The Tribune, Chandigarh, India

ARTICLE

Expectations from Budget
Finance Minister has a lot of balancing to do
by Jayshree Sengupta

The main challenge before the Union Finance Minister relating to the Budget for 2012 will be to maintain the image of India as an important emerging economy and boost the confidence of investors. In the last quarter of 2011, India’s growth came down to 6.2 per cent and the recent big dip in the stock market also indicated fears of inflation among investors. Much will depend on the oil prices because India’s inflation rate will gather momentum if there is a big jump in oil prices.

Fortunately for the Finance Minister, food inflation has ebbed significantly, but the first nationwide Consumer Price Index (CPI) data show that inflation was at 7.65 per cent in January 2012. It was higher at 8.25 per cent for urban centres and 7.38 per cent in rural areas. India’s CPI is one of the highest in the world and only lower than Pakistan’s. Industrial slowdown is also clearly a reality with IIP plummeting to 1.8 per cent in January.

Investments are slowing down because companies are raking in less profit due to a fall in sales. High inflation for almost two years has reduced the demand and investment both. Investment has been affected by the prevalence of high interest rates over the last one and a half years, a policy adopted by the RBI in a bid to contain inflation. Even now with inflation having climbed down, the RBI is dithering from lowering the interest rate.

The Finance Minister, however, regularly meets people from different walks of life for consultations before each Budget. Every year the industrial lobby as well as people from agriculture and the services sectors place their wish list before the announcement of the Union Budget.

This time the industrial sector representatives are hoping for a rise in the depreciation rate that will encourage investment in capital goods. Most probably, the depreciation rate or the rate at which the government offers rebate for junking old machinery and equipment will be raised from 15 per cent to 30 per cent.

Last year the Finance Minister wanted to increase the share of manufacturing from 16 per cent of the GDP to 24 per cent. This has not been fulfilled and can only materialise if there is a revival of industrial growth. With the global recession still far from being over and some European Union countries experiencing a huge increase in unemployment and debt, the impetus is not likely to come from external demand or exports. The widening of the current account deficit is a matter of concern also for India and how to sustain high export growth is a problem before the government. Exporters naturally are demanding a lot of sops but what they will get in the Budget may be disappointing.

Also clearly the fiscal consolidation that the Finance Minister hoped for in the last Budget has not happened. He aimed at a reduction of fiscal deficit from 5.1 per cent to 4.6 per cent. It is likely that the target will be missed this time.

For making up for revenue shortfall the government may be contemplating an increase in service tax. Already the common man is reeling under the hefty service tax charges imposed on all services, including the essential ones. There has been a strong plea from all quarters for not raising service tax, but fiscal compulsions may disappoint everyone.

In agriculture, there are serious problems regarding the quality of inputs, including water. In the last Budget there were interest rate subventions (from 3 to 2 per cent) offered to those farmers who repaid their crop loans on time. But were the small farmers really helped? Today it is the small and marginal farmers who need help most. Hopefully, their needs and problems will be addressed more specifically for their survival in an increasingly competitive world.

Most probably, the Finance Minister is going to announce some new measures for strengthening the food security of the country. Concrete proposals for cash transfers are likely to be announced in this Budget which will replace the current public distribution system (PDS). More measures to make the PDS ‘leakage’ proof are likely to be taken.

Rural India will also get its due attention. Linked to last year’s allocation for skill formation, there can be more schemes announced for enhancing the job capability of India’s burgeoning youth population. The provision of rural jobs will become more and more important in the future and some more incentives for rural industrial growth may be announced.

In the case of direct taxes, the government is naturally interested in stimulating demand, and some sops in the form of Income tax exemptions up to Rs 3 lakh may be announced. A reduction in the corporate tax rate is also likely to offer relief to the struggling industrial sector.

Infrastructure will again be focused upon in this year’s Budget because even with a huge increase in investment, much work on roads, railways, ports and airports remains unfinished. Air India also is in deep trouble. Some announcements on the disinvestment front and bailout of Air India would quell the fears regarding the bankruptcy of India’s flagship airline. Whether the target for disinvestment will be raised further from last year’s Rs 40,000 crore is hard to guess.

The Budget will have to include the demands of the common person and so there will be incentives offered in the social sector, especially when reports of persistent and pervasive malnutrition have come out in recent times.

Even though there has been a rise in the allocation for the health sector in the last few Budgets of the UPA government, the quality of public health in rural and urban areas continues to remain dismal.

