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Congress speaks up Mega sickness |
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From aid to trade
RBI takes a
cautious step
Beyond excellence
Corruption: Catch
me if you can
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Mega sickness More than 27,000 patients were examined or treated by around 400 doctors at the two-day “mega” health camp which concluded at Mansa on Sunday. The Punjab Chief Minister and the MP of the area visited the camp and inquired after the health of patients. A similar camp was held earlier at Badal village. This is politics of cynicism at its supreme. People are first allowed to suffer for want of care, and then succour is provided directly from the hands of “benefactors”, who are from one family and elected from constituencies in which the camps are held. The spirit behind the events was just what it has been with the ‘sangat darshans’ that the Chief Minister is so fond of holding. This is a feudal approach, where providing people their much-denied right is made to look like a favour. The foremost damage such exercises have is the diversion of funds. Money doesn’t come from the heads meant for the purpose, which means some other sectors suffer. Then there is no accounting for how it is spent. Unscrupulous officials only await opportunities in such chaos. Also questionable is the benefit of the one-time comfort people are provided. Chronic diseases cannot be addressed at a camp — where follow-ups are not possible — and short-term diseases don’t come timed to a camp. The Chief Minister has even proposed setting aside a budget next year for medical camps. This would amount to institutionalising an irregular system, while letting the proper channel go to seed. The need is to breathe life back into the dying medical infrastructure, rather than let doctors from private hospitals hand out business cards at farcical medical camps. Put doctors in hospitals, operators behind the few diagnostic machines that government facilities do have, and supply the medicines needed. The very fact that thousands turned up at the Mansa jamboree should have shocked the powers that be; it was proof of how many people did not have access to, or could not afford, medical attention.
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From aid to trade The
UK is likely to announce a phasing out of its aid payments to India. During her forthcoming visit to New Delhi, Justine Greening, Britain’s International Development Secretary, is expected to announce that the current £280m-a-year programme of aid from her nation will be phased out by 2015. The move comes as no surprise since it has been discussed for long. Both nations have evolved to a state where instead of being a recipient of aid, India is now a trading partner that Britain cultivates. Indeed, it was a trade decision, of selecting the French fighter planes Rafale instead of the Typhoons that the British favoured, which triggered the controversy over aid in Britain. British MPs questioned the efficacy of giving aid without having the ability to influence trade decisions and pointed out that India was one of the fastest developing economies in the world, and thus did not need aid as much as other nations did. On the other hand, in India, the then Finance Minister Pranab Mukherjee characterised British aid as “a peanut in our total development expenditure”. Nationalistic jingoism aside, as India has become prosperous, it has focussed more on giving aid than receiving it, although it is certainly not alone in being at both ends of this equation. India has developed into a vibrant economy which has a growth rate that would be the envy of many developed nations. The nation simultaneously has to battle with poverty and other developmental imbalances, some of which it tackles with foreign aid. Loans and aid are a part of the complex matrix of inter-related forces at work in maintaining international relations between sovereign nations. Indeed, India and the UK both need to keep a level head as their relationship goes into another level, one in which trade will play a more dominant role than aid. But then, both nations have shown great maturity in dealing with the complexities of historical baggage and the fast-changing demands of
realpolitik.
