Union Budget and the Common man

I recently read a quote about the union budget, “The common man can’t understand the union budget, and the union budget can’t understand the common man!!” Although our current finance minister would like to contest the second part of the phrase, there is still no doubt that the common man can’t understand the budget. First of all the budget is prepared in complete isolation and secrecy. It is kept a big secret until ‘budget day’ for mysterious reasons. When every issue of national importance is discussed in a transparent and open manner in the parliament, why should the budget be an exception? Why is it that the finance minister straight away comes to parliament and reads out his speech and how he and his assistants have planned things for the entire year. The point that Im pressing here is that of transparency in the budget making process. Now let us see why the common man can’t understand the budget or why is it that he is not much interested in it, which in my view is the real reason behind his not understanding it. It is lack of interest not intellect which determines this. When Nani Palkhivala eminent jurist and economist delivered a lecture on the budget in brebourne stadium in Bombay, thousands of people used to come to attend the program, and were interested in knowing what is in store for them in this budget. Palkhivala could actually make a dry and boring subject like the budget interesting and enjoyable and moreover could simplify it from the technical economic language, which drove people to listen to him. His budget speeches finally ended in 1994. Today there are many people who deliver a similar lecture on the budget, lawyers, Charted Accountants, tax consultants; financial experts all express their opinions and views about the budget and its implications for the various segments of the population. But these people cater to a very niche audience. These are lectures where, businessmen, management experts, industrialists go and attend. It is difficult to find the common man here, who once sat in brebourne stadium and intently listened. After interest comes knowledge of economics or atleast elementary economics. Arindham Chaudhuri says “Economics is complex, mathematised, pseudo intellectual, quite unfit for the common man, around whom economics should actually revolve”. Reading and understanding the budget definitely requires good understanding of simple macro economics nothing more. And finally comes the role of the media in spreading the analysis of the budget far and wide. The print media does a very good job in analyzing the budget. ‘The Times Of India’ made a good presentation of the budget, simplified most of the provisions, especially the ones related to income tax and other taxes. They even showed how various sectors are affected by the budget. But the problem is with the electronic media. On the day of the budget, I saw 4 programs on television, on CNN IBN, TIMES NOW, NDTV and CNBC. All these programs were good but the problem is that they were only and only in english, the hindi news channels dint seem to cover the budget as extensively as the english channels did. This straightaway means that only the english speaking urban people will be able to understand what the panelists are saying. The panel members were almost the same in all the programs. Why dint some of the eminent panel members like Sitaram Yechury, Kapil Sibal and other financial gurus go on to atleast one hindi channel where they can explain the details to a much larger audience.

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Economic growth a global trend……………

 

MS Swaminathan wrote an interesting article in the Times of India on 16/3/08. The article basically spoke about the high growth rates that India and many other countries experienced for about a year or so. He argues that the sudden high growth rate that we experienced is not only because of the government’s economic policies and efficiencies; it was actually a global trend which was originating from America. We know at the moment most Americans are living beyond their means, this is reflected in the sub prime crisis, the housing market slump and the mounting losses of financial companies due to increasing number of loan defaulters.  The demand for goods and services had tremendously increased for the past 2 years, which resulted in America having a trade deficit of $700 billion. China being the biggest exporter of electronic goods to America and India exporting various other goods and mainly services, thrived because of this one factor of excessive consumption in America. And because there was huge demand for goods there was automatically a huge demand for raw materials and semi finished goods which came from Africa and other less developed countries.  Hence even these countries immensely benefited. Therefore Swaminathan says that every country remotely associated with America enjoyed high economic growth, the African countries which were growing at 3% also started growing at 5%, similarly in India economic growth was 6% to 7% for many years it suddenly became 9%. If the above reasoning is true, then we have to ponder over a very important question, what is going to be the state of the Indian economy if there is a recession or slow down in the US economy which is very likely. There has already been a dip in the industrial production rate for the last 3 months. And the industrial production also determines the government’s collection of the excise duty. As it is as per the Union budget 2008 excise duty has been reduced from 18% to 16%, combine this with a fall in industrial production and it results in a loss of revenue for the government.   

 

Roaring corporate sector and a booming economy!! But what about the last man standing on the street??

