Economic Highlights

New Delhi, 12 June 2009

Beginning Of Difficult Era

FM ENCOUNTERS HURDLES

By Shivaji Sarkar

The budgetary process ushers in the first phase of a difficult era. The country is besotted with scarce resources, poor finances, fall in revenues and high deficit. Yet it has to answer these with budgetary solutions to accelerate growth, create jobs, reduce, if not eliminate, poverty and ensure a low-interest, low-cost and high productive regime.

The Finance Minister Pranab Mukherjee has struck the first two hurdles. The bankers are unwilling to cut interest rates and the State Finance Ministers do not want to stick to the low deficit model that the Fiscal Responsibility and Budget Management Act imposes on them.

The State Finance Ministers want to throw to winds the fiscal norms that the International Monetary Fund has been able to push through during the last two decades. It stipulated managing the finances within the limits of revenue earnings by doing away with the system of deficit financing. Higher deficit financing also leads to an inflationary situation.

The Central Government is in a quandary. The critical situation has left it with little choice. The Finance Minister is cajoling the banking sector to come to its rescue by ensuring a low-cost banking regime. This is needed to ensure capital flow as also help all those who want to contribute to the growth of the economy.

The banks are in a catch 22 situation. They are custodians of the people’s money. Difficult times also mean high-risk banking because the capacity to repay suffers. The public sector banks already have an increase of Rs 5,000 crores in bad loans. In March 2008, they had bad loans worth Rs 40,269 crores. It has risen to Rs 45,157 crores. This means that larger sums are going out of the public domain. It also means that the good customers and investors are being penalized with higher costs and low interest rates.

Another source of the earning by banks is lending money. It is evident this has become high risk. Besides, actual lending by banks has reduced despite the so-called touted signs of recovery and impressive claims by the Planning Commission Deputy Chairman Montek Ahluwalia. Overall, bank credit fell by an estimated Rs 51,071 crores during 1 April 1 and 22 May this year. The trend had started last year itself. During the same period last year the fall in credit was Rs 10,650 crores.

This is also marked by the fall in the credit-deposit ratio (amount of credit disbursed out of a unit of deposit received by banks) to 68.95% on 22 May from 71.04% for the fortnight ending 10 April 2009. It is usual for credit to slow down during the new fiscal. The slide, however, has been higher than expected. Bankers ascribe this to the recessionary condition and do not expect a recovery till December.

The off-take by the industry has come down because of slackening demand. The small and medium industries (SME) have been worst hit. The SMEs have been facing payment problems from buyers and demand deceleration from big companies. The banks are wary of extending credit to them. This is a telling sign of the direction of the economy.

The gross advances by the banks are coming down since 2007. In 2006-07 the gross advance growth was 28.5%, in 07-08 it came down to 23.14% and in 08-09 touched 19.72%. Similarly the educational loan growth came down to 39.51% in 08-09 from 42.65% in 06-07.

The worst hit has been the housing finances sector which decelerated from a growth of 23.22% in 06-07 to 12.7% in 07-08 and 5.9% 08-09. 

Clearly, the Finance Minister has his constraints. He has to chart out a prescription, which is supposed to be more difficult than the ailment of 1990. The “era of so-called global reforms” is not over. Mukherjee is under pressure to address that from a person (Manmohan Singh) who had scripted the reforms prescription in 1991 as also from the global, particularly the western, players. Nobody wants to assert that post the Soviet era economic reforms are failing.

Mukherjee’s immediate concern is to boost housing loans. The housing industry is in a severe crisis owing to a credit squeeze enforced by the RBI to prevent speculative deals in the sector. Despite the crisis, the builders have refused to bring down the prices.

Importantly, what the Finance Minister is trying to do would not only spiral the housing prices, but would also lead to a severe default in repayments. Many lending agencies are already facing this. Owing to either a cut in their wages or a loss of jobs.  The downturn is unlikely to make any difference. Questionably, for whom is the Finance Minister fighting?

