Wednesday, October 7, 2015

Modi is right in reforming the bureaucracy!

Modi is right in reforming the bureaucracy!

Anoop Swarup
Anoop Swarup
In contrast to the earlier regimes when the Administrative Reforms Commission Reports mostly gathered dust now all the State Governments have been asked to study the recommendations of the 2nd Administrative Reforms Commission including that of its 15th report that advocates abolition of the post of Divisional Commissioners to avoid red tapism and delays to realign these roles and also to review and monitor the reforms and their implementation. It is hoped that by reforming and streamlining the bureaucracy Modi will be a pathbreaker in both letter and spirit. The amendment by the Narendra Modi Government of the 46 year old All India Service Rules one may recall, included a 19 point guideline that was widely welcomed both by the bureaucracy and the fourth estate. Amongst other issues it had exhorted the much beleaguered relic of the Raj and the much hyped steel frame to maintain honesty, integrity and high ethical standards. More importantly it also mandated the bureaucracy to maintain political neutrality, make recommendations on merit alone and take decisions only in public interest. There has been a decline over the years on all these ideals of yesteryears. One may find it amazing that even in England not to speak of the US, Australia or for that matter the European Union, the Civil Service is mostly hired from professionals on contract with specific and well defined key performance indicators, targets and goals. It is ironical that the various services that do commit themselves to complete loyalty and unremitting zeal have failed to discharge themselves on any of the ideals set before them by the founding fathers of our country at the time of independence.

Let us briefly understand the past before we redefine the future . If we go back to history, the genesis of various services and the post of District Collector goes to 1786 when the East India Company made the Districts as the focal point of revenue administration and the following year vested them with magisterial powers with certain exceptions as the mainstay of their presence in British India. The bureaucracy in India and the various Services are much criticized now for corrupt practices in particular, and for apathy to the common man. The reason may not be far fetched as both the All India and Central Services even in the 21st century do follow the Cornwallis Code of 1793 at least in practice if not in spirit where distrust and class consciousness was distinctly promoted. Narendra Modi may well go down in the annals of history as the first Prime Minister of independent India to have taken the much needed decision to clip the wings of red tape and to reform this colonial vestige.
Let us examine some of the changes in the offing for the bureaucrats, particularly the work culture and on the ethics front. Semantics apart the former conduct rules for the babus of various services stated “All members shall at all times maintain absolute integrity and devotion to duty and shall do nothing which is unbecoming of a member of the Service.” I at the cost of repetition would like to restate what is already there but as it always happens is that it is lost sight of and have no doubt that many of the babus are blissfully unaware of its letter and spirit. Perhaps it will do well for the country if both the federal and state governments have these rules prominently displayed both at the entrance to the Secretariats and the Ministers’ offices for the public and the common man they are appointed to serve that it be known that it is incumbent on them to: “Maintain principles of merit, fairness and impartiality while discharging duties; Maintain accountability and transparency, responsiveness to the public — particularly to the weaker sections; Maintain courtesy and good behavior with the public; Maintain discipline in discharge of duties; Be liable in implementing the lawful orders duly communicated to them; Maintain confidentiality in the performance of duties as required by law, particularly with regard to information, disclosure of which will prejudicially affect the sovereignty and integrity of India, strategic, scientific or economic interests of the nation or friendly relations with foreign countries; Commit themselves to the Constitution and uphold its supremacy and democratic values; defend and uphold the sovereignty and integrity of India, the security of the state, public order, decency and morality; Take decisions solely in public interest and use or cause to use public resources efficiently, effectively and economically; Maintain high ethical standards, integrity and honesty; Maintain accountability and transparency; Promote the