Priorities
for Raksha Mantri
By Maj
Gen V K Madhok (retired)
Of late,
there has been an unusual though for a
change, fairly, well informed criticism
of the military leadership in the media.
It has been supported with evidence from
official investigation reports. Cases of
favouritism, moral turpitude (cooking up
false encounters at Siachen) and even
corruption (Tehelka) have been cited.
Concern has been shown about the shortage
of officers-nearly 12,000 Captains and
Majors in the Army besides 10,000 or so
superseded officers, with 900 and 800
officers short in the Air Force and the
Navy respectively. Attention has been
drawn on the TV about the misuse of
"Sahayaks" by the officers.
Also, about the dangers of politicisation
and a downward trend in military
discipline with nearly 1528 cases of Army
personnel pending in the civil courts.
Besides, increasing involvement of the
Army in internal security has come in for
adverse comment.
How is it
that the fourth largest army in the world
has become a hostage to foreign countries
with nearly 70 percent of equipment of
the IAF and the Army and 60 percent of
the Navy from erstwhile USSR and east
European countries? Why cant the civil
industry take on the manufacture of
defence spares with assistance from the
R&D which has a well established base
and has been the largest Third World
recipient of foreign technology?
So far as
the defence equipment is concerned the
crucial danger is not that the equipment
will be grounded or become idle, because
sooner or later, defence spares and
replacements will come or made available
by advanced countries but on their terms.
It is the psychological aspect, the
impact of this situation on the soldiery
which should be a cause of concern. The
players in the game of defence production
are :India's 39 ordinance factories -
employing nearly two lac personnel, under
a DGOF (Director General Ordnance
Factories) and an OFB (Ordnance Factory
Board); the Scientific Advisor to the
Raksha Mantri (RM) who also heads the
DRDO (Defence Research and Development
Organisation) with its nearly 42
laboratories spread all over the country;
the DGQA (Director General Quality
Assurance) of the rank of Lieutenant
General with 108 establishments for
inspection and quality assurance, both
for foreign purchases and indigenously
produced equipment.
In
addition, there is the civil industry
which is primarily being used for
fabrication or to manufacture minor
assemblies and has been kept outside the
domain of defence production vide
industrial resolution which forbids
manufacture of defence equipment by the
private sector. Besides, there is the
User (defence services) for whom all
defence equipment is produced. And last,
the defence agent, representing foreign
firms - with clout in the polity or with
the controlling officers, with his eyes
focussed on profits and other pay offs
and what he can supply for the next war.
Inspite of
the fact that we have a sound defence
production infrastructure, probably the
best in the Third World, the end result
is that India is not in a position to
supply an indigenous aircraft, a tank, an
APC or AD systems to the armed forces,
nor bullet proof vests, mine detectors,
RPVs (Remotely Piloted Vehicles) or 155
mm Howitzers. Although the largest
producer of weapons in the Third World,
India is also one of the largest
importers of foreign defence equipment in
the world. It was as early as in January
1992 that the Scientific Adviser to the
RM announced with much fanfare that
R&D establishments would henceforth
be open to the civil entrepreneurs for
assistance. The question is what has gone
wrong? First, there is lack of
coordination amongst various agencies. A
typical example is when the CAG pulled up
the defence services and the Army in
particular for various lapses. He said
that two projects for setting up
maintenance and overhaul facilities for
tank systems and ICVs were not being
progressed after execution of certain
preliminry work at a cost of Rs. 7.07
crores. As a result tanks and ICVS could
not be overhauled. Land measuring 1,388
acres acquired for one of these projects
(Bhopal) was handed over to a training
centre. Currently, it is only the
Secretary Defence Production who accepts,
monitors and progresses all production
projects with the assistance of 20 odd
heads of various agencies.
Second,
there is no functional policy-making
organ for long term requirements.
Although there is the RM's equipment and
policy-making committee, it is doubtful
whether it has ever met. Third, the User
is either not interested or has been
deliberately kept out of defence
production process. But it is the User
who has to lay down as to what he wants
and to convey his ideas to the R&D.