Before removing the cap on housing finance, Mukherjee must ensure that a regulatory mechanism for the sector is in place. This is difficult. The builders are against it. A section of the supporters of the Government also do not want it. The process itself requires passing an Act by Parliament which is time consuming.

The bankers have repeatedly suggested the need for the regulator. However, if the Government is serious about ensuring discipline in the housing sector it must empower the banks to institute a system to allow them to check the mode of pricing, which is often arbitrary and whimsical. So far the Government has not taken any step in this direction.

The banks owing to the lack of this power have taken the simplest step of denying loans. The Finance Minister has to understand that a mere diktat to the bankers would not be enough. It requires stern and appropriate action not only to discipline the housing sector but others as well. Besides, the FIIs (foreign institutional investors) are wreaking havoc by manipulating the rupee value. Real investment is not coming. A shaky country spends less and less. Thus, Mukherjee has to devise methods to generate demands.

In sum, an increase in public spending as suggested by State Finance Ministers is a must. Both the Central and State Governments have to break the deficit barrier. This also means straining the banking system. Given that the Governments have to borrow from them. It has its own problems. This is likely to shoot up the prices, which at the consumer level hover around 10%. But if this is invested properly, jobs would be created and growth ensured. It is likely that reconsolidation might begin in about two years.

As of now it seems that banks would not be able to help the Government much in attaining the Finance Minister’s objectives. The malaise is deeper. It requires a new prescription and a brake on the 1991 reforms process. ----- INFA

(Copyright India news & Feature Alliance)

Round The World

New Delhi, 10 June 2009

 Obama Reaches Out To Muslims

YET US-ISLAMIC TIES NO BED OF ROSES

By Monish Tourangbam

Research Scholar, School of International Studies, JNU

The ever-inventive US President Barack Hussein Obama delivered another first of its kind. Speaking at Cairo University on 4 June, Obama gave a broad brush of his Administration’s policy to bring about inter-faith dialogue and a multilateral approach to global politics. Quoting extensively from the Holy Koran and the Bible and never compromising on his expert grasp over tonality, the US President gave an eloquent speech that could lay the foundation stones for an era of constructive and diplomatic dialogue to solve some pressing issues.

Though broadly structured, Obama had his attention clearly geared towards efforts to defuse the Israel-Palestine conflict and ease tensions enveloping Iraq, Iran, Afghanistan and Pakistan. Significantly, the landmark address was well-timed ahead of elections in Lebanon, Iran and Afghanistan.

In one of the most widely anticipated speeches in recent times, President Obama called for a “new beginning between the US and Muslims around the world, based on mutual interest and mutual respect.”  The speech was translated in 13 languages and was keenly watched by a global TV audience.

Dwelling on the checkered history of Islam and the West, he spoke of the fear and mistrust holding the two apart. Explaining that the events during the Cold War, changes brought by globalization and the impact of 9/11 have cemented these negative sentiments, he added. “This cycle of suspicion and discord must end.”

Never before has he used his Muslim roots to such effect. He began his address with the traditional Islamic greeting “Assalaamu Alaykum”, drawing a huge round of applause. In fact, the entire speech was often punctuated by various rounds of applause and cheers from the audience. Obama used those gaps to the right effect, emphasizing on the most important points, with the flair of a seasoned orator.

Drawing out the roots of his Kenyan family, that included generations of Muslims and reminiscing growing up in Indonesia, he dwelt on the significance of Islam in human civilization and acknowledged its part in the growth of America as a nation. He said, “The first nation to recognize my country was Morocco.”

Obama’s effort to strike a pragmatic balance was evident through the entire speech. He vowed to fight against negative stereotypes of Islam wherever they appeared. But at the same time, he expected the same principle to apply in reverse. “Just as Muslims do not fit a crude stereotype, America is not the crude stereotype of a self-interested empire,” the American President asserted.

