Need to produce good diplomats

By Indu Prakash Singh

Once coveted, the Indian Foreign Service (IFS) is at discount. The falling academic standards and the Mandalisation of the IFS is playing havoc as those competing for Central Services, prefer home turf. It is largely because the Mandalised selection process pushes up candidates from the rock-bottom in the merit list who are ill-equipped to face the challenging tasks of career diplomats. Grasp over English language, impressive personality, capability to win friends and influence people are the hallmark of diplomacy. Unfortunately, the Mandalised recruits, invariably, don't possess such qualities.

The liberalisation of economy is weaning away brilliant students towards trade and industry. It has tended to make the Foreign Service a less attractive career option for the brighter young Indian. Many young men and women, who would have avidly sought a diplomatic career 10-year ago, now seek to go abroad or opt for the higher incentives of the liberalized corporate sector, preferably multinational. More important, the large numbers who still take the UPSC entrance examinations prefer to join the IAS and other home-based services which hold greater prospects of exercising power with corresponding social and economic benefits.

The UPSC figures are a telling comment on the declining popularity of the Foreign Service, once an elite cadre under Nehru and Indira Gandhi. In 1960 the eight vacancies in the IFS were filled from the first 43 of the UPSC merit list. In 1970, the figures were 11 from the 72, and in 1981 they were 20 out of the first 81. In 2001 11 vacancies were filled from 14 eligible candidates.

In 2006, 10 IFS vacancies could be filled only by reaching down to the 480th position in the merit list. The following year the curve dipped to 10 from 487 and in 1990 to 10 from 709. Last year there was a marginal improvement with 15 vacancies filled from the first 641 positions.

The present frontline of IFS officers had joined it in the early seventies as the cream of the then selections. It is sometimes asked if it now leads a Service comparable in quality to that at the time of the Bangladesh War, when the present seniors were ably discharging the nitty-gritty of junior diplomatic work. The answer is probably yes, but the question is not as important as what will be the quality of the IFS a decade hence, when the present new entrants will be moving into posts of higher responsibility.

Merit list positions, with sometimes just a mark's difference between each rank, are insufficient evidence of relative calibre and development potential at the start of a diplomatic career. Nevertheless, the qualitative difference between the 70th and the 700th merit position may not be inconsequential. Today's recruit may be India's envoy after 20-years, with a critical role in the country's diplomacy. The question is not if he will perform well, but if someone selected more rigorously would not have performed better.

The same question is posed by the decision to provide a fifty per cent reservation for scheduled castes, tribes and other backward castes in the competitive filling of central government service vacancies. The roster prescribed for the IFS requires that fully half of its next 200 vacancies should be filled from the reserved category. As the normal IFS intake is 10 to 15 probationers per annum, this process may continue for the next 15-years or so. By its end nearly 200 present serving officers would have retired and only half of their replacements will have been inducted on merit alone. While this transformation will make the IFS more broad-based and representative, what does it portend for the future standards of India's diplomatic work?

Some recent gloomy prognostications point to factors such as lower standards in English, command over which language has been a traditional asset of Indian diplomats, and perhaps diminished poise and confidence. But they overlook that the earlier quota of 22.5 per cent reservation has already been in force in the IFS since the last 42-years without causing any notable disasters. Some reserved category recruits may well have proved sub-standard or worse, but so have some from the general category. Both categories have produced officers of proven competence, which shows that everyone can do well if given the opportunity. Living and working under similar conditions in a comparatively small community also has a certain homogenizing effect which often blurs diversities of social and economic backgrounds. Innate abilities and characteristics of course frequently remain constant and sometimes become stronger.

The fact to note is that reserved category candidates have shown the same propensities as the others. The attractions of the IFS and a life abroad are declining both categories as they increasingly look for government services which provide power and patronage at home. Of the 15 probationers from both categories who joined the IFS last year, only three had opted for it as the service of their first choice. The rest came in only because their merit list positions were not high enough to get them the IAS or other preferred home services. Several reserved category candidates are, in addition, disinclined to join the IFS as their family backgrounds make the prospect of living abroad a strong disincentive.

The External Affairs Ministry then has no option but to dip deeper to the bottom of the UPSC list to fill its now enhanced quota from the reserved category. A solution may be to have a separate merit list for the Foreign Service, drawn only from those candidates, whether of the reserved or general category, who have opted for the IFS as a first or second choice. The main solution to any quality problems of the IFS lies of course in greater emphasis on systematic training integrated with career planning of its officers at the induction, middle and advanced service stages. The IAS has already devised such programmes for its officers. The defence services have long had a system of training linked promotions and deployments.

