the worst sufferers will be the poor. The upgrade of rural and urban infrastructure could be postponed and the much needed affordable housing, supply of clean potable water, sanitation and sewage disposal programmes could receive less government help. Public money has to be spent on cushioning the adverse impact of slow economic growth and high inflation on low-income groups because unlike the EU, India does not have any social safety net for the extremely poor.

There is a lot of money which the government can tap for making provisions for the poor and the needy despite austerity measures. Unfortunately, only 3 per cent or 31.5 million of the population pays income taxe as compared to 45 per cent in the US. Getting more people in the tax net and eradication of corruption could mobilise huge sums of money into government coffers. Cutting subsidies, however, would be the most acceptable way to get back on track regarding fiscal deficit management by the government, and it will be a measure approved by the credit rating agencies. So, expect more pain from austerity measures.

MIDDLE

Smoke-free Shimla
by Shriniwas Joshi

Shimla, like Chandigarh, is smoke-free. One cannot smoke here in public places which include The Ridge and The Mall. When it was not a smoke-free town, people used to smoke openly everywhere. Raaja Bhasin, the author of ‘Simla’, once narrated an old incident.

A top bureaucrat was crossing The Ridge with a cigarette in his mouth. When he had puffed to his heart’s content, he threw the butt on the road. Throwing cigarette butts or wrappers of eatables on the road has been a no-no here as British legacy. A policeman followed him and very courteously said, “Sir, you have dropped something of yours on the road.” The boss returned, silently picked up the butt and kept it in his pocket to dump it in a dustbin. All credits to the policeman.

A smoker always finds it difficult to quit smoking but when a chain smoker was able to quit ‘cancer stick’, I congratulated him on giving up cigarettes. He had gained weight and said, “But look at all these added kilograms!” The impromptu words that came out of me were: “Don’t worry about that. Just think of all the extra years you will have in which to lose them.” He has left smoking for good and has safely treasured my words.

Our Chief Justice Joseph Kurien once told a story. He was new to the State and was not a recognised face. He was Malling once when he saw a young one smoking. He said to him, “Don’t smoke here. It is banned by law.” The youth turned on him, “What is to you? Are you the Chief Minister of the State?”

I do not know the ‘what next?’ of it. But recently when I saw a tourist lady smoking in the open space of Ashiana restaurant on the Ridge, I politely told her not to smoke there. She rebuked, “I’m not smoking inside. I am out here in the open.” When I told her that the entire complex was public place and smoking, by law, was banned there, she asked me to tell a place where she could smoke. I told her that the nearest that she could do that was either Lakkar bazaar or Middle bazaar. She said with disdain, “Both these bazaars are more congested and more crowded and these are not the declared public places.”

And then she quoted from Charles Dickens’ Oliver Twist, “Your law is an ass – an idiot”. She hurriedly left the place and with ‘lung dart’ in hand went inside the Queen. I was frozen there feeling like Jack while picture of the King from the next door was sneering at me.

OPED document

A PARTNERSHIP OF PROFIT
Global problems require global solutions, coordinated action and joint consultations. India and France can achieve great things together
Alain Juppe

I have come with a message of confidence. Confidence in my country, which is extensively reforming and working harder than ever for peace and international cooperation; Confidence in your country, India, as a major democratic power that gains in strength every day; and confidence in what our two great nations can achieve together if we join forces to work for security, freedom and prosperity in the world.

Today’s international economy is deeply interdependent. The repercussions of the economic crises have swept across the globe. Following the 2008 financial crisis, we are now facing a new sovereign debt crisis in many countries. This is why France is taking action to enable the European Union to overcome the crisis.

France has specialised in putting up Nuclear Reactors in clusters of four or five at the same site. A view of one of the French Nuclear installations

The meeting of G20 finance ministers on 14 and 15 October in Paris – in which India participated actively – set major milestones in the lead-up to the summit.

l On response to the crisis, with the preparation of an ambitious, detailed action plan for growth;

l On financial regulation, with an agreement on position limits regarding commodities derivatives;

l On reforming the international monetary system, with agreements on managing capital flows, an action plan on developing local-currency bond markets, and principles for cooperation between the International Monetary Fund and regional financial arrangements;

And finally on development, with a discussion on innovative financing, in particular the proposed tax on financial transactions, and a list of ten selected priority infrastructure projects. 

