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EDITORIAL

VIJAYAWADA

THE HINDU

THURSDAY, MARCH 10, 2016

Good economics is good politics

thursday, march 10, 2016

Evasive politics
on Muzaffarnagar
hose who dont learn from history may be fated
to repeat it, but what about those who dont get
their history down in the first place? Indias record in officially taking stock of communal
riots has been especially poor in recent decades, and the
report of the Justice Vishnu Sahai commission inquiring
into the 2013 Muzaffarnagar violence plays to form. The
report, tabled in the Uttar Pradesh Assembly this month,
zeroes in on the negligence of the local administration,
the failure of the intelligence agencies and exaggeration
on social and print media for the violence that coursed
through many districts of U.P., leaving more than 60 dead
and 60,000 homeless, an overwhelming number of them
Muslims. Commissions of inquiry are often guided, by
framing the terms of reference in a particular way, to conclusions that are politically manageable for governments.
Whether by omission or by the terms set for it, the Sahai
commission appears to have exonerated the entire political class. It has also stopped short of extending the line of
responsibility for local administrative failures to the Secretariat in Lucknow. Certainly, responsibility must be
fixed on the intelligence and administrative machinery for
failing to pick up and act upon signs of trouble leading up
to a combustive mahapanchayat of September 7, 2013. But
once the mahapanchayat gave a rousing war cry, as violence was visited upon unsuspecting rural dwellings in
Muzaffarnagar and neighbouring districts, and as the survivors fled in search of safety, the Akhilesh Yadav government distinguished itself by responding exceedingly slowly, a lack of haste that was widely seen to be deliberate.
While giving a clean chit to Mr. Yadavs Samajwadi Party government, the Sahai report mostly glosses over the
role of the Sangh Parivar in the violence. There appears to
be an effort on the part of the SP to deny the Bharatiya Janata Party any opportunity to bring Muzaffarnagar back
into the political discourse indeed, to deny the BJP a
chance to sharpen communal politics. Just recently, the
BJPs candidate won a by-election in Muzaffarnagar after a
polarising campaign. If this is an indication that the SP is
regretting its obvious strategy in 2013 to play along with
the BJPs divisive politics in the hope that it would consolidate the anti-BJP votes to its advantage, the party would
have to do much more to come clean. The fissures that
started showing in September 2013 have grown with time.
These have to be addressed administratively, by providing
compensation to the victims and bringing the guilty to
book. But they cannot be fixed if the politics itself remains
evasive, with the BJP using its Hindutva strategy to consolidate its vote and its opponents side-stepping the issue for
fear of giving Hindutva more oxygen. The Narendra Modi
government made a statement about where it stands by
making one of the accused, Sanjeev Balyan, a Union Minister. That the Samajwadi Party government and the Opposition parties refuse to engagingly contest the anodyne
conclusions of the Sahai report is a depressing indication
that, for now, the political healing touch needed to rectify
the wrongs of 2013 is absent.

The backdrop to Finance Minister Arun Jaitleys third Budget was a domestic economy
confronted with a rather adverse global environment, an
agricultural sector reeling
BHASKAR from two successive years of
DUTTA
drought, and a manufacturing
sector that has been limping along. Although the gross domestic product (GDP)
growth rate has been relatively impressive
at over 7 per cent (though this figure has
been contested as unduly high by many who
attribute the overestimate to the shift in
the method of computing GDP), there was a
universal feeling that the economy was in a
vulnerable state and that even a relatively
minor shock could cause a big downward
slide. The believers in impending doom for
the economy felt that an expansionary Budget designed to stimulate aggregate demand
was the only way out. Ranged against this
school were the fiscal conservatives who
believed with equally strong conviction that
the Budget must keep the fiscal deficit under control.
Economic sense seemed to suggest that
the Finance Minister would have to choose
one or the other option. However, Mr. Jaitley seems to have achieved the impossible.
He has definitely embraced fiscal prudence.
He has announced that the budgetary deficit for the current year will not exceed 3.9
per cent of GDP, and has promised to lower
the fiscal deficit for 2016-17 to 3.5 per cent of
GDP. Since these are figures that were mentioned last year, the intention is clearly to
ensure that there is no financial slippage in
so far as the Central government is concerned. Surprisingly, fiscal prudence does
not seem to have come at the cost of a cut in
government expenditure. Mr. Jaitley has announced a significant increase in the allocation to agriculture and rural development,
as well as infrastructure. He has also made a
large budgetary provision for payments
arising out of the Seventh Pay Commission
awards and the modified pension scheme
for the military. Moreover, the tax measures
are anything but draconian. So, how has he
managed to square the circle?
Banking on assumptions
The government has benefited a great
deal from the windfall gain arising from the

The qualitative stance in the Budget is

praiseworthy: increase investment in the rural
sector and infrastructure, particularly road
construction, and hope that these relatively
labour-intensive investments will have both a
magnified effect on employment as well as output
steep fall in crude oil prices. The price of
crude oil is less than half of what it was a
year ago. However, the government has not
passed on the substantial savings achieved
on the import bill to consumers the retail
prices of petrol and diesel have come down
by only a few rupees! Clearly, the government is hoping to continue its reliance on
this source of non-tax revenue. Of course,
this strategy carries with it the risk that the
government estimates of revenue on this account during 2016-17 will be hit for a six if
the global economy recovers from its cur-

ceeds are going to be anywhere close to Mr.