The fact that he has insufficient
confidence in the R&D and other
production agencies does not mean, that
every time a new gadget is offered we
have to rush delegations abroad to
purchase equipment. For a change, the
User must exercise control over the
production agencies and monitor their
progress. Our factories, PSUs and
inspection agencies must be made
accountable to him. A DPB (Defence
Production Board) together with an DIB
(Defence Indigenisation Board) should be
constituted which are headed by
professionals in rotation from each
service and which are answerable to the
RM.
The
promotion system must focus its attention
from the grassroots level upwards and not
the other way around by axing officers at
top levels. Senior military leaders
should really be removed or superseded
for cowardice in battle and disloyalty to
the State.
And
officers with moral turpitude should be
thrown out in any case much earlier, a
requirement which the promotion system
must fulfil. If we do that, no
substandard officer will find his way to
higher echelons of command. How is that
to be done? We need to revise and update
the selection system formed in the 40s by
our erstwhile British Masters. The IMA
and NDA must not let a cadet with
doubtful character qualities get a
commission. After commission, before an
officer comes up for selection grade
promotion from Major to Lieutenant
Colonel, he has to pass atleast four
promotion tests at various stages.
Existing rules provide that after a
stipulated number of chances, if the
concerned officer fails to clear these,
then the personnel Branch can terminate
his services. But we fail to enforce
these well established rules.
Army's
present promotion system is impersonal.
The officer has no say in the system
throughout his career. There is
insufficient feedback to the officer
about his performance. The Selection
Boards never get to know as to what an
officer wants or has to say? The officer
is seldom consulted about his future
posting. No wonder, according to a
report, atleast six Lieutenant Generals
made it to the civil courts during the
mid 90s to seek justice. One option is to
reduce the present confidential report to
one page from the present 20 pages, with
the officer writing his own report
listing his goals, achievements during
the report period and future aspirations,
as is being done in many armies with
endorsements by superior officers in the
chain. Thus it will be seen that while
the armed forces have the necessary
infrastructure, there is a need to
initiate reforms. There is no reason why
the new RM alongwith a well-informed
polity and the chiefs should not be able
to do so.
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This
'gentleman' is a tough man
By B L
Kak
This
'gentleman'? Answer : He is none other
than India's new Prime Minister, Sardar
Manmohan Singh. He is a known
trouble-shooter. Hence, his thinking and
action against trouble-makers. He is
publicity shy. No wonder, this
unostentatious Sardarji maintained utter
secrecy as he set at rest tension and
controversy triggered as a result of the
reported statement by the Minister for
External Affairs, Natwar Singh, vis-a-vis
the mechanism for India-Pakistan
dialogue.
It was
Sardarji's quiet intervention, which led
Natwar Singh to get into touch with his
Pakistani counterpart, Khurshid Mehmood
Kasuri. The telephonic conversation took
place at a time when Pakistan President,
Gen. Parvez Musharraf, had virtually
threatened to go slow if the new
Government in New Delhi continued to over
emphasise the need and relevance of
Shimla Agreement instead of pursuing the
subsequent agreements between the two
countries. And no sooner did Kasuri tell
Natwar Singh that Islamabad looked
forward to ''a new chapter'' in the
India-Pakistan relationship than Indian
Foreign Minister assured him that the
Indian leadership--an obvious reference
to the Manmohan Singh Government--was
''fully committed'' to the dialogue
process.
''Shimla,
Lahore plus January 6 : total
continuity''. This was Natwar Singh's
assurance to Kasuri. Two days earlier, on
June 1, Natwar Singh deemed it necessary
to avoid being rigid on the issue. In
other words, the peace process with
Pakistan was placed back on track with
Natwar Singh giving up the Shimla accord
and the Sino-India model for foreign
secretary-level talks on June 27 and 28.
Insiders
found Sonia Gandhi, too, unwilling to
allow the controversy to persist. Sonia,
who, like her Congress party's allies
within and outside the Manmohan Singh
Government, did not want things to hot up
on India-Pakistan front, played her part,
without any fanfare, to erase doubts and
misgivings. This was illustrated by the
June 1 statement of Natwar Singh at his
first press conference in the capital as
the new Minister for External Affairs:
''India has changed. I have changed, the
world has changed, the international
agenda has changed''.
