Connect with us

Analysis

Anatomy of a decline

The PM in attempting to usher in the era of a cashless society, has rendered poor people cashless.

Published

on

Kapil Sibal

The economy is in deep trouble. Growth indicators have been in constant decline. In the April-June quarter, growth plummeted to a dismal 5.7 per cent. In all likelihood, growth for fiscal 2017-18 will be below 7 per cent. This will not give the finance minister elbow room to increase allocations in sectors starved of funds. We cannot expect increased allocations in education, health, agriculture, rural development, transportation, women and child welfare when the finance minister presents his next budget. Reduced allocations in MGNREGA will further hurt the poor, after having been made victims of ill thought out, knee-jerk economic decisions of this government. The PM in attempting to usher in the era of a cashless society, has rendered poor people cashless. This broke the back of the aam aadmi already overburdened with the pain of poverty.

Demonetisation was followed by the ill-timed imposition of a flawed GST. This has had a lethal effect on the informal sector. MSMEs are ill prepared for compliance issues. Glitches in the GSTN network have further hurt businesses. Those surviving on job work have lost out. Beneficiaries of downstream procurement now require registration. Without that businesses will seek alternatives and procure from those already registered. This has caused unexpected business disruptions.

While the business community will continue to grapple with the challenges of an uncertain economic environment, the government has very little space to manoeuvre and reverse the downward spiralling of the economy. After 19 months of declining exports, they first plateaued, and now we see some signs of recovery. For the economy to grow at a constant 7 per cent, exports must pace upward of 15 per cent annually. Our exports are just not competitive unless interest rates come down and the rupee declines substantially. I don’t see that happening. Even if it does, the ecosystem of an export-oriented market economy is not in place. The textile sector awaits modernisation and with cow-vigilantism the leather sector is unlikely to recover in the near future. Our pharmaceutical pricing policy has dampened prospects of investments. Absence of robust exports means a slowdown in manufacturing which in turn impacts employment.

Farmer suicides, around 12,000 in 2015 alone, are the result of the crisis bedevilling agriculture. Nearly 70 per cent of those occupied in agriculture have holdings of 1 hectare and less, not enough to sustain families. Most are marginal farmers entirely dependent on the vagaries of the weather. Drought and floods play havoc and the consequent dependence on moneylenders entangles them in a vicious debt cycle. In good times, even with bumper yields, prices crash and the farmer loses. The real problem is the absence of a ready market when the crop is harvested. Absence of cold chains to preserve fruits and vegetables makes for a buyers’ market. What is needed is a shift to horticulture and commercial cropping to increase farmers’ income. Loan waivers may give a temporary reprieve but that is not a solution. To deal with other ailments we must think out of the box. To sustain high growth, agriculture must grow at 4 per cent per annum.

The index of industrial production has been slipping. Manufacturing has suffered and bank credit growth, as low as 5.1 per cent in 2016-17, was the lowest since 1963 according to the RBI. This is evidence of the drying up of private sector investment. The conditions for private enterprise to flourish are non-existent. Ease of doing business is replaced with many ceasing to do business. Big industry is investing abroad rather than at home. The taxman is breathing down everyone’s neck and investigating agencies are not far behind. They blackmail and exploit, spreading fear.

With a downturn in manufacturing, job opportunities have dried up. Industry, too, is downsizing its workforce. Even in the IT sector, thousands have been laid off. The demographic dividend might turn out to be a demographic nightmare. The time bomb is ticking as society is being torn asunder. The PM, unfazed, inaugurates the bullet train from Ahmedabad to Mumbai.

The telecom sector is undergoing consolidation. Auction of spectrum at Rs 56,000 crore for 5 megahertz has crippled the industry. It is under debt of around Rs 4 lakh crore. It has to spend Rs 1.25 for every rupee earned. This is unsustainable. Telenor has already said goodbye to India and Vodafone is merging with Idea. Sistema is ready to be taken over. Jio is the new disruptive player. Competitors are crying foul. Discoms in the power sector are reeling under debt. The politics behind subsidised power is the villain. Lack of demand for power is evidence of industrial slowdown. There are no takers for coal blocks put up for auction. Those auctioned are in trouble. Major players in the steel sector are facing insolvency. Mining is at a standstill, with court orders strangulating it with their vice-like grip. Core sector growth is, therefore, tepid.

