The Tribune, Chandigarh, India

EDITORIALS

Poll-driven Railway Budget

RAILWAY Minister Nitish Kumar had thrown loud-enough hints in advance that he would be presenting a “soft” budget. Well, he has lived up to his promise, and more. With eyes fixed firmly on the forthcoming elections, he has presented a surplus budget which is soft to the extent of being semi-liquid. This is perhaps the first time that there is no increase at all in rail fares or freight rates. On the contrary, fares have come down in the case of some prestigious trains. Even the freight rates for petrol, petroleum products, cement, clinker, manganese ore and caustic soda liquid are proposed to be brought down. Fifty new trains have been introduced, the frequency of 13 has been increased and the run of 24 others has been extended. At first glance, not all these decisions stand good on the touchstone of calculating the expected traffic and revenue. Goodies have been showered on the passengers, so much so that the year 2003-04 has been dedicated to the customers and declared as “Customer Satisfaction Year”. Cancer, Thalassemia Major and heart patients are to be granted up to 75 per cent concession on rail fares. Kidney patients undergoing train journey for the purpose of treatment are to get similar travel concessions. The age for getting senior citizen concessions has been reduced from 65 to 60. On the freight front, the Railways is expecting to carry 540 million tonnes of traffic during the year which is 25 million tonnes more than the traffic of 515 million tonnes of the current fiscal.

In short, it is quite a “please-all” exercise. That is why even Opposition leaders were seen fighting for words while picking holes in it. Some of them called it an electoral gimmick, while others criticised it for regional imbalance. But it was clear that they did not want to appear villainous in the eyes of the travelling public. While the passengers will hail the budget, the specialists are unlikely to be impressed. In economics, the basic rule is that if some proposal appears to be too good to be true, it probably is not true. This dictum fully applies to the Railway Budget because all these facilities are going to cost money and the ministry is just not in the right shape to bear the burden. Mr Nitish Kumar says that resources will be raised by the rationalisation of operations. That hardly sounds rational because his ministry has hardly done anything to reduce expenses. The only way to improve finances was by bringing passenger user charges closer to the cost of service but that route was simply blocked due to political exigencies. The railway users are subsidised by the government to the extent of Rs 5,000 crore. This burden is only going to increase further.

The white paper on safety, which was expected to be presented along with the budget, will be made public later during the current session of Parliament. The recent accidents are a crying shame indeed. Mr Nitish Kumar has laid stress on remedying the situation but the vision required for doing this is hardly visible. Even the non-lapsable Railway Safety Fund has not been of much help so far. The budget mainly speaks of installing anti-collision devices. Maintenance and upgrading of tracks and bridges as well as the rolling stock and signalling equipment, gauge conversion and new lines require a concerted drive. Claims to do the needful were made in the past but have proved to be a paper exercise. Unless the pricing, staffing and debt structures undergo fundamental changes, commercial interests of the railways cannot be safeguarded.

In its 150th year, the Railways is taking some steps towards modernisation, but ever so haltingly. Internet kiosks are to be introduced at the New Delhi station as a pilot project. For the first time, fare reduction is to be introduced from July 15 to September 15 on an experimental basis. Apparently, the cue has been taken from the airlines. And the cleaning job is proposed to be given in private hands. Laudable that these steps are, they are hardly enough. The need for striking a perfect balance between social obligations and professional operations cannot be over-emphasised. Even at the cost of annoying some passengers, it must be added that the majority of them do not mind paying a little extra provided they get better services in return. But even when there has been a hike in fares, the additional income has not improved the quality of service. The minister has announced that seven new zones and eight new divisions will soon be operationalised. The expenditure involved will be tremendous. It is doubtful if the Railways is in a position to absorb it. Commercial interests of the Railways can be served only if the vacancies are filled by redeployment and not by fresh recruitment. Of late, the tendency of announcing new trains and major projects outside the budget has been growing. Even passenger fares and freight are hiked during the year. To that extent, the sanctity of the railway budget is getting eroded. This trend must be reversed, otherwise the demand for merging the Railway Budget with the General Budget will only grow sharper.

