In defence of Bibek Debroy’s purported defence of the UPA’s budget

Out of context

To draw attention to Bibek Debroy’s commentary on the second UPA government’s first budget, I wrote, on Twitter:

Bibek Debroy in IE: “If con is antithesis of pro, Congress is the antithesis of Progress.” [@acorn]

In response, Zahan Malkani writes (via email):

This is regarding your Tweet about the IE opinion piece ‘Read Between the Lines’ posted on @acorn approximately three hour ago. I’m replying via email as my account is a protected one and I’ve realised that my replies never reach you.

The Tweet in question is, in my opinion, a blatant misrepresentation of the spirit and overall tone of the article by Mr. Debroy.

Sure, you did quote him verbatim, but thoroughly out of context. Not unlike the legions who quote Marx as having once said ‘religion is the opiate of the masses’, which completely misses the point.

Not to sound pretentious, but in an era defined by 140-character-or-less, it becomes all the more important for you to represent other’s work in an unbiased manner that captures the spirit of the piece.

As I see it, Mr. Debroy was rather upbeat on the new budget and its ramifications. The thesis, if you can call it that, seemed to be that this budget was rather a good sign, given the circumstances.

Indeed to draw from Mr. Debroy’s last paragraph,

“I am glad the Budget isn’t flashy and spectacular. It seems pedestrian. But given the constraints, it isn’t quite that… Despite public expenditure and the doubtful efficacy of Central universities in every state, there is nothing to kill green shoots.”

I would appreciate it if you posted an update reflecting the context of the article that you extracted the quote from. This government has a hard enough time ahead impressing critics like yourself (whom I readily admire for your work) without misrepresentations.

Yours sincerely,
Zahan Malkani

Now, whether or not the Indian government cares about twittering critics, whether or not its twittering critics matter, and whether or not the ball was inside or outside the line, Mr Malkani’s email is worth bringing to the attention of this blog’s readers.

Let them go on pilgrimages

A state of moral welfare

The government of Karnataka, we are informed has “taken a decision to introduce a scheme to conduct pilgrimage tours for poor people.” People below the poverty line (BPL) qualify. (But the last time the Karnataka government tried to compile a list of BPL families 91% of them applied.) According to the New Indian Express, “the government will provide bus, boarding, lodging and darshan facilities at Kollur Mookambika Temple, Sri Krishna Temple at Udupi, Dharmasthala, Soudatti and other places at a subsidised cost.”

Here is a government that takes care of citizens’ welfare—in this world and the next, in this life and the next—for a trivial Rs 10 crore (presumably, every year). That’s not all. Should you residents of Karnataka find it extremely difficult to get a place to stay in those strange, foreign climes of neighbouring Andhra Pradesh state, relax in the knowledge that your government “has approved a plan for construction of a 500-room guesthouse and 25 cottages for VIPs at Tirumala in Tirupati.” This, for a trivial Rs 110 crore.

The floodgates have been opened wide.

Related Post: Andhra Pradesh’s state-subsidised tours to the holy land

For some serious policing

Planned spending, informed planning

Sushant K Singh and Ramavtar Yadav make a case for police reforms in today’s Mint.

Social and economic security needs to be immediately adopted as one of the Plan sectors by the commission. This sector should set national objectives and provide assured resources—funds, manpower, equipment and training—for policing and encompass crimes, crimogens, criminal justice system (CJS), police organization, correctional services and judicial service.

There have been incessant calls to discard the archaic system of centralized planning and the distinction between Plan and non-Plan accounting, which has many drawbacks. In the present scheme of things, however, a Plan scheme acquires priority and urgency by virtue of being a Plan item of expenditure. A very elaborate process governs the fixing of Plan expenditure by the government and the commission. Non-Plan expenditure suffers from a lack of cost consciousness, no medium-term perspective for continuing activities and allocations, lack of macropolicy knowledge at the level where budget estimates are made and lack of feedback on performance and results. The underlying logic of identifying and channelling resources into core sectors through planned expenditures will provide policing with the necessary legitimacy, urgency and impetus in the present government set-up. [Mint]

They also call for a national crime survey that can form the basis for planning. If that sounds like common sense to you, isn’t it shocking that the current approach lacks it?

The hole that the UPA dug India into

Caught in a storm without an umbrella

Mint makes a very important point in today’s editorial:

We have often said in these columns that the UPA government made a cardinal mistake during its term: buoyant tax revenues should have been used to fix the fiscal problem. The money that flowed into the kitty was frittered away, even as the promise to restructure government spending was not followed up on. India is in a fiscal mess at precisely the point when it needs fiscal muscle to support weakening demand. The blame for this has to be laid squarely at the door of the Manmohan Singh government.

The overall tone of ministerial statements is one of innocent helplessness: The domestic slowdown is because of the global economic crisis. That is technically correct. But then the domestic acceleration, too, was partly because of the global boom between 2003 and 2007. The UPA government can’t have it both ways: claiming credit in good times and blaming others during bad times.[Mint]

By Invitation: Buy lots of mattresses

Wall Street woes

By V Anantha Nageswaran

In the last few months, financial markets had got used to the idea of the authorities conjuring up some solutions to problems in the US financial industry over the weekend and announcing it on Monday morning (Asian time) in time for the Asian stocks to open higher. This routine worked initially but when problems did not go away, the impact became rather muted.

