The Tribune, Chandigarh, India

Badal's temple politics
Punjab needs better schools, hospitals

Ruling parties often use the taxpayers’ money to nurture their vote banks. The Congress has its welfare schemes for the poor and is known to woo Muslims. Regional parties offer freebies for votes. One can understand Punjab Chief Minister Parkash Singh Badal doing something to improve the lot of the Scheduled Castes, who constitute 31.9 per cent of the state population. But by promising to build a Rs 115-crore temple for a section of them, the Valmikis, he is not only playing divisive and dangerous politics of competitive populism but is also squandering precious resources which can be better used to eradicate unemployment, poverty and disease as well as build infrastructure. Even Narendra Modi recently argued for the construction of toilets in place of temples.

Badal is ruining an already financially stressed state by diverting resources to temples and memorials. In a secular state the government is supposed to stay neutral and leave it to the communities to manage their religious affairs. It should work for the welfare of all. Good education is the key to progress. Access to quality health care at affordable rates is needed, especially for the poor. But such is the condition of schools and hospitals due to a chronic shortage of teachers and doctors that even the poor parents try to send their children to private schools and turn to private clinics for reliable treatment. Sukhbir Badal, who is dubbed the “CEO of Punjab”, took everyone by surprise when he told the SGPC in September to stop building schools and colleges.

By offering free power, Badat has tried to woo farmers and has still lost elections. He likes to see people with folded hands seeking “justice”. Distributing cheques of small amounts at "sangat darshan" functions is his favourite past time. He wastes state resources on unproductive things — much like former UP Chief Minister Mayawati, who got built 200 huge statues of elephants and herself. She was voted out of power — and deservedly so! Badal calls himself a Ph.D. in politics and knows very trick that can fetch votes. One wishes he knew a little about development also.

Dreaming gold
Treasure hunt reveals a lot about India

A writer had once said that “Many centuries coexist in India”. It rings true when you read about the ASI digging for a treasure of 1,000 tonnes of gold at Daudiakala village in Uttar Pradesh's Unnao district. The excavation that began on October 18 was the result of, if you please, a dream. The story has all the ingredients of a potboiler, what with a swami, a fort, a king and the people who congregated in huge numbers at the spot, of course, not to mention the claimants to the treasure. A local hermit, Swami Shoban Sarkar, dreamt that the gold was buried under the ruins of a 19th century fort belonging to former king Raja Rao Ram Bux Singh, who appeared in his dream and told the seer to guard the treasure.

Enter the Union Minister of State for food Processing, Charandas Mahant, a disciple of Sarkar. The latter convinced the Geological survey of India and the ASI to begin digging. Before that, the GSI conducted a ground-penetrating radar survey which indicated the presence of an alloy. While the rationalists mocked the excavation prompted by a dream, BJP prime-ministerial candidate Narendra Modi took his own dig at the decision to dig. He asked for huge amounts of black money stashed away in the Swiss banks to be retrieved since they were much more than the treasure.

The swami had also written to the RBI, saying that the gold (if discovered) could bail out the country from the economic downturn. The Supreme Court also heard a petition by an individual who was anxious that the gold might vanish. The heirs of the king wanted their share in the booty while the inhabitants of the village wanted a part of the 'treasure' to be spent on the development of their village. As if all that was not enough to dazzle, there was a gem from Uttar Pradesh Chief Minister Akhliesh Yadav who said he wanted every district in the state to have a treasure so that people could be happy! All that glitters may not be gold but nothing like a treasure to reveal more than is concealed.

Thought for the Day

You must have long-range goals to keep you from being frustrated by short-range failures.

— Charles C. Noble

ARTICLE

Reviving the economy
Need for more proactive government role
by Jayshree Sengupta

Recently the shrinking of the trade deficit to $6.7 billion in September from $10.9 billion in August 2013, has cheered the UPA government, which can now claim that its policy of curbing gold imports has been successful. The lowering of trade deficit means that there is hope of lowering the current account deficit in 2013-14 to around $55 billion. The widening of the current account deficit has been one of the reasons why India has got a poor rating by the international investment rating agencies.

Now the current account deficit (CAD) could be under control though one month’s trade data is not a sure sign of a long-term solution to the problem. If the trend of lowering of trade deficit continues, it would mean more FIIs and FDI will flow into the country which will ease the pressure on the rupee.

The rupee has depreciated by 16 per cent in the last few months and the widening of the CAD is one of the causes. A high trade deficit is usually unsustainable in the long run because it has to be paid for by exports (which are low) and forex reserves. On the other hand, a small trade deficit is a healthy sign of industrial activity because it shows that industry is importing capital goods that would improve the quality of production, especially exports.