Government hospitals are terribly congested and, as a result, medical healthcare in the private sector is booming and becoming costlier and less and less reliable, causing a huge burden on the poor and the underprivileged. The government has to raise the allocation to the health sector substantially this year (more than last year’s 20 per cent) in order to make the health sector more accessible and efficient to all with special emphasis on primary health care.

Similarly, the quality of education has not improved just because the allocation to education went up by 20 per cent last year. The quality of teaching has to be emphasised to give better education to children from low income groups, and school infrastructure has to be improved (with toilets for girls) to reduce the number of dropouts. Urban housing and slum development are also important and in keeping with the rising trend towards urbanisation.

In general, the Finance Minister will have to do a balancing act and come up with an imaginative Budget which will please all and hurt none.

MIDDLE

An amazing Indian
by P.C. Sharma

Short in stature, thinly built, clad in coarse khadi and a ‘jhola’ stacked with photocopies of government orders and court judgements hanging down his shoulders, Baghambar Pattnaik is an amazing Indian. His wizened face rarely betrays a smile; his eyes have a piercing gaze but his persona is a picture of humility. He met me three or four years back with a petition against hereditary system of bonded labour being practised in one of states on the eastern coast of India.

Speaking in staccato style, he explained with fire and fervour against the feudal custom of ‘Bartan’(bonded labour). Washing the feet of guests, serving them meals on a banana leave and collecting them later and performing other abominal community services are the routine features of the ‘Bartan’ system. It rewarded the ‘sewaks’ only with six ‘gaunis’ (15 kg of paddy) in a year and left-overs of the meals are what is left for the ‘sewaks’ to feed themselves on. The system has firmly entrenched itself in the social milieu and, prevailing for centuries, it has become hereditary and has acquired social sanction and tacit approval of the authorities.

In our tete-a-tete, Patnaik poured his disgust against the ‘Bartan’ system, his anger against the bureaucracy and his rage against feudal elements. His frustration was total at the district-level authorities who failed to stop this venal practice --- why, for it benefited the elite of society which included the classes that most persons in authority themselves come from.

Submission to this degrading custom yielded a pittance, but failure to perform invited enormous wrath of the perpetrators. In practice, almost all over the state the custom enjoyed widespread support, but the opposition to it was muted and feeble.

Baghambar Pattanaik decided years back to chuck his job of a school teacher and resolved to raise his voice against the ‘Bartan’ system. Deriving no benefits of his job, having no homestead for shelter, not enough money for buying stationary and getting his petitions typed, Baghambar was an unlikely warrior against the “sea of trouble” that his fight had become. In his feeble frame and almost no one to stand by him, this lonely figure decided to follow Tagor’s advice, “Ekla Chalo”. But his greatest strength was his resolve to fight and his belief that someday there will be someone on his side, too.

Reminded of Hamlet’s line, “there is divinity that shapes over ends;” and an intense belief that each human being has the potential of making history, I decided to push his case to the National Human Rights Commission. This time he was not alone.

Protracted proceedings before the court of the commission — a veritable exercise in ensuring social justice — had senior bureaucrats and district officials stand before the commission and explain their failure to eradicate ‘Bartan’. They quoted chapters and verses and expounded various theories that people performing ‘Bartan’ duties in rural areas could not be deemed as bonded labour as they were doing social service. But during the commission’s proceedings they soon learnt that their pleadings were hollow and their ignorance was colossal.

Finally, the National Human Rights Commission held that “Bartan was a degrading social practice falling within the pale of bonded labour”. Conceding the commission’s observation, the state government issued a notification to the effect that “since time immemorial” the custom of ‘Bartan’ “was exploitative and beneath the dignity of human beings” and notified that such practice is abolished. The constitutional promise of an egalitarian society has been redeemed, though only partially. Baghambar’s face registered a smile. This was his triumph and for the commission, a landmark.

OPED: THE TRIBUNE DEBATE: NCTC

Inadequate consultation is the bane
B. Raman

Consensus on an effective architecture to deal with terror has proved elusive over the past two decades. Mistrust between different agencies, and not just between the Union and the States, has dogged the issue

B. Raman

India has been facing the evil of terrorism since 1971 when two members of the Jammu & Kashmir Liberation Front (JKLF) hijacked an Indian Airlines plane to Lahore and set it on fire after asking the passengers and crew to leave the plane.

Except in J&K and the North-East, where the Army had to be asked to take over the leadership of counter-terrorism and counter-insurgency operations, in the rest of the country, the responsibility for dealing with terrorism vested with the State Police. In Punjab, it was the Police under the able leadership of K.P.S.Gill, the Director-General of Police, that effectively brought the so-called Khalistani terrorism under control.

