Daily Excelsior... Editorial

EDITORIAL

Lungpower derails
search for truth

Grey areas in
defence planning

By Brig. (Retd.) S.N. Sachadeva

Left eyes on
Third front

By Arun Nehru

Global financial
slowdown

By S. Sethuraman

EDITORIAL

Lungpower derails
search for truth

Who has gained from the sine die adjournment of both the Houses of the legislature in the midst of unprecedented chaos? The answer can only be in one word: none. First, the issue that caused uproarious scenes in the Assembly and the Council after Daily Excelsior scooped the Kundal Committee report ten days ago remains unresolved. Can any legislator claim to have discussed the document or any part thereof in some detail? Instead, we have been exposed to acrimonious exchanges, allegations, counter-allegations and the sights of marshals having to be deployed to evict recalcitrant members. One feels sad that the two Houses have not been free from what a former presiding officer of the Rajya Sabha has described as "infantile disorders or the measles of the middle age" by (this is the observation of another Chairman of the Rajya Sabha) "irresponsible professional agitators." The Assembly was adjourned sine die on Wednesday. The Council followed on Thursday. It is said that the present session may be resumed before the Darbar move in April. At least three important bills are pending pertaining to promotional benefits for scheduled castes and scheduled tribes, Kashmiri Pandit shrines and the Right to Information Act (RTI). What is the guarantee that the dust that has been raised now settles down by then to facilitate smooth working? We had expressed apprehension in these columns earlier that every party might assume populist postures in view of the coming polls. Our worst fears have come true with the two Houses having been unable to fully transact the listed business for more than a week. The scenario can only become more volatile with the National Conference and the People’s Democratic Party getting into a no-holds-barred confrontation. There is no doubt that they are addressing their common audience in the Kashmir region. The NC especially is not satisfied that all the matters arising out of the Kundal Committee report have been referred to one agency or the other for further investigation. It wants the exit of two PDP ministers from the Cabinet because it feels that a needle of suspicion is pointed in their direction. The PDP, on the other hand, has hit back. It has not only denied involvement in any foul play but also gone on to heave missiles on the NC in the form of subjects that figure nowhere in the Kundal Committee report. For its part the Congress has tried to wriggle out of evidently uneasy circumstances for the party by adopting a middle road. Its professed stand is that it is unable to reach a decision in the absence of discussion on the floor of the House. How does such posturing help the party to explain its stand to the electorate that look up to it and are not under the influence of either the NC or the PDP?

The sine die adjournment of the legislature is not without irony. Originally the session was scheduled to be held up to February 1. It was following the Opposition’s insistence that it was extended till February 9. It seems to be all over barring a formality on January 31 itself. Who is responsible for this premature climax? Debate is the essence of Parliamentary democracy and that has become a casualty in this case. To ordinary citizens it must be clear that legislators are desperately settling personal and partisan scores instead of reaching the truth about what has actually gone wrong with our forests. Can they gather any other impression from televised proceedings or photographs of feuding members and alert marshals appearing on front pages? It is often stated that half-a-dozen small screen and page one pictures are enough to make anyone a celebrity in these days of media boom. Do those privileged to be in hollowed precincts of a legislature also think likewise? It is a matter of regret that the demands of grants of as many as 25 ministries and departments have been passed on a single day in just four minutes. These include such significant limbs of the administration as finance, housing, urban development, agriculture, horticulture, transport, public health engineering, irrigation, health and medical education, Ladakh affairs, roads and buildings, higher and school education, forests, power and industries. The guillotine has thus fallen on an extremely valuable legislative activity. One does not have to elaborate the objective of this exercise. It is to conduct a close scrutiny for the benefit of people at large. The opportunity is lost at least so far as this session is concerned. For decades the application of guillotine in legislatures has been a matter of concern. Faced with disorders and disruptions Parliament has devised an instrumentality. It has formed Standing Committees to thoroughly analyse the demands. Members enthusiastically participate in them regardless of what they may or may not do on the floors of the Lok Sabha and the Rajya Sabha. Their reports are later adopted by Parliament. Would it not be worthwhile to replicate this model in the State? Is there any hindrance in the way?