principles of merit, fairness and impartiality while discharging duties; Make choices, take decisions and make recommendations on merit alone; Not misuse position and not take decisions in order to derive financial or material benefits; Not place themselves under any financial or other obligations to any individual or organization which may influence them in the performance of their official duties; Refrain from doing anything which is or may be contrary to any law, rules, regulations and established practices; Declare any private interests relating to their public duties and take steps to resolve any conflicts in a way that protects the public interest; Perform and discharge duties with the highest degree of professionalism and dedication to the best of their abilities; Act with fairness and impartiality and don’t discriminate against anyone, particularly the poor and the under-privileged; Ensure courtesy and good behavior with the public, display responsiveness to the public, particularly to the weaker section.”
Let me now briefly delve into other factors and particularly what really ails our bureaucracy. Attempts made in the past to reform the bureaucracy have only been either cosmetic or a lip service to appease the stray voice both within and outside the corridors of power. I recall the Vora Commission set up with much fanfare, to which I had the occasion to informally contribute much to though informally, almost two decades ago on bureaucrat politician nexus and on eradicating corruption, that is now gathering dust in the North Block. No wonder that the services though once regarded as the steel frame were programmed during the raj to function on distrust of the masses and to provide an insulation against any revolt or unrest became not only self-preserving and self-aggrandizing by their very instincts but also through active connivance of vested interests. These vested interests have over the years not only focussed on centralizing the power function but along with it the planning process. This has been the most unfortunate reason over the years for very poor participation of the masses in their own growth story when virtually every country both in the developed and the developing world were scripting a success story of sorts. This damning indictment of the various Services was well orchestrated by none other the then Cabinet Secretary Nirmal Mukarji who in his key note at the 50th anniversary of the Service made a very pertinent point that the Indian Administrative Service should ‘move from a command and control strategy to a more interactive, interdependent system’ that should give way to local state and central bureaucracies as an aid to better accountability, involvement and efficiency.
It need not be overemphasized that the countries and the city councils in the west being more participatory have ensured not only better delivery but have made the democratic process a real success at the grassroots. There is thus now a very strong case as Modi plans his strategy for good governance that we abolish these services in favor of federalism. The local representation that will hire the best professionals locally will fortify the existing Panchayats, Municipal Bodies, Corporations and the local self governments with its own brand of good governance that suits the needs, aspirations, language, culture and traditions of the people. Also for sure they will be more responsive instead of simply carrying forward the legacy of the Raj and the ‘Lal Batti’ culture and a good antidote to any form of corruption or nepotism as they will be locally hired and directly answerable to the people.
No doubt that the professionals who are hired both at the national and local levels on contract will deliver on strict time frames. It is now reliably learnt that Prime Minister Modi may redefine the role of District Collector/ Deputy Commissioner, again a vestige of the past for a more development oriented and more professional body that will be forward looking in keeping with his reforms agenda. There is now a realization though belated that the Deputy Commissioner or the Deputy Commissioner will contribute more to his existing core functions such as land and revenue, excise and treasury management as also coordination and general administration, the developmental roles may be better handled by a more professional body such as those of disaster management, public distribution and civil supplies, elections, transport, census and developmental projects whereas law and order may be left to the Police where the prevailing metropolitan commissionerate model may be redefined.
With administrative reforms now on cards, administration should be closer to the citizens and the “minimum government and maximum governance” mantra of Modi should be a dream come true.