Coming to the delicate issue of the Israel-Palestine conflict, Obama was courageous enough to slam Israel with a publicly stated U.S. policy of denying the legitimacy of continuing Israeli settlements. “Israelis must acknowledge that just as Israel's right to exist cannot be denied, neither can Palestine's. The US does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop,” he said.

But in the same breadth, he also acknowledged the “unbreakable” bond between Israel and the US and added, “Palestinians must abandon violence.” He called on the Palestinian Authority to develop its capacity to govern and the Hamas to relinquish violence and accept Israel’s right to exist. He advocated the often-repeated but illusive two-State solution to end the conflict.

During his speech, President Obama also took up the issue of non-proliferation and the tense relationship between the U.S. and Iran. Acknowledging that it will not be easy to wipe out the mistrust developed over the years, he reiterated his offer for dialogue with Iran “without preconditions.” He was audacious enough to accept America’s role in the coup of the democratically-elected Government of Mohammad Mossadeq in 1953. 

He also recognised Iran’s right to pursue the peaceful uses of nuclear energy, provided “it complies with its responsibilities under the Nuclear Non-proliferation Treaty.”  Advocating universal disarmament and speaking against adopting double standards when it came to the possession of nuclear weapons, Obama added, “No single nation should pick and choose which nations hold nuclear weapons. That is why I strongly reaffirmed America's commitment to seek a world in which no nations hold nuclear weapons.” 

By advocating universal disarmament, he seemed to take away some of the sting from an otherwise brilliant and courageous speech. It is hard to believe that nuclear disarmament would ever form a part of America’s national security strategy. Obama could surely have talked about reduction of arsenals but an emphasis on universal disarmament would be something hard to sell to the international audience.

On one issue that his predecessor, President George Bush had made a centerpiece of his second term --- the spread of democracy, Obama chose to tread lightly and safely. Stating, “No system of Government can or should be imposed upon one nation by any other.” Nevertheless, he also reiterated his commitment to Governments “that reflect the will of the people.” He dismissed the argument that America was seeking military bases either in Iraq or Afghanistan and stressed on Washington’s respect for Iraq’s sovereignty.

Besides, Obama’s choice of venue for the speech has raised eyebrows in certain quarters. The lectern was set up in the domed main auditorium of Cairo University on a stage dominated by a picture of the Egyptian President Hosni Mubarak. Human rights advocates found that symbolism troubling: an American President watched over by an aging autocrat who has ruled Egypt since 1981. “Egypt's democrats cannot help being concerned,” wrote Dina Guirguis, Executive Director of Voices for a Democratic Egypt.

The reactions to Obama’s address have been mixed. Many groups despite welcoming the conciliatory nature of his speech have questioned the lack of specifics and a pragmatic mechanism to tackle the issues mentioned.  The Israeli Right has been outright in condemning the speech for comparing the sufferings of the Palestinians to what the Jews endured in the Holocaust. Palestinian President Mahmoud Abbas welcomed Obama's words.

On the other hand, rival-group Hamas remained sceptic despite seeing positives in the speech. Fawzi Barhoum, a Hamas spokesman in Gaza complained that the US President did not specifically note the suffering in Gaza following the three-week Israeli incursion earlier this year and did not apologize for US military attacks in Iraq and Afghanistan.

A militant Shia-group MP Hezbollah Hassan Fadlallah, asserted, “The Islamic and Arab world does not need lectures, but real acts starting with a radical change toward the Palestinian cause.” Iran also insisted that Obama should match words with actions. Speaking ahead of Obama’s speech, Iran's Supreme Leader Ayatollah Ali Khamenei said, “Changes should be made in practice and not by making nice speeches to world Muslims.”

In the ultimate, with years of mistrust and a history of confrontation bequeathed to his Presidency, it would be stating the obvious that a bed of roses does not await President Barack Obama. Moreover, the level of trust that America enjoys at this juncture in the Islamic world is a matter of concern.  No doubt, a monumental speech has been delivered. Now, it remains to be seen how much of it he can actually implement. ---INFA

(Copyright, India News and Feature Alliance)

Political Diary

New Delhi, 13 June 2009

BJP In Doldrums

PARTY JISKI SUBAH NAHIN?

