I Congratulate Editor of
the newspaper 'Economic Times' for providing excellent
articles in Today's edition (16th December 2012 ) on manipulative attitude of
Government, on medicine for curing sick economy prescribed by learned Finance Minister
Mr. P Chidambram and on disrespect to and mockery of Democracy
undertaken by greedy politicians sacrificing interest of the common men and
that of the country only for the sake of advantage politicians likely to gain in enhancing their
individual and political power.
In Editorial titled as 'Bitter medicine' the
learned editor has rightly told that it is the politicians who are to swallow
bitter medicine, none other. Because it is politicians who have in fact damaged the economy and it is they who
are responsible for non performance of Ministry and that of public sector
undertaking.
In another article titled 'Wrong time for Jugaad' the writer Mr.
Mythli Bhusnurmath has rightly concluded that rate cut is not the
only panacea for all ills economy is suffering and for poor credit
delivery from public sector bank or for growing bad assets in these banks. Rate
cut cannot guarantee credit growth in bank and GDP growth for the
country as long as bankers, ministers and administrative officials are weak,
inefficient, and ineffective and corrupt and as long as politicians focus and
manipulate policies as per ther sweet will for political gain. As a matter of
fact Interest less is less responsible for sickness of banks and sickness of
overall economy of the country as the poor movement of files in all offices and torturous treatment to honest
and perfect businessmen and servicemen are.
Similarly Mr. Raghu Krishnan has very rightly said that the way
government is manipulating majority in Parliament , the way political parties
like SP and BSP or parties like DMK and AIADMK or Congress Party and BJP behave
in Parliament, the way debate and discussion is conducted , the way politicians
ignore the opinions expressed by their opponents, the way elected
representatives are mandated to vote as per whims of their high command and the
way political masters play dual game to cheat the voters: they say one thing
and act other way,---------- it is the need of the hour to conduct referendum on vital
issues like FDI in retail or Yes to Nuclear bill or on other crucial national
issues like reservation in promotion demanded by Mayawati and supported by leaders of BJP and congress Party.
When MPs are bound to act as per whips of high Command , it snatches the freedom of MP . One can say that democracy becomes victim of a few leaders of ruling party or one may say that Parliament is hijacked by High Command of ruling party.Voting on any bill under the threat of WHIP in Parliament is simply a dramatic act to kill the spirit of the democracy and to perpetuate dictatorial rule under the guidance of a few leaders of ruling party under the whims of High Command. There is no one to listen the voice of common men .
When MPs are bound to act as per whips of high Command , it snatches the freedom of MP . One can say that democracy becomes victim of a few leaders of ruling party or one may say that Parliament is hijacked by High Command of ruling party.Voting on any bill under the threat of WHIP in Parliament is simply a dramatic act to kill the spirit of the democracy and to perpetuate dictatorial rule under the guidance of a few leaders of ruling party under the whims of High Command. There is no one to listen the voice of common men .
People of India in fact have lost
faith in their elected representative, in politicians and consequently and pathetically
in Parliament, in democracy and in so called secularism too.
I once again congratulate the editor of Economic times and other
writers for their candid opinion on crucial issues and for giving the readers
such good articles. I salute the boldness and courage shown. I am
really astonished; I am regular reader of valued newspaper Economic times.
For the economy to revive, it is politics that has to swallow bitter medicine
Finance minister P Chidambaram has warned that some bitter medicine is required to restore the health of the economy. Well said. But who has to take the medicine, and who is to administer it? Since it is the finance minister who says this, it is easily assumed that economic agents have to take the medicine and the government would administer it, in the form of tough policy.
However, the constituent components of the nation that require real bitter medicine are the political parties and politicians. They and the manner in which they have arranged the affairs of the nation have let the people down. If growth today stands hobbled, and prices stay high, unreformed politics is to blame.
Capital formation in the economy has slowed to a crawl and farm production does not keep pace with the demand, resulting in food price inflation. Who is to blame? Our politicians are, squarely. Okay, the courts have banned mining in Karnataka and in Goa, starving steel plants of ore and drying up exports. Such bans err on the side of excess while administering a corrective.