India's Foreign Service Training Institute started 21-years ago, but has yet to realize its full potential. The IFS, as a body, seems too small and busy to devote enough efforts to long term forward planning for its human resource development. After all, who has time for issues which may become critical only after a decade? New problems may also arise by then, if the principle of reservation spreads to promotions and postings also. INAV

Checking inflation

By Nantoo Banerjee

A slew of indirect tax reliefs proposed in the 2008-09 union budget is certain to benefit the industry and the corporate sector. But, the same is unlikely to come true for consumers if the past experience is any indicator. The tax relief – from packaged coconut water to water purifiers, steel to automobile, cattle feed to medicine, breakfast cereals to paper and paper board, puffed rice to refrigerator – is basically aimed at countering the sluggish trend in the economy. There is no clear indication that the duty relief is linked with inflation control. The government has no specific programme to tackle inflation. It has no regulatory network to check prices of even essential goods and services. It has left the control button of the inflation mechanism almost entirely with the industry and the corporate sector.

Take for instance, the prices of pharmaceuticals. The prices of essential drugs in terms of their ‘MRP’ (maximum retail price) have skyrocketed over the last three years not because of the input costs, which becomes much cheaper after this budget, but due to a mind boggling ‘post-manufacturing expense’ (PME) and retail margins allowed by the department’s industry-friendly minister, Ramvilas Paswan. The drug price control mechanism has been rendered toothless and clawless. So fat are the retail margins that most retailers in metro-cities and mini-metros offer five to 12 per cent discounts on the printed MRP of pharmaceutical formulations. Giving further relief to the drug industry, without putting a proper price regulatory authority in place, is meaningless. The relief may bring down the prices of some common drugs, but there is no guarantee that the suffering public will suffer less in terms of the medicine bills. An industry-drug administrator nexus has led to a growing use of the so-called combination drugs and ‘new improved’ varieties of branded products. These new brands of drugs are highly recommended and prescribed by physicians. And, they are invariably much costlier. The budget will help the ever-greedy pharmaceutical manufacturers make more profit, taking full advantage of the absence of a strong price regulatory authority.

Similarly, in time, the prices of consumer durables as well as perishables, will also go up. In keeping with the age-old practice, the prices of several manufactured products and raw materials were raised in the last two months having an eye on the budget. In a government-powered economy with the state exercising control over the business and industry through the annual tinkering with the taxes and levies, industry has been using the pre-budget post-manufacturing price increases to lessen the blow of taxes and tariffs on their sales and bottom-line. While the prevailing high prices of goods will deter the government from raising the levels of duties, they are also meant to ensure higher sales volume and profitability in case the industry is required to lower prices to pass on the benefits of indirect tax-cuts to consumers.

In the past, the duty relief by the government had brought little relief to the end consumer or the common man. The industry is supposed to pass on the relief to the consumer. It does, but only for a very short period. The prices are invariably jacked up after two or three months on the ground of increased input costs, including the cost of funds and wages. To the cynics, the 2008-09 budget is a ‘sell-out’ to business lobbyists before the national election. Others think it is a ‘very bold’ budget. Never before had the government been so generous to industry and had reposed such strong ‘faith’ in the country’s business community.

However, the key question is: will the tax sops lower the price levels – how much and for how long? The last four budgets of the United Progressive Alliance (UPA) government, which have taken forward the ongoing economic reform by rationalising the investment and tax structures, have failed to achieve success in controlling inflation. Key economic indicators suggest that the economy will be under greater inflationary pressure in 2008-09 than in the previous four years. The shortage of food and high prices of energy will fuel inflation. The prices of rice and cooking oil have already started soaring. The UPA government is bound to feel the inflationary heat if it continues beyond October, 2008.

This explains why the market has shown a shaky response to such a pro-industry, pro-middle class budget by bringing down the already battered Sensex – the 30-share sensitive index of the Bombay stock exchange – by 900 points on the first weekday of trading after the budget announcement, recording the second biggest fall in the last 52 weeks. The Sensex had shed 1,400 points only six weeks earlier on January 21, 2008. With the slow-down in the economic growth rate, sustained inflationary pressure and the possibility of a Parliamentary election in November being almost a certainty, the bulls are likely to stay inactive until the next government is installed. This, once again, is a normal practice. The stock market has always remained subdued in the election year. There is no reason to hope that 2008 will be an exception although the commodity market promises to be quite bullish to the discomfort of the general public and the ruling political alliance. (IPA)

Partners in creation of poverty

By Dr Bharat Jhunjhunwala

Criticism of the loan write-off of farmers in the budget by opposition is along expected lines. However, the criticism lacks teeth. Main question is of reduction of poverty. Two approaches are possible to this vexed question. Congress has made policies that benefit the big companies; then it has taxed these same companies to run welfare programmes like Employment Guarantee. For example, the Congress has allowed import of cheap palm oil from Malaysia. This has led to decline in prices of oilseeds produced by our farmers and to increase in their poverty and indebtedness. Congress has supported entry of big companies in retail trade leading to loss of livelihood of street-corner shops. Reservation for small businesses is being removed. These economic policies clearly benefit big companies. Huge increase in corporate income tax in the last four years of Congress rule is proof of their increasing profits. The Congress has also increased the level of tax on these companies as seen in increase in tax-GDP ratio. These tax revenues are being used to run Employment Guarantee and other welfare programmes.