Of course,
much significance was attached to Natwar
Singh's argument: ''The future of
India-Pakistan relations no longer lies
in the past. We cannot forget the past
but neither should we be prisoners of
past''. As the Congress-led coalition
Government's allies, particularly the
weighty Left parties, cautioned both
Sonia Gandhi and Sardar Manmohan Singh
against wrong signals in relation to
India-Pakistan dialogue, Natwar Singh was
left with no option but to put to rest
the controversy over the Shimla agreement
as the 'bedrock' of bilateral relations.
It was
compulsion of circumstances: Natwar Singh
declaring publicly that his references to
the Shimla Agreement were not on a
standalone basis and that he had always
maintianed that this along with the
Lahore Declaration and the January 6
Islamabad agreement would govern the
talks with Pakistan. There is no denying
that he was also compelled to
disassociate himself from his proposal of
the Sino-India model being applicable to
Jammu and Kashmir in talks with Pakistan.
At the
same time, Natwar Singh took the
Pakistani counterpart by surprise when he
joined issue with him. Kasuri had
expressed concern about the Indian
Government's position on the Line of
Control (LoC) as a permanent border, a
plebiscite in Jammu and Kashmir, the
Shimla Agreement and the China model.
Natwar Singh asserted that no Indian
leader had made any statement about the
border. ''And as for plebiscite, the
issue had died many years ago', was his
message to Islamabad.
The
''secular'' Congress party has enough
reasons to be inimical to the
''communal'' BJP. But Sardar Manmohan
Singh has, through some of his gestures,
suggested his willingness to appreciate
'positive' and productive actions of the
Congress Party's political adversaries--
in this case, the Bhartiya Janata Party
which led the National Democratic
Alliance 2004. Atal Bihari Vajpayee of
course belogns to the ''communal'' BJP.
But he has to be given credit for
bringing his rabble rousers under some
modicum of restraint and working along
with Gen. Parvez Musharraf in taking the
first step towards speaking politely.
Is it not
a fact of history that it was difficult
for the bureaucrats on both sides to
digest? Is it also not a fact that a
beginning was made by the Vajpayee
Government in that India and Pakistan
actually started talking to each other
without regressing to harsh rhetoric?
Pakistan cannot be faulted for being
resistant to the application of the China
model. It requires to be understood that
no one with any idea of the ground
situation can seriously draw parallels
between the border issue between India
and China and Jammu and Kashmir.
That New
Delhi deemed it necessary to ensure that
Islamabad did not entertain unnecessary
doubts and misgivings vis-a-vis the
future of India-Pakistan dialogue was
illustrated by the announcement by the
President, APJ Abdul Kalam, on June 7
that the new Government will give
''highest priority'' to close relations
with its neighbours, and it will pursue
dialogue with Pakistan on all outstanding
issues on a sustained basis within the
framework of the Shimla Agreement and all
subsequent accords. The accords include
the joint statement of January 6, 2004,
Kalam said while addressing the joint
session of Parliament.
The over
obsession with the 1972 Shimla Agreement,
the insistence that this will be and
should be the 'bedrock' of dialogue, and
the refusal to respect the sensitivities
of the other side were allowed, for a
week though, despite the fact that the
Common Minimum Programme (CMP) of the
present ruling alliance at the Centre had
insisted that dialogue with Pakistan on
all issue will be pursued
''systematically and on a sustained
basis''.
Since the
formation of new Government in New Delhi
with ''Mr Clean'' (Sardar Manmohan Singh)
as the Prime Minister, Islamabad has been
pretty quick in its responses to any
Indian move or musing. Islamabad was, of
course, surprised by Natwar Singh's
''positive'' views on the overland gas
pipeline from Iran. Singh was quoted as
saying in a media interview just the
other day that India is willing to
consider the Iran-India gas pipeline ''if
Pakistan provides us with international
security guarantees''.
Pakistan's
Foreign Office, responsing to Natwar
Singh's views, let it be known that
Islamabad is ready to provide
international guarantees for the proposed
gas pipelines. It requires to be
mentioned here that ever since Gen
Musharraf took over in October 1999 in a
military coup, Pakistan has been pleading
with India to consider the Iranian gas
pipeline. India did resist engaging
Pakistan on the subject.
