Indian Economy: News and Discussion (Jan 1 2010)

[putnanja]

somnath, no "ji" please. Lets keep it informal.

1. As for disinvestment, UPA's has to be adjusted for changed scenarios. What was worth 1000cr in 2001 isn't worth same amount in 2005. In case of UPA disinvestment too, PSUs like LIC invested a lot in companies like NMDC, NTPC, SAIL etc to make the disinvestment a success.

2. The APM dismantling was started during NDA time, but they sort of suspended it during the general elections. It was not perfect, but it was a start. The UPA never carried forward with it anyway. Kerosine prices haven't increased in last few years. And duties and taxes on fuel hasn't been rationalized. India has one of the highest taxes on fuel( both state and central) and nothing has been done to address this. Please see this link

...
In the two years before the NDA government's tenure came to an end, prices of petrol and diesel were allowed to be changed initially once every fortnight and later once every month.

While prices went up several times, there were also a few occasions when the domestic prices fell because of a downward revision in international crude oil prices. Even though the LPG and kerosene prices were not freed and the petroleum ministry did not give the oil companies full freedom on prices, there was some relief that the APM was a thing of the past, the hidden subsidies on petrol and diesel had ended and that more reforms would surely be initiated to give the oil companies complete pricing freedom.

Alas, such hopes were misplaced. The United Progressive Alliance (UPA) government turned the clock back on petroleum sector reforms. In the first stage, the petroleum ministry under the UPA regime took away whatever powers the oil companies had to fix petrol and diesel prices.
...

4. Roads and rails are the biggest need, and nothing has changed in it. It has almost come to a halt. PMGSY is a hit or miss, as the implementation is done by state governments, and depending on each state, things vary. Telecom took off once the NDA changed the policies to revenue sharing mechanism. I still remember that cell phone charges were around Rs 16 per min in 1997-98. By 2003, the prices were down to Rs 2 per call and kept falling. The base was laid by the NDA govt, which the UPA govt followed. Of course, apart from selling 2g spectrum at 2001 prices, the UPA hasn't had a clear policy on telecom

5. PFRDA is mainly toothless. There has been no further movement on the pension or labor reforms.

6. Incidentally, it was the NDA govt which accepted the Melhotra committee recommendations and opened up insurance sector. The IRDA act etc were passed in 2001.

7. The government is still continuing the old subsidy on urea, leading to its overuse. The new policy is yet to take into effect, and one wonders how successful it will be

[amit]

But they were not partculatrly different from the Congress/UPA....

That IMHO is the crux of the issue. The instincts have been to open up the economy. The biggest constraint has been the nature of coalition politics.

We can debate on who's reforms policies were more TFTA till the cows come home but the above will still remain the same because reforms cannot be done - especially in the fiver year windows that govts in India get - in a vacuum. You have to build on what you have as it's a continuous process.

[putnanja]

amit/somanth, it is easy to blame everything on coalition and opposition, like what MMS did. But the government and the PM too should set the policy goals, right?

The fact is that UPA-II even after being in power for more than a year is yet to embark on any reforms. They have been free of the left this time around. However, when you have ministers misusing their powers in key ministries like Telecom, civil aviation, environment etc, and the PM blaming everything on coalition politics, it is difficult to believe that any meaningful reforms will be attempted. The first two years of any new government are the right time for big ticket reforms as the govt won't have to worry about elections. However, with the various scams that this government has been embroiled in coming to light, the government is in no mood to persist with major reforms. Now, with elections due in TN, West Bengal etc, the government will lose what little time it had for any big reforms.

[somnath]

Putnanja,

1. The inflation-adjustment argument is really bizarre..First the numbers I quoted are average (the details are there in the link)..Second, people, govts and corporates dont "spend" or "earn" anything on an inflation-adjusted basis, they simply earn and spend dollars...The concept of inflation-adjustment is used in estimating GDP growth (GDP deflator) as what is being sought to be measured is increase in "output", rather than the dollar value of it...

2. The APM was never allowed to be implemented by Ram naik..In fact the NDA govt was lucky in having a benign global oil price scenario for most of its term..But when the prices started rising, Ram Naik did exactly wht other petroleum miinsters have done...Taxes on fuel too is nothing unique to UPA, the numbers were not materially different for NDA...But now, finally, petrol prices have been truly put to bed..

4. On infra - check out the global competitivenss reports over the years (of WEF)..They have an infra index as input...It has only shown improvements over the years...Obvioulsy the quality of infra in India isnt adequate, but not as if NDA came and made a Changi out of IGI! (Heck, that was done by UPA!) About telecoms, yes, the pricing regime was an important variable (btw, in hindsight, lots of revenues given up )..

5. PFRDA is toothless in what way? they have a marketing and penetration issue (linked largely to distribution commissions payable - they are too "low cost" for their own good!)..But in wht way is it toothless?

6. Well, I said before - part of YS's (and BJP/SJMs) hypocrisies...the IRDA bill was attmpted by MMS and PC at various stages - it was the "swadeshi" crowd that stymied it for 3-4 years...YS had to do it as ABV wanted to push it through - and obvioulsy congress couldnt disown its own baby!

7. The policy has just been laid down...WSJ is making a more sweeping comment, not specifically on the fertilizer policy - hence that sweeping remark..here is the execution plan in some detail..
http://smetimes.tradeindia.com/smetimes ... 60874.html

[amit]

amit/somanth, it is easy to blame everything on coalition and opposition, like what MMS did. But the government and the PM too should set the policy goals, right?

The fact is that UPA-II even after being in power for more than a year is yet to embark on any reforms. They have been free of the left this time around. However, when you have ministers misusing their powers in key ministries like Telecom, civil aviation, environment etc, and the PM blaming everything on coalition politics, it is difficult to believe that any meaningful reforms will be attempted. The first two years of any new government are the right time for big ticket reforms as the govt won't have to worry about elections. However, with the various scams that this government has been embroiled in coming to light, the government is in no mood to persist with major reforms. Now, with elections due in TN, West Bengal etc, the government will lose what little time it had for any big reforms.

