Open Forum

New Delhi, 14 June 2007   

Tackling Inflation

Sustainable Approach Necessary

 By Dhurjati Mukherjee

The Economic Survey rightly took the view that inflation was due to a shortfall in the supply of agricultural commodities. It is generally believed that this price rise has been caused by faulty policies of the Union Government. As is well known, the price rise has been steepest in essential commodities like cooking oil, pulses, wheat, flour etc., thereby affecting the poorer sections of society the most.

By encouraging multi-commodity exchange and forward trading, the Government has kept essential commodities on the same footing as share prices of companies. According to an estimate, around Rs 20 lakh crore is invested in the multi-commodities market. There are apprehensions, and not without reason, that those who have invested such a huge amount would not allow prices to come down, even if there is adequate supply of commodities.

Moreover, procurement is not done at the right time by the FCI. It does not support farming community by raising the minimum support price (MSP). The argument given for this is that it has no money to subsidize the Indian farmers but in the name of containing inflation imports are resorted to, mostly at higher prices. It is indeed tragic that the country’s farmers cannot be supported who are committing suicide but farmers in countries like Australia are being given higher prices for foodgrains imported from there.   

Rising prices are an invisible tax on the masses by which their money floes from them towards the rich. The economically weaker sections, specially the work force in the unorganized sectors, suffer the most because they have no protection like increase in dearness allowance or the salary increases in the private sector. And the booming economy means more disposable income in the hands of those sharing this boom. This is indicated by the highest manufacturing inflation in the last 18 months or so.

 “Inflation is always and everywhere a monetary phenomenon”. This is the mantra repeated tirelessly by the legion of Milton Friedman’s disciples and is an idea, which has taken firm root in mainstream thinking. Short-term trade-offs recession (unemployment) and inflation are illusory according to this view. Thus it is generally believed that excessive money creation leads to inflation.   

As economists feel that the primary cause of inflation was excessive demand, the most effective instrument to curb demand would have been the Budget. But nothing has been done in the current Budget and experts believe that the Finance Minister has just not done his job. It has, however, been argued by the Finance Ministry that the Budget was deflationary, which however is not acceptable even though expenditure growth is projected to be lower than revenue growth. It is doubtful whether the Government would succeed in finally keeping the expenditure growth lower at the year-end.

 The present measures taken by the RBI to tighten monetary policy to contain expansion of credit may be in the right direction. The recent fall in inflation has been on expected lines due to the monetary and fiscal steps taken by the Government and the RBI. Though the reduction on import duty on crude and imported palm oil by 10 per cent has been right decisions a lot, however, would depend on the rabi harvest and to what extent it is able to ease the supply-side constraints.

 It may be mentioned here that Central Banks across Europe, Japan and China also raised their interest rates in 2006 and is expected to do it again 2007. An RBI statement pointed out: “The stance of monetary policy has progressively shifted from an equal emphasis on price stability along with growth to one of reinforcing price stability along with immediate monetary measures and to take recourse to all possible measures promptly in response to evolving circumstances”. Even the RBI Governor, Y. Y. Reddy, indicated that the apex bank planned to maintain inflation below 5 per cent in the medium term, which appears not quite a realistic proposition.

 The situation today is definitely one of concern and the RBI has indicated that “the economy is growing at somewhat above sustainable levels, thereby risking the acceleration of inflation in future”. There is more money in the economy. Broad money supply is running higher than the targeted 17-18 per cent.

 The deposit rate in banks has gone up steadily. But the Government diktat and control over certain segments of funds such as small savings and employees provident fund leads the way for lower deposit rates. This implies less money in the hands of the vulnerable section and senior citizens to meet the extra cost of living. Whether the monetary steps of the RBI to curb liquidity resulting in stabilizing prices work remains to be seen in the coming months.

 Former RBI Governor, Dr. Bimal Jalan, had suggested that he would rather go for a GDP growth of 7-8 per cent with low inflation than have a growth of 9.5 per cent plus and inflation rate hovering around in the 6-7 per cent range. There are many others who subscribe to this view. But though some believe that high growth and inflation go hand in hand, including the Prime Minister and Finance Minister, it needs to mention here that China made it possible to attain 10 per cent growth with 2 per cent inflation.

