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Another NRI show Ride for a price |
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Economic outlook to be better
Left to feel all too less human
Bailing out the financially stressed states
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Another NRI show A
sizable number of Punjabis settled abroad come to their home towns and villages for winter vacation, hobnob with ruling politicians, voice their concerns, attack the corrupt system here in private talk and return to their safe and secure environs. The Punjab government has done a few things for the non-resident Indians. It has set up an NRI commission, NRI police stations and NRI courts. Now a jail too is needed, said Chief Minister Parkash Singh Badal light-heartedly. But this is a serious issue. NRIs who fund militancy, pedal drugs or abandon wives do need to be put behind bars. There is a minister too for NRI affairs, currently fending off charges of involvement in drug trade. Year after year the NRIs attending the annual jamboree are urged to invest in Punjab. They, however, prefer to do their bit for their villages or alma mater through private channels. They do not seem to trust the government. The Chief Minister and his deputy have painted a rosy picture of the state where industrialists queue up for investment, power is surplus and jobs are aplenty. The need is to stop building castles in the air and get real. NRIs know the ground realities. They interact with their relatives and friends as well as representatives of the system. Although the deserted wives have a genuine reason to be unhappy with the favours shown to the NRIs while they pursue their cases in courts and police stations without help from the government, Canadian sports minister Bal Gosal was honest and bold enough to question the preferential treatment given to the NRIs, especially the reservation of 10 per cent allotment in industrial and residential plots. What the NRIs look for essentially is good governance and the rule of law. If they do not invest here, it is largely because of corruption, red tape, a dilatory justice system and the selective application of the rules and laws. Politicians and police officers bless property grabbers and other law-breakers. There is too much the Punjabis in general and the NRIs in particular cannot put up with. |
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Ride for a price The
recent fracas at a toll barrier on the Panipat-Rohtak stretch and the attack on toll booths by a political party in
Kohlapur, Maharashtra, on Sunday are a reflection of the growing public resentment over toll rates. On more than one occasion the user charges, especially when perceived as steep and arbitrary, have led to protests. Even otherwise toll prices cause much heart-burn among road users who often anguish over the need to pay for the basic infrastructure after coughing up road tax and income tax. PIL petitions too have challenged the legality of toll tax collections. A toll highway is not a new phenomenon. The practice has existed since times immemorial. However, in recent times not only have toll plazas become more ubiquitous but the rates are also often steep and in contravention of the rules, especially on state roads. What is worse is that invariably users have to pay for roads full of potholes and for expressways that seem to be in the making forever. Recently the government considered amendments to the existing toll rules. The proposals may lead to a reduction in charges on under-expansion highways and the suspension of the toll if construction work is not completed within the stipulated time frame. But as of now little has been done to mitigate the misery of a common user who not only has to shell out money for facilities that do not exist but also put up with long queues to pay the toll. No one is disputing that public-private partnership is one of the most significant steps forward to progress. Yet in the absence of a proper regulator often this model becomes a stumbling block to development. If the BOT (build, operate, transfer) system truly has to work for the benefit of road users, there has to be greater transparency in the contracts signed between the government and the concessionaire. Besides, the defaulting developers can't be let off the hook nor allowed to hold the government and the people to ransom by stalling the project. Strict action and penalties are certainly in order.
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Because of their size, parents may be difficult to discipline properly. —P. J. O'Rourke
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THE Bombay Government has issued a press note on a new system of physical culture for students designed by Mr. P. Wren. He demonstrated the system before a class of teachers, school inspectors and others at Poona for about a fortnight. For others he is preparing a book and this will be soon published. Mr. Wren's main object is that exercise should be for health and not for big muscles. At present Indian students preparing for public examinations which are made more and more difficult work under a heavy strain, without proper exercise, leisure and comfort. Consequently many students break down at any early age in life. The few that take exercise and thereby attend to the development of body have no clear idea of what is required. It is therefore necessary for teachers in pubic schools to make their students take proper exercise which in most cases does not require more than a few moments each day, rather than for longer periods once or twice a week. Mr. Wren laid stress on the theory that the health and strength of the heart, lungs and digestive apparatus must inevitably precede the health and strength of the muscles. Every student must have healthy respiration, digestion, circulation and perspiration. Indians in the railway service
THE Public Service Commission is recording evidence on matters concerning railway service in India. By far the most important point urged by witnesses is the improvement of the pay of the Engineers. Another question of equal importance is the possibility of increasing the number of Indians. Col C.A.R. Browne, Manager, E.B.S. Railway, asked by Sir Valentine Chirol, stated in his evidence given on the 8th instant that he was perfectly willing to increase the number of Indians but could not get men of the right sort. He added that as Indians proved themselves fit for the work, he would increase the percentage.