Iran has
been for years now pressing India to
build on the complementaries in the
energy sector. Iran has an abundance of
natural gas resources. India is one of
the biggest markets. The biggest
political hurdle all these years has been
volatility of India-Pakistan relations.
India has cited security reasons for the
protracted technical negotiations with
Iran during the last three years.
Paksitan's
willingness to help Iran and India set up
the gas pipeline is, apparently, based on
monetary considerations. In plain
language, Pakistan seen enormous gains in
terms of transit fees on the Iranian gas
pipeline to India through its territory.
Hence, Gen. Musharraf's open move,
backing the trilateral project and
expressing his willingness to address all
Indian concerns on the security of the
pipeline.
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Kashmir
solution from London?
TALES OF TRAVESTY
By Dr. Jitendra Singh
Another Kashmir
Conference has just concluded in London. Without
coming forward with any definite Kashmir
solution. Thus paving the way for yet another
similar confernece in UK or USA or Switzerland.
This has become a
fashion. Every now and then, one or the other
foreign based group of self-proclaimed Kashmir
sympathisers comes up with the idea of organising
a meet to discuss Kashmir. Press hand-outs are
meticulously circulated. Wide publicity is sought
by sending out letters of invitation to such of
the mediapersons who can promise a favourable
press coverage throughout the course of event.
Media-savvy politicians and a few celebrities
from both India and Pakistan are also included
among the invitees whose names are selected
purely on the basis of convenience, suitability
and subjective preference of the organisers. The
socalled intellectuals, if any, who attend such
purposeless meets end up more as vain show-pieces
rather than men or women of any substance.
And, what is it
that they talk about? Or, what is it that they
suggest to solve what they fondly describe as the
"Kashmir problem"? The jargon is
familiar in every Kashmir related conference or
seminar whether it is held in London or New York
or Geneva. The same monotonous postulations. The
same ambiguous discourses. The same vague
formulae. The same hi-fi rhetoric. Talk to
Kashmir. Talk to India and Pakistan. Have a
bipartite dialogue. Have a tripartite dialogue.
Have a quadripartite dialogue. Encourage people
to people contact. Encourage intellectual to
intellectual contact. Encourage artist to artist
contact. So on and so forth. The most recent
London Conference on Kashmir was also a victim of
this much often repeated cocophony. Incidentally,
the most forthright and perhaps the most
realistic suggestion came from a person who
otherwise carries the reputation of a being a
non-serious disco politician --- Farooq Abdullah
--- who bluntly told the audience that nothing is
going to change with Jammu and Kashmir, and
therefore it is high time India and Pakistan
learnt to live in peace and put an end to the
ongoing bloodshed.
The next
question - about the venue? Why is it that the
Non-Resident Kashmiris invariably organise
Kashmir conferences outside Kashmir? Why don't
these wealthy foreign based sons of soil shell
out a part of their enormous resources to hold a
conference like this nearer home and preferably
within the Kashmir Valley so that they may get an
actual feel of the hard ground reality and may
also experience how it is being exposed to the
threat of mercenary violence and unsparing
terrorism. A conference at a local venue may also
enable their lesser brethren back home to share a
few privileged moments with them. and, even if a
conference like this is not feasible at a venue
within Jammu and Kashmir due to some technical
reasons or diplomatic restrictions, can't it
still be held atleast at a nearer venue albeit
outside the State so that native Kashmiris too
may find it accessible?
Kashmiris have
suffered enough of politicking in the name of
Kashmir. The precise problem currently in Kashmir
is that of sponsored militancy which has become a
vested interest for some self-seeking politicians
who masquerade as sympathisers of Kashmiris and
provoke the young Kashmiri youth to jump into
socalled "Jehad" while their own
children lead luxurious lifestyle in safe
heavens.
If Kashmiris want
to return to peace and prosperity, they would
have to defeat the designs of the self-styled
leaders who churn out peace formulae from far
away London but who have never had the taste of
hardship suffered by a common man in Kashmir and
whose conference feasts thrive at the cost of an
ordinary Umapathy, a La Akbar Allahabadi, "Qaum
Ke Gham Mein Dinner Khaatey Hain Hukkam Ke Saath,
Ranj Leader Ko Bahut Hain Magar Aaraam Ke
Saath!"