In Tamil Nadu, it was again the Police that brought the activities of the so-called Al Umma, a local terrorist organisation, under control. The police also dealt with the activities of the Liberation Tigers of Tamil Eelam (LTTE).

Wreckage of motorbikes at the site of the bomb explosion outside the Opera House in Mumbai. A file photo

In Mumbai, the successful investigation of the 1993 serial blasts was carried out by the police. Thus between 1971 and 1993, the police forces in different States were able to deal effectively with terrorism with the help of intelligence inputs and guidance, where necessary, from the central intelligence agencies.

The infiltration of the Lashkar-e-Toiba (LET) and other Pakistani terrorist organisations into India — first into J&K and subsequently into other States of India — from 1993 onwards gave a new pan-Indian dimension to the evil of terrorism and made Indian counter-terrorism experts realise that the police alone, however capable, would not be able to deal with the jihadi octopus of Pakistani origin. The problem was aggravated by the emergence of the so-called Indian Mujahideen in 2007.

NEW ARCHITECTURE

The need for a pan-Indian counter-terrorism doctrine and architecture was increasingly felt in the post-1993 years, but unfortunately no action has been taken to evolve such a doctrine and architecture. Despite terrorism of the jihadi kind, originating from Pakistan, assuming a pan-Indian and global dimension, we continued to deal with it in an ad hoc manner with the help of the police in different States.

The Task Force for the Revamping of the Intelligence Apparatus, headed by G.C. Saxena, former chief of the R&AW, which was set up by the Atal Behari Vajpayee Government in 2000, drew attention to our failure to address the problem of pan-Indian terrorism in a professional manner and suggested the creation of a Counter-Terrorism Centre (CTC) in the Intelligence Bureau to deal with terrorism in a coordinated manner.

The CTC suggested by it was patterned after the CTC of the USA's Central Intelligence Agency (CIA), which was then responsible for counter-terrorism in the US, since the terrorist threats to the US before 9/11 mainly emanated from abroad and were largely directed at US nationals and interests abroad. Since terrorism in India — whether regional or pan-Indian-was largely directed at homeland targets, the Saxena Task Force, of which I was a member, suggested that the proposed CTC should be part of the Intelligence Bureau and should work under the direction of the Director, Intelligence Bureau (DIB).

The CTC, as proposed by the Saxena Task Force, was essentially a preventive architecture responsible for introducing the principle of jointness in preventing terrorism. Jointness meant counter-terrorism experts from different agencies of the Government of India working together under the leadership of the DIB for analysing and assessing the intelligence collected by different agencies and the Police and giving directions for follow-up action.

The idea was that the follow-up action would still be taken by the State Police, but on the guidance and directions of the CTC, which was not given any executive powers of its own. The Vajpayee Government set up the CTC in the IB, but named it the Multi-Agency Centre (MAC). Since it was not given any executive powers to act independently on its own in the jurisdiction of the State Police, there was no objection to its creation from the States.

NATIONAL & INTERNAL SECURITY

Before his death in January 2002, R.N.Kao, the founding father of the R&AW, met Vajpayee and told him that without the co-operation of the State Police, the Government of India would not be able to deal with terrorism effectively. He also expressed the view that the National Security Adviser, being an officer of the Indian Foreign Service, with no exposure to the State Police, would not be able to command the required co-operation from the State Police. He, therefore, suggested the creation of a post of Deputy NSA to be manned by a senior officer of the Indian Police Service either from the States or the IB.

Kao told me that Vajpayee reacted positively to his advice and said that he would initiate action for the creation of a post of Dy NSA to be manned by a police officer, who was an expert in internal security and who commanded the confidence of the State Police. By the time this post came into being, Kao passed away. When this post was created, it was filled up by another IFS officer, who was an unknown quantity in the States and who had very little expertise in internal security matters.

The 9/11 terrorist strikes in the US Homeland brought out inadequacies in the functioning of the CTC of the CIA. It was decided by the George Bush Administration in 2004 to set up an independent organisation called the National Counter-Terrorism Centre (NCTC) for ensuring jointmanship in dealing with terrorism and place it under the Director, National Intelligence. It also modified the counter-terrorism architecture in the US by creating a Homeland Security Council, which was distinct from the NSC, and placing it under a Homeland Security Adviser, distinct from the NSA.