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Economic outlook to be better Looking
ahead into 2014, we have to take stock of the past economic trends which have not been particularly good or special. Apart from a normal monsoon, there was little to cheer about 2013. Manufacturing growth fell in December and the index of industrial production declined in October. Service sector growth slowed down to 5.9 per cent due to a decline in demand for services, especially IT services, because of the slow economic recovery in the EU and the US. Service sector growth is important as it contributes to more than half of India's GDP. The rupee's depreciation could, however, help the competitiveness of IT/business process outsourcing this year.
Agricultural growth had not been at the targeted level of 4 per cent in the past few years but it was 4.6 per cent in the last quarter. Due to a good monsoon the agricultural growth rate is likely to be higher at around 4.9 per cent. It will lead to higher demand for goods and is likely to give a fillip to industry this year. A spurt in domestic demand will play an important role in the revival of industrial growth. As agricultural incomes grow, there is bound to be an increase in demand for cars, two-wheelers and other consumer goods. The stagnant investment scene has become a big problem and has also been due to the rising interest rates and uncertainty regarding policy environment and continuation of high inflation. Unless investment rises, the much needed rise in industrial production and competitiveness may not occur. New machinery and improved, innovative practices are needed for raising productivity otherwise Indian manufacturing would fall behind not only China but also smaller ASEAN countries. Food inflation, which was high at 11.24 per cent, may come down if there is direct trading by farmers to buyers in the market. By eliminating the restrictions imposed by Agricultural Price Marketing Committee Act, the government has facilitated direct trading. This could improve agricultural growth potential and the supply of agricultural products and bring down inflation. Otherwise the RBI may be forced to hike the repo rates that would raise interest rates further, pushing up companies' borrowing costs. After the elections the new government at the Centre will take critical decisions, indicating the future economic policy. Until the elections no major policy decisions are expected, although the UPA government has cleared many pending foreign direct investment proposals in the last few months. The Cabinet Committee on Investments has cleared over 120 projects worth over Rs 400,000 crore. Out of the total projects over half would go to the power sector. FDI has not been picking up at a rapid rate and even declined in 2013 from the previous year by 10 per cent (January to September FDI was at $16.85 billion). Now that the US Federal Reserve has made it clear that tapering of its monetary easing policy (that involves the releasing of $85 billion a month into the financial system) will start in 2014, this will definitely raise US interest rates from the near zero level and the US will become an attractive destination for FIIs this year. FIIs would still come if prospects of Indian industry improve and the rupee's depreciation is arrested but FIIs will not flood the emerging markets as before. A balance of payments crisis may be averted this year with the shrinking of the current account deficit and higher FII inflows. Exports may pick up faster if the US recovery stays on track and the EU is able to overcome the crisis of rising unemployment. India's export growth did gain in momentum in 2013 but again slackened in recent months. Much more attention has to be paid by the new government to export facilitation measures and the reduction of transaction costs to enhance competitiveness. Compression of imports has been an important reason for the narrowing of the current account deficit. The fall in gold as well as oil imports has contributed largely to the decline in the current account deficit. Gold imports should not increase in 2014. The forex reserves have also grown in the last few months after being slightly depleted to defend the rupee and the rupee has reached a stable mode at the beginning of 2014. Hopefully red tape and corruption will be reduced in 2014 with the passing of the Lokpal Bill. Various hurdles remain in the industry's perception regarding the acquisition of land for spatial expansion or mining. The new land acquisition law is very good from the point of view of rehabilitating the displaced people but industrialists may run away from financing resettlement of the displaced people. Many industrialists may look towards foreign destinations for fresh business ventures rather than go through the rigmarole of settling people. Thus there has to be further clarity regarding the land acquisition law and modalities have to be outlined and the process has to be corruption free to benefit both the purchasing and selling parties. The year 2014 may witness some additional clarifications that could give incentives to the mining industry which has been shrinking. On the whole, the economy is likely to pick up. With the expected better governance from a new government at the Centre, faster decision-making in key areas may happen. The fiscal deficit has to be managed well and should meet the target of 4.8 per cent of the GDP. Otherwise, higher government outlay could be inflationary. The growth forecast of most international agencies for India seems to hover over 5 per cent which is still not the optimum growth for a developing country like India where there is an urgent need to create more jobs. But it is better than 4.8 per cent growth experienced in 2013, almost half of the growth rate achieved in 2009-10.Global outlook is positive for 2014 and the UN's world GDP growth forecast is at 3 per cent. If the US recovery is rapid, it would benefit all countries, including India, due to an expansion in trade and investment. |