If imports of important spare parts, components, capital goods and project-related goods decline, it signifies a low level of economic activity and lowering of India’s competitiveness. Imports have gone down by 18.1 per cent in September and between April and August 2013, and machinery imports as well as project goods imports fell by 12 per cent and 38 per cent, respectively.

Thus a deeper problem of an on-going downturn is surfacing and it is taking time to go away. The slow industrial growth is a warning and the slackening growth rate of the automobile sector is another indicator.

It was the automobile sector which was the driving force behind high manufacturing growth. Now for about a year, the automobile sector has been experiencing a stagnant growth rate. Associated with the growth of the automobile sector is the auto-component sector which is also experiencing a slow-down. It has led to a very low industrial growth of 0.6 per cent in August 2013.

Basically such low industrial growth is an ominous trend and it could be due to slow rate of investment and slack consumer demand which has been due to high inflation. The inflation rate as reflected by the WPI was 8.01 per cent in August. But food inflation was at 18.18 per cent and CPI too was high at 9.5 per cent. Since essential items like food grains, milk, edible oil and fuel prices have been experiencing continuous price hike, people have less money to spend on expensive goods. They are postponing buying big ticket items like consumer durables (TV, refrigerators, washing machines etc.) and consumer durables’ growth contracted by 7.6 per cent in August. Gold and silver being non- essential items, most people are now postponing purchases. Demand for oil has also been less in August.

People in India and abroad are now watching for signs of economic recovery. Officially, India is not in recession because only if there is a contraction of GDP consecutively for three quarters, a country is supposed to be in recession. But India is definitely undergoing a slowdown since GDP growth sank to 4.7 per cent in the last (third) quarter.

Many predictions have been made about the GDP growth on which economic recovery would depend. The IMF has reduced its forecast for India’s GDP growth recently to 4.25 per cent in next one year. Unless manufacturing growth picks up there cannot be recovery. Manufacturing growth contracted by 0.1 per cent in August. Industrial growth in July was however positive at 2.6 per cent. Around 11 out of 22 industry groups in manufacturing sector showed positive growth during July 2013 as compared to corresponding month the previous year.

There is a global element too in the reduced demand facing manufacturers which is the continuing economic crisis in the EU which has dampened the demand for Indian exports. Most of India’s merchandise exports have been adversely affected by the economic slowdown in EU and recently even the service sector exports have been affected. Service sector growth is important for boosting GDP growth.

Yet it is heartening to note that export growth is up and is in double digit (12.9 per cent). Imports would also pick up when recovery takes place because manufacturers would require more raw materials, capital goods and spare parts for production for domestic and export market.

Agricultural growth is also important for the recovery of the manufacturing sector which is dependent on rural demand. Agricultural growth has been sluggish at 1.9 per cent. There is however a bumper crop this year and agricultural growth is slated to be over 5 per cent. How the supplies are managed will be important for controlling food inflation.

Reviving the manufacturing sector would require lower interest rates. Unfortunately many of the recent decisions regarding interest rates, vital for lowering the financial costs of companies have not been conducive to promoting a higher rate of industrial investment and growth. The RBI has actually raised the repo rate in its last policy review on September 20th by 250 basis points, to 7.5 per cent and this will affect investors’ sentiments. As has been the experience in the past of many countries, tinkering with the interest rate cannot offer an effective antidote to inflation. There has to be supply - side measures also which will effectively increase the supply of those goods (especially food items) for which there is excess demand.

It is also the infrastructure and the high transaction costs that need to be improved to boost exports further. There will have to be easier clearances for trade between neighbouring countries and more jobs could be created on both sides which will lead to greater traction in the demand for goods and services from new wage earners. Fortunately, agricultural demand is likely to go up.

Thus we need to be cautious about favourable signs like a reduction of the trade deficit. Because though it is going to reduce one of the disturbing parameters that are slowing down growth, it could also be indicative of slack industrial activity.

Reviving the economy should be the first priority of the government now. There is need for a more proactive role of the government in trade facilitation and investment promotion. But with general elections so close at hand, will that be possible? Besides, gold imports have to remain low for trade deficit to decline further.

MIDDLE

To be or not to be a senior citizen
by Bhartendu Sood

Now when I’m already sixty, the grey hair on my head far exceed the black ones. But, this doesn’t frighten me since I’ve come to realise that the inevitable process of ageing can’t be stopped and today there is nothing like having the looks of an elderly person.

Besides various statutory benefits, I experience many such situations where it pays to be a senior citizen. When you enter a crowded bus, people already seated, try to make room even if they are reluctant to leave their own seats. This show of concern and care; when rudeness and lack of concern for others have become very common everywhere, fills my heart with happiness. Quite often, I get a considerate response in government offices too.