Thursday, September 10, 2015

Will the crude oil windfall make the “India Story” complete?

Will the crude oil windfall make the “India Story” complete?

Anoop Swarup
Anoop Swarup
It is said that economic theories are only good for academics but not for intelligent animals and of course not for real world politics. Are the ‘acchey din’ (good days) here again? Well a lot will be incumbent on the policy response to the drop in crude oil prices, well over 25% since July that means a cumulative saving of USD 10 billion or INR 61000 crore for the Indian economy. Surely, this is a windfall for a country like India, which has large oil import needs and external adjustment pressures that also impact its overall credit ratings. No wonder external agencies such as Fitch Ratings are now painting a rosy picture with better economic growth prospects, improved terms of trade provided that the lower prices are sustained below USD 90/bbl through 2015, as being forecast.

But there is a lot more than what meets the eye! Incidentally this month’s production output has been the highest for the last two years by OPEC at 31.06 million bpd according to Reuter’s surveys. Latest reports suggest that the weighted average marginal cost of oil at Shale dominated onshore at USD 73 a barrel plays an important role in fixing international oil price and therefore a short position now will play a major role for a rally later as observed in case of gold. Also, paradoxically there would be a big winner in the US oil industry and the US consumer who gain a rebate of almost USD 600 per household in case Brent crude falls to USD 80 per Barrel. Yes, there would be an income boost to the BRICS as also the emerging economies as their net oil import bills are significant. On the world stage the global economy is set to have a daily windfall of USD 1.8 billion dollars.
The big question remains whether or not the impact will be passed on to the consumers for positive consumption effect as the lower oil prices may not only help in lowering inflation but also may act as a trade offset. Our policy makers have the twin challenge to bolster growth while reducing the external account deficits. Thus in India the diesel prices were rightly enough, deregulated on October 18 and the direct impact on headline fiscal forecast is expected to be limited making the fiscal accounts more robust against future oil shocks as both diesel and petrol prices will now be determined by the markets. Unlike in Indonesia where President Joko Widodo raised the administered price by over 30% recently to cater to the fuel subsidies and to implement his reforms agenda, to make the best of this happy reversal of fortunes, India is yet to come up with some very ingenious measures to make the best of the fortune.
Let us also have a brief overview of the impact of such a fall in countries other than India. Lest we forget, the collapse of Soviet Union in 1991 was preceded by a fall in price of oil, its main export by two thirds during 1980 and 1986. Likewise oil producing countries such as Iraq, Syria, Nigeria and Libya, now are in turmoil as the price of Brent crude fell over 25% in the last three months and for countries such as Saudi Arabia their budgets may go into red as this translates into a yearly loss of 100 billion USD in export income. Venezuela wants oil at USD 120 barrel and Iran at USD 135 a barrel to sustain their spending plans. Even emerging economies like Brazil want to have high oil prices to attract investments for its deep offshore oil reserves.
The assumption is not off the mark that though a windfall for some, at least half the world economy may face a slowdown with crude oil prices at historic low. On a strategic front it is held that by 2018 the US crude will replace the entire Middle East production that will also help the US save its dollar from being replaced as a reserve trading currency. Similarly, Russia has much more to achieve on the strategic front with higher defense and military spending in recent years that can be met only by higher production and higher prices currently estimated at USD 130 a barrel for its sustainability. There is no denying the fact that sovereign funds accumulated over the years by the Middle East and Arab world, have been a threat to the US and the European economies. Thus there appears to be a competing drive to achieve more production outcomes rather than just the debt sustainability that is ostensibly professed by these nations.
In order to sustain crude at levels of USD 120 there have been concerted and frantic efforts by many oil majors that need a potential capital spend of over 550 billion USD in the next ten years for newer projects and to keep pace with higher oil field service bills. Thus there is an imminent danger of a price war that will keep pace with a cold war between major oil exporters. The aggressive Russian posturing and the latest air strikes by the US in Syria at targeted oil facilities controlled by the ISIS may be a pointer of the shape of things to come. Mathew Levitt, a former US financial intelligence official has reportedly stated that ‘the ISIS is probably the wealthiest terrorist group we have ever known’ as it now controls a huge swath of land area that is now bigger than the UK and has enormous revenue currently estimated by Iraq Energy Institute at over USD 3 million a day from the oil resources that it controls and the discounted sales in the black market at USD 40 a barrel.
No wonder that the reason why crude prices are on the down swing now need no further elaboration. Let us now examine the policy imperatives and a strategic plan for India at this juncture. Of course India needs superb storage facilities for a time when crude price may hit the roof in the international market as also better exploration outcomes and efficiencies in existing production. Developing alternative energy resources particularly for the agriculture and agro-business sector may be a necessity as in the near future the world economy will have a predicted slow down with consequential impact on India. Also on the downside is also the fear of a unemployment due to a prolonged and massive slow down of global economy. We may at this stage question RBI about cutting down interest rates as the economy is now in terms of the FRBM as promised during the last budget.
For India, though the India story gets a boost when global growth is weakening, the twin deficits–current account and fiscal–will surely moderate and inflation will decline with liquidity in the banking system likely to improve leaving more room for cutting interest rates. Yet there is no need for complacency–notwithstanding the jubilation among the public over Prime Minister Narendra Modi’s much publicized India story because its too early in the day and the story is far from complete! Indeed there is the conventional wisdom, but there are pertinent issues that we should not be losing sight of. As it is perhaps the conventional wisdom that has held us back all these years! Now since the global crude prices are low and are expected to be below USD 100 until March 2015 based on the reports from the world market in view of the low productivity and demand in the US, Europe and China. Finance Minister Arun Jaitly may well have an opportunity as India’s emerging economy not only needs more crude from abroad but also the surplus funds that would now be available for investments in well thought out policy initiatives to break from the ghosts of the past.
The crude war is indeed dirty. There are so many challenges and we may have little to smile at due to the dark clouds that loom on the horizon.The drop in crude oil price has given an opportunity that we cannot afford to throw away by inadequate policy response.

On values, morals, ethics and good governance Mr. Prime Minister!

On values, morals, ethics and good governance Mr. Prime Minister!

