Modi reform on the way

BRP Bhaskar
Gulf Today

Prime Minister Narendra Modi, whom critics have accused of continuing with the policies and programmes of the previous administration, announced last week a step towards changing the way the government functions. The Planning Commission, set up by the first prime minister, Jawaharlal Nehru, 64 years ago, will be wound up, he said.

Nehru was an admirer of socialist planning since his visit to the Soviet Union in 1927 on the tenth anniversary of the October Revolution. He established the Commission to draw up perspective plans for economic development.

He envisaged a socialistic pattern of society in which the public sector will occupy the commanding heights of the economy. The Commission’s task was to formulate five-year plans with this end in view. Under successive prime ministers it produced 12 such plans, and the last of them is now in the process of implementation.

Since the Commission was a brainchild of Nehru, some have interpreted Modi’s decision to do away with it as part of the process of burying his legacy, the main political asset of the Congress Party which was in power for most of the years of Independence.

During this year’s parliamentary elections Modi had campaigned for a Congress-free India. His lieutenant, Amit Shah, who was recently elected president of the Bharatiya Janata Party, has adopted the same slogan for the upcoming Assembly elections in some states.

The fact is that planning in India predates Nehru’s days as prime minister. As Congress President, Subhas Chandra Bose set up a national planning committee in 1938 to formulate a plan for establishment of industries after the country gained freedom. A group of economists and industrialists made another non-official effort in the same direction in 1944. In the last years of colonial rule, the British established a planning board to rebuild the war-ravaged economy.

From the second plan onwards, the Planning Commission followed an economic model developed by internationally reputed statistician PC Mahalanobis, who laid emphasis on industrialisation with key areas under state control. Market reforms of the era of globalisation rendered that model irrelevant. 

The United Progressive Alliance government, which pushed globalisation during the past 10 years, recognised the need to reform the Commission in the light of new realities. It set up an Independent Evaluation Office (IEO) attached to the Commission to initiate the process. However, there was not much change.

Montek Singh Ahluwalia, who ran the Commission under Manmohan Singh, made it a laughing stock by fixing the poverty line at the abysmally low level of a monthly consumption of Rs859.60 in urban areas and Rs672.80 in rural areas. He also came under criticism for spending Rs3.5 million on renovation of toilets in the Commission’s headquarters.

Justifying the decision to scrap the Commission and go in for a new institution, Modi said, “Sometimes it costs a lot to repair an old house. It gives us no satisfaction and we have a feeling that it is better to construct a new house.”

The IEO, in a report submitted to Modi in June, immediately after he took office, had recommended abolition of the Commission. It suggested that a think tank be created in its place to advise the states on developmental plans. Modi has not indicated what the shape of the new body will be. Some media reports have suggested that he has in mind something like China’s National Development and Reforms Council.

But China, which started revamping its Planning Commission in 1998, still does not have an institution which its rulers consider satisfactory. The NDRC is a leviathan with 30,000 bureaucrats spread across the country. The new leadership of the Communist Party of China is reportedly planning to clip its wings.

According to some other reports, the think tank will consist of eight members, of whom five will be central ministers or serving or former state chief ministers and the remaining three will be drawn from industry.

The crucial issue is not the size and composition of the body but the procedures it will follow. In all likelihood, the Finance Ministry will take over the task of fixing annual outlays of state plans and providing the requisite funds. This may not be conducive to strengthening of federalism, which Modi has mentioned as a key element of his developmental policy, along with optimum use of the country’s young population and promotion of the public-private partnership.-- Gulf Today, Sharjah, August19, 2014.

Corruption in the age of globalization

B.R.P.Bhaskar

Corruption is a part of mankind’s hoary tradition. Ancient Indian works bear testimony to its existence in the distant past. Going by the Gospels, one of Christ’s disciples was an official who was corrupt. In theory, in a feudal dispensation fear of instant retribution may deter an official from accepting illegal gratification but when rulers want to amass riches for personal gratification or for financing wars they cannot act against corrupt officials who help them realize their goal. In the early phases of British rule in India, the administration was highly corrupt. Officials of the East India Company returned to England from their Indian assignment with immense wealth. Hickey, who set up India’s first newspaper, exposed corruption by Company officials but he was acting in the interests of a faction within the organization and was not a genuine anti-graft crusader. The House of Commons summoned Robert Clive and Warren Hastings, two enthusiastic empire builders, to answer charges of corruption. Under the Company’s rule there arose a class of Indians who served the cause of the colonial masters and obtained opportunities to fatten themselves at the cost of their own countrymen. Those whom the Company had employed to prepare land registers falsified the records and dispossessed people of their holdings. After the British government assumed direct responsibility for the governance of India military adventurers were replaced by officials selected through a competitive process, and they tried to provide a clean administration. 