According to this report, here's what's expected to be tabled in Parliament during the Budget session:

Among the key economic Bills to be tabled before lawmakers is one to pave the way for the introduction of the goods and services tax (GST), three separate Bills on the financial sector, the Land Acquisition (Amendment) Bill and the Women’s Reservation Bill.

If the GST bill can be passed then that would itself be a great achievement. The GoI has been trying to get it through since 2007. Let's see...

There have been some discussion earlier on this thread that GST is not a big deal. However, I beg to differ, my personal estimate is that, properly implemented, it could add around one percentage point to our GDP.

Here's a report which seems to think the same.

The introduction of a goods and services tax (GST) will help create a single Indian market, reduce transaction costs, minimize distortions in the use of resources and provide manufacturing industries with a chance to build economies of scale. The GST will increase the size of India’s economy by between 0.9% and 1.7%, according to estimates.

[ShauryaT]

True and hence personalities, especially in our system count only to a degree. Calling YS term as worst is a direct attack on the ABV record in relation to economic policies and it just does not sqare.

Let's stop getting carried away by emotions here. I too criticize YS as a FM, and if that is an attack on ABV (as ridiculous as that sounds), my response is, so be it. I consider PVNR and ABV as the two best PMs India has had, yet I've no qualms about being 'accused' of criticizing either, if the topic so demands.

You have an issue with the criticism of YS; please address that directly, instead of waving hands and viewing it as an attack on someone else. Maybe there are worse FMs (I could think of a few from the 1960s...) but 'worst' is subjective. Let's keep with the tenor of this thread when we debate. Vigorous debate is fine - just keep it on topic. Thanks.

Critiquing the record is different than critiquing the personalities. I have no qualms with the former and people will have differing views on the record. However, it seems there are some, who mix up their emotions for the personalities/parties, with the record.

So, when I hear comparisons to the Chandrashekhar period that he did not usher in reforms!, and everything good at his tenure at the NDA being attributed to someone else and everything bad being attributed to YS. Instead of looking at his message in the interview, people start attacking his personality/party affiliations, SJM links and what not, it leads to questions.

No one here is above political sympathies. However, just because the message is from a person, not to someone's political preference, does not mean the entire message needs to be dismissed. The opposition is not to be treated like a Paki!

I hope participants here can do better than that. (Not addressed to you).

Each one of us has our favorites, but critique needs to be focused on the policy and not personalities, in line with the topic.

[ShauryaT]

However, why don't you list the reasons that why you think that Yashwant Sinha interview is worth taking seriously so that it can form the basis of an interesting debate.

Because the interview touches on issues most important to my view of things. Namely, inflation, interest rates, fiscal deficit, government spending and waste and subsidies and lack of adequate reforms.

I discounted the black money part of the discussion because in my view the problem is far more structural.

[vina]

with great bureaucratic support from the exceptional Ramu Damodaran, ABV's pvt secretary

Ramu Damodaran. Isn't he the bureaucrat dude who use to read news on DD in the days of black & white TV ? He I think was PVNR's pet and private secy. Didnt know that ABV adopted him as well!

[SwamyG]

In India, are all the street vendors required to have a license? I am especially curious about the vendors who do not encroach platforms, roads or other pubic space; but the ones who roam around the streets selling fruits, vegetables, vessels, clothes and myriad other things. Official links would be highly appreciated.

I did google and found "National Policy on Urban Street Vendors 2009" being mentioned couple of times. But it is little confusing and I like some clarity, hopefully some of you have a good idea on this subject.

Another way of stating what I want to know is "Is the guy selling vegetables on a trolley need license/permission/sanction/ityadi to trade?" Also do they have to register themselves with some government authority?

Added:
1. http://mhupa.gov.in/policies/natpol.htm
2. http://www.nasvinet.org/nasvi.php?page_code_no=33

[somnath]

Ramu Damodaran. Isn't he the bureaucrat dude who use to read news on DD in the days of black & white TV ? He I think was PVNR's pet and private secy. Didnt know that ABV adopted him as well!

Mea culpa..you are riht - Ramu D was PVNR's secy..The cha I was referring to is Ajay Bisaria..He had a stellar role to play in another matter...when the other crakpot in ABV's cabinet, Murli ManoharJoshi, tried mucking around with the IITs and IIMs, some "illustrious" alumni tried to tackle it by directly appealing to the PM - Ajay Bisaria was a great help then as well (he is IIM, Cal alum himself)..

[Hari Seldon]

^^^The real crackpottying around with the IITMs was, IMHO, done by sri arjun singh. Not to defend MMJ's mistakes or anything but MMJ was a mere academic bachcha in front of the wily thakur. The damage AS did is yet to manifest in the open. But this is probably OT.

[ShauryaT]

What should be done? For a start, we should scrap the system of Centrally sponsored schemes (CSSs) and Central sector schemes? No one seems to know how many such schemes there are. After a Central Plan Schemes Monitoring System was established in 2008-09, there are reports that there are 1045 such schemes. These proliferated, especially since the late-1960s, because the Centre wished to control inefficient expenditure in States. So we set up Central templates, irrespective of what local conditions warranted. This has a bearing on the role of the Planning Commission. Why do we need the Planning Commission, which isn’t a body that is mentioned in the Constitution? It was set up through an executive order. The relevant Constitutional body for devolution (vertical and horizontal) is the Finance Commission, but its powers were progressively diluted in the second half of the 1960s. To ensure inclusion, we need to ensure devolution to local bodies by routing and unifying devolution (Finance Commission, Planning Commission and Central schemes) through the Central and State Finance Commissions. Simultaneously, planning should be decentralised and aggregated upwards, instead of the present system of being top down. Once we accept this, the Planning Commission is no longer needed. It does some research and produces data too. However, there are private sources for such work and one need not object if the Planning Commission remains no more than a think tank. To return to the point, Rajiv Gandhi made a passing remark that only 15 per cent of public expenditure reaches the target beneficiary. Contrary to what many people think, this wasn’t because of corruption and leakage, but because of high administrative and delivery costs. Central Ministries and departments also eat into this money. In the social sectors, do we really need Central Ministries? Nor is it necessarily obvious that a Central template is desirable. For instance, assuming that we need to target infant mortality, in one district of the country, immunisation may be important. But in another district of the country, it might be ICDS. Stated differently, we can have a Central menu in terms of what the money can be spent for, say child health. But having done that, why should Delhi prescribe exactly what that money should be spent for?