“20000 points on the sensex, the economy growing at 9% have a good weekend” wrote economic times on one Saturday. It is indeed great to have a booming sensex and it’s equally good to know that we are one of the fastest growing economies of the world. But does it end there?? Is a booming sensex and a roaring corporate sector all we want for our country, where millions of people still sleep on the road. In the history of our country this is truly one of the most important eras because on one hand we are the front runners in economic growth and global investments. In fact in the Presidential debate of 2004 between President Bush and Senator Kerry, Senator Kerry assured the people of America that if he becomes President then he will prevent American jobs from being “Bangalored” and sent to India where a booming IT sector awaits the best talent on the globe. On the other hand we are also known to be the front runners in mal nutrition and poverty and illiteracy. Do these people who are mal nourished and illiterate even know why their country is respected globally? They don’t, and why should they?? When the hyped growth and the boom that Economic Times raves about has not gone even remotely close to them.

Therefore the time has come when we need to make economic growth more inclusive. The current pattern of economic growth is only favoring specific sectors of the economy. And therefore people associated with those sectors are also benefiting. But the people who do not come under the purview of those sectors are experiencing stagnant growth. An article recently published in the Navbharat Times pointed out that the present government or for that matter any government has a tendency to start worrying about things only when a worrisome situation gets created. While the situation is gradually going from bad to worse they are indifferent. The economic policies being followed by the current government have undoubtedly increased foreign investment, boosted economic growth and made India one of the preferred destinations on the globe for any kind of business and financial activities. But at the same time as a result of all of this, the government is forced to reduce the fiscal deficit as per the terms and conditions of IMF and WTO. Reduction in fiscal deficit results in declining expenditure for essential services like health and education. According to the Kothari commission led by Dr Vijay Kothari in 1966 expenditure on education has to be minimum 6% of the GDP but for the last several years it has remained between 2.5% to 3.5%. In the eleventh plan it is estimated to be at around 4%. Recently it was reported the IITs don’t have enough funds to pay proper salaries to its professors. IIT Bombay made a request to the government to give a grant of 20000 crores, so it can look after its basic expenditure. This is one of the implications of reducing the fiscal deficit that even the premier institutes are down in the dumps. IMF tells our government to reduce the fiscal deficit to control inflation. According to an article on the Indian economy, when the government borrows money from the RBI it tends to increase the quantity of money and hence it results in inflation. This argument has two flaws one that the new quantity of money doesn’t chase the same goods conventionally perceived. While the quantity of money circulating in the economy increases the production and output also increases. But apart from these technical details and principles, it is important to note that if the government reduces its expenditures on health and education then any significant development for the masses is not achievable, and then it’s meaningless to merely float on the fact that sensex is on 20000 and economy is growing at whatever percent when it is of no consequence to majority of the population.

Retail sector in India and corporate houses

Entry of the corporate houses in the retail market or for that matter into any sector is popularly perceived to be a part of economic growth. The increasing participation of the private sector is considered as one of the instruments of economic growth and job creation. Economic growth by itself creates jobs says Lord Desai a professor of economics at the London school of economics. But this I reiterate is a popular perception, whether the entry of corporate houses into every market and field is justified or not is a different matter. In my view it is incorrect to make general statements about economic growth and job creation, one has to be very precise when dealing with this subject. Economic growth I agree does create jobs; it does push the economy to a more productive stage. As the economist Rosenstein Rodan has said in his theory the “Big push” that for a plane to take off it requires a certain minimum ground speed, anything less than that and the plane wont take off, similarly to pursue economic growth we need to mobilize a certain minimum amount of investment, anything less than that is inadequate. And investment mobilization happens through the corporate houses or the private sector. So Im not against the private sector per se, but for the government and people to jump to a conclusion that the corporate houses no matter what they do and where they go will bring beneficial results certainly comes under a cloud of suspicion. To prove that the entry of the corporate houses into the retail market is beneficial we would have to rely on the theory of trickle down effect, but the trickle down effect is simply another way of saying that what is good for the business houses is good for the country, which is obviously not true. Trickle down effect has been named the horse and sparrow theory by JK Galbraith “if you feed enough oats to the horse, some will pass through to feed the sparrows.” Unfortunately today the horse is the corporate sector and the sparrow is the working class.

