No option but to wait for Mamata`s national mass movement as the left refused to lead from the front!
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"Looting is on in the name of aam admi and reforms," Trinamool Congress chief Mamata Banerjee hit out today ahead of her party's demonstration in Delhi on October one to protest the UPA government's decision to allow FDI in multi-brand retail. Mamata Banerjee does an Anna Hazare; invites people on Facebook for Delhi!
Continuing her protest against the Centre's push for Foreign Direct Investment (FDI) in multi-brand retail, West Bengal Chief Minister and erstwhile UPA member Mamata Banerjee is planning a huge rally in New Delhi on October 01.Banerjee has been steadfast in her opposition to the foreign supermarket chains, saying they would hurt millions of small shopkeepers. Many experts say her breaking away from the government could actually free the economist Prime Minister to announce some more long pending reforms.With no party willing to face the electorate right now, the government is not in immediate danger of losing power.
Reiterating that reforms are not once-for-all process, PM says 'will do what's good for nation'! Taking on the Opposition, Prime Minister Manmohan Singh on Saturday made it clear that the "ongoing" reforms process was here to stay. We are not a country to be dictated by others, PM said in response to Gujarat CM's charge that allowing FDI was aimed at pleasing the US.Notwithstanding profit booking, the BSE benchmark Sensex ended higher for the second week in a row and hit a 14-month high of 18762 on buying towards the end on the back of global rally triggered by Spain announcing a crisis budget for 2013.
Singh questioned, "What has America got to do with reforms in India?"
Would Mamata Banerjee pave the way to end UPA rule? Would she able to abort a shaffron come back?This is million dollar question remains unanswered.Earlier this month, Banerjee pulled out of the ruling coalition over the 'anti-people' economic reforms initiated by the Congress led government at the Centre that included a rise in the prices of diesel, FDI in multi-brand retail, aviation and media, and putting a cap on number of subsidised LPG cylinders to be issued to BPL families.She has maintained that she welcomes private investment to create jobs in areas such as tourism and industrial projects, even for hospitals, but will always oppose policies that destroy jobs for farmers and small retailers. Banerjee said she would uphold her years-old opposition to raising the price of heavily subsidised fuel and rail fares.
No option but to wait for Mamata`s national mass movement as the left refused to lead from the front!My marxist friends would be angry, I know. But it is the objective situation as the left has been betraying us for last twenty years and did not take any initiative for resistance whatsoever. They have control on the most of the trade union activities in the country. They have skill to mobilise social forces including peasants, women, students, youth, professionals and so on. But they opted for honeymoon with corporate governance and deviated from marxist ideology!
Meanwhile, the civil society hyped by the media and projected as the saviour of Indian people seized within, has been exposed naked.What next?
Is it be Mamata`s turn?
Anna Hazare says no more fasts, Congress claims Kejriwal used him!
May be, most of us would doubt credentials of West Bengal Chief Minister Ms Mamata Banerjee, well known for her volatile, fluctuating populist politics! But amongst all the politicians, she dared to challenge the corporate promoter builder raj. The secular democratic forces led by the left should have taken the initative, they failed miserably, I am afraid to say.As the ruling party and the opposition, both support economic ethnic cleansing, third front would have been an escape route, but the self styled redical leftists and the original left would not allow to opt for that.However, Mamata has an enviable expertise to organise mass moement. We have to wait with patience whether she succeeds to launch a national movement at all.
"I have seen some people sitting in a room and they just increase the price only for the common people. You have to nurture the other options also, you have to go for other new ways out also. How can you develop? How can the business be developed? How can you earn more money?" she had said recently.
CPI(M) General Secretary Prakash Karat said that the left parties were not seized with the issue of forming a third front as an alternative to the UPA and the NDA as of now.
"We are not working on formation of third front as of now as there is no no immediate threat to the UPA government at the Centre," Karat told reporters.
The left front was, however, working on strategies to launch a joint agitation against the "anti-people" policies of the UPA government and rope in like minded parties to put pressure on the central government to roll back the recent decisions including FDI in multi-brand retail, he said.
It is quite amusing that Mamata launches crusade against corporate rule and has left for Delhi to create a storm while claiming there have been 13 starvation deaths in West Bengal in the past 14 months, a network of trade unions and NGOs on Saturday demanded reforms in the public distribution system (PDS).It also urged the state government to "convince" the central government to make certain amendments in the proposed Food Security Bill.