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Silence is only frightening to people who are compulsively verbalising. — William S. Burroughs
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RBI takes a cautious step The
good news is that India and China are both showing signs of economic recovery. India’s manufacturing as well as the core sector growth (eight industries like steel, cement, gas etc.) are rising slowly. But the Reserve Bank of India has projected the GDP growth rate for 2013 at 5.7 percent. It has also anticipated that the inflation rate is likely to be high at 7.7 percent. Most importantly, it has shown its stubbornness in not decreasing the repo rate—the rate at which the RBI lends to banks. It is not as though it can or has acted alone because government economic advisers have fully supported the RBI’s cautious move. It has decided to increase liquidity in the monetary system (by around Rs 1,75,000 crore) by reducing the cash reserve requirement of banks (that has to be maintained with the RBI) from 5 percent to 4.25 percent. But this alone may not be adequate in bringing about the needed change in the growth prospects of the country and it may not translate into banks reducing their interest rates to encourage growth in consumer demand and it will not be adequate to boost private investment. The RBI’s cautious step is probably a hedge against further inflation which it sees on the horizon but its keeping the repo rate unchanged is not going to help the stagnation in demand which is now affecting many Indian industries. Most people are postponing the buying of goods on hire-purchase, one of the commonest ways of financing the buying of cars, consumer durables, flats etc. because of the high EMIs. One must recall that the RBI raised interest rates 13 times over the past one and a half years and only reduced the repo rate by 50 basis points in April 2012. This was not enough to revive industrial growth and manufacturing growth took a serious negative turn in June and it was mainly due to the fact that demand was flagging both externally and domestically. A rise in demand is important for encouraging new investment because unless inventories are cleared, industrialists do not take decisions to invest further in building capacity. Thus what the RBI has done is to stave off demand and is doing so under pressure from the government to act tough on controlling inflation. Persistent double-digit inflation is going to be bad for electoral politics. But a further rise in inflation is inevitable because of the recent sharp rise in diesel, electricity, coal and petrol prices. Besides, all other input prices have risen in the past few months and the result is that overall costs of companies have gone up and profits have shrunk. Compared to India’s stance of keeping interest rates high, all over the Western world, interest rates have been kept very low in order to facilitate recovery. US Fed Reserve chief Ben Bernanke has started his third tranch of monetary easing (in September 2012) which will release $40 billion into the global financial system to sustain economic recovery. Some of this is bound to find its way to India in the stock markets and will lead to an asset price bubble which would be inflationary. The EU is also going for monetary easing of another kind which involves the European Central Bank purchasing sovereign bonds to increase liquidity in the Eurozone. In the EU, the austerity measures have led to the shrinkage of demand for domestic and imported goods. Austerity measures and budget cuts have led to widespread unemployment in all the ‘peripheral’ countries like Greece, Portugal, Spain and Italy. All this monetary easing in the EU and also in Japan will no doubt bring about an economic revival but will also lead to global inflation. On the other hand, as part of the dual exercise of bringing the economy on track in India, the Finance Minister has announced that there will be budgetary control measures to reduce the fiscal deficit. What these measures will be have not been spelt out but from reports it seems there could be a few drastic budgetary cuts. Naturally, the main recipe for budgetary consolidation roadmap would be cutting ‘flabs’ and subsidies have been regarded as outrageously high, and full of leakages. If they cut subsidies for the poor — on food and fertilizers — it would harm small farmers and will lead to lower productivity and an escalation of poverty. Giving direct subsidy to the poor has been initiated with a big bang and cash transfer to bank accounts of beneficiaries has been identified as a fool-proof method. But how many of the 98 million small farmers have bank accounts? Only around 35.5 per cent of the population has bank accounts and a much lower proportion has it in villages. If cash is handed out to men, then there is a big chance of it being used for other purposes than for what it is meant for. It could be alcohol, drugs, mobile phones or any other item of consumption. If it is handed to women, chances are the money will be used for food and family welfare. But it will depend on whether the women are empowered enough to take key decisions in the household. Budget cutting can be aimed at the social sector like health and education as in the EU. It will be disastrous because already India’s human development profile has many black marks and India is unlikely to meet the Millennium Development Goals as far as maternal mortality, child malnourishment and basic sanitation goals are concerned. India has vast slums, poor healthcare, problems in the quality of primary education, gender inequality and lack of basic sanitation in major cities, towns and villages. These require huge investments and not just increases in the Planning Commission’s allocations that are never fully utilized by the states. Besides, better physical infrastructure — like connecting roads to towns, better housing for the urban and rural poor — will increase the mobility and incomes of the poor in remote villages. All these could be under the budgetary axe to bring down the fiscal deficit from 5.8 to 5.3 per cent of the GDP. The main driver for cutting the fiscal deficit seems to be the fear of India getting downgraded by the investment rating agencies to ‘junk status’ and India not getting more foreign direct investment which has been portrayed as the most important requirement for India today. With savings at 32 percent of the GDP, what we need is the mobilisation of our own resources, both from home and abroad (stashed away in Swiss banks) for productive use and, most importantly, reduce rampant corruption. FDI will have to supplement our own resources and sustain
recovery.
