Thursday, March 2, 2000,
Chandigarh, India





THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
E D I T O R I A L   P A G E


EDITORIALS

Rural uplift is neglected
FINANCE MINISTER Yashwant Sinha has got his sums wrong when it comes to the rural and agricultural sectors. Budgetary allotment for agriculture has come down from the revised estimates for the current year. Farm outlay is down by 6 per cent, rural development by 11.13 per cent and public distribution of foodgrains by 1.17 per cent.

Communal canker
THOSE who have seen or known Kashmir and Kashmiriyat are dying a little every day. Neither securitymen nor those who supervise the final act of the living for the dead in cremation grounds or in graveyards are able to keep count of the victims of terrorist violence.

Another ‘‘hijacking’’!
LESS than two months after the hijacking of an Indian Airlines plane from Kathmandu to Kandahar, which forced the Central government to accept the demand for the release of some hardcore Pakistani terrorists, including the fire-spitting Maulana Masood Azhar, another incident of a similar nature on Indian soil last week once again exposed the loopholes in the country’s airport security structure.


EARLIER ARTICLES
 
OPINION

SELECTING CHIEF OF ARMY STAFF
Dangers of politicising the armed forces
by Harwant Singh

INSPIRED leaks, planting of stories and creating doubts on the choice and selection of the next Chief of Army Staff (COAS) after Gen Ved Prakash Malik are making headlines in the national dailies. While the selection of the Army Chief has always generated interest in the public, the current leaks, and lobbying has all the foreboding of politicising this high and sensitive office.

Pakistan’s siren song
by R. A. Singh
IN a chat with newsmen at the Indian Embassy here on February 10, Foreign Secretary Lalit Mansingh averred that the focus of President Clinton’s scheduled visit to India in March would be on a political and economic partnership between the two nations, with stress on cooperation in science and technology and the energy sector. No deals had been made because India was not seeking any favours.

BUDGET 2000

Growth linked to fiscal reforms
By S. Sethuraman

ECONOMIC trends in 1999-2000 have been so mixed that the pre-Budget survey of the Finance Ministry has blended optimism with concerns. It suggests an industrial recovery after a downturn spread over three years, but the daunting challenge of fiscal stabilisation and other areas of serious concern cloud the prospects for higher growth at the new millennium.

Millennium Budget & common man
By C.M. Kulshreshtha
ALL eyes were glued on Friday — waiting for 2 p.m. to strike so as to know what the Finance Minister has in store for them. With the Finance Minister having threatened the public to be prepared ‘‘to bite the bullet’’, yet in all fairness this time the common man was given no worse deal. Nobody can dispute the Finance Minister’s constraints — heavy inflation, enormous expenditure on defence due to the Kargil war, vagaries of agriculture production and arbitrary behaviour of the weather gods.


75 years ago

March 2, 1925
An Ingenious Argument
A
VERY ingenious argument was recently employed in the Legislative Assembly by the spokesman of the Government to justify the reduction of fares for first and second class passengers without any corresponding reduction in the case of third class passengers.



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Rural uplift is neglected

FINANCE MINISTER Yashwant Sinha has got his sums wrong when it comes to the rural and agricultural sectors. Budgetary allotment for agriculture has come down from the revised estimates for the current year. Farm outlay is down by 6 per cent, rural development by 11.13 per cent and public distribution of foodgrains by 1.17 per cent. The budget is silent on funding the ongoing irrigation projects started by the Congress regime and continued by the UF government. These schemes have obviously fallen victim to the fancy idea of zero budgeting. (Incidentally, this form of budgeting became popular in the USA during the Reagan years but Washington abandoned it when it was found to corrode the delicate exercise of focused spending. But someone in Delhi has resurrected and sold it to the high bureaucracy.) Technology will dominate the new millennium but the budget ignores the need for further farm research and extension. This indifference goes ill with the imperative of advance in biotechnology and the availability of world class scientists. The most revolutionary proposal is to merge 28 centrally sponsored programmes into one and breathlessly watch the new avatar transform rural India into a liveable and lovable place! Is the Centre out to disinvest its famed commitment to stimulate farm output both to build food security and to mitigate grinding poverty in villages? It is particularly unfortunate in a year when foodgrains production is expected to fall by about 2 per cent or four million tonnes in all, bringing down the rate of economic growth. The sharp increase in urea price, until now the only fertiliser medium farmers could afford, fits in with this negative outlook. It will now cost 15 per cent more and the decontrolled diammonium phosphate and muriate of potash 7 per cent more. This is directly because of the cut in the so-called subsidy, in reality the money the government reimburses to the highly inefficient producers. The effect of ending concessional railway freight may be to further push up the price. Old manufacturing plants will survive since their cost of production is low thanks to the favourable effect of long years of depreciation of building and equipment. But new ones, including Oswal Fertilisers, will find the going tough.

