A Needy Tinkerer's Budget

A Needy Tinkerer’s Budget

Where are the 2^nd generation structural reforms this country and its would-be foreign investors have been waiting 25 years for?   

Where is even the massive push to revive rural India?  The rural sector needs at least Rs. 300 lakh crores in direct development funds right here right now - if words like transformational can be applied to it.

There is Rs. 87,765 crores allocated to ‘rural development’, but this is already part of the one happy ‘infrastructure figure’ in this budget.The Rs. 2.87 lakh crore announced for gram panchayats and municipalities, is an intent.

The finance minister may well claim an increase in the GDP from 6.3% to 7.6%, but most of this has come from lower petroleum prices. Internally, via the efforts of the NDA government over 21 months, India has not grown much. It is still in dire need of a set of bold initiatives. Alas, this budget, like the two before, is not it.

This budget can best be described as a compendium of detail and petty husbanding of resources, a fiddle-faddle, a tinkering.

Nobody in the finance ministry has thought fit to attempt the make-or-break budget called for. There is hardly anything large enough in it to make any section particularly happy, with the sole exception of a healthy allocation of Rs. 2.21 lakh crores, all to be spent this year, to infrastructure.

This, of course, includes highways, rural-roads, and the railways. But still, it is likely to yield new jobs, and fine long-term economic results.

Almost everything else, including the unproductive, if humanitarian, dole of the highest-ever allocation for MNREGA (Rs. 38,500 crores), is not going to do very much.

All over the budget speech, the finance minister demonstrated his characteristic trickling of ambition, as if using a domestic watering can, when a flood of resources and bold action is called for.

The priority ostensibly given to the rural sector is not accompanied by structural policy changes that could have brought in a surge of badly needed foreign investment.  

Instead, paltry sums are allocated to try and deal with 50% of the population in crisis after consecutive years of drought and flood. There is just Rs. 35, 984 crores allocated for agriculture, and a target of upping agricultural credit from Rs. 8.5 lakh crore to Rs.9 lakh crore. There is Rs. 60,000 crores for recharging ground water, and even less for irrigation. Another miniscule Rs. 5,500 crores for the Fasal Bima Yojana. A token Rs. 412 crores has been placed towards encouraging organic farming.

Rural electrification though, such as it is defined, is proceeding apace.  

There is a nod towards the food processing sector- 100% FDI will be permitted in the marketing of value-added produce, as long as it is processed in India.

With such dynamism, the intention of doubling farm income in five years seems decidedly dodgy.

In broader terms, looking at the rest of  the proposals, the indelible stamp of bureaucracy blended with a discernible tug towards the left is evident.  

Cars and SUVs of all types will cost more, as will jewellery. Dividends will now be taxed in the hands of those who earn more than Rs. 10 lakhs from it. Smokers will fork out 15% more in excise duties.

 There is minutiae when it comes to reliefs:  1% reduction in corporate income tax to 29%; no changes to individual income taxes except for raising the HRA rent deduction from Rs. 24,000 to Rs. 60,000. Tax rebate under another section of the IT Act for those who earn Rs. 5 lakhs taxable, raised from Rs. 2,000 to Rs. 5,000! There is also a Rs. 50,000 deduction on home loans up to Rs. 35 lakh for a first home, priced at not more than Rs. 50 lakhs.

Most incentives are equally niggardly: Start-ups will get tax exemption for 3 years except for MAT. Service tax, which now stands at 15%, is exempted from affordable housing upto 60 sq.metres.

The plan to ‘skill’ I crore youth over the next three years begs the question whether there will be jobs created for them.

Much has been made by observers over the government’s resolve to retain the fiscal deficit target unchanged at 3.9% for FY16 and 3.5% in FY17. The logic being that possible inflation from a more relaxed fiscal deficit would be the most pernicious of taxes, and hit the poor the hardest. The resultant higher levels of investment into growth sectors that allowing a higher deficit would have permitted, does not seem to have many backers. In any case, the government has opted against it.

Some welcome liberalisation: shops can stay open for all seven days just like malls. Privates can operate public transport systems. Income tax officials will have less discretion to harass.

But, overall, yet another lost opportunity for this government.

For: The Quint

(800 words)

February 29^th, 2016

Gautam Mukherjee

Budget Bullseye: Jobs, Odd-Jobs & No-Jobs

Budget Bullseye : Jobs, Odd-Jobs & No Jobs

Sabka Saath, Sabka Vikas, the master slogan of the Modi surge to power, apart from being inclusive, implied progress and prosperity for all.

Amongst all the cacophony on the edge of budget day, we must place the demand for jobs- a-plenty centre-stage. But, 21 months in, India’s ‘demographic dividend’, 65% in age-band 15 to 35, is still a ticking time-bomb.

The coming budget is sure to allocate substantial resources to rural areas, hit by consecutive droughts and floods. But, will the money be targeted for job creation?