"Since May 2011, 13 starvation deaths have been reported in the state, which implies that that the food security situation in West Bengal is still worrying. There is an urgent need to carry out reforms in the PDS so that the benefits actually reach the poor and the needy," West Bengal Adviser to the Supreme Court Anuradha Talwar said in Kolkata.
On the other hand,Prime Minister Manmohan Singh vowed Saturday to press ahead with reforms to further liberalise the country's still inward-looking economy, undeterred by strong political opposition.Singh's government announced in September a sudden blitz of reforms designed to open the retail, aviation and broadcasting sectors to more foreign investment and revive an economy in which growth stalled at around three-year lows.
"We will do what is good for the country... reforms are not a one-off process," Singh told reporters in New Delhi.
BJP today refused to buy Prime Minister Manmohan Singh's contention that no international pressure was behind the decision to allow FDI in multibrand retail and charged that he has done a U-turn on his own stand till 2004 against the policy.
"It is strange and it is time the Prime Minister clarifies on this. In 2002 and 2004, he had spoken against FDI in multi-brand retail. He has taken a U-turn somewhere between 2004 and 2010," BJP spokesperson Nirmala Sitharaman said. She pointed out that though in November 2011, the government had assured that it would not take any step on FDI in multibrand retail unless all consultations with all stakeholders have been done.
The reforms have prompted a coalition ally to pull out of the Congress-led government and a string of protests nationwide.
But they have been warmly greeted by business and investors, with the Indian currency hitting a five-month high of 52.49 rupees against the dollar Friday as more foreign investment has poured in.
Further,Prime Minister Manmohan Singh has taken charge of the UPA's initiatives to directly transfer welfare benefits and subsidies into individual beneficiaries' bank accounts - a system that would plug the rampant leakages of funds earmarked for the poor via schemes such as NREGA on which the government spends over 3,00,000 crore annually.A new ministerial co-ordination committee under the PM would now fast-track the architecture for cash transfers while bringing multiple ministries on the same page for the implementation of direct electronic transfers for the entire population. Success on this front could be critical for the UPA ahead of the 2014 general elections, with the likelihood of a positive impact on millions of beneficiaries.Moving from the present paper-based, cash-driven system to an electronic direct transfer system 'would improve targeting, reduce corruption, eliminate waste, control expenditure and facilitate reforms', a statement from the PMO said on Friday. The government aims to put everything from NREGA wages, scholarships, pensions, income support and health benefit schemes as well as other subsidy programmes under the new system. Economic times reports.
Thus, the prime minister is making the illegal UID project legal linking it directly to cash subsidy. The biometric identitification has to be the best tool of displacement, deportation and survellience.
It is a corporate project implemented by the corporate to defend corporate interest.
I have been writing on this topic since it is launched. Better browse for earlier write ups and also video!
The Prime Minister hopes to leverage Aadhaar numbers for delivering cash benefits directly to the poor and has included Nandan Nilekani who heads the Unique Identification Authority of India (UIDAI) in the ministerial panel.Cabinet ministers in charge of finance, petroleum and natural gas, food, fertilizers, health, labour minority affairs, human resources development, social justice and information technology, will also be part of the committee.The UIDAI, which completes two years of operations on September 30, has captured the biometrics of 20 crore residents so far and has been given the mandate to issue unique identity (Aadhaar) numbers to another 40 crore people.The home ministry-run National Population Register has the mandate to capture the identities of the other 60 crore Indian residents. Once these exercises are complete, it would be possible to move to a system of transferring cash benefits directly to the poor, the PMO said.
"Looting is on in the name of aam admi and reforms," Trinamool Congress chief Mamata Banerjee hit out today ahead of her party's demonstration in Delhi on October one to protest the UPA government's decision to allow FDI in multi-brand retail.
"Reforms are meant to usher development for the people. Now-a-days, the trend is whenever any anti-people decision is taken, it is taken in the name of reforms," Banerjee, who left for Delhi during the day to attend her party's demonstration at Jantar Mantar on Monday, said in her post in Facebook.
Her comments came shortly after Prime Minister Manmohan Singh indicated that the Centre may continue with the reforms process and expressed willingness to discuss issues with the allies.
"We will do what is good for the country... reforms are not one-off process," he said in Delhi.
On whether he will invite West Bengal Chief Minister Mamata Banerjee in the proposed movement, he alleged that she too had taken many anti-people decisions and was trying to muzzle the voice of opposition in the state.