With a gamut of privileges for senior citizens, there is nothing wrong if I don’t try to look younger by dyeing my hair. However, my problem is that my other half doesn’t like my sporting grey hair. She insists that I should dye my hair regularly, though I was at pains to explain to her that black hair alone won’t give me a younger look. Wrinkles, a receding hairline and one’s posture will not allow others to be deceived. But having learnt it the hard way that marriage is a relationship in which one person is always right and the other is the husband, I avoid arguing much. I dye my hair once in a fortnight though deep inside the heart I have a lingering fear that this could rob me off the privileges that I have become used to.

My fear turned out to be true. During my Metro train travel in Delhi, as I scooted towards the seats reserved for senior citizens, a young girl already there vacated the seat on seeing my body language and huge expectation on my face but, after a pause, said puckishly, “Uncle I‘ve vacated the seat but let me tell you, you don’t look old enough to deserve this seat.”

Wearing a hangdog look, I remained silent as I knew the culprit and took a pledge that I’d never ever dye my hair again. Back home, hardly a fortnight had passed when my sweet half yelled at me, “Are you waiting your head to be white like snow.” “Dear, I’ve decided not to dye.” Continuing in the same vein, I said: “By the way, it is my life and my hair. How is it going to affect you?” I replied as dominance-personified partner. For a moment, she looked baffled at this rare display of courage but then said with a piercing gaze, “I am not mad who will unnecessarily break my head with a bullheaded person like you. Your elderly looks undo what I do to look younger. Try to understand.”

Yes, I’m in dilemma. On one side, there are countless privileges and on other side a threat to my peace at home.

Oped Society

CSR: An effort towards inclusiveness and equity
Corporate houses will now have to spend on social causes. A new clause in the Companies Act will make it necessary for them to do so. It may help to redistribute the benefits of growth
Ranjit Singh Ghuman

The recently passed CSR Bill seems to aim at corporate responsibility towards society, including education and health. The mandatory two per cent contribution of the profit (after tax) of each company to the CSR will add up to a sizeable amount. It aims at integrating the interest of the business with that of the communities in which it operates. A Tribune photograph

The Indian Companies Bill (2011), passed by both houses of Parliament and going to become the Companies Act 2013, will replace the nearly five-decade-old Companies Act, 1956. This bill, inter-alia, includes a very significant new clause (135) pertaining to Corporate Social Responsibility (CSR) of the companies.

Though Clause 135 consists of the CSR details, yet, sub-clause 35 (1) needs a special mention. It reads as under:

"Every company having a net worth of Rs 500 crore or more, or turnover of Rs 1000 crore or more or a net profit of Rs 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.”

The recommendations of the CSR committee will form the basis of the CSR policy of the company, which shall be disclosed in its report and also be uploaded in the company's website.

The board of every company shall make every endeavour to ensure that the company spends, in every financial year, at least two per cent of the average net profit of the company made during the three immediately preceding financial years, in pursuance of its CSR policy. If the company fails to spend such an amount, the board shall specify the reasons for not spending the amount in its report.

Schedule VIII of the Bill identifies an indicative list of activities to be included by Companies in their CSR Policies. These activities relate to eradicating extreme hunger and poverty; promotion of education; promoting gender equality and empowering women; reducing child mortality and improving maternal health; combating HIV (human immunodeficiency virus), acquired immune deficiency syndrome, malaria and other diseases; ensuring environmental sustainability; employment enhancing vocational skills; social business projects; contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government or the state governments for socio-economic development and relief and funds for the welfare of the Schedules Castes, the Schedules Tribes, other Backward Classes, minorities and women; and such other matters as may be prescribed.

Responsibility towards society

Prior to this bill, Indian Companies, both public and private, were voluntarily doing certain philanthropic activities, mainly focussed on religion and education, etc. They, however, were not under any obligation. With the enactment of the new Companies Act, the CSR shall become mandatory for all those companies, covered under the above mentioned clause, 135.

According to the policy for Public Enterprises (2012), the Central Public Enterprises (CPEs) are supposed to spend one per cent of their profit after tax (PAT) on CSR projects. Prior to that, it was only 0.5 per cent.

The rationale of the CSR lies in the fact that the actions of business and industry, particularly corporate sector, directly and indirectly touch and impact the lives of citizens at many points. Hence, the business and industry is expected to assure reasonable level of responsibilities towards society.

The CSR is, thus, a philosophy that looks at the social interest and the enlightened self-interest of business over long run as compared with the old, narrow and unrestrained short-run self interest. It aims at integrating the interest of the business with that of the communities in which it operates. The corporations have an obligation to various groups of society and are expected to be ethical and a good corporate citizen.

