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Petrol shoots up |
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House of shame
Uncertainty in Egypt
Winding down the Afghan war
Paradise lost
It’s a crunch, govt shows some grit
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Petrol shoots up
The
steep increase in petrol prices would have been avoidable had the government followed its policy of decontrol. It did not let petrol prices move in tandem with global rates --- first due to assembly elections, then because Parliament was in session and it could not afford to provoke disruptions. Besides, the UPA was too timid to take hard decisions. Now with Mulayam Singh on board, it has gained enough confidence to take on Mamata Banerjee, a persistent opponent of every reform. She had got the rail fare hike reversed. The hope is the UPA may even revive other reforms. Currently, global crude hovers around $90 a barrel, but the government wants to recoup past losses as well as undo the damage done by a fast-depreciating rupee. Irrational proposals in the budget had scared away foreign investors, hastening the rupee’s sharp fall. The UPA budget had indicated a cut in subsidies this year to tide over financial difficulties. The Opposition did not protest then. Now it tries to stoke and profit from middle-class anger. Why should vehicle owners be subsidised? Those who protest the loudest over the poor surviving over just Rs 20 a day also drag their feet when asked to share the burden. Experts argue for even diesel and LPG decontrol. Stable Central finances and pro-growth reforms will stem capital outflows, check rupee depreciation, reduce chances of rating downgrades, cut interest rates and boost private investment as well as industrial production. On its part, the government should control waste, profligacy, corruption and tax evasion. Why doesn’t it genuinely go after black money? Taxing people is the easiest way of raising revenue. While the losses of oil firms have deepened, the governments at the Centre and in states should slash taxes on petrol, which account for 40 per cent of the price. Chief Minister Parkash Singh Badal was among the first to demand a rollback of the petrol price hike. Let Punjab and other Opposition-ruled states show the way by cutting taxes on petrol if they are genuinely concerned about the burden on the “aam
aadmi”.
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House of shame
It
is without doubt a horrific tale. As more and more skeletons are tumbling out of Rohtak’s Apna Ghar, a shelter home for the destitute, it is hard to believe that such abominable behaviour can take place in the name of protection. While the harrowing accounts of inmates, many of whom were allegedly sexually abused as well, are bound to shock even the most thick-skinned, it has also come to light that no proper records of the funds the NGO received were being maintained. That the administration ignored its wrong-doings goes to prove their insensitivity and apathy, if not outright collusion. Ever since the deplorable incidents at Gurgaon homes came to the fore the rot that defines shelter homes in Haryana has been exposed. While on the one hand several NGOs dealing with childcare were not registered, on the other hand it has been seen that the condition in the state-recognised institutions such as Apna Ghar is no better. That the blacklisted NGO was allowed to function again and the complaints of inmates blatantly ignored points to a much deeper malaise. Whether or not a judicial probe, as demanded by some political parties, or the ongoing investigation will be able to nail the guilty, violations cannot go unpunished. No sympathy should be shown to those arrested if found guilty, and the role of officials too must be looked into. Many NGOs have been doing commendable and credible work in India. But once in a while one comes to know about NGOs which, like the proverbial black sheep, tarnish the fair name of those engaged in true philanthropy. For the sake of the well-meaning NGOs and for the scores of traumatised victims no stone should be left unturned to ensure justice. The Haryana government must realise that mere admission of laxity in the monitoring of shelter homes cannot absolve it of its questionable conduct. It must act swiftly in the Apna Ghar case. Simultaneously, it must put in place a foolproof mechanism to see to it that such shameful incidents are not repeated. The least the government owes to the destitute and the vulnerable, already victims of circumstances, is basic human dignity.
