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24 September, 2013

Playing for high stakes

BRP Bhaskar
Gulf Today

Soon after the Bharatiya Janata Party named Gujarat Chief Minister Narendra Modi as its prime ministerial candidate, noted Indian writer and educationist UR Ananthamurthy said he wouldn’t live in a country ruled by him.

Ananthamurthy was voicing his concern over the nomination of Modi, who bears the stigma of facilitating the anti-Muslim riots of 2002, for the high office by the main opposition party. In an orchestrated response to his remark, Modi fans started sending him money orders to buy a one-way ticket to fly out of the country. Several other writers immediately rallied to his defence.

The episode is indicative of the secular sections’ misgivings over Modi’s emergence on the national scene and the Hindutva camp’s scant regard for their concerns as it plays for high stakes.

The BJP heads the National Democratic Alliance, which ruled the country from 1998 to 2004 and is the main opposition in Parliament. It is approaching next year’s elections with high hopes as the ruling United Progressive Alliance, led by the Congress, will be facing the electorate with the burden of double incumbency and grave corruption charges. Having lost two successive elections, the BJP desperately needs a win.

The Rashtriya Swayamsevak Sangh, Hindutva’s ideological powerhouse, had planned to declare Modi its prime ministerial nominee last June. It could not accomplish the mission then as Lal Kishen Advani, the party’s tallest leader after former prime minister Atal Behari Vajpayee and the chairman of the NDA, remonstrated. As a first step, it made Modi the party’s chief campaigner. This month, it proclaimed him prime ministerial nominee.

Criticism from outside the party notwithstanding, Modi appears to be the best candidature the BJP could find. Advani had led the party unsuccessfully in the elections of 2004 and 2009, and, at 85, age was clearly against him. None of the other leaders at the national level could claim to be his natural successor. Among the state-level leaders, Modi was the one with the most national exposure, even if he received attention for the wrong reasons.

The BJP has been declining continuously for years, and Modi faces an uphill task. Its popularity peaked in 1998 when, with a poll share of 25.59 per cent, it secured 182 seats in the Lok Sabha and emerged, for the first time, as the largest party in the House. This enabled it to attract a number of small parties and cobble up enough support to form the first NDA government.

The Congress party bagged 25.82 per cent of the votes polled in that election but got only 141 seats.

When fresh elections were called in 1999 following the collapse of the NDA government, the BJP’s vote share dropped to 23.75 per cent but it managed to maintain its strength of 182 seats and retained power. The Congress party’s vote share went up to 28.30 per cent but the vagaries of the electoral system restricted its strength in the House to 114 seats.

After the second NDA government completed its five-year term, the BJP went to the polls with the catchy slogan “India Shining” but was rebuffed by the electorate. Its vote share fell to 22.16 per cent and the number of seats dwindled to 138. The Congress party’s vote share fell too, to 26.53 per cent, but its Lok Sabha strength rose to 145, making it once again the largest single party in the house.

In 2009, the BJP’s poll share fell further to 18.80 per cent. Modi has to reverse the declining trend and push up the party’s vote share. A rise of five percentage points can take it back to the 1999 level and possibly once again make it the largest party in the Lok Sabha.

However, the party cannot expect a replication of the old scenario. During 1998-99 it could draw towards it many small parties since they disliked the Congress more than they disliked it. Besides, in Vajpayee it had a leader who had a wide measure of acceptability across the political spectrum.

The first thing Modi did on taking charge of the party’s election campaign was to dispatch his close associate, Amit Shah, to Uttar Pradesh, which has the largest bloc of 80 seats in the Lok Sabha. In 2009 the BJP won only 10 seats there, and was way behind the Samajwadi Party (23 seats), the Congress (20) and the Bahujan Samaj Party (20).

This month 48 persons were killed in communal riots in the Muzaffarnagar district of UP. The Congress and the Left parties have attributed the violence to the BJP strategy of communally polarising the society ahead of the election. Such a strategy may help win more seats but render the task of forging post-election alliances difficult by reviving memories of Gujarat 2002.--Gulf Today, Sharjah, September 24, 2013.

17 September, 2013

Flawed electoral system

BRP Bhaskar
Gulf Today

India’s democratic system has facilitated multi-party elections at regular intervals and changes of government at the Centre and in the states through the ballot. However, it has its flaws, which are crying for remedy.

The emergence of money and muscle power as elements that can influence the outcome of elections has led to a rise in the number of persons with criminal records in the two houses of parliament and in the state legislatures.

The Association for Democratic Reforms (ADR) and the National Election Watch (NEW), which studied affidavits filed by candidates who have sought elections since 2004, found that about 30 per cent of the members of the Lok Sabha and 17 per cent of the members of the Rajya Sabha had criminal cases pending against them when they filed their nomination papers. Some were charged with heinous crimes like murder, kidnapping and rape.

