The RK Puram Budget

RK Puram is a determinedly down-market neighborhood in southwest Delhi. It is chockablock with government colonies for middle-level bureaucrats, schooled in the cruel education system that strips young people of hope and ideals; the cynics who have held the economy to ransom.

These housing settlements are pleasant enough with lots of shady trees and large green spaces. The apartment buildings, however, are a different story: built by the Central Public Works Department, they are shoddy and ugly; islands of bad design in an otherwise nice environment.

RK Puram sprang to mind as I reviewed the 2015 budget of the absolute-majority BJP government. In his budget speech, the finance minister presented us with an economic RK Puram, dressed up in rhetoric and intention but tacky, grotesque and dysfunctional in content. Bottom line: higher taxes, higher government spending and significant tax policy obfuscation to keep everyone guessing.

This budget is especially prone to criticism because the government leadership has mindlessly hyped its sermon of happy days: a new and improved “India Shining” with gleaming highways, bullet trains, smart cities, soaring stock markets, a tsunami of foreign investment, gainful employment and “gili-gili,” a waving wand to banish the reality of blight and deprivation. Instead, as the first major government initiative, not counting all the diplomatic event management, the budget is seriously disappointing.

The finance minister, not particularly known for his grasp of economics and somewhat shorn of a sense of irony, said in his budget speech, “It is quite obvious that incremental change is not going to take us anywhere. We have to think in terms of a quantum jump.” The rest of his speech was devoted to what might best be called bureaucratic tinkering such as raising deductions in taxable income, easing resolution of commercial disputes and what have you. All the words and sentences and paragraphs of the speech could not obscure reality: it was a bureaucrat’s do-nothing budget.

Claiming credit for the introduction of a Constitutional amendment to facilitate a nationwide Goods and Services Tax (GST), the finance minister appeared to sweep under the rug, his party’s opposition to GST when the UPA first proposed it.

His was also the voice that could be heard in the recent Parliamentary debate over the land acquisition bill, proclaiming disingenuously against the Opposition’s “politics of obstruction.” He seemed to forget that his party had supported the UPA-sponsored bill while opposing everything else including the proposal to allow global retail chains to set up operations in India and the one to permit multinational insurance firms to increase stakes in their joint ventures. During the UPA’s two terms, the disruptions forced by the BJP were frequent, extended and virtually paralyzed Parliament.

The finance minister’s lack of a sense of irony was matched only by his lack of grace. This was abundantly evident in his ad hominem attack on the previous government, calling it a “scam, scandal and corruption raj.” These are not just the finance minister’s failings; almost no one in his party has the sensibility or moderation that is required of statesmanship.

To get back to the finance minister’s budget proposals, several of them of them stand out for their potential to hurt the economy:

First, the increase in service tax from 12.23 to 14 percent. Though the increase is less than two percent, its impact on small and medium service businesses is likely to be huge. In its search for “happy days,” the government needs to give such businesses access to credit and tax breaks to smooth their cash flow. They are the key to “development,” the backbone of the economy. The budget proposals will simply make it harder and harder for them to function. That’s not all: the proposed increase in service tax remains in suspense because there has been no notification by the government.

Second, the proposal to allow the fiscal deficit to balloon to 3.9 percent of Gross Domestic Product instead of the restricting it to 3.6 percent targeted by the previous government is troubling. The finance minister seems to have thrown fiscal rectitude to the winds and has, perhaps unwittingly, endorsed the waste and redundancy that are hallmarks of the bureaucracy.

Third, the assumptions trumpeted in his speech are at best fantastic. The notion that economic growth will exceed eight percent next year is simply outlandish. So is the minister’s assertion that the global economic situation has turned adverse. On the contrary, as former Prime Minister Manmohan Singh pointed out, external factors are favorable for India to chart a high-growth orbit once again. The hurdles are all internal and if this government was serious, the budget could have focused on addressing them. Instead, the finance minister’s speech seems to have been caught between hype and bureaucratic tinkering, a sure sign of the policy paralysis to come.

(An edited version of this post will appear in Education World, April 2015.) 

  

And Accountability For All

This article appeared in The Times of India, April 21, 2010.