The word expectation can be used in two different senses. First, what is desirable? This is a normative strand. Second, what is likely to happen? And the two should not be confused. On the first, my expectation is that one should announce the scrapping of all such Central schemes and the scrapping of the Planning Commission. On the subsidies, we don’t need the fertiliser and petroleum product ones. Even on food and perhaps education subsidies, this isn’t the way it should be done. The identification of the poor should be decentralised. Beginning with the Ninth Five Year Plan, this was experimented with, using some criteria. During the Tenth Plan, 13 specific criteria were mentioned. However, apart from Rural Development Ministry’s survey, we don’t seem to be interested in this decentralised identification. However, on the second point, is this likely to happen? Of course not.

Inclusion has been on the agenda of both UPA governments. And inclusion has been interpreted as increased public expenditure. Budget expectations shouldn’t be about liberalising banking, insurance, pensions and retail and reforming labour laws. But they should certainly be about improving the efficiency of public expenditure. But that hasn’t happened and the outlay-outcome exercise was quickly given up. Why? The outlay-outcome exercise is pertinent only at the level of citizen interface with State and local governments, especially the latter, not at the level of the Centre. Since we continually invoke Rajiv Gandhi’s name, how about pushing the decentralisation and devolution agenda in Budget 2011-12? For example, let us pass a law stating that we will never use the word “Centre” again. Centre suggests that Delhi is important and everything else is the periphery. For the record, the word “Centre” is never used in the Constitution. The Constitution refers to a “Union”. That’s what India is, a Union of States. Continual usage of the word “Centre” reflects a mindset that Delhi knows what is best. That’s not the case. Had Delhi known what was best, there would no longer have been any poverty in India and we would not have worried so much about inclusion so many years after Independence.

However, none of this is likely to happen. Consequently, when it comes to Budget Day, we will be preoccupied with whether the fiscal deficit/GDP ratio is actually 4.8 per cent in 2011-12, as was promised in the rolling plan, and whether the 5.5 per cent promised in the budget estimates for 2010-11 was adhered to. We will worry about the nitty gritty of whether nominal GDP growth rate projected is 13.5 per cent or 14 per cent. The inclusion agenda will remain unfulfilled.

Bibek Debroy is Distinguished Fellow, Skoch Development Foundation

Expectations from the Budget

[Arjun]

However, you seem to forget that there's one crucial difference between the Dynasty and RSS. And that is the Dynasty is unashamedly political creatures - you may not agree with their politics but you cannot deny that - and they regularly take part in elections and win some and loses others.

The RSS on the other hand is supposed to be an apolitical organisation which is not answerable to voters during elections. Yet it can decide on who's going to be the FM and that FM actually consults the RSS before formulating the budget which can affect my wallet.

Amit, getting back to you on this one as promised.

Firstly, the RSS cannot be prevented from having views on political, social and economic issues. Their rights on this are the same as any other individual or organization - as example, the Church in general and the Vatican in particular regularly comes out with its own commentary on various political and economic issues - far more so than probably any other religious organization around the world (possibly excluding the Mullahs !). Also, the Finance Minister cannot and should not be prevented from consulting with and seeking the opinion of organizations of various shades. What I do agree on is that there should be a separation of church and state - and that if it is correct that the BJP was following the diktat of the RSS on this matter - that should not have been allowed. This is just as reprehensible as the Republicans under Bush following the Vatican diktat wrt views on abortion and stem cell research.

The bottomline is that the PM is supposed to be the head of the executive in India, and we need to make sure that this person is not just a figurehead taking orders from other personalities, but is indeed the head responsible for all decisions - as envisaged under the constitution.

This brings me to the second and far more serious instance where India has seen a violation of this basic principle. As far as the elections that brought in UPA-1 go, the voting was based on the expectation that the Queen Bee would become head of the executive. What followed was a divorce of powers and responsiblities where MMS was designated as head of the executive, while SG retained all powers without the responsibility. In the elections that brought UPA-2 in, the message was that MMS would head the executive branch - but what do we see instead - the Dynasts continuing to force their decisions (eg of the Advsory Council etc) on that of the supposed head of the executive.

I see this is a far far more egregious violation that needs to be tackled on an urgent basis, so the rule and spirit of the constitution is brought back to the country's governance.

It is something that was always the contentious issue in NDA's time...A bunch of shadowy characters with (sometimes) funny names influencing policy - and these guys never face the ballot box...

Hmmm, so we are now reduced to racist comments on 'funny names' as the last resort? I have heard Indian names being described as funny by Christians and other non-Hindus, but never by a Hindu so far. I guess there is always a first to everything ! On the other hand, I may be assuming too much about your religious allegiances - if so, my apologies.

[somnath]

The union budget, from MMS's famous 1992 "sarfaroshi ki tamanna" effort ( by far the best speech and policy statement ever, IMO), has been seen as a pulpit for policy statements...The fact however, is that the budget is no more and no less than a statement of accounts...The substantive policy statement made need legislative work, and is often out of the purview of the Finance Ministry! On taxes, most of the work on direct taxes is done, ditto for indirect taxes (with CENVAT) - and the balance would be done once GST is implemented..FMs going big on policy statements without enough homework typically have to regret at leisure - the prime example, again being our good friend Yashwant Sinha, who deservedly earned the sobriquet of "rollback Sinha"!