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Senior
citizens need strong budgetary support
By O P Modi
Before the Lok
Sabha polls NDA’s Finance Minister Jaswant
Singhpromised to issue the so called
"Dada-Dadi" bonds during April this
year. That now is a fiction of the bygone days.
Sadly, the Congress led United Progressive
Alliance’s Common Minimum Programme (CMP)
too was disappointing because along with other
vulnerable sections there is no mention of 10
crore senior citizens who have become victims of
the fast changing transitional social disorder.
While their number is growing their woes too have
increased and are becoming more and more complex.
The Union budget is going to be presented next
month. One may hope that Finance Minister
P.Chidambram would provide adequate budgetary
support to mitigate sufferings of the old persons
our country.
Though the CMP
rightly emphasises the vulnerability of women,
children and the poor sections of the society it
has missed the plight of senior citizens most of
whom are faced with social rejection by their own
progeny on account of breaking up of the
centuries old joint family system. Along with the
disintegration of the joint families the attitude
of the younger generations towards their parents
and other elders is also undergoing a change that
distinctly belongs to the Western culture. The
youth no longer considers itself responsible for
looking after the family’s elders. Thus the
old persons have become the most unprotected lot
in our society today. Left uncared for by their
children even the government has so far failed to
provide social security to the old and infirm.
Unfortunately, as yet, we do not have any social
security system in place in our country like what
the Western world has for the old people. It is
paradoxical that though most of those who shaped
the CMP are themselves senior citizens yet they
forgot the sad state of affairs of their peers
among the general public.
No doubt many sops
already exist for the seniors. These include
concessions in Rail and Air fares, income tax
rebate and instant income tax refund where it
becomes due and so on. But how many old persons
undertake journey by rail or by air? How many get
the tax refund immediately on filing their
return? The fact is that the physical condition
of the elderly becomes so fragile that neither
they willingly undertake journeys nor can they
make rounds of the offices to get their problems
remedied. The ideal solution to most of their
difficulties would be to deliver the government
or NGO’s assistance at their door steps.
A typical case is
that of Radha Kishen (name changed). Four years
back, at 76, he retired from his business.
Selling off his business he deposited a sum of
rupees ten lakh in a bank at 12 percent interest.
It fetched him Rs. 10,000/- every month. The
amount was just sufficient for him and his wife
to live respectably in a hired house. Then the
interest rates started falling.Now he is getting
only rupees 4880/- per month on his deposit i.e.
an interest @ 5.75 percent including the
additional ½ percent for a senior citizen.
In the Union
budget 2003-04 under the Virishtha Pension Yojana
9 percent interest is provided. But the scheme is
flawed on four counts. First only one of the old
couple can invest in it and get the pension.
Second to receive a meagre pension of Rs. 2,000/-
per month the maximum amount that one is allowed
to deposit is Rs.2.66 Lakh. Third the depositor
can not get the money back at any stage. Only his
or her nominee gets the deposited amount after
the depositor’s death. Fourthly after three
years one can get loan against the deposited
amount at 11 percent rate of interest i.e. he
will have to pay 2 percent higher interest on his
own money!
Romesh Chander
Mittal ( name changed) is 89. He lives alone in a
big bungalow. His two sons are very well settled
abroad. He is having good bank balance also. His
wife left him long back. Despite his efforts he
is not getting any reliable domestic servant.
Even when he gets one he gets mortally afraid of
being killed and robbed of his money by him. He
does not want to live in a Viridh Ashram run on
charity. But he would be happy if he is relieved
from the worries of maintaining a big house and
standing in a queue to pay the electricity and
telephone bills. He would very much like to live
in a decent one room accommodation and be looked
after by some NGO for all the services at a
reasonable price.
Now the neglected
old persons are pinning all their hopes on the
forthcoming Union Budget. So far the assistance
to the senior citizens has been given on
fragmented basis. No special thought has been
given to the huge number of old persons who are
left to fend for themselves. Unless an integrated
plan is drawn to care for the persons who are
above 60 or 65 yearsof age the assistance
provided by the government till now will continue
to prove inadequate and not of much use to them.
