Open Forum

New Delhi, 6 April 2011

Collapsing Welfare System

BIOMETRIC SMART CARDS VITAL

By Dhurjati Mukherjee

While the GDP growth has been quite high over the last few years --- with the current year expected to witness a 9% jump --- the main challenge before the Government is the need to uplift the poor and backward sections. Thus, reaching welfare to them is a big task.

Over the last decade, the Government’s spending on social welfare grew nearly five-fold, rising from $ 9 billion in 2000 to $ 42 billion in 2010. Over the next five years, India will spend $ 250 billion on services for the poor. The big problem is about $ 100 billion of this, if unreformed will be stolen, misused or otherwise wasted.    

It is estimated that as per a latest study by economists around 55 per cent of the Rs 56,000 crores that the Government will spend this year on subsidized food will never reach the real beneficiaries. At least 20 million ration cards for subsidized food are in the names of ‘ghosts’, people who do not exist, or people who do not actually fall in the category.

Undoubtedly, the welfare system is in a state of collapse as the poor are too scared to assert or reveal their identity and get the benefits. To address this problem the Government decided to provide a 12-digit Unique Identification Number (UID) that will be proof of identity across the country.

The UID will have three biometric details --- iris, photograph and 10 fingerprints --- which will ensure that it does not falter on its mandate to ensure uniqueness across a large population and minimize the likelihood of the system incorrectly rejecting or accepting a person.

It would also help the process of social security reform of clearing ghosts, diversion of funds and other attendant anomalies and help the process of ensuring that subsidies/assistance reach the people for whom they are intended.

If the value of a beneficiary’s food entitlements (presently rice, wheat and kerosene) is transferred to a smart card, he or she can use it anywhere in India. The PDS can also be greatly expanded to regular, retail shops. This will allow better access as only about 57% of BPL households can reach PDS shops. And over Rs 20,000 crores required to in delivering subsidized food would also be saved. 

It is in this context that a smart card gains significance. Around 600 million are expected to be provided UID numbers by 2014. This will also facilitate people having an identity to enter the banking system and avail of facilities. Presently, only one in four people have a bank account which is sure to change in the coming years.

It may be pertinent to mention here that credit facilities at much cheaper rates (than those provided by the money-lenders) would be easily available to rural artisans and small farmers along-with subsidies. Add to this technology which is destined to transform the lives of the poor and economically weaker sections in a big way.

Experts believe that given the country’s info-tech prowess, there is no reason why the UID project would not be successful. It would not only help the poor to prove his/her identity but also easily avail various facilities provided by the State Government or the local panchayat. Tribals in remote districts of Jharkhand, Bihar or Chhattisgarh, homeless residing in jhuggi-jhopri colonies or railway tracks would have no problem in proving their identity. As things stand today, due to lack of address and identity they cannot avail any facilities.

While lot of programmes like the NREGS, Integrated Child Development Programme (ICDS), National Rural Health Mission (NRHM), Rashtriya Swastha Bima Yojana (RSBY) et al have been continuing for years, the results of their success have been far from encouraging. And with the Food Bill expected to come into force, it would be necessary to ensure that the beneficiaries are properly identified and the benefits reach them fully. Clearly, the IUD should augur well in reaching the right beneficiaries with technology extending the required help and support to serve the interests of the poor. 

Particularly, as the social sector spending of the Centre and the States more than doubled between 2004-05 and 2009-10 from Rs 1.73 lakh crores to Rs 4.46 lakh crores and from 5.33% of the GDP to 7.23%. In the coming years, this is expected to further increase in view of the emphasis for inclusive growth to upgrade the living conditions of the poor, specially those residing in the rural areas. But unless the desired beneficiaries can be reached, the purpose would be defeated, as is happening now.

It is expected that the much of the corruption inherent in the system would get weeded and the vicious nexus of politicians and Government officials cornering the benefits of subsidies and grants would not be successful with the introduction of the UID cards. Moreover, the development paradigm would find a new orientation with benefits reaching the lowest tiers of society.

According to a study by McKinsey the Government can save money to boost social sector spending by 25 % by channeling cash via bank accounts. It is in this context that launching cash transfers in lieu of subsidized kerosene, cooking gas and fertilizers gains significance and a Government task force is expected to come out with the modalities so that this could be made operational by March 2012.

Clearly, biometric technology has shown the way forward whereby anyone can make use of this by using fingerprints and irises. It is believed that the biometric smart cards will reduce but might not completely eliminate leakages.

