The Tribune, Chandigarh, India

Itching for a fight
Annandale dispute can be settled in court

Himachal Pradesh Chief Minister Prem Kumar Dhumal, it seems, has no better causes to champion than to convert Shimla’s historic Annandale ground into a cricket stadium. His son heads the cricket association that, among others, has launched a “save Annandale campaign”. At one time it would have been unthinkable for a chief minister to come out publicly against as respectable an institution as the Army. Given the scandalous developments of the recent past, Dhumal found no reason to restrain himself while threatening legal action, including a defamation suit, against the Army authorities, whose help he might need in case of an emergency. The Himachal capital is in a quake-prone zone and there is merit in the argument that Annandale could well come handy for disaster management.

Violating the long-honoured Army tradition of avoiding a public controversy or confrontation with the civil authorities, the Western Command made wild allegations against the Chief Minister, who, after all, is the head of the government and has to act in public interest. The recent dirty debates on TV channels involving the Army did not dissuade the military authorities from rushing to the media with a provocatively worded statement. There may be some truth in the picture they project should Annandale fall in civil hands: unplanned urbanisation, mushrooming of malls, shopping complexes, hotels and housing societies, threatening the fragile ecology of the 121-bigha ground, just 4.5 km from Shimla’s Ridge. But it is also true that their lease agreement over Annandale has expired.

There is no denying the fact that the land mafia is at work at many places in Himachal, including Shimla, and politicians, regardless of their party, have changed laws and rules to encourage private builders. The chaotic growth and expansion of Shimla is a matter of concern for all. But there are institutions – Lokayukta and courts -- dealing with acts of wrongdoing and land disputes. The Army and the state government should have quietly settled their dispute over Annandale in a court of law, or better, at their own level outside court.

Saving Golconda
Heritage is not meant for profiteering

Our architectural marvels represent our heritage and most of these sites are in danger. The callous neglect of our heritage does not make news unless it involves one of the 27 World Heritage Sites, so declared by UNESCO (United Nations Educational, Scientific & Cultural Organisation). This time around it involves the 16th century monument, Golconda Fort, a cultural symbol of Hyderabad. An 18 hole golf course is being laid out on 212.17 acres within the protected area, around the fort. Out of this, 50 acres are in Naya Quila area, inside the fort walls. Ostensibly, the state government gave approval to the plan to promote tourism and prevent further encroachment.

Any construction, within 100m of a protected monument is prohibited. Understandably, the efforts towards preservation of these monuments end up in pushing them further towards their doom. As central and state governments pump in more funds for the ‘development’ of these sites, and add facilities to attract more tourists to earn revenue, these efforts result in inviting trouble for the health of the monuments. The fine balance between the environment, where these buildings have survived over centuries, and the monuments is lost with growing pressure of infrastructure around the sites.

Environment activists had to fight a long-drawn battle to save 15th century Hampi ruins in Karnataka from the serious damage caused from illegal quarrying and blasting activities around the world heritage site. Mining was stopped only after a lot of damage was done to three monuments. And action was taken only after UNESCO threatened to remove Hampi from its list of protected sites. The problems of rural migration and urban settlements also add to the woes of these monuments. UNESCO insists that India must have a master plan for the protection of all these sites. Of the 27 sites selected, only 13 have a master plan to manage the entire site. We cannot depend on foreign agencies to protect our legacy, we need to respect our invaluable inheritance.

Thought for the Day

Even peace may be purchased at too high a price.— Benjamin Franklin

ARTICLE

Has India lost its shine?
It’s time for introspection
by Jayshree Sengupta

The Western media now perceives that India is losing its shine. This belief is based on the fact that India’s GDP growth rate is slowing down ( from 9 per cent to less than 7 per cent). It is also being mentioned that because of the many political problems that the UPA government is facing, it is unable to act fast on economic reforms. The big multinational business abroad has often been criticising India for not opening up the economy faster. According to them, many obstacles to a free flow of foreign investment and trade remain unresolved. After all, India is a huge market and a slowdown in growth and policy-making does not look encouraging.