Most of the senior
citizens put their savings in the banks or post
offices as most other avenues of investment are
risky and their operation is burdensome. The
present ½ percent additional interest allowed by
the banks over their normal rates to the seniors
is totally insufficient. The old persons have not
only to meet their expenses on food, clothes and
other daily needs their bill for medicines is
three times higher than that of the younger
persons. With medicine prices and the medical
assistance cost skyrocketing it has become
difficult for them to subsist. They do not have
any possibility of employment due to their age.
There should, therefore, be at least 3.5 percent
additional interest (over and above the normal
bank interest rates) for the deposits made by the
senior citizens. A provision in the impending
budget should be made for this purpose by the
Finance Minister.
Similarly the
Virishtha Pension Yojana implemented last year
should be amended so as to increase the maximum
investment limit to Rs. 10 Lakh instead of the
present limit of Rs. 2.66 Lakh.
An integrated
scheme for providing relief to the old people at
the fag end of their lives should include
provision of exclusive enclaves or living space
for them. Such enclaves, Ashrams, or Hostels
should be well planned according to the needs of
different categories of old persons. Provision
for financial assistance to the states for
allocating adequate land near district
headquarters, in every district, for setting up
exclusive enclaves for the old persons should be
made in the Union Budget. There should be
provision of land and the construction there on
for three different categories of persons. In the
first category land and financial assistance
should be made available for charity based Old
Age Homes. The second category is of those who
cannot build their own one room tenement but are
willing to live in a pay and stay hostel.
Sufficient funds should be ear marked for land
and buildings in the budget for such hostels.
Thirdly budget should include provision of land
for those who can build or pay the cost of one
room tenement and are willing to live in a
community style establishment that will have all
necessities of life managed by a trust formed by
the inmates of such establishments.
Lastly, before the
budget provisions are finalised the Finance
Minister should invite Senior Citizens’
organisations in the country, to submit their
suggestions for helping the old persons in their
twilight years.
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Economic
agenda for new Government
By Sumedha Sudhaman
Unlike in 1991,
when the Narasimha Rao led Congress Government
took over, the economy is now not in bad shape.
There is no balance of payment crisis; inflation
is low; macro-economic fundamentals are strong.
The only alarming bell is deficit - the combined
fiscal deficit mounted to over 10 per cent of
GDP.
With 8.2 per cent
GDP growth this year on the back of nearly a
record 17 per cent growth in agriculture and a
comfortable foreign exchange reserves at $ 118
billion, the Congress-led United Progressive
Alliance (UP A) Government is in a happy
position. Yes, there are two major areas of
concern, which would need urgent attention of
Finance Minister P Chidambaram.
As economist Vijay
Kelkar puts, the first is the problem of
successful resolution of fiscal consolidation
issues and the second is that of regional
disparities. He goes on to say fiscal deficit is
one of the biggest problems faced in India as the
consolidated fiscal deficit of the centre and
states has been at "stubbornly high
levels" for around twenty years now.
At a recent
lecture in Australia, he went into the genesis at
this problem to say stagnation in Tax-GDP ratio
is the main cause. He reels out statistics to
substantiate his point, which is very valid.
Between 1990-91 and 2003-04, there was progress
on direct taxes, which went up from 1.9 per cent
to 3.5 per cent of GDP. The direct tax receipts
are estimated to be around 625 billion dollars.
The phasing out of
customs duties has had a negative impact on the
growth in indirect taxes, which went down from
7.9 per cent to 5.7 per cent of GDP. The fiscal
difficulties at the states have given a fresh
impetus to state level tax efforts, which have
yielded some progress from 5.3 per cent of GDP to
6.3 per cent of GDP. However, the overall picture
has been unchanged, with the tax GDP ratio being
stable at 15.5 per cent ofGDP from 1990-91 to
2003-04.
The combination of
large fiscal deficits with a stagnant tax/GDP
ratio has given sharp growth in the debt/GDP
ratio. From 1992 to 1998, the debt/GDP ratio was
stable at 60 per cent of GDP, and that might have
given some comfort. But after that, it has
resumed an extremely rapid climb to the present
level of 80 per cent of GDP.