When we speak of the retail market we are primarily dealing with a section of society where the people are not economically privileged. Retailers at the lower end, like the vegetable sellers, the fruit sellers basically are the underprivileged section of the society, and when the government permits the corporate houses to enter this field with their attractive pricing strategies the government is practically wiping these 4 crore middle men out. And the justification given is “growth will create jobs for them as well”. For people who say my question is can you give a guarantee that those very 4 crore people will get their jobs back. And they are 4 crore human beings not ants who can be trampled under the feet of men.

Entry of the corporate houses into the retail market is a part of the de licensing policy which was started in 70s. Before the 70s most of the industrial production was handled by the public sector. In the 70s it was realized that the participation of the corporate houses is also very essential if we have to be on par with the rest of the world in terms of technology and capital. For this reason the license policy was scrapped out. Only industries of national importance like defense, railways, atomic energy were to be kept in the control of the public sector. So the purpose of the de licensing policy was to increase productivity. Today in 2007 if we analyze the repercussions of this policy we find that the corporate houses have increased productivity no doubt, but have also increased the divide between rural areas and the urban areas, between the bourgeois and the proletariat. This divide has very unfavorable social consequences which need to be settled first than increasing productivity for only a certain class of society.

 

Urbanization and environment

This was my speech for a competition, the topic was “Urbanization improves environment” and i was speaking for the proposition.

Urbanization this term has economic as well as social significance. Economic because it brings about a structural change in the way people function and seek jobs and this influences the economic activity of individual units of the population and the economy. Social significance is the natural outcome of the economic significance, as Karl Marx once explained, that a change in the economic system and structure has its social repercussions as well. Urbanization today is a natural and independent process; the percentage of population migrating to the urban areas is rising inexorably irrespective of the developments taking place in the rural areas. According Warren Thomson an American demographer as the economy expands its people move from the rural to the urban, now this movement may not necessarily be geographic movement of going to urban cities but a change in the basic character of a place where people live, a change from the rural character to the urban character. So taking into account this principle urbanization in my view is an inevitable process and a natural outcome of development.

Coming to environment, environment isn’t just air, water, land and resources, it also includes man, his activities and his material welfare. The two major factors determining the environment in the urban setting, is the population and the economic development. One of the distinguishing factors of urbanization is capital formation. Goods are made to sell and money is earned to buy, but certain amount of consumption has to be kept away for future use. Current consumption has to be used for creation of capital in future. As Prof Shahuraja has put it “It is necessary to break away from the vicious circle of poverty and initiate the virtuous circle of prosperity. To improve the environment investments in education and health are important and this happen only through capital formation. The rural economy tends to be self sufficient, now self sufficiency is not bad per se but to move to a productive level interaction between resources and saving of resources is necessary and it happens only through urbanization. Also urbanization facilitates mobilization of huge investments to initiate and implement new policies. As the economist Rosenstein Rodan has said in his theory “the big push” that for a plane to take off it requires a certain minimum ground speed, anything less than that and the plane won’t take off, similarly for improving the environment we need a certain minimum investment to be mobilized, anything less than that is inadequate.

Now speaking of development it is not just the addition of physical capital but also human capital Urbanization facilitates the training of human capital we may have the best of equipments and machinery but to match that, we need equally good human capital. We need skilled human capital for economic growth and development and we need sensible human capital to maintain social tranquility and political stability. Urbanization gives importance to education and practical training. Education ultimately has the power to pull the poor people from the lower end of the poverty line and push them to the upper and through urbanization education assumes importance. Urbanization also increases the prospect of revenue generation and revenue collection for the government. And this revenue is utilized to give essential services like education and health at a subsidized rate. So essential services like good health care and education are given at a subsidized rate.

Coming to the point of natural environment, at the outset I must say that man has always been in a conflict with nature. Man, in pursuing his interests and the interest of the community at large has had no choice but to alter the physical structure of nature. A water power project requires the construction of a dam and a reservoir and this may have an impact on the physical environment, it may even force a number of people to relocate themselves. But on the other hand, it’s difficult to exist without electricity. If environment is for the people even development is FOR the people. If we are sacrificing the natural environment to some extents we are creating value at the same time. Development always comes with a price, we have to ensure that the cost of any project or plan does not outweigh the benefits; if this balance can be maintained then we can certainly have sustainable development.

