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EDITORIAL Internal security has been the wanton victim not as much of the foreign terrorists as the internal snakes and scorpions galore. There is typical nexus between politicians and subversives, vagabonds, terrorists, mafias, private senas and whatnots. There is hardly a State or region that is free from this affliction. Politicians in particular seem to have no fear of the law or for that matter any answerability to the people. They are solely motivated by an irresistible temptation to remain glued unto the seats of power by means fair or foul. When the top rung gives such obnoxious and nasty lead, others down the rung are left with no choice but tip-toe their line. This is as much true of the bureaucracy as the police whose main trait is to protect life and property of the citizens and not permit the law breakers any liberties whatsoever. The fact remains that post independence period has witnessed gradual debasement of values and erosion of law. Today it is gory scenario of life being cut short unceremoniously so abruptly. There is the willy-nilly or even deliberate acquiescence in as much as even fool-proof cases are sought to be diluted to take the sting out of the case for sure acquittal. Ms Mattoo's brutal murder amply proves how the sons of the big guns succeed in making mockery of the law and the law enforcing agencies. In the process internal security stands weakened and the country earns the ignominy of being too soft Yes, the soft one. But who softens the pitch for the criminals of all hues to play recklessly ....more |
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Middle east: The By Major Kulbir Singh Contemporary By Prof S K Bhalla By O P Modi Fall in Domestic By S.V. Vaidyanathan By : Shekhar Bhatnagar Charity, Mr Jalan, |
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EDITORIAL Internal security has been the wanton victim not as much of the foreign terrorists as the internal snakes and scorpions galore. There is typical nexus between politicians and subversives, vagabonds, terrorists, mafias, private senas and whatnots. There is hardly a State or region that is free from this affliction. Politicians in particular seem to have no fear of the law or for that matter any answerability to the people. They are solely motivated by an irresistible temptation to remain glued unto the seats of power by means fair or foul. When the top rung gives such obnoxious and nasty lead, others down the rung are left with no choice but tip-toe their line. This is as much true of the bureaucracy as the police whose main trait is to protect life and property of the citizens and not permit the law breakers any liberties whatsoever. The fact remains that post independence period has witnessed gradual debasement of values and erosion of law. Today it is gory scenario of life being cut short unceremoniously so abruptly. There is the willy-nilly or even deliberate acquiescence in as much as even fool-proof cases are sought to be diluted to take the sting out of the case for sure acquittal. Ms Mattoo's brutal murder amply proves how the sons of the big guns succeed in making mockery of the law and the law enforcing agencies. In the process internal security stands weakened and the country earns the ignominy of being too soft. Yes, the soft one. But who softens the pitch for the criminals of all hues to play recklessly with the lives of the hapless citizens. Whichever case one views it is the politician that remains the villain. Look at the case of forest brigand who has more than hundred murders to his long list of criminal acts, looting of property worth hundreds of crores and denuding sandal forests to mint millions. The latest on him is that he not only enjoys official patronage of the political hierarchy but also is in close league with terrorists of foreign brands as also secessionists. The police nabbed him once only to facilitate his escape, albeit at the behest of powers that be. Task forces are created to nab him only to set them in traps laid down by Veerappan. Not that cops are incompetent. No. Given the orders they can indeed do the job. So they hold long meetings to make peace with the outlaw. It is nothing but tomfoolery par excellence. They had almost succeeded in getting released Veerappan's 56 accompalices detained under TADA but for the Apex Court's intervention. So politicians for a change feel humiliated. But not really. They belong to the creed which soonafter birth pray to God, ''Oh, God! Make me a little shameless. Rest of the world I will manage myself''. Take the case of another man called Shahubuddin. There are daily allegations of his participation in many heinous crimes in Bihar which includes extortions, maintaining private army and even acts punishable under Section 302. But the Bihar administration remains mute spectator to his nefarious acts. He thus holds almost everyone around to ransom by creating immense fear amongst the citizens as one who enjoys full immunity. Such is the jaundiced ruling clan in Bihar. So court's intervention is once again sought as police does not have nod from political hierarchy to proceed against him. Be it riots, murders and other heinous acts. Nearer home in our State there are frequent allegations of moles right inside the ruling clan but that is that. After all none is touchable in as much as no terrorist outfit in the State is banned. The nexus is total. It is indeed a miracle that State yet survives; so is the country. |