One is amazed that as veteran a legislator as Mr P. Namgyal (Congress) should have found fault with the media with respect to the coverage of legislative proceedings. According to him, the NC members have created a mess and it has become routine on their part to create unruly scenes. What one finds offensive is his accusation that the media was projecting this "drama" and, therefore, giving encouragement to opposition members to resort to such acts more "vigorously". Another Congress member Lal Mohammad Sabir has blamed the media for having developed a biased approach. Mr Namgyal has held the portfolio of Parliamentary Affairs at the Union level. At least he can’t be unaware that the media simply mirrors the happenings in legislatures as these take place. He has expressed the view that even un-Parliamentary words and actions have found mention in the media. How can any expression or happening be reported unless it is uttered or occurs in either House? A Speaker of the Lok Sabha has remarked that the idea of televising proceedings has not yielded the desired result. It was thought that it would help restore dignity, decorum and discipline of legislatures. Instead, what one comes across is quite to the contrary. Lungpower drowns all chances of a reasoned exchange of opinions as it has been seen in our legislature during this session.

Grey areas in defence planning

By Brig. (Retd.) S.N. Sachadeva

India's annual expenditure on defence is going up and up. To an extent, this is inevitable. Modernisation and replacement of obsolete equipment and securing for the armed forces greater fire power, more mobility and better means of communications-the principal aims of defence planning is a costly business. The government's policy of diversifying the sources of supply by placing orders for the purchase of eight P-8i long-range maritime reconnaissance (LRMR) patrol aircraft, with anti-submarine warfare capabilities, for the Indian Navy, and the Super Hercules deal to plug operational gaps in its maritime snooping abilities with the US-based armament manufacturers. The first-P8i will be delivered within 48 months that is in mid-2012 and all the eight by mid-2015. They will replace the Navy's eight aging Russian Tupolev-142Ms.

While Russia notches up sales worth about $1.5 billion to India every year, Israel chalks up an annual tally of around $1 billion. America's only big-ticket deal with India in recent years has been the $190 million contract in 2002 to supply 12 AN/TPQ-37 fire-finder weapon-locating radars. Then, of course, India last year acquired amphibious transport vessel USS Trenton for $38.23 million with the six UH-3H helicopters to operate from it costing another $39 million. With India spending a whopping $25 billion on arms imports since the 1999 Kargil conflict, and planning another $30 billion worth in 2007-2012, the US is obviously desperate to grab a big piece of action. It has been particularly aggressive in marketing its F/A-18 "Super Hornets" (Boeing) and F-16 "Falcons" (Lockheed Martin) for the gigantic $10.4-billion project to supply 126 multi-role combat fighters to IAF.

Before one rushes to cry a halt to the forces' evident spending spree, it is imperative to recognise that no price is too much to pay for the nation's security, that both China and Pakistan have vigorously embarked on programmes to augment their military might, and the enlarged military presence of the great powers in the Indian Ocean have vastly heightened threats to stability in India's vicinity and that international acceptance of 200-nautical-mile economic zone as well as 350-nautical-mile continental shelf has substantially increased the responsibilities of the Indian navy and air force. In any case, at 3.6 per cent in 2006-07, India still spends much less of its GNP on defence than most other countries, including all of its neighbours.

In this perspective, the issue is not whether the country can afford to maintain defence expenditure at the current level or at the escalating rates in prospect but whether it is getting good value for the money spent. In today's world there is a time-lag of 10 to 15-years between the conception of a major weapons system and its induction into the services if it is indigenously produced. Even if it is bought from a foreign supplier, the "gestation period" is seldom less than five years. Besides, it is a truism among the defence planners everywhere that while the intentions of friends and foes alike can change in a jiffy, their capabilities cannot. Given these constraints, it is impossible to buy absolute security almost at any price. All that one can legitimately ask, therefore, is whether the equipment and strength of the three services relate to the immediate and foreseeable threats to India's security? And, secondly, whether their organisation and training is so designed as to minimise waste and ensure overall economy?