This is not all. The budget has delivered a few more knocks to the farm sector. The increase in the fair price shop grains for those living above the poverty line is bound to suppress demand from this source. That, in turn, will push down the volume of operational stock with the FCI, freeing it from the obligation to lift the stored wheat and rice from Punjab and Haryana. The storage space will remain blocked for long, damaging the stock and putting pressure on the coming rabi crop. The reduction in the peak customs duty and levy of tax on exporters of all commodities pose a twin threat. Export opportunity will die and the extremely cheap grains from countries like the USA will flood the market. The Finance Minister does not appear to have given thought to any of these questions. This has provoked Punjab Chief Minister Badal and his Haryana counterpart Mr Chautala to protest against the urea price rise and demand its rollback. Other farm states too have raised their angry voice, including the DMK, an NDA partner. For the rest, Mr Sinha is content with allocating more money for agricultural credit and what he calls micro enterprise in rural areas. It gets Rs 100 crore and panchayats, cooperatives and non-governmental organisations will distribute the money and oversee its use. The idea seems to be to loan a small sum, say, Rs 30 to rural women to weave cane baskets for sale in fashionable ethnic outlets in the urban areas. It will be micro but backbreaking business for the village women but a good profitable line for the middlemen.
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Communal canker

THOSE who have seen or known Kashmir and Kashmiriyat are dying a little every day. Neither securitymen nor those who supervise the final act of the living for the dead in cremation grounds or in graveyards are able to keep count of the victims of terrorist violence. Let us think of four innocent persons, including three women, who were gunned down by heavily armed Pakistani mercenaries in a hamlet called Harni in Poonch district on Sunday night. Monday had a still more gruesome plan in the terrorists' pockets. On Mir Bazar Road, between Khanabal and Qazigund, 55 km from Srinagar, private truck operators and their helpers were pulled out from their seats. An identification parade was held on the highway near Anantnag. People of two communities were separated in two rows. Those belonging to a particular community were shot at from close range and killed. The two incidents have a common link —the minority status. When Pandits were systematically murdered and pushed out of their state to become refugees in their own country, the process of the negation of Lal Ded began in a weird manner — over a decade ago. Travelling back in time, we can count corpses without the fear of being proved wrong. More than 40,000 lives have been lost in militancy-related activities in Jammu and Kashmir. Had a large number of Pandits not left their homes to escape death, the toll would have been several times higher. In recent years, the figures of civilian casualties have been like this: 1996—1336; 1997—938 and 1998—over 1,000. The year 1999 saw so much of blood and gore that it was difficult to keep a credible record of the number of the dead. Now 2,000 AD is showing us a very high death rate. It is tragic that we have fallen into the habit of recording the number of civilian murders in isolation with the figures of the killing of security personnel.

The sun does not set on a day without leaving us weeping over an average of a dozen bodies. The civilian blood is as Indian as paramilitary or military blood. The minorities in Jammu and Kashmir go by a collective description which is different from that of their kind in other parts of the country. Kashmir has, for centuries, never drawn any line between the Hindus and the Muslims. When the Instrument of Accession was signed, the then ruler of the state took a decision on the basis of the compositeness and indivisibility of the population. Nobody saw Parmanand and Sheikh Nooruddin Wali with different angles. It was a blessing to be a Kashmiri. It was a privilege to be born or to have a chance to grow up in the region. Now that foreign mercenaries have been put in charge of the culture of Kashmir by the Pakistanis, we have come to expect Harnis and Mir Bazars daily. Hundreds of truck operators bring essential goods to Kashmir. One does not feel less hurt when one Farooq Ahmad is found killed in Batmaloo or a Naved Kamar is shot in Baramula. Even school teachers, children and disabled and sick persons are not spared. We had to witness this kind of a situation for quite a few years in Punjab. But the Punjabis said, "we shall overcome," and they crushed terrorism. Pakistan is the fountainhead of terrorist activities in India. The shocking factor of spreading communalism makes one extremely worried. Chief Minister Farooq Abdullah should take due responsibility for monitoring the psychological disorientation of the minorities in the valley and in the plains. He has begun to talk more about autonomy than about cohesion and harmony. The Union Home Ministry should realise its own role and the security of the citizens should not be made the concern of the security forces alone. It is time to end the reign of terror. The sand in the hour glass is falling fast and even tomorrow can be too late for the preservation of Kashmiriyat.
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Another ‘‘hijacking’’!