Also, the urban new manufacturing, even if it increases its share of GDP in value terms, from the current 17.8% to 25%, cannot deliver very many jobs. Not in the context of the coming decade wanting over a 100 million new ones!

So far, the government has only managed, per its Labour Bureau statistics, to generate 524,000 jobs till March 2015.

To get anywhere near the numbers needed, India will have to unleash massive infrastructure development, and the complete modernisation/urbanisation, of the rural areas.

Definitions of rural employment have to change. With constant land sub-division and farming producing just 17% of GDP, it cannot support 50% of the population.

To get ahead, rural India needs to mix it up with those activities it can find accessible. It is interesting to note that a grouping like ‘trade, repair, hotels and restaurants’ from the ‘services’ listing , contributes 12.40% to GDP today (Planning Commission- July 2015).

Another sub-head here, ‘financial, real estate and professional services’, notches up 20.54% . With over 300 cities and towns in the A, B, C, and lesser categories, there is scope here.

The services sector, that will embrace all the new age digital, e-commerce business emerging, is today at 52.97% of GDP.  ‘Construction’ accounts for 8.04% under the ‘industry’ grouping. There is no reason for all this to be exclusively urban.

The money also lies in food-processing, innovation, value addition of farm produce, that will also curb food wastage.  India is, after all, the 2^nd largest  agricultural producer in the world.

Then there is Packaging, rural automation, materials handling, grain storage facilities, farm machinery, seeds, yield betterment technologies, automation, servicing workshops, vocational skilling institutes, digital connectivity, localised urbanisation via the smart cities programmes, development of tourist attractions/infrastructure around heritage treasures, large educational campuses, entertainment complexes.

Building rural physical infrastructure contributes to upliftment alright, but an unimaginative throwing of government money at one or the other of the labour-intensive welfare programmes is shabby.  As a dole, it is a political hot potato and will no doubt continue.  But rural infrastructure can be built much faster and better using modern methods.

Similarly, in urban India, that contains the other half of our population, there needs to be a great push towards fostering entrepreneurship, start-ups, e-commerce, services, digital initiatives, construction, the arts, cinema; all things that are in addition to mostly automated manufacturing.

Besides, the trends cannot be bucked. A recent White House Council of Economic Advisers (CEA) report states that there is an 83% chance that jobs in the US that pay below $20 an hour, will likely go to machines. And another 31% chance that jobs paying between $ 20-$40 an hour, will also follow suit. 

Once assembly-line jobs were plentiful, but they have declined 37% since 1979. In 1965, manufacturing accounted for 53% of all US jobs, but it’s down to just 9% now.

Oxford University researchers Carl Benedict Frey and Michael Osborne estimate that 47% of all US jobs, including those creative, discretionary, apparently robot-proof ones, could end up automated by 2033.

So welcome to the world of thinking robots, intuitive computers that can do lateral-think too. Such abilities are being embedded in all sorts of devices, from smartphones and manufacturing robots, to sex dolls.

This is all good for GDP growth and productivity, even as we are already in the age of air drones that can do surveillance, delivery work or kill on demand. Similarly there are undersea-bots, driverless trains, and cars.

Let us understand that the most desired defence production and Make in India programmes will certainly bring a portion of the foreign procurement home, and sophisticate the skilling programme. They may even yield high value exports, and up our global trade percentages, and yes, add a few million better-paid jobs.

But right now, 90% of Indian jobs are in the ‘unorganised sector’. The government should take a cue from this enterprise, facilitate its growth, hook it up to a supportive grid, and then get out of the way.

(751 words)

February 26^th, 2016

Gautam Mukherjee

Rail Budget Hallmarks: Execution, Modernisation, CAPEX

Rail Budget Hallmarks: Execution, Modernisation, Capex

The Modi government’s  2^nd railway budget reiterated its transformational/aspirational thematics, with emphasis on modernisation across the board, and its hallmark of execution.

The tone of this budget was energetic and futuristic. And for the first time ever, it had an implementation report at annexure 2, based on promises made last year- 139 of which are at different stages of implementation.

The 2016 budget unveiled some new types of trains: fully unreserved, air-conditioned all 3 tier ones, those that will travel at 130 km/hour or faster, with newly designed coaches, double-decker trains that can carry 40% more people.

The strategic departure is in how the railway is rapidly connecting the North East, with broad gauge trains to Mizoram and Manipur.

Freight, the cash cow of the railways, will be enhanced with 25 tonne axle-load wagons, and the urgent implementation of the first two of the freight corridors by 2019, with access from at least 100 private sidings, RoRo technology, and a drive to recapture its dwindling market-share.

There is a plan to connect ports and highways to trains, a Diamond Quadrilateral to complement the Golden Quadrilateral. Also, an auto-hub is coming up in Chennai to help transport cars.

Two new locomotive factories in Bihar will be built soon. The electrification budget is up 50% , and 2,000 km of track will go electric in 2016-17, alongside another 2,800 km of new track laying.