By Poonam I Kaushish

Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall. All the King’s horses and all the King’s men could not put Humpty Dumpty together again. This nursery rhyme reflects the state of the BJP today. The tragedy of it all is that it has none but itself to blame!

Worse, it continues to wallow in self-deception. Raising a moot point: Is the BJP defeated by defeat? Or will it be able to put itself together again? Given that its fall since its defeat in Mandate 2004 has been sharp and rapid. In the ever-changing political kaleidoscope, power is ephemeral, here today, gone tomorrow.

To strike a death knell of the Saffron Party and right its obituary is the easiest thing a political analyst can do. It would be stating the obvious that the BJP has been aware of the rot piling up in its backyard. Yet ostrich-like it has refused to see the writing on the wall --- the end of the road unless it undertakes honest introspection for its defeat and a course correction.

But to do that it first has to come to terms with its defeat, admit its failures, realize that it experiencing a brand crisis and a severe leadership deficit. Aggravated by its inability to connect with the masses and vitriolic Hindutva rhetoric, a la Varun Gandhi’s and stubbornly holding on to its yesteryear old-belief’s instead of projecting itself as a “current party”.

Sadly, the Central leadership is reticent about conducting a post-mortem, address the accountability issue and own up responsibility for the Party’s humiliating defeat. Instead, as it licks the wounds, the BJP has been wracked by vicious factional feuding that threatens to embroil the Party into a full-blown civil war. Encapsulated succinctly by senior leader Jaswant Singh, “Obviously the Party failed to learn any lessons from the 2004 general election debacle. Why was no action taken on the internal report on the causes for defeat in the Rajasthan Assembly polls in 2008? Shouldn't there be a co-relation between performance and reward.”

In fact, since its shock defeat in 2004, the Party has increasingly looked an agglomerate of factions whose composition keeps altering according to the interests of ambitious individuals who make for the so-called central leadership. The situation has worsened as Advani — the only one after A B Vajpayee to command respect across most of the factions — fades out. The authority of RSS as the ultimate arbiter has declined with the consequence that fights continue indefinitely, reducing the party to a maelstrom of competing aspirations which can fuse for a common end only to drift apart.

Exposing as never before the turmoil within. Of a party in complete disarray. Directionless, rudderless, disillusioned and surprising arrogance. A party of bad losers, who still have to reconcile themselves to their defeat.  Of Ram Bhaktas waiting for divine intervention!. Making matters worse, the confusion at the top has percolated down to the rank and file. In most States, the Party’s organizational abilities are in doldrums. As the UP Lok Sabha results show, it came at the bottom of the heap after the Congress.

Moreover, as the BJP stumbles from crisis to crisis, the intra-party problems continue to multiply---ideological, factional and organisational. The problem is aggravated as the Party is no longer a cohesive extension of the RSS, governed by small-group dynamics. It is a vague, formless mass movement motivated by divergent expectations of change.  Those initiated in Parivar ‘sanskar’ draw a sharp distinction between themselves and those who have been lured by the privileges of power.

Part of the BJP’s quandary is its fallacy of what it stands for. What is the core of the Party? Is it Hindutva? That begs another question, what is Hindutva? If it is adhering to a Hindu way of life then all Hindus do so, where is the issue? Or does the BJP have another definition of the Hindu way of life? No one knows. Not the leaders, nor its cadres. Compounding by the RSS demanding that the BJP adhere to its old Hindutva roots. (Sic). In fact, according to Nagpur the causes for the BJP downfall was only one, that it gave up its Hindutva ideology and embraced all and sundry.

Today the Hindutva brigade’s stands at the crossroads. Its inability to morph into a Party of the centre-right means it needs to now decide on which way to go. Clearly, there is a limit to how far one can flog Hindutva issues for the Party. Towards that end, there is need for ideological distillation of thought. It needs clarity on what Hindutva means.