Karat, however, refused to criticize Samajwadi Party supremo Mulayam Singh Yadav for his alleged inconsistent stand under which he has opposed the FDI in retail and other policy decisions of the UPA government, but did not withdraw support to it.
Karat said that all parties had their own understanding of issues and SP was supporting the UPA government from outside and at the same time working with the left parties on common issues.
The CPI(M) leader advocated debate in Parliament on the FDI in multi-brand retail to nail the government on the issue and said that left front and like-minded parties would formulate their strategies in this regard soon.
Karat said that a crucial meeting of the left parties would take place on October 6 where the strategies would be chalked out to pin down the UPA government on the FDI in retail and other issues in Parliament and outside.
On the land acquisition bill, the CPI(M) leader alleged that a parliamentary committee vetting the bill was trying to weaken the draft proposal apparently to benefit those acquiring land for industrial activities.
The Centre should incorporate a provision to ensure that the opinion of 80 per cent landowners should be taken into account before deciding of acquiring land and there should be hike in compensation and rehabilitation of the affected people, he said.
Karat urged the UPA government to bring the food security bill at the earliest and remove the distinction of BPL and APL to ensure that all needy families get 35 kg foodgrain per month at the rate of Rs two per kg.
On his assessment of development in Bihar during the NDA government headed by the Chief Minister Nitish Kumar, Karat said that the masses were dissatisfied with the performance of the state government and discontent was fast simmering among the people.
Six Trinamool Congress central ministers had submitted their resignations on September 21 to the Prime Minister in protest against allowing FDI in retail, diesel price hike and the cap on subsidised cooking gas cylinders. The party had also submitted a letter to President Pranab Mukherjee formally withdrawing TMC's support to the UPA II government.
Senior party leader and former union minister of state for Urban Development Saugata Roy told PTI that all the party MPs are supposed to take part at the dharna at Jantar Mantar on Monday.
Referring to the Finance Ministry's decision to levy service tax on air conditioned passenger coaches and freight services fares in Railways from October 1, he said it would further burden the people after the decisions on hiking price of diesel, restriction on subsidised LPG cylinders, increase in fertiliser prices and permission to FDI in retail.
However, state Food Minister Jyoti Priya Mullick rubbished the reports of starvation deaths in West Bengal.
"Not a single death due to starvation has taken place. Although the said deaths were unnatural in some cases but were not due to hunger or starvation. While in few cases the deaths were due to snakebite, in others it was due to old age and sickness," said Mullick.
Talwar, quoting death certificates of the deceased, claimed the deaths were due to starvation.
The Talwar-led Paschim Banga Khet Majoor Samity (a trade union) and several other unions and NGOs will undertake a statewide agitation demanding reforms to check mismanagement in the PDS.
The demands include correction of PDS beneficiaries' list, enhanced monitoring and vigilance of PDS shops and monitoring of sick tea estates.
Claiming that the proposed Food Security Bill will actually reduce the food grain allocation for PDS, the network urged the state government to insist on a bill that ensures universal coverage with equal entitlements for all and guarantees decentralised procurement.
Talwar also said the central government's proposal to provide cash transfers to PDS beneficiaries instead of providing them food grains would increase corruption.
"If the cash transfer system is allowed it will absolutely corrupt the much corrupt PDS," added Talwar.
The central government is mulling winding up the antiquated PDS and replace it with a system by which food stamps or coupons, and where necessary, cash transfers, are mailed directly to the recipients of subsidised food grain, sugar and kerosene.
Unfazed by the uproar over FDI in retail and other tough decisions, Prime Minister Manmohan Singh today indicated that the Government may continue with the reforms process and expressed willingness to discuss issues with allies.
"We will do what is good for the country... reforms are not one-off process," he said.
The Prime Minister was responding to questions on demands for rollback of decisions on FDI in multi-brand retail, diesel price hike and cap on subsidised LPG cylinders by the opposition.
When asked to respond to reservations expressed by allies that the recent decisions could hurt their electoral prospects, Singh said the issue could be discussed. "We are far away from elections."
Singh, who was speaking on the sidelines of the swearing-in of India's new chief justice, Altamas Kabir, did not outline what new steps he plans, but analysts expect him also to liberalise the insurance and other sectors.
The premier had no comment on a report by a government panel late Friday that warned India faced a "fiscal precipice" and called on New Delhi to phase out fuel, food and fertiliser subsidies to rein in a ballooning deficit.