However, a certain section of experts like Dr. Omkar Goswami, believe that there is little that RBI can do as the current bout of inflation is driven largely by the supply side. The RBI measures of hiking cost of funds may only impede growth and with it manufacturing and perhaps even services. But is it not better to curb unsustainable growth to tackle inflation ? It remains to be said that the challenge of all economic policy makers is to combat the problem without losing sight of medium and long-term goals and possibilities. 

The Government is focussed on growth and growth alone. But there have been no efforts to examine how much of this growth reaches the masses, constituting the majority of the country. As has been aptly pointed out: “Peddling prosperity for all, based on budgetary sops and extra-budgetary support to a small portion of the economic players, is now revealing the darker side of growth as a beacon light of globalization”. It now appears that the windfall gains from globalization are coming to an end with world inflation creeping up. 

Growth without welfare is sure to cause imbalances and vulnerabilities and lead to resentment and chaos, which is already being manifest in different forms in various parts of the country. If growth is not broad-based across sectors and geographical regions, it cannot be sustainable and wholesome and cannot benefit the larger sections of the population whose upliftment has become imperative today.---INFA

 (Copyright, India News and Feature Alliance)

Open Forum

New Delhi, 7 June 2007

Sorabjee’s Model Act

BLUEPRINT FOR A POLICE STATE

By Ashok Kapur, IAS (Retd)

 Arguably, the most fiercely burning issue facing the nation today is the crucial question of police reforms. Hardly a day passes when the national media does not report the unceasing sins of omission and commission committed by a force that is supposed to be the guardian of law.  In a perverse way, the police has become a page one fixture.

Of late, a new and disturbing feature of the daily atrocities habitually committed by the force has emerged. Earlier, most of the crimes that are a regular feature of the functioning of the police were reportedly ascribed to the “ranks”, i.e. the subordinate levels of police Inspectors and other NGOs.  The “senior officers”, meaning I.P.S. officers were mostly reproved for “lack of supervision or leadership”, or, even more simplistically, if not indulgently for ineffective “control”.

With the recent arrest of three senior I.P.S. officers of Gujarat police, for the cold-blooded murder of a hapless citizen, maybe even his innocent wife, the lid has been finally blown off. The entire police is now being described as a lawless force. If senior officers have turned so brazen, it would be a fatuous alibi merely to blame the “ranks”. It reveals a total lack of police accountability, which, in a manner of speaking, distinguishes a civil democracy from a police state.

The malady has become so intractable as to defy solution.  True, the absence of any reform is not for want of trying. Both the Government of India and the Supreme Court are concerned over the same. Numerous commissions and committees have been set up. However, there is no respite for the common citizen.

The main reason for the continuing helplessness of the Government is that these committees comprise mostly the police themselves. And, what is worse, they are serviced exclusively by the members of the force, although with a civilian gloss. A lawless force, which is a major part of the problem, is thus sought to be made a part of the solution. An elaborate exercise in futility, if not deception, even to begin with.

The latest Committee on the subject was headed by Soli Sorabjee, former Attorney General of India. As before, this Committee too was serviced exclusively by the members of the police force. It was mandated to suggest a model Police Act. For, it is being widely propagated, without any rationale though, that the current Police Act of 1861, is somehow “outdated”.

Shockingly, the Committee has failed miserably in the task allotted to it. It has not given any reason why the existing Police Act is considered “outdated”. There is no mention of any existing provision which stands in the way of efficient police functioning. Inexplicably, the Committee has failed to take note of the fact that the Police Act (of 1861) is merely an adjunct to the Criminal Procedure Code, 1860, enacted a year before the Police Act.

For almost a century and a half, the Cr. P.C., as also the Police Act have stood the test of time. When first enacted, the Cr. P.C. laid the foundation of a civilian democracy in pre-independent India. Contrary to popular belief, it is not merely procedural law but is also a substantive one. It is one of the finest criminal codes in any civilized democracy.