Add to this, with rural banking and use of mobile telephones steadily gaining momentum it would facilitate mobile banking using biometric cards. The process would need 3G broadband to be really effective and this should become a reality within a year. In fact, cash transfers have worked well in Brazil, Mexico, and Chile. These countries give poor families cash transfers in various areas and reports suggest that only the intended beneficiaries get the benefits.  

Thus, the announcement of the Finance Minister in the current Budget to give subsidy for kerosene, LPG and fertilizer in the form of cash transfer is to be welcomed as it is expected that only the intended beneficiaries reap the benefits. Experts believe that leakages would be reduced from 60%o to 15% with cash transfer through smart cards.  ---- INFA

(Copyright, India News and Feature Alliance)

Open Forum

New Delhi, 29 March 2011

‘Credible’ Cash For Votes

BEGINNING OF END OF DEMOCRACY?

By Proloy Bagchi

The “India Cables” accessed by the Hindu newspaper from Wiki Leaks has virtually bombed the UPA Government. The deadly “cash for votes” cables sent from the US Embassy, seemingly, set the cat among the pigeons. The cables talked of crores of rupees being paid to a certain political party at the time of the 2008 no-confidence motion moved against the Manmohan Singh Government that lost its majority character on withdrawal of support by the Left parties over the Indo-US nuclear deal.

Disrupting the Budget Session, the leaked cable created furore in the Parliament with adjournments and walk-outs by the Opposition. The July 22 2008 no-confidence motion moved against UPA Government by the Opposition was followed by tremendous amount of theatrics.

Three BJP MPs came rushing into the Lok Sabha waving bundles of currency notes in front of the Speaker, alleging attempts by the Samajwadi Party, then a supporter of the Government, to bribe them with Rs one crore each for voting for the Government. The name of former Samajwadi MP Amar Singh was mentioned in this connection. The expose was result of a sting operation by the CNN-IBN news channel, master-minded by a BJP ideologue.

The money was seized by the Speaker and, later, a Lok Sabha committee was constituted to probe the matter. Failing to arrive at a definite conclusion, notwithstanding video tapes, phone calls records and other documents relating to bribes being paid etc. were submitted by the news channel and the BJP to the Committee. However, the Committee exonerated Amar Singh but labelled his aide, one Sanjeev Saxena, as a bribe-giver who was caught on camera bribing a BJP MP.

Unable to probe further for technical reasons, the Committee suggested further investigations into the matter. However, neither was the matter probed further nor a case registered with the local police at the instance of the Speaker pursued. The Manmohan Singh Government survived the motion with the help of a few abstentions and support of a few BJP MPs who defied the Party’s whip.

The Hindu has now published the US Embassy cables which came into the possession of Wiki Leaks. According to one of the cables, the Congress, apparently, zeroed in on MPs belonging to UP’s regional outfit Ajit Singh’s Rashtriya Lok Dal. It stands to reason that as a measure of abundant caution the Congress Party attempted to muster as many votes as possible in favour of the Government.

After all, the Prime Minister was deeply committed to the Indo-US nuclear deal and the Government (and the ruling Party) had to take all measures to ensure its survival to push it through. Ajit Singh’s RLD fitted the bill for the purpose as reports frequently appeared of the Party lending support for monetary considerations to shaky Governments.

The US Embassy cable indicated that its “contact” was told that the RLD MPs had been paid Rs 10 crores each. But the MPs’ reputation, was such that even Congressman, what to speak of then Congress Rajya Sabha MP Satish Sharma’s aide Nachiketa Kapur, who organised the payment, was not sure whether they would vote in favour of the Government. 

Significantly, against the backdrop of what happened in the Lok Sabha in July 2008, contents of the leaked cable seem perfectly credible. Besides, yet another factor that lends credence to the contents of the cable is the mention of Satish Sharma who also met with his US Embassy contact. Implying thereby, that both Sharma and Kapur were jointly in charge of the operation of bribing the RLD MPs.

Once a close friend of the late Rajiv Gandhi, Satish Sharma is now a close associate of Rajiv’s widow and Congress President Sonia Gandhi. With a chequered political career with several brushes with law, Sharma seemingly, has been involved in the dirty work of the Congress.

Recall, he was also involved in the 1993 infamous Jharkhand Mukti Morcha (JMM) bribery case to save the then Congress Prime Minister Narasimha Rao’s minority Government in a trust-vote moved by the Opposition. The investigations carried out then had reportedly revealed that various industrialists had paid Rs 13 crore to Satish Sharma, who arranged payments to the JMM MPs out of this amount. He, along with the JMM MPs had been prosecuted. 