At the moment neither question can be answered in the affirmative with confidence. Since the Chinese aggression in 1962, the defence of the country's territorial integrity against China as well as Pakistan have been the clear-cut objectives of the Indian armed forces. But soon a grey area emerged in 1964 when China acquired nuclear capability and no attempt was made by the defence ministry to assess the long-term implications of this development for the size, the relative strength and the equipment of Indian army, the navy and the air force. The event was simply ignored with the litanies that while this country had no intention of "going nuclear", it would keep its "nuclear option" open.

The seriousness of the lapse is becoming increasingly apparent. Until about the mid-seventies the sights of Indian navy were trained on "maritime defence" but have since been raised to the "defence of the country's maritime interests". This implies that the navy's role is no longer confined to the protection of India's long coastline, its seaborne trade and its economic resources in or under the sea along the shore. It will extend the protection of the country's military power to the Indian Ocean littoral. The naval top brass still do not entertain the "fantasy" of matching, let alone, outmatching the "military presence" of the great powers in the area. They are, however, clear in their mind that, in the event of hostilities, they must raise the "threshold of interdiction" against the enemy. But a viable doctrine to acquire long-endurance warships for the purpose has yet to emerge. Even the proposal to buy or build another aircraft carrier to extend the range of the navy's air arm right round the year still hangs in the balance. (Indian navy's aircraft carrier Vikrant has to be docked for at least a couple of months after every ten months or so for repairs and maintenance). Russians have delayed delivery schedule of aircraft carrier Admiral Gorshkov.

All modern armies, including Pakistan's now have their own aviation corps but the Indian army's bid to acquire one is being stalled due to not so much a lack of funds as the opposition of the IAF.

Thanks to the thick veil of secrecy drawn on defence spending, it is not possible to compute the cost of such overstaffed organisations as military farms or ordnance factories for clothing which can be better run under civilian management, if they are not altogether redundant. But enough is known about the slippages in defence research and development organisation to make the politicians sit up and do something about it. How the indigenous development of anti-tank and other missiles, IAF's basic trainer aircraft, an armed light helicopter, the engine or sub-systems for the main battle tank and two critical communication facilities-AREN and ADGES-have been inexcusably delayed or bungled has by now been well-documented. The main thing is that the DRDO still spreads its effort too thinly on the ground instead of concentrating on a few carefully chosen "thrust areas" and achieving tangible results. Likewise, the number of men in uniform is going up all along the line without any improvement in the teeth-to-tail ratio in three services, particularly the army. Why this is happening is yet another grey area. INAV

Left eyes on Third front

By Arun Nehru

We are back to a 'three group' race as the Left front look for a Third alternative to the Congress/BJP and this arrangement will suit all the Regional parties as the winning 'numbers' determine alliance structures and all the allies barring a few [Shiv Sena] can align with any of the three groups. The best example is the state of Tamil Nadu and look at the regularity at which alliances are made and broken and the flexibility adopted by the DMK/AIDMK. The Congress /BJP are no longer in a dominant position and on the big picture I don't see the Congress/BJP winning more than 220-230 seats [others will win 300-310 seats] and it makes logical sense for the Left to opt for a Third front. There are conflicts within a state where two regional parties fight for supremacy and a classic example is Uttar Pradesh where the BSP with a potential to win 40-50 seats will align with no one till the elections are over and can negotiate with all three fronts and the SP which can win 25-35 seats is in a similar situation but will preferably opt for the Third Front. Government formation will never be difficult and the successful combination will not suffer from instability as it will be based on power distribution based on 'seats' won by the party. Things are very fluid and politics can go in several directions but I think the major players in 'group formation' will be the Left/SP [70-80 SEATS], BSP [40-50 SEATS], AIDMK [20-25 SEATS], TDP [20-25 SEATS] . The Congress will be the largest group followed by the BJP and besides elections in Karnataka, MP, Rajasthan and Chattisgarh and the three North East states there are crucial alliances to be made in many states and these will determine crucial numbers to the Congress/BJP. The General elections are a year away but at this moment there are no clear cut winners and 'political accidents' during the year can make the pendulum swing in many directions.