Besides in 21^st century India when real issues like terrorism, unemployment, price rise, worry the electorate, who has time for Hindutva? Neither has the electorate, taken kindly to the BJP oft raising the bogies of ‘nation in danger’ a la Mumbai terror attacks and corruption. Instead it has rejected the Party’s habitual reliance on using terror attacks to whip up sentiments. What to speak of its MPs embroiled in corruption scandals.

The BJP’s biggest challenge today is to recognize and accept pluralist India’s aversion for both Right and Left extremes. It needs to ponder very seriously why its traditional support base, the educated and urban middle class went against it and rework its ideology and strategy to get it back on board. Remember, the pink chaddi campaign against the Ram Sena led to the urban youth turning its back on the Party.

As Advani walks into the sunset, the Gen Next leaders need to re-package Brand BJP as a modern and constructive mukhota which would face future electoral challenges on a positive plank. But before that, the Party needs to set its house in order. Put in place a hierarchy to end the in-fighting between its ambitious Gen Next leaders.

For starters, it needs to immediately get rid of President Rajnath Singh who is widely viewed as being behind the intra-party politics. (Remember the fracas with Arun Jaitely over power-broker Suddhanshu Mittal.) Also, he has surrounded himself with a motley crowd of petty mofussil leaders instead of relying on the selfless party cadres. All eyes will now be on the RSS. Will it be able to show a new disha?

Clearly, difficult days lay ahead for the BJP as it faces multi-dimensional problems. Much is at stake. Not only its credibility but also its future at the national level with its present ideology.  It needs to get its act together if it has to retain its top slot as a national party. Not only has it to grapple with a loss of seats but also vote share, even in States considered to be its strongholds. To redeem itself now it needs to stop pussy-footing and undertake honest, self critical introspection on issues relating to ideology, organisational health of the Party, leadership at various levels and build the morale of its disillusioned cadres.

All in all, it desperately needs a USP to market itself. The Sangh Parivar needs to reinvent itself and recast its Hindutva moorings into a modern right-of-centre internationally liberal-minded grouping to regain credibility and behave as a responsible and effective Opposition Party. It has to desist from taking short cuts for its survival and embark on a new reform road with an inclusive agenda. This is going to be its agni pareeksha if it has to attain political moksha. --- INFA

 
(Copyright, India News and Feature Alliance)

Round The States

New Delhi, 11 June 2009

Murder, Corruption Rocks

MAHARASHTRA, KERALA IN TAINT STORM

By Insaf

From the high portals of Parliament, some more States are now in the vicious tentacles of corruption. After UP and Bihar, last week alone, Maharashtra and Kerala are in the eye of the taint storm. In Mumbai sitting NPC MP and former State Minister Padmasinh Patil was arrested for his alleged involvement in the “double murder” of Maharashtra Congress leader Pawanraje Nimbalkar and his driver three years ago. Coming just months before the Assembly polls later this year, it has caused big embarrassment to the Party which is now caught between a rock and hard place. Notwithstanding, Patil’s suspension from the Party he continues to be an MP. Even as NCP supremo Sharad Pawar asserted “law will take its own course

In Kerala, the CBI has got the Governor Gavai’s permission to prosecute CPM State Secretary Pinarayi Vijayan in the infamous SNC Lavlin case. Recall, in 1997 when Vijayan was the State Power Minister, the Kerala Government entered into a contract with Canadian company SNC Lavlin to renovate and modernise three hydro-electric projects. Later, a CAG report found that the Rs 375-crore project money was wasted as the company did not complete them. Besides, these projects, Lavlin also had a sub-deal to mobilise Rs 98 crore for a cancer hospital controlled by the Party, of which only Rs 9 crore came. Needless to say this has put the Party in a cleft stick with a lot of egg on its face.

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Bihar For Scrapping Central Schemes

Bihar’s Chief Minister, Nitish Kumar, has now pitched for a lot more than the special status he has been demanding for his state like some other Chief Ministers. He now wants the Central schemes scrapped and the funds allotted for these schemes to be transferred to the States so that they can use them for programmes relevant to their needs. The Central schemes, he argues, were unable to achieve their aim because different states had their different requirements. It was, therefore, futile to have common schemes for the country as a whole considering its sub-continental size.