But the corrective was necessitated, in the first place, by corrupt politics that focused on rent-seeking. The explanation is no different when it comes to excess/illegal mining of iron ore in Orissa or absent permission to mine abundant bauxite in the state. If babus fear to take decisions, as they do except under rare leadership, lest they land up in court or jail years later, it is because trust and public confidence have leeched out of the decision-making process.
Wrong time for jugaad
Tomorrow, the Reserve Bank of India (RBI) will announce its mid-quarter review of the monetary policy, 2012-13. Yawn! Not because the picture on the inflation front remains largely unchanged since its October review, even as there are faint signs that its policy of staying the course might be bearing fruit. But because even if it does cut policy rates, it is not going to make a significant difference to growth! Arate cut is no magic bullet.
On the contrary, as this writer has observed before, the problem this time round is the lack of quick-fixes. The time for both fiscal and monetary stimuli is over. In the immediate aftermath of the crisis, they bought us time — to ward off the worst and set our house in order. But we threw away that opportunity. So, there is no alternative now but to batten down the hatches and get on with the slow and painful job of fixing structural and policy glitches.
The government has made a beginning by sticking to its decision on allowing foreign direct investment (FDI) in multi-brand retail. But as subsequent events have shown, the political price to be paid makes it unlikely it will be able to push meaningful reforms on other fronts. We are in for a long haul. There is no other way.
In the interim, what the government needs to do is educate the public. It must tone down expectations of double-digit growth even as it tries to cushion the shock for the poor; not by handing out an endless series of unaffordable sops but by increasing employment opportunities by facilitating growth. Jugaad, our very Indian approach to finding quick-fix answers to problems, might be possible, nay even desirable, in other spheres. It is undoubtedly smart to use idle washing machines to make buttermilk.
But jugaad in economic policy can be catastrophic. Quick-fixes, like keeping interest rates artificially low or handing out ever more sops that the fisc can no longer afford, have long-term adverse consequences. They exact a heavy toll and cannot be easily reversed. The good news is the latest numbers for the index of industrial production (IIP) for October 2012 and wholesale price inflation for November suggest the RBI’s policy of staying the course might be bearing fruit.
Agreed, it is too early to draw any firm conclusions, especially since gyrations in our IIP numbers have increasing begun to look like the Sensex’s! However, as long as consumer inflation continues to hover dangerously close to 10%, the option of easing up on monetary policy is a non-option.
Factor in the element of suppressed inflation on account of administered or unadjusted prices for diesel, LPG, kerosene, coal and electricity and the case for a rate cut becomes even weaker. Meanwhile, foreign institutional investors have invested close to $21 billion to date and with the US Fed showing no let up in monetary easing, liquidity is unlikely to be a constraint.
In any case, it is a fundamental misconception that all it takes to kick-start a sputtering economy is to cut interest rates. If that were the case, the Japanese economy would be firing on all cylinders as interest rates have been close to zero for a more than a decade now. Closer home, the 50-basis-point reduction in April 2012 would have elicited a prompt response from industry. Instead, it is only now when government seems to have got into the act by showing some reformist resolve, that industrial activity is showing faint signs of revival. This suggests there are factors beyond interest rates that are holding back growth; factors that lie squarely in the government’s domain.
In such a scenario, trying to boost demand via interest rate cuts rather than working on increasing supply will only worsen inflationary pressures, near term. Yes, one could argue that growth has fallen more than anticipated as evidenced by the poor GDP growth of 5.3% in the second quarter of the current fiscal year. But if growth has fallen more than anticipated, inflation has risen more than anticipated. Moreover, the RBI has already cut the cash reserve ratio — the amount of money banks keep with the RBI — by 25 basis points to 4.25% in order to “pre-empt a prospective tightening of liquidity conditions” to support growth. It has also held out the promise of a “reasonable likelihood of further policy easing in the last quarter of 2012-13”.