The post-Independence mixed economy model (also known as Nehruvian Development Model), based on planned development strategy with public sector in commanding heights, was aware of the state’s social responsibility. This model not only pushed Indian growth from less than one per cent per annum, during the first half of the 20th century, to an average annual growth rate of 3.5 per cent during the 3rd quarter of the same century but also had growth with social justice as its cherished goal. To a large extent, this model did not allow inequality to increase while moderately addressing the problem of poverty, illiteracy and unemployment.

The post-1991, new economic policy (also known as neo-liberal model) succeeded to attain a reasonably high growth rate during 1990s and a higher growth rate during the first decade of the 21st century. It also succeeded in moderately addressing the poverty and unemployment but led to an unprecedented increase in inequality and concentration of wealth. Lately, not only the growth rate has dwindled but the economy is also facing an inflationary pressure with high unemployment.

During the post-reform period, the Indian private companies made a good fortune. The share of organised private sector in the GDP of India increased from 13 per cent to 25 per cent during 1993-94 and 2009-10; an unprecedented shift of 12 percentage points in a short span of 15 years. This has happened at the cost of unorganised sector and public sector. Significantly, the share of the unorganised sector in the GDP decreased from 63 per cent to 55 per cent during the same period while this sector employs 92 per cent of workforce.

The share of wages in net domestic product of India witnessed an upward trend during 1993-94 to 2000-01 (from 33.8 per cent to 38.3 per cent) but a sharp decline thereafter. It oscillated between 28 per cent and 31 per cent during 2004-05 and 2009-10. This, along with 77 per cent of Indian people living up to Rs 20 per capita per day (Arjun Sen Gupta Committee Report), provides sufficient evidence of exclusive growth.

Sharing the benefits

Nevertheless, 'growth at any cost' and 'growth is to be followed by redistribution' seems to be a dominant philosophy of Indian policy makers. The CSR clause is aiming at redistributing the benefits of growth among those who have been bye-passed by growth.

The access to education, skill and health still seem to be a distant dream of the common man. Without empowering them with education, skill and health, it is just not possible to enable them to participate in the growth process. Reaping of demographic dividends, their translation into growth and maintaining or achieving high growth rate may just not be possible without empowering the common man.

The main thrust of the new growth theorists and that of Amartya Sen is on the quality of human capital and its role in growth and development. Jagdish Bhagwati, like Indian policy makers, mainly imported from the US and international agencies, however, seem to be more growth sensitive — 'growth at any cost' than the inclusiveness and equity.

One wonders how they will be able to maintain high growth rate leaving a very high proportion of Indian population at the margin! The trade-off is then between the growth and redistribution (the populism and charity) on the one hand and empowerment and participation on the other.

Nonetheless, it does not mean that the hungry should not be fed till they are empowered to participate in growth and development.

The recently passed CSR bill seems to aim at corporate responsibility towards society, including education and health. The mandatory two per cent contribution of the profit (after tax) of each company to the CSR will add up to a sizeable amount.

India’s growth story

Significantly, the number of firms in India has increased from 30,000 in 1956 to 8, 50,000 in 2012. All those companies covered by sub-clause 135 (1) of the Companies Act 2013 are under mandate to spend a minimum of two per cent of their yearly profit on CSR activities. This will annually generate billion of rupees for CSR activities. If invested properly, it shall certainly generate formidable result and positive impact.

Many public sector enterprises have been voluntarily performing CSR since the 1950s. For example, the Steel Authority of India Ltd (SAIL) — a public sector Maharatna Company has already set an example by way of its CSR activities. During the last four years (2009-10 to 2012-13), it has spent about Rs 262 crore on its various CSR projects, including education, health, vocational training, rural infrastructure and mid-day meals.

The public sector enterprises were set up as part of state's social welfare approach. Of late, some private enterprises, too, have been doing such activities, most of them aiming at enhancing their business and profit.

The CSR clause of the ensuring Companies Act (2013) will prove to be a revolutionary step-in redistributing the benefits of growth as well as empower the poor and marginalised people of India. This, in turn, will contribute to India's growth story. To reap its fullest benefits, the government, companies and people shall have to be transparent and socially responsible.

Let us hope that the companies rise to the occasion and follow the CSR policy in letter and spirit. Implementation, monitoring and independent evaluation would be the litmus test of this flagship programme.

— The writer is Nehru SAIL Chair Professor and a former Professor of Economics, Punjabi University, Patiala, Centre for Research in Rural & Industrial Development (CRRID), Chandigarh