The Sorabjee Committee has virtually rewritten the Cr. P.C., an entirely unconstitutional exercise, Criminal law is a Union List subject. The Criminal Code has been adopted by Parliament after the coming into force of the Constitution. The Committee has suggested a “model” State Act, in substantive and in direct variance with a Central Act.

The role of civil magistracy has been virtually erased. After the separation of the executive from the judiciary, the Cr. P.C. was amended in 1973.  The executive magistrates continue to exercise supervisory authority over the police force under more than a dozen chapters of the Criminal Code.

The right of citizens to enjoy freedom of speech is a fundamental right.  The further right of citizens to “assemble peaceably and without arms” is merely a collective right to freedom of speech, an extension of the individual right. The Sorabjee Committee has suggested that this fundamental right shall be regulated by the police. Such a suggestion is contrary to the existing law on the subject, as laid down by the Supreme Court. Accordingly to the Court, such a right should be regulated by “superior administrative authorities”.

According to the settled law on the subject, a public prosecutor is defined as an officer of the court. His task has been delineated to assist the court in search of truth. The Sorabjee Committee has suggested that all public prosecutors shall instead be part of the prosecution agency, i.e. the police.

Under the Criminal code, “public nuisance” is treated for what it actually is a civil lapse. The Sorabjee Committee has suggested that a civil lapse would henceforth be treated as a cognizable offence. In other words, the police would enjoy the powers to arrest without warrant any citizen merely for a civil lapse or any act of carelessness or callousness.

Such a suggestion by the Sorabjee Committee is indeed extraordinary. The Constitutional Review Commission headed by the distinguished former Chief Justice of India, M.N. Venkatchaliah concluded in 2002 that the police all over India is grossly misusing its powers of arrest without warrant. Eighty per cent of the arrests made by the police have been found to be “unnecessary”. Hence, if anything, there is a compelling case for limiting the powers of the police to arrest without warrant. Incidentally, Sorabjee was a member of the said Constitutional Review Commission.

A large number of purely executive functions are sought to be entrusted to the police force. On the one hand, it is claimed by apologists for the police force is under-staffed, if not under-armed. On the other hand, the police force is to be burdened with such purely executive functions as organizing urban and rural citizens committees.

There is no suggestion whatsoever about the norms for criminal investigation by the force, which is its core function. This, inspite of the fact that several senior police officers were members of the Sorabjee Committee.

The accountability mechanism suggested leaves much to be desired. The establishment of police accountability boards comprising private citizens is mere eyewash. The presence of “eminent” citizens having no experience or knowledge of the criminal laws can hardly ensure police accountability. Besides, law does not define “eminence”.

A democratic government is a continuum.  The National Police Commission, which had equal number of senior policemen as members, had tellingly suggested that police officers should be barred from accepting any post-retirement public office, in order to maintain professional integrity and to insulate them from political influence.  Admittedly, it had come across several instances of police officers nearing retirement “hobnobbing” with ruling party members, in the expectation of “rewards” later. The sentiment was so strong that the Commission had suggested a legal ban.

The Sorabjee Committee has bypassed this suggestion altogether, without assigning any reason. Ostensibly, the entire exercise of “reforms” was to insulate the police from political interference.

In sum, the Committee report is a veritable blueprint for a police state and deserves to be consigned to the archives.----INFA

 (Copyright, India News and Feature Alliance)

Open Forum

New Delhi, 31 May 2007        

IPCC Predictions

TOWARDS DisastER IN Coming Decades

By Dhurjati Mukherjee

The recent reports of the Inter-governmental Panel on Climate Change (IPCC) have raised grave apprehensions about the consequences of global warming. The seriousness of the problem has been clearly spelt out by scientists, economists and policy makers of over one hundred countries, which participated in the deliberations at Paris, Brussels and Bangkok. It cannot be denied that though the pattern of climate change was set off by greenhouse gas-emitting industrial processes in developed countries, the consequences of a heating planet are being experienced all over the world.