Saddam’s suicide note

THE decks appear to have been cleared for a formal invasion of Iraq by US-led troops. And the person to make the possibility of attack look real is Iraqi leader Saddam Hussein who has been quoted as having said that “I will not destroy” the banned Al-Samoud 2 missiles. Chief United Nations weapons inspector Hans Blix had given him a deadline of March 1 to start the process of dismantling the missiles that violate the 150 kilometre range limit imposed by the world body on Iraq after the last Gulf war. The Iraqi leader has said that the missiles in question do not violate the range restriction allowed by the UN. The latest Iraqi stand was not surprisingly rejected by America. President George W. Bush, without referring to the Iraqi President’s offer of a debate with him on all contentious issues in his typical belligerent style, reiterated that he would accept nothing short of “full disarmament” from Iraq. The statement attributed to the Iraqi leader would be seen as a suicide note from him at a crucial juncture with the anti-war global uproar forcing America and Britain to revise their strategy for setting foot on the oil-rich Arab soil under the pretext of saving mankind from Iraq’s weapons of mass destruction. The only lifeline available to President Saddam Hussein is the excuse that he had merely expressed his personal views on the missile controversy in the course of an interview with CBS News and they did not reflect the official policy on the subject. Of course, America is not going to buy this line for the simple reason that a dictator’s personal views cannot be different from his official policy.

However, there is still time to salvage the situation before President Bush pulls the trigger. The members of the international community who were thus far concentrating on restraining America and Britain from acting without UN authorisation must now send emissaries to Baghdad for persuading President Hussein to place his trust in their collective ability to avert the invasion of Iraq and global catastrophe. They will have to play a proactive role to ensure that the world is not dragged into a destructive war because of the intransigence of two men, one sitting over huge stocks of untapped oil and the other wanting to gain control of the liquid gold. The 13th Non-Aligned Movement summit that ended on Tuesday emphasised the need for a peaceful resolution of the Iraq crisis. It demanded the lifting of sanctions on Iraq and an active role for the UN in resolving the crisis through dialogue and diplomacy. However, a part of the resolution that welcomed Iraq’s decision to allow unconditional return of UN weapons inspectors now stands altered after President Saddam Hussein’s controversial posturing on American television. NAM’s condemnation of the no-fly zone imposed on Iraq by some countries without UN authorisation too would need to be reworked. To show that NAM means business, the member-nations should now send a delegation without delay to persuade Iraq to invite UN peacekeepers as a declaration of its intent of wanting peace at all costs. Even if it entails loss of face for the Iraqi leader in the eyes of his own people. If he does not fall in line, he may have no face to lose in the event of an America-led invasion for eliminating him.

OPINION

RUN-UP TO THE UNION BUDGET
Budget, circumstances & ideologies
Deficit financing may hit the poor hard
Satya Prakash Singh

POET Kalidasa wrote in “Raghuvansha” (1/18): “Prajanameva bhutyartham sa tabhyo balimagraheet. Sahasragunamutsrastumadatte hi rasam ravih.” (For the prosperity of the subject, the king collected taxes from them as the sun draws water from the earth to give back thousandfold). That may be a utopia. Yet, the underlying principle of public finance is, and it is logical for the public to expect, that if the government takes away Re 1 from their pockets as tax it should provide at least that much worth of benefit to the public although not as quid pro quo. Will the Budget 2003-04 meet that expectation?