Now let’s examine the commodity of land under urbanization. It so happens that in the rural areas the population is scattered over a vast region of land, almost every piece of land is utilized either for living or for cultivation. And as we all know that the supply of land is scarce in relation to the demand, so effective utilization of land is very important since it’s a very important natural resource. Now urbanization concentrates the population into smaller land areas, leaving more land undistributed and therefore protecting it and making it available for other important activities like farming, and other agricultural activities.

Resources are constantly needed by cities. And one of the outputs of resources is waste and this waste has to be properly handled to prevent any serious damages to the environment. The waste hierarchy system plays an important role in waste minimization, it refers to the three “R’s” reduce, reuse and recycle. The aim of the waste hierarchy system is to extract the maximum practical benefits from products and to generate the minimum amount of waste. Another method is the extended producer responsibility, in this system the producer has to be accountable for the entire life cycle of the product, so firms which manufacture are required to be responsible for the products during manufacture and even after their useful life. Also the standard sanitation technology in urban areas collects waste water and treats it so that it can be left in the sea or lakes. So urbanization provides safer and better water and provides better sanitation facilities. So the crux of the matter is that although urbanization harms the environment and creates waste it ALSO ensures its proper handling and disposal, infact the input of resources and output of waste has been described as the metabolism of cities.

And finally at a social and cultural level urbanization improves environment because it increases the credence given to status of education or other merit based achievements and reduces the credence given to birth status which originally existed. So urbanization does improve the social, economic, political and cultural environment and it does sustain the natural environment.

Sanjay Dutt’s sentencing

Equality before law and the rule of law was reinforced in the public mind when Sanjay Dutt was sentenced to six years rigorous imprisonment. His matter had come on the board of TADA court about six months back and the judge kept adjourning the matter, finally on 31 July the judge pronounced the verdict. From the legal point of view the verdict was quite satisfactory, since the minimum sentence for illegal possession of weapons is 5 years. The judge used his discretion and gave six. After the acquittal of Manu Sharma the son of an industrialist and the acquittal of the Chief Minister of Jharkand, there was a general feeling that the high and mighty always get away and that the law is systematically twisted from time to time to suit those in power. This view was dispelled when Sanjay was sentenced.

The judicial process in our country can be very predictable, as soon as Sanjay Dutt was sentenced to rigorous imprisonment he was immediately released on bail on the grounds that he did not receive a copy of the judgment, till he receives that copy he can remain on bail and after he receives it from TADA court he can apply for regular bail and thereafter the matter regarding his conviction. But explanation can there be for not giving the judgment?? The very fact Judge Kode has sentenced Sanjay implies that after hearing the matter he dictated a judgment, then why is a copy of it not given. It is not possible that the TADA court doesn’t have the printing machinery to take out a copy of the judgment. From the given circumstance it is quite clear that there is some element of manipulation involved with this issue otherwise there is no reasonable explanation for this delay.

Another aspect which must be dealt with is the public reaction to Sanjays sentencing or rather it should be called public sentiment due to its very nature. There are people who are writing blogs, saying that the sentencing is too harsh and “Munnabhai” must be dealt with some compassion and care. Here particularly I would like to quote the lines of a charted accountant who writes Column’s regularly on the website of CNN IBN.

Many will agree that Sanjay Dutt, though had a different image earlier, now, apparently, reflects a complete transformation as a human being. His apparent soft & humble gestures, the hand shakes, his statements in the court, the feeling of guilt, et al. are clearly the reflections of his makeover in the past years. Sanju Baba’s characters in his recent movies Munnabhai MBBS and the sequel Lago Raho Munnabhai carried mind-boggling touching messages which ended up leaving lost lasting & worth following impressions on several minds (I will say at least mine).

Tell me, what we are going to achieve by putting this person behind the bars. We will be seriously wasting 6 years of an amazing talent, which can be put to better use of spreading more Munnabhai messages around. But as we have to keep the punishment also in mind, so Sanju Baba can be let free to work for movies and other noble & social projects – but with the strict caveat that all the remuneration he receives from these projects should go to fund a specific social project, which can help lacs of ailing and poor families of our country by providing basic amenities of food, clothing & shelter. Besides, there can be other restrictions with respect to his moving out of country or doing or not doing certain acts or many such other things for which judiciary is more capable to decide.