"We cannot overemphasise the need and urgency of fiscal consolidation," the panel said, warning corrective moves were an "imperative necessity" as India's "external payment situation is flashing red lights".
Singh's left-leaning government is deeply wary of cutting subsidies, especially on food, in the still heavily poor country of 1.2 billion people, fearing a voter backlash in general elections due in 2014.
The panel headed by former Indian finance secretary Vijay Kelkar also called for stepping up sales of stakes in state-owned firmed and revamping India's archaic, patchwork tax system that drives up company costs.
India could find itself in a worse financial state than during 1991 balance-of-payments crisis when the country teetered on the edge of bankruptcy and was forced to seek a bailout by the International Monetary fund.
The government needs to subsidise kerosene and food for poor, former finance secretary Vijay Kelkar said observing that the committee on fiscal consolidation headed by him was not against elimination of all subsidies.Mind you, as Economic Times reports,the government appears to have developed cold feet over implementing Kelkar panel's recommendations to slash subsidies drastically at a time when it is facing backlash for raising diesel prices and capping subsidised cooking cylinders.The report, which has been put out for public comments, warns that India is on the edge of a fiscal precipice. A senior finance ministry official has said that the report has not been accepted so far and that some of the panel's recommendations run contrary to the government's larger objectives.
The committee had submitted its report on September 3, before the government unleashed the recent reforms that sparked a stock market rally and led to appreciation of the rupee. "The Indian economy is presently poised on the edge of a fiscal precipice, making corrective measures aimed at speedy fiscal consolidation an imperative necessity if serious adverse consequences stemming from this situation are to be averted in an efficient and timely manner," the committee has said.If no corrective measures are taken, India can face a crisis worse than the one in 1991, the committee has said. It has also cautioned that the deficit for the current fiscal can widen to 6.1% of the GDP against the budgeted 5.1%, but the government does not seem to agree with the grim prognosis.
"Some recommendations appear contrary to the declared objective of the government of 'sustained and inclusive' growth," Arvind Mayaram, secretary in the department of economic affairs said, adding, "The government is of the view that in a developing country, where a significant proportion of population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable section of the society."
Mayaram said the government is yet to take a call on the report which calls for abolition of subsidy on diesel by next year and on cooking gas by 2014-15, suggestions that the government has indicated will be difficult to accept. "While taking a final view on the various recommendations of the report, the government will bear in mind that the goal is to achieve high growth, inclusive development, and economic and social justice for all," Mayaram added.
"I agree with people who argue that we cannot eliminate subsidies, we shouldn't eliminate subsidies. Food subsidy is defensible. For undernourished children or lactating mothers food subsidy is not only defensible, it is ethically right and morally correct", Kelkar said in an interview to CNBC TV18.
"Subsidy must be continued for kerosene as long as it is affordable (for the government)," he added.
Responding to the report of Kelkar committee, the government had earlier said that panel's suggestions on removal of subsidy were contrary to government's policy of protecting poor.
"The government is of the view that in a developing country where a significant proportion of the population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable sections of the society", Department of Economic Affairs (DEA) secretary Arvind Mayaram had said.
Mayaram had further said Committee's recommendation of withdrawal of certain subsidies is in divergence with the stated policy of the government.
The final view on the recommendations of the committee, set up by Finance Minister P Chidambaram to suggest fiscal consolidation road map, will be taken by the government after receiving feedback from stake holders.
The Kelkar committee wanted that implementation of the Food Security Bill to provide cheap grains to persons below poverty line, be "appropriately phased" in view of difficult fiscal challenges.
The government's proposed Food Security Bill which is being given the final touches by the Cabinet is estimated to cost the exchequer at least Rs 1.19 lakh crore by way of subsidy.
In case of food and fertiliser subsidies, it wanted the government to increase the urea price and raise issue price of foodgrains at ration shops.
Kelkar, in his interview, said that he has suggested phasing out of subsidy on diesel and LPG.
"We mentioned to remove inequitable subsidies like LPG. LPG subsidies do not go to our people who fall in the low income bracket," Kelkar said.
The Committee has suggested phased elimination of subsidy on diesel and LPG in the next four years and reduction in kerosene subsidy by one-third by 2014-15.
It had cautioned that in absence of these measures, the fiscal deficit of the government could shoot up to 6.1 per cent of the Gross Domestic Product ( GDP) in the current financial year. It can be contained to 5.2 per cent with the proposed reforms, the report had said.