Today, the Prime Minister Manmohan Singh brazened out the Wiki Leaks disclosures by an outright denial of the allegations of bribery and rejected the charge of the Opposition, which he said was based on “speculative, unverified and unverifiable'' communication. He told both Houses of Parliament that none from the Government or the Congress had indulged in any unlawful act during that time.

This is not all. He went on to say that the Government “cannot confirm the veracity, contents or even the existence of such communication.” Earlier speaking at the India Today Conclave he asserted, “I have no knowledge of any such purchases and I am absolutely categorical, I have not authorized anyone to purchase any votes. I am not aware of any acts of purchase of votes…I am absolutely certain in asserting that I am not at all, I think, involved in any of these transactions”.

Importantly, nobody is buying the Prime Minister’s assertions. Given that US officials have since certified the accuracy and credibility of the Wiki Leaks cables. In fact, Editor in-Chief of Wiki Leaks Julian Assange, branded Manmohan Singh’ statements of denial as “misleading”, a charge that is serious when made against a Prime Minister.

Needless to say people are aghast at the way Manmohan Singh with his distinguished academic and bureaucratic background and generally known for his clean image, staked his reputation and all that he had for winning a trust-vote to see  a mere deal through. In a recent interview with the editors of TV news channels the Prime Minister asserted that, after his academic and bureaucratic stints, politics was a fresh learning experience. Apparently, he has been very quick in picking up the tricks of his current trade. 

Apart from Manmohan Singh’s, the image of Congress, too, has taken a severe hit. However, what has taken a worse hit is India’s democracy. Thanks to our polity’s, particularly the Grand Old Party’s insatiable lust for power. This is not the first time that the Congress adopted fraudulent means for what Mahatma Gandhi described as “...the ungainly skirmish for power”.

The Father of the Nation also predicted that were it to persist with such skirmishes “it (Congress) will find one fine morning that it is no more.” That may well happen with the riff-raff that it now constitutes it. Tragically, that might also herald the very end of the country’s democratic traditions so assiduously (though falteringly) built over the last few decades. ---- INFA

(Copyright, India News and Feature Alliance)

Events & Issues

New Delhi, 4 April 2011

Indian Perspective

IMMEDIATE CEASEFIRE VITAL

By Col. (Dr.) P. K. Vasudeva (Retd)

With the US, France and Britain under NATO forces launching military action against Col. Muammar Gaddafi’s regime in Libya, the prospect of stability in West Asia, which has been in the throes of uncertainty for the past three months on account of anti-regime popular upheavals in several Arab countries, Egypt, Libya, Bahrain and Syria, has nose-dived. Importantly, is Libya going to be another Iraq or Afghanistan?

This has been mainly due to the vote in the UN Security Council sanctioning imposition of a no-fly zone in Libya. Not purely for Gaddafi's atrocities towards his civilian population but broadly at the instance of the Americans to allow for “all necessary measures” against the dictator’s regime, an euphemism for military attack. The 10-5 vote in the Security Council largely came about when it became clear that the Arab League was in favour of a no-fly zone.

However, the Arab League is not gung-ho about military action. India did well to abstain on the vote along with Russia, China, Brazil and Germany. Significantly, Germany decided to pull its forces out of NATO over the on-going disagreement on who will lead the campaign. The way the politics of key three Western countries were moving, it was apparent that the authorisation of a no-fly zone would, in effect, mean military assault.  

The US President Barack Obama, has gone on record to say that American ground troops would not take part in any action against Libya. However, direct combat responsibilities have been entrusted to NATO devolving on the US, British and French who have avidly stepped forward to do war. Even so, there is no getting away from the fact that America would be seen at war in three Islamic countries simultaneously, earlier Afghanistan and Iraq and now Libya, when led by a President who is a Nobel laureate. 

In order to retain the right to rule, Gaddafi had unconscionably unleashed air power and artillery against his own people. Should the outside world respond with the use of military force to oust such a ruler? In America, the opinion appeared to be sharply divided. The Defence Secretary, National Security Adviser and the Counter-Terrorism Chief were reportedly not enthusiastic about the course of action the President had green-signalled after being persuaded by Secretary of State Hillary Clinton, among others. An important consideration for the pragmatists was that though Libya is not vital to American security, yet it is important for looting Libya’s oil reserves.