LESS than two months after the hijacking of an Indian Airlines plane from Kathmandu to Kandahar, which forced the Central government to accept the demand for the release of some hardcore Pakistani terrorists, including the fire-spitting Maulana Masood Azhar, another incident of a similar nature on Indian soil last week once again exposed the loopholes in the country’s airport security structure. Mercifully, no lives were lost and no terrorists were released by the authorities because the ‘‘hijacking’’ of the Jet Airways plane at Bangalore on Saturday was part of a mock exercise for identifying areas of airport security which need to be strengthened. However, the flip side of the Bangalore incident carries a disturbing message. If the authorities concerned did not deem it necessary to step up the level of airport security after the Kandahar episode, it is doubtful whether the mock exercise would make them hang their heads in shame for what amounts to criminal indifference to their duty. The Bangalore incident was a frightening replay of what actually happened at Kathmandu airport which resulted in the death of one passenger and avoidable agony to those who remained cooped up inside the aircraft at Kandahar during the prolonged negotiations between the well-armed hijackers and the Indian authorities for the safe return of passengers, crew and the aircraft. The members of the Bureau of Civil Aviation Security who conducted the mock hijacking drama were able to smuggle arms into the aircraft with the same ease as was noticed in the operation conducted by trained terrorists in Kathmandu. Nevertheless, the need for organising similar mock incidents on a regular basis should be self-evident to those in charge of airport security in all parts of the country. However, to make the effort of constantly exposing the chinks in the security apparatus more meaningful officials found wanting in discharging their duty should be promptly placed under suspension and asked to explain why their services should not be terminated. In the present case the indifference of the security staff at Bangalore in making a thorough check of the passengers (and their baggage) boarding the Jet Airways flight could have resulted in a major tragedy had the ‘‘hijackers’’ not been members of the BCAS checking out the improvement, if any, in airport security after the Kathmandu incident.
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SELECTING CHIEF OF ARMY STAFF
Dangers of politicising the armed forces
by Harwant Singh

INSPIRED leaks, planting of stories and creating doubts on the choice and selection of the next Chief of Army Staff (COAS) after Gen Ved Prakash Malik are making headlines in the national dailies. While the selection of the Army Chief has always generated interest in the public, the current leaks, and lobbying has all the foreboding of politicising this high and sensitive office. The mischievous plant that a particular Minister and his political party is backing one contestant while the other is backed by a different party and set of politicians, or one or the other belongs to a particular region and, therefore, has greater chances, etc, is indeed despicable and disturbing. It is equally absurd to spread the word that the blame for the non-detection of the Kargil intrusions rests with the former Northern Army Commander, (who incidentally had vacated that post months before the intrusions surfaced in May, 1999) and, therefore, this supposed lapse would come in the way of his elevation to the position of COAS. Such innuendoes, raised with a purpose by interested groups, are the precursors to possible manipulation and the politicising of the armed forces of the country, and are likely to deliver a body blow to their apolitical character.

It is all the more worrying at a time when the security environments are deteriorating and internal unrest is on the increase. Widening economic disparities, population pressures, social strife, criminalisation and Mandalisation of politics makes the internal scene fairly grim. The move by some of the state governments to allow government servants to join the RSS has added a new dimension and caused widespread dismay and misgivings. All this bodes ill for the country. An apolitical army is the nation’s best bet, not only against external threats but internal upheavals as well.

Promotions in the Indian Army are entirely based on assessed merit. It is a command-oriented Army and, therefore, command criteria and performance there carries the maximum weightage for promotion at each stage and rank. As an example, no one can command a brigade unless he has successfully commanded a unit and this pattern is followed all the way up. An unfortunate departure from this well-established practice took place when General Joshi died in harness and the next senior in line did not meet this basic requirement. The government, ill-prepared as it invariably is for the unexpected, was found wanting in taking the appropriate decision, and in near panic elevated Gen Shankar Roy-Chaudhury to the post of the COAS, setting a dangerous precedent. The MoD tried to take shelter behind a noting on its file that the ARTRAC commander could also be considered for the appointment of the COAS. Thus a chair-borne post of ARTRAC came to be equated with the active command of a field army through the magic of a noting on a file. How very clerical can we get!