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Beyond excellence We
lazily shake out of the Building Two in the Soldier Field Park Apartments, Harvard Business School, located at 1 Western Avenue, at sharp 7 to begin the day. The 10-hour academic activity and carry home reading assignments are exhaustive, for many of us who are on the wrong side of 50. It is mid-May. The sun is rather bright, set against the blue sky. However, Ken, with whom I share the apartment, insists that we carry umbrellas. A professor at Utah University, he is very particular on the weather check and forecast indicates light showers in the evening. The walk to Harvard Kennedy School is barely 20 minutes. Walking along the Harvard Way, as we get past Burden Hall and approach Kresge Dining Hall, the pace picks up due to the sheer breath-taking beauty of nature around. The fatigue gradually begins to evaporate. The steps slow down for a brief pause in front the majestic Baker Library Building. Facing the magnificent structure is a huge open lush green lawn, the size of the soccer field, hemmed between the Morris and Mellon Halls. At the home edge of the lawn stands the replica of the sacred bell of Danilova Monastery in Moscow. It is a symbolic tribute to friendship and understanding between Harvard University and the Monastery of Saint Daniel. Skirting around the Morris Hall, we are now over the Week Bridge across the Charles river. The deep blue water ripples through the tree-lined banks with thick vegetation. The cool breeze fills the lungs and the feel-good environment livens up the spirits. Charles was once a heavily polluted water body and a dip inside meant a complimentary tetanus shot. While vehicular traffic along the Soldier Field and Memorial Drive roads, either side of the Charles river is heavy, but its serenity is fully respected by keeping the air and noise pollution to the barest minimal. There is no honking and pedestrians and cyclists always have the right of way. The healthy culture of jogging and cycling is the gift of abundance of nature. Across the Week Bridge, we are now on the John F Kennedy (JFK) Street. The JFK Park on the left runs along the Memorial Drive and always full of nature lovers. Book worms, love birds, fitness freaks and baby-sitters all rub shoulders with one another. As we cross the JFK Park, our memorable morning stroll ends when we enter Kennedy School. It is late evening as we wind up the day. There is light drizzle when we walk back to our apartments. The lights of the passing cars softly graze over the quiet meandering Charles river. The tiny rain drops dripping from the trees gently tap the umbrellas. I am wondering as to what makes Harvard a global ‘centre of excellence’. Is it its faculty, students or infrastructure? Perhaps not! Maybe, it is the perfect harmony between nature and man which is at its best; creating a unique setting, well beyond
excellence!
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Corruption: Catch me if you can
The crux of the problem of spiralling corruption in India rests with the approach to it, which has always been from the standpoint of law enforcement, whereas it is an issue with much wider dimensions The country has been wracked by scams in every decade since Independence. In the 1940s, the purchase of Jeeps for the Army was tainted by scandal. In the 1950s, there was a stock market scam which involved investments by the Life Insurance Corporation in dubious companies owned by businessman Haridas Mundhra. In the 1960s, the Pratap Singh Kairon scandal was the first instance of the use of office for personal enrichment. In the 1970s, in the Kuo Oil deal scandal, public sector oil companies were duped by a fictitious Hong Kong-based company. In the 1980s, in the Antulay Trust scandal, builders were forced to donate money to the Congress for cement quotas. The 1990s saw the Bofors commission-for-arms scandal and the Bihar fodder scam. The next decade saw many more starting with the UTI Ketan Parekh scam to the allotment of petrol pumps to the 2G and CWG scams. Ineffective probes The Jeep scandal set the template on how the post-scam scenario would play out. An enquiry committee would be appointed, their censure would be ignored, and the government and everyone else would blithely go about their business. Indeed, in 2003, my research on 25 years of political scams since the Bofors deal revealed that there were barely two convictions in scams, accounting for Rs 25,000 crore of public monies. Of course, today, after the 2G spectrum scam, that amount appears
miniscule.