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Uncertainty in Egypt
After
a long wait, Egyptians finally exercised their right of franchise in the two-day presidential elections that concluded on Thursday. But no one knows who has the maximum chances of victory. There were no reliable opinion polls to give an idea about the likely winner. The contest, however, is basically among five of the 13 candidates in the fray. Except for Muslim Brotherhood nominee Mohamed Mursi, no one has a strong organisational support. The Brotherhood has a large following because of its history of being on the forefront of the anti-dictatorship movement, but Mursi faces a major challenge from Abdel Moniem Abul Fotouh, a former icon of the Brotherhood. Fotouh was shunted out of the Brotherhood when he unilaterally announced that he aspired to be a contender for the President’s post. But he has succeeded in winning the support of another conservative organisation, the Salafi Dawa. This means a sharp division in the conservative vote bank. Mr Amr Moussa, a veteran diplomat, has emerged as a favourite of liberals and minority groups, but he suffers from the taint of his long association with Hosni Mubarak, the dethroned dictator. Though he has the experience of running the administration, this hardly matters for ordinary voters. The same weakness may mar the chances of victory for former Prime Minister Ahmad Shafiq, who also is known for his administrative abilities. Left-leaning candidate Hamdeen Sabahi is expected to get considerable support from liberal and leftist voters, but they are not in a position to tilt the balance in his favour. If there is no clear winner, the Egyptian electoral law has the provision of a run-off poll. The situation of confusion suits the Egyptian military, which has always been in search of some pretext to continue to control the levers of power. The military, the interim ruler, was forced to go in for the presidential elections after pro-democracy protests got intensified some time back with a large number of people occupying the famous Tehreer Square again. Egypt is passing through a period of uncertainty so far as the establishment of democracy in that country is concerned.
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God sleeps in the minerals, awakens in plants, walks in animals, and thinks in man. — Arthur Young
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Winding down the Afghan war AS was to be expected, the NATO summit in Chicago "endorsed" the Obama administration's plan to hand over to the Afghan National Army by the middle of 2013 the responsibility for the country's security so that the role of US and other International Security Assistance Forces (ISAF) is transformed from combat to "training and advice", as a prelude to their final departure at the end of 2014. However, as President Barack Obama took care to emphasise, Afghanistan "will not stand alone" even after December 31, 2014. Under the United States-Afghanistan strategic agreement already signed, there would be America's "enduring engagement" with Kabul during what the Afghan President Hamid Karzai described as his country's "transformational decade". Details of what the two countries have agreed to have not yet been disclosed, but reliable reports indicate that the US would have five strategically located bases in Afghanistan from where it can operate its formidable air power, and would maintain about 20,000 troops there in the post-2014 era. Moreover, the US would underwrite the expenditure of just over $ 4 billion a year on the maintenance and equipment of 240,000-strong Afghan army although recent reports have suggested that America's close allies haven't yet fully committed themselves to contributing a little over a fourth of this annual expense. At Chicago, the 28-nation NATO took in its stride the decision of France to withdraw its troops from the rugged country in the Hindu Kush well before the NATO deadline. They also recognised that the war-ravaged Afghanistan would need a lot more economic aid than the mere cost of its army. How to go about this is the one-item agenda of an international conference to be held in Tokyo shortly. All this is good as far as it goes, but does it go far enough? Evidently not because, as many competent observers have underscored, the Chicago summit has left three critically important questions unanswered. First, would the Afghan National Army and police be really able to take over the responsibility of safeguarding Afghanistan's security in the next 12 months? Especially after what happened following the burning by US troops of the Quran at Bagaram and sundry incidents of uniformed Afghan troops shooting and killing US and NATO "comrades"? What lends this question an even sharper edge is that recent concerted attacks on Kabul by the Taliban have belied the US and NATO claims that they had "broken the back" of the Taliban in their stronghold of Kandahar and the adjoining region. Secondly, nothing was said at Chicago about the outcome of America's negotiations with selected Taliban at Doha. Nobody, therefore, knows what the Taliban's role in the future set-up in Kabul would be. Remarkably, the US no longer talks of integrating in the Afghan mosaic only "good Taliban". The expression now in vogue is "good Afghans" whatever that might mean. Nor is it clear whether Mr Karzai would accept what the Americans negotiate with their handpicked interlocutors or whether he would have his own preferences among the Taliban to make up with? Fairness of the elections that Mr Karzai proposes to advance is another question mark that looms ahead. To make matters worse, the ethnic schisms between the Pushtoons and other ethnic groups that once constituted the Northern Alliance are escalating. In this context the third question — the role of Pakistan as Afghanistan's closest neighbour with a record of constant interference in its affairs — assumes huge importance, if only because relations between the US and Pakistan, for years “key allies” in the war on terror, are so bad that they couldn't be worse. The reason for this currently is closure for the last six months of the all-important Pakistani transition route for vital supplies to NATO troops in Afghanistan. This happened