One of the most profound theorems of Keynesian economics is that Re 1 of government expenditure increases national income by much more than Re 1 (the government budget multiplier effect). And since a government can spend more than its revenue in a year, it (deficit financing) can amazingly work as an engine for growth. Further, the theory (of balanced budget multiplier) states that if government spends Re 1 even if collected by taxing private individuals, the national income will increase by Re 1. The theory is indeed a restatement of the assumption that the allocation of funds by the government is to more desirable ends and the utilisation is more efficient than in the private sector. That unfortunately does not quite seem to happen in India. Instead, there is crowding-out effect whereby public expenditure replaces private investment. And the social return on public expenditure for reasons well known may well be less than the private expenditure. The real problem, therefore, before the government is how to ensure the desirability of ends to which the funds are allocated and their effectiveness.

True, there is a change in the Finance portfolio. Mr Jaswant Singh has replaced Mr Yashwant Sinha. But the spirit of Budget 2003-04 is not likely to change. Why? In a democracy, budgets do not depend much on the individual characteristics of finance ministers, but on the circumstances and economic ideology of the party in power. Both Mr Sinha and Mr Singh belong to the same political party. The same Mr A.B. Vajpayee continues to be the Prime Minister. Their commitment to the reform process is well known. Like the last year, the overriding socio-political factors are going to determine the shape of the budget more than the budget economics. The environmental factors have not changed. Internal and cross-border terrorism continue to spread their venomous fangs. Fear of war with Pakistan and of, what is more probable this time, a war in the Middle-East looms large. Feeling of regionalism even at the cost of nationalism has been spreading and intensifying. Uncertainties in the world trade and capital markets, the increasing divide between the rich and poor countries (India being one of the poorest), increasing conflict of cultures and religions across the world and their impact on the Indian polity, society and economy haunt the nation. Increasing intolerance and belligerence among different social and religious sections of the Indian people with its ugly fallout and enormous economic costs continue to bother. Behaviour of political parties determined by short-term political expediency rather than ideology and the consequent unpredictability of leaders, the contradictions embedded in the politics of coalition and sharp divisions among leaders even within a political party add to uncertainties and complexities in the economic and political decision-making process. The vagaries of nature play their own part as the villain of the piece — e.g. the monsoon could be more important a determinant of growth rate than any economic policy of the government. In the age of scams and scandals, corruption permeates nearly every walk of life with an ever-increasing expanse and intensity. And the list of problems does not end there.

It hardly matters whether Mr Jaswant Singh learnt his early lessons from the sahukars of Rajasthan. Whether he has been impressed by the entrepreneurial skills of the marwaris. Or he is a Rajput by birth. Whether he writes his speeches himself. Or that the literal meanings of the two names, Mr Jaswant Singh and Mr Yashwant Sinha, are identical. What is important is that he is a seasoned politician. He is expected to produce a budget that is naturally subservient to the political objectives of the BJP and the NDA. There is nothing wrong in that per se. It is also natural that Mr Singh will have an eye on the forthcoming elections. As a politician he has to present a popular budget, which his detractors will definitely call populist. So what? Any Finance Minister in a democracy shall try to make his budget popular and its presentation interesting.

But, Mr Jaswant Singh cannot afford to ignore the economic fundamentals. His budget will indeed be the sixth link in the “value-chain” of budgets. Each budget is a short-term plan, a link in the long-term chain of grand vision that any ruling party intending to remain in power must have. This vision must be grounded in long-term economic reality and considerations of sustainable growth, stability, equity and justice. Mr Jaswant Singh’s budget should reflect a mix of bold risks and careful calculations.

Joseph A. Schumpeter wrote many decades back while referring to the drama over government budgets and their economic significance: “The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare, all this and more is written in its fiscal history…. He who knows how to listen to its messenger here discerns the thunder of world history more clearly than anywhere else.” (Quoted by Paul A Samuelson in his famous text, “Economics”, 17th edition, p.322). One may miss the thunder pertaining to the Indian budget in Parliament this time. The Opposition is going to be busy cornering the government on several other essentially non-economic issues that have been making headlines in media these days. It may be a “forgettable” budget, as a well-established commentator has opined in an economic daily, in view of the public and, more important, the media being more busy in the outcome of the elections in Himachal Pradesh and the North-East or in the World Cup cricket. Even last year the budget did not get much attention in Parliament. Nonetheless, economic impacts the budget will surely make.