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Middle east: The battle continues By Major Kulbir Singh Maj General Abdel-Razak-al-Majaydeh, a senior Palestinian Security Official on July, this year had warned of violence, if the West Asia Peace Summit at camp David ended without an agreement. Well, it did, despite the US President putting in his weight. Majaydeh's predictions came true. His exact words were: "If it reaches a dead lock or failure, there will be disappointment among Palestinians which could be accompanied by violence". Status of Jerusalem, claimed by both parties as their capital, proved to be the toughest stumbling block, while progress had been made on the other issues, such as nature and borders of a Palestinian refugees and of Jewish settlers. Palestinian analyst Khalil Shika Ki says Mr Arafat's pledge to declare a State this year has been too unequivocal to be shelved a second time. Mr Arafat is under extreme pressure to declare a State. Not just pressure coming from the opposition but pressure from those who are very close to him. September 13 was the date given to him to resolve bitter dispute and reach a final peace treaty. That did not happen. That was also the date when Mr Arafat was expected to decide whether to go ahead with statehood plans or bide his time. Again nothing concrete emerged. Time is precisely what the 70 year old former guerrilla who is rumoured to be in ailing health, does not have. Mr Arafat has taken in his stride criticism by opposition Palestinian groups accusing him of selling out on steadfast national objectives by forging peace agreements with Israel. As violence once again swept Gaza strip, west Bank and else where Mr Arafat was once again bearing the brunt of criticism and peace process was once again looking for guarantees and inquiries. Mr Ariel Sharan, the leader of the opposition in Israel is a strong headed man, who perhaps never tires of violence. The present heat in the middle east seems again a deliberate provocation of the Palestinians. Strutting around the AL AQSA complex to show that Israel ultimately controls the site, he triggered off the volcanic outburst. Mr Sharan made his tour of AL AQSA complex despite warnings from all around that his action could trigger clashes at a fragile moment in the interaction between Israelis and Palestinians. Negotiators from both the sides had just reviewed their discussions in what could be the final effort to sort out the main issues on contention. Full control over the AL AQSA complex, known to the Jews as Temple Mount, is the issue most in contention and the most difficult one to resolve. There also seems, no doubt, that whatever be the agreement, the Palestinians will continue to have access to the AL AQSA complex and the right to pray there. Jews similarly will continue to pray at the western wall which runs along one side of the complex. The AL AQSA area is administered by a Palestinian Waqf although Israel maintains a security parameter round the sensitive complex. What is in contention is the question of which side will be designated as the sovereign over the site. It was in this surcharged atmosphere that Mr Sharan decided to take a stroll. He could hardly have overlooked the fact that his tour took place on the day before Palestinians gather in large numbers at AL - AQSA for Friday prayers. It was almost a dead certainty that the Palestinians would react, sensitive as they are to the fact that the balance of power them and given their fear that they might lose sovereignty over AL AQSA and the inevitable happened. Palestinians gathered for Friday prayers began stonning a large Israeli police contingent, stationed at the entrance to the complex. The latter retaliated with rubber bullets and then with live bullets. As the rioting spread, machine guns, battle tanks and helicopters gun ships joined the fray, casualties began to mount and the issue once again hit the headlines with international leaders showing concern over the future of the talks. This was the most violent outbreak in four years. If you all may recount Mr Sharan was in command of the Israeli forces when the massacres in the Sabra and Shatilla refugee camps took place (Christian militia men allied with Israeli's) slaughtered hundreds of Palestinians, mostly civilians in these refugees camps. The horror has apparently not left any impact on Mr Sharan Mr Sharan was sure of having it both ways when he decided to tour the Temple Mount/AL-AQSA. If the Israeli authorities had tried to stop him, he would have decried the negotiations as a process that would eventually stop Jews from visiting holiest of the holy places. By visiting the place, he has aroused Palestinian concern and anger that Jews are trying to establish their sovereignty over AL-AQSA complex. The most intricate issue in contention between the two sides which they were nevertheless