The Indian Civil Service, which comprised educated Britons and Indians selected on the basis of a tough examination, enjoyed a high reputation for efficiency and integrity. It was, however, not entirely free from corruption. Soon after Independence, two senior Indian officers of the service, S.A. Venkataraman and S.Y. Krishnamoorthi, faced corruption charges. Under the rules, an ICS officer could only be tried by another member of the service. The British officer who tried Venkataraman was scandalized by the evidence that a contractor who had dealings with his department had picked up the bills for the Scotch whiskey which a New Delhi wine shop delivered at his house each month. Both Venkataraman and Krishnamoorthi were sentenced to jail terms. That was in the 1950s. Since then there have been few instances of officials of such seniority being prosecuted although the system continued to provide scope for corruption. Evidently, somewhere along the way it lost the ability to act against corrupt officials presumably because they were acting in concert with political elements. 

Prime Minister Jawaharlal Nehru established a convention of ordering a judicial inquiry when a prima facie case of corruption or other impropriety was established against a Central minister or State Chief Minister.  On the appointment of an inquiry commission the minister was obliged to resign but an adverse finding did not lead to criminal prosecution or prevent return to the government at a later stage. In other words, corruption only exacted a small political price. It did

not invite a legal penalty.

Over the years corruption charges have spiralled. In the 1970s, Prime Minister Indira Gandhi famously described corruption as a global phenomenon. It is true that corruption has existed in all societies and at all times but there is nothing to indicate that in India it was as widespread at any time as it is today. The economic liberalization programme the government initiated in the 1990s has been widely represented as one involving dismantling of the licence-permit raj, which had spawned corruption in the early years of Independence. However, the era of globalization it inaugurated has seen enormous growth in the extent and volume of corruption.

At the root of the continuous expansion of corruption is the political parties’ growing need for resources to fight elections. In a five-year period, they have to face three elections – at the national, state and local levels – and even cadre parties are becoming increasingly reliant on money for the conduct of campaigns. Acceptance of contributions from corporate entities was widely seen as undesirable as it would place the parties under obligation to them, and at a very early stage Parliament passed a law prohibiting political contributions by companies. The ill-conceived legal remedy led to widespread use of black money in elections.  Many business houses found it necessary to generate black money to fund political campaigns. The law has since been changed but black money continues to oil the election machinery of the political parties.

When the Congress dominated politics at the Central and State levels it was the major beneficiary of corporate donations. Jawaharlal Nehru is known to have stayed away from fund raising, leaving the job to party leaders who maintained close contacts with the captains of industry. As other parties grew and began posing a challenge to the Congress, businessmen started patronizing them too. Over the years the fund collectors came to have much clout within the parties and some of them started siphoning off part of the donations to build private kitties. A veteran of the freedom movement observed in the 1970s, “In our time 80 per cent of the money we collected reached the AICC, the rest going into expenses. Now only 20 per cent reaches the AICC, the rest going into other channels.”  As collections dwindled, parties in power began raising money through kickbacks. There was now a direct link between favours shown to individual business houses and the money that flowed into party coffers. Still later a similar link emerged in the award of foreign contracts too. The Bofors scandal is a case of this kind that got exposed. In many States, postings and transfers of officials also became a source of political funds. When officials are drawn into fund raising in one way or another it becomes difficult for the political masters to check corruption in the bureaucracy. That explains why the system which could throw the book at members of the ICS is unable to take on members of the less glamorous successor services.