Real estate is in a mess. Homebuyers are up in arms and major players will soon face insolvency. I am afraid court orders, instead of helping matters, will exacerbate the troubles the sector faces. Courts cannot and are also unwilling to comprehend the economic consequences of judicial diktats. Slowdown in construction activity impacts not only jobs but also impacts the demand for steel, cement, sanitary ware and other inputs which are an integral part of construction activity.
To top it all, bank NPAs have risen to Rs 8,80,000 crore. Government has no surplus funds to bail them out. There are no easy solutions. Economists have warned against attempts to merge banks to reduce NPAs. There is talk of increasing public expenditure with a stimulus package, in an attempt to revive demand.

Three and a half years have gone by. The economic situation is getting messier by the day. Let us await what New India has in store for us since the PM no longer talks of achhe din.

Courtesy: Article is published on Indian Express dated 29th September 2017

The writer, a senior Congress leader, is a former Union minister.

Analysis

2018 In Retrospect: Permanent peace eludes Jammu and Kashmir, as it has for last 30 years

Published

on

Jammu/Srinagar, Dec 17: It’s been a fairly turbulent year in the state, both security-wise and politically. It saw more violence compared to last year, even though the security forces killed many militants, including some top commanders of militant outfits.

There were 587 incidents of violence during 2018 compared to 329 last year. Official figures say 240 militants were killed during the year against 200 last year.

Casualties among civilians and the security forces have also been comparatively higher. Thirty-seven civilians and 86 security men were killed in 2018 against 36 civilians and 74 security personnel killed last year.

Permanent peace eluded the state in 2018 as it has during more than 30-years of strife.

According to senior intelligence officers, there are still around 240 militants, including foreigners, who are active in the state.

“The number keeps on varying depending upon infiltration of new militants from across the line of control (LoC) and recruitment of local youth into militant ranks”, said a senior intelligence officer.

Summing up the security scenario, Lieutenant General A.K. Bhatt, who commands the Srinagar-headquartered 15 corps of the Indian Army and is the senior-most army officer in the Valley, said: “The security forces have a limited role in controlling the ground situation in the state. The final solution has to be political.”

On the political front, there was a dramatic turn in June when the right-wing Bharatiya Janata Party (BJP) suddenly announced in New Delhi that it was withdrawing from the ruling coalition in the state, headed by the Peoples Democratic Party.

The announcement was not unexpected as the two ideologically opposed parties were ruling the state for four years through an uneasy arrangement that appeared brittle from day one since the late Mufti Muhammad Sayeed announced it in 2015.

With the withdrawal of BJP support, the Mehbooba Mufti-led coalition fell and Governor N.N.Vohra dismissed the government, even though the state assembly was kept in suspended animation for any future alliance to stake claim to power.

Vohra was subsequently replaced by Satya Pal Malik who became the first politician to be made the state governor. As compared to his predecessor, Malik chose to speak to media as often as he could to put forth his view point, sometimes to the embarrassment of both New Delhi and Malik himself.

The fist thing the new governor did was to announce local urban bodies and panchayat elections in the state. Both these democratic processes were concluded peacefully throughout the state and their conduct is considered a feather in the administration’s cap as the elected government had been shying away from conducting the elections.

With the imposition of governor’s rule, the PDP started suffering desertions as some of its dissident legislators launched an open rebellion against the party leadership. In the forefront of the dissidents was senior Shia leader and former state minister Imran Ansari who finally joined the Peoples Conference (PC) headed by Sajad Lone, himself a former minister in the PDP-BJP coalition government.

Sajad’s PC started emerging as the possible Third Front that could, in future, pose a challenge to both the PDP and the regional National Conference (NC) headed by Farooq Abdullah.

Ever since the elected government fell, rumours started doing the rounds in the state that dissidents in the PDP, the NC and even the Congress party were waiting in wings to join the Third Front. The visit of BJP general secretary Ram Madhav to the state and his meetings with Sajad Lone and dissidents kept fuelling these rumours even when Madhav said there was no immediate move to form a government in the state.

The fear of their flock being poached pushed the arch rivals, the NC and the PDP, come close to each other. In a surprise move, Altaf Bukhari, senior PDP leader and former minister emerged as the contender for the Chief Minister’s post with outside support by the NC. With the NC’s 15 and the PDP’s 29 seats, the two parties hold a simple majority in the 87-member state assembly.

The NC and the PDP said they had decided to sink their differences to protect the special status of the state as article 35-A and other constitutional provisions were being challenged to dilute this.

There were also reports that the Congress was in the loop to shoot down horse-trading in the state. The PDP president, Mehbooba Mufti, sent a fax to the Raj Bhawan seeking an appointment with the Governor to stake claim to power. The fax was never received as the Governor said later the fax operator at the Raj Bhawan was off duty due to a holiday.