trying to resolve, has now been exposed in its most atavistic dimensions. The raw passions that the Temple Mount/AL AQSA issue arouses, now so thoroughly exposed will not allow any peaceful settlement, though there were attempts to make out an agreement which would leave out the temple Mount/AL-AQSA issue for now. Palestinian officials had demurred at the propsoal. They had pointed out that if the issue was left unresolved it would transform itself from a political question into a religious one. The events of last week make it clear that the horrors would be unimaginable once such transformation takes place. "Palestinians have no choice but to continue armed struggle against Israel," said the head of the political wing of Palestinian rebel movement HAMAS Mr Khaled Mashal 'Lebanon was liberated from Israeli occupation by negotiations," but by war he added. Meanwhile, President Saddam Hussain of Iraq is back in news. He accused Arab leaders of taking a weak stance towards Israel's massacre of Palestinians. "Enough is enough we should not accept any more humiliation, let us put an end to Zionism." These volatile comments obviously do not augur well for west Asia, as the efforts to resolve the crisis take shape. This by far has been the worst clashes in four years and have left the peace process in tatters and shocked the world with graphic images of a 12 years old Palestinian boy being shot dead. So the battle continues with no legitimate end in sight. Will the conclusive end to this epic tragedy ever arrive is any body's guess but surely not in the near future. |
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By O P Modi Recently some significant statements have been made by Hindu leaders of India and the leaders of Pakistan's Mohajir community (Muslims who, during partition, left India to settle in Pakistan). While the Mohajir leaders visiting India have highlighted the consequences of the partition the BJP's new president Bangaru Laxman has asked its cadre to woo the Indian Muslims. Another notable statement is that of RSS sarsanghchalak K S Sudershan. Addressing the rally of RSS volunteers in Nagpur, early this month, he said "The Muslims of India have realised that the fight for one united Muslim nation was not possible and that the other Islamic countries will not accept them merely because of their common religion." The RSS chief went on to say, "Hence the Indian Muslims should try to associate themselves with cultural mainstream of India." Notwithstanding the controversy as to what Mr Sudershan means by 'cultural mainstream' one cannot overlook the perceptive shift in the thinking of the RSS. Taken together the statements of BJP and RSS Chiefs it is obvious that there is enormous change in the approach of these two organisations which hitherto had been accused of having anti-Muslim sentiments. The leaders of Mohajir's Muttahida Quami Movement (MQM), visiting India, have stated the stark truth viz. "The division of the sub-continent was in fact a division of the Muslims living there." They also endorsed their London based chief Altaf Hussain's statement that the partition of India was the "greatest historic blunder". These leaders, despite considerable risk to their lives and properties back home, have given a number of interviews to the Indian print and electronic media besides talking to many political leaders and addressing a number of seminars in this country. Their refrain has been that the partition in effect has partitioned the Muslim of the region. The Muslim, who for centuries had been living together in the undivided country until 1947, have been divided into three parts and are now living in three different countries namely Bangla Desh, Pakistan and India. Part of the families of a huge number of Mohajirs lives in India and relatives of many regularly come from Pakistan to meet them. It is important to note that of all the three countries of the region India has the largest Muslims population. In fact the Mohajirs whose forefathers came from Uttar Pradesh and Bihar were on the forefront of Mohd. Ali Jinah's movement for a Muslim State inthe sub-continent. But even afte 52 years of their domicile in that country they are treated as second class citizens. "We have come to India to tell the Indian Muslims as to what is being done to the Mohajirs in that country" said Dr Khalid Mahmood, a member of the MQM delegation. He told that Mohajirs form one third population of Pakistan but remain suspect in the eyes of the administration of that country. Truth for J&K majority The truth that religion cannot be a binding force seems to be precipitating slowly but surely. It should, above all open the eyes of pro Pakistan Muslims in Jammu and Kashmir. If in rest of India Hindus form the majority in the State the Muslims are in majority. Syed Qaisar Mahmood in one of his articles says "Holy Prophet Mohammed said that if a person commits injustice against a non-Muslim living in an Islamic society, assigns him a job beyond his capacity, infringes his rights or takes something away from him unlawfully, then the Prophet would contend against such a person on the day of Judgement." And so far as the rights of non-Muslims go, under