Corruption in the bureaucracy operates differently at different levels. When officials at the higher levels take bribes it is generally to show favours. Businessmen consider the payments they make as part of their investment. Ordinary people who deal with the lower levels of the administration for routine matters often find it necessary to grease palms not to receive any favour but to get what they are entitled to as a matter of right such as a birth or death certificate or a caste or income certificate.  The licence-permit raj undoubtedly offered much scope for corruption. Rahul Bajaj, a leading industrialist, has admitted that he expanded his business surreptitiously by producing more than what he was licensed to manufacture. This is how the famed Harvard Business School, of which he is a distinguished alumnus, records the story in his own words at its website: “To lower my costs while improving the price and quality of my products, I needed economies of scale," he explains. "Ignoring a government regulation, I increased my volume by more than the permitted 25 per cent of my licensed capacity. If I had to go to jail for the excess production of a commodity that most Indians needed, I didn't mind."Bajaj’s confession about breaking the rule has special significance as he is the scion of a business family which had close connections with the nationalist movement and Mahatma Gandhi. He did not go jail for his defiance of the law, which his alma mater describes as “his own form of disobedience” in a bid to pass it off as something akin to Gandhi’s civil resistance movement. It is not unreasonable to assume that the authorities, politicians and officials, were not unaware of the goings-on in the Bajaj plant and that their acquiescence was bought in a manner which neither he nor Harvard wishes to acknowledge. In a book titled “The Polyester Prince”, published in 1998, Hamish McDonald, an Australian journalist, chronicled how Dhirubhai Ambani, a self-made businessman, built a big empire in a short period. A few copies of the book reached India soon after its publication but quickly disappeared and no further consignments reached the country. The Ambanis reportedly threatened to launch legal action if the book was sold in India. At one time the book was available online but now it is not easily traceable even in cyberspace. It is not clear if the credit for blocking it belongs to the powerful state or to the resourceful business house.  Dhirubhai Ambani’s two sons figure high up in the Forbes list of Indian billionaires, and the magazine has indicated that the older of them, Mukesh, could emerge sooner or later as the richest man in the world. The names of the Ambani brothers and their mother, Kokilaben, figure in the list of Indians who had accounts in a branch of the Hongkong and Shanghai Banking Corporation in Switzerland, which France had made available to India some time ago. The Indian government’s failure to act against the bank or the account holders suggests it is reluctant to pursue black money trails which may lead to corrupt politicians and officials.

                                                                                                                                                                  

Corruption of the permit raj days, enormous as it was, pales into insignificance in comparison with the scams of the era of globalization, the amounts involved running into hundreds of billions of rupees. There has been an exponential growth of graft since investors, domestic and foreign, started rushing to grab valuable resources such as land and minerals. Rapacious businessmen have shown readiness to bribe their way around obstacles such as environmental laws and opposition from local residents.  Many politicians have acquired business interests in diverse fields, including the media. Affidavits filed by candidates seeking re-election to public offices have revealed enormous growth in their assets during their earlier term. It was against this background that Anna Hazare launched a campaign to force the government to enact legislation for setting up a Lokpal with powers to prosecute corrupt politicians and officials. 

The idea of a Lokpal at the Centre and a Lokayukta in each State to deal with complaints against the administration was first mooted by a high-powered committee half a century ago. Several States have already created Lokayuktas, headed by retired Supreme Court judges or High Court Chief Justices. Their performance has generally fallen short of expectations of the public. In a few instances they have pursued cases against powerful persons relentlessly but the law does not invest them with sufficient powers to punish those found guilty. A Central law has not materialized so far. On several occasions bills were introduced in Parliament and allowed to lapse with the dissolution of the Lok Sabha. Finding the pending bill drafted by the government unsatisfactory, Anna Hazare and his associates, who included some lawyers and former officials, prepared a draft of their own with strong provisions and insisted that Parliament pass it into law. The government modified some provisions of its draft to meet their criticism but the bill fell through. While the government ritually reiterates it is committed to enact a strong anti-corruption law, its lackadaisical approach leaves doubts in the public mind about its earnestness in the matter.    

An act of corruption, while benefitting some, almost invariably deprives others of justice and fair play. As such, it amounts to a violation of human rights. However, the human rights movement in the country has not involved itself seriously in the fight against corruption.  Even the moral and ethical aspects of corruption have not received adequate attention. Indeed, with elements known to be corrupt parading in public as roaring successes in their fields, there is often sneaking admiration for them and willingness to emulate them.

India is currently going through a phase of fast economic growth. Even a cursory look at the history of the developed societies will show that they witnessed large-scale corruption in the early stages of explosive growth. Britain experienced such a phase in the 18^th and 19^th centuries. The United States went through a similar period in late 19^th and early 20^th centuries. Japan and South Korea, two Asian countries which saw swift development after World War II, were dogged by scams. The biggest economic success story of recent years has been China’s, and it is grappling with the problem of corruption at high levels. Where India differs from these countries is in the inability of its system to deal effectively with corruption at high levels of the administration.  Two former Prime Ministers of Japan and a former President of South Korea were jailed on corruption charges. China executed a provincial governor after being found guilty in the early days of economic liberalization. More recently it jailed two members of the powerful Politburo of the Communist Party and a third high-ranking party official is expected to go on trial soon. The real problem that India faces is not the absence of a strong law but the incapacity of the system to move against those at the top. A change in this state of affairs cannot be expected until the political machinery is cleansed and the electoral system is freed from the influence of money. (Social Science in Perspective, Vol 4, Nos. 2 and 4, July-December 2012)

Economy at a crossroads

BRP Bhaskar
Gulf Today

Is the Indian dream fading? With the growth rate sliding, the rupee falling and the stock market going for a spin, this question is being raised within the country and abroad.