As the Congress seized the opportunity of the widening rift between Anna Hazare and Arvind Kejriwal by saying that the latter used the anti-corruption crusader for his political ambitions, Hazare also declared that he will no more resort to fasting to press for his demands. "Now onwards I will not undertake fast. In future I will fight for my causes through agitations," he said.
Hazare said he would continue to work to send "clean" people to Parliament. He also said that a large number of retired IAS officers have shown their willingness to join his movement for a corruption-free India.
Expressing full faith in the country's youth, Hazare asked them not to be pessimistic about future of the country. Hazare had gone for fast thrice last year (twice in New Delhi and once in Mumbai) to press for a strong Lokpal Bill.
The Gandhian again sat on a protest fast at Jantar Mantar in New Delhi in July this year. Earlier, he had undertaken hunger strikes on several occasions in Maharashtra on issues related to corruption and transparency in governance.
Hazare said he is deeply influenced by Mahatma Gandhi, for whom fasting was a spiritual weapon.
Meanwhile, the Congress targeted Kejriwal by saying that his real intentions have been known by the public. "Now it is clear to everyone that Anna wanted to run campaign for Lokpal but Arvind Kejriwal and others used him for making political party. Now it is clear that they had the intentions of using Anna for their political ambitions," Congress leader Jagdambika Pal said while reacting to Hazare's blog.
In a veiled attack on Kejriwal, Hazare on Friday had said "politics has split" the anti-corruption movement and the pro-party group has gone against his will. "Those who favour the party has been saying that if Anna says, then they will not form a party. But despite that, they have decided to go ahead with the plan against my decision."
"Sometimes, it is also said they were forming the party because Anna has decided so. This is not right," he added.
In his latest blog, the 75-year-old activist had expressed confidence that the Lokpal Bill will be passed before the 2014 Lok Sabha elections and said, "Unfortunately, the movement has split even before we got the Bill. One wants to go political and the other wants to keep the movement alive."
"Now, there is an effort to link me with some party, or communal organisations. I have never in my life been a part of any such organisations. Till my last breath, I will not be part of any such things...the movement has split due to politics. Efforts are on to destroy whatever is left now. People should not fall into such accusations," he insisted.
"As elections are nearing, some party will try to misuse my name to garner votes. They will try to associate myself with them. There will be misuse of movement's name. You should not trust all these. The movement will remain movement only. Because it is sacred," Hazare said.
On the next course of his movement, he said his movement now needs an office in Delhi to coordinate its affairs. "But because of lack of money, we are not able to find one. I have not taken even Rs 5 from the donations which came in Jantar Mantar and Ramlila Maidan. I kept all the money with IAC so that it will be spent on the movement," he said.
Meanwhile, Gujarat chief minister Narendra Modi on Friday unleashed a scathing offensive on Prime Minister Manmohan Singh and Congress president Sonia Gandhi over corruption and FDI in multi-brand retail.His diatribe came within hours of BJP patriarch LK Advani asking the party to look within and ensure an "unblemished" and "united" image to be a credible alternative to the UPA government, which he said was unlikely to last till 2014.While Advani adopted the role of a mentor making the closing remarks at BJP's national council meet, advising the party to set its house in order to cash in on the "public anger" against corruption, Modi took centrestage as the party's show-stopper to take on UPA at a public rally winding up the conclave.
"The country wants to know why in eight years you have become Singham twice - once when there was the nuclear treaty with US, and the second time on the FDI issue... Why not become Singham for India," Modi said alleging that in both instances it was done to benefit foreigners. He said that both times, the US was in election year and asked if there was a connection between the two.
Taking on the government on FDI in multi-brand retail, he said US President Barack Obama had tweeted that Americans should buy from small shopkeepers. "I wonder why our prime minister could not see the position President Obama took," he said and demanded an answer from Singh on whether FDI in retail had anything to do with Sonia Gandhi's visit to the US as it was announced soon after her return from there. Referring to coal block allocations, Modi said it seemed like the Congress president had a role in all "scams" and that the prime minister was answerable for this to the country.
Flaunting Gujarat's progress in dairy farming, he said "even in the prime minister's house, the milk comes from Gujarata¦ In Gujarat, even cattle are operated for cataract; such facilities are not there for human beings in some other states."