In many ways, the government has embarked on a path-breaking route, in terms of both domestic and foreign policy. For instance, some time ago, the issue of fertiliser subsidies came up. In one fell swoop, the government changed the game by targeting subsidies on the basis of nutrients. Thanks to the policy change, farmers will look to nutrients other than urea. This will increase yields dramatically. Urea-based fertilisers were once good and government policies championed their use. Over the years, it became clear that they had passed the point of diminishing returns. Everywhere in the world, governments have promoted suplhur-based and other nutrients in the mix to increase yields and protect the soil.

With all the noise about food inflation, the government has pointed to the exploitative role of middlemen in the journey farm products make from the fields to the market. In recent times, the finance minister has made several references to the need for organised retail in the grocery business, most recently at the CII national meeting in Delhi.

Coming to taxes, the finance minister cut individual taxes while increasing some indirect levies. The idea is sterling: put more money in the hands of middle-class families and let them decide what they can or cannot afford. If i am considering buying a car and it costs a few thousand rupees more, it is my call. By putting economic decisions in the citizens' hands, the government has been making a major paradigm shift.

The emphasis on infrastructure is also welcome. Roads, ports, airports and railroads are being built. The trouble is that modern infrastructure is at the disposal of government agencies and citizens with zero ethics or civic consciousness. Thus, it gets caught up in bottlenecks caused by lackadaisical enforcement and citizens who habitually violate the law.

For instance, many cities now have modern airports. They are like white elephants because, the minute you step outside, there is total chaos. It's the same thing for highways. We recently travelled to Chandigarh from Delhi. The road is a work-in-progress and there are significant flyovers and wide pavements. But there is total traffic chaos.

Even as you rev to the top speed of 90 km per hour, you find yourself having to deal with vehicles going the wrong way, underpowered trucks, three-wheeled vehicles, bullock carts, cycle rickshaws, handcarts, herds of cows and sheep and, scariest of all, daredevil pedestrians trying to cross the highway. They make the journey a nightmare. There is simply no policing, no signage or other facilities that go with modern highways. It's almost as though modern amenities are made available to citizens with a pre-modern mindset by officials with no clue about modernity.

The tragedy is that the police have no authority to enforce the law. Even worse, they don't even know the law. Just recently, I stopped a police car on the spanking new expressway that connects Delhi and Gurgaon to the airports. I told the police officer that the unchecked use of the expressway by two- and three-wheeled vehicles was a major traffic violation and that there were signs that these vehicles were not allowed. He told me to mind my own business. The government needs to show its hard-headedness in such matters as much as it is doing with the Maoists in central India.

Talking of internal security, the government has made major moves. It has taken on the Maoist movement with force. True, there are complaints of security forces riding roughshod over the ultras. But then, the Maoists are not known for grace and diplomacy either. A tough approach will not only contain the insurgents but also send a clear message that this is a hard government that will not stomach violent agitations.

On national security, the government has embarked on a new course. Even while initiating talks with Pakistan, it authorised a major air force exercise some time ago in the Rajasthan desert to demonstrate its fighting capabilities. It was a brilliant move to invite the defense attaches of major diplomatic missions, leaving out the representatives of China and Pakistan. The idea was to exhibit hard power.

To reinforce the government's hard line, the prime minister went to Saudi Arabia and urged its authorities to weigh in with Pakistan to control terrorist groups operating from there. It is clear Pakistan's government has neither the wherewithal nor the will to rein in various terrorist groups with a free run within the country's borders. A Saudi nudge could go a long way to boost the crippled civilian government against rogue elements within the army and intelligence agency.

In the end, however, you have in India an enlightened government beset by a crude political class, a malignant bureaucracy and a pre-modern citizenry. Also, the ship of state seems unable to deal with casteism, communalism and corruption. Bureaucrats blame crass politicians and the ignorant citizenry. Politicians castigate the bureaucracy. Citizens berate politicians and bureaucrats. It's a sort of beggar-thy-neighbour view enabling the entire system to elude responsibility. If everyone's to blame, nobody is accountable. What's clear is that citizens have to take on responsibility; blaming the government and politicians is not enough.

Copyright Rajiv Desai 2011.

Good Policy

Need Governance

In many ways, the government has embarked on a path breaking route, in terms of both domestic and foreign policy.