A surfeit of recommendations has been filed with successive governments on the causes of corruption, its consequences and the course of action to be taken to tackle it. Starting with the ‘Report on the Reorganisation of the Machinery of Government’ by Gopalaswami Ayyangar in 1949, there has been a parade of recommendations. In 1951, A. D. Gorwala, who chaired the Committee on Public Administration, observed while submitting the report that, despite grave allegations, ‘people holding positions of high authority remain in power without being cleared’, leading the public to believe that the influential always get away. In 1962, the government set up a committee under K. Santhanam to suggest mechanisms and institutions to combat corruption. In 1964, this committee said, “There is a widespread impression that failure of integrity is not uncommon among ministers and that some ministers who have held office during the last 16 years have enriched themselves illegitimately, obtained good jobs for their sons and relations through nepotism and have reaped other advantages inconsistent with any notion of purity in public life.” This holds true even more so
today. The Right to Information (RTI) Act enables citizens to question what the government has done and how it was done. Functional democracy requires the government to take the next few strategic steps. A republic, by definition, demands participative governance. The government must make a self-declaration of intent and objectives. This can be monitored through the RTI Act and public scrutiny will identify the wrongdoers.
There has been no dearth of institutions to combat corruption. The report submitted by the Santhanam Committee in 1964 recommended the creation of the Central Vigilance Commission and the setting up of a code of conduct for ministers. The Central Bureau of Investigation, set up in 1963, came out of the Delhi Special Police Establishment Act 1941 (enacted to target corruption in supplier-contracts during World War II).The Administrative Reforms Commission of 1967 suggested the creation of Lokpal and Lokayuktas at the Centre and states to investigate cases of corruption against ministers. Lame laws Every decade since the 1960s has seen changes in the laws to tackle corruption. The original avatar of the Prevention of Corruption Act was passed in 1947 which, along with the Commission of Enquiry Act, formed the legal instrument for tackling corruption. When the Rajiv Gandhi government was wracked by charges of corruption in the Bofors arms deal, it reconfigured the Prevention of Corruption Act in 1988. In 2003, following a series of scams, the NDA government legislated a law empowering the Central Vigilance Commission. Theoretically, the statute has enough legal teeth to tackle corruption. Yet, in 2011, public outrage—fuelled by Anna Hazare and Baba Ramdev’s activism—forced the political class to accept in Parliament the urgent need for the longstanding Lokpal Bill. A Bill was tabled in Parliament, studied by the Standing Committee on Personnel, Public Grievances, Law and Justice and passed in the Lok Sabha in December 2011. However, it fell through in the Rajya Sabha. The Lokpal Bill was recognised as an imperative by the First Administrative Reforms Commission of 1967, the National Commission to Review the Working of the Constitution in 2002 and the Second Administrative Reforms Commission in 2007 besides a host of other committees. Between 1968 and 2011, the Bill was introduced before Parliament under seven different prime ministers — in 1968, 1969, 1971, 1977, 1985, 1989, 1996, 1998 and 2001— and failed each
time.