In an attempt to check the rise of criminal elements in elected bodies, the Supreme Court recently ruled that a member will forfeit his seat immediately if he or she is convicted on a charge that attracts a jail term of two years or more.

The law provides for such forfeiture but until now the court had, as a rule, suspended the sentence and allowed the convicted member to retain his seat pending a decision on his appeal.

The government considered amending the law to overcome the effect of the judgement, but gave up the idea after the apex court indicated that it is not inclined to revise its decision in the matter.

In another recent judgement, the Supreme Court ruled that a person in lawful custody cannot contest elections. While its intention was good, the ruling opened the way for a government which is not scrupulous in observing democratic niceties to vitiate the electoral process by throwing opposition leaders in jail on trumped-up charges on the eve of the elections.

While addressing the Kerala Assembly on the occasion of its 125th anniversary a few days ago (the state came into being only in 1956 but its legislature traces its history to the setting up of an assembly in the princely state of Travancore before Independence), Vice-President Hamid Ansari dwelt on another grave weakness of the country’s democratic system. He pointed out that the first-past-the-post system often results in candidates getting elected with the support of not more than a quarter or one-third of the voters.

The flawed electoral system, borrowed from the British, casts doubts on the representative capacity of not only individual legislators but also the elected bodies. The fact is that no government in the country’s history enjoyed the support of a majority of the electorate. The massive majority that the Congress won in the first three general elections, fought under the leadership of Jawaharlal Nehru, arguably the most popular of all prime ministers, was secured with vote shares ranging from 44.72 per cent to 47.78 per cent.

The system allowed the undivided Communist Party of India with a vote share of only 3.79 per cent to win 16 seats and emerge as the largest opposition group in the first Lok Sabha, edging past the Socialist Party which could get only 12 seats with its 10.59 per cent votes. In 1984, a regional party, Telugu Desam of Andhra Pradesh, became the main opposition in Parliament winning 30 of the state’s 40 Lok Sabha seats.

Electoral systems designed to ensure that the government and individual legislators have the support of a majority of the electorate are now in force in many countries. The most popular one involves a runoff between the two candidates who receive the largest number of votes in the initial ballot.

While there have been cursory discussions on electoral reform from time to time, political parties in the country have little interest in improving the system as they have developed a vested interest in the present arrangement.

Parties with narrow bases stand to benefit from the first-past-the-post principle. When votes in a constituency get widely splintered in a multi-cornered contest a small but significant caste, religious or class vote bank can help a party to win.

All national parties have suffered erosion in their geographical base in the past few years and regional parties have come to the fore. The support base of both national and regional parties is narrow and they are, therefore, heavily dependent upon vote banks.--Gulf Today, September 17, 2013.

10 September, 2013

Balancing act at G20

BRP Bhaskar
Gulf Today

India’s economic woes were uppermost in Prime Minister Manmohan Singh’s mind when he went to St Petersburg, Russia, for the G20 meet last week. His plea to the developed countries for calibration of their monetary policies to avoid adverse impact on the economies of the developing countries received support from many countries.

Heeding their voice, the United States and other advanced economies agreed in the summit declaration to carefully manage winding down of the monetary stimulus, brought in to deal with the situation created by the global economic slowdown.

At the root of the worry articulated by Manmohan Singh was the depreciation of the currencies of some developing countries as global investors started pulling out following reports that the US Federal Reserve may taper off its monthly $85 billion bonds purchase.

While committing itself to moderate the Fed’s quantitative easing programme, the US argued that the difficulties of the developing countries were the result of lack of economic reforms. This viewpoint, too, found expression in the declaration which said “sound macroeconomic policies, structural reforms and strong prudential frameworks will help address an increase in volatility”.

As was to be expected, the declaration represents a balancing act. The G20 nations undertook to co-operate to ensure that the policies they implemented to support domestic growth also supported global growth and financial stability and to manage their spillovers on other countries.

US officials claimed later that while China, India and Brazil raised the issue of quantitative easing, most G20 members agreed that what was good for the US was good for the global economy.

The G20 nations reiterated their commitment to free trade. At the same time, the target date for ending the moratorium on any new protectionist measures was moved from 2014 to 2016.

There was a consensus in favour of adoption of an action plan which focuses on economic growth and job creation. However, the details remain to be worked out. The member states have been asked to outline their respective positions on the subject at next year’s summit, to be held in Brisbane, Australia.

Another positive outcome of the summit was the agreement to create an international framework to fight cross-border tax evasion by 2015. The proposal requires financial institutions to ascertain the residential status of their customers for tax purposes and pass on the information to the authorities concerned.

The US and Britain were among the key promoters of the proposal. Apple, America’s most profitable technology company, is said to have avoided billions in taxes in the US as well as other countries by creating a web of subsidiaries. Another American company, Starbucks, which runs a global coffee house chain, had sales of nearly $630 million in Britain last year but paid no taxes. It has, however, offered to pay taxes from this year.