Unfortunately for Lehman Brothers such a weekend solution did not arrive. Late on Sunday evening in the US it announced that it was going to declare bankruptcy. Wanting to avoid that fate, Merrill Lynch sold itself to Bank of America. Some called it tectonic shifts on Wall Street. Alan Greenspan, former chairman of the Federal Reserve said that America was facing once-in-a-century financial crisis. He should know better because he played no small role in creating it. Continue reading “By Invitation: Buy lots of mattresses”

Slapping cess

How you should react if the government increases taxes to subsidise petrol

Over at Barbad Katte, Ramesh makes a startling call:

Here is a possible response to the Petroleum Minister’s proposal to levy a cess on income tax payers in lieu of a hike in the price of fuel. Get hold of your neighbourhood Congress man and give him one tight slap. [Barbad Katte]

No, no, it’s not a partisan thing. Go read his post to understand why.

Now, this blog deplores the use violence to make political points (and this has to be said, because there are always some irony-deficient, metaphor-deaf people). Instead, it recommends that taxpayers to line up in large numbers and vote against the simians making economic policy.

The knave of bad times

They destroyed the paddle. Schitt creek* is coming up

Growth in industrial production fell to 3%, the lowest in six years, indicating that bad times might be ahead. There’s worse. As Niranjan Rajadhyaksha demonstrates, the UPA government has frittered away the opportunity to put the economy on the footing to handle the coming problems. In the “misery index” he constructs, among emerging market economies, only Pakistan and Egypt fare worse than India.

But there is little doubt that the economic fundamentals are deteriorating. The hole in the government’s finances is getting bigger. It could now be close to 1991 levels, if measured correctly. The current account deficit, too, is growing and could conceivably touch 1991 levels by the end of this year. The foreign exchange market has already picked up these worrying signs. The rupee has been slipping against most major currencies over the past few weeks. Somewhere in some tax haven, a few hedge funds must be seeing these trends and sharpening their claws.

It is unfortunate and inexcusable that India is now at a point when it seems far more vulnerable than most other emerging market economies. The government should have used the splendid five-year economic boom and soaring tax collections to slash its deficit and prepare the economy for an economic downturn. It did not.

History will not judge the United Progressive Alliance government too kindly on this score. It is distressing that some of the same people who helped pull India out of trouble in 1991 have done so little to prepare for the next round of economic turmoil. One expected more from a team led by Manmohan Singh.[Mint]

Mr Rajadhyaksha is being charitable to Dr Singh and the UPA government. Not only did this crew fail to prepare for the coming storm, but actually damaged the boat. It’s a sin of commission. [Also see Swaminathan Aiyar’s piece on fiscal deficit]

* Thanks to Chidanand Rajghatta for revealing the decorous use of that euphonious euphemism

How wrong Manmohan Singh is

He advocates a false morality to disguise his government’s failures

Dr Manmohan Singh the prime minister has routinely relied on platitudes (instead of on incentives) to motivate the UPA government’s policies. But he is getting even the platitudes wrong. In a country where the average annual per capita income hovers around an unacceptably low US$1000, he wants people to earn less. Why? Because, according to him, earning less, and expecting to earn less, is a national duty.

By equating a degree of self-sacrifice with national duty, the PM has tried to make a moral argument. He has said that this is what corporates and highly paid executives owed in the endeavour to contain prices and keep the overall growth momentum on track. While this has a populist touch and will appeal to an opinion that is ready to view corporates as “fat cats”, private employment is increasingly the preferred option for most educated persons.

Sectors characterised by “significant market power” in the hands of a few producers have a societal obligation to assist the government in moderating inflationary expectations, the PM rounded off. [TOI]

He has gotten it exactly wrong. The national duty of every citizen is to make as much money as legally possible. Anyone who suggests otherwise cannot have the best interests of the Indian people at heart. Oh, he’s only referring to the top executives, you say? Well, first, depressing wages at the top will cascade down and result in lower earnings for everyone in the pyramid (just as increasing wages at the top will increase wages for everyone). And as a matter of principle, just how does making the rich earn less help the nation? In fact, it does just the opposite. It would have been one thing for Dr Singh to call upon the rich to deepen the culture of philanthropy. But to equate “self-sacrifice” with “national duty” is dangerous nonsense.

Dr Singh shamelessly masks his government’s failure to ensure free, competitive markets—and prevent the build up of significant market power—by claiming that monopolists have societal obligations. That’s dangerous nonsense too. The solution to the build-up of market power is further liberalisation and effective regulatory oversight. Dr Singh’s admission that there are sectors where companies have significant market power calls for moving forward with the economic reform process. Just what happened to the privatisation (okay, disinvestment) agenda?

We have said this before, and we say again: Dr Manmohan Singh has done immense harm to India’s future. The evil that he has done will live long after him. The good was interr’d with P V Narasimha Rao’s bones. Corporate India would do well to ignore the shameless moral poseur. Yes, it’s late in the day for this government. But Dr Singh should go. [See previous calls.]

Defence under-expenditure, again

The defence ministry surrendered 10% of its capital allocations last year

In the Union Budget 2008-09, unveiled by Finance Minister P Chidambaram in parliament today, the budgeted capital outlay for defence services has been increased from Rs 41,922 crore to Rs 48,007 crore, by around 14.5%.

That’s good news for military modernisation. If the albatross-like procurement policies would actually allow this money to be spent. Of the Rs 41,922 crore outlay in last year’s budget, the actual spending was only Rs 37,705 crore. In other words, the defence ministry surrendered just over 10% of its allocated capital budget because it couldn’t spend it. Significant among the spending shorfalls were: the Indian Air Force’s Rs 1843 crore and the Army’s Rs 940 crore under the head “Other Equipment”.

With the government showing no real signs of reforming defence procurement we can expect a similar shortfall this year.