Delving into the past, the IPCC came out with its first report in 1990, which outlined the risks of warming and prompted governments to agree to a 1992 UN climate convention that set a non-binding goal of stabilizing greenhouse gases at 1990 levels by the year 2000. The target, however, was not met. In 1995, the IPCC report concluded that “the balance of evidence suggest a discernible human influence on global climate”, the first recognition that it was more than 50 per cent likely that humans were to blame.

The 2001 study that followed found “new and stronger evidence” linking human activities to rising temperatures. By that time several researches were conducted on different consequences of global warming all of which pointed to grave consequences if greenhouse gases were not controlled. Meanwhile, there was all-round pressure for the implementation of the Kyoto Protocol, which obliged 35 industrial nations to cut greenhouse gases by 5 per cent below 1990 levels by 2008-12.

This year, the first IPCC report (released at Paris) said that was ‘very likely” or at least 90 per cent certain that mankind was to blame for most of the warming in the last half century. The previous report (in 2001) had put up probability at ‘likely’ or at least 66 per cent. The present report projected a “best estimate” that temperatures would rise by 1.8 to 4 degrees C this century. 

The consequences, according to this report, are: loss of food production due to droughts with global production falling by 10 per cent and African production by 15 to 35 per cent; sea level rise up to 53cm with Bangladesh and Vietnam being the worst hit along with other coastal cities like Tokyo, New York, Hong Kong, Kolkata and Karachi; half the Arctic tundra at risk while the West Antartica ice sheet and the Greenland ice sheet starts to melt; more diseases as mosquitoes thrive exposing 80 million more people to malaria in Africa and 2.5 billion more to dengue fever; 20 to 50 per cent of land species threatened with extinction; and fresh water availability to be halved in Africa and Mediterranean.  

The second report released at Brussels sounded the warning accepting global warming to have disastrous consequences. It found increased flooding and rock avalanches within two or three decades and then led to decreased river flows as glaciers recede. Freshwater in large river basins in Central, South and East Asia would steadily decrease which, along with the high population and increasing demand, would affect more than a billion people by 2050.

The report further stated that illness and death from diarrhoeal diseases due to floods and droughts are expected to rise in the above regions due to change in the water cycle caused by global warming. “Increases in the coastal water temperatures would also exacerbate the abundance and toxicity of cholera in South Asia”, the report pointed out.

The IPCC observed that adaptation will be necessary to address impacts from warming, which has become unavoidable due to continued emissions of greenhouse gases that trap heat from the sun and raise global temperatures. The concern expressed in the report was indicative of the fact that something needed to be done at the earliest to check or control these deadly gases.

It is generally agreed that climate change would severely affect the tropics and specially India. Even a half metre rise in sea levels would have catastrophic effects in the coastal areas of India and Bangladesh. Parts of the Indian coast, including densely populated areas like Mumbai, would be inundated due to such rise, affecting a large section of the population. In fact, it is predicted that the entire coastline would face up to 20 per cent increased risk of cyclonic storms.

Glaciers cover nearly 38,000 sq. km. of the Himalayas which, in turn, account for 800 cubic km. of water. The Gangotri glacier is receding by 25 metres a year, the Pindari glacier by 23 metres, Bara Shigri by 36 metres and Zemu by 28 metres to name only a few. Rapid melt of this snow is expected to cause floods initially but by 2020 when glaciers would have significantly melted, the situation would be reversed, affecting the flow of the rivers. Ganga   would be a pale shadow of its current glory, shoreline cities would be compelled to build dykes to keep out the invading seas. The impact on agriculture is obvious as lack of water would reduce arable land and that, in turn, would affect the country’s food security.

Apart from this, three-fourths of India’s forests would undergo dramatic changes and its biggest catchments – Ganga and Brahmaputra – are expected to pose a grave risk of flooding to the region. Changes in forests would also impact watersheds and river systems. There are apprehensions that soil productivity and water systems are likely to impact the country’s food security. Scientific evidence suggests that the world has already walked the first few steps towards the catastrophe.