Curiously, the proposal to check tax evasion did not receive much attention in India though the country stands to benefit from the proposed international framework. Global Financial Integrity, a non-profit research organisation, had reported last year that Indians were holding an estimated $500 billion in secret accounts in foreign banks.

Manmohan Singh can derive some satisfaction from the fact that he could persuade the developed nations to take note of the adverse implications of the high volatility of financial flows and exchange rates for India’s economic stability. However, he obtained more tangible results from the discussions he had with some of the summit participants outside the conference hall.

In talks held on the sidelines of the summit, Japan agreed to raise the ceiling on the currency swap agreement with India from $15 billion to $50 billion. This will strengthen India’s effort to arrest the decline of the rupee.

The BRICS deliberations at St Petersburg resulted in agreement on the contributions members of the group must make towards the reserves of the 100-billion dollar development bank which they are to set up. China will provide $41 billion, Brazil, Russia and India $18 billion each and South Africa $5 billion.

The BRICS bank is designed to help finance infrastructure and development projects in the member nations. It will also pool foreign currencies to help meet any financial crisis in the future. Some see it as an alternative to the International Monetary Fund, where the US is in a position to veto any proposal.-- Gulf Today, Sharjah, September 10, 2013.

03 September, 2013

Coping with economic ills

BRP Bhaskar
Gulf Today

With the rupee in free fall, the stock market in violent fluctuation and inflation in two digits, last week threw up evidence that India’s economy is ailing.

While presenting the budget, Finance Minister P Chidambaram had held out hopes of a growth rate of 6.1 to 6.7 per cent during this year. Replying to a debate on the state of the currency in the upper house of Parliament on Friday, Prime Minister Manmohan Singh lowered the target to 5.5 per cent. Data released by the Central Statistical Organisation later shows even this may be unrealistic.

The CSO report said growth in the first quarter of the fiscal was only 4.4 per cent, the lowest since the global meltdown of 2009. The growth rate fell in every sector of the economy except that of social and personal services, which registered an increase — from 8.9 per cent to 9.4 per cent.

Some foreign analysts and domestic critics cited the Food Security Bill, which provides for heavy subsidy on grains supplied to the poor, as one of the reasons for the decline of the rupee. The fact, however, is that the rupee began falling weeks before the bill was adopted by the lower house of Parliament, and it was caused primarily by global investors moving money out of foreign financial markets following the US move to tighten money policy in view of improvement in its economy.

The economies of many countries had suffered when the US experienced meltdown a few years ago. It is ironic that some of them now suffer because the US economy is improving.

The rupee is not the only currency affected by outflow of foreign investment. The currencies of many developing countries from Brazil to Indonesia have suffered erosion in recent weeks. However, the rupee happens to be the worst hit.

India received foreign institutional investment of $12 billion this year. About $1 billion went out in a fortnight as investors began pulling out.

The main cause of the plight of the rupee is the growth in the current account deficit — the gap between the value of imports and that of exports — which touched an all-time high of $88.2 billion during the last financial year. This was 4.8 per cent of the GDP. The government planned to reduce the CAD to $70 billion, or 3.7 per cent of the GDP, this year. High oil and gold imports foiled its efforts.

Appeals to the public to reduce oil and gold consumption having failed, the government is considering other remedial measures. Buying more oil from Iran paying rupees and keeping petrol outlets closed from 8pm to 8am are among the ideas mooted to reduce oil import bill. Austerity measures are also envisaged.

Some analysts have likened the current situation to what prevailed in the early 1990s when India borrowed heavily from the International Monetary Fund and suggested going back to the IMF. However the government says the situation does not warrant recourse to IMF aid.

Its optimism is based mainly on two factors. One is that the country has foreign exchange reserves of about $280 billion as against short-term debts of about $172 billion. The other is that since there was plentiful rain during the year the outlook on the farm front is bright.

However, Corporate India has cause for worry. Taking advantage of the economic reforms, many companies borrowed heavily from abroad and the falling rupee has pushed up their repayment burden.

A US website has quoted an official of the financial services firm Morgan Stanley as saying 25 per cent of Indian companies technically do not have enough money to make interest payments and 15 per cent have negative cash flows.

Manmohan Singh shares Corporate India’s view that the answer to the current economic problems lies in more reform. However, since general elections are approaching, he cannot overlook the fact economic reform, while benefiting big corporations, has added to the misery of the poor. The food security and land acquisition measures which the government is trying to push through are aimed at mitigating its impact on the vulnerable sections of the population.

Amid the gloom of the week the state-owned Life Insurance Corporation spread a bit of cheer by releasing a report of the global research firm Dun and Bradstreet, which said India is likely to achieve an average growth rate of over 8.3 per cent between 2014 and 2020 and realise its full potential. -- Gulf Today, Sharjah, September 3, 2013.