Anoop Swarup
Anoop Swarup
Let us examine the underpinnings in a democracy such as ours as also the continuities and change in our societal heritage in the backdrop of both ancient and modern practices of our own upbringing, values that transcend socio religious beliefs, public life and duties, private morals and virtues, political governance and personal rights, and responsibilities.
We may have no doubt that such a study is important as it stands at the intersection between the practice of our belief system, our own democratic citizenship, and the exercise of morals, values and political ethics.
This issue has been addressed through the ages in different countries, on law and morality, from the Vedic ages and ancient Mesopotamia to the age of enlightenment to modern times; this millennium’s scientific, technological and information transformations to that of evolving links with various cultures, religions, practices, civilizations and different beliefs. Also intricate and complex ethical issues in domestic and international democratic governance that in varying contexts assume critical importance for our developing economy in today’s globalizing world should be understood before we understand morals, ethics, values and good governance.
I do believe that when a government and its representatives such as ours justify their actions in our name that is the public at large, we not only have the right but also a moral duty to be concerned. Thus public wrong doing or even apathy by the political class or the bureaucrats or for that matter even the judiciary may not be exposed by the fourth estate and that leads to the need for us to separate individual citizens who bear a special responsibility. It is not very infrequent that individual citizens may bear the wrath of failures of their representatives and the state institutions and the intellectual class will have to be responsible and act lest they would be taken to be morally corrupt be complicit. A case in point is the lal batti (beacon light now in different colors) culture of the ruling classes that include all the pillars of our democracy and the clamor for more goodies such as pensions by the elected representatives. The confrontation with the political class of any ideology is a moral dilemma or an ethical challenge that many a times institutional remedies fail to cope with and hence we need a fair discourse on the issue.
Our obligation to participate in the democratic process does make it incumbent on us to question every decision of the political class that tends to believe that it is the master particularly due to the feudal mindset of our polity. It is in this context particularly welcome is the call of Prime Minister Narendra Modi that each of the 125 crore citizen in our country will be his ‘think tank’. We should nonetheless be mindful that obligation to participate in the democratic process is much greater when we risk serving as accomplices in the process. At this juncture I may question whether a country such as ours that is steeped in poverty, ignorance, superstitions, beliefs and identities in the garb of ‘unity in diversity’ be allowed to delay the process of development, prosperity, literacy, scientific temperament and positivity? If the answer is no than it is high time that we should be led by the ‘highest common factor’ and not the ‘least common multiple’. If this be the case than the time is ripe for our country to have a debate on Presidential form of Government where the country is led by the professionals and experts in disparate fields instead of so called public representatives who may be good orators but have little interest in good governance and perhaps negligible understanding of the very complex and intricate policy issues and processes. Having said so based on my own past dealings with the political class in various Ministries of the Government I may assert that more often than not the babus do tend to find an easy way to either discover a via media or be complicit with their political masters much to the detriment of the masses. Thus the two pillars in our democracy more by incidence than by design only fortify each other much to the detriment of the masses. It is also very frequently asserted that the fourth estate is only a fiction and does not exist. The notable exception is judiciary but in most cases justice can be delayed and perhaps denied due to complicity in an archaic and stale framework of eighteenth century Anglo-Saxon jurisprudence that we have inherited from the Raj days.
Now let me briefly delve into the apathy that our bureaucrat and political masters have when it comes to good quality school education for all our children who will be the citizens of tomorrow’s India. I may mention that with all the talk on introducing values and morals in the Universities, it is indeed the Schools that we should be more focused on. There is no denying that over the years we have created a distinct division between the haves and have nots in having government schools that in most cases impart poor quality education on one hand and the convents and the public schools in private hands on the other hand that invariably see a mad rush from desperate parents who spend their savings of a life time and loans in ensuring admissions for their wards. A society that does not care for its future generations has no right to question moral deprivations, and values in society and above all corruption at the political stage. It is amazing that when I questioned a bureaucrat who was incidentally vested with many other charges apart from elementary education in a state government when he replied demurely that the cost would be immense considering over 100,000 schools in the state. My obvious retort to him was to do away with all the unnecessary departments in the state ranging from fisheries development and public works to public enterprises and electricity and to just focus on key areas such as elementary education, health and infrastructure rest being a policy outcome as is being done in most countries.
When it comes to access, equity and quality of education that indeed holds the key to a good and enlightened society we should bank more on policy outcomes such as the concept of neighborhood schools and mid day meals, attract the best in the society to school education particularly government schools and to deliberate on what constitutes good education than on introducing mindless changes in the course content and curricula by the reigning political class and leave it to the academia. It will not be a surprise that the more the political and bureaucrat class control the quality of education more it will be the detrimental to the quality of education.
Postscript: I am reminded of Mahatma Gandhi, who had once noted : “I will give you a talisman. Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man [woman] whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him [her]. Will he [she] gain anything by it? Will it restore him [her] to a control over his [her] own life and destiny? In other words, will it lead to Swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and yourself melt away.” Ironically enough, the thumb rule prescribed by the Mahatma seems to have been forgotten completely by the political masters and bureaucrats.