Undoubtedly, General Chaudhury was the senior-most Lt-General at the time, but the fact that he was never given command of a field army, for whatever reason, did debar him from being the COAS. The appointment of the Army Chief is unlike any other appointment in the government, say that of a Secretary to the Government of India or, for that matter, the Cabinet Secretary. The incumbent must have command experience at every level, enjoy high professional reputation, inspire confidence among the officer cadre and be free from prejudices. He must have strategic vision and be able to render fair and firm professional advice to the government and carry his awesome responsibilities with equanimity. These are some of the very basic and inescapable attributes of a commander-in-chief, and any shortfall in these can have far-reaching implications during war and other national emergencies or periods of internal chaos.

In the past there have been cases where manipulation, mischief and unethical practices were followed by arbitrarily giving an extension to a favoured person with a view to promoting him by wasting out a politically/ bureaucratically less connected officer. In the case of the IAF, a deep conspiracy was hatched by giving an extension in service to a junior in order to waste out the senior with the ultimate aim of disturbing the chain of promotions so as to ensure that a bureaucrat’s close relative gets the Chief’s position at a subsequent stage. There are numerous other cases where bureaucrats and politicians, using their clout in the MoD, have conspired to help their close, though less deserving, relatives to climb the promotion ladder. Such practices shatter the confidence in the justice and fair-play system of the defence services and upsets the entire chain of promotions leading to heart-burning and demoralisation, especially when vacancies in the higher ranks are extremely limited, and the more deserving get left out. The Services’ own record, both in assessment and selection for promotion, is not always free from blemish. This has resulted in an ever-increasing number of defence personnel, including some high ranking officers, knocking at the doors of the courts. It has also led to more and more officers seeking political patronage and bureaucratic contacts.

The choice and selection of the COAS is not a subject of public debate nor an issue for speculation or rumour-mongering, but indeed a prerogative of the government. The Defence Minister needs to quash such rumours, put an end to the murky stories doing the rounds and make a clear and unambiguous statement that the government will follow the well-established norms in the instant case and come up with its decision at the appropriate time. Army Headquarters has already made it clear that it has nothing to do with these rumours and the conspiracy, nor has it any role to play in the selection of the next COAS. That by inference shifts the origin of this mischief to the next door in South Block.

Politicising the Indian Army will be a dangerous development. A retired and much respected Naval Chief had made an observation in a national newspaper that many officers wore saffron vests under their olive green uniforms. Two Deputy Chiefs of Army Staff got tickets from the BJP for parliamentary elections immediately after their retirement. Quite obviously they had been patronised by that political party while in service. An increasing number of retired defence services officers and men are joining political parties because they have come to believe that the normal disciplined channels of the defence services have failed to get them what is their due, so politics appears to them as the best option. This development is bound to have a spill-over effect on the serving personnel. All this does not augur well for the apolitical character of the Indian armed forces. Big events sometimes have small beginnings!

This, perhaps, is the right occasion to look at the promotion criteria for higher posts in the defence forces. All promotions in the defence services are based on a process of rejection and selection by various selection boards keeping in focus the overriding requirement of comparative merit of candidates and the qualitative requirement for that rank and matched against the available vacancies. This practice is followed all the way up to the rank of Lt-General. Thereafter, for the appointment of army commanders, seniority becomes the sole consideration. The same practice is followed in the case of selection of the COAS. However, for the latter appointment there have been a few cases of manipulation at the bureaucratic and political levels to ease out the less favoured in favour of the more pliable.

Liddel Hart in his book, “The Other Side of The Hill”, referring to the German high command before World War II, writes correctly of a “modern Pontius Pilate” who simply washes his hands in innocence because he is merely carrying out his orders, petrified in the attitude of obedience. Lt-Gen P.S. Bhagat, in his book, “The Sword and the Shield”, records that a commander-in-chief, if he feels strongly on a matter of great significance and cannot get the government to agree to his point of view, owes it to the nation and the service to make an issue of it, and if the government still fails to see the point, he must resign to register his protest for the country to take note of the issues at stake. At another plane he alone represents the cause, hopes and aspirations of his officers and men, as they cannot form an association, like other government employees, for collective bargaining, or launch a protest. This places great moral responsibility on the COAS. His commitments are quite apart from that of any other government functionary, because these also relate to vital issues of national security.