"This has
fuelled concerns about the possibility of India
facing the problem of debt trap as interest
payments have steadily become a bigger fraction
of tax revenues," Kelkar says, elaborating
the magnitude of the problem, which has not yet
been gauged by the political bosses particularly
from the Left and regional parties like RJD and
they still feel doling out sops and free lunches
are the best way to tackle the problems of the
poor.
Kelkar is right in
saying that India's fiscal problem is seen
"narrowly" in terms of debt
sustainability or a debt trap. "I think this
is a narrow perspective. The fiscal problem can
be damaging to growth in coming years, even if it
does not come to a debt trap."
He lists out four
reasons how high fiscal deficit could damage the
economy.
*It has eliminated
the room for manoeuvre in terms of counter
cyclical fiscal policy.
*It has sharply
circumscribed the ability of the state to
initiate new spending programmes, which could
produce highly beneficial public goods.
*It has served to
crowd out private investment, and thus reduce GDP
growth.
*It has generated
incentives for many distorted policies in the
financial sector, where it has helped inhibit
banking reform and the development of liquid
markets for interest rates.
Kelkar also points
out that the fiscal problems would have had an
exacerbated impact on growth, by crowding out
private investment, if it had not been for the
growth in household savings.
Roughly the
Government has taken 10 per cent of GDP in 1990
and in 2003 by way of fiscal deficit. However
household savings grew from 18 per cent to 23 per
cent, thus supplying an additional five
percentage points of GDP to non-Government
investment in the country.
Of course,
expenditure control, particularly downsizing of
Government could help in bringing about fiscal
consolidation. But as Kelkar says, it would be
difficult to visualize a drop in expenditure,
which would be large enough to significantly
contribute to the required fiscal adjustment.
That too with the
Left parties not very keen on drastic cut on
subsidies and totally against big ticket
disinvestment of public sector enterprises, the
Government has very little elbow room for
expenditure control as both Prime Minister
Manmohan Singh and Chidambaram have repeatedly
said reforms would be made "painless"
and carried forward with a human face.
Chidambaram has
gone one step forward to say that the Government
would have to focus 'the doctrine of
proportionality' so that the burden of reforms on
the poor is to the extent they could bear.
This leaves the
Government with only one option that is to focus
on improving tax revenues and to make them in the
words of Kelkar "central policy
instrument" for fiscal adjustment.
The prescription
that he gives is
* Enlarge the tax
base by rationalizing exemptions and expanding
services tax.
* Process
engineering of the tax system
* Achieving a
simple and rational tax system.
* Reduction in
transaction costs; improved taxpayers services.
* Reduction in
subsidies with better targetting.
Carring forward
tax reforms is one of the major economic agenda
of the Manmohan Singh Government and this is
evident from the fact that Chidambaram has had
detailed presentation by Kelkar on the very first
day he assumed office as Finance Minister.
There are also
indications that Kelkar, whose panel came out
with two volumes on direct and indirect tax
reforms, would continue to be Chidambaram's
adviser, goes to show the Government is serious
about taking measures towards this end in the
Budget, which is to be presented early July.
With Manmohan
Singh, the architect of India's economic reforms,
at the helm of affairs, one would not be wrong in
saying that this area of concern would get
serious attention. Singh, after being appointed
Prime Minister, said he would adopt policies,
which are "pro-growth, pro-savings,
'pro-investment and proemployment".
Singh as Finance
Minister had declared, "The days of free
lunches are over". I do not know if we would
be able to stand by that statement fully now more
so with the Left parties and regional outlifts
like RJD as partners of the coalition. Perhaps,
he would have to do some tight ropewalk in
blending tough economic measures with populism.
It is true that
there is some softening of approach by the Left
parties as reflected in the Common Minimum
Programme (CMP). The Congress, on its part, has
also climbed down from its tough stance on
reforms. Our experience of one and a half decades
of economic reforms have shown that painstaking
policies could be implemented even with a
coalition Government at the helm of affairs.
Reforms might not
have gone on at a break-neck speed in India as in
some other developing countries but these have
certainly moved forward steadily making the
country's macro-economic fundamentals strong and
resilient to shocks.
The country is
certainly on a higher growth path. How fast we
move forward would depend on the pulls and
pressures of the coalition partners of Prime
Minister Manmohan Singh and electoral politics. (Syndicate
Features)
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