Emerging market economies are important for the industrialised countries for selling their products because of their large population and the rapid rise of the middle class with purchasing power. India has always had a creamy layer of people who enjoyed luxury goods from the industrialised West. The Maharajas of the past ordered jewelry, cars, guns, furniture and decorative items from famous brand names of Europe and America. In the last 20 years, however, the unprecedented influx of Western branded consumer goods in the Indian markets has made them accessible to a much larger cross-section of people with high salaries and incomes.

Now with the slowdown of the economy, the same makers of branded goods are afraid of losing their lucrative market and are calling for more ‘economic reforms’ which would allow them to have a higher equity stake or complete ownership in the companies producing various consumer items for the Indian market. They want further opening up of retail, insurance, automobile, wines and spirits, legal and accounting services, defence, banking and aviation sectors. This would ensure them a more secure and a larger share of the Indian market.

India will no doubt gain from more foreign direct investment, especially if it comes to important sectors like infrastructure and capital goods industries. It will bring more expertise and foreign exchange also. But India will have to watch out whether our own industrial interests and the national agenda for development is not disturbed or jeopardised. For example, foreign banks will have to have branches in villages if they want to come to India with higher equity stake. Perhaps, introspection regarding which reforms to undertake is a good thing, and not mindlessly opening up.

For many people across the world, however, India will never lose its shine because it does not depend too much on foreign investment. Nor will a slightly lower GDP growth be an indicator of India losing its shine. Many have been inspired by India’s repository of knowledge, tradition in music, art, indigenous medicines, yoga, decorative arts and textiles, and they are always going to come to India because India remains unique with centuries of knowledge, ingenuity, originality and craftsmanship. Even the Chinese are enamoured of the ‘Indian Model’ of development which has democracy at its core.

India can lose its shine only when the ordinary common man or woman is no longer happy or secure and is worried about children’s future. It is children’s education, housing, job, health, environment and peace which are the true indicators of a country’s attraction as a place of residence.

After Independence, India has been struggling with millions of problems but in the last 20 years, the problems have been compounded due to the rise in population, rural migration, urban congestion, inadequate infrastructure and rising inequalities of income and wealth. The inequalities in consumption patterns and lifestyles have also become more glaring, and better communications have led to higher aspirations. We also have around 300 million people who have remained poor and whose children have not been properly educated and who cannot find jobs. There are thousands of youth out of work and who lack marketable skills and training. There are around 80 million people living under inhuman conditions in slums.

Health care is one area in which we have progressed in a bizarre way, and the rich have been the beneficiaries of the latest medical practices and procedures in well equipped super-specialty, spotlessly clean hospitals. The poor, by contrast, have to stand in queues for hours to seek medical advice or get tests done.

Also, to become a world power, we have to look for ways to make the ordinary person’s life more fulfilling and secure with justice and equity for all. There has to be proper sanitation and hygiene in cities and villages, and people should have access to universal healthcare and universal food security. Everyone points out the need for good governance which, of course, is badly needed with less corruption and more accountability. There will have to be more involvement of the common man or ordinary people in the decision-making process, and the top-down approach has to be abandoned in favour of a more people-centric approach in which civil society participates. Decentralisation and giving more autonomy to the states is important for them to carry out their business according to their needs, and there has to be flexibility in the way they manage their finances.

Gender equality is also important. No emerging world power can afford to have frequent reports in the Press of female babies being killed. The sex ratio has to improve and female foeticide has to be stopped, and those indulging in violence against women punished.