Prabhu announced a stretched revenue target of Rs 1.85 lakh crores for 2016-17.  And this, to be delivered via an operating ratio of 92%, up from 90% presently. This ratio is up slightly to allow for the awards of the 7^th Pay Commission, an additional Rs. 28,450 crores, for the 2.6 million railway employees and pensioners.

The minister plans to revamp the workings of the bureaucratic Railway Board to improve implementation and wants to introduce zero based budgeting.

Over the last year, the railways have not been able to achieve its freight revenue targets, but this was largely offset via operational savings and lower fuel bills.

But still, the ministry does have some momentum: over the last year, 44 new projects, worth Rs. 28,000 crores, were awarded, compared to just Rs. 13,000 in aggregate in the previous six years prior.

Prabhu continues the modernisation drive here, with a capital expenditure budget of Rs. 1.21 lakh crores, up 20% , and more than double the  average of Rs. 48,000 crores annually, in the UPA years.

This capital expenditure is the key ingredient to the revival strategy for the Railways, announced as part of the Rs.8.8 lakh crores to be spent over five years. But to kick in Rs. 2 lakh crore each for the remaining three years of this government’s tenure may be daunting, unless, of course, new revenue streams are found.

The government will provide Rs. 40,000 crores towards this year’s capex, again, as it did last year. A financial investment from LIC has also been secured for Rs. 1.5 lakh crores, albeit disbursable over 5 years, but at excellent terms, per the minister.

The minister also indicated that a concerted effort will be made to realise at least 20% of future revenues from non-tariff sources such as advertising on railway property/stations, and judicious monetisation of railway land in innovative ways. Comparable railway networks abroad do obtain about 30% of their income from non-tariff sources.

For the first time, the Indian Railways is also actively seeking collaboration with the various states, and while 17 states have shown interest, 6 MOU’s have already been signed.

The bullet train from Mumbai to Ahmedabad, with Japanese involvement, was also mentioned, as a force-multiplier, and in terms of technology, know-how, and skill development.

Prabhu plans to build bio-toilets on every train, (up from the 17,000 already done), do away with dangerous unmanned crossings altogether, renovate over 400 stations, vastly improve cleanliness, introduce wi-fi, e-ticketing, FM radio, wheel chairs, hand-held ticketing, phoned in cancellations, dustbins, CCTV coverage, better class catering etc.  

Speeds will increase all around; freight up to 50km/hour and express trains up to a minimum of 80 km/hour. The Railways will be integrated with other modes of transport. Its extensive data mining might be monetised too. There will be two elevated suburban corridors created in  Mumbai, and other city metro networks will expand too.

But all in all, much of this is not news. Competent, path-breaking, and far- reaching as this budget in series is; and most commentators are giving it 7 points on 10, there were no out-of-the-box surprises.

For: The Quint

(749 words)

February 25^th, 2016

Gautam Mukherjee

Careful With Your Pride

Careful With Your Pride

How do you try and stymie, if not unseat, an elected government with the first absolute majority in 30 years?

Use agitational politics; go for the jugular, but try to win the battle of perception. Prevent all progress as best you can, and say, before each parliamentary session - getting things done, is the responsibility of the government.

This was the muscularity hit upon by a badly mauled Congress. Still, with just 45 seats in the Lok Sabha, and some 68 in the Rajya Sabha, it took  audacity. Good job that it happens to be working just fine, both  in terms of its obstruction, and its ability to unite different elements of the opposition.

But, what else would have saved Congress from oblivion, after those general election results of 2014? Certainly not being a constructive, responsible opposition.

Besides, it was inspiring, an eye-opener, for all, to see what an NGO type, a complete johnny-come-lately, could do. It was spectacular success for a new-fangled, do-it-yourself instant politician, and the political party he  built from scratch.

AAP’s entire salience, man and machine, was born on a makeshift stage at Jantar Mantar, on a metaphorical Monday. It purloined the aam aadmi slogan on Tuesday; reprised the Gandhi cap in paper, with its party name printed on it, like ones made for American cafeteria employees, on Wednesday.

And then, just like that, it stole the election for Delhi quasi-state, twice over; once on Thursday, followed by a tantrum, and then again on Friday, for keeps, or five years, at least.

What USP did this AAP use? Agitational politics of course, with anti-corruption for a sauce. It was very different from the grim revolution advocated by JP Narayan all those years ago, but perhaps that was just the despair politics of a dying man.

The AAP style is derived from the NGO universe. It uses slogans, placards, dharnas, hoardings, three-wheeled scooter portraits, marches, gheraos, wild allegations, fiery speeches, reheated Marxism, self-glorifying advertisements, donations,  freebies, shaming, naming and blaming, a platoon of freshly acquired never-been-a-politician-before acolytes, and plenty, just plenty, of free media exposure, over and above the ads.

While Rahul Gandhi’s Congress has admiringly adopted a lot of this, his elders have gilded the lily, and turned the enterprise into something more sinister, befitting the political skills of a party that has ruled this country for decades.