When the Dr.Manmohan Singh Government came to office in 2004, it created a separate post of Internal Security Adviser on the pattern of the USA's Homeland Security Adviser and made him exercise leadership in all internal security matters, including counter-terrorism. M.K.Narayanan, former DIB, was appointed to this post.

In 2005, after the death of J.N Dixit, the then National Security Adviser, Narayanan was designated as the NSA and asked to perform both the tasks of co-ordinating external and internal security duties. He was not able to devote adequate attention to internal security matters because of his preoccupation with the negotiation with the US on civil nuclear co-operation.

Internal Security Management in the Centre consequently suffered. The progress in the implementation of the Saxena Task Force's recommendation on counter-terrorism was slow and no attempt was made to draw up a co-ordinated Counter-Terrorism Doctrine and revamp our counter-terrorism architecture.

The result: The 26/11 terrorist strikes, which dramatically exposed the poor state of our preventive architecture. There was no co-ordinated follow-up action even on the limited intelligence that reportedly came from the US through the R&AW regarding the plans of the LET to launch sea-borne terrorist strikes in Mumbai.

Chidambaram's plan

After taking over as the Home Minister post-26/11, Chidambaram, who has assumed total responsibility for counter-terrorism management, has sought to revamp the counter-terrorism architecture. He initiated in particular four steps.

Firstly, he decentralised the deployment of the National Security Guards and created the National Investigation Agency (NIA) to improve our investigation capabilities. Secondly, he instituted a system of daily meetings of the intelligence chiefs under his chairmanship to discuss the available intelligence and assess the evolving threats. Thirdly, he speeded up the implementation of the Saxena Task Force recommendation for the Multi-Agency Centre, which had gone into doldrums under ShivRaj Patil, his predecessor. And fourthly, after a visit to the US, he decided to set up an NCTC partly — not totally — on the pattern of the USA's counterpart.

While his first three steps did not meet with any opposition from the States, his attempt to create the NCTC has met with serious opposition because of his decision to keep it as part of the IB and give it independent executive powers of arrest and searches without the prior knowledge of the State Police.

His idea probably was that to meet situations where a State Police dragged its feet for making an arrest, the NCTC should have its own powers of arrest so that it could make an arrest, produce the suspect before the Police and direct it to act against him.

This was a major encroachment on the powers of the State Police and without the prior concurrence of the States.

In his NCTC architecture, Chidambaram has made two significant departures from existing practices in countries such as the US. Instead of making the NCTC an independent institution, he has made it a part of the IB. By giving the NCTC independent powers of arrest, he has violated the widely held principle in other democracies that a clandestine intelligence agency should not have police powers of arrest, which could be misused for political purposes.

His failure to consult the States beforehand and his attempt to confront the States with a fait accompli, which would have definitely infringed on their rights, have created so much opposition that the very principle of jointmanship in preventing terrorism through a body like the NCTC, now stands suspected as a politicised measure to circumvent the States.

Apparently, there were inadequate consultations even at the Centre as one could see from the opposition expressed by an increasing number of ex-R&AW officers to the move to make the NCTC a part of the IB. The controversy has not only become a Centre vs State issue, but is also threatening to become an IB vs R&AW issue.

At a time when there is an urgent need for unity of action against terrorism, creation of a preventive architecture against terrorism has become a highly contentious and politicised issue. While one has to welcome Chidambaram's decision to postpone the implementation till belated consultations are held with the States, it is doubtful whether the opposition-ruled States, whose suspicions have been aroused, will now agree to the creation of the NCTC at all even if it is not given executive powers. The whole concept, which is necessary, has become suspect in their eyes. It is very unfortunate.

There is no hurry to create the NCTC now. The MAC could continue to handle the tasks of follow-up action on the intelligence collected and prevention. The States have not objected to the MAC and have got used to it. Instead, Chidambaram should focus on revamping the counter-terrorism architecture by making the NCTC an independent institution, without executive powers working under the direction of the DIB, who could wear two hats as the head of the IB and of the NCTC.

The NCTC could work under the DIB but without becoming a part of the IB. It would be similar to the R&AW and the Directorate-General of Security, which are independent institutions working under Secretary (R), who wears two hats.

In his address to IB officers in 2010, Chidambaram had suggested the creation of a Ministry of Internal Security to focus exclusively on the operational aspects of Internal Security Management. There has been no follow-up on this since then.

The time has come to consider this proposal as part of the over-all revamping. None of these ideas would work unless he manages to reach a political consensus with other political parties and the States. Prior consultations with the States should be sincere and serious and not just a gimmick.

The writer is former Additional Secretary, R&AW, Cabinet Secretariat