Jaitleys estimate.
The government also hopes to exploit
non-budgetary sources of financing infrastructure projects. First, there is the hope
that some infrastructure projects will be
funded through public-private partnerships. Second, the National Investment and
Infrastructure Fund (NIIF) has been allocated Rs.4,000 crore in the 2016-17 Budget.
The government hopes that the NIIF can
leverage this to raise additional funds
through the bond market. Third, there are

Mr. Jaitley has announced the target of doubling farm incomes

within five years. This can be nothing more than a pipe dream.
Farm incomes would have to record an average annual growth
rate of about 14 per cent in order to achieve this target
rent slump. This would result in an increase
in the demand for oil and hence a rise in
crude oil prices.
Mr. Jaitley has also made some rather optimistic assumptions about the volume of
resources available to finance the governments expenditure. He is hoping for a significant increase in revenue from personal
income tax. The bulk of this increase must
come from better tax compliance since
there has been only a modest increase in
taxes for the super-rich. What is more questionable is his assumption that disinvestment and the strategic sale of public sector
enterprises will fetch the exchequer the
sum of Rs.56,000 crore. This is surely quite
unreasonable in view of the fact that the revised estimate for 2015-16 is less than half
this figure. The stock market will have to
improve considerably if disinvestment pro-

approved market borrowings of around

Rs.30,000 crore for several financial intermediaries. Of course, the government cannot be completely certain that the targeted
volume of resources will materialise from
these sources. There is also the danger that
public borrowings will crowd out private
borrowing if the overall credit scenario is
not satisfactory.
Focus on the farms
As far as budgetary allocations are concerned, the emphasis has definitely been on
agriculture and the rural sector in general,
with a huge increase in the allocation to the
sector. A key policy instrument will be a
large increase in investment in irrigation,
with the emphasis on completing several
projects very soon. The Budget also provides for an increase in funds allocated to

CARTOONSCAPE

Maria Sharapova
and a poser for sport
wo months after the tennis world was rocked
by match-fixing allegations, Maria Sharapova, a
five-time Grand Slam champion and the highest-paid female athlete, dropped a bombshell
when she admitted to testing positive for the recently prohibited drug meldonium at the Australian Open. She has
been provisionally suspended from March 12. The drug
was added to the Prohibited List of 2016 on January 1 after
being on the World Anti-Doping Agencys (WADA) monitoring list in 2015. The Agency banned the substance because of evidence of its use by athletes with the intention
of enhancing performance. According to WADA, a substance is placed in the prohibited list if it enhances performance, poses a threat to health, or violates the spirit of
sport. In this case, by aiding the circulation of oxygen
through increased blood flow, the medication (primarily
meant to treat serious heart problems) enhances performance, thus violating the spirit of sport. The effect of the
drug is similar to other banned substances autogenous
and allogeneic blood transfusion for extra doses of red
cells and the erythropoietin hormone to produce more red
blood cells to increase oxygen supply to muscles, thereby
enhancing endurance. Since the drug was banned on January 1, 2016, the titles Sharapova won during her career will
not be taken back. Nonetheless, by netting one of the biggest stars, the tennis anti-doping programme has at once
brought to an end the debate on whether it has been soft
on tennis players; two other tennis players were caught as
recently as in 2013.
While some may be inclined to consider Sharapovas an
honest mistake, as she did not know that the mildronate medication that she had been taking for the last 10
years is also known as meldonium, it raises a few questions. Sharapova has been residing in Florida since 1994,
and it is unclear how she gained access to the drug, as it is
not approved by the U.S. Food and Drug Administration.
She is still to adequately explain the medical requirements
that necessitated its consumption for a decade, as according to the company that manufactures the drug, the treatment course may vary from four to six weeks and it can
be repeated twice or thrice a year. But she can seek a retroactive therapeutic use exemption by proving the merit
of her case. Whether or not she enjoyed the performanceenhancing benefits of the drug during the last decade, it
once again underlines the fact that scientific evidencegathering and testing methods are slow to catch up with
the increased use of performance-enhancing substances.
This case should serve as a reminder for India too to clean
up its act. While India may not be producing many worldclass athletes and sportspersons, it ranks very high in
terms of the number of cheats. According to a 2013 WADA
report, with 91 dope offenders, India is ranked third, behind Russia and Turkey. Russia had 212 persons testing
positive for prohibited substances, while Turkey had 155.