In the grown-up version, the orchestrated disruption in the legislature, the use of procedural blocks, vague threats, accusations, gratuitous insults, sneers, slurs, are all there, supplemented with making common cause with every anti-national enterprise on offer for a force multiplier, and to make trouble for the government.

But when Congress was on the receiving end of such politics, it imposed the Emergency, way back in the seventies. Now, it has torn a page out of that very book, for inspiration.

If the idea was to provoke the government into a crack-down, then it is starting to succeed. It has certainly closed the gap between seized issues - from a suicide Dalit/OBC student in the South, and over two dozen live separatists/seditionists in the North.

Both fall in nicely within the brackets that need to contain references to Leftist/ Dalit/Muslim/Casteist emoticons – linked hopefully to the spontaneous arsonist’s tinder box.  

The Congress has invested much political capital and sunk-cost into this strategy. The civil disturbance pot is boiling nicely. It makes young veep Rahul Gandhi look much more focussed. It turns the public gaze away from the embezzled billions, the graft and payola of the Congress past.

The Modi government in its place, though electorally unassailable, must either prevail in the face of this growing mayhem, or be thrown out, much before the end of its term, let alone the next general elections.

 The chaos is growing; on the street, in the media, the campus, in broken and charred government property,  uproar in parliament,  abusive studio debates, religious passions aroused, caste slurs, wild talk of freedom of expression, the converse of alleged suppression. In social media slugfests, the divided judiciary, police, the armed forces, constitutionality itself. We have secessionism, terrorism,  spies, fifth columns, rapes as protest, security compromised, mayhem, arson, blockades, outrage, fakery, lies, state, centre- all on the menu.  

Will this threat of growing anarchy peter out and stop in the face of determined government stonewalling or even a sustained counter-attack? Or will it take hold, catch on, and spread like a virus that is out of control?

Will the insurgency ever grow to the dimensions of the pre-Emergency period, when George Fernandes had shut down the railways, JP Narayan was calling for open rebellion, the Allahabad High Court had declared prime minister Indira Gandhi’s election null and void, and every major city crossroad was blocked with squatting demonstrators?

Even if it did, will Modi’s government tamely fall, or crush this hullaballoo of 2016 by turning the tables on the anti-nationalists and their supporters?   If not, what is being hoped for-our version of the Arab Spring/ Civil war?

The Congress siding opposition has been searching for suitable hooks for a long time. It tried, to stir things up accusations of corruption against the Modi government, two, maybe three, washed-out parliamentary sessions ago. But, it didn’t take. Next,   the scene shifted to implicit accusations of fascism- the returning of Sahitya Akademi and other awards, popular Bollywood stars jumping into the fray and wringing their hands about ‘growing intolerance’, and a bizarre beef murder/lynching at Dadri. This one did much better- The BJP was routed in the state assembly election in Bihar, and all the award returning stopped overnight.

 And now we have a couple of student agitations, just in time for the budget session. But perhaps this matter is already being overtaken in the news cycle, with the legal process beginning to unfold.

Besides, a group of humourless Jats in SUVs, armed with lathis, knives and guns, have critiqued and improved upon the Congress strategy already. Over a dozen have been killed but allegations have surfaced that the former Congress government may be instigating the violence here too. A former aide of erstwhile chief minister Hooda has been booked for sedition.  

The Jats mounted a quasi-military operation - burning railway stations, police stations, schools, and a minister’s house, toll plazas, the properties of non-Jat groups like the Sainis, particularly in the epicentre of Rohtak. This, apart from the burning of the usual buses and cars. They cut trenches through highways, blocked Delhi’s drinking water, stopped trains and thousands of food trucks bound for Delhi. They marched, shielded by their women and children up front.  

The Jats, who have contributed  substantially to the armed forces, sports, the arts, and  are regarded as a relatively prosperous community, have excelled themselves at insurrection this time, in their swift ferocity from a standing start, barely a week ago.

And the Modi government, that knows a serious agitation from a stagey one, has wasted no time before promptly caving in.

For: SirfNEWS

(1,155 words)

February 26^th, 2016

Gautam Mukherjee

Fortune Is A Fickle Friend

Fortune Is A Fickle Friend

Ideals are peaceful, history is violent-Fury (2014)

Aphorisms, I suspect, are the writer’s handiest tools. Their pithy wisdom provide ready hooks to expand an argument or narrative upon. This government too, with its acronyms and slogans, started off lucky, but where are the delightful surprises for the rest of us?

At its goading, India too is experiencing an ideological shift, but it needs to be given biting teeth to join the party. And the shadows, even at 21 months, are lengthening.

The socialists and communists, the political parties associated, their influential supporters, the rank and file, are in a fury of dissent. To build lost heft, they are joining forces with anyone handy, trying to leverage victimhood - amongst castes, tribals, minorities, secessionists, anarchists, even Islamic terrorists.

But at an economic level, progress, even though it has been slowed by vote bank politics, cannot be stopped entirely. The forwards and kickers have been waiting in the wings, ever since the benefits of 1991 began to appear.