The G20 countries account for 85% of the world economy. If we can agree on further progress in economic and financial cooperation, the entire world stands to gain. The French presidency of the G20 has put ambitious proposals on the table. We are on the right track. I can tell you that Prime minister Manmohan Singh and Finance minister Pranab Mukherjee have expressed determination of India also in this respect. 

For France, working in the interests of peace means striving for a more balanced, fairer world, founded on dialogue between the major powers.

Everyone is well aware that given the political and military challenges that concern us all, consultation between all of the world’s major powers is crucial.

Of course, there are still significant differences in approach between the West, Russia and emerging countries. But they do not prevent the development of strong, trust-based bilateral relations such as those that France and India maintain through their “strategic partnership”.

Strategic partnership

The lazy way out would be to keep the old system, with the five permanent members of the Security Council and the G8 on the one hand, and the BRIC or IBSA meeting outside the G8 on the other. That would be a political and strategic error. When the world changes, institutions must change. A fair world is a world in which each country holds its rightful place.

Therefore France proposed establishing the G20, where the major emerging countries now play a leading role, commensurate with their growing economic might. In the same spirit, France supports the enlargement of the United Nations Security Council. In particular, we are in favour of giving a permanent seat to India. We therefore endorse the G4 initiative, which includes India.

As you realise, in this rapidly changing world, France and India must unite their efforts.

The strategic partnership between France and India is a rational choice for us. With the end of the colonial era and the founding of modern India, we saw a millennia-old civilisation embrace modernity, without ever renouncing its roots or its wisdom. We saw your people add humanism and democracy to a rich legacy of languages, religions and cultural traditions. Never has India strayed from that path, despite wars, and despite terrorism that strikes today.

France and India share the universal values of democracy, respect for human rights, and tolerance. Like India, France intends to remain true to itself, preserving its soul, rich identity and original culture. After my discussions with the Indian leaders, I believe we are ready to move on to a new stage in our relations.

Firstly, there are what we call the “three pillars” of our strategic partnership: combating terrorism, civil nuclear cooperation, and defence relations.

On terrorism, we are in profound agreement. The threat is still present. The recent attack in your capital is evidence of that. The fight against terrorism is not the fight of one civilisation against another. It is the fight of civilisation against barbarity. We will therefore strengthen our cooperation. We urge Pakistan to do everything in its power to prevent terrorists from launching strikes from its territory.

In the area of civil nuclear power, France and India are determined to continue working together, because nuclear energy will remain a key component in energy supply for a long time to come. The Fukushima disaster in Japan, does not call that strategic choice into question. It confirms our belief that nuclear safety is an absolute imperative. We did not wait for Fukushima to develop the safest latest-generation reactors in the world, which we are offering India.

France is also proud to have been among the first countries to support the reform of international rules to allow India access to nuclear technology.

Lastly, on defence cooperation, we are making good progress. Our navies and air forces are training together and consult each other on a regular basis. For the first time, we recently conducted joint land exercises. In terms of military hardware, we have several potential major projects, in aeronautics, helicopters, missiles, land and naval weaponry. Of course, there is legitimate competition. In that competition, France is offering India two elements which I think are vital. Firstly, a partnership rather than a commercial relationship. Secondly, the certainty of having in France a reliable, constant and long-term partner, that has chosen technological and political independence for itself.

Beyond those three pillars, I am convinced we will develop an even more dynamic cooperation and even closer ties.

I am thinking of the space sector. Our cooperation has just been illustrated by the launch of the Franco-Indian satellite, Megha-Tropiques. This is a magnificent success. I hope we will soon agree on other ambitious projects for the decades ahead.

I also have university exchanges in mind. To the young people gathered here today, I would like to say that France is waiting for you. At the same time, we will encourage more young French people to come and study in India.

On economic and industrial relations, we are moving towards the target of €12 billion in 2012, but we can do much better than that. Signing a balanced, mutually profitable free trade agreement between the European Union and India would be a major advantage. We must put the close, strong bilateral relationship between India and France at the service of the whole international community. We will have an opportunity to do so in November, with the Climate Change Conference in Durban and the G20 Summit on the global economy. There will also be the Security Council, and we will strengthen our consultation in advance on all the issues that will be discussed there.

“India has a responsibility in the world’s destiny”. Today, in the age of globalisation, the Arab awakening and the global challenge of sustainable development, the words of André Malraux have a special resonance. I believe we can achieve great things together.

Excerpts from the speech delivered in New Delhi on October 21 by the French Minister for Foreign and European Affairs