Amid claims and counter-claims, Governor Malik, in a dramatic move, dissolved the state assembly on November 21, justifying this by saying that he wanted to “prevent horse-trading”.

The possibility of any dialogue between the centre and the separatist leadership remained a distant possibility during the year. In all likelihood, this will have to wait till a new government takes office at the centre after the 2019 general elections in the country.

Elections to the state assembly are also likely to be held simultaneously with the 2019 Lok Sabha elections around April-May next year.

By Sheikh Qayoom

(Sheikh Qayoom can be contacted at [email protected])

 

Continue Reading

Analysis

Agrarian crisis dominates, set to influence 2019 general elections – 2018 In Retrospect

At the same rally, Congress President Rahul Gandhi had said: “The voice that is reverberating now across the country is of the farmers who are in deep distress and crisis.”

Published

on

New Delhi, Dec 17 : Agrarian crisis emerged as a major political concern in 2018, fuelled mainly by a fall in crop prices and a poor procurement mechanism which will provide opposition parties a common ground to rally against the BJP ahead of the next year’s general elections.

The anger brewing against the perceived “anti-farm policies” of the government could be measured by the poor performance of the BJP in the rural parts of Hindi heartland states in the just-concluded Assembly elections, that saw the BJP ousted from power in all three states.

In past one year, the national capital alone saw at least five major rallies of farmers, despite the BJP-government coming up with a new price-fixation formula and a score of schemes to impress the tillers of the soil.

The police firing in Madhya Pradesh’s Mandsaur last year that led to the death of six farmers, sparked agitations throughout the country over rural distress, which snowballed into a major political and social issue this year. The simmering discontent among farmers gained political traction in 2018.

Various opposition parties have been raising their voices against different issues to suit their electoral needs but they showed unanimity in expressing their solidarity with the demands for better crop remuneration and farm loan waivers during the November 30 farmers’ rally in the capital.

At the same rally, Congress President Rahul Gandhi had said: “The voice that is reverberating now across the country is of the farmers who are in deep distress and crisis.”

For the first time, the 2019 Lok Sabha elections will be fought on issues revolving around rural distress, said Yogendra Yadav of Swaraj India, who is credited with bringing over 200 farmers’ outfits under one banner — the All India Kisan Sangharsh Coordination Committee (AIKSCC).

“There has always been agrarian distress in the country. However, it never got an occasion to become a principal factor in the elections. The BJP’s defeat in the Assembly polls, coupled with the newly-achieved unity among farmers, has ensured that farm distress would take a centre stage in the 2019 elections,” Yadav told IANS.

He termed the BJP regime led by Prime Minister Narendra Modi “the most anti-farmer” government in the history of the independent India because of its “unsympathetic” treatment of farmers in the past four-and-a-half years.

Many videos throughout the year went viral on the social media, featuring angry farmers throwing their harvest and milk on the roads in the absence of remunerative prices.

Amid protests, the government increased the Minimum Support Price (MSP) for certain agriculture commodities. However, the farmers found this not at par with their demands and expectations.

Also, poor procurement of commodities owing to inadequate numbers and delay in the opening of purchasing centres by the government agencies forced the farmers to make distress sales.

In the case of vegetables, while the retail prices hovered between Rs 20-30 in major cities, the prices received by farmers for semi-perishable commodities such as potatoes and onion slumped to Rs 1 per kg.

The Agriculture Ministry seemed “ineffective” to create a redressal mechanism, activists said, though it came up with three procurement plans. Notably, Union Minister and Senior BJP leader Nitin Gadkari had in June this year acknowledged that there was agrarian crisis due to surplus crop output and sought action to address the problem.

And yet, the BJP-government failed to take corrective action by analysing the demand-and-supply situation, said Swabhimani Shetkari Sanghatana leader and Lok Sabha member Raju Shetti, who quit BJP-led National Democratic Alliance (NDA) over farmers issues’ last year.

“The government has been quite aware of the farmers’ issues. However, it did not take required action to ensure remunerative prices for farmers and the procurement of their harvest was ineffective,” Shetti added.

Noted agronomist Ashok Gulati said there was “lack of understanding” and “lack of vision” in the current BJP regime. He said the government did not carry out the required market reforms but resorted to just slogans and announcements.

“Even after the Mandsaur firing episode, the government did not act,” he said.

Any government needs a smart agriculture minister for effective implementation of schemes, he added.

Interestingly, Agriculture Minister Radha Mohan Singh chose to attend a Yoga session with Baba Ramdev in Bihar two days after the Mandsaur firing.