The rewards of liberalisation and competition, introduced by stealth, and in the teeth of a balance-of-payments crisis, nevertheless took the shine off old school socialism. They delivered consistent, near double-digit growth, and on the promises and addictions of capitalism - infrastructure, consumerism, technology, aspiration, money, mobility.

But then, since the next logical step did not come about, neither did the double-digit roar. Instead, socialism picked itself off the floor and made a come-back. This time it didn’t scream against competition, private enterprise and foreign investment. Instead, it set itself up as the moral arbiter, demanding to know what was the use of GDP growth without jobs?  

It ignored the millions raised above the poverty line, the rise in life expectancy and per capita income, the PPP parities, the urbanisation, the job mobility, the talk of a rising tide raising all boats.   

This neo-socialism, because the Marxist/Leninist/Stalinist/Maoist/Castro brand was dead or dying globally, did however have a point. Things were not moving nearly fast enough to cope with the needs of over a billion people.

And so, by default, the leftist intellectual discourse of all the lost decades was reinstated. Business and industry returned to being the dirty words they once were, sneered at for not counting amongst the voters, alongside others, like profit and greed.

Still, it was too late to turn the clock back. Prime minister PV Narasimha Rao, then finance minister Manmohan Singh, and the World Bank, had done too good a job of it. All that was possible afterwards was to put speed-breakers in its way.

But later, the socialists decided to exploit the growth they could not wreck. The larger economy, up from less than half a billion to $ 2 trillion, could afford more welfarism, and perhaps yield grateful votes in perpetuity.

And though this calculation went awry, welfarism is now firmly embedded. It cannot be reversed without dire consequences, whatever be the bill for development.

When Modi emerged from Gujarat onto the national stage in 2013/14, the voter thought the time had come at last to see economic pyrotechnics. It thought, he would promptly shift gear, put on speed, and aim for the brass ring.

But 21 months later, there is a sense of frustration. What happened? Why does Modi as prime minister not seem to be the same man who won the first majority in 30 years?

Where are the big-bang second-generation structural reforms that seemed imminent? Why is no attempt made to deal firmly with the disruption of parliament? Why does this government resemble the last one in so many of its policies, and yet not fight back when it is accused of communalism and stamping on personal freedoms? Why is it growing bigger instead of downsizing?

The 1991 liberalisations have endured for 25 years precisely because they were too much of a departure for any subsequent government to reverse. Almost none of it involved new laws, only liberal union budgets and executive action.

But, in 2016, the Indian habit of building amendments and corollaries, has reintroduced elements of the infamous licence-permit raj. The socialists, minority obscurants, and caste inheritors of reservations and quotas, instead of  the development politics of Modi, still rule the roost.  

Even for this government at the centre, and the BJP ruled states, development is pursued defensively, like a guilty secret. The accusations of crony-capitalism, favouring business and industry over farmers and the poor have hit home. As well they might, in the vacuum created by not doing very much.

But the economic roar we want cannot come about like this. It needs freedom to innovate and grow, unfettered by state supervision. The state must encourage and facilitate, as it once did in China and Japan.

There needs to be low taxes, cheap and abundant utilities, a modern infrastructure and connectivity, a convertible currency, free movements of capital, expanded banking and financial markets, freedom to hire and fire at will, land on demand, a judiciary that works efficiently and hands down judgements within a reasonable time, a security environment that is reliable, and many other hallmarks of a competitive business environment.

Whatever bits of these things have been introduced, are still calibrated, rather than free and unlimited.  Corruption and delays remain endemic.

A true open sesame to unleash potential resides only in an Aboriginal dreamtime. But, still, the opportunity to make it all happen, is staring this government in the face.

For: Mail Today

(899 words)

February 21^st, 2016

Gautam Mukherjee

Arun Jaitley's 3rd Budget: Watershed To Weathervane

Arun Jaitley’s 3^rd Budget: Watershed To Weathervane

Finance minister Arun Jaitley’s third budget, to be tabled on the ‘leapling’ 29^th of February 2016, evokes great expectations. It is a time of tremendous opportunity, but also an overhang of unfulfilled promises. What are the discernible trends at this time? 

In the context of a rather charged political backdrop, this budget needs to be a watershed that will be spoken of in future for its shift towards a raft of substantial second generation reforms.

2016 must be remembered, as we often recall 1991, as the year when the foundations of a developed India were put in place.

This budget should, as a money bill, that cannot be blocked or stymied under the Constitution, be made to serve as a vehicle for a plethora of urgent pending legislation. These could be reworked to its barebones, reduced to its financial parameters, and be inserted into this document.

Two expensive parliamentary sessions have been wasted so far, and this one, coming up, is also expected to fail. But the budget will be passed because it sanctions monies for the running of parliament itself, and the provisioning of the legislator salaries and perquisites as well.