An important aspect of climate change is the shortage of water and in India this is predicted to drop from 1900 presently to 1000 by 2025. According to scientists, there is 90 per cent chance that more than a billion Asian would have to bear the brunt of global warning in diverse ways mid-way during this century. And obviously the poorer sections of society would be hardest hit, as Rajendra Pachauri, the Chairman of the IPCC, has pointed out: “It’s the poorest of the poor, and this includes the poor people even in prosperous societies, who are going to be hit the hardest”.

All countries, including India, would have to take drastic steps to shift from fossil fuels like coal and oil, the mitigation strategy suggested. While developed countries have been asked to alter their lifestyles and high consumption patterns, their developing counterparts like India, still much lower on per capita emissions of global warming gases, would have to undertake substantial changes in the transport sector, energy supply system, construction business and agriculture besides undertaking afforestation in a big way.

Though under the existing international agreement, India dies not need to commit to any targets for emission cuts, but when the Kyoto Protocol comes up for debate in December at the conference of all the member countries, there may be pressure for setting hard targets for developing countries. It may be mentioned here that the Kyoto Protocol is mandated to last till 2012 before which the new terms of global engagement would be fiercely negotiated. Till then the recommendations of the UN reports remain merely suggestive for India. However, the suggestion of the last report for countries switching from coal to gas for fuel needs, looking at nuclear energy as well as renewable sources like hydropower, solar and wind need to be seriously considered at this crucial juncture.---INFA

(Copyright, India News and Feature Alliance)

Open Forum

New Delhi, 24 May 2007

Simple Story Made Complex

Uttar Pradesh Poll: A Post-mortem

By Dr. Syed Ali Mujtaba

The victory of the BSP was more due to default rather than any calculated design. In the triangular contest, the other two high profile parties; both the Samajwadi Party and the BJP had lost the poll even before the electioneering had begun. The Congress on the fourth place had never been in the political fray in any big way.

So there was nothing startling about the UP electoral results. Every thing has been on expected lines as the script was well-written before the elections. Those trying to read too much into this result are basically the ones who are fond of blowing the trumpet when the procession has hit the road.

As far as the BJP is concerned, it had lost the election the moment it distributed the controversial CD. Its poll managers thought that through the CD they would be able to polarize the society to the 1990 level and win the election hands down. The Muslims did not violently react and instead kept cool and so their strategy miserably failed. In fact, the CD dissuaded many people who might have initially thought of voting for the BJP. 

Even the “caste arithmeticians” of the BJP could not save their boat from sinking. The party remained a silent spectator to the breaking of the Brahmin-Bania alliance in spite of having stalwart upper-caste leaders like Atal Bihari Vajpayee, Murali Manohar Joshi, Rajnath Singh, all from the State in its ranks. Their strategy of patching up with, Kalyan Singh, the estranged OBC leader, too did not work. The former Chief Minister could not steal a single vote from the SP or the BSP's kitty. On the contrary, he presided over the loss of both upper caste and lower caste votes to the BSP and the SP.  

The BJP owes its ascendance in Indian politics to Uttar Pradesh. It had a dream run from 1986 to 1992 when it generated a mass hysteria among the innocent voters promising them the Ram Raj by constructing a Ram temple at Ayodhya where stood the Babari masjid. The gullible and religiously emotional people got enticed by their high profile campaign; Saugandh Ram ki khate hain, Mandir Wahin Banayenge (I vow in the name of Ram to construct the Mandir at the same spot where the Babari Masjid stands). The "Chalaks""Ram Naam ki loot machi hai, loot sako to looto" (there is a loot going on in the name of Ram, loot it if you can. (intelligent) who could sense the pulse of the time joined the BJP ranks because for them it was;

In 1989 the BJP had 89 seats, thanks to its temple campaign, its tally shot up to more than 200 seats in 1992. However, after the destruction of the Babari Masjid in 1992, its fortunes started tumbling down. The party since then has been witnessing a free fall. Currently it holds just 50 seats in the 403-member Assembly. Indeed, the results must be a day of rejoicing for the party’s rebel leader, Uma Bharti who had openly called some of the BJP leaders as "Satta ke dalal" – (‘Pimps for Power’).  