the laws of Holy Quran and Sunnah "they have to be treated at par with Muslims in respect to fundamental rights" writes Qaiser Mahmood. According to an article by Feroz Bakht Ahmed "Prophet Mohammad very explicitly clarified that Islam is a religion that recognises other religions, their legitimacy, their existence, their common humanity, and common message of all religions. According to Holy Prophet Muslim rulers must not be concerned with the form of Government. What they should be concerned with must be social welfare and benefit of all people irrespective of their denomination, caste, creed or belief." Something totally contrary to the injuctions of Holy Prophet is being perpetrated by Pakistan in the State today. Thousands of innocent people have been killed and hundreds of women have been dishonored. Lakhs of Hindus had to flee their homes and hearths in the Valley as their neighbours could not guarantee the protection of their life and honour. It was absolutely different during the 1947 Pakistani aggression. When whole of North India was engulfed by communal frenzy and men women and children were being slaughtered by the millions, in Pakistan and India, it was not the State Government but vast majority of Valley's Muslims who protected the honour and lives of non-Muslims against the marauding hordes of tribals and armed forces of Pakistan. At that time the preachings of Holy Quran were truly followed. The names of Master Abdul Aziz of Muzaffarabad, Mohammad Maqbool Sherwani of Baramullah and Munshi Jalal-u-Din of Rajouri are imprinted in the hearts of Hindus and Sikhs of the State and will never be erased. The reward of this was that while the Indian Armed Froces gallantly guarded the borders and repulsed the Pakistani aggression twice (1965 and 1971), for 52 years, the people of Kashmir prospered in the sunshine of peace and security. Then in 1989 with the help of some Kashmiri youth Pakistan started the proxy war. Eleven long years have gone by. During this nightmare of terrorism the lush green jungles of Kashmir have disappeared. Mountains have been denuded beause of all round lawlessness. There is either scant snow fall or the snow melts away soon after the summer sets in. There are either floods or droughts in certain areas of the Valley. Wuhler, once an inland ocean, has become a small lake and the famous Dal Lake has shrunk from 22 sq km. to just 8 sq. km. Other lakes too have suffered grave ecological tragedy. The sub-soil water table having gone down, many springs have dried up and grains and fruits crops have suffered immense loss. Man is his own friend and he himself is his own enemy says Geeta. The enemy from without can do no harm; it is the enemy within who can destroy us. The lesson is loud and clear. The majority must protect the minority where ever it is and in which ever State it happens to be. The Muslims majority in Kashmir must welcome back, with open arms, the migrant Kashmiri Pandits and others who fled from the Valley. They must go to Jammu and Delhi and assure the migrants that they would be protected by them, even at the cost of their own lives, if and when the migrants return to their homes. Only then Kashmir once again will be blessed by the Almighty Allah and again, someday soon, it will regain it's lost glory. |
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Fall in Domestic savings to jeopardise economic growth By S.V. Vaidyanathan Domestic savings engine economic growth. This is particularly true of budding economies liberated from foreign rule in the forties and fifties. Their zeal to safeguard the new-found freedom and attempt at self-sufficiency resulted in economic isolation. India has been suffering from this syndrome since its independence. The economy remained isolated till 1991. During the period the GDP registered the Hindu Rate of Growth, which hovered between 3-3.5 per cent. The GDP growth was primarily financed through domestic savings, household savings in particular. On the eve of the Eighth Plan they stood at a record level of over 25 per cent. It was this high level of savings that boosted GDP growth to 5.5 per cent in the late 1980s. Domestic savings continued to play a key role even after liberalisation of the economy in 1991. However, flow of foreign investment and larger private investment in the core sectors did not underscore the importance of domestic savings for higher growth. In the recent years, savings growth rate has declined despite a healthy growth in the Gross Domestic Product (GDP). According to the quick estimates of the Central Statistical Organisation (CSO) the rate of growth of domestic savings fell to 22.3 per cent of the GDP in 1998-99 from 24.7 per cent in 1997-98. The decline is steep when compared to the peak growth of 25.6 per cent achieved in 1995-96. The 23 per cent growth rate is marginally higher over the lowest rate of growth of 22.5 per cent recorded in 1992-93. The development does not augur well for the economy which is witnessing a deceleration in GDP with a short spell of robust growth in the eight plan. While framing the Ninth Five Year Plan, the Planning Commission had assumed domestic savings to grow at 26 per cent for achieving