So Union Budget 2016 should become the first one in our history that carries legislative load in its pages, alongside changes in taxation provisions, and allocations of monies for various purposes. The Rajya Sabha cannot stop, or hold up a designated money bill, for more than 14 days.

The economy does have some sunny spots, though most of the initiatives taken by this government have yet to show results. 

A key block is that the investment cycle in private business and industry has not yet begun. Demand is still soft, and credit is both expensive, and very hard to come by.

However, the FDI picture is rosy, and particularly in defence manufacturing, the Indian Railways, and selected infrastructure projects, it is expected to go through the roof by general election year 2019.

Growing its GDP at between 7.3 and 7.6 % on the revised calculation basis at the moment is not bad. But this is mainly on the back of the government’s own infrastructure spending.  

India has had a bonanza of over Rs. 2,00,000 crores, gained from its reduced oil bill. And more coming up, with prices unlikely to spike any   time soon. This saving is being redeployed even though there are hefty unpaid subsidy backlogs from UPA times.

The prompt doing away with the subsidy on petrol/aviation fuel and diesel, has probably been this government’s boldest, and only, major reform so far.

And though the subsidy on kerosene and LPG continues, there have been voluntary surrenders for the latter, in response to the prime minister’s appeal.

Many other subsidies and welfare programmes, particularly for rural India, initiated by the UPA, which this government has decided to carry forward and even enhance, have to be funded. This may not be the best   thing in classic economics, but the government has an obligation to help the poor. 

Luckily there are some other initiatives that have contributed to government coffers. The very successful round one of spectrum auctions garnered a handsome Rs. 1.1 lakh crore.

Coal mining- practically dead and buried under the UPA, has been revived. The public sector Coal India is functioning well again, but modernisation of the mining processes is yet to happen.  Imports have been drastically cut, and a saving of some Rs. 30,000 crores is expected in FY 16. Coal auctions have given the private sector access to the mineral, even though, the government is no longer giving it away for nothing.

Iron ore mining in Goa has been revived, and this has restored a source of revenue there in addition to tourism and rampant construction. But other, much larger mining initiatives in Odisha and elsewhere are stuck for want of various clearances, and land. When, and if this is tackled, it could add substantially to growth.

The power generation, transmission and distribution systems have been much improved and alternate energy sources such as solar power are being seriously tapped.

The government’s disinvestment targets of Rs.69,500 crores from last year has been under-achieved, at Rs. 37,000 crores, despite a volatile stock market.

The collection of direct and indirect taxes is going well enough, and is expected to end fiscal year ’15 very near target. 66%  of it has already been collected by December 2015.

Job creation, though not exactly stellar, did produce 460,000 new jobs  by December 2014. These were in industry and services, according to the government’s own labour bureau surveys. Another 64,000 new jobs were added by March 2015; so presumably the end of fiscal 2015 will see a respectable figure too.

But, since 10 lakh new entrants come into the labour market yearly, the promises of 100 million jobs over the next six years is indeed one of the most pressing needs.

The outlay for floods and droughts compensation has gone up sharply from an earlier average of Rs. 8,000-9,000 crores to over Rs. 24,000 crores, even as only 30% of crop destruction was compensated.

And these natural disasters, in the absence of adequate engineered solutions, have set the entire rural sector back, both in per capita income and overall contribution to growth terms.

While torrents of  gratuitous advice, and wish-lists from business, industry, chambers of commerce, bankers, politicians, and columnists, has come in, the broad future direction seems to have been already set.

The finance minister will emphasise and dwell on the upliftment of rural India, which is in distress. 

PSU banks, under-capitalised, burdened with NPAs, are being cleaned up, presumably with an intent to sell up to 49% of their equity, to foreign investors and privates. This will, if accomplished, see them adopt best-practices, improve their performance and profitability. In turn, the banks which need to grow, some estimates call for an $ 35 billion infusion, will begin to lend robustly once again.

The indications are that Modi is set on continuing with a largely mixed economy, rather than a Thatcherite privatisation drive. The endeavour will be to strengthen both the private and the public sectors, at the same time.  The government does want to dilute its holding in many enterprises, but only in order to help it grow under more efficient management.

This centrist stance is inevitable for the moment, particularly since infrastructure development in roads and ports etc. and the upgrading of the railways, has had to be kick-started with government investment. This, even though private and foreign funding is welcome and expected to join in shortly.

The key change however, is that no area is being reserved exclusively for the government any more. There are no ‘commanding heights’ of the economy to be exclusively state-owned, whether it is defence, nuclear power, roads, ports, electricity, solar energy, services, e-commerce, digital India, smart cities, and so on.

This is clear from a large number of announcements - but most recently, the US howitzers, long awaited, that will shortly commence manufacturing, partly in India, in collaboration with the Mahindra Group. 

Almost all manufacturing sectors are now open to foreign and private sector investment. Even Health and Education is being opened up, though the necessary emphasis is still missing.