But simplifying expenditure patterns on govt is a good idea...In any case most expenditure is carried out by state govts - central govt should allocate an amount on a broad head and leave it to the states to spend it in the best way they can..

[Suraj]

Personally, I find rolling back reform measures the least of any finance minister's foibles. It is the nature of coalition politics than if anything is attempted, one must account for additional slack to give as compromise, if not be entirely compelled to rollback some measure. When a major policy measure is announced, the FM must by default overreach, so that concessions can be made, leaving behind enough meat, if there's sufficient consensus within his party to back the measure after compromises are addressed. If not he's compelled to, well, roll back the measure. NDA would have done even better than it already did had it given Jaswant Singh the FM's position earlier, instead of just between 2002-04, because he was a man whom ABV backed further than anything YS got.

On the other side of the aisle, PC was a bad candidate for FM under MMS - the latter simply lacked the force of personality to back PC, who in turn was far too pushy and wont to rub others the wrong way, to be left to flail without support from a strong PM. Likewise, under the present scenario, I think a far better option from an economic/administrative perspective would be for PM and MMS to exchange roles; the former has much greater authority within the party to be effective as PM when compared to MMS. Unfortunately, thanks to the dynasty dynamics, that itself is the reason PM can't be PM.

[Suraj]

Enough of MMJ and Arjun Singh on this thread please. The existing posts about them will be deleted shortly.

[somnath]

Hmmm, so we are now reduced to racist comments on 'funny names' as the last resort?

Arjun-ji, wasnt being racist, only attempting (admitedly bad) humour!

the key point is different though..there will always be special interest groups and lobbies, especially in a democracy...But an unelected group of people actively deciding policy is not acceptable...And RSS to an extent, tried doing that in NDA's time..From the appointment of key ministers, to policy-making - we had this strange spectre of cabinet ministers regularly visiting Jhandewalan for direction and advice...To that extent, what we had in UPAI between INC and Left was better - a bunch of guys actively negotiated positions on various policies - but both groups were political, and had been elected..And would need to go back to the people next time around..EVen appointment of Raja - it was (a contemptible) compromise, but at least we know that the key actors will need to go back to the people next time around....The LEft saw the impact of its cussedness in 2008...DMK will likely see it next year..RSS is a different, more pernicious influence - it is not accountable to anyone, but lords over India's biggest opposition party (and ex-ruling party!)..Anyway, enough OT on RSS..

[Arjun]

Hmmm, so we are now reduced to racist comments on 'funny names' as the last resort?

Arjun-ji, wasnt being racist, only attempting (admitedly bad) humour!

Ok ... Though this is OT, would help to know your religious affiliation so there is no inadvertent offense caused. I recall one ex-moderator who used to be in the Army, who though being born Hindu took serious offense to being termed as Hindu by others on the thread.

If it helps, I can do the same in my case - I am born Hindu but would not really describe myself as being a practicing one. I would describe myself as an agnostic, but with a very strong bias AGAINST dogma-based religion. In that sense, you could say I land up actively supporting Hinduism as the largest of the non-dogmatic faiths globally.

RSS is a different, more pernicious influence - it is not accountable to anyone, but lords over India's biggest opposition party (and ex-ruling party!)

Like I have stated earlier, if RSS did remote-control the BJP on certain matters (which I have no active proof of) that is certainly not acceptable.

But to me what is far more pernicious as well as the problem we are facing here and now is the divorce of power and responsibility in the current dispensation. Please take a look at my previous post. What are your thoughts on that issue?

[somnath]

would help to know your religious affiliation so there is no inadvertent offense caused

No offense is taken by me on antyihng around religion - I am quite blase about it..(My "practice" of hinduism is a dependent variable, dependent on projected outomes, for example, used to become a HUGE believer just before exams , and even bigger before the results!)

But to me what is far more pernicious as well as the problem we are facing here and now is the divorce of power and responsibility in the current dispensation. Please take a look at my previous post. What are your thoughts on that issue?

It is a less-than-desirable situation..Primarily because it devalues the office of the PM to a level that sets a very bad precedent...Having said that, the principals in this case are all political animals...Sonia Gandhi and her cohorts (Digvijay Singh etc) will need to go back and fight elections...To that extent, people can make a choice..And remember, its not the first time its being "tried"...The Congress Syndicate was attempting something similar with Indira Gandhi too..Its another matter that it backfired..One can argue that Shiv Sena is run similaryl as well...Whoever be the nominal Chief Ministre, eal power always resided with Balasaheb..

[Arjun]

It is a less-than-desirable situation..Primarily because it devalues the office of the PM to a level that sets a very bad precedent...Having said that, the principals in this case are all political animals...Sonia Gandhi and her cohorts (Digvijay Singh etc) will need to go back and fight elections...To that extent, people can make a choice..And remember, its not the first time its being "tried"...The Congress Syndicate was attempting something similar with Indira Gandhi too..Its another matter that it backfired..One can argue that Shiv Sena is run similaryl as well...Whoever be the nominal Chief Ministre, eal power always resided with Balasaheb..

One could use the same logic for the BJP and for Bush. The BJP needs to fight elections and their relationship with the RSS is well known so there is actually nothing wrong with BJP taking direction from the RSS on certain matters. or that Bush' evangelist sympathies were known when he was elected so the Vatican -inspired polices are fine.

No - I don't believe that logic can be used at all. And no excuse can work for the BJP, Shiv Sena or for the INC. By virtue of being the ruling party at the center, the INC issue is now the single most urgent and pressing one to be rectified forthwith and after the corruption issue certainly the one the media needs to highlight as the biggest lacunae (along with dynastyism in politics - which is feudalism back in another guise in the country).