Fortune at the bottom of the Pyramid: A case for “Acchey Din” Mr. Prime Minister

Fortune at the bottom of the Pyramid: A case for “Acchey Din” Mr. Prime Minister

Dr Anoop Swarup
Anoop Swarup
Is there fortune at the bottom of the pyramid? Yes indeed, I raise the question notwithstanding the assertion of Raghuram Rajan, the Governor of the Reserve Bank of India, who made a case before the Bankers that there was no fortune at the bottom and therefore not to look for it but only to seek reasonable profits. I would beg to differ and almost certainly go with C K Prahalad and Stuart L Hart who had made a strong case to the contrary in the Journal Strategy+ Business almost a decade ago that there indeed was fortune at the bottom of the pyramid and it is for us to make the best of the opportunity.

Obviously enough in our country the opportunity is there for a hitherto unrecognized and undiscovered world of prosperity in the heartland of rural India that can be unleashed for its unrealized potential. I foresee the wind of change that is now blowing across the rural landscape in our country and the dynamism of our youth and our entrepreneurial men and women that had unfortunately gone untapped over the years. We see that in recent years there has been an unprecedented rise in emerging opportunities and employment generation in rural India. In a recent report submitted to the Prime Minister, the potential to generate employment opportunities have been highlighted as there is a projected annual demand of 100 lakh additional vocational capacity necessary to cope with the rising demand for workers in rural India who have to be trained for country’s future needs. The unemployed as well as the underemployed in our country in terms of policy recommendations and opportunities have to be skilled on an urgent basis so that the demographic dividend is brought in line with the emerging opportunities. No wonder that the rising rural prosperity levels have been estimated to generate at least 100 million additional and self employment opportunities both in formal and non formal sectors in our country. There emphasis has to be on agriculture, animal husbandry, agro-industry, rural services and related vocations.
The Indian economy generates every year about seven million employment opportunities more so in rural settings but there is a lack of accurate information both in terms of numbers and places. With the rise in the productivity of Indian agriculture, crop yields have almost doubled in a decade and improving plant nutrition through micro-nutrient analysis and improving irrigation through deep chiseling of soil has resulted in a tripling of crop yields necessitating a three-fold increase in the requirement of farm technicians and labour force. The rise in rural incomes consequential to the rise in productivity has unleashed a multiplier effect with increase in the demand for farm and non-farm products thus stimulating opportunities for growth of other service sectors.
There is an increasing realization that Indian agriculture is constrained by weak linkages between agriculture training and extension, crop production, farm credit and insurance programmes, creation of linkages between crop insurance, crop loans, and farm school training and improved cultivation practices means an emerging prospect for a new breed of young professionals. This would also entail a requirement for prospective artisans who may range from agriculture graduates, management and marketing graduates, entrepreneurs and change agents. On another important front, rise in rural prosperity, with more and better health care products being introduced, require medical and paramedic staff to man the primary health centres and the various pathology labs in rural areas. Similarly investment both public and private that includes road connectivity through the Pradhan Mantri Gramin Sadak Nirman Yojana and the construction of offices and residential accommodation is the need of the hour in almost all the states. Similarly water, sanitation, hygiene now being resourced through the Swach Bharat Abhiyan that has seen a quantum jump in investments from both the State and the Central Government would require both civil engineering and architectural professionals apart from the ITI and polytechnic trained youth. There is concomitant requirement in both traditional and non-traditional sources such as Solar, Wind, Biogas, Biofuels and Geothermal as also the mining and resource sectors have seen a dramatic rise necessitating huge investments both from private and public resources thus requiring huge demand on both engineering and skilled manpower for construction