In rural India there must be radical change to make it profitable. So much is on the anvil, including  modern storage and grain handling, the cold chain, modern marketing/ auctioning/price discovery infrastructure, food processing,  alternate energy sources, rural  connectivity/infrastructure, both physical and IT, and so on. All of it seeks private/foreign investment/know-how.

This government is not embarrassed to admit that it cannot generate the trillions of dollars, and access the technology needed for all this by itself. But it doesn’t want progress to be greatly slowed or stopped as a consequence.

But bringing manufacturing to India for items that were bought out from abroad, will have a very welcome effect on GDP growth going forward. Results should begin to show from this year.

The skilling development to come will be a natural corollary, and export potential of truly high-value and high-technology items will result and extend the evident early success of ISRO in the business of launching foreign satellites, for example.

However, the bold structural reforms must begin now. The important pending legislation- GST, Labour, Land, Bankruptcy laws etc. must find their reworked way into money bills.

Some states have already passed their own new land acquisition laws, but more of them need to take the plunge.

This union budget will also follow on from a far more dynamic Railway Budget that has been the case in recent years. The determination is to both vastly modernise the railways, and return it to substantial profitability. Work on freight corridors is proceeding apace, and should provide a revenue boost when completed.

The Economic Survey to follow the Railway Budget is expected to be cautiously optimistic. At this juncture, India’s is the fastest growing economy in the world, albeit on a small $2 trillion base.

The consumption led boost expected from the implementation of the OROP and 7^th Pay Commission awards, will also play its part in increasing liquidity.

The 3% or less of our population that pay income taxes may get some relief in terms of a raised exemption threshold.  But tax deducted at source,(TDS), and other onerous taxes such as service tax, should really be thrown over. Instead, the much talked about minimal expenditure tax payable by all who conduct a bank transaction above a certain specified limit, should be introduced forthwith. 

In any case, the government collects most of its tax indirectly, but all efforts to widen the income tax base have not really done much. So, this need for a more or less universal direct expenditure tax is urgent.

Whatever be the hesitations, this budget must seize the day. It needs to boldly point towards the policies of an NDA ruled future. It cannot afford to be a rehash, a cut-and-paste job, of timid and incremental UPA ideas, for which this government has been much mocked already.

It must excite enthusiasm and renewed support from all sections including overseas observers. It must set policy and structural direction, for the next three years, and beyond.  

Let us proceed with the belief that the NDA will secure a second term. Looking at the voters, this is a strong likelihood, based on stubborn and substantial support for the prime minister Narendra Modi, in particular. The BJP/NDA vote share too has not slipped, despite two years in the saddle, and the grievous loss of Delhi and Bihar in assembly polls.

The opposition, meanwhile, is increasingly painting itself into a corner. It blocks legislation in parliament, makes offensive remarks against the prime minister, and wild, half-baked allegations against other important ministers and chief ministers.

It speaks against Modi and his government sitting in Pakistan! It threatens to unleash anarchy on the streets; as if this country and its welfare is none of its concern. This, in addition to supporting anti-national, secessionist and subversive forces, along with the AAP, and the Left, in particular, often to the discomfiture of other regional parties.

All this is not going down well with the masses, the armed forces, police, CRPF, BSF, being insulted by opposition disdain for their contributions, a good part of silent majority, the outraged legal fraternity.

Even within itself, this lot are fractious, with uneasy and multiple parties trying to rub together in their craven quest for power.  

There are discernible early trends towards a disgust with people that don’t even baulk at the prospect of consorting with the Khalistanis, Maoists, Kashmiri separatists, ISIS, various Pakistani terrorist outfits such as LeT, JeM, the Taliban, and others.

The mass of voters, now more or less evenly split between urban and rural India, are not comfortable with secessionists and terrorist helpers. Recent results from assembly election by-polls in different parts of the country had the BJP winning 7 out of the 12 seats contested.

A great opportunity to consolidate its position with a bold and far reaching budget, handed to it by opposition extremism, should not therefore be squandered by the NDA at this point.

For: The Sunday Pioneer, AGENDA  (Cover Story)

( 2,016 words)

February 19^th, 2016

Gautam Mukherjee

Get The Reds Out From Under Every Bed!

Get The Reds Out From Under Every Bed!

America, the richest democracy on earth, can’t abide socialism. In this 2016 election, the 74 year old democrat and presidential  contender Sanders, has done himself no favours by calling himself socialist. 

President Obama, approaching the end of his very competent two terms in office, is regularly reviled as a socialist, spuriously, but truth be damned. African-American president notwithstanding, racism is not yet dead in America by a long chalk. But being communist is thought of as being worse than being African-American. The jury is still out on gender equality though.

That is why Noam Chomsky, the notorious linguist/ anarchist professor and Jewish intellectual from MIT and Harvard, with at least 100 books to his name, is mostly regarded as Anti-American and subversive by mainstream America.

Overall, being called a socialist/communist is abuse in the US. Wish it were so here! But in India, it is a proud privilege. So much so, that the very suggestion of dumping leftist ideology in India, brings on an apoplectic outrage, and acute withdrawal symptoms throughout the intellectual classes and the body politic.