Earlier, Advani had sent a clear message that at a time when BJP was taking on Congress on issues like corruption, it cannot afford to hesitate in addressing shortcomings within the party, amidst applause from members. "When we criticise Congress on corruption and there is even a whiff of corruption in our party, there is so much noise," he said. His remarks come at a time when allegations have been made by an RTI activist against BJP President Nitin Gadkari that he did not want the irrigation scam in Maharashtra to be pursued. Gadkari has denied the charges and sent a legal notice to activist Anjali Damania seeking an apology from her.
Advani touched a raw nerve in the party when he said BJP leaders should not speak in multiple voices. "It has never happened that BJP leaders speak in different voices. We should speak in one voice," he said.
Sat, Sep 29, 2012 at 13:16
Indian economy in perfect storm: Kelkar
The Vijay Kelkar Committee has finally submitted its report on medium-term fiscal consolidation for the Government of India. The government has partly acted upon this report and will be acted upon in the days to come. Dr Vijay Kelkar in an exclusive interview to CNBC-TV18 talks in dept about the report.
The Vijay Kelkar Committee has finally submitted its report on medium-term fiscal consolidation for the Government of India. The government has partly acted upon this report and will be acted upon in the days to come. Dr Vijay Kelkar in an exclusive interview to CNBC-TV18 talks in dept about the report.
Also read: Kelkar report calls for cut in subsidy, boost in divestment
After the report being made public by the finance ministry the headlines are varied. Some say that the Kelkar panel wants the government to bite the bullet on subsidy, bring down excise service tax to 8 percent, act on fuel, food and fertilizers before this situation goes back to 1991. You described that the Indian economy is in a condition of a perfect storm in the report.
They say the Kelkar panel wants the government to bite the bullet on subsidy, bring down excise service tax to 8 percent, act on fuel, food and fertilizers before this situation goes back to 1991. Your own description in the report is that the Indian economy is in a condition of a perfect storm.
Below is the edited transcript of his interview to CNBC-TV18.
Q: How would you describe the actions that the government has taken post the submission of the report and are you enthused by the response that you have seen to your recommendations?
A: The honorable finance minister called me, Dr Sanjeev Mishra and Professor Indira Rajaraman and gave us four weeks to prepare a roadmap for fiscal consolidation as the ministry of finance was aware of the need for fiscal consolidation.
We were able to bring out the report in four week time due to the cooperation from MoF and other concerned officials. We made the report as per the requirements of the ministry; they required a report on medium-term roadmap and framework. But, in the report we wanted to mention that why there's a need for fiscal consolidation. The Prime Minister in his nation address made a remark that 'money does not grow on tress' and I think that he was implying that if government cannot pretend in spending continuous spend without raising adequate resources then we will have unsustainable fiscal position.
However, there is one important twist to this, just like money does not grow on trees although one could argue that Indian currency can be printed by RBI but even RBI cannot print foreign currency. The fiscal deficit sooner or later gets translated into current account deficit (CAD), where our imports are higher than our exports. Our CAD is increasing from last two years which created stress on balance of payments (BoP).
Last year, our CAD was 4.2% and we quickly realized that if we don't allow the present trend then fiscal deficit will increase, and will lead to higher increase in current account deficit roughly around 4.2-4.3% of GDP which is about USD 90 billion. Plus, the short-term debt which will mature in next 12-18 months raised a very important challenge to the Indian economy for raising resources for financial current account deficit.
That really flashes the red light. So, there is urgency for fiscal consolidation otherwise our BoP will become unsustainable, not unlike 1991 crisis. CAD exceeded the limit, went above 4%. We are exactly going through a similar phase and that is what we have highlighted. Fiscal consolidation is a must because present trend indicates that this year our fiscal deficit may increase compared to last year.
Last year revised figure which was talked was 5.8%. We felt that it can exceed 6%, and our CAD will exceed 4.2%, which could exceed. Certainly, it is not a total unstable. So, in the first chapter of our report we mentioned the reason that why do we need fiscal consolidation.
Q: The government has had almost well over three weeks to consider, discuss and implement some of the recommendations. There has been a credible move on fuel subsidy front. In fact going a rupee beyond on diesel, but not acting on kerosene, doing something different on LPG. The MoF even now maintains that it is on track for only a marginal increase over the budget estimate of 5.1% of the fiscal deficit for the current year. Your report mentions 6.1%. How enthused are you by the recent steps of the government as far as fiscal consolidation is concerned? Do you pick it up as a positive signal of a commitment from this government that it will act on the fiscal front?