If, during the years preceding 1962 and the run up to the India-China war, the country had an Army Chief who could render firm advice to the government and stand up to the antics of the then Defence Minister, V.K. Krishna Menon, the country would not have had to face such ignominy. Or during the Bangladesh crisis, a lesser Chief than Sam Manekshaw would have allowed himself to be hustled into going over to the offensive in East Pakistan in April-May, 1971, itself with the campaign ending in a predictable fiasco. And, again, if General Raina had firmly advised Indira Gandhi against imposing the Emergency, when the latter called him to her office to inform him of her intentions, she would have, in all probability, desisted from doing so, pressure from Sanjay Gandhi and others notwithstanding. Finally, if the then COAS had raised serious objections to the employment of the Army in an assault on the Golden Temple, perhaps the government would have realised its folly and instead used the police or found some other solution. So much turmoil and tragedy would have been avoided.

Since the promotion and elevation to the level of army commanders and later the COAS get related to only the seniority, without any further selection, it is imperative that the assessment for promotion to the rank of Lt-General follow the most stringent standards; not only relating to professional merit and strategic vision but also to unassailable character qualities, probity and strong moral fibre.

Unfortunately, the Indian politician has always harboured visions of a military takeover. The bureaucrat and intelligence man has not only sustained that suspicion but added to his fears. The Indian Army draws its manpower and officer cadre from all over the country, is highly professional and a perfect picture of national integration. It is completely apolitical in character, deeply rooted in democratic traditions and under oath to uphold the Constitution. Anyone who dreams of a scenario of a military takeover in India is surely in need of early psychiatric help.

(The writer, a retired Lieut-General, was a Deputy Chief of Army Staff).
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Pakistan’s siren song
by R. A. Singh

IN a chat with newsmen at the Indian Embassy here on February 10, Foreign Secretary Lalit Mansingh averred that the focus of President Clinton’s scheduled visit to India in March would be on a political and economic partnership between the two nations, with stress on cooperation in science and technology and the energy sector. No deals had been made because India was not seeking any favours. The Foreign Secretary also declared categorically that no conditions were attached to the Clinton visit.

News emanating from US sources, however, characterise the forthcoming visit in a different mould. President Clinton, Secretary of State Madeleine Albright, and even Defence Secretary Cohen are all quoted as referring to Kashmir as the flashpoint or the fuse in a dangerous face-off between the newly nuclear-capable India and Pakistan. They also refer to the need to bring the two nations together, presumably pushing the idea that President Clinton is the man to do it.

Given America’s Janus-faced foreign policy and the overt tilt of some of the US power elite towards Pakistan, one wonders if President Clinton would not use his trip to India to explore the possibility of his leadership role in resolving the Kashmir issue. Both Prime Minister Vajpayee and External Affairs Minister Jaswant Singh have made it pointedly clear that there is no scope for third-party mediation on the Kashmir issue. But such rebuffs do not always discourage Clinton the peacemaker, one of whose primary preoccupations is the legacy he leaves behind when he quits office at the end of the year.

One thing is crystal clear: President Clinton is eager to include Pakistan in his South Asian itinerary. All he needs is a small conciliatory statement from General Pervez Musharraf which can then be touted as an extenuating circumstance to justify the visit to Senators and Congressmen who are totally averse to according legitimacy to a military regime through a presidential visit.

It is not that President Clinton does not know that General Musharraf will never opt for civilian rule in Pakistan; that the General’s life and career are hostage to the fervour of fundamentalists and the anti-civilian rule ethos of his fellow military coup-makers; and that the General would not last even two days if he attempts to have Osama bin Laden handed over to the USA, or if he tries to neutralise the terrorists in Pakistan.

President Clinton also knows full well, despite his contradictory statements, that the recent hijacking of an Indian Airlines Airbus was the handiwork of Pakistan’s intelligence agency, the ISI, aided and abetted by the Taliban. More to the point, President Clinton is aware that the visceral hostility between India and Pakistan does not begin with Kashmir, nor will it end with Kashmir. Even if India gives away the whole of Kashmir to Pakistan, it does not follow that Pakistan will be a trustworthy neighbour thereafter. For, Kashmir is just a symptom of the malaise injected into the psyche of the people living on both sides through the divide-and-rule policy which the British used to subjugate the country.