It will be clear that there is no possibility of removal of poverty in this economic model. Poverty of Indian farmers will surely increase due to import of cheap palm oil. The poverty so created will be partly removed through write-off of loans. This will lead to some speeding-up of the leg of alleviation in the cycle of creation-and-alleviation of poverty and should be wholeheartedly welcomed.

Yet, this policy will be inadequate. It can be criticized at two levels. One criticism is that efforts at poverty alleviation are insufficient and should be deepened. Loans of large farmers should also be written off. Alternative criticism is that policies that lead to increase in poverty, such as cheap imports of palm oil, should be ended. This will spontaneously lead to increased incomes for our farmers and there will remain no need to write-off loans or run Employment Guarantee and other welfare programmes. This will be clear from an example. Two policies can be made for control of malaria. One is to increase expenditures on provision of medicines and free hospitalization for patients. Patients will be helped to rid of the disease after they have contracted it. Alternative policy is to increase expenditures on spraying of village tanks with insecticides. This will lead to less spread of malaria and people will not have to be given free hospitalization in order to regain health. Similarly, two policies are possible with respect to write-off of farmer's loans. One is to write-off loans so that the poverty created due to cheap imports is lessened. Second is to stop cheap imports so that there remains no need for writing-off loans.

The opposition has mainly criticized the budget for making inadequate efforts to alleviate poverty. BSP Supremo Mayawati has demanded that loans of farmers having more than to hectare land should also be written-off; non-agricultural loans taken by poor from various development corporations should be written-off; Public Distribution System should be expanded; subsidies on fertilizers, seeds and insecticides should be increased; and 365 days employment should be provided under the Guarantee Programme. It would be clear that these demands would still lead to generation of poverty de to import of cheap palm oil-only the pain would be more lessened than under the present dispensation.

Former Finance Minister and BJP leader Yashwant Sinha has demanded that loans taken by farmers from village moneylenders should also be written-off because two-thirds loans taken by farmers fall in this category. Clearly, the demand is for expansion of the loan write-off plan. He has also criticized the Finance Minister for not providing for the write-off in the present budget and, instead, shifting the blame to future budgets. Remember, Finance Minister P Chidambaram has said that Public Sector Banks will write-off these loans immediately but they will be compensated later. Provision of the cost of write-off in the present budget does not end the creation of poverty. It only implies that alleviation should be done wholly here and now. BJP is not opposed to imports of cheap palm oil.

Other demands made by BSP and BJP are slightly better. Mayawati has demanded that special package be made for the poverty-stricken Budelkhand and Poorvanchal regions of UP. More investment in roads, electricity and irrigation would enable those farmers to increase production and help them face declining incomes from reduction in prices in the market. Similarly, Yashwant Sinha has criticized the budget for not providing funds for development of infrastructure. Better roads and internet connectivity will help people to increase production. However, these policies may still not lead to higher incomes. Increased production can come along with low prices. The production of grains in the country has vastly increased in the last thirty years but so have the number of suicides by farmers. Therefore, special package for Bundelkhand or more investment in infrastructure will not lead to better incomes unless accompanied by higher prices.

Both Mayawati and Sinha have criticized the Finance Minister for not giving adequate attention to control of prices. This is laudable. However, this does not solve the problem of poverty one bit. Lower prices of food grains provide relief to the poorest labourers but hit at the income of farmers. The demand for control of prices only means that farmers will be more impoverished. Finance Minister P Chidambaram has already made clear his resolve to contain prices of food items by increasing production. This means that the farmer will have to produce more at lower prices and suffer greater losses. This is what Mayawati and Sinha are demanding. Increase in subsidies on fertilizers etc. also does not help when the Finance Minister has resolved to keep farm prices low.

It seems to me that BSP, BJP and Congress are all partners in the Government of India Company, which produces both poverty and poverty alleviation programmes. The need was to identify economic policies that lead to generation of poverty. Restrictions should be imposed on imports of cheap palm oil and other goods that are produced by the poor. Taxes must be imposed on big companies and technologies that eat jobs of the poor. It is unfortunate that both main opposition parties are not raising questions about the economic model being implemented by the Congress, which is leading to generation of poverty. Instead, they are only demanding more efforts at its alleviation-while leaving the monster that generates poverty intact. Even greater tragedy is that people have no inclination to understand how economic policies are hitting at their livelihood. They are happy with write-off of loans and to receive more doles under Employment Guarantee Scheme, Public Distribution System and the like. The people will get no relief until they understand the game politicians play and seek a better economic model.