A: I am quite encouraged by what is being said and done by the ministry of finance. The FM is totally seized up the issue, he is concerned, committed for fiscal discipline and promoting fiscal consolidation. I think that the FM has been successful in changing the perception of his political colleagues.
Q: We got the message that Chidambaram's return to finance and North Block has reduced the gap between North Block and South Block. The most crucial responses that we got after the report was made public, the is suggesting that it would not be possible to do away with all the subsidies using specifically the word that it is not possible to eliminate all subsidies. Is that a negative signal? Why do you think that is the situation because your foreword itself recognises the need for these recommendations to be relevant to the political economy?
A: Our report itself does not suggest elimination of all subsidies. We mentioned to remove inequitable subsidies like LPG. LPG subsidies do not go to our people who fall in the low income bracket. So is the diesel subsidy. We are not against kerosene subsidy and food subsidy. In fact we mentioned that food subsidy must be there, we only have to contain it.
Similarly, we said subsidy must be continued for kerosene as long as it is affordable.
We are quite convinced that diesel subsidy is not defensible both for efficiency ground or equity ground and even on the ground of environment protection. What is subsidised diesel doing to the Indian economy? Today's subsidy of fertilizer is distorting the nutrient ratios in Indian economy. We also mentioned to rationalized fertilizer subsidy and have given a method for rationalising it. In our report we have taken a proposal which is already made by fertilizer and food department. As soon as Aadhaar scheme is successfully implemented we can completely shift it towards cash based transfers.
It is a logical transition what we have proposed. Annexure 6 of the report, mention about executive reforms where this transition is mentioned. So, I agree with people who argue that we cannot eliminate subsidies, we shouldn't eliminate subsidies. Food subsidy is defensible. For undernourished children or lactating mothers food subsidy is not only defensible, it is ethically right and morally correct.
Q: On the taxation front in your report there is a very crucial suggestion moving from 12 percent to 8 percent as far as excise and service tax go in a period of few years. This suggestion along with the fact that there is a proposal for the goods and service tax where some of the rates are basically being talked about at the level of 14 percent how do you think this will work out? Is this something that can be done and what is the logic behind having suggested this gradual reduction?
A: We have analyzed this in our GST rates discussion and in our finance commission report. I hold to the conclusion then and now that revenue neutral rates would be around 12-14 percent, where Centre and state both would not exceed 8 percent, it can be lower than that. So, 8 percent unifying goods and services is moving the direction of overall rate of taxation coming to 14 percent or less compared to present level of 24-26 percent.
So, reduction and unifying rates because we are enlarging the tax base for Centre and the state. We are now going to include all service transactions except negative list; we are going to include oil manufacturing sectors, we also going to have GST on imports which we don't have today, so that enables to reduce the tax rate because it enlarges the tax base. It is revenue neutral in fact it will increase total tax collection for simple reason is going to improve compliance because transaction cost will go down, as the rates go down compliance improves; it's going to increase the growth in the Indian economy so it's also increased tax. So, it's going to increase tax buoyancy, tax compliance, and tax collections so I think that direction we are proposing we should move on indirect taxes.
Q: Is there scope to move on this front on this suggestion in steps starting with the upcoming Budget itself because one of the points really would be that if you also need to ensure that growth continues. Tax stimulus, a return given in 2008 would provide some impetus, wont you agree?
A: We had given a map for medium term for GST implementation, there can be variation to that but commitment for unifying single rate in a shorter possible time is the key. Now, how do you make transition, the political economy will decide but what is more important, market wants the vision which they have for indirect taxes and how it's going to workout.
Q: At this point really the task therefore before the government and the FM would be to come up with a type of redrafted version for tax structure of the GST proposal is concerned and the Constitutional Amendment Bill also has to play out. Do you expect any realistic progress on it in the next couple of quarters because the political uncertainty that seems to have compounded and added to the perfect storm as mentioned?
A: This country also has the capability of surprising people. Mr Modi, deputy chief minister, Bihar, is a very seasoned and knowledgeable person as the chairman of state finance ministers along with a very enlightened FM and I won't be surprised if we find certain progress made as we also have Yashwant Sinha who's chairing this standing committee which is examining the bill. He was also one of the architects of reforms of indirect taxes. With this combination there is a possibility that we may see a breakthrough.
