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Austerity in government in India


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Analyzes why governments in India are willy-nilly bankrupt and the hollowness of their austerity measures.

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Austerity in government in India

  1. 1. Covetousness and Austerity: Recipe for Survival of UPA-II or General Election 2012? Barun Kumar Basu The Gupta statesman of ancient India, Chanakya, has been quoted as having said that“There is no austerity equal to a balanced mind, and there is no happiness equal to contentment;there is no disease like covetousness, and no virtue like mercy.” In simple terms, while abalanced mind based upon mercy is the bases of public contentment, such contentment can beseverely vitiated by covetousness or greed. How many of these attributes does the UPA-II andtheir Finance Minister possess? The Controller General of Accounts in the Union Finance Ministry shows on their website that the fiscal deficit is up by 79% from last fiscal (till Feb, 2012), revenue deficit by 90%,primary deficit by 248%, non-plan expenditure on revenue account by 15% and overall non-planexpenditure by 17%. How have all these imbalances happened? Profligacy geared to populism and fund raising for Election 2014 is the primary causativefactor. For instance, politics of sustenance in poverty is evident in several thousand crore Rupeesspent on MNREGA and NRHM. The need to keep body and soul together without adding anyskills or value to India’s unskilled labor force undoes higher-paid skilled labor demand in urbanagglomerations leading to scarcity of such labor. Likewise, inefficient stated-owned medicalcenters fall prey to siphoning of resources invested in them by bureaucrats and politicians alikewithout much net gain in health conditions of beneficiaries; rather sponsoring private clinics withsubsidies/concessional loans policed by a dutiful regulator may be the answer. Similarly, write-off of Rs. 70000-80000 crore due mostly to cooperative banks by farmers has not bailed thedistressed farmer from the clutches of the village money lender, only enriched bank owners, whoare also politicians. In a like manner, Air India lives off open blackmail and is sought to be keptalive artificially by infusing Rs. 30000 crore while the Railways that bind the nation and are astrategic necessity, operate on God’s gratis. The politics of sustenance of body and soul of the poor voter are enshrined in a milliondifferent subsidies, most of which is cornered by unscrupulous fertilizer dealers, PDS shopowners, contractors in connivance with government functionaries, et al. Subsidies havecontinued unabated over the last 60 years even where they are no longer required, evenapplicable. Neither has any concerted effort been made to stop such leakage of subsidies toindustry when things have not improved even six decades after such subsidies initially started.Yet UPA-II does not contemplate a large single point subsidy on fuel prices that may have had acooling effect on the retail market and caused a spurt in public consumption and governmentspending. Instead UPA-II has chosen to add to India’s debt that accounted for 85% or so of thefiscal deficit in 2011-12 to plug ever-widening gaps in public finances. Thus there is neitherbalance nor mercy, least of all public contentment. The quality of government spending too is entirely suspect. UPA-II has not witnessed thesuccessful completion of any major public project funded by the state of the magnitude of theBhakra Dam, least of all FCI godowns for storing the bumper harvest this year. The PlanningCommission has been reduced to a money-doling instrumentality in the search for more votes 1
  2. 2. and allies for Election 2014. Special survival packages for profligate states like Bengal andPunjab are bandied unmindful of these states’ past and present fiscal records based entirely uponpopulism and unwillingness to raise their internal revenue. Instead investments to store surplusfood grains, road networks to assure timely deliveries of food to remote areas, assure bettersupport prices to farmers to act as incentives and raise productivity of land would have assuredbetter return on investment and the public good than moneys spent again with an eye on Election2014. Nor has much serious effort been made to increase revenue in real terms. The FinanceMinister’s White Paper on Black Money presented in Parliament on 21st May last, lists a largenumber of enforcement agencies whose collective efforts have yielded no more than Rs. 5000-10000 crore per annum as revenue, including the cost of maintaining these behemoths. Threats toprivate industry by retrospective taxation as in Vodafone’s case, an opaque land acquisitionpolicy for industry, unrealistic, even arbitrary, pricing of natural and man-made resources forsale to industry, eternal time lines for industrial and environmental