The reason why

Only recently we had argued in these columns that election authorities in this region ought to be doubly careful while executing their current exercise of preparing new voter lists. Our concern was based on the continuing entry of illegal immigrants from Bangladesh. Although to a lesser extent they are coming in from Myanmar as well. They need to be at once detected and deported. It is true that we not heard of them for some days now. Who can deny then that we have not heard of any other thing during this period except the echo of the land allotment controversy? In fact, it is quite possible that they have found the present state of affairs conducive for pouring in large numbers. They may have well exploited the situation to their advantage with all of us looking in one direction. Our apprehension is that in the long run apart from straining our limited resources they may upset our demography. It is not an unfounded fear. It has its genesis in our bitter experience in North-East and the national capital among other places. Now we have got another reminder about the reason why we have to be even more alert in this regard. In a significant judgment Justice B.K. Sharma of the Gauhati High Court has dealt with adverse influences triggered by unauthorised Bangladeshis in Assam. He has made a stunning observation that they have become the "kingmakers" in the sensitive State. He has stated that "a strong political will to free Assam from illegal Bangladeshis is the need of the hour coupled with public activism in that direction." Justice Sharma dealt with 23 petitions filed by 61 persons after they were declared foreigners by respective foreigners' tribunals. He upheld the tribunals' awards against them in most of the cases confirming that 49 of 61 petitioners were indeed foreigners. He directed the police to keep them in custody till their deportation.

How do the foreigners misuse the electoral rolls? Justice Sharma has elaborated: "Till now the petitioners have been successful in avoiding the proceedings against them as well as their deportation from India. In the process, they have incorporated their names in the voters' lists on the basis of which they must have cast their votes. Thus the petitioners and such other large number of Bangladeshis present in the State of Assam have a major role in electing the representatives both to the Legislative Assembly and Parliament and consequently in the decision-making process towards building the nation. They have become the kingmakers." He has added: "It is no longer a secret or in the domain of 'doubt' that illegal Bangladeshis have intruded every nook and corner of Assam including forest land. In some of the cases, the petitioners themselves stated before the police during investigation that they were living in government and forest land. If reports are to be believed, they have even intruded upon the most sacred Xattra lands. Very often, they are protected by extending the protective lands of 'secularism' branding them to be Indian 'minorities' in Assam." There is a serious note of caution: "The day is not far off when the indigenous people of Assam both Hindus and Muslims and other religious groups will be reduced to minorities in their own land and the Bangladeshis who are freely and merrily moving around the fertile land of Assam will intrude upon the corridors of power."

Justice Sharma has asked the State Home Department and the Director-General of Police to furnish report on the action plan with respect to detection and deportation of foreign nationals from Assam. He has also sought a report on the action plan and the time limit within which the names of illegal voters in various voters' list would be deleted. He has clearly defined the role and responsibilities of the Central and state Governments. According to him, the foremost duty of the Central Government is to defend the borders of the country, prevent any trespass and make the life of the citizens safe and secure. The State government, he has added, is also equally responsible for taking effective measures to stop the unabated influx of Bangladeshi nationals to Assam threatening the very existence of the indigenous people in their own State. "Neither the Central government nor the State government can disown such solemn responsibilities, they being the protectors of the citizens," he has observed. Are all these comments not applicable to us in this region? It is in our interest that we not only heed to them but ensure their implementation to prevent Jammu from being an Assam. Right now, sadly, we are not attentive enough. Our attitude actually reminds us of the following variation of Martin Niemoller's famous poem about the inactivity of German intellectuals following the Nazi rise to power: "First they came for the Communists, but I was not a communist so I did not speak out. Then they came for the Socialists and the Trade Unionists, but I was neither, so I did not speak out. Then they came for the Jews, but I was not a Jew so I did not speak out. And when they came for me, there was no one left to speak out for me." It is high time we woke up.

Who is Mr Right?

Who is Mr Right? One who likes, loves, cares, trusts and does not believe in violence. A combination of Mr Right and Miss Perfect entails mutual respect and the ability and strength to together take reverses in stride. It is a question of striking correct rapport and having right credentials. This is a traditional viewpoint. The new philosophy includes this and at least one more aspect. A team of Harvard University researchers has found that being married to a smoker can significantly raise risk of a stroke. It goes beyond previous studies that have indicated the dangers of stroke to smokers alone. The conclusion now is that tying the knot to a smoker increases the chance of suffering a heart stroke by up to 72 per cent. It is based on an analysis of records of more than 16000 people in the United States aged over 50 and their spouses over a period of nine years. On the positive side is the observation: "The health benefits of quitting smoking likely extend beyond individual smokers to affect their spouses potentially multiplying the benefits of smoking." One tends to believe that aspirants for happy and healthy wedded life will draw proper lessons from this finding. It is better not to puff. Smoking is a disaster for married life.

Wrong prognosis to control inflation

By S.V. Vaidyanathan

The Reserve Bank of India (RBI) governor, Dr. Y.V. Reddy, has a penchant for surprises. On July 29 he lived up to his reputation with a higher-than-expected hike in the repo rate (rate at which banks borrow from the central bank) and a hike in the cash reserve ratio (CRR), the amount of funds banks have to keep with the central bank. In what is technically his last monetary policy review (his term ends in September), Dr Reddy raised both CRR and the repo rate to a more than seven-year high of 9 per cent. Both stock and bond markets promptly reacted; the BSE sensex falling 589 points, while the 10-year bond yield shot up to 9.4 per cent, seeing the bank's distinctly hawkish stance on inflation as a dampener for growth.