The outgoing Samajwadi Party had lost the confidence of the people and its rule had become synonymous with rampant corruption, nepotism and lawlessness (goonda raj). The Party failed to address any of the pressing developmental issues and got embroiled into many things that dented its poor, pro-dalit, and pro-minority image.

The SP leader, Amar Singh, who actually held the strings of power, had become an eyesore for his flamboyant lifestyle. His close proximity with actress Jayaparadha, actor Amithabh Bachchan, industrialist Anil Ambani and the owner of Sahara group of industries, left the people wondering whether the Samajwdi Party was championing the cause of the poor or it was a party of the rich. The Nithari killings were the last nail in the SP’s coffin. It had lost the election even before the dates for the polling were announced.  

As far as the Congress is concerned, the party was nowhere in the political race. It still has not been able to recover its lost base it enjoyed during the pre-1980s phase. Traditionally, the Congress was favoured by the upper castes and the Muslims. And in combination of certain other backward categories, it was able to cobble a majority during successive elections since independence. The Congress support base got totally demolished when religion versus pro-poor politics (Kamandal vs Mandal) came into play in Uttar Pradesh. The upper caste vote went to the BJP, the Muslims opted for the Samajwadi Party and Bahujan Samaj Party and the other backward categories and Schedule Castes too flocked to the SP or BSP ranks. So the Congress was left with nothing to fall back on.

Given such background, no matter how much Gandhi Parivar may have toiled their sweat and blood electioneering in the heat and dust of the Indo-Gangetic plains, they could hardly make any difference on the electorates. People may have flocked to the road shows of the Gandhi family, but when it came to voting, they had their own preferences. These days voters just do not vote for the name sake, they analyze the elections in terms of their own cost-benefit.

The Congress’ tally of 22 seats and its paltry vote percentage speaks volumes about the poor organizational strength of India's oldest political party. If this trend continues, the Congress may be reduced to a mere symbol on the electronic voting machines.

The BSP’s victory makes the picture crystal clear. The people of Uttar Pradesh had to choose between SP, BJP and the BSP. The SP had been thoroughly discredited during its rule and people wanted a change of Government. Now their choice was reduced to the BJP and the BSP. The BJP had shot itself in the foot by releasing the controversial CD. So the people had no other choice but to vote for the BSP. It is a simple story, made complex.

The only great thing about BSP’s victory was that it gave up its strident political campaign against the upper castes. Its direct attack on them saying; BJP ke Teen Dalal; Tilak, Tarazu aur Talwar (the BJP has three pimps; Brahmins (Tilak) Bania (tarazu) and Rajput (sword) was a very powerful piece of sloganeering that sums up the entire Indian history in terms of oppression by these three symbols of power all through its civilization.

The BSP having realized that such sloganeering could not catapult it to power in the previous elections, decided to drop this time and made friends with the upper castes. By giving tickets to the upper caste candidates, the party was able to get a comfortable majority.

The people of Uttar Pradesh must be complimented for giving a decisive mandate to a political party. Their collective effort saved the State from the ordeals of post-poll alliances and horse-trading that has become a hallmark of the Indian polity these days. This also shows the signs of maturating of the Indian democracy.

The people have had four core demands; road, water, electricity and job (sarak, paani, bijli aur naukri). They tried all the three political formations before; they have lived under the Ram Raj of the BJP, the Mulyam Raj and the Mayawait Raj, but none had been able to addressssing it right!   their basic demands. They have again brought the BSP to power. Will the new Government change the ground realities? Well, this is a tough call and no marks for gue

However, one great lesson to learn from the Uttar Pradesh elections is that the voters these days just do not vote for the name sake, they judge the party’s performance in power and select or reject them in the next poll. The next election is a long way from now, till then the people of Uttar Pradesh have no other go than to face the Maya Raj!---INFA

(Copyright, India News and Feature Alliance)