CM
YK

gram panchayats. This is part of a huge increase in outlay on rural development, including rural road construction. Somewhat
surprisingly, the Budget has dramatically increased funding for one of the previous
United Progressive Alliance governments
flagship programmes Mahatma Gandhi
National Rural Employment Guarantee
Scheme. Other benefits to farmers include
smoother credit flow, insurance against
crop failures, and improved marketing
facilities.
Echoing the Prime Ministers recent
promise, Mr. Jaitley too has announced the
target of doubling farm incomes within five
years. This can be nothing more than a pipe
dream. Farm incomes would have to record
an average annual growth rate of about 14
per cent in order to achieve this target. The
annual growth rate of agricultural output in
India during any five-year period has not
even touched half this level. What magic
wand does the Finance Minister have to
achieve this miraculous feat? And even if
this could be achieved, who will buy double
the current volume of agricultural output
given the low income elasticity of demand
for agricultural output? Of course, there are
many countries where farmers incomes are
several times that of Indian farmers. But, in
order for Indian farmers to reach these levels of income, agricultural productivity has
to increase dramatically and far fewer people have to depend on agriculture for a livelihood. This in turn requires massive migration of people from the rural to the urban
sector. There is no mention in the Budget
speech of whether this is expected to take
place.
Steady structure of taxation
There has been very little change in the
structure of taxation. The Finance Minister
has stayed away from overt populism such
as raising the income tax exemption limit.
There is clearly no justification for such a
move when barely 5 per cent of households
pay personal income tax. Direct tax rates for
the vast majority of taxpayers remain unchanged, but those with taxable income
above Rs.1 crore will pay a higher surcharge.
Moreover, tax compliance is sought to be increased by levying a penal tax on undisclosed incomes. Some minor concessions
have been provided to small taxpayers and
new companies. Taxes on diesel cars have
been increased in order to discourage their
use. Diesel itself is difficult to tax since this
has an adverse knock-on effect on the entire
transport sector. However, it has always
been a mystery why Mr. Jaitleys predecessors have not imposed a disincentive tax on
diesel cars. After all, indirect taxes are also
supposed to serve an allocative purpose.
Viewed in its entirety, an admittedly simplistic characterisation of the Budget is that
it is pro-poor rather than pro-rich. Certainly,
there is very little in the Budget to label it as
one for the suited-booted. It is debatable
whether the quantitative targets claimed
during the Budget speech will be achieved.
However, the qualitative stance in the Budget is praiseworthy increase investment
in the rural sector and infrastructure, particularly road construction, hope that these
relatively labour-intensive investments will
have both a magnified effect on employment as well as output. The cynical will
claim that this shift in emphasis from probusiness reforms to the somewhat old-fashioned strategy of stimulating agriculture
has been brought about by the Bharatiya Janata Partys electoral defeats in the Bihar
and Delhi Assembly elections. But good politics is not necessarily bad economics. This
Budget may well be an example of this.

(Bhaskar Dutta is a Professor at the

Department of Economics, University of
Warwick, U.K.)

LETTERS TO THE EDITOR

Withdrawing EPF tax
The governments announcement
that it would like to do a
comprehensive review of taxing
Employees Provident Fund denies
an opportunity to Parliament to
take an informed view on the
governments plan to move
towards a pensioned society
(Backlash forces Jaitley to
withdraw EPF tax, March 9).
The blame for this should be
shared equally by the government,
which came forward with
measures without considering all
the
implications,
and
the
Opposition, which tried to claim
credit for defeating a government
proposal without waiting for the
debate on the Finance Bill in
Parliament. Let us hope that a
parliamentary
committee
supported by expert views will
now go into the pros and cons of all
the initiatives taken since 2004
when the New Pension Scheme
(the National Pension System) was
introduced through an executive
order without any legislative
sanction. Of course there was no
opposition to the move, as the NPS
was made applicable to employees
joining service after the scheme
was introduced. It will be in the
interest of smooth implementation
of all retirement savings schemes
to make them tax-free. This is not
asking for the moon and is
consistent with the governments
approach of making dividends taxfree in the hands of payees. The
government can, when there is a
need, tax the return on
investments made by fund
managers which will have an
impact on the earnings on
retirement corpus of savers.
M.G. Warrier,
Mumbai

Letters emailed to letters@thehindu.co.in must carry the full postal address and the full name or the name with initials.