because of the November 26 US air attack inside Pakistan as a result of which 24 Pakistani soldiers were killed. The US condoled these deaths but resolutely refused to apologise for them. It also rejected the Pakistani demand for cessation of drone attacks. Pakistan retaliated by choking off the supply line. America's response was not to invite Pakistan to the Chicago summit at the time when invitations were issued to other heads of state. At the last minute an invitation was sent to President Asif Ali Zardari. When he accepted it with alacrity, everyone assumed that Pakistan had agreed to reopen the supply route. The Pakistani media published that Islamabad had already allowed four NATO trucks to leave and that Mr Zardari would announce full restoration of supplies in Mr Obama's hometown. Since this did not happen, President Obama decided conspicuously to snub the Pakistani President. While welcoming his guests, he did not even mention Mr Zardari but spoke warmly of President Karzai and "officials" of Central Asian republics and Russia that are providing the NATO with alternative supply routes. He also ducked Mr Zaradri's request for a bilateral meeting. The Pakistan President had to be content with a call on the US Secretary of State, Mrs Hillary Clinton. At the end of it, he declared that the "trust-deficit" between Pakistan and the US had to be overcome. Meanwhile, the US media and even official sources made no secret of their impatience with Pakistan's dogged refusal to reopen the supply routes and thus impede the "draw down" in Afghanistan. What has particularly irked them is Pakistan's demand for $ 5,000 per US/NATO tanker or truck instead of $ 250 so far. It also wants $ 1 billion as reparations for its "war sacrifices". To settle these matters, American officials admit, would take not days but weeks. It seems that General Ashfaq Kayani's eventual decision not to accompany Mr Zardari to Chicago is the cause for the current uncertainty. Yet Mr Obama eventually chose to mollify Mr Zardari, even finding a way to have a chance meeting with him that ended with his statement that Pakistan had to be a part of the "solution" of the problem; it must play a "positive role" in ensuring peace, stability and prosperity in Afghanistan. This is a replay of the oft-staged drama wherein the US and Pakistan say the harshest things about each other but always end up with the declaration: "The bottom line is that neither would walk away from the
other."
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Paradise lost This
marshy patch in my village was from paradise itself. Being here, one could experience the thrill of the peaceful and sublime overtures of a natural kind, and a sheer bliss of being in the angelic company of nature’s elements. This place blessed with serenity and calmness, typical of a sanctum sanctorum, with bird squeaks fluting once in a while, as if to add effect to a spiritual meditation, where you hear nothing but divine notes, was at a stone’s throw from our house. A little flurry, prompted by soft breeze on the sheet of water, creating ripples that cannot be called waves, as if rubbing balm or a lotion on the skin, to let being massaged for a touch, and even a visual feel, was fascinating. The ecstatic moments were brimming with a feel one would have while meditating, without an effort for concentration. Mind, body, soul and self dissolved and disintegrated into something that just floated, glided and hovered over. Well, it was the silt-bank that ran alongside the canal. It was all swamp and slush. It had vegetation typical to the tropics with long shafts of pliable and pithy green pulp called Patera. Sparrows hung on to them and bent them to a degree, as would almost touch the water below, when the naughty-avian would fly away, letting the plant regain its posture, as if like an old man who stands up after playing horsy to a kid. Having watched this scene a number of times, I became an expert who could tell a baby-sparrow’s tweet from its mother’s. The weaver-birds made their nests joining three or four pithy stems of the water-grass. They’d retire early for clamouring a good-morning chorus the next day. Such was the gremlin-game of the elements that none seemed to be different from one another. They never seemed to cross paths-be it fire or water, earth or sky, human or sub-human. Everything obtaining in adequate measures. Even the dead-wood dropped in those shallow waters contributed its bit to harbouring moss on it on the one hand, and throwing the crevices open for other creatures to slither in, on the other. Given the disposition of calmness and serenity, the moon often came here to rest on the water surface. Sun and rain were never harsh on this patch from paradise. The scenario did not change with a change in its open-to-sky canopy’s height or expanse. Winds, howsoever belligerent and whacky, did not stir or upset anything here. Turtles slithered. Toads trotted. Even small fish finning in groups made a wavy pattern in the see-through water. With them moved the underwater ferns and grasses to a slouch or a swagger, as a young one would feel tickled when stroked by the mother. The perpendicular dive of a snake-bird never went unrewarded, unbaited. Small shores had sand and shells deposited, brought from the mother-river that fed the canal. We collected them for fun. For more fun, we restored them back to the waters when they sounded a jingle-crackle note. A dusty track leading up to the swamp wove through the Mata-a deified structure villagers used to throng for obeisance and making offerings to perform rituals with rhythmical frequency. The jamun tree close by boasted of being a centurion. Its delicacy came for free. Come the month of Sawan and swings could be seen tethered to its branches, ferrying women folk, singing folklore appropriate to the occasion, from one top-end to the other, via a top-down in the loop. Young men tied their long ropes to manoeuvre the swings with women tucked in on wooden platforms to sit on. Hold your tongue and let me have a swing-ride to the times gone by. The swamps are now dried up. Only to yield cash crops. But I can still hear the ‘Did you do it-did you do it?’ tweet of the lapwing who seems to have again forgotten where she laid her
eggs.