Many would look at the inflation rate also to ascertain whether India is ‘shining’ or not. Low inflation, a good banking system, and low interest rates facilitate business and lead to prosperity. The inflation rate was at 6.9 per cent in February but for the last two years, people have suffered high inflation. To control it, high interest rates had to be imposed which has adversely impacted on investment decisions, and the industrial growth rate has faltered to 4.1 per cent in February 2012. Obviously, with slowdown in industrial growth, there will be less jobs created and lower profits for business. Indeed with a high rate of unemployment, no country can shine. Already, the unemployment rate is quite high at 6.6 per cent with around 28 million people out of work and many more disguisedly unemployed.

Thus, India will never lose its allure in some ways because of its unique culture and warmth. But on other fronts India is slipping especially if it does not care about giving an equal opportunity to all its citizens for a better life. If there is inefficient delivery of the most important public goods like good roads-especially village roads — good affordable housing, clean drinking water, food, sanitation, education and health services, India will not be shining for long. n

MIDDLE

Daredevils on the roads
by Rama Kashyap

Is the traffic light there just for your entertainment?” asked Oprah Winfrey, the American talk show host icon on her recent visit to India. Quite clearly she was aghast at our utter disregard for traffic rules.

Traffic lights may not be for our entertainment but it is a fact that many of us care two hoots for the signal and would jump the lights when the traffic cop is not in sight. Our impatience at the traffic signal gives the impression that Indians are the busiest people in the world with no time to stand and wait. The lightening speed at which some people jump the lights, reminds me of a batsman who snatches a cheeky single on the cricket field. There are many who prefer to travel extra distance rather than wait at the lights. Never mind the risk of banging into others, they would go via the slip road, take a U-turn from the divider (the short ones) and again take the route of the other slip road to go across. Imagine the risk and all this extra effort to save a few seconds!

Driving in many of the congested cities in the country, negotiating the chaotic traffic is a nightmare. Forget about following the rules, people, it appears, do not even know the traffic rules. The other day, my daughter-in-law, who has recently shifted from Chandigarh to Noida, was shocked when the driver of the car behind her went on honking continuously as she waited at traffic lights.

Even though traffic policing is quite strict in Chandigarh, there is no dearth of ‘daredevils’ on the roads. Rowdy youngsters, at times three on a bike pulling off stunts on the roads and, of course, most of the times without helmets, is a common sight. Then there are young men who play loud blaring music while driving their cars at maddening speed. It is not unusual to be pestered by the speeding drivers who keep honking, trying to overtake from the left or the right, even though one is driving at the desirable speed in the right lane.

Not wearing helmets is a matter of pride for youngsters. I remember my brother who, in his younger days, would keep the helmet between his feet on the scooter rather than wear it on his head. The moment he spotted a cop from a distance, like a juggler, he would pick up the head gear with one hand and put it on his head. Boys are bound by the law to wear helmets but girls, who have no such binding, prefer to protect their skin rather than their skull. No wonder, most of them are without helmets. On a hot summer day one can easily spot look-alikes of dacoits on the city roads, scores of girls speeding on their two-wheelers with their faces thoroughly covered.

OPED ECONOMY

Dangers of the ‘Resource Raj’
Even as the world becomes more competitive, India’s star has dimmed in the last few months as our governance is besmirched by corruption scandals and our macro-economic health has deteriorated. Alarm bells should sound when domestic industry no longer wants to invest in India, even while eagerly investing abroad
Raghuram Rajan

By reducing controls and increasing competition and entry, the reforms that India undertook in the 1990s unleashed the latent and suppressed energy of our people. India has achieved much in the two and a quarter decades since then.

Prime Minister Manmohan Singh being presented a copy of a festschrift entitled ‘Economic Reforms and Development Essays for Manmohan Singh’ by Isher Judge Ahluwalia and IMD Little in New Delhi on Saturday. Also seen are Raghuram Rajan (extreme left) and RBI Governor D Subbarao (extreme right). — PTI

There is so much to celebrate, whether it is that we have moved away from the Hindu rate of growth of 3.5 per cent or whether it is that so many millions of Indians have moved out of debilitating poverty into a life of some comfort – and yes, despite all the furore over the Planning Commission’s poverty line, we have brought down poverty enormously.