a 7 per cent growth rate for the plan period with foreign investment flow notwithstanding. Like several other, the assumption of a steady savings rate during the plan period, too, has fallen through. What is worrisome is that the decline in domestic savings has been all across. The major component of savings – the public sector, private corporates and households – have witnessed the slide. For instance, PU savings have been dipping. From a growth rate of 1.4 per cent of the GDP in 1997-98, they have become negative, according to recent review of the public sector. Even the profit making units’ bottom lines have been eroded. This is likely to aggravate the decline. Referring to the corporate savings, CSO estimates show that they sagged from 4.3 per cent to 3.8 per cent during the period under review. Corporate savings have slid because of the demand recession since 1997 onwards with a slight respite in the last six months of the 1999-2000 fiscal. A decline in household savings is most disturbing. This segment accounts for the larger part of domestic savings. These account for nearly 82 per cent of the total domestic savings and have traditionally been the main contributor to the capital asset build up. Their share in the GDP has been around 19 per cent but it declined to 18.5 per cent according to estimates for 1998-99. The revelation has come as a shock to the policy makers especially when savings were expected to rise. It should be highlighted here that all the economic parameters are on the slide since 1998-99. For instance, the industry has been facing recession during the period. A decline in savings at this juncture when urgent investment is needed in all sectors including agriculture, infrastructure and social services will result in a set back to growth. The all important question is what has triggered the fall in domestic savings especially the household savings? It is overall monetary policies that encourage or discourage savings. Indian householder has traditionally been a safe investor. Banks have been his custodians. Therefore, interest rates do play a key role in mobilising individual savings. This a conventional argument pur forth in explaining a decline of domestic savings. However, in the case of the Indian saver, it is the safety factor that determines his investments. So, fluctuations in interest rates have played but a marginal role in declining savings. The basic reason for erosion in household savings/ small savings are several including the middle class propensity to save. This has been curtailed due to the inflationary pressures. In the last decade, with the exception of 1999-2000, inflation had been steadily ruling at 10 per cent. Besides, there had been a shift in the consumption pattern of the saver. He was spending more on the consumer durables or creating physical assets rather than creating financial assets. This marked a deviation from the traditional mode of saving in financial assets to consumer durables. It was this shift in consumption pattern that had given boost to manufacturing articles in 1998-1999. However, the fall in domestic savings has serious economic repercussions. This reduces the volume of investible resources in the hands of the banks who in turn fund both the private and public investment. This trend would cause more hardships to the beleagured policy makers facing paucity of funds for fresh investment. Lower investments would recharge the recessonary trends once again. Lower investment means lower growth and consequently lower rate of savings. The government will have to immediately address to the problem and provide sops that encourage savings. It will be difficult to reconcile the two because higher interest would mean higher returns to the savers but hurt the industry by escalating its costs. The need of the hour is that the government take measures to reduce PU losses, reduce its fiscal deficit and provide sops to the corporates to improve their margins to generate higher savings in the system. The behaviour pattern of household savings has been rather erratic in the nineties. Steps will have to be taken to reduce complete dependence on this segment for investible funds. INAV |
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By : Shekhar Bhatnagar Though we pride in being a Global super power in I T Sector the Military, Science and Technology, Agriculture and Industrial houses, why are we forced to equate ourselves with countries like Ethiopia, or Camaroon and even look upto less prominent nations of the third world when it comes to the field of sports. This feeling of humiliation and puzzle is more pronounced when we consider especially the national strengths, facilities and privileges that our country enjoys. * Third largest workforce of educated professionals in the world. * Adequate national income to meet an enhanced sports budget. * CBI monitoring to ensure proper compliance of spending in the ministry of sports. * Long experience in organising complex sporting event- beginning from the very first Asian games organised in New Delhi. The involvement and interest of our senior most bureaucrats indicates their ''sporty'' attitude towards games and events. Our P M Mr A