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It’s a crunch, govt shows some grit Taking note of these straws in the wind, global financial research and services company Standard & Poor’s (S&P) had last month lowered India’s rating outlook to negative and warned of a downgrade in two years. Finance Minister Pranab Mukherjee called the development an “alarm bell”. The clock is ticking and unless cuts in the fiscal deficit and subsidies are initiated quickly, India runs the risk of being downgraded to junk status. A sovereign rating by S&P or others is like an appraisal or grading of a country’s creditworthiness and investment outlook assessed on the basis of several macro-economic factors. Sound economic fundamentals lead to a better rating, which in turn makes the country more attractive for foreign investors. A good rating means the debt paper issued by the government or companies has to bear lower interest cost and vice versa. India’s rating of “BBB-”, which is already the lowest investment grade rating, is also at risk now if quick action is not taken to address the issues of fiscal deficit, cutting subsidies and boosting growth through reforms. However, India can draw some comfort from the fact that even if the economy is not booming, it is still the second fastest growing major economy in the world. With the developed world slowly being engulfed by a recession, India still remains an important investment destination.
FigureS of fall
Industrial production declined by 3.5 per cent in March due to the weak investment climate. Through 2011-12, it grew a dismal 2.8 per cent, as compared to 8.2 per cent in the previous fiscal. Inflation came in higher than expected at 7.23 per cent for April on the back of increase in prices of vegetables and pulses, leading to worries over a potentially grim situation in the economy where inflation is rising while growth is weak, pointing to a looming “stagflation” and almost ruling out chances of any substantial interest rate cuts by the Central bank. The current account deficit, or the gap between exports and imports, is at $180 billion, largely due to inelastic demand for crude oil and gold. S&P has not bought the Finance Ministry’s estimates on GDP growth and fiscal deficit. It has pegged growth much lower at 5.3 per cent for 2012-13, as compared to the government’s 7 per cent forecast. The government has set a target of 5.1 per cent fiscal deficit and limiting subsidies to 2 per cent of the GDP, but the environment and the will to take tough decisions to achieve these goals is not there. According to Ramesh Adige, a public policy expert, India is falling short on major parameters such as fiscal situation, growth prospects, external debt and policy making. On the impact of the action, he said when sovereign credit rating goes down, it takes down with it the credit rating of private debt instruments as well, including the entire banking system. In addition, it could affect the weakening rupee, affect foreign investors, both capital and FDI flows, raise borrowings costs for Indian companies in the international markets and dent India’s reputation as a growth story and investment destination.
An opportunity
While things are grim in the macro-economy picture, the only positive to come out of the high-voltage shock of the S&P warning is that it can help the government hardsell tough economic decisions — such as raising fuel prices and cutting subsidies — to the larger political spectrum, as it is now more of a need rather than matter of choice. Since 1991 — when the first round of economic liberalisation in India took place — it has been several times that tough economic decisions have been taken only in crunch situations. This event may be another similar trigger to act. The latest fuel hike (biggest in history) would be an example of just that. “The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish or progress on fiscal reforms remains slow in a weakened political setting,” said S&P’s credit analyst Takahira Ogawa on the India outlook. The S&P view is that high fiscal deficits and a heavy debt burden remain the most significant constraints on the sovereign ratings of India. “We expect only modest progress in fiscal and public sector reforms, given the political cycle — with the next elections to be held by May 2014 — and the current political gridlock. Such reforms include reducing fuel and fertiliser subsidies, introducing a nationwide goods and services tax, and easing of restrictions on foreign ownership of various sectors such as banking, insurance, and retail sectors,” S&P said. According to a note prepared by Edelweiss Research, at this stage it is just an outlook change, and not a ratings downgrade. To that extent, it is more of a warning of increasing vulnerabilities of the country.