[somnath]

Economic Survey highlights..

http://www.business-standard.com/ecosur ... /126915/on

[Nihat]

Following on

Economic Survey: India to grow at 9 per cent

New Delhi: The Indian economy is expected to grow at 8.75 to 9.25 per cent in the financial year 2011-12, according to the Economic Survey 2010-11. The Economic Survey 2010-11 was tabled in the Lok Sabha by Finance Minister Pranab Mukherjee on Friday.

According to the Economic Survey there is an urgent need for persistent anti-inflation monetary stand as inflation may stay elevated due to crisis and unrest in West Asia. Food Price and demand pressure are likely drive inflation up.

According to the survey, rising food inflation has underlined a need for larger investment in agriculture.



Savings and investment rates are likely to rise further and the Government is implementing gradual exit from stimulus.

Production of food grains is estimated at 232.1 million tonnes according to the Economic Survey.

According to the Survey, Gross Fiscal Deficit stands at 4.8 per cent of GDP down from 6.3 per cent last year.

The trade gap also narrowed to $ 82.01 billion in April-December 2010.

The social programme spending stepped up by 5 percentage points of GDP over past 5 years.

Growth broad based with rebound in agriculture, continued momentum in manufacturing and private services.

The report also warned that there has been no significant capacity expansion in core industries.

"Likewise, slow rate of capacity edition in physical infrastructure sector is constricting industrial sector growth. Capacity edition in core sectors and renewal of bottlenecks would spur industrial sector output in the medium to long term," it said.

The Economic Survey has also suggested various reforms for overall growth of economy. Better convergence of the Schemes to avoid duplications and leakage and to ensure benefits reach to the targeted groups.

Private sector participation in social sectors, such as health and education in the form of public-social-private partnership could be one of the possible alternatives for supplementing the on-going efforts of the Government.

It also underlines the urgent need to streamline land acquisition and environment clearance for infrastructure projects. Bringing parity between the compensation package admissible under the Land Acquisition Act, 1894 and that applicable to land acquisition under the National Highways Act, 1956 is also an important outcome.

The survey has propsed a National Forest Land Bank, with clear paper work and titles to reduce approval time for forest clearance.

The survey also speaks about second Green Revolution with technological break-through in agricultural sector. And a need for prioritisation of targeted development of rainfed area and effective marketing links be ensured for better returns to the farmers.

There ia a proposal of further improvements in the Mahatma Gandhi National Rural Employment Guarantee Scheme suggested such as shifting to permanent asset building and infrastructure development activities, reducing transaction costs, better monitoring and extension of the scheme to urban areas.

[amit]

This is getting OT so I'll just make one post and apologies in advance to Suraj

This brings me to the second and far more serious instance where India has seen a violation of this basic principle. As far as the elections that brought in UPA-1 go, the voting was based on the expectation that the Queen Bee would become head of the executive. What followed was a divorce of powers and responsiblities where MMS was designated as head of the executive, while SG retained all powers without the responsibility. In the elections that brought UPA-2 in, the message was that MMS would head the executive branch - but what do we see instead - the Dynasts continuing to force their decisions (eg of the Advsory Council etc) on that of the supposed head of the executive.

I see this is a far far more egregious violation that needs to be tackled on an urgent basis, so the rule and spirit of the constitution is brought back to the country's governance.

Arjun, before I type my response to this let me state something very clearly.

I'm no great fan of Sonia Gandhi because I think she's a very lackluster leader who does not have the dynamism or foresight to be a strong political figure. I don't know if she's personally corrupt - that's for the folks who have accused her of being so to prove and in a way I really welcome the BJP whitepaper on black money which names her and her husband of having Swiss accounts. Hopefully when the BJP is next in power they will walk the talk and undertake an investigation on this. If they don't then, in my eyes at least they will lose all credibility.

Now having said that, I'd like point out that in a parliamentary system of government, the voters elect a party and not a persona like in case of the US Presidential elections. As such that's why the party which wins the election "elects" the PM. Everybody knows that Sonia calls the shots in INC, however, due not to a small measure the active opposition to a foreign-born person becoming the PM carried out by the BJP, led by Sushma Swarj ji - who threatened to cut off her hair, if Sonia became PM - the compromise candidate for PM was MMS. Of course various conspiracy theorist say that MMS was always intended to become the PM so that Sonia could call the shots from behind the scenes, I don't know what's true.

However, the fact remains that however weak and vacillating a PM MMS was/is, the UPA won the elections, this time with a bigger majority. Now the question you need to ask, in whom did the electorate repose its faith? MMS, INC or Sonia? Or was it a combination of all three?

And if, due to all these scams, the electorate decides to punish the present dispensation next time around and vote BJP to power, who will they be punishing? MMS, INC or Sonia? Or would it be a combination of all three?

The point of what I'm trying to say is that Sonia swims or sinks with the fortunes of the INC. And that's why I fail to understand all the conspiracy theories about the Dynasty manipulating MMS in order to get nasty things done without any accountability. For a politician or political party what other accountability is there save the elections?

Also, the Finance Minister cannot and should not be prevented from consulting with and seeking the opinion of organizations of various shades. What I do agree on is that there should be a separation of church and state - and that if it is correct that the BJP was following the diktat of the RSS on this matter - that should not have been allowed. This is just as reprehensible as the Republicans under Bush following the Vatican diktat wrt views on abortion and stem cell research.

Sure the FM should consult all stakeholders and with the BJP in power the RSS was certainly a stakeholder. However, the problem I have with this is not just the RSS part - which as I said before are manned by able people but who are not answerable to the people of India because they are not political creatures. I'm against the level of involvement which YS had with the RSS. See this link

He says that the statement of Dattopant Thengdi, one of the senior most leaders of the RSS, calling him an "aparadhi" (culprit) in a public meeting in Delhi and accusing him of deviating from the path of Swadeshi, "affected me greatly".

"I drafted a brief letter of resignation and was planning to go to the Prime Minister to hand it over when perchance I get a telephone call from L K Advani... Advani's pep talk made me give up the thought of resigning," he says.