Prudence, therefore, demands the governor keep his powder dry. For now! Indeed, the popular assumption that a rate cut alone is enough to lead to faster economic growth reminds me of the old joke on the uncanny parallels between two years, 1981 and 2005. 1981: Prince Charles got married. Liverpool was crowned soccer champion of Europe. Australia lost the Ashes. The Pope died. 2005: Prince Charles got married. Liverpool was crowned soccer Champion of Europe. Australia lost the Ashes. The Pope died. What’s the lesson to be learned? The next time Charles gets married, someone should warn the Pope! Likewise, don’t jump to hasty conclusions. Quick-fixes don’t lead to quick results!
Time for a referendum?
Mahatma Gandhi’s belief that the means were as important as the ends was sadly not reflected in the voting in Parliament on the motion seeking the revoking of the government decision to allow 51% foreign direct investment (FDI) in multi-brand retail. After their leaders vehemently opposed FDI in retail on what they termed a matter of principle, the SP’s 22 MPs and the BSP’s 21 walked out of the Lok Sabha at the time of voting, thereby enabling the UPA to defeat the BJP motion by 254 votes to 217 on December 5.
The pattern of voting in the Rajya Sabha on December 7 was even stranger, with the BSP siding with the UPA while the SP walked out once again, and the AIADMK motion was defeated by 123 votes to 102. Should principle now be spelt as principal, as in amount? Should quid pro quo be taken literally?
How else can one explain the prediction repeatedly made on TV news channels by political pundits that the CBI’s disproportionate assets (DA) cases against Mulayam and Mayawati could be a factor in how the voting on FDI went!
There had also been considerable speculation on television news channels of the BSP wanting the government to move a Bill on mandatory promotions for SC/ST employees as part of a backroom deal for supporting FDI. The farcical extent to which things could apparently be manipulated in the country’s highest forum was when TV news channels projected more than 10 different scenarios on how the voting could go some 24 hours before the Lok Sabha rejected the BJP motion.
The political pundits kept pointing out on the idiot box that the SP and the BSP would not vote against the UPA even if their leaders vehemently argued that FDI would hurt crores of farmers and small retailers. The fig leaf to cover the unabashedly unprincipled stand was that these regional parties —not just the SP, and BSP but the DMK with 18 Lok Sabha MPs — did not want to be seen as siding with the ‘communal’ forces.
Contrast that with the far more principled position taken by the Left parties and the TMC that did not let themselves be manipulated by any overt or covert Hand. As CPI (M) leader Sitaram Yechury put it, “We were against FDI, we are against FDI, and we will continue to be against FDI.”
The stand taken by the Left/TMC was far more principled than that of the BJP, which had reportedly considered 100% FDI when Atal Bihari Vajpayee’s NDA government was ruling the country. If properly implemented at a time when the government is strapped for funds, FDI could lead to the creation of muchneeded cold-storage infrastructure — warehousing and refrigerated transport — that could significantly reduce the 35% wastage of fruit and vegeables rotting in the post-harvesting stage.
However, the manner in which the proceedings were hijacked indicated that the merits and demerits of FDI had little to do with the voting that seemed to be all about saving the face of the UPA coalition government so that it could continue.
At the end of the voting on the Indo-US nuclear deal in July 2008, TV news channels kept playing the theme song of a Bollywood blockbuster titled Singh is Kinng while showing Manmohan flashing a V for Victory sign. At the end of the discussion on the FDI motion, should the theme song be one of “Voting can be manipulated”? The manner in which FDI was voted on makes one wonder whether major policy initiatives should not be put up to the people.
Any referendum in the world’s most populous democracy would be a very cumbersome and time-consuming process. However, even that could be better than the manipulative farce we have just witnessed! Cynics could argue that the Indian masses are not sufficiently educated to understand the nuances of an Indo-US nuclear deal or the 51% FDI in multi-brand retail. The cynics could even maintain that vast sections of the electorate are below the poverty line and could, therefore, be easily influenced by sops, whether in the form of free
colour TV sets or covert or overt cash transfers!
However, the results of the assembly elections in states like Tamil Nadu have clearly demonstrated that sops cannot keep a party in power when some of its leaders are widely perceived to be involved in 2G and other gargantuan scams. As Abraham Lincoln once famously observed, “You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.”
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