B Vajpayee was quick to congratulate Mrs Malleshwari on her success in the weight lifting event in Sydney Australia last month. * It is quite incorrect to consider the problem to be rooted in our cultural ethos. ''We do not have sports minded society. '' Is a common argument put forward by my opic and ignorant critics. The Olympic events were top Priority across the entire country during the games in Sydney and were no less a lime light among our top brass Government, Military, Business and other social circles. One and all were keenly glued to their TV sets at late hours and early mornings to watch performances. The entire nation was jubiliant at National successes and rather disappointed anxious and apprehensive at not-so successful events. We, as a nation are keenly involved in and have a burning rage to make India proud in the international sporting arena. Moreover, other countries are not more sports minded on an average than we Indians are. Possessing the 2nd largest population in the universe, and having a large section of youth under 25 years of age, we are expected to perform way above our present levels. It is rather surprising why our sportsmen do not come upto international standards. Present Insight Not too long ago, India was a small player in the IT field. Today we boast of the world's IInd largest work force. From an importer of basic food items to an exporter of Sattellites, ships and nuclear power stations from a small trading community to among the biggest MNC's in the world- we have come a long way. Producing the largest quantity of milk internationally, producing the third largest number or books and periodicals globally and having one of the world's largest and most sophisticated standing armies, India has a whole lot to be proud of. Our administrators, professionals and workers have done commendable jobs in their respective fields and done their country a great service. Future perspective Having participated in almost every event from athletics to swimming, India has trained sportsmen in many disciplines. A short term quick strategy would be to focus on this existing group and sharpen their performance levels through enhanced and superior practice. Other sports and games not presently participated in can be cultivated. A larger group of sportsmen will hence be created. It is said that our neighbouring country China spends a whopping 500 times more aggregate money on its sports ministry than we do. This might call for enhancing our budgetary allocations on sports and atheletic ventures. A more keen and interested attitude is also required by our national leaders and policy makers in this field. With superior training, with greater rewards and incentives given to our sportsmen and with a keener involvement by our National leaders in sports we can surely emulate the performance or the IT and industrial sectors in the coming events and Olympics. Charity, Mr Jalan,
begins at home Reserve Bank governor Bimal Jalan has fallen into the trap of macroeconomic stability. This prescription fails if world capital continues to evade developing countries for reasons other than economic stability. Then we fall into a trap. Domestic investment suffers because of macroeconomic stability and foreign investment does not come for other reasons. There was a need, therefore, to draw up a contingency plan for building our infrastructure. This, unfortunately, Jalan fails to do. The mid-term review of the monetary and credit policy released by Jalan stresses the need for the government to control the fiscal deficit by curbing expenditures. The underlying philosophy is one that was evolved by the IMF, World Bank and US Government and known as the 'Washington Consensus' in the backdrop of the Latin American debt defaults of the eighties. These experts held that the problem originated in government profligacy. The Latin governments had borrowed heavily from the global capital markets and used the money for grandiose projects like the Olympics in Mexico City and for paying hefty salaries to government employees. The leaders siphoned off money much from the State coffers and deposited in the Swiss Banks as their personal fortunes. The problem was not that the developing countries were borrowing money for investment but that they were misusing it. The Washington experts came up with 'macroeconomic stability' to deal with this situation. The leaders of the developing countries were corrupt. Instead of providing capital to the developing country governments for investment, they said, it should be provided through the private route. The leaders would then not be able to bleed the money out of their economies. Thence came the prescription that the governments should be forced to contain their fiscal deficit and cut down their expenditures, including those for infrastructure. The resulting stability would make those countries attractive for foreign investors. The money would reach the developing countries as previously but private investors would see that it was not misappropriated. The developing countries would get the capital that they needed and global capital would get the security of good governance that it sought. The developing countries