Shops are full of goods that we could only dream of buying in 1990, many of them made in India. I can withdraw money from my U.S. bank account today from any ATM nearby (by the way, not incurring the fees I would incur in the US), while a migrant worker can send money using his cell phone to his family’s bank account in his village. We can buy air and train tickets online, which has eliminated long waits and some corruption in those areas. Organisations like Shankar Netralaya are showing the world how to offer medical care cheaply but effectively. The consumer has never had more choice in India than today. Even our gloom today over the fall in growth to between 6 and 7 per cent reflects how far we have come – 20 years ago we would have been elated with such performance.

Why the gloom?

The problem is that despite the tremendous success of the first generation of reforms, some of the key next-generation reforms have been stymied. Typically, these are the reforms that reduce rents and patronage, while increasing competition – for example, the bill on foreign entry into higher education, attempts to auction resources transparently, or attempts to transform public sector enterprises into more autonomous corporations. On the other hand, rent, patronage, or entitlement enhancing measures have sailed through.

For a while, growth papered over the paralysis in growth-enhancing reforms, while it made the expansion in subsidies and entitlements seem affordable. With growth slowing, government tax revenues stagnant as a fraction of the GDP, and spending high, fiscal deficits remain high. At the same time, private consumption, especially in rural areas, is growing strongly on the back of rising incomes, strong credit growth and continuing government transfers and subsidies.

The result: The gap between our spending and our saving is making us dependent on short-term foreign inflows to a dangerously high extent, at a time that the international investor is increasingly skeptical about the India story.

The depreciating rupee is the first warning sign of an unstable macro-economy, rising long-term interest rates could be the second. Dangerously volatile oil prices could lead to a blowout in our fiscal and current account deficits, while at the same time depressing exchange rates and elevating interest rates. Given geo-political uncertainties, we cannot be complacent.

There is hope

For a large vibrant economy like India’s, there is always hope. We still have tools to tackle our problems. But we must exercise those tools with vigor and a sense of urgency. I know that a sense of urgency is shared within the government, but urgency has to translate to persuasion and action. We need a common minimum programme across all sensible political parties to ensure that we stabilise the economy and foreign investor perceptions quickly.

How have we come to this pass? My hypothesis is that while the 1991 reforms opened up the economy and brought in competition in a number of areas, they were incomplete in four important respects:

First, they left untouched a number of areas such as higher education, where the Licence Permit Raj continued and significant rent-seeking persisted. Second, they left the public sector occupying the commanding heights, even possessing a virtual monopoly in some areas such as coal. Third, they did not recognise the importance of national resources such as land, spectrum and commodities, and left their allocation ill-defined. And fourth, despite undoubted successes, they did not change the public mindset as much as they might have.

All this was to a large extent understandable. One could not do everything at one go, so reforms had to be prioritised. Moreover, the need to undertake some reforms became apparent only after the success of the first set of reforms. For instance, the public hunger for education, and the rents from running capitation fee colleges became obvious only after the dramatic increases in growth and the demand for skilled workers post reform.

‘The connected’

By the early 2000s, India was therefore ripe for a second generation of reforms to cement Dr. Manmohan Singh’s legacy. But powerful elements of the political class, which had never been fully convinced about giving up rents from the Licence Raj in the first place, had by then formed an unholy coalition with aggressive business people, whom I will refer to simply as “the connected”. What has ensued is coalition adharma, a coalition of the bad. The new post-Licence Raj equilibrium became the Resource Raj.

The Resource Raj resulted in massive fortunes generated by the connected and by politicians. Again, this is not to take away from genuinely innovative and strong businesses there are myriad examples of. Many industries became really competitive and innovative, including ones like telecom that are the focus of investigations today. Dr. Manmohan Singh’s reforms have made India enormously better off.

But if we want to understand why there is a sense of pessimism today we have to acknowledge that the full intent of those reforms, to liberalise so as to enhance entry, competition and efficiency, to move from a producer bias to a consumer bias, and to price and allocate national resources and opportunities fairly, have not been realised in a number of areas of the economy.