He prefaced it saying that one reason for his unhappiness in the finance ministry was that "I had lost the confidence of the Swadeshi Jagran Manch and the RSS, with whom I had worked so closely earlier in the swadeshi movement." There was a widening communication gap between "them" and "us", he says.

Here we had a FM who wanted to quit because he was sad that he lost the confidence of a fringe group like the SJM and of course the RSS. Do you still think YS' "consultations" with RSS and SJM were of a routine nature, the type which FMs do with various interest groups like chambers of commerce? And why is that the other BJP FM after him felt no need to do the same?

The bottomline is that the PM is supposed to be the head of the executive in India, and we need to make sure that this person is not just a figurehead taking orders from other personalities, but is indeed the head responsible for all decisions - as envisaged under the constitution.

Certainly the PM is supposed to be the head of the executive. But him taking orders from other personalities is a bit of a stretch. We are talking about him taking orders from the President of the INC and INC constitution does not say that the PM and President of the party has to be the same person. Also as I said earlier the President, just like the PM, sinks or swims with the fortunes of the INC at the hustings so, trying to portray Sonia as a distant being remote controlling affairs in the Congress is a bit of a stretch IMO.

If the Congress tangles itself into a pretty mess due to meddling by Sonia she would suffer just as much as anyone else in the party. The Indian electorate has shown plenty of times that it can be pretty unforgiving. So if you are not one of those conspiracy theory believers who think all EVMs are rigged then you'd have to agree that Sonia is very much vulnerable to bad policy decisions/corruption et al as anyone else in the INC.

Does that exonerate her? Hardly. However, the comparison between her and her family (Dynasty) with RSS remote control is IMO a bit of a stretch.

Anyway last post on the issue. Back to the Economic Survey and the impending Budget.

[Singha]

there was a report on IR yesterday on TV.

- cash reserve at historic low of 5000cr
- payments to suppliers deferred for first time in its history apparently
- very little of the 1000km/yr of new track promised done
- the reported asked people where lalu or didi was better - uniformly they gave didi 0 and said while lalu atleast spent his time on railways, didi spent all her time on WB politics
- the reporter did a walkthrough of some bathrooms on a running train and gave 0 for smell and hygiene.

the IR seems to have fallen into a disaster during didi's long reign ?

[somnath]

^^^ Mamta Bannerji is a disaster..God save WB!

[Nihat]

Budget 2011: What lies in Pranab's kitty?

Posting in full because important snippets are scattered.

New Delhi: Finance Minister Pranab Mukherjee will try to ease inflation-hit voters' pain with a budget heavy on spending for food, fuel and fertiliser subsidies, while selectively lifting taxes to meet fiscal targets.

Mukherjee, known to compromise on fiscal reforms to meet political needs, faces a tough time reining in inflation while keeping the economy on a high-growth path when he presents his annual budget for 2011/12 in parliament on February 28.

Last year, India rolled back about $10 billion of a $40 billion stimulus package implemented during the 2008 global financial crisis.

Budget 2011: What lies in Pranab's kitty?

This year, the Congress party leadership is unlikely to make tough belt-tightening decisions. It is on the back foot over corruption scandals and faces elections in four major states.

Stubbornly sticky inflation in Asia's third largest economy, driven by food and other commodity prices, combined with a high fiscal deficit has prompted repeated calls from the central bank for fiscal consolidation.

However, New Delhi tends to bank on higher revenues rather than spending cuts, a formula that worked in the current fiscal year thanks to a windfall from the sale of 3G mobile bandwidth.

Below are some questions and possible answers that the finance minister faces over the budget:

Will India Further Trim Fiscal Stimulus?

Since Mukherjee wants to reduce the fiscal deficit to 4.8 per cent of gross domestic product in 2011-12 and 4.1 per cent in 2012-13, he is expected to continue a gradual rollback of the fiscal stimulus package unveiled during 2008 global crisis.

In last year's budget, he trimmed the package by raising factory gate duties on all major items to 10 per cent from 8 per cent and reimposing the taxes on crude oil, petrol and diesel that were withdrawn in 2008.

The government rolled out its stimulus package in three phases during 2008 and 2009 by cutting taxes and lifting spending on infrastructure to prop up demand.

Meanwhile, an effort to overhaul India's tax system has been deferred until next year, meaning Mukherjee may hold off on raising tax rates across the board and instead lift rates only for goods such as cars and commercial vehicles, while bringing more services into the tax net.

Will New Delhi Follow The Fiscal Consolidation Path?

Partially. Mukherjee could rely on a surge in domestic demand and global recovery to drive tax receipts to meet fiscal targets.

The Indian central bank, which has raised rates seven times since March to tackle high inflation, hopes the government moves towards fiscal consolidation in 2011/12.

The finance minister may also marginally lower government borrowings below this year's 4.47 trillion rupees ($98 billion) to show his commitment to fiscal consolidation, though he will not have the cushion of revenue from the 3G spectrum auction in the new year.

The government could raise up to 400 billion rupees from the sale of stakes in companies, partially offsetting a swelling food subsidy bill estimated at 700 billion rupees. A downturn in the stock market, however, has curbed investor appetite for new issues for the time being.

What Are The Options On Oil Subsidies And Duties?

The widening gap between international crude prices, now over $100 a barrel, and domestic retail prices of diesel, cooking gas and kerosene, could force Mukherjee to slash levies on imported crude and domestic petroleum products.

High inflation and upcoming state elections mean Mukherjee will not pass along the full impact of rising crude prices.

The oil ministry has urged Mukherjee to eliminate the 5 per cent customs duty on crude and reduce duties on petrol and diesel to 2.5 per cent from 7.5 per cent.

How Can India Curb Inflation Without Hurting Growth?

This is a major challenge. India wants its economy to grow at 9 per cent in 2011/12, up from about 8.5 per cent this fiscal year, even as inflation remains well above government targets, at 8.23 per cent in January.

More infrastructure would help ease bottlenecks. The Planning Commission, a government body, has recommended an increase of up to 20 per cent from last year's $38 billion budgeted for sectors including roads, ports, airports and railways, as well as for health and education.