This is a welcome move. The

government should not decide
how a person should use his or her
PF amount. Through this move,
the Bharatiya Janata Party might
have saved some of its votes for the
upcoming Assembly elections.
Arthee.K,
Chennai

Womens Bill
It is really surprising that Congress
president Sonia Gandhi is
challenging
the
National
Democratic Alliance government
to get the Womens Reservation
Bill
passed
in
Parliament
(Working to get Womens Bill
through, says Venkaiah Naidu,
March 9). This Bill has been
pending for years. Political parties
are unwilling to give more tickets
to women during elections but
they continue to shed crocodile
tears on this Bill.
Janaki Mahadevan,
Chennai

The Womens Reservation Bill is

the need of the hour but it cannot
be a panacea for problems of
empowerment and representation
(Time to deliver on Womens
Bill, March 8). Most of the women
who are elected in different
constituencies are controlled by
their male counterparts. It is a
paradox that even after many
women heading the major political
parties in the country, the
hegemony of men in decisionmaking is still prevalent. It seems
as though parties have jettisoned
the idea of gender equality and are
reluctant to give seats to more
women candidates. India has such
a high Gender Inequality Index
that only Afghanistan has a worse
ranking in South Asia. There is a
need for greater attitudinal change

in society so that stigmas attached

to women perish. If the country
does not move forward in this
respect, it cannot progress in a
holistic manner.
Gagan Pratap Singh,
Noida

Aadhaar and privacy

This refers to the editorial Dont
compromise on privacy (March
9). The Aadhaar Bill is certainly a
welcome move as it provides the
detailed provisions for the
controversial Aadhaar project.
Aadhaar has enabled direct
benefits transfer and has saved the
government crores of rupees,
which would otherwise go to ghost
accounts
and
ineligible
beneficiaries. The provision that
Aadhaar will not be treated as
confidential should be seen in the
backdrop of treating national
security as paramount.
However, the government
would do well to define what
constitutes national security and
the agencies with whom the details
of Aadhaar will be shared. This
will generate more confidence in
the public that private information
will not be misused.
Sweety Kumari,
Delhi

Universities under siege

The article Taking back our
universities (March 9) has rightly
drawn attention to the siege of
universities across the country by
a regime that seeks to spread its
ideology in a big way on campuses.
The modus operandi involves
crushing all voices of dissent and
stifling the growth of student
unions that profess a different
strain of thought while at the same
time propelling the growth of the
Akhil
Bharatiya
Vidyarthi

Parishad, which now has an

aggressive presence on these
campuses. Such an agenda was
conspicuous by its absence during
the earlier stints of the NDA at the
Centre, and this was largely due to
the concentration of power in the
hands of leaders such as Atal Bihari
Vajpayee and L.K. Advani who
could hold right-wing forces at
arms length by not giving them
much leeway to project their
ideologies in a belligerent manner.
In stark contrast is the situation
now. It is alarming. The way things
are shaping up shows that the
student community is fast turning
restless.
C.V. Aravind,
Chennai

Climate engineering
Novel approaches in climate
engineering have been suggested
to bring temperatures down
(Cooling the earth down, March
9). However, the apprehensions
that have also been stated need to
be considered and the implications
carefully
studied
before
implementation. Societies have to
come up with a broader collective
approach to save the environment.
For example, in India, civil society
should involve the youth in such
efforts. Each colony should be
encouraged to have some green
cover. Trees should be planted on
the road side. There should be
stress on replacing autorickshaws
with e-rickshaws like it has been
done in Delhi. Social media can
help create awareness and
increase peoples participation.
These small steps will surely
enhance the quality of air in cities
like Ludhiana which have crossed
the threshold pollution level.
Abhinav Sharma,
Ludhiana

Charge of bias
The Hindu has been and will
always be one of the most trusted
and respected newspapers of this
country
(Investigating
the
charges of bias, March 7).
However, recent trends have
been disturbing, especially the
coverage of the suicide in the
University of Hyderabad and the
Jawaharlal Nehru University
episode, both of which have been
one-sided. This newspaper has
been the voice of the nation and
should not be allowed to fall prey
to propagandists.
Sidharth Gehlawat,
Gurgaon

From the steady inflow of letters

complaining of a leftist editorial
slant, one can gauge the level to
which the right wing has
succeeded in making its definition
of nationalism appear mainstream.
This is a frightening occurrence.
Our ancient culture which is
rooted in the concept of
Vasudhaiva Kutumbakam is being
eroded by western ideas of
jingoistic nationalism which is
alien to us. In this context, it is a
huge relief to see that at least The
Hindu is publishing thoughtful
articles that uphold those humane
ideals.
Thehseen Zakir,
Kochi

I have been reading this

newspaper for the past 55 years
with my morning coffee. It has not
swerved from factual reporting
and has remained balanced in its
views. It is not partisan in its news
coverage and is devoid of political
affiliation.
N. Visveswaran,
Chennai
VJ-VJ