UP with 80 seats will determine the political agenda and the Ballia result [won by SP] indicates that the BSP cannot take their success in the Assembly elections for granted. Mayawati is a powerful leader with a mass following and will get a National vote between 5-8% [a few seats also] but she cannot ignore or take the voter for granted in her home state as Mulayam Singh and the SP are formidable competitors and I place 65-70 seats between the two parties. The BJP shrink as does the Congress and both parties have much to do even to maintain their current seat share. The BJP leaders are all in the 70's going into the 80's and have a serious problem. The Congress make a effort and this is commendable after many years of inaction and the task facing Rahul Gandhi is that the party cadres and the vote bank have melted away and success will not be easy but it is good to see a resolve to engage in political battle in the state. The SP/BSP both have cases in the Supreme Court and Central agencies like the CBI/DRI/IT all conduct their selective activities and all this little as political battles are not won or lost by government agencies and we can see the contradictions in the stand taken by two different government or by the same government [alliance patterns change] and this is very unfortunate for politics. Political battles are won or lost by 'political acts' and not by the repressive action of a few motivated officials and government agencies. No political party or leader today has the moral or ethical edge over others as there is no transparency in fund collections for the party itself and the result is that huge assets are weaned away by 'individuals' in power for the moment and the image of the party and everyone else takes a hit. Probes into political leaders by their opponents have little credibility and I think the law courts to get involved in 'selective' action taken by the government is not good for the system. Cases are pending for many years [many over a decade] and this trend is not likely to change in the near future. There are exceptions to the system [Narender Modi, Navin Patnaik, Nitish Kumar, BC Khanduri] and most of them will beat the anti incumbency trend in their states.

The USA is very much in the news and the race for the Presidential election and the messy situation in Iraq is pushed away by the media and the spotlight is on the financial markets and the chaos of 'sub prime' losses. Billions are being written off as we see a breakdown of regulatory procedures, greed and utter incompetence in a financial system which was considered a global leader in the financial community. The warning signal were evident when the fraud on Enron was discovered and worst still was the disaster on audit firms when 'accounts' were fudged to hide losses and possible fraud. There is news that a French bank has lost 28,000 crores by the action of a 'rouge trader' and can this be possible in a structure where proper regulatory controls exist? The current crisis is one of credibility and confidence in the 'system' and I think there will still be affair amount of pain in the system as 'sub prime' extends to other area's. The Banana republic syndrome can well be applied to some of these financial institutions and many in the middle class and the poorer sections of society will lose heavily in the process whilst a few would have earned huge commission and bonus payments into these transactions. The failure of the regulatory process and lack of accountability is a warning to everyone in the global community that proper due diligence is necessary when dealing with these institutions.

The effects will be minimal in India as we have a strong internal consumption story combined with a 8% plus GDP growth but there are lessons to be learnt in this episode and as the stock market goes up and down as the 'sub prime' mess unfolds in the largest commercial power in the World.

Global financial slowdown

By S. Sethuraman

India has progressed in its globalisation quest to an extent that it can no longer work on policies which are focused on protecting domestic market in tradable sectors or assume that it can ward off the negative consequences of international financial market turmoils or other global developments having impact on trade and capital flows. After six years of sustained expansion, the world economy is on a downturn though output growth would not be significantly affected in emerging economies. Both this slowdown and the credit market crunch in the wake of the housing mortgage crisis in America have thrust the central banks to the forefront for remedial actions on the monetary and credit front while governments have to supplement them with fiscal policy measures. Financial Globalisation with all its innovative products is at the root of the present crisis in financial markets.

As global asset markets crashed against the background of America heading into a recession, the Federal Reserve in USA moved in panic to effect one of the largest cuts in short-term interest rates, from 4.25 to 3.0 per cent, ostensibly to stave off recession in the world's largest economy whose travails have begun to spread across the world including emerging economies, irrespective of their negligible exposure to the sub-prime mortgage market crisis originating in the United States. Such a deep cut in US interest rates would have further dampening effect on the dollar and could lead to another surge in capital flows into rapidly growing market economies like China and India.

