Poll spending can bring boom in economy

 Poll spending can bring boom in the economy

By Gopal K Agarwal,

Elections have been declared. They will take place between  April 16 and May 13, 2009. As the elections are approaching, there is a frenetic reaching out to all the political spectrum. Many announcements and foundation-laying ceremonies are taking place across the country and across the party lines. Huge promises and schemes are being dolled out but they have neither been properly budgeted nor there is any hope of concrete action being taken on these announcements, Showbiz, is being carried out recently by the UPA government under the Bharat Nirman Programme All these announcements and the schemes of the government are going to put heavy pressure on the resources of the country. The government's recent measures include excise duty and service tax cuts. Then comes dearness allowance, hike for Central government employees and pensioners, and a scheme to build affordable housing while boosting other infrastructure projects. With the argument of global slowdown, the UPA is content that boosting consumption and investment is a bigger priority today than belt-tightening. The heavy fiscal deficit being resorted to by this government will put heavy strain on the incoming government.

The second important impасt on the economy will be the cost of the election process. It is estimated that the elections will cost to the tune of Rs 10,000 crore to the country, which is more than the estimated expenditure of Rs 8,000 crore on US elections. With the Election Commission being strict on the expenditure limits for the candidates and the parties, lot of unaccounted money will find its way in this channel. This situation will also definitely effect the economy in a big way.

The impending economic gloom throughout the world is definitely having major effect on our country. Our economy is in recession, and there is complete slowdown. The Gross Domestic Product (GDP) growth rate in the third quarter of 2008/09 was declared to be 5.3, year on year (yoy) basis, which is a sizeable drop in relation to 7.6, year on year (yoy) basis in the 2^nd quarter of this fiscal year. The stimulus package which was needed so badly to revive the economy. It is nowhere coming in the near future. There was an opportunity for the government to take action at the time of presentation of the Budget, but the government shunned its responsibility by terming it as an interim budget. Shri Arun Shourie wrote in his article in The Indian Express, "Extraordinary economic circumstances merit extraordinary measures, declares the finance minister in his new Budget, the last one of the government. Now is the time to take such measures." And then proceeds not to take them at all!.

There are job losses across the country, by falling production indices and mounting defaults. All this is putting pressure on our banks and the financial systems. The corporate sector is in doldrums, which is evident in episodes like Satyam and Maytas. This government has all along refused to recognise the seriousness of the crisis in which its mismanagement has pushed the country's economy. All its previous actions have brought little results. The prime minister had announced a special package for making Mumbai into an international financial hub. But Mumbai remains as it has ever been. The prime minister had pledged Rs 1,000 crore for this purpose, but till July 2007, as per Shri Kireet Somaiya MP, only Rs 16 crore and 16 lakh had been released. We see exactly the same sequence in regard to the promise that was made in the aftermath of the devastating flood in Mumbai. Not even a special package announced to reconstruct the Dharavi slum has resulted in a single shed of the promised reconstruction and development to come up.

And this outcome is typical across a range of projects. Shri Chidambaram had said that outcome is important; we will come out with Outcome Budget, nothing of the sort happened. He proudly announced that subsidies need to be sharply targeted, but the subsidy Bill has been mounting, without being focused towards the lower echelons of the country. The Prime Minister's National Highways project of the NDA government, which had given tremendous boost to the economy, has been brought to a gruesome halt. The Fiscal Responsibility Bill (FRB) has been thrown to the dustbin.

As per the Kotak Equities research team, the alarming level of deficit in the late 1980s contributed to the complete breakdown of our economy in 1991. During that period, the gross fiscal deficit was on the average 7.7 per cent of GDP. Now the gross fiscal deficit of the Centre is 6.4 per cent of the GDP and if the off-budget items are included, it becomes 8.1 per cent; and if the state's deficit is included, it becomes over 10.7 per cent.

The Fll's are selling heavily in the capital market, which is evident in their daily sales figures as given by SEBI. The dollar is appreciating to a new high each day. On the other hand, the government, in its anxiety to prevent public unrest at the time of elections, is trying to stop the stock market from plummeting further by asking Indian institutions to buy in the market. All these points out to what the future holds for us. This is in a way, providing an exit route to the foreign institutions, and is highly questionable.