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Left to feel all too less human Life
at times gives an experience that leaves one feeling an inferior human. I had walked some 80 metres ahead, struggling to open the umbrella against the gale, when a car coming from behind overtook me and screeched to a halt some metres ahead. "You aive a probleme?" the man at the wheel asked with the typical French thriftiness with the letter 'h'. Having checked that the stranded car was mine and I needed help, he asked me to get in. I settled down in the rear seat alongside some fishing gear while the gentleman and his lady companion were in the front. We drove some 5 km outside the town and stopped at a garage. Asking me to keep sitting, the man ran inside through the stormy rain. Recalling an unhappy experience of a friend in similar circumstances, my thoughts turned negative. 'Why has he come this far when other garages could have been available closer in the town? Does he have some interest in this garage; maybe he owns it' I saw him talking to a person in greasy work overalls. Being far I could only see them gesticulating. I read a meaning in each gesture and became mentally ready for a con. Returning after a few minutes, the man said, "We will aive to go to another garage." We drove back, past my car into the heart of the town. He found a bigger garage and repeated the drill of going to the manager while asking me to remain seated. 'Maybe he did not get a lucrative cut'. My pessimistic thinking continued. I cursed myself for having accepted a stranger's offer. Unconsciously I touched my pocket to feel the wallet. "The manager says he will recover and repair your car," said the man, now drenched. He smiled and opened the car door for me to alight. I tried to detect hints of a triumph in his smile. As I walked up to the manager, I heard the car behind me start and drive away. "Where has he gone?" I asked. The manager looked at me questioningly. "Don't you know him?" I enquired. "No monsieur, I do not know him. He does not belong to this town. He was only driving through when he noticed that you needed help." "But…" and the words failed me. I ran out in the rain but he was gone. I was suddenly seized by a sense of guilt for all my evil thoughts, made worse by the knowledge that I could never trace and thank the angel.
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Bailing out the financially stressed states Country
building is an exercise that demands dynamic policies that are always open to debate and amendment, if need be, in the larger interest rather than being restrained by the existing norms and practices. Putting it in context, one may recall that the 13th Finance Commission made clear observations that three States – West Bengal, Kerala and Punjab – were fiscally distressed and consequently advised the Government of India to address the issue of allocating enough of its resources to them in future so that the States could be brought back in line with the required trajectory of growth.
The Government of India, however, did not take a final view on this issue. At my recent meeting with Union Finance Minister P. Chidambaram on the issue, he gave a stock reply that there was no provision or policy to provide for such a bailout to a State. One may also argue that there is no provision or law that stops a federal government from doing so either. It is the need of the hour and the dynamism of policy framework is the tool needed to implement such recommendations and ease the pressure on these states. In the present circumstances I feel that the 14th Finance Commission is the right forum to address the issue again. The Finance Commission is vested with the constitutional authority and responsibility to look after the economies as well as government finances of the States. The Commission, being a constitutional body, not only enjoys complete independence, but is also not bound by the terms of reference given to it by the Government of India. The terms of reference may not be even a guiding principle if these interfere with its mandate of constitutional authority and responsibility. More so, the Commission may even reject the legitimacy of terms of reference if it deems fit. Thus, it can recommend a definite amount of resources to be given under various policies and schemes and may even evolve customised policies and schemes wholly designed for the States while taking into account the causes of such a fiscal distress and economic disabilities. The cause of distress as such becomes as relevant as the solution to it. The genesis of financial troubles In our attempt to understand the genesis of such a “financial distress”, while confining ourselves to the case of West Bengal, the most fiscally distressed State, the situation seems reminiscent to the international experience of the Soviet Union and other East European States and their eventual collapse.