Suppose, for example, if Mr Jaswant Singh pushes the agenda for the second generation reforms, although its momentum is doubtful in view of some stiff resistance within the government, the investment climate will get tremendous boost. But, at the same time, it will lead to increased unemployment and inequality. Tax sops on small savings, which are likely, will be in the direction of distributive justice and increasing the national propensity to save. Abolition of dividend tax, capital gains tax and minimum alternative tax will improve industrial investment. But the increase in the revenue through indirect taxes resulting from increased industrial production may not be enough to compensate for the revenue losses due to the abolition of these taxes. A possible reduction of excise on consumer durables, including automobiles, will give a demand-pull to that sector of the industry. But it will also fuel consumerism of upper-middle and rich classes. If Mr Jaswant Singh learns from Mr Kelkar and abolishes tax holidays granted to investments in the large infrastructure projects like highways and ports, the investors who have made such investments will not like it. That may hamper the development of infrastructure so crucial to economic growth. Again, on the recommendation of Mr Kelkar, Mr Singh may take a step towards simplifying the structure of Customs duty to a two-rate structure of 10 per cent on raw materials and 20 per cent on finished products. It will make life in the foreign trade sector much easier. Any reduction of corporate tax from 35 per cent will make the corporate sector happy, but will the tax elasticity of revenue from corporate tax be strong enough to make that a worthwhile proposition?

No Finance Minister can reduce the size of the budget. The Defence budget will increase as also the development-oriented expenditure. Even the unproductive expenditures cannot be reduced, rhetoric notwithstanding. Often “unproductive” becomes urgent! Mr Singh, like his predecessors will have to look for avenues to increase revenue.

The short-run outlook of the economy is encouraging. According to a recent Business Confidence Survey, the corporate sector is optimistic about the future. NASSCOM data reveals that software and service exports went up by 28 per cent in April-December, 2002. And the Central Statistical Organisation tells that industrial production grew up by 5.3 per cent during the same period as compared to 2.5 per cent in 2001. The data on merchandise exports, trade deficit, foreign exchange reserves, tax collections, the overall growth rate and inflation rate, etc. in the recent past are all encouraging. It is hoped that Mr Singh will find ways and means to draw resources to finance the budget.

The Finance Minister makes the budget on the basis of an economic survey that is a snapshot view of what happened in the past. Then a future situation is anticipated as if that will happen with certainty. On that basis expenditures are planned and how revenues will be generated to meet the expenditure is spelt out. Alas, future cannot be anticipated with certainty. We observe every year that projections go awry and budget estimates are revised. New demands are put forth. Is it not time that men and women trained in econometric sensitivity analysis try to incorporate uncertainties to present a more meaningful budget? What if a war erupts in the Middle-East? Will it not be better if the budget contains provisions of what will then be done rather than making changes when actually the war takes place?

Even a simple change in the budgeting exercise as suggested below will go a long way in improving the quality of the budget. Take the figures of incomes and expenditures that the minister will include in his budget. These, in all likelihood, are optimistic estimates. It should be made clear that these estimates are indeed optimistic. An attempt should be made to incorporate most likely and pessimistic estimates of incomes and expenditures. These estimates can be generated on the basis of (subjective) perception of uncertainties by experts, officials of the Ministry of Finance and, of course, of the Finance Minister. On the basis of the three scenarios (most likely, pessimistic and optimistic), a contingent action plan can be prepared. This plan must have a time-schedule of implementation so as to become a tool of monitoring and control. The budget is not only an economic document. It is a management tool in the hands of those who have the responsibility of managing the national economy.