Last week a foreign news agency quoted a spokesman of India Inc as saying, “We have a full-blown crisis on our hands.” In a report which painted a picture of a paralysed political leadership and a drifting economy, the agency also quoted former US envoy Tim Roemer as saying the American business community was “increasingly frustrated and fatigued by flip-flops and roll-backs and reversals of decisions.”

Both were batting for acceleration of the globalisation process which has been on hold for some time in the face of strong opposition from some of the Congress party’s allies in the ruling United Progressive Alliance. Foreign and domestic business interests argue that more reform is the answer to India’s current problems but the experience of the fully globalised economies does not bear this out.

India emerged without major injury from the global economic meltdown of 2007 primarily because reform measures had not gone so far as to draw it deep into the financial convulsions of the time.  Foreign investors found it an attractive market and the economy continued to grow at a fast pace.

The scenario has changed somewhat since then. Last month the global agency Standard & Poor’s lowered India’s sovereign credit rating outlook from “stable” to “negative”, citing concerns over rising fiscal deficit and debt burden and lower growth rate.

Officials point out that there has been no general downgrading of credit rating and that the outlook on long-term ratings has in fact been revised from “negative” to “stable”. However, fears that foreign investors may shy away persist.

Finance Minister Pranab Mukherjee, who attributes the current difficulties to the Eurozone downturn, says the government has noted the concerns and is taking steps to strengthen and sustain robust economic growth.     

Advocates of accelerated reform attribute the government’s reluctance to move forward to differences between Prime Minister Manmohan Singh and the Finance Minister. They believe Manmohan Singh, who, as Finance Minister, began the process of dismantling the controlled economic system, is willing to go forward but Pranab Mukherjee, who is a pragmatic politician, is holding the government back.

The country no doubt is facing a serious situation. At the end of the last financial year the fiscal deficit stood at Rs522 billion. While the government’s income rose by only 36 per cent in the previous five years the deficit shot up by 312 per cent. The trade deficit mounted to $185 billion. The rupee fell to 54.91 against the dollar, the lowest level so far.

Many believe a slight fall in the value of the rupee was necessary as a corrective measure but with importers buying up dollars to hedge against the global uncertainty the decline has gone way beyond the desirable level. Everybody is looking up to the government and the central bank to intervene and arrest the slide but they have to move cautiously lest they should add to inflation, which is already running high.

Foreign and domestic corporate interests consider the situation ripe to press home the International Monetary Fund’s proposal to cut subsidies. When they talk of subsidies, they have in mind the subsidies on food, fertilisers and petroleum products like diesel, kerosene and cooking gas, which by and large benefit the poor and the middle class. They overlook the subsidies that benefit the affluent, which are a bigger drain on the economy than those that benefit the poor.

In the most recent budget, food, fertiliser and petroleum subsidies add up to a mere Rs2,163 billion. The subsidies to the rich, which figure in the document under the head “revenue foregone”, total Rs4,373 billion. The figure includes customs duty waiver of Rs1,953 billion, excise duty waiver of Rs1,691 billion and corporate income tax waiver of Rs729 billion.

In 2008, corporate tax in India was only 17.3 per cent while it ranged between 20.7 per cent and 37.0 per cent in the other BRICS states and between 30 per cent and 50 per cent in the developed economies. Since then it has come down to 14.7 per cent. Is it any wonder that India is producing billionaires faster than any other country?

Emergent India is at a crossroads. It has to decide whether to follow the route that landed the developed economies in the throes of crisis or furrow a new path taking into account its special circumstances. It will be disastrous to let less than one per cent walk away with undue gains and heap new burdens and make life more difficult for more than 99 per cent.--Gulf Today, Sharjah, May 22, 2012.

Counting blessings at 64

BRP Bhaskar
Gulf Today

As India enters the 65th year of Independence, it is grappling with some serious problems that have been dogging it since long. However, it has several blessings to count. The country’s pace of growth in the era of globalisation has been second only to that of China, which embarked upon the path of liberalisation 13 years earlier than India and is now believed to be the world’s second largest economy.