President Clinton knows that no Pakistani regime can survive without fuelling the fires of anti-India hatred as a prime principle of governance. Nor can the President be blind to the fact that if Pakistan’s increasing provocations lead to yet another military conflict, Pakistan would be further mutilated - Islamabad can never match India’s military and economic might and its political stability.

Yet, with all that, President Clinton would like to treat India and Pakistan alike. The obvious reason is that like Presidents Nixon, Reagan and Bush, Clinton too cannot keep his heart from leaning towards Pakistan even as his mind whispers in favour of India.

Meanwhile, as the Clinton visit draws close, General Musharraf has begun to change his tune and send positive signals in the direction of the White House in the hope that President Clinton will swallow the attractively packaged bait and could then be reeled in to land in Pakistan. In the last few days, the General has been indicating that he is quite willing to consider the various conditions Washington put before him for resuming “business as usual.”

Of course, hemmed in as he is by fundamentalist forces to whom America is anathema, General Musharraf was prudent enough not to address his conciliatory message to President Clinton or the US Administration. Instead, he wisely chose to write to South Dakota Democratic Senator Tim Johnson who has a record of being well-disposed towards Pakistan, and who had visited him in Islamabad last month. The wily General was certain that the letter will get wide publicity and reach the right quarters.

When General Musharraf rode in like a knight on a white charger, promising to cleanse the nation of the political corruption that had been bleeding it white, he struck a sympathetic chord in the minds of the long-suffering people. But the problem with knights in shining armour is that they raise expectations too high, and when they are unable to deliver, the sheen gets dulled and the people tend to get restive. Pakistan is practically bankrupt, and even to ensure a modicum of normal life, Islamabad needs large infusions of life-giving financial sustenance from the World Bank and the International Monetary Fund. The USA has the voting power and political clout to turn off the spigot in both institutions. Hence the urgent need to kowtow to Washington.

The letter to Senator Johnson tried to reassure the USA on all its concerns. The General promised, for instance, to wage an “unequivocal” fight against terrorism; he pledged to cooperate with the U.S. in curbing the spread of nuclear weapons; and he vowed to hold local elections by the end of the year.

It is quite evident that General Musharraf’s new air of sweet reasonableness is a patent ploy to prevent the catastrophe of President Clinton ignoring Pakistan during his South Asia trip. Apart from the perceived personal slight involved in President Clinton shunning him, such a snub particularly when he will be wined and dined and feted and fawned upon for almost a week in India — would in all likelihood push Pakistani fundamentalists over the edge, threatening the very survival of the General Musharraf at the head of the military regime. After all, there are atleast two co-equal Pakistani Generals whose fundamentalist credentials are more to the liking of the “jihad” crowd.

Unfortunately for him, General Musharraf is in the unfortunate position of being betwixt and between the two: There are certain US officials who consider him a secular military leader with a Western orientation and would like President Clinton to make a stopover in Islamabad. Of course, these are closet cold warriors who are still nostalgic about the “good old days” when Pakistan was a willing conduit for the wherewithal pumped by the CIA to the Mojaheedin battling Soviet troops in Afghanistan. At the same time, General Musharraf has also to be careful not to annoy the Islamic fundamentalist groups which have a free rein within the country and have the power to mobilise large enough crowds to make life difficult for whoever is in power.

General Musharraf’s letter to Senator Johnson made the specific point that it was important for President Clinton “to visit Pakistan when he is in the region next month.” Among other things, he declared that such a visit would provide a unique opportunity to discuss and promote a peaceful solution to the Kashmir imbroglio.

President Clinton would be well-advised to take all the promises with a very large pinch of salt. Desperate individuals often make promises they cannot keep, or have no intentions of keeping. In fact, despite General Musharraf’s offer to cooperate in curbing the spread of nuclear weapons, Pakistan’s Foreign Minister Abdus Sattar subsequently made it clear that even if Pakistan signed the Comprehensive Test Ban Treaty (CTBT), it would not constitute a bar to further testing or development of nuclear weapons. One can only hope that President Clinton will not listen to the siren song from Islamabad and wreck his foreign policy vessel on the rocks of Islamabad’s unkept pledges and unabashed fundamentalism.