Foreign hand
The global uncertainty and the worsening economic situation in Europe are certainly not helping India’s cause. Indranil Pan, chief economist, Kotak Mahindra Bank, has said in a recent report that funding the current account deficit becomes a challenge as global financial market turbulence continues and also due to flip-flops in domestic policy and the S&P downgrade. Pan says that though India has historically been a current account deficit (CAD) economy, the difficulty in financing the deficit had not been a serious challenge until the onset of the financial crisis. “The global flip-flop between risk appetite and aversion has also failed to provide any concrete view on capital flows, also creating an uncertain atmosphere for the currency.” While most developed economies are faltering, the new variable is a tilt towards Socialism. US President Barack Obama is making protectionist noises time and again on losing jobs and factories to India and China. In Europe, where there is a full-blown sovereign debt crisis, the cascading effect is causing turbulence across continents, and countries are not able to agree on a resolution. French President Nicolas Sarkozy became the 11th government head to be voted out in Europe after the financial crisis, and incoming President Francois Hollande is rejecting austerity and has vowed to heavily tax the rich instead. Greece, tottering on the edge of a default, has rejected an austerity package that called for hardship, as a vast population is against it. There is a dichotomy the world over with markets wanting fiscal discipline and the general population saying that we don’t care. Governments are finding it difficult to balance between the two. A global domino effect may only accentuate India’s woes. Adige says, “It is not surprising, therefore, that S&P lowered the outlook, especially when rating agencies are taking a conservative position with all other countries as well. The criticism the rating agencies received for not foreseeing the 2008-2009 financial and banking crisis is making them conservative, now that a global sovereign debt crisis seems to be looming on the horizon”.
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If not big time, go for process reforms There
is massive pressure on the government to bite the bullet on the “bold and big ticket” reforms. However, the reality is that a lot of things would improve if only the governance and day-to-day decisions came around to “business as usual”. The fear of scams has paralysed governance and decision making. While lack of political consensus and a weakened government are responsible for fresh reforms being put on hold, policies already in place are not being implemented amidst the fear psychosis. Assocham president Rajkumar Dhoot says what the country needs us ‘process reforms’, i.e., effective implementation of the enacted policies. The reforms that are on the agenda but held up due to ally pressure and political opposition include Goods and Services Tax (GST) and a Direct Tax Code (DTC). Allowing FDI in aviation, insurance, multi-brand retailing and banking are also held up. A movement For now, the White Paper on Black Money presented by Mukherjee can be a game changer to garner revenues. Says Ashish Tilotia of Kotak Securities, “Given the estimates of annual generation of black money at 20 per cent of the GDP, effective taxation can lead to meaningful revenue gain. At 30 per cent tax rates, this can yield 6 per cent of the GDP, wiping off the fiscal deficit.” One crucial step the government has finally shown the will for is the much-needed fuel hike. Yet, what is desired is delinking user charges from politics, and putting them on auto pilot. They may be indexed to inflation and input costs, and things like diesel price, railway fares, electricity tariffs should no more be decided by politicians. According to Kotak, the fuel price increase was critical for better fiscal management. “Investors would see the increase as a sign of good governance and feel more assured about the government’s ability and willingness to take tough but sensible economic decisions,” it says. — SS
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India’s vital economic signs are not looking great. A cause of immediate worry is the sharp fall in the rupee, which has plunged below the never-before level of 56 to a US dollar. A weak rupee has the effect of making foreign travel, overseas education and imports like oil and consumer goods more expensive. However, it is beneficial for exporters of software, textiles, gems and jewellery. The problems in Europe and Greece have been a big spoiler for the global economy and the problems there are leading to a risk aversion, leading to capital moving out of riskier assets — like equities shifting to gold and dollar, which are considered safer.