Needless to say, Libya is the largest oil economy in the African continent with 46.5 billion barrels of proven reserves. It holds approximately 3.5 per cent of the global oil reserves, more than twice those of the U.S. Many doubt that the allies scripted 'Operation Libya' to gain control over more than sixty per cent of the world's reserves of oil and natural gas lying in the Middle East and Central Asia. Although the Libyan attack is on a humanitarian mandate, yet the US interests seem to be the same as in Iraq.

Nobody wants another Iraq or Afghanistan. The so-called freedom from the dictators at the mercy of another country is yet another form of surrendering ones' sovereignty. We already have three war theatres --- Palestine, Afghanistan, Iraq --- being kept alive by Western forces where bloodshed never ends.

More viable peace proposals should be brought forth to avoid bloodshed and the UN should take initiatives to promote peaceful means to put an end to the unrest. From the Indian national security and foreign policy perspective, the regime in Tripoli needs to be a friendly one since Libya is an oil rich country. Whereby, western air attacks or civil war could affect India’s industrial investments and energy security interests there, read Libyan oil.  

Besides, India's national interests in Libya are essentially economic in nature. Considering an estimated 18,000 Indians who work in that country, it is a considerable contribution to the remittance economy and adds to our foreign exchange kitty. Furthermore, Indian companies, especially in the hydro-carbon, power, construction and IT sector have several ongoing projects in Libya.

This is not all. India’s oil majors, Indian Oil, Oil India and ONGC Videsh are increasingly involving themselves with the Libyan hydro-carbon sector, both in upstream and downstream. Also, BHEL has successfully completed execution of the prestigious Western Mountain Gas Turbine Power Project. Similarly, I-Flex Solutions is implementing a project on core banking solutions with the Central Bank of Libya and five other banks.

In addition, Indian companies have executed several projects like building hospitals, houses, schools, roads, power plants, airports, dams, transmission lines etc. The bilateral trade between the two countries for 2009-10 was $844.62 million, showing a significant upward trend since 2004-05, peaking to $1,366.65 million in 2007-08 compared to $29.12 million in 2003-04.

The ostensible logic of the US-led western powers to embark on this two-dimensional military adventure from the air and sea was only to prevent carnage of rebel forces through neutralisation of Gaddafi's airpower, tanks and artillery by aerial and naval bombardment. The opposition to western air strikes is solely on the grounds that collateral damage would ensue and innocent citizenry would be hurt due to flaws in the military target acquisition procedures based on inaccurate intelligence inputs.

If NATO forces believed that their aerial bombardment of Libya would contribute to ousting Gaddafi in a matter of days, they have been proved wrong. The Libyan strongman has indicated that he is no pushover. Clearly, he does enjoy some support among the people, a point that NATO leaders failed to factor in when they charted out their grand strategy to oust him.

According to media reports from Libya, residents in towns like Nawfaliyah are fighting along-side Government forces. This is an ominous sign of an upcoming civil war. The mounting civilian casualties from NATO’s aerial bombing seem to have increased public support for Gaddafi.

A conference of 40 countries has given Gaddafi an ultimatum to step down and go into exile or be prepared to face more bombardment. Why would Gaddafi go when he is regaining ground in his country?

The NATO intervention has gone in his favour. The US, which appears to be playing a secondary role to Britain and France in the military operations, has said that NATO is providing only food, medicines and communication equipment to the rebels. However, President Obama has not ruled out the supply of arms to them.

Sadly, instead of correcting a flawed strategy, the US and its NATO allies seem determined to escalate their military involvement in Libya. Undoubtedly, Libya’s descent to civil war must be halted. An immediate ceasefire is needed. ---INFA

(Copyright, India News and Feature Alliance)

Economic Highlight

New Delhi, 1 April 2011

Higher Deficit

GROWTH MAY GET STUNTED?

By Shivaji Sarkar

A tsunami may be awaiting the Indian economy. A Budget showcased for political purposes conceals more. It does not reveal that the Government estimates are based on the surreal if not unreal.

It also does not speak that the so-called growth is based on high deficit, unreal crude price expectations, unaffordable though sometimes necessary largesse, falling investments and also does not take into account the impact of a high inflation and interest rates.

The country has a compound inflation rate of about 15 per cent during the last two years. The Reserve Bank Deputy Governor in-charge of monetary policy Subir Gokarn, says he is concerned as not only food inflation but even non-food manufacturing inflation has risen to 6.1 per cent in February from 4.8 per cent in January.