The ideological clap-trap of decades of failed policies has not dented socialism’s appeal, both amongst the masses, and a goodly proportion of the classes. It is seen as some kind of emetic and purge for the venality and perniciousness of capitalist ‘greed’; anathema to the genetic memory and psyches of many Indians, perhaps from imperial and feudal times.

But, this pro-labour/farmer/poor rubric harnessed with contempt and hostility towards capital and the engines of growth, is combined now with a toxic love for the Islamic terrorist/the murderous Maoist and so on. It is not above undermining and sabotaging the very state it lives in, insulting the military, combining forces with anyone who wants to bring it down.

The matter has now assumed dangerous proportions with many opposition parties supporting such seditious elements in the name of democratic freedoms. And, it is being keenly watched by the Pakistani ISI, the Khalistanis, and other inimical forces.

Indeed, our highly subsidised universities, crucibles of this us-and-them dichotomy, seem to compensate for their lack of intellectual rigour with outpourings of what Joseph McCarthy, the infamous communist hunting crusader in America, called ‘dangerous radicalism’.

It was McCarthy who coined the phrase: ‘There’s a red under every bed’, to spur support for his anti-communist crusade. That the Soviets had been  American allies during WWII, being the first to capture Hitler’s Berlin, was the essential basis of the confusion. Particularly, when the post-war aftermath quickly cooled into Cold War, the long night of the: ‘Iron and Bamboo Curtains’.

It may be serendipity that we have an American film on freedom of expression, political belief, patriotism and suspected sedition, showing in our multiplexes currently. It is also a serious contender to win an Academy Award or more this year.

Trumbo, the feature film, there have been documentaries on the man before this, has come at a time when the tolerance debate has been swirling and eddying between Bollywood, the chasms of the political arena, the mainline and social media spaces.    

It looks like the socialists in their bastions and their variegated political bosses in multiple political opposition parties, are in mortal fear of being turfed out by a resurgent RSS/BJP combine. So they are squealing blue murder to try and thwart it. Will their efforts at mass mobilisation to turn the clock back succeed, or have they already gone, kicking and screaming, into the dustbin of history?

As in the America of the 1947-1975 period, when Trumbo lived and worked, our democracy too is evolving, and groping its way towards its true meanings.

If Trumbo (2015), succeeds as a metaphor for India in transition, it does so because of the tremendous native talent of the subject, the real-life screenwriter James Dalton Trumbo, that transcended the prejudice, persecution and opposition generated by his political views.

Likewise, India, not by any means an easy place to do business, might nevertheless be worth taking on for foreign investors, because of its tremendous potential and steady growth rates in the midst of an economically troubled world. After all, many abroad do not understand our pretensions and protestations of secularism. They see India as an obviously Hindu majority, even majoritarian, state, and think it is right that it be so.

The villain of the piece in Trumbo, one of two actually, is cast as the inquisitorial Congress House Un-American Activities Committee. But, do we not need a similar device here in India, to curb the depredations of so many bold ‘anti-nationals’, openly preaching and practicing sedition?    

The other villain of the piece in the movie was The Motion Picture Alliance for the Preservation of American Ideals, a kind of Trump-like far-right Republican Party of Hollywood - the RSS/BJP parallel perhaps. This one, more localised than the country-wide commission, was backed by the likes of the iconic John Wayne, and powerful gossip columnist Heda Hopper, who boasted of a readership of 35 million people. 

Trumbo himself though was that rare bird, an unabashed, if well-to-do ‘conviction’ communist, but also a solid family man, with a doting wife and three supportive children.

Trumbo was so good at writing scripts for movie hits that also often won awards, that the big and small studio bosses, just couldn’t do without him. So they accessed his talents by the back door, even when the front door was officially closed to him. And this throughout the period, from 1947 till the early sixties.

The real-life Trumbo won a quartet of Oscars, for several legendary ‘best films’: Roman Holiday, Spartacus, Exodus, The Brave One. He also won a lifetime award, once he could come out from behind the arras, from The Screenwriters Guild of America.  

For screenwriters to dodge the boycott was one thing, but sympathiser actors like Edward G Robinson had to buckle under, retract, denounce and conform. Typically, all the liberal support melted away, once the commission began to bite.

Finally, the persecution did come off for Trumbo, when JFK as president attended a screening of Spartacus and allowed that he liked the movie.  Kirk Douglas, the star and executive producer of the film, had already defied the ban by attributing the screenplay to Trumbo.

Bryan Craston, the anti-hero of hit TV drama Breaking Bad, plays James Dalton Trumbo.  But the director, Jay Roach, did sanitise the real-life Trumbo’s serious support for Soviet-style communism.  And Trumbo was not alone in this. The commission may not have been fashionable, but it was definitely needed, for the idea of a capitalist America to succeed. That is why it was only wound up in 1975.  

For: The Pioneer

(1,099 words)

February 15^th, 2016

Gautam Mukherjee