The second-generation reforms are ready and packaged in the form of bills waiting to be passed. But these bills, some of them conceived by Atal Behari Vajpayee’s government, are stuck, not just because the government does not have the votes to pass them, but because there is not enough political will, even in the ruling coalition, to move on them.

Assertive institutions

Finally, what has made the unreformed areas bottlenecks today is that the middle class has grown larger, and it has become more aware, partly because of legislation like the Right to Information Act brought in by the UPA government. Newly assertive institutions such as the media, the CAG, and the judiciary have started uncovering the massive nexus between the oligarchy and politicians and bureaucrats that built up during the go-go years. Unlike in the past, middle class anger now has tools with which to assert itself even if the middle class is still numerically an electoral minority.

Under this scrutiny, the non-transparent systems to acquire and allocate land, iron ore and other commodities have ground to a halt so business and investment in these areas is threatened. We have not established public support for the basic principles of competition and free enterprise. Indeed, distrust of even the legitimate activities of the private sector has grown.

Not surprisingly, the utopia promised by the extreme left is once again enjoying a resurgence of popularity. Unfortunately, even necessary new reforms such as the proposed Land Acquisition Bill do not draw fully on the intent of Dr. Manmohan Singh’s reforms, underemphasising the need to provide good incentives and making success overly dependent on government capacity.

Rents vs reforms

This then is the dangerous place we are at. Growth is slowing, in part because of bottlenecks. At the same time, given public dissatisfaction, politicians are even more focussed on subsidies and transfers to keep people happy, especially as the general election is near. No one wants to be blamed for taking away the goodies, even as our ability to pay for them has plummeted. Politicians are loathe to act quickly to give up their rents, so reforms that might improve sentiment are stuck. And opposition to liberalisation is gathering strength amongst the angry middle class – they have become more willing to listen to old discredited remedies once again because their trust in the private sector has been shattered.

But we should not succumb to pessimism. There is no reason that India’s growth cannot regain double digits. Simply moving our millions from low productivity agriculture to rural industry or services will give us growth for years to come, provided we are willing to do the minimum necessary to collect the low-hanging fruit.

Open up education

That requires completing the second generation of reforms. We need to liberalise sectors like education, retail and the media, freeing entry and improving customer choice. We need to transform more government-owned firms into well-managed publicly owned firms which are free from political influence or government support. And we need to evolve transparent means of pricing and allocating the bountiful natural resources in our country. Clearly, we need to ensure that growth reaches more people. But there is no better way of inclusion than a decent job, no doubt augmented by better public services as well as targeted conditional cash transfers to the poor.

I am hopeful that our increasingly difficult situation will focus political minds.

Given that the public is no longer willing to tolerate the adharmik coalition and the lack of transparency, perhaps politicians will see they have no alternative but to change. Moreover, and perhaps as important, the connected businesspeople are themselves now frustrated with the free-for-all resource grab, and government paralysis. I sense they too want change. When everyone wants change, it just might occur.

Excerpted from a speech the writer, a University of Chicago professor, delivered at the launch of a festschrift in Prime Minister Manmohan Singh’s honour in Delhi on April 14

Start with three steps
l Raise fuel prices to international levels in a set of quick steps, then completely deregulate them. Announce this as soon as politically possible, and do not roll back.
l Resolve the commodity bottleneck in a way that does not give a windfall or bailout to any party, least of all the private promoters, but that ensures these projects/plants can resume production. If necessary, write down the equity of these promoters before restructuring bank liabilities.
l Be kinder to foreign investors – they are not the enemy but a necessity — we need their money to fund our spending to the tune of 4% of GDP. No doubt, however badly we treat them today, they may eventually want to be in India, but crises are always about timing. We need them now, when India looks increasingly tattered compared to alternative investment opportunities, not five years from now when growth recovers.