This suggests that producers are passing on the rising input and investment costs spurred by higher food inflation and interest rates to the consumers. Gokarn agrees that inflation figures are a big worry for achieving the growth target of 8.6 per cent.

The RBI panacea is to counter it with a further interest rate hike. As that would fuel general inflation so another dose of interest rate rise would be the prescription. The prescription would lead to fall in investments and higher deposit rates would attract higher bank deposits. Lending cost would rise and so again the cycle of inflation-interest rate would continue ultimately making Government borrowings expensive.

This has led to even higher cost of corporate borrowings and the Indians appetite for more funds has made external commercial borrowings costlier. The Chairman and Managing Director of the National Hydro Power Corporation (NHPC) ABL Srivastava avers international borrowing is “not a cheaper option for us”.  

Importantly, in all likelihood, the deficit target would be unachievable. The expenditures side is a big worry. Last year, the Government had a deficit of 5.1 per cent. If the 3G auction revenue is excluded it would be close to 6.5 per cent. The target for the current year at 4.6 per cent is far from being realistic.

The proposed disinvestments again are doubtful in the volatile global stock market scenario amid political tensions in the Arab world, financial crisis in Europe and a meltdown in Japan. The Mumbai sensex has given one of the lowest returns in the financial year 2010-11 at 11 per cent. The market is more in a selling mood than buying.

Besides, industrial production has turned critical as per the industrial index. The automobile sector growth may get stymied as indicated by the move of Honda to cut car production at its Noida unit due to supply constraints of components following the earthquake and tsunami in Japan.

The trends may lead to shortfall on the revenue side. The question again would be whether the Government would be able to restrict itself to the projected deficit of 4.6 per cent of Rs 343,00 crore. The targets are likely to be exceeded.

Significantly, the deficit figures are dependent on a 9 per cent GDP growth. This is an ambitious figure and most independent forecasts hover around 8 per cent. This growth, if at all real, was driven by deficit spending. The fiscal deficit, in reality, doubled, during the past few years from 3 per cent of the GDP to 6 per cent --- an increase of about Rs 2.5 lakh crore.

In short, almost 3 per cent of the GDP growth came from higher Government spending --- larger stimulus for corporate, backed by borrowings from the market.

The Government is almost repeating the profligacy of the US Government and its economy both before and after the sub-prime crisis.

The country’s overall debt level has increased from 72 per cent of the GDP to 78 per cent over the last two years. Higher debt is a risk. The country needs to learn from Ireland, Greece, Portugal, Dubai and Japan. It reduces the economic flexibility to withstand any future economic and financial shocks --- a large possibility in the present global scenario.

The fundamentals are projected to be strong. It is not so. The Government is faced with the challenge to meet its political goals for programmes like the MNREGS, food security, rural spends, social security commitments and education for all.

The budgetary figures are based on an assumed oil price of $ 84 per barrel. But the price is hovering over $ 100. This has an impact on deficit. It is estimated that borrowing requirements would increase by Rs 36,000 crore for every extra $ 10 in oil prices. Thus, deficit is bound to increase to new highs.

But this time the earlier cushion of a low interest regime is missing. This would have a telling effect on the overall scenario. Coupled with this is the unpredictable monsoon and climate change. It may lead again to a severe price situation particularly amid reports of a yellow rust fungal disease affecting the wheat crop in Himachal, UP and other northern States.  

Undoubtedly, the growth story is passing through a difficult phase. When the country achieved the 8 per cent plus growth as per projections, it rode on the low interest regime of 5 to 6 per cent. The acceleration happened on a lag of about three years of low-interest regime. The deceleration too may take time to reflect but it is likely to be less than the process of acceleration. The fall is faster than climbing up.

Falling investment is also bad news. Corporates are getting squeezed as individual taxpayers are. Jobs are not coming up. Earnings through corporate sales or lesser jobs would possibly face slowdown. It needs to be noted that 80 per cent improvement in tax to GDP ratio so far has come from the corporate sector. This is likely to get hit affecting bottom-lines of Government finance.

The Government has to look for policy makers whose objective is not myopic short-time achievement. A policy overhaul tailoring the short-time goals with a long-term perspective is required. The Planning Commission was supposed to do it. It may now be replaced with a real think tank. Growth as of now is doubtful.

The country is having an unreasonable policy looking for extreme short-time propagandist solutions. If it is not corrected, it would not be late to slip into a Europe-type crisis. The present growth story may get moth-eaten unless bold policies with a perspective are adopted. It requires a political will. Does the country have it? ---- INFA

(Copyright, India News and Feature Alliance)