Industrialisation was high on the agenda of successive Indian governments. Latest statistical data indicate that the country has entered the post-industrial phase with the service sector contributing 55.3 per cent of the gross domestic product last year as against the industrial sector’s share of 28.6 per cent and the agriculture sector’s 16.1 per cent.

Per capita income has recorded a phenomenal increase — from Rs1,126.9 in 1950-51 to Rs54,227 in 2010-11. The flip side of the economic story is that about 40 per cent of Indians are below the poverty line.

At the time of Independence, agriculture contributed more than 55 per cent of the GDP. While the rise in agricultural production made possible by the Green Revolution put an end to the chronic shortage of grains a large section of the population lacks access to food.

This fact points to skewed development. The cases of farmers’ suicide reported from different parts of the country even as the economy booms testifies to the growth of inequalities despite efforts by Central and state governments to provide relief to the affected sections.

At the moment, the country’s main worry is high inflation, estimated last year at 8.72 per cent. Official measures to curb the money in circulation have pushed up interest rates to levels that could slow down the economy.

The Constitution, which came into force in the third year of Independence, gives primacy to “justice — social, economic and political.” The test of the nation’s success, therefore, lies not in the GDP figures but in the extent to which it has progressed towards the proclaimed goal.

India takes legitimate pride in that, unless China, it has achieved economic progress under a democratic political system. Unlike other democratic societies, it is highly heterogeneous and has been the scene of contention between sectarian forces in all its history.

The banning of “Aarakshan,” a Hindi movie dealing with the contentious issue of reservation in schools and in government service, by three states following scattered protests is a reminder that the problem of social inequality is still alive. The caste census now under way may provide a clear picture of the current status of the various communities and help reorganise the reservation system on a realistic basis.

In one sense, the terror problem the country faces is a mutated form of communal animosities in the subcontinent which intensified under Britain’s ‘divide and rule’ policy. The National Investigation Agency, set up specifically to deal with terrorism cases, registered its first success with a court handing down multiple life terms for two accused last week.

The internal dimension of India’s terror problem is no less important than the external one. When Mumbai, which has borne the brunt of terrorism in the country came under attack again this year, official agencies attributed it to local elements aligned with foreign groups. However, they have not been able to produce any credible evidence so far.

The enforcement of resurrected colonial laws which gives impunity to armed forces units posted in some border states and the fake encounters reported from different parts of the country from time to time reveal that the democratic system remains highly deficient. A few days ago a Supreme Court bench observed that those responsible for fake encounters must be given the death penalty. It is a welcome if belated acknowledgement by the apex court that custodial killing is cold-blooded murder which deserves no mercy.

The judiciary has earned much praise for its contribution to the deepening of democracy by ensuring that the basic freedoms are available to all citizens. However, the high cost of the judicial process severely limits the poor’s access to it.

A glaring weakness of the constitutional system has been its inability to deal effectively with corruption at the higher levels in all limbs of the state. On Tuesday Anna Hazare, social activist from Maharashtra, who has been leading a national campaign for a tough anti-corruption law, will go on a fast to force the government’s hands in this regard. The outcome of this campaign may determine the course of Indian democracy at least in the short run.

Understanding H1N1, the new global threat

In the current worldwide “swine flu” (H1N1) outbreak, two sources are shouldering most of the blame: pigs and Mexico. Interestingly, there seems to be a louder, broader public defense of pigs than of Mexico, says NAM contributor Gebe Martinez, a veteran Washington journalist, a regular contributing columnist for Politico and a frequent lecturer and commentator on the policy and politics of Capitol Hill.

Introducing Martinez’s article, NAM editor says: “It seems like swine flu is increasingly becoming a political football, with the right wing using the crisis to whip up opposition to immigration from south of the US border”.

In a NAM commentary, Laura Carlsen, who directs the Americas Program of the Center for International Policy and runs the website www.americaspolicy.org, discusses how the North American Free Trade Agreement (NAFTA), with its misplaced priority on profits over human health in the context of a globalized world, may have led to the global spread of the swine flu.

Mexico has long been considered the laboratory of globalization. Now a potentially deadly virus has germinated in that laboratory, finding ideal conditions to move quickly along a path toward global pandemic, writes Carlsen.

Links to articles:

As Swine Flu Spreads, So Does Backlash Against Mexico by Gebe Martinez

How NAFTA Helped Spread Swine Flu by Laura Carlsen