Mukherjee may direct funds towards more production of milk, poultry, fish, vegetables and fruit, which have driven food inflation running at 11 per cent annually.

Will The Finmin Announce Major Reforms?

Probably not. The government is focused on blunting opposition attacks over a series of corruption scandals and may announce a broad parliamentary probe into the huge 2G spectrum scandal. At this time, it is unlikely to try anything controversial.

Mukherjee will therefore probably not announce any major economic reforms such as opening the retail sector more broadly to foreign investors or raising foreign investment limits in insurance, although some reforms may be announced later.

He may, however, announce the set-up of an infrastructure debt fund and initiatives to deepen the corporate debt market.

Will There Be Any Steps To Address The Current Account Gap?

The finance minister and central bank have expressed concern over the high current account deficit and the reliance on fickle short-term portfolio inflows to fund it.

More exports are needed, and the budget may include incentives for labour-intense export sectors such as textile, leather and wood products.

The current account deficit is on track to touch 3.5 per cent of gross domestic product this fiscal year, which the central bank governor has said is unsustainable.

[amit]

the IR seems to have fallen into a disaster during didi's long reign ?

Didi is an unmitigated disaster in any administrative post. And more so her current assignment where she's more busy at toppling the Leftists in West Bengal. I feel really sad for my State. The first time in more than 30 years there's a chance to get the Leftists out of power. And whom do we have as alternative? Mamata Banerjee.

[chackojoseph]

At FI, we have asked industry to comment on their expectations.

Indian Budget 2011: Ensure people welfare says Suresh Rao, Mindteck

Budget 2011: GDP growth of 10% says Souma Das, VP Sales and MD, Infor

[Arjun]

Sure the FM should consult all stakeholders and with the BJP in power the RSS was certainly a stakeholder. However, the problem I have with this is not just the RSS part - which as I said before are manned by able people but who are not answerable to the people of India because they are not political creatures. I'm against the level of involvement which YS had with the RSS. See this link

Ok, the link proves your point regarding YS....There is a fairly thin line between 'taking directions from' and 'being influenced by ideas of'....I am surprised that YS did not even try and couch it as a case of the latter, so there really is no fig leaf for him !

The point of what I'm trying to say is that Sonia swims or sinks with the fortunes of the INC. And that's why I fail to understand all the conspiracy theories about the Dynasty manipulating MMS in order to get nasty things done without any accountability. For a politician or political party what other accountability is there save the elections?

I fail to understand the distinction you draw between the BJP/RSS case and the INC one. If winning elections is the only criteria of accountability, then what is your objection to the BJP/RSS relationship? Surely voters voted for the NDA knowing fully well that they were a part of the Sangh Parivar and closely linked with RSS. Is your case that NDA lost the subsequent elections, in which case the relationship is proven to be bad now, but as and when BJP wins again the relationship would be justified in your eyes?

If accountability is decided solely by going back to the voters every 5 years - then the only conclusion is that there is nothing wrong with either BJP/RSS or INC shenanigans, as long as they keep winning the elections. So there is really nothing much to debate out here - the only debate is in front of the voters every 5 years.

I would much rather determine the appropriate governance model for the country based on the spirit as embodied in the constitution.

Now there are again 2 models out here. You could say that the Indian model envisages only parties being elected, and not individuals for leading the executive. So the voters voted for INC, and it is upto the INC to split powers as it determines fit between PM, party President etc and it does not really matter if the PM takes the leading role or the Party President does. Well if that is your argument, then again the BJP / RSS case can be justified by the BJP as and when it comes to power again. The BJP can appoint some RSS functionary to a BJP party post - which would be entirely justified since the RSS is meant to focus on social issues and the BJP on political ones so there is no conflict in an individual belonging to both organizations. Then the BJP can use the fig-leaf of devolving some powers to this party post and thereby justify aligning BJP policies with the RSS - after all individuals should not matter but only that the party as a whole should formulate policies !

The other model - which I am personally in favor of, goes back to the Indian constitution, and I am enclosing a relevant description of the governance model envisaged:

The constitutional head of the Executive of the Union is the President. As per Article 79 of the Constitution of India, the council of the Parliament of the Union consists of the President and two Houses known as the Council of States (Rajya Sabha) and the House of the People (Lok Sabha). Article 74(1) of the Constitution provides that there shall be a Council of Ministers with the Prime Minister as its head to aid and advise the President, who shall exercise his functions in accordance to the advice. The real executive power is thus vested in the Council of Ministers with the Prime Minister as its head.

So the titular head of executive is the President of the country - but he is supposed to exercise his / her functions in accordance with the advice of the Council of Ministers headed by the PM. So real executive power is vested with the PM. Going by the spirit of the constitution, the PM should be the leader who takes the final decisions and takes responsibility for all matters of state. Per this spirit, neither is the BJP/RSS relationship correct nor the MMS/SG one.

[putnanja]

Isn't the current UPA government taking directions from NAC? The NAC is drafting laws for which the funding isn't identified. Most of them are mainly political.

[ShauryaT]

Isn't the current UPA government taking directions from NAC? The NAC is drafting laws for which the funding isn't identified. Most of them are mainly political.

The trick here is the separate the fact that the NAC is drafting/pushing these bills and focus on the merits of the bills themselves. If members can do that, there will be a healthy debate.

So in that spirit, yes the NAC pushes for politically motivated ideas to bribe its likely voters through government funded freebies and doles. MGNREGA and the food bill being prime examples.

It is also important that it is the head of the executive that takes the final call on matters for regardless of who he may consult, it should be his call or the very essence of our democratic structures come into question.

[Theo_Fidel]

And whom do we have as alternative? Mamata Banerjee.

Sadly the first terms of these inexperienced shrill types are always disasters.

Didi will do better at the second term, when she at least thinks a bit more about governance. Think Mayawati. Until then WB has to grit its teeth and suffer thru..