Q: If you were to look at the timeframe of the next couple of quarters it would also logically be the right time for the finance minister to go ahead and do what he has proposed to do with the DTC and that is to sort of review it look at the draft that has been put out and possibly push for a more definitive road map announcement with the next budget, if not before really?
A: I would not be surprised if that happens.
Q: You spent a long life in government and the political economy. One of the imperatives that will come up is that even as the government, the PM, the FM act towards fiscal consolidation, make it clear that it is very important to prevent a rerun of what has happened many years back to the Indian economy, the politics would possibly demand that the government reach out through more and more welfare schemes. The food security law many people would say is the biggest weapon that this government will deploy in the forthcoming elections or in the run-up to the forthcoming elections, just like the bank loan wavier program worked in the previous elections. You have suggested a staggered implementation, a phased implementation; the government has immediately said that the food security law remains a priority. Given all of this it is clear that the contradiction between fiscal consolidation and political needs would not allow the government to fully implement the prescription that you have prescribed?
A: It is totally understandable if government wants to pursue, in fact it is obliged to pursue their objectives of maintaining macro economic stability both external and internal stability as well as pursue the objective of equity. If there is tension between these two objectives in short run, it will be resolved, but I don't think there is any tension in medium term in these two objectives.
You cannot have equity without stability and you cannot have stability without equity. So, there is no tension in medium term. Short term there will be tension between these two objectives and we have to sequence it in a very informed, innovative and creative way they will have to do it. We did it earlier and why we cant do it now? I don't see any difficulty in meeting these two important objectives of a democrat polity. So, I am quite confident that, this can be done and this will be done.
Q: In the report you have mentioned which is possible but given the overall administrative inefficiencies that we see with regards to tax collection we have seen a situation where the government has vacillated, the finance ministry vacillated from a position where the cash management went for a toss because there was a sudden spurt of refunds. Refunds were actually given in time and possibly even before times as per standard averages to a situation where now there is a sort of a full stop break on the refund process. This type of tax inefficiency is more worrisome than an increase in the basic tax rate that corporates and other tax payers would be worried about. Is it possible for any government, for the system to act on upon this? How can we break that lock-jam?
A: Correct. In any country and particularly in emerging markets tax administration is tax policy. In other words improving tax administration is very important part of tax policy and we have an advantage that we are capable. This country is capable of using, mobilizing IT, Information Technology for improving tax administration. A lot of advance has been made by both direct taxes and indirect taxes people in the area using IT for improving administration. In our report we have given full section on this class of issues. It's quite detailed proposal we have given, how to improve this, how to reduce transaction cost for tax payers, how to improve tax payer services. I think they are all doable and I have no reason to believe that it will not be done.
Q: You say that it is doable, but in the days and once the government receives the public comments that it has sought on this report do you expect more measures to be implemented in the immediate short term, possibly within the next couple of months to shore up the fiscal further?
A: We should recognise that it is very important that government's policies have credibility. So, it doesn't matter if the pace may be little slower in initial stages but as long as your performance is better than promise, as long as we do what we say, as long as we continuously maintain this program of fiscal consolidation. Markets will react to it. There will be investment flow. Central bank reducing interest rates more rapidly than it would have otherwise and it will promote growth and employment. To my mind nothing is more inclusive than increasing productive employment. So, if employment starts growing especially productive employment that will be key instrument to move towards more inclusive growth. It will happen, it will happen step by step, in a measured way it will be done. The whole world is watching us. World respects the statecraft if done well. We will again show the world that this country is capable of finding its own destiny in its own way.
Q: You made an important points about disinvestment where you spoken about the need to move faster. You recommended an exit from all minority shareholding including companies like Hindustan Zinc and Balco, decisions which have needlessly been kept pending. We see a sense that this government intends to move along with the uptick that it is seeing in the markets. Are you hopeful of the disinvestment strategy that seems to be articulated at this point of time?
A: Disinvestment is a very important instrument for government not only for resource mobilisation, but more as an instrument for resource reallocation or rebalancing the governments balance sheet.
Government can move increasingly into the assets which are more in line with the new needs of the economy and exit from assets which now can be taken over by other actors in the economy, but move into the assets which otherwise no investment will be made. We have proposed a number of possible instruments which can help to accelerate this process of disinvestment and Rs 30,000 crore is certainly doable this year, even more so next year and even more so in the following year because by that time we can also get a place to mobilise governments underutilized land resources.
Saturday, September 29, 2012
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