(The writer is based in Washington).
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Growth linked to fiscal reforms
By S. Sethuraman

ECONOMIC trends in 1999-2000 have been so mixed that the pre-Budget survey of the Finance Ministry has blended optimism with concerns. It suggests an industrial recovery after a downturn spread over three years, but the daunting challenge of fiscal stabilisation and other areas of serious concern cloud the prospects for higher growth at the new millennium.

The decline in domestic savings and capital formation, slowdown in corporate investments, fall in foreign direct investment flows, reduced non-oil imports needed to raise production and modernise manufacturing equipment, and continuing infrastructural bottlenecks do not augur well for an economic take-off. These concerns are unmistakable in the survey.

The survey, presented to Parliament a day before the Union Budget for 2000-01, has no doubt underlined some of the positive developments — a significant growth in manufacturing, drop in inflation to international levels of 2 per cent to 3 per cent, rise in foreign reserves, a turnaround in exports and the boom in the stock market. It projects a GDP growth of 5.9 per cent in the current year.

But equally it highlights the challenges both in regard to management of public finances and accelerating the pace of economic reforms calling for “hard decisions on many fronts”. Prospects for achieving higher growth (7 per cent to 8 per cent) depend crucially on the success in bringing down fiscal and revenue deficits which have led to low savings and investment, mounting interest payments, and high level of real interest rates.

Fiscal trends at the Centre in 1999-2000 have been “worrisome”, and no less disturbing is the financial health of state governments. “Setbacks and reversals” have marked the efforts to control fiscal deficit during the decade, the survey notes. The current year’s strain is largely related to higher defence expenditure and non-realisation of the targeted Rs 10,000 crore in divestment.

While it may be difficult to cut government expenditures “in the short run”, the survey outlines a fiscal strategy which runs on familiar lines — downsizing government, reducing subsidies, vigorously disinvesting in commercial undertakings (power and transport) and levying user charges for economic services.

Tax collections have run below the target in the current year. The general recipe is to broaden the base of taxation covering services and minimising exemptions and incentives. The declining tax-GDP ratio has to be reversed.

Moving on to the challenges of globalisation, the survey calls for further liberalisation of trade policies, including reductions in tariffs, greater encouragement to foreign direct investment than thus far, a carefully phased transition to convertibility on capital account, and adhering to market-determined exchange rate policy.

India must learn from the lessons of the Asian crisis and strengthen the banking sector, dealing with weak banks, and bring down the non-performing assets (NPAs) of the banking system.

Budget incentives of recent years have fuelled the growth of the information technology (IT) sector which, as in leading world markets, has fuelled the boom in India’s stock market. To sustain industrial recovery and growth, the survey says the country must also look beyond the knowledge-based industries. Industrial and labour laws have to be revised to provide more employment and meet the challenges of the future, it adds.

Foreign exchange reserves have gained by $ 2.4 billion in the current year to exceed $ 32 billion and contributed to easier BOP management. But for sustained viability of balance of payments, export growth by 12 per cent to 15 per cent in dollar terms a year on average would be essential besides attracting larger inflows of foreign investment.

The decline in FDI in the current year remains an area of “serious concern”, the survey points out, in the context of the target of $ 10 billion within two to three years. Given the importance of non-debt creating flows in BOP management, there is need to further liberalise the environment for foreign direct investment.

Though India can tide over the BOP situation despite a higher import bill arising from the surge in oil prices, capital flows would be needed to finance current account deficits. The slowdown in growth of non-oil imports is unlikely to last once industry gets ready to increase production of international standards. There has been a significant fall in capital goods imports possibly because investment in machinery and equipment has been slow.

The survey also emphasises the importance of agricultural growth at an average rate of 4 per cent for higher economic growth. Foodgrain output growth (other than wheat) has come down in the 1990s. Agriculture continues to be the key determinant of economic growth, and the survey urges step-up in investments in agriculture and rural assets and elimination of all controls to free agriculture and enable it to meet the emerging international competition.

The survey has little positive to report on social development though it says that expenditure on social sectors as a ratio of total expenditure rose from 9.4 per cent in 1993-94 to 11.4 per cent in 1999-2000 (BE). There has been no reduction in poverty while employment growth has been lacklustre. — IPA
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Millennium Budget & common man
By C.M. Kulshreshtha

ALL eyes were glued on Friday — waiting for 2 p.m. to strike so as to know what the Finance Minister has in store for them.