This is further buttressed by the RBI's lower GDP projection of 8 per cent, down from 8.0-8.5 per cent earlier. Also, the inflation rate is projected 'close to 7 per cent' by end March 2009, up from 5 per cent earlier. The Reserve Bank's prognosis-higher than anticipated inflation and lower than expected growth- coupled with the tough medicine meted out was enough to spook markets.

In the backdrop of domestic macroeconomic signals remaining ambiguous and there is no clarity on the global scenario. There is also the burden posed by profligate government spending-high subsidies, the farm loan waiver, and of course, the impending payout on account of the Sixth Pay Commission recommendations. The net result is that when the hour of reckoning comes, monetary policy is often forced to carry an undue share of the burden. This is not the first time: it happened in the late '90s when a sharp tightening of monetary policy led to a prolonged growth slowdown.

This is why despite "more than anticipated moderation in activity in the industrial and some service sectors", the RBI, perhaps, had no choice but to dole out harsh punishment. Optimists may argue the structure of the Indian economy has changed; it is now more resilient and so on. But the reality is bank credit to GDP is now much higher than before. Hence the impact of any monetary tightening is also bound to be greater. Whether the long-term gain will be worth the short-term pain or whether it will prove excessive is something we will know only some years from now. Success or otherwise in monetary policy management is always known by hindsight.

The public sector banks are clearly caught in a cleft stick. And, as election day approaches closer, their predicament only promises to get worse. Given the bewildering skew in India's risk-reward matrix, bank will have to soon decide whose advice they want to follow. On the one side is their owner, the government as the largest shareholder. This owner wants it wards to adopt certain attitudes which are in keeping with its overall political stance. On the other side is the regulator and the monetary authority, the Reserve Bank of India, which usually has the last word on how these financial agents should behave in the market-place, attitudes be damned.

The short lesson here is: hell hath no fury like a central banker spurned. Obviously, RBI governor is miffed with banks for not paying adequate attention to his repeated appeal to moderate lending growth. Despite the constant badgering, credit growth till July 4, on a year-on-year basis, was almost 26 per cent, compared to 24.6 per cent during the same period last year. This, coupled with lower deposit growth this year, has led to a rising credit-deposit ratio. Governor Reddy mentions in his review:… "the growth in credit during 2008-09 so far has taken the incremental non-food credit-deposit ratio to 82.4 per cent which appears high given the prescribed CRR/SLR and banks' preference for holding excess reserves on a day-to-day basis."

All this stems from the RBI's single-point agenda of controlling inflation this time, unlike in the past when inflation control was balanced with economic growth. And, the RBI's worries on the price front emanate from the all-too-evident aggregate demand pressures, which are somewhat aggravated by the "slack in supply response". The RBI is looking at a few indicators to gauge the aggregate demand pressures-a sharp rise in inflationary pressures, monetary and banking variables stubbornly registering growth levels in excess of targets, continuing strong investment and consumption demand and a widening trade deficit. In addition, the worsening fiscal situation-created by the Centre's off-budget borrowings, deferred expenditure on subsidies, farm debt waiver scheme and the expected wage hikes in the state sector-will put further pressure on the aggregate demand scenario.

There has been an unprecedented surge in short-term capital inflows. Net capital flows rose from $23.4 billion in 2006 to $44.9 billion in 2007. The net inflow of foreign institutional investments into the stock and debt market has risen since 2003. During the first 10 months of 2007, an estimated $18.6 billion flowed into the country, against a yearly average of $8.8 billion between 2003 and 2006.

Indian companies have been exploiting the liberalised external commercial borrowing policy of the RBI and are borrowing massively abroad. Figure for the January to May period indicate that borrowing totalled $ 15.3 billion in 2007 with $ 10.8 billion and $ 3.4 billion during the corresponding periods in 2006 and 2005 respectively.

Foreign exchange reserves that stood at $ 76 billion at the end of the 2002-03 fiscal, nearly doubled to touch $151.6 billion by March-end 2006 and have risen to $ 199.2 billion by end-March 2007. As a result the RBI has lost control over the supply of money.

Due to the liberalisation of rules regarding foreign capital inflows and the reduced taxation of capital gain made in the stock market, monetary policy is now controlled not by the government by the flow of foreign capital. To control this massive supply of money coming from abroad, the RBI has initiated a programme to sell government bonds to take out some money from the system, but the move comes rather late in the day.

Under the Market Stabilisation Scheme introduced in April 2004, the RBI sold government bonds worth Rs. 60,000 crore. In November 2007 the target for 2007-08 was raised to Rs. 250,000 crore, but it is still inadequate to control the flow of money to the economy. Thus the cosmetic exercise to control inflation by RBI will not prove effective. On the other hand, common people such as borrowers-home loan, consumer loan and others will be badly hit by the new RBI policy. It should be clear that the burgeoning inflation has its genesis in supply side economics not in excess money supply. Thus, the RBI governor is barking at wrong tree. INAV