and manning of the utilities and services. On the Sports, Tourism and Adventure front considering the huge interest in India particularly for offbeat places and the fact that the Ministry of Youth affairs and Sports as also the Ministry of Tourism and Culture have a strategic plan for investments in a big way through its network of Hotels, Archaeological Sites, World Heritage sites and places of historical interest the Ministry of Culture, Ministry of Tourism as also the Sports Authority of India and the Nehru Yuvak Kendras, have projected an increasing demand for sportsmen and women both amateurs and professionals as also hospitality and tourism professionals who will contribute to the massive demand as also participation in national and international events for the country. Let us now examine the literacy and education front where in keeping with our resolve to be a developed nation there is a dire necessity to educate and empower rural masses both on the adult literacy front and the primary school education front thus entailing the requirement for trained teachers in virtually every field ranging from languages, sciences, mathematics and humanities to physical education and vocational education & skilling.
A recent report recommends the establishment of newer agro-processing industries, fisheries and horticulture initiatives, dairy and bee-keeping cooperatives, pomiculture and sericulture products, village-based farm schools to demonstrate the impact of advanced technology, establishment of a network of sophisticated test laboratories, high volume precision analysis of 13 essential plant nutrients, recommendation of individualized packages of cultivation practices for each crop, new agro product, location and soil profile that would necessitate well equipped professionals who will bring about reforms and revolutionize past practices. If anyone has any doubts on the requirement of computer sciences and software professionals in rural India he is in for a shock as a new study reveals that the requirements for these skilled professionals is in for a quantum jump at Block and village level. The establishment of Rural Information Centers to act as a medium for transmission of all information and its uplink to the Districts and the State Capitals in a global age is the need of the hour. Also increasingly concepts such as the ‘Sanchar Haat’ and ‘e Choupal’ where meteorology, weather and soil test data as also recommended practices, access to current input and market prices, and other essential information for upgrading agriculture, agro products, village industries and exports is now a dire necessity.
On the export front, recent policy measures to encourage handicrafts, rural arts and crafts to encourage our traditional knowledge will encourage small and medium enterprises as also help agri-business firms and self-help groups to increase access to advanced technology, quality inputs, bank credit, processing, marketing and insurance.
There will be a need for young professionals to take charge both as self employed entrepreneurs and as skilled professionals who may contribute as partners and employees in the emerging rural prosperity revolution. In keeping with the rise in rural productivity the services sector particularly in banking and finance I foresee a new wave that will be sweeping the rural heartland that is fast emerging as the final frontier to usher in a revolution for better financial and personal services, micro-credit and insurance services. There is a emerging need for professionals in the vast financial services and financial planning sector that is seeing a year on year rise of almost 25 percent and it is for the new government to make the best of it.
On the eve of the New Year 2015, now free from electoral compulsions and political posturing the time is ripe Mr. Prime Minister for a decisive government where good policy and planning backed by real governance has to be the norm as promised. In our debate on ‘India Vs Bharat’ it is high time that the Prime Minister, with the right resolve, focuses on the rural heartland that is the real Bharat to bring in ‘Acchey Din’ (good days). Indeed it is the highly qualified professionals who are ready to work in rural settings who have to be encouraged and inspired to not only ‘make in India’ but more importantly to realize the ‘made in India’ dream come true. This would be a very welcome coming of age of India’s development and thought agenda and in no less a measure an omen for the change that would take the world by storm and the vision of Mahatma Gandhi will not be too distant a dream that ‘the future of India would be in its villages”.