Economists now agree that a balanced budget is the best budget. Any attempt to have deficit financing would hit the poor most. Mr Singh should resist any such temptation as he may have in view of the stable (controlled inflation) condition of the economy. There is one more very genuine reason for a balanced or even surplus budget. Every year a significant amount of expenditure has to be incurred on unforeseen items largely due to man-made or natural calamities — a riot, a terrorist attack, a train accident, a war, an earthquake, drought, etc. Short of funds, the government may have to resort to the invisible trick of deficit financing to control such situations. A balanced budget will have a cushion in such a case. If the government has already planned to meet a significant part of its predetermined expenditures, such exigencies may throw the economy out of gear as past experience suggests.

We trust the Finance Minister. We hope he will do the best possible. A nation of great individuals and high talents we ranked 124th on the human development index out of 173 countries with a score of 0.577 in the year 2000. We wish to march ahead by a few digits.

The writer is a professor at the University Business School, Panjab University, Chandigarh.

OF LIFE SUBLIME

The lovable fraternity of fools
Darshan Singh Maini

THE sublime, as we know, is seen or perceived or experienced in many a form and facet. It’s as much a reaching out and for, as a reaching down and deep. It operates as much, horizontally as vertically — from the common creature life to the consciousnesses operating on the higher scales of values. And it comprehends at once the sage and the saint, the dervesh and the divine.

However, not many of us realise that the presence of sublimity in those slightly touched in the head — and gone off the tangent — contain, in some strange cases, whole multitudes of sublime moments invisible to the common eye. And it’s this lovable fraternity of “fools” that I wish to deal with.

Almost each culture and country has a sui generis stock of folk songs and stories about such souls — those who, for one reason or another, drifted into a state of mind where they lost touch with the putative reality, and went on to create a new order of consciousness. They, in a manner, became adversaries to the prevailing societal norms, and as such, alienated from home, family and the world around. And though we call them “fools”, and “idiots” and “lunatics”, they, if we have an empathic imagination, would, then, strike us as closer to the Creator than those governed solely by cold logic or reason. Even in our scriptures, we find copious references to the persons who transcend the limits of rationality to become saints attuned to higher harmonies.

Of the English poets, I would settle for Traherne, Blake and Wordsworth for the present. At least the first two are seen as “possessed” poets whose songs like those of sufi poets in the Punjabi tongue almost reach the borders of sublimity in moments of divine frenzy. Almost addled, even derailed, they unbutton their souls in ecstasy. The mystic moments multiply to take the poet towards epiphanic truths. Thus, in the case of Blake, in particular, the breakthrough occurs when there is a breakdown. His Songs of Innocence suggest strongly the link between a certain order of “insanity” and divinity.

I’m reminded of R.D. Laing’s influential book, The Divided Self where he comes close enough to our argument. Only when a soul is pressed against the wall, its outer defences crumble but not its inner wholeness. Another American thinker, Norman, O’Brown in his Freudian study, Love’s Body, celebrates “the body’s napture” and the enchantment which has a spiritual origin.

Wordsworth and the American Walt Whitman, of course, do not slide into a state of mind where unhinged, they raise paens to God’s glory and the wondrous world of nature in its felicitous and fabulous forms. Another American poet, Emily Dickinson’s complex, gnomic, titleless little poems that “tease us out of thought” have a deeply mystic appeal arising out of her hidden sexual despairs and her ruptured psyche.

And now to “the divine fools” in literary creations. Shakespeare’s King Lear is one of the greatest books in the world, and its multiple levels of reality explored with deep insight leave the reader as much in a “trance” as the unhinged king himself when wilding over the heaths he passes from state to state — from royal hauteur and pride to utter child-like “innocence” in the face of stupendous suffering. His court “Fool”, to be sure, has moments of pragmatic jibes in a state of mental derangement, but some of his utterances do suggest his oblique vision and suggestive depths.

However, if we turn to fiction, The Idiot by Dostoevsky strikes me as a supreme example of innocence in a grown-up man touching the hem of sublimity. A long novel in which the Russian novelist uncovers, among other things, the churnings and anguished strivings of the Slav soul, Prince Myshikih, our “Idiot” advances, step by step, into that circle where the angels live.