To begin with, there is the issue of fertilizer subsidies. In one fell swoop, by targeting subsidies on the basis of nutrients, the government has changed the game. Now farmers will look to nutrients other than urea. This will increase yields dramatically. Urea-based fertilizers were good and government policies championed their use. Over the years, it became clear that they had passed the point of diminishing returns. Everywhere in the world, governments promoted suplhur-based and other nutrients in the mix to increase yields and protect the soil.

With all the noise about food inflation, the government has pointed to the exploitative role of middlemen in the journey that farm products make from the fields to the market. The finance minister made several references to the need for organized retail in the grocery business, most recently at the CII national meeting in Delhi.

Coming to taxes, the finance minister, in his budget speech, cut individual taxes while increasing some indirect levies. The idea is sterling: put more money in the hands of middle class families and let them decide what they can or cannot afford. If I am considering buying a car and it costs a few thousand rupees more, it is my call. By putting economic decisions in the hands of citizens, the government has made a major paradigm shift.

On internal security, the government has made major moves. It has taken on the Maoist movement in central India with force. The most recent incident in Dantewada only underscored the Prime Minister’s six-old assessment that Maoists pose the most significant threat to national security. True, there are complaints of security forces riding roughshod over the militants. But then, Dantewada showed that the Maoists are not known for their grace and diplomacy either. This tough approach seeks not only to contain the insurgents but to send a clear message that this is a hard government that will not stomach violent agitations.

On the national security front, the government has embarked on a new course. While initiating talks with Pakistan, it authorized a major Air Force exercise in the desert of Rajasthan to demonstrate its fighting capabilities. It was a brilliant move to invite most defense attaches of diplomatic missions and to leave out the representatives of China and Pakistan. The idea clearly was to exhibit hard power.

To reinforce the government’s hard line, the Prime Minister went to Saudi Arabia and urged the authorities there to weigh in with Pakistan to control the various terrorist groups that operate from there. It’s clear the Pakistan government has neither the wherewithal nor the will to reign in various terrorist groups that have a free run within its borders. A Saudi nudge could go a long way to boost the crippled Zardari government and the rogue elements within its army and the intelligence agency.

The emphasis on infrastructure is a key feature aspect of the government’s priorities. Roads, ports, airports, railroads are being built. The trouble is that corrupt and inept government agencies are in charge and its users are citizens, who lack civic consciousness. Thus it gets caught up in the bottlenecks caused by lackadaisical enforcement and scofflaw citizens.

Many cities now have modern airports; they are like white elephants because the minute you step outside there is total chaos. It’s the same thing for the highways. We recently traveled to Chandigarh from Delhi. The road is a work in progress and there are significant flyovers and wide pavements. But there is total traffic chaos. Even as you rev to the top speed of 90 kilometers an hours, you find yourself having to deal with vehicles going the wrong way, underpowered trucks, three-wheeled vehicles, bullock carts, cycle rickshaws, handcarts, herds of cows and sheep and scariest of all, daredevil pedestrians trying to cross the highway. There is simply no policing, no signage or any other accoutrements that go with modern highways. It’s almost as though modern amenities are made available to people with a medieval mindset.

Tragedy is the police have no authority to enforce the law. Even worse, they don’t even know the law. Just recently, I stopped a police car on the spanking new expressway that connects Delhi and Gurgaon to the airports. I told the police officer that the unchecked use of the expressway by two- and three-wheeled vehicles was a major traffic violation. I told him there were signs that these vehicles were not allowed. He told me to mind my own business. The government needs also to show its hard self here as much as it is doing with the Maoists in central India.

In the end, you have a modernizing government that is beset by a crude political class, a malignant bureaucracy and a pre-modern citizenry. As such, even though the government pursues enlightened policies, the ship of state seems to be caught on the rocks of casteism, communalism and corruption.

Bureaucrats blame crass politicians and the ignorant citizenry. Politicians castigate the bureaucracy. Citizens berate politicians and bureaucrats. It’s a sort of beggar-thy-neighbor view that enables the entire system to elude responsibility. If everyone’s to blame, then nobody is accountable.

This is the challenge for India that the world deems as an up and coming power.

An edited version of this article appeared in The Times of India, April 21, 2010

Copyright Rajiv Desai 2010