A case for Modinomics and reforms, forthcoming budget and lowering of taxes

A case for Modinomics and reforms, forthcoming budget and lowering of taxes

 Anoop Swarup
Anoop_Swarup
In an earlier column I had presented a case for ‘achey din’ for the Prime Minister in view of the anticipated bonanza to the developing world, particularly India as a spin off to the global crude oil windfall. Now with the Budget Session due next month, the Direct Tax Code and the budgetary exercises being in full swing with the North Block mandarins I would make a case for lowering of the tax regime. This indeed is imperative to kick start the growth engines in the economy and for bringing about a favourable investment climate. For the Prime Minister this also unravels an opportunity to do away with the poorly planned government schemes and the half hearted and shoddy austerity measures of the years bygone. In no less a measure this should not turn out to be another exercise in vain for jacking up of government investments in ill conceived development schemes of the past that have miserably failed the masses over the post independence years.

In fact the danger looming before the world at large is because of uncertain markets and the poor export demand internationally. Let us briefly review the global scene and the response from other economies. The question indeed is whether we follow the traditional Keynesian economics of lowering the taxation rates to boost household savings for improving the investment climate or for annual deficit budgets that bank on burrowed funds leading to fiscal deficits, for public subsidies and investments in poorly conceived socio-economic programmes that India is used to. I draw a simile to Narendra Modi with John F Kennedy who became the President of the United States in 1961 and brought Keynesian ideas to national thinking to expand national income. One of his key policy measures was to drastically reduce taxes and the outcome was phenomenal with a five fold rise in real GDP and fall in unemployment rates.
Incidentally with a growth forecast of 7.3 percent during 2015 the Chinese government is on an overdrive to boost its investments in order to maintain its growth forecasts like many other economies whereas the United States is currently struggling to get inflation to reflect manufacturing and construction take off. It is worth understanding that Quantitative Easing is an unconventional technique first used by the Bank of Japan more than a decade ago and now by many administrations such as with the European Central Bank and the US Federal Reserve. Most economies including India focus on buying covered bonds, a form of corporate debt, thus the US federal reserve holdings equal almost 20 percent of US GDP whereas European Central Banks assets were worth 30 percent of its GDP. We know that almost 60 percent of the US corporate cash reserve are outside the US and bringing it back would imply raising the taxation rates which will not be politically or economically the right approach for the Obamanomics think tank. It is also an equally interesting observation that invariably huge public investments as during the great depression or government austerity measures as in the past to kick start the economy may not yield as good a result as boosting of the cash reserves with the consumers and the households. Further the stock markets ostensibly are driven more by the confidence of the consumers and in India the highly volatile stock market conditions need such an adrenaline push in no less a measure. It is also an irony that barely 1 percent of the population in India perhaps the service class pays its taxes and bears the burden of welfare schemes as also the plan and non-plan expenditure for the government. In the developed world and more so in countries such as the US historical study reveals that low interest rates and reduced indirect taxation rates do spook up investments. In a country like India where individual enterprise and entrepreneurship have been traditionally valued as an asset, lowering of tax rates thereby making goods and services cheap would help not only in boosting household savings but also in improving the investment climate as a whole. Considering the inefficiencies, the state run institutions and projects as we have seen in years bygone post-Independence, it is better imperative to have private participation along with the public particularly in infrastructure development. In the West as I observed the economic growth is fueled through major infrastructure development even which may in itself be a mirage as real economic growth may still elude these economies.
We in India would do well to understand that for a country of our size and diversity the best investment by the government would be in education and health that would deliver great outcomes over the long run in terms of enterprise, innovation and creativity that will be the cornerstone for future growth in an era of technology and information whereas the private sector may do well when it comes to better decision making and to ensure returns on investment. As spin off, better efficiencies and improved employment opportunities in a globally competitive world would be a definitive outcome. It would be a strategic approach and a tactical measure to attract foreign direct investment particularly in greenfield projects as well, with lower tax rates in India vis-a-vis the developed world. The developed world, including the US, is well aware that it could remain an attractive destinations for overseas investors considering the huge availability of an amount of USD 2 trillion from their international cash reserves. Reduced taxes would imply a growth push and increasing the interest rates by the central banks have been resorted to by most central banks to control money supply and inflation in as much as regulating liquidity and ensuring export competitiveness through currency depreciation. From a historical perspective it would be seen that most countries are vary of the fact that in a globalised world transnational corporations may easily shift their base for cost effective and better and cheaper manufacturing. No wonder that the developed economies with little or no politico-bureaucratic indulgence perform much better and corruption is kept at bay. In view of the foregoing it is fervently hoped that the Modinomics would take a cue from Obamanomics and would find a strategic path to usher in tactical solutions as discussed above by not only making Indian economy more liberalised and by eradicating the archaic jungle of bureaucratic rules and regulations ranging from the labour laws to the much needed reforms in goods and service taxes regime and the excise and income taxes that have eluded the Indian electorate in the past. India will no doubt emerge as an attractive investment destination and provide the much needed relief to both the honest tax payers and the foreign investors through the much needed reforms and liberalisation and by reduction of the taxation rates so as to usher in the ‘achey din’ that the country awaits.

In India’s National Interest: About Identity, Sense of Purpose and National Pride !

In India’s National Interest: About Identity, Sense of Purpose and National Pride!