Small is beautiful The collapse of States or their governments is a phenomenon that has generated animated debates about its genesis and the set of complementary factors associated with it. The Soviet Union, the most influential and dominating country heading a block of nations, stood as a mighty challenger to the power block of nations that the American empire led. The story of how the potent Soviet Union got disintegrated with its empire splitting into smaller nations and thus reducing it to the present Russian State is fantastically exciting in terms of how internal forces worked it up and no governmental power could rescue it. It is interesting to share a dialogue that happened two decades ago (May 1992) at my house when I invited Swaran Singh, a member in the Cabinets of Jawaharlal Nehru, Lal Bahadur Shastri and Indira Gandhi. Notable among the leaders who joined at that meeting were the present Prime Minister, Dr. Manmohan Singh, in his first year as the Finance Minister. During the conversation, Dr. Manmohan Singh happened to ask Swaran Singh about the then hot and recent global occurrence of “Soviet Union collapse”. The answer that we all got was the “uncontrolled expansion of the government and a huge military expenditure” coupled with “an already resource-starved government having excessive welfare expenditure” that forced the leadership of Mr. Gorbachev to slowly develop revulsion against the system. Dr. Karan Singh, personally known to Gorbachev, later revealed to me that Gorbachev allowed the Soviet Union to disintegrate peacefully. He continued to emphasise that a “big” government became a major instrument of destruction of the Soviet Union and it sort of “caved under its own weight.” The case of West Bengal In our own country, let us try to extrapolate the example in the case of West Bengal. The Communist government while in power continued to swell and inflate by recruiting the Marxist cadre in the government to satisfy its voracious hunger to control the entire State machinery. Administrative expenditure in different States of India has varied vastly. However, it is a dramatically interesting revelation that in most developed States like Haryana and Gujarat, where this expenditure is only 2.47% and 3% of the State GDP, respectively, but the case of West Bengal has been an abnormal aberration where this expenditure has persistently stayed in the range of whopping 6%. West Bengal also has the dubious distinction of having the highest debt of 40% of its GDP, whereas no other State has this liability of more than 25% of the GDP. In per capita terms, this debt is the largest in the country by far and putting it in perspective, though a bit sadly, each child born in Bengal does carry on his or her shoulder a debt weight of Rs. 21,000. The latest Budget of West Bengal mentions that in the past dozen years the debt has grown phenomenally by 500%. Allow me to quote the 12th and 13th Finance Commissions here. The revenue deficit of West Bengal was huge and it got freebies in the form of ‘grants for revenue deficit.’ (12th). And, in the 13th Finance Commission, it was declared as “fiscally distressed” State along with Kerala and Punjab. A blackmailing practice If this is not a permanent blackmailing practice of the Marxist Governments to present such a pathetic financial picture of the State to the Finance Commissions, then what is this? It is true that the ploy in order to get free money from the Union Government is deplorable and appalling. None of the major State Governments in India enjoy such “free lunches” from the Federal Government through Finance Commissions. However, had it not happened, the State of West Bengal could have collapsed long ago like the Soviet Union. On the economic front, an opportunity came knocking during the liberalisation period of the 1990s. However, the Marxist Government of West Bengal vehemently opposed India’s economic reform policies. It shut its doors to private capital and entrepreneurship seeking to develop the vast potential of growth that existed in the State in abundance. It again let the occasion go by while on the other hand, there are examples of these policy reforms taking roots and reaping rewards in many other States of India, particularly Andhra Pradesh, Tamil Nadu, Karnataka, Gujarat, Haryana and Maharashtra. Generations lost to Communism International experience may well be a guiding factor here. We witness many European States are facing the same problem of a mountain of debt while multilateral institutions like the World Bank, the IMF and the European Bank are bailing them out. Take another appropriate example of East Germany when it merged with West Germany. West Germany had to keep on bailing it out for nearly two decades. One can simply imagine how the people in East Germany suffered the Marxist rule and generations were lost. The story is unending if we count the Eastern European States now separated from the Marxist rule of the Soviet Union. Nearly two generations of the people of West Bengal have lost to Communism. Imagine the fate of Bengal if the Indian State could not provide a helping hand and In the light of these historical facts and tough conditions that the State of West Bengal faces, it would be unwise and irrational to expect a miracle that in the non-Communist government, the growth journey will automatically start. The stagnant vehicle that has been in a state of inertia for so long needs to be put back in shape to be able to start its engine before it fires up to commence its journey towards the meteoric heights that it has the latent potential of.
The writer is a former Finance Minister of Punjab.
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We were travelling by road from Brussels to Paris. In order to see more of the countryside we took the national road instead of the rather dreary auto-route drive. We were passing the town of Compiègne, some 70 km northeast of Paris, when heavy rain and strong winds began. As I crested a flyover, the car gave an unhealthy jerk and the engine died. It failed to restart despite my repeated attempts. Leaving my wife in the car, I decided to go out and seek help by calling from the next pole-mounted emergency telephone.