clearances, and a millionmore reasons have made India an unattractive business destination. Now Indian corporates, flushwith acquisition war chests, are acquiring assets as far away as Latin America and remote partsof Africa. And why blame them? UPA-II has viewed each allocation of mining rights, spectrum,offshore oil and natural gas, coal blocks and public-private partnerships, et al as cash cows. Ifnothing else, the run on our natural resources is parallel to the run-up to Elections 2014. Having put in stellar performances in NDA & UPA-I, Indian industry today is on thenegative growth path. The nation’s sovereign rating has been downgraded along with its leadingbanks and financial institutions. FIIs are routinely blamed from leaving Indian bourses while ablind eye is turned to India’s corporate investment abroad. Divestment of holdings in PSUs hasflopped while return on capital deployed is almost negligible. Government borrowings are on adramatic upswing and a Grecian tragedy is waiting to happen. With the Rupee sinking, all ourforex would now be diverted to preserving our oil import lifeline with little left for RBI to step inand bolster the sagging Rupee. As government borrowings increase and its capacity to containinflation declines, our personal savings may no longer be in safe custody as is happening inGreece presently with a bankrupt government. Successive loan write-offs have weakened thecapital base of our banks that now require recapitalization to survive. NPAs have been risingalarmingly as politicians and bureaucrats bear upon public sector banks to sanction irrecoverableloans and working capital to many an undeserving private industry and business. Indeed a repeatof 1991 – a mix of Weimar and Greece - and worse may not be too far off. The Finance Minister now talks of yet another put-on austerity in governmentexpenditure. Jaded measures include non-5-star hospitality, less foreign travel, more economyclass travel, illusory spending cuts, et al. If India’s globe-trotting President, the Dy. Chairman ofthe Planning Commission and Speaker of the Lok Sabha can set the exchequer back by Rs. 250-300 crore with their foreign travel bills, what about faceless bureaucrats that travel abroad at thedrop of a hat and tot up many times more? Does the Finance Minister propose to disclose thedetails of foreign and domestic travel made by bureaucrats and politicians in eachMinistry/Department in the last three years in another White Paper? He should, for the nation hasthe right to know. Lakhs of staff cars and private taxies hired by government departments fortheir officers that cost Rs. 50000-100000 each per month to operate and staff must set thegovernment back by few thousand crore each year and several lakh liters of fuel.Notwithstanding recent developments in communication technology, why are innumerable 2
  3. 3. workshops and seminars hosted every year, many in exotic locations and on inane subjects? Andfor these, no “coalition compulsions” are involved. Ministries and departments have multiplied exponentially with even low key departmentslike Sports and Youth Affairs boasting of individual Secretaries and armies of supporting civilservants with a single installment of Dearness Allowance burning a Rs. 7000-8000 crore hole inthe central exchequer’s pocket. Logistical nightmares are thus deliberately created leading to aninexorable spiral of rent-seeking and interminable inter-departmental wrangling. Incidentally, aJt. Secretary level officer sets the exchequer back by Rs. 4-5 lakh per month, contrary to popularbelief that the private sector pays better for similar quality or absence of output! Not just that,even appointments to key decision-making posts like Chairman, NHAI, remain plagued bynepotism while the national highway network lives off artificial resuscitation. No serious effortshave been made to bind civil servants into performance contracts, reduce their numbers andenhance their pay packages and assure transparency and accountability in their functioning.What the nation needs is governance, not government, leadership, not self-serving subservienceand fancy offices and cars. I have addressed only a few selected issues, myriad others remain for limitations ofspace. Coalition compulsions cause deficits in governance or so our PM informs us, so much so,that now Congress spokespersons themselves admit the strong possibility of UPA-II having tosettle for the Opposition benches in Parliament after Election 2014. Will it be 2014 or earlier?Chanakya’s postulates presume that UPA-II is rational. Bertrand Russell famously asserted, “Ithas been said that man is a rational animal. All my life I have been searching for evidence whichcould support this.” Before our life runs out in search of rationality, let us campaign for GeneralElection 2012 and gift unto us a balanced mind based upon mercy leading to public contentment,indeed another chance to survive!The author is a former Ambassador of India 3