Meanwhile, corruption spirals. The crux of the problem rests with the approach to it. The approach to corruption in India has always been from the standpoint of the law enforcement, whereas it is an issue with much wider dimensions. Power dwells in a dominant coalition of interests. The land-owning classes routinely pledge muscle power to politicians to retain assets and control social hierarchies. Big and small businesses fund the revenue model of political parties, using their influence in the clearance regime to thwart competition. Politicians use both social and business models to remain in power. In this they are aided by the bureaucracy, which seeks to safeguard its own power and privileges. Thus corruption turns into a cancer. The reigning cliché about India is that we have a law for every problem and a solution for every law. The Indian State enacts a law just as ritualistically as its people perform pujas to cure ills. Every law is, in essence, a cascade of smartly arranged words, clauses that seem to address the cause and punishments that promise deterrence. But the actual implementation of law is always left for another day as electoral expediency overtakes the logic of governance. Unless implemented in letter and spirit — like former Election Commissioner T. N. Seshan did for elections in the 1990s — laws are essentially dead on arrival. Anatomy of corruption
Corruption in India stems from three quarters — revenue collection, clearances and delivery of citizens’ services. The loudest clamour is mostly about corruption in clearances, where the political executive uses its decision-making powers to deliver benefits for a price. The theft in revenue areas, however, has not received equal attention although it is a creeping crisis. The under-reporting of income in business transactions, the over-invoicing of imports by corporates and the under-invoicing of exports are the principal routes of black-money generation. In recent times mergers and acquisitions have been used to transfer ill-gotten assets. Then, of course, there is the delivery of services. India spends roughly Rs 50,000 crore or about $10 billion on food subsidies every year to get food grains to the poor. The government itself admits that every second bag of food grain never reaches the intended beneficiary and is siphoned off. Every year, the Centre and state governments spend more than Rs 5 lakh crore (about $100 billion) on social-sector programmes. Evaporation of public monies is one of the fallouts of the social percolation theory. Obviously, none of this can transpire without political patronage. One way to prevent the poor from being robbed and the corrupt from being enriched is the effective implementation of the Unique Identity Scheme (UID). While it is a great way to establish identity, with its simple number-based registration and biometric identification, the UID can also create a national database. This data can form the basis for future reforms — ranging from delivery of services to cash transfers to the poor. Nip the rot
The next big move needed is to halt big-ticket corruption. The annual crop of black money is irrigated by the canals of discretionary powers vested in the system. This explains why politicians are so unwilling to dismantle ad hoc practices, particularly in the allocation of natural resources like telecom spectrum, coal fields or iron ore mines. Legislation to deal with mining, for instance, has been pending since 2006. It is true that political power is vested in the discretion to decide, but discretion must be backed by reason and the reasoning must be transparent. The government must make its system of processes and clearances transparent; it must provide room for public intervention. The Right to Information (RTI) Act enables citizens to question what the government has done and how it was done. But little is gained if the corrupt go scotfree. With over 31 million cases pending in the courts, it is imperative that the system is empowered with fast-track judicial action so that punishment follows swiftly and an atmosphere of deterrence is
established.
However, it isn’t enough to tackle the supply side of the political economy of corruption. India has to look hard at the demand side of the political economy. The core of the problem is greed but there is also a deemed need. India needs to find a viable system for political parties to fund their politics. The business model of politics thrives on the cash economy. India has a provision for donations to political parties by cheque, but the bulk of the money is transferred in the form of cash derived from corrupt practices. There is no way to know if a donation is a donation or a bribe. Sometimes bribes are converted into donations and even declared to the Income Tax Department. This model of cash-and-carry politics makes it convenient for the corrupt — on either side of the fence — to freely conduct
transactions.
Every five years, 13,986 candidates — assuming three serious candidates per party —fight for seats in the Lok Sabha and state legislative assemblies. Depending on the geography and the party, candidates are known to spend 10 times the official limit allowed for election expenses. Assume, for a moment that the limits on expenditure are being adhered to. This means a Lok Sabha candidate spends Rs 40 lakh and a candidate for the assembly spends Rs 16 lakh. What is the source of all this money? Candidates do declare their known personal assets, but are not required to explain the source, or how they funded the acquisition of those assets. Indians must demand a transparent system of political funding, the kind followed in America. It has its downsides, of course, such as the rich cornering the attention of lawmakers. But it is transparent enough for citizens to know who is paying money to parties and what is expected in return. Corruption is robbing the poor and the middle class, enriching criminality and is inflationary. Its perpetuation enables the wrong kind of politicians to be elected. This leads to the subversion of the democratic process.
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