India even today is a land of antiquity and a billion dreams not mutinies, not snake charmers but charmers of a different kind to woo the voters with freebies, where poorest of the poor do coexist with the stinking rich. An India where black money and black market thrives, where corrupt often display ill-gotten wealth,unabashedly, particularly in marriages and other social functions. A functioning anarchy where mis-governance is the name of the game particularly in the states and where India’s rich diversity of caste, creed, religion and beliefs is more often than not played up by unscrupulous politicians to achieve their own self-fulfilling goals.
Anoop Swarup
Anoop Swarup
Anoop Swarup
Incredible India as the sponsored banners run across the globe, yes incredible it is as India even today is a land of antiquity and a billion dreams not mutinies, not snake charmers but charmers of a different kind to woo the voters with freebies, where poorest of the poor do coexist with the stinking rich. An India where black money and black market thrives, where corrupt often display ill-gotten wealth,unabashedly, particularly in marriages and other social functions. A functioning anarchy where mis-governance is the name of the game particularly in the states and where India’s rich diversity of caste, creed, religion and beliefs is more often than not played up by unscrupulous politicians to achieve their own self-fulfilling goals. Yet India a great civilisation of the past is well set to make its mark on the global stage of the future.
Yes, indeed it is a sense of national pride and esteem, belongingness, fellowship and above all a sense of achievement, thus far on the back burner, now is exceptionally apparent. It is the exuding confidence of a new breed of global Indians everywhere including those who ride the world of transnationals and multinationals. Also the sweeping waves of change is visible in sports, in the World Cup cricket particularly. In Melbourne I could not help but feel elated at a sense of national identity with the swamy army swarming the MCG and pride on display among Indians of all hues and the admiration writ large on the faces of other nationalities with India on a wining spree. Incidentally all this is despite the mayhem of self-serving politicians, members of sports associations and their respective self acclaimed boards that thrive on public money and who do more disservice to their own proclaimed aims and ideals than any desire to achieve the goals and objectives for the country at large. A sense of national interest and national pride, though once in a while, is racked up in the anti-terror sentiments and on the border with Pakistan and of course by the Bollywood movies. The media ironically churns up more junk than other industry with a focus on TRP ratings and therefore more on sensationalism, yet more on politicians and the Bollywood actors than on any real news. In the fight against terror national pride and honour is relegated to the defence forces most of the time and virtues, apart from school text books, are considered to be the domain of gods and our glorious past.
As usual when we hear about the news headlines that Greenpeace is taking away 40,000 MW of projects from India, I do wonder if the so-called misguided notion of tribal rights and environmentalism have precedence over the tribals own legitimate demands for energy, growth and development. During the post-Independence nehruvian years there was a thought process to save the tribals from losing their identity and character. All these years we not only saw the tribal sub plans and the special constitutional status and protection for them though originally in their best interest did more damage than any good as these were the lost years as they were deprived of their legitimate aspirations to grow and be a part of the mainstream. It is indeed our own past perceptions that have made a huge difference to any change for the better that India could have seen all these years and been saved of the aftermath of the maoist onslaught in the tribal heartland, not to speak of the years gone by when the whole world was passing through the throes of growth and development.
Yes, in this backdrop the question remains — Is Greenpeace upholding sovereign rights and the so called right to defend tribal rights, freedom and democracy? Also the issue of national interest now being tested in the High Court is whether or not the integrity of India is compromised with a few individuals seeking to testify against India before a foreign parliament. Incidentally Istanbul declaration boldly proclaims the stalling of 45 per cent thermal projects in India. Is it not the fundamental duty of every Indian citizen to safeguard national interest that is development and the interest of the poorest of the poor before we talk about a very abstract idea of tribal rights and environmentalism that perhaps even the tribals do not understand.
Let me now address the issue of perceived national interest so much apparent when very recently a terror boat from Pakistan was set afire by suspected terrorists at Porbunder. The rhetoric and the counter statements were made more amusing by the flip-flop by the braggart DIG of Coast Guard. The absurdity of the entire situation was more evident as the episode not only became a game of ping-pong diplomacy between the two countries but the unfortunate statements made by the Congress party against the Defence Minister surprisingly enough had put their own party interest above national interest to the nations surprise. As usual and amazingly once again the Congress spokesperson appeared to make a case for Pakistan by raising amateurish question marks on the fire on board the fishing vessel from Pakistan. Again amidst all brickbats it was ironically enough the national interest and the prestige of our country that was being undermined. Surprisingly enough and once again against national interest, in one of the most bizarre cases of corporate espionage whence the top honchos of major oil companies were caught stealing documents from the corridors of Shastri Bhawan. Evidently this was being carried on for a number of years with national interest at stake, perhaps hand-in-glove with the mandarins in the Ministry who are as yet scot-free and had no idea that they were trading national secrets for little personal gain.
It is high time that India has to rethink, reformulate and implement a fresh approach to the idea of making a bold new India by rekindling and reigniting the spirit of national pride so that national interest becomes the prime mover for political discourse and the country’s development agenda does not suffer in the time to come. Idealism, honesty of purpose, great deeds and virtues to be emulated from great personalities of yesteryears are not to be left on the school text books but should be emulated by our leaders so that India has an overall sense of identity and purpose and it is national interest that has to be above any self interest and of course above any petty politics and outdated ideologies of the past.