The Reserve Bank of India's Third Quarter Review on January 29 would likely reflect a modified stance designed to ensure sustainable levels of capital inflows through easing of monetary policy so as not to add pressures on both liquidity and the exchange rate. It would be one more balancing act of RBI when global events have left it with no other option. Most central banks are now currently obsessed with the fall-out of protracted financial market instability on economic growth which is already slowing up in most developed countries.

Increasingly the trend in monetary stance is a shift in emphasis at present from inflation control to growth, especially in economies which are on the brink of sharp slowdown or even recession, as is feared in USA where a section of economists are of the view that the economy is already in recession. It is these fears, highlighted by the market mayhem which took a global dimension in the week beginning January 21, that forced Fed's hands ahead of its scheduled meeting at the end of the month. This is being complemented by a 150-billion dollar stimulus package of the Bush Administration with the backing of US Congress. The Administration hopes that "timely and targeted" tax rebates of the order of 100 billion for individuals and married couples could trigger consumption and revive economic activity.

As the Sensex in Mumbai Exchange dropped in four digits for two successive days, the Finance Minister Mr P Chidambaram did fire fighting assuring investors that India's economic fundamentals are strong and indicated Government's readiness to take fiscal measures to overcome weak spots in the production processes to avert any slowdown from the projected robust growth of 8.5 to 9 percent. India would respond with "appropriate fiscal and monetary measures" to meet the situation arising out of the hefty US cuts which would trigger larger capital flows into emerging economies like India as well as the financial market crisis which would impact on its economy, he said. Advocates of cut in key rates (repo, reverse repo) and the reserve ratio (CRR) base their argument on slowdown in the economy, inflation hovering below four per cent and the need to check a surge in capital flows.

The New Year has had a stormy start with pronounced fears of a global recession and widespread loss of confidence driving markets down to low depths after six years of solid growth in the world economy. India's stock markets reacted as other Asian markets did taking their cue from the sudden downturn in America's principal market. Uncertainties surrounding the global economy, especially USA, have not lifted -even the stock market was cool to Fed's bold slashing of interest rate - and the Prime Minister Dr Manmohan Singh also sought to assure investing public not to give in to fears or market rumours as India's strong economic fundamentals have not changed.

The equity market crash, which punishes millions of small investors, has once again underlined the need for effective mechanisms for strengthened supervision of financial system and regulation of markets to prevent undue volatility. Growth and Markets, though not directly linked, will therefore get the attention of the Finance Minister when he presents his budge for 2008-09 on February 29 though he is also expected to announce incentives for sharp revival of "stressed" sectors both in output and exports, in the light of the recent slowdown trends. The Prime Minister also set up to suggest policy measures to reverse the downtrend in manufacturing output.

Reflecting the domestic trends and global developments of recent days, the Economic Advisory Council of the Prime Minister, has revised the growth estimate for the current year from 9 to 8.9 per cent while it envisages a further moderation to 8.5 per cent in 2008-09. In its view, successive interest rate increases to fight inflation has curbed demand for consumer goods, especially durables. This is something for RBI to consider how far it could soften the interest rates, as the Council itself notes that, given the pressure on prices of oil, food and other raw materials likely to continue, inflation management in 2008/09 would be "quite challenging". RBI is not required to give its indicative growth and inflation targets till it announces its monetary and credit policy for next year in April. But there is great expectation on interest rates, as with the Fed cuts the rate differential between USA and India has widened with consequences for both capital flows and appreciation of the rupee.This is where the Finance Minister wants early action, monetary and fiscal.

On the fiscal side, the Council headed by Dr.C.,Rangarajan favours income-tax adjustments in slabs but not any substantial rate reductions, and also cuts in excise duties in sectors where demand has gone down like consumer durables. This is in line with the common theory that more money in the hands of investors would spur growth. This consideration would apply also to the Finance Minister's resource mobilization strategy in which the burden falls more on direct taxes, as in recent years. It is revenue buoyancy, from greater tax-payer response, that has helped the fiscal consolidation to progress, thus creating scope for making available more resources for plan expenditure. (IPA Service)