(Saurabh Katkurwar can be contacted at [email protected])

Continue Reading

Analysis

Now comes the hard part for the Congress

The Congress and its president will have to realise that such generalities no longer pay political dividends. The voters, especially the youth, are interested in specifics, including the spelling out of targets.

Published

on

Winning, although narrowly in Rajasthan and Madhya Pradesh, was the easy part for the Congress.

The favourable signals were there from the party’s earlier by-election victories in the two states. But despite the Congress’s latest success, what must be worrying for the party is that it missed losing by a hair’s breadth, given how close the voting percentages were for the two contenders – 39.3 per cent for the Congress in Rajasthan against 38.8 for the Bharatiya Janata Party (BJP) and 40.9 per cent in Madhya Pradesh for the Congress against the BJP’s 41.

What this means for the Congress is that it doesn’t have a moment to lose to show that it can provide better governance than its predecessor. There is no time for the party to bask in the glory of having risen like a Phoenix from the ashes of the 2014 drubbing. It has to hit the ground running, as the phrase goes.

It will not do for the Congress to bank only on populist measure like loan waivers for farmers which are frowned upon by economists as sops which ultimately help neither the farmers nor the agricultural economy. The loan waivers are in line with Sonia Gandhi’s favourite rural employment scheme of the Manmohan Singh government which was of no help to the party in 2014.

Nor will the pursuit of a “soft” Hindutva line to project the Congress as a BJP minus the gau rakshaks be of any help. Instead, the party will have to take definitive steps to demonstrate that it means business in dealing with agrarian distress and unemployment – the two main factors which brought about the BJP’s downfall.

Neither of the two steps will be easy for a state government, especially when there is an unfriendly regime at the centre, waiting to see how it fumbles. But an emphasis on irrigation and on groundwater and surface water management can underline the state government’s serious intent.

An expansion of the formal credit facilities can also reduce the dependence of the farmers on rapacious money-lenders, as can efforts to ensure that the routine subsidies are not misappropriated by the richer farmers.

Similarly, joblessness can be partly alleviated by helping in the growth of small and medium businesses in states which haven’t yet been able to shed the damaging BIMARU tag of being “sick” where the social and economic indicators are concerned.

But, in addition to such initiatives which are within the capabilities of the state governments, it is time that the Congress at the national level outlines its broad economic vision, which has been hazy so far as was evident from Rahul Gandhi’s reluctance to specify what he means when he talks of supporting farmers, creating jobs and extending health care, as he did at the London School of Economics last summer.

The Congress and its president will have to realise that such generalities no longer pay political dividends. The voters, especially the youth, are interested in specifics, including the spelling out of targets.

Since the problem with the Congress is that it has been unable to make up its mind between populist and pro-market policies, it appears to be suspended in midair where economics is concerned with no one knowing what to expect from a Congress government – a return to Manmohan Singh’s economic reforms or to Sonia Gandhi’s focus on freebees.

So far, the Congress governments in Punjab and Karnataka have been run-of-the-mill ones with little to show them as result-oriented, especially in the matter of bolstering the economy.

But, now that three more states have come under the party’s aegis, there has to be greater focus in its policies instead of a recourse to homilies.

For Rahul Gandhi, the unambiguous projection of an economic direction in the run-up to the next general election will be a bigger test than containing the Congress’ age-old malady of internal factionalism dating to the Tilak-Gokhale split of 1907.

If Narendra Modi is perceived to be faltering, it is because he tried to tackle the country’s economic ills with patchwork repairs like opening myriad bank accounts, providing direct cash transfers for cooking gas cylinders, extending rural electrification and undertaking faster highway construction. But he failed in carrying out what are called “big bang” reforms to rejuvenate the economy, which was the expectation behind his 2014 success.

If Rahul Gandhi, too, is found to be following in the BJP’s footsteps not only in pursuing “soft” Hindutva, but also in the economic field, the unforgiving people of India, who are increasingly becoming impatient for quick results, will have no hesitation in dumping the Congress.

The Congress president’s problem is that he will have carry with him his allies in the mahagathbandhan – if and when the grand alliance is formed – and so he cannot make unilateral announcements on key issues.

But he must remember that the eagerness with which many of them court foreign investors shows that the earlier aversion of the average politician to capitalism is dying out.

Rahul Gandhi will have to state whether he shares their views or still considers himself to be a foot soldier of the Niyamgiri tribals of Odisha who ensured the eviction of investors from their sacred hills.

(Amulya Ganguli is a political analyst. The views expressed are personal. He can be reached at [email protected])

Continue Reading
Advertisement

Most Popular