and global capital would thus establish a mutually beneficial relationship. All would live happily ever after ! This is precisely the message that Jalan has for the country. ''It is necessary to build up strong expectations on the fiscal front,'' states the mid-term review. There is a catch in this Washington-Jalan consensus though. The flow of global capital is not a function of macroeconomic stability alone. A host of unrelated factors can effect these flows. The increase in US Treasury interest rates has led to the flow of global capital into that 'safe haven'. The buoyancy in the Nasdaq till about an year ago had led the flows in that direction. A war like Kargil can change the perception of the investors with respect to security. Sanctions can be imposed for exploding a nuclear device. And there is competition between developing countries to reckon with. Other worse placed countries can offer better terms like lower tax regimes to attract them. Most of these reason have been recognized by the RBI in its Annual Report. It is, therefore, not certain that foreign investment will come if macroeconomic stability is established. The question that Jalan fails to answer is this : What happens if foreign capital flows do not take place despite macro-economic stability ? India has followed- substantially, if not fully- the Washington prescription. Government expenditures- specially public investment in infrastructure has been prudently controlled. If our fiscal deficit has not declined, it has also not increased. Our external debt as a percentage of GDP has reduced. Inflation is lower than in the eighties. Yet, after mid-nineties foreign capital inflows have remain placid. So also our rate of economic growth. The prescription given by Jalan now is to further control government expenditures, persevere in macro-economic stability and remove the remaining roadblocks to foreign capital inflows. It is like giving a higher dose of antibiotics to a person suffering from malaria. The problem is uncertainty of global capital markets and we are trying to solve it by strengthening macro-economic stability. In the short run this approach would certainly lead to a further reduction of public investment and a decline in growth rates. Whether this translates into a long run increase in growth would, of course, depend upon the perception of global investors. If this long run fortuitous circumstance does not arise then we would be doubly condemned. Neither domestic nor foreign investment will take place. Then there is the problem of political feasibility. Jalan counsels the government to reduce the expenditures on its employees. This is easier said than done. And Jalan should know. The record of the Reserve Bank in controlling its own salary expenditures appears no better than that of the government. Consider the figures. In 1992-93 the 'Establishment Expenditure'- comprising mostly of salaries -- was 7.3 percent of RBI's total expenditure. In 1997-98 they had bloated to 17.8 per cent in 1998-99 they declined marginally to 15.1 percent. Instead of worrying about the more than double increase since the early nineties, the RBI Annual Report for that year states that ''the higher expenditure in 1997-98 was mainly due to an ad hoc provision of Rs 220 crore made towards leave encashment liability in respect of retiring employees''. The RBI is happy that it has managed to double those expenditures since early nineties ! Charity, Mr Jalan, begins at home. If the RBI cannot contain its own salary expenditures, it has no business to advise the government to do so. Certainly it would be wonderful of a lean and efficient government as well as the RBI could be established. But given the stranglehold of the bureaucracy it was necessary to come up with a contingency plan. There are two problems with the Jalan prescription. First, what if government salary expenditures cannot be controlled? Second, what if foreign investors shy away despite macroeconomic stability? There Jalan utterly fails to answer. His prescription then becomes a strategy for non-investment. To be fair, in its Annual Report the RBI also calls upon the government to reduce the financial burdens by '' plugging leakages and misappropriation''. But it does not seem to dawn upon Jalan that the very raison d'etre of macroeconomic stability arose from the inability of the government to control these leakages. If the government could actually plug the leakages then the very logic of macroeconomic stability would get thrown out. If the government spent Rs 2 crore and built a road worth Rs 2 crore then there was no problem to begin with. The problem had arisen because Rs 2 crore was spent to build a road of Rs 1 crore. The wise men of Mumbai should consider loosening the monetary policy and increasing government expenditures in infrastructure even if the leakages and government salary expenditures are not controlled. These are compromises that we have to make in the face of the political realities. Certainly it will lead to some inflation but that is a small cost in comparison to the non-development that the Washington-Jalan prescription leads to. |
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