Nitish Kumar clarifies: “At the time of devolution of funds, the Centre allocates funds for its schemes and only the rest of the money is shared with the States. This practice must change. Every State has different needs and the State Governments should be allowed to run schemes that address their requirements.” Significantly, Nitish Kumar has the backing of the JD (U) and its President, Sharad Yadav. His party also wants the Centre to give greater importance to regional balance in allocating resources. Adequate attention, for instance, needs to be given to Bihar’s level of poverty and backwardness.

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Kashmir On The Boil

Kashmir continues to be on the boil over the rape and murder of two young women in South Kashmir’s Shopian district ten days ago. Despite the Chief Minister Omar Abdullah ordering an impartial enquiry into the murders, Srinagar remains under a blanket of curfew. Normal activity stands crippled with schools and colleges shut. In fact, deserted streets and closed shops greeted the summer tourists thanks to a strike called by the All Parties Hurriyat (Freedom) Conference. With the unrest refusing to die down, the Union Home Minister Chidambaram on his maiden visit to the Valley has asked the Unified Command Council to bring things under control.  Specially, as the Amarnath Yatra is all set to roll out from 15 June.

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Plan To Rid States Of Red Terror

Good news awaits States infested by the deadly Maoists virus. The Union Home Ministry is all set to unleash a major post-monsoon offensive time-bound counter-operation led by the special anti-Naxal Cobra battalions against the Naxalites-ridden Jharkhand, Chhattisgarh and Orissa. The three States, apart from Maharashtra and Bihar, have witnessed a string of deadly “Red terror’ Maoists attacks killing over 381 persons, including 149 security personnel since the beginning of the year. The last straw was when the Naxalites triggered a landmine blast in Jharkhand killing 11 CRPF personnel. Hopefully, the States can breathe a sigh of relief!

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Dynastic Politics Hurrah!

India’s dynastic politics, which shockingly continues to grow by leaps and bounds, has set a new, if little noticed, record. Laws and rules were bent in December 2008 to enable Hamdullah Sayeed, son of the late PM Sayeed, Union Minister, to contest and win the recent election to the Lok Sabha from Lakshdweep and, at 27, become the youngest MP in the 15^th Lok Sabha. Lakshdweep, India’s smallest constituency with a population of 60,595, is governed by the Constitution (Scheduled Tribes) (Union Territories) Order 1951. This in its original form disqualified from contesting anyone who was not born in the cluster of in those tiny islands.

Hamdullah did not fulfil this condition as he was born in Karnataka and brought up in New Delhi, where PM Sayeed spent most of his adult years as one repeatedly elected by the people of Lakshdweep to the Lok Sabha. Conscious that every seat was going to count in the 2009 Lok Sabha poll, the UPA Government pushed an amendment to that special law in December 2008 so that Hamdullah could inherit the legacy of his late father, who died in office. The amendment dispensed with the requirement that the candidate should be born in Lakshdweep. Instead it provided that it would be enough if both the parents of the candidate were born there. Hurrah!

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UP Colleges Ban Jeans For Women

Even as the Congress appears ‘gung-ho’ over the Women Reservation Bill, the States are in ‘regressive mode’. On the heels of the Ram Sene campaign in Karnataka against women frequenting pubs, now it is the turn of UP. Four leading Kanpur women colleges have said a big no to girls wearing jeans, tight tops, sleeveless blouses and high heels on the campus. Cell phones too have been banned. On the facetious ground that it would  “prevent eve-teasing.” Recall, only last month the Shiromani Gurudwara Prabandhak Committee in Punjab disallowed a girl admission in its college as she had ‘tweezed eyebrows’. So much for women empowerment. Pink chaddi campaign, anyone.---INFA

(Copyright, India News and Feature Alliance)