Really, no one is going to achieve anything by imprisoning a worthwhile talent who is also capable of earning huge sums of money in a short period of time, which in turn can help countless deprived families in our nation. The case is set to be appealed and heard in the highest court of the country and, possibly, it is a rare chance for the judiciary to do something imaginative and create new benchmarks and examples for the years – rather generations to come.”

As soon as I read this post I wrote a comment on the website which was not published by CNN IBN, I said that im really surprised that educated people who are also regular columnists have the audacity to say this “His apparent soft & humble gestures, the hand shakes, his statements in the court, the feeling of guilt, et al. are clearly the reflections of his makeover in the past years” This Mr. Columnist of CNN IBN apparently does not know the rule of law, and the behavior of a person can hardly be judged from his films and his public appearances where he will put up his best behavior. The columnist further says “Tell me, what we are going to achieve by putting this person behind the bars. We will be seriously wasting 6 years of an amazing talent, which can be put to better use of spreading more Munnabhai messages around.” Just because a person is talented and spreads messages doesn’t mean he will be granted a lesser sentencing than what the statue prescribes, and if he does get lesser sentencing, it amounts to discrimination by the judiciary. The public reaction to this case is truly disappointing. People are not so vocal when it comes to fighting poverty a problem which we have had for decades, for those police officers who are dying in naxalite areas, for those farmers who are committing suicides for the last 100 years since 1907 (earlier it was due to British imperialism and today it is because of globalization). Had public sentiment acted for these issues we would have had a better place to live in today.

 

 

 

 

 

 

Real life immitates reel life….No it does not!!!!

Ricciotto Canudo an Italian film theoretician has described cinema as a combination of the spatial arts and the temporal arts, in other words a film is a combination of music and dance on one hand and a suitable story supported with adequate presentation and imagery on the other. So although what we see in reel life may be true, it is substantially regulated and designed with a certain objective in mind, it is a result of concoction. Whereas real life is beyond any definition or explanation if we try to define real life it can fill hundreds and thousands of books due to its vastness, uncertainty and complexity. Hence the concepts and issues which arise in real life will outnumber those in reel life substantially. Reel life is a part of real life infact it originates from real life. One of the major functions of reel life is to portray social reality in a systematic manner, its important that reel life has to be significant in the era in which it is made and showed. A very good example in this context is the transition between films of Rajesh Khanna and Amitabh Bachan. In the Rajesh Khanna films of early seventies like Anand and Bavarcheee many socialist values get reflected, values like fairness, equity and justice are reflected in these films because at that time Nehruvian socialism was predominant. Whereas in the Amitabh Bachan films of late seventies and early eighties the concept of the “angry young man” is used to show the frustrations of the people then due to the economic crisis and the introduction of mills which lead to the exploitation of the proletariat, all this was reflected through the angry young man.

Now the rural population and people from the lower social strata may be desirous of imitating reel life, but mere desire cannot lead to imitation, imitating reel life requires monetary backing and strong economic background which is absent in the people of the lower social strata, hence imitation by a large number of people is out of question.

If we observe reel life in its totality which includes not just films but also page 3, media and the add world we find that only those things get portrayed which sell easily. For e.g., if it’s a movie it has to be  a good story, a good actor, a captivating performance if its media it has to be some sensational news and other things. Whereas real life is not just about selling or acting or presenting, real life involves real situations real people and it may not always be very interesting and worth selling.

Another very important aspect is that real is driven by several ideologies, Joseph Stiligitz former chief economist at the World Bank mentions in his book that even economic and financial decisions at the World Bank were often made on the basis of ideologies and not solely on the basis of facts. Ideology therefore is an intrinsic part of real life, whereas reel life is not based on any specific ideology, its sole purpose is to attract public attention, do better business increase TRPs etc.

Some of my learned friends made a point that many people especially the youth lust for reel life at the expense of real life, now they may desire it, but imitation is not possible because the circumstances in real and reel are different, ideologies are different, and purpose is different. They may at the most imitate the clothes, accessories and fashion, but that forms a very minuscule part of what life is, we are debating whether real life imitates reel life and just because there is imitation in terms fashion that doesn’t mean life also in these two becomes similar.