[ramana]

Theo, Telegraph, Kolkata graphic on Indian Economy Score Card:

[ramana]

2009-10 was a very bad year in all aspects.

[Theo_Fidel]

2009-10 was a very bad year in all aspects.

Couldn't have been all bad, we had 8% GDP growth. How did that happen despite the obvious visible slow down.

In other news, good to see the NE growing strongly.

http://economictimes.indiatimes.com/new ... 554878.cms

NEW DELHI: The northeastern state of Arunchal Pradesh clocked the highest economic growth rate in the country of 22.43 percent in 2009-10, followed by Mizoram and Goa, according to a government report.

Arunachal Pradesh's Gross State Domestic Product (GSDP) rose by 7.51 percent in 2008-09.

Minister of State for Planning Ashwani Kumar informed the Lok Sabha that Mizoram and Goa registered GSDP growth of 13.95 percent and 13.03 percent, respectively, in 2009-10.

However, the GSDP growth performance of Rajasthan -- at 3.95 percent -- was the lowest among the 32 states and Union Territories in the country last fiscal.

The other two states where the pace of economic expansion was low were Andaman and Nicobar and Karnataka , at 4.39 and 4.99 percent, respectively.

Kumar also said in his reply that as many as 19 states and Union Territories recorded economic expansion at a rate over 8 percent during the year.

[Suraj]

The official website of the latest economic survey is here. A wealth of information for the watchers. Here are a few:
GDP
Chap 1: State of the Economy and Prospects
GDP advance estimate is Rs.78,77,947 cr (~$1,750 billion) (section 0.1: Key Indicators)
Gross Domestic Savings (Table 1.5) is up to 33.7% from 32.2%
Investment/GDP is up to 36.5% from 34.5%
These two underpinnings remain solid going into a very testy 2011...

Trade
Chap 7: International Trade
See Box 7.4 : SEZs now comprise 30% of all exports from India, to the tune of Rs.223,000cr (~$50 billion) between April-Dec 2010, exceeding the Rs.220,000cr in exports for the whole of fiscal 2009-10.

[somnath]

The trick here is the separate the fact that the NAC is drafting/pushing these bills and focus on the merits of the bills themselves. If members can do that, there will be a healthy debate.

So in that spirit, yes the NAC pushes for politically motivated ideas to bribe its likely voters through government funded freebies and doles. MGNREGA and the food bill being prime examples.

It is also important that it is the head of the executive that takes the final call on matters for regardless of who he may consult, it should be his call or the very essence of our democratic structures come into question.

There isnt much that can be faulted on NAC itself...It is designed like an internal INC think tank, headed by the Congress President who is an elected MP, and works primarily on the domain of legislative policy suggestions (a miniature, "focussed" Brookings in a manner of speaking, if you will)...The composition of the NAC too is unexceptionable - it has members from both sides of the fence...For a Jean Dreze in there, there is also a Naren Jadhav...(Naren J is an ex Chief Economist at RBI, one of the sharpest guys around, decidedly "neo liberal", btw also carries an inspiring personal story)...One can argue on relative merits of what the NAC proposes, but it is undeniable that their suggestions are grounded in solid intellectual inputs from fine brains....

Compared to that, the RSS represents (or used to in NDa's time) direct intervention on executive polcy (not legilative suggestions that need to go to PArliament) by a shadowy group led by people who never fight elections and whose intellectual depth doesnt exceed the nullah outside their office in Jhandewallan...

[somnath]

2009-10 was a very bad year in all aspects.

Not really..In hindsight, quite respectable in all respects..As widely expected, the final GDP growth numbers for last year were better than the earlier estimates (someone here was casting aspersions on 2010-11 numbers as being conjecture!)...At 8%, to put it in perspective, it is almost as good as NDA's best year (8.6%), which in turn was massively aided by base effect..(Just to be sure, I am not doing an NDA-UPA comparison here, just pointing out how far the trend levels have travled in the last 6-7 years)....And 2010 wasnt a base effect flash in the pan, as the curent year numbers (8.6%) shows...BTW, I think when the final numbers come out, we will see the 2011 numbers revised upwards, closer to that 9% mark....

The key indicators are all fine - savings rates are up, the share of houselhold financial savigns continues its upward growth, imports and exports both are up...The worrying point in inflation, but the good news is that the govt has taken the political call that it is better to trade off growth for inflation.....

One last point...the quality of the Economic Survey continues to be exceptional under Kaushik Basu - he is perhaps the best CEA after Shankar Acharya...(taking parochial pride in the fact both are bengalis )...

[Arjun]

There isnt much that can be faulted on NAC itself...It is designed like an internal INC think tank, headed by the Congress President who is an elected MP, and works primarily on the domain of legislative policy suggestions (a miniature, "focussed" Brookings in a manner of speaking, if you will)...The composition of the NAC too is unexceptionable - it has members from both sides of the fence...For a Jean Dreze in there, there is also a Naren Jadhav...(Naren J is an ex Chief Economist at RBI, one of the sharpest guys around, decidedly "neo liberal", btw also carries an inspiring personal story)...One can argue on relative merits of what the NAC proposes, but it is undeniable that their suggestions are grounded in solid intellectual inputs from fine brains....

Compared to that, the RSS represents (or used to in NDa's time) direct intervention on executive polcy (not legilative suggestions that need to go to PArliament) by a shadowy group led by people who never fight elections and whose intellectual depth doesnt exceed the nullah outside their office in Jhandewallan...

You are right....the RSS has to learn to dress up and provide more sophisticated fig-leaves for their interventions by constituting advisory councils with leading name figureheads. This they need to certainly learn from the Dynasty.

[vina]

Nah. The BJP needs to get rid of the SJM kind of luddites first. The SJM belong to the CPI/CPM or CPI-Marxist-Leninist and Maoists. The SJM are just "believing" Marxists with the same kind of economic outlook that is statist and status quoist.