With the Finance Minister having threatened the public to be prepared ‘‘to bite the bullet’’, yet in all fairness this time the common man was given no worse deal. Nobody can dispute the Finance Minister’s constraints — heavy inflation, enormous expenditure on defence due to the Kargil war, vagaries of agriculture production and arbitrary behaviour of the weather gods. And yet the surprise element was that even though there has been no increase in the ceiling of exemption of income tax and no other freebies, the household budget can still be contained —by tightening the belt at least.

The government has practically frozen the different sources of ‘‘unearned income’’. To start with the Finance Minister has laid emphasis on basic needs of infrastructure like health and sanitation in rural areas. He has also tried to define the land use policy. With a view to universalising elementary education to all he has proposed the Saravshiksha campaign, which to start with will be restricted to the states of UP, West Bengal and Orissa.

The Finance Minister promised that the fruits of the second general reforms would be shared by all the sector — the corporate and the common man alike. So far as the ceiling of Rs 12,000 (for Mutual Funds, UTI etc it is Rs 15,000) under Section 80L for interest from bank, post offices etc is concerned it will be the same. There has been no populist move. Taking a mature view of the situation and the fact that these are meant for the relatively weaker sections of society, these remain unchanged.

No doubt the ceiling could have been raised to fight inflation. But there would have been other implications also, apart from political constraints. No housewife would suffer on this account. As regards deposit from gullible investors by ‘‘fly by night operators’’ who disappear after taking the money and paying a few post dated cheques which are fabulous in amount, the Minister has promised much more stringent action against non-banking financial companies (NBFCs). This would help a great deal in tackling the problem of such deposits. The Budget promises that sick public sector enterprises have to be either closed down or disinvested — without affecting any change in the work force.

Private sector banks would be encourage but not a single bank in the public sector would be affected. In fact, the latter would be encourage to offer public issues. Computers, particularly hardware, would be cheaper though software may cost more. Even the tyre industry would benefit. Relying on the basic principles of stability, rationalism and simplification of the tax procedure the Minister has proposed changes in section 54 EA and ED which provide relief to holders of security for three years and more. No doubt the housewife will have to pay more for sugar since income tax accesses will not be allowed to get the benefit of the PDS system but such a move will not be that harsh.

The most important relief has been given to the housing sector. Loan would be available with greater ease and banks would give up to Rs 1 lakh without the usual security or mortgage. How the directive is implemented is yet to seen. The limit of repayment of housing loan has been increased for purposes of Section 88 of the Income Tax Act which remain unchanged. The ceiling is still Rs 60,000 — already increased to Rs 70,000 if part of the investment, subject to a minimum of Rs 10,000, is invested in infrastructure related securities.

The dividend from shares will be tax free and so would be the dividend on US 64 and other units of the Unit Trust of India (UTI) and other mutual funds. They would pay the tax but the income could be tax free in the hands of the investors.

Far too many farms houses have sprung up. They are regularly used for marriage and other functions and pay no tax since they declare it as ‘‘agricultural income’’. Now a minimum alternative tax (MAT) is provided. The overall affect is rationalisation.

However, there is a silver lining for senior citizens. Now the rebate for them on income tax is increased to Rs 15,000 as against Rs 10,000 earlier. There is no other concession directly visible. Pensions have been increased after the implementation of the Fifth Pay Commission report but even then the relief is nominal.

There could have been a scope for increasing the ceiling under section 88 since no growth is possible without saving. The Budget is not saving oriented.

The least graceful part is that despite a fair representation in the Padma awards of writers, authors and playwrights, musicians etc, followed by the Prime Ministers’ eloquence while inaugurating the Book Fair how the written word is mightier than the nuclear bomb, no dispensations have been made. In any case they represent only a fraction of society.
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75 years ago

March 2, 1925
An Ingenious Argument

A VERY ingenious argument was recently employed in the Legislative Assembly by the spokesman of the Government to justify the reduction of fares for first and second class passengers without any corresponding reduction in the case of third class passengers.

It was said that the increase in the first case had led to actual reduction in traffic and the consequent loss of revenue, while the increase in the other had brought in more revenue. But may not this mean that while persons who would otherwise have travelled by the first and second class have escaped the hardship imposed by the enhanced fares by travelling by a lower class, the third class passengers, just because there is no fourth class, have actually had to pay the increased fare as the lesser of the two evils, the only alternative being for them not to travel at all.

Surely, this does not mean that the burden is not too heavy for the poor man. Nor can any government that calls itself civilised afford to ignore so vital a consideration.

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