The elections also do not give hope of a clear and strong mandate to any one national party. regional parties will be in a deciding position. The situation is quite different than earlier elections when national parties got more than 75 per cent votes and regional parties got less than 25 per cent votes and were limited in number. If in the current scenario public gives a fragmented mandate, India will be in a difficult situation. Our neighbouring countries are in complete disarray,whether it is Pakistan, Bangladesh, Nepal, or Sri Lanka. If there is no strong-willed government at the Centre, our security situation is bound to worsen.

It always sounds good to be optimistic, but unless the people of the country rise to the occasion and analyse the ground level realities without getting carried away by media blitz, and cast there votes, there is a dark period ahead. I hope everybody is listening

The Fll's are selling heavily in the capital market, which is evident in their daily sales figures as given by SEBI. The dollar is appreciating to a new high each day. On the other hand the government in its anxiety to prevent public unrest at the time of elections, is trying to stop the stock market to plummet further by asking Indian institutions to buy in the market.

The writer can be contacted an gopalagarwal@hotmail.com)

 

Indian economy has the potential to bounce back

 Indian economy has the potential to bounce back

By Gopal K Agarwal, 

The global crisis has many lessons for India. On one hand last year's gloom in USA and Europe is dampening our sentiments, on the other hand 2009 can be a year of opportunities for India. Though political stability after the general elections in near future will be a major determining factor.

In the world scenario, the guiding principle of free market economy has lost its charm, people are talking of end of capitalism as a vehicle of economic development. People want the bailout packages by the government; they want the government to use the taxpayers' money to cover up losses of private companies. Many institutions and banks, considered to be the backbone of the financial market, declared bankruptcy and were looking for immediate liquidity. The whole world lost trillions of dollars in capital. Earlier, communism failed costs because people lost faith in the system. Now people have become cynical about capitalism. They have lost faith in banks, stock markets, and debts; their confidence has been completely shaken. 

There are few lessons to be learnt: uncontrollable greed, over leveraging and debt is not good for the economy; putting profit as a motivator over and above people is not a good idea; and living on credit is simply bad lifestyle. The world needs to look beyond the Western powers setting the global economic agenda. 

In this situation, if India can stabilise itself in 2009, it will emerge stronger in 2010 Last year, the focus of the global economy shifted eastwards and Asia emerged as an engine of growth. India has now the potential to be an engine of future growth. The fundamentals of our economy are stronger than is often recognised. India's growth has been based on a sustained rise in the capital formation and gross savings rate as a percentage of GDP. In comparison to this, Western economic development was based on consumerism.

We don't need to focus too much on stock market, which had become too dependent on external factors. The focus of our attention must shift to the real economy India needs growth in its core sectors, especially manufacturing, construction, and agriculture. The slowdown in the export-based sectors and services will have to be balanced. This has been clearly brought out by National Manufacturing Competitiveness Commission. 2009 has to be the year of manufacturing revival in India. We expect the inflation rate to stabilise around 8.0 per cent and GDP to grow between 7 to 8 per cent. This is reasonably good and will bring the desired results.

India's strategy will, of course, have to be based on the assumption that the western countries are not likely to be growth propellant for us. We have to depend on domestic demand, which will sustain our growth. India will be under pressure to liberalise on regional and international scene US and other countries are asking the developing countries not to put up trade barriers and impose customs duties, but they themselves are resorting to all kinds of subsidies. Shri Barack Obama has asked for labour-wage standards to be part of international trade. wherein those countries, which have low wages, will have to bear with import duties in US. Similarly, Indonesia has put import restrictions on 500 items. Russia has put duties on several food items; France is subsidising domestic manufacturing- ing industries. Argentina and Brazil are imposing import duties on food and clothing. The world is preaching liberalisation, but acting differently. India also needs to watch out for its own interests. We need to preserve our domestic market at all costs and take measures to boost our economy.

Keeping this in mind, the government has come out with two packages to stimulate our economic development. In less than a month since the government announced a  Rs 32,000 crore booster dose for the slowing economy, it came out with a more comprehensive and detailed stimulus package valued at over Rs 200000 crore. This second package focuses specifically on stressed sectors such as commercial vehicles, non-banking finance companies, real estate, infrastructure and small and medium businesses.

The Centre has also provided states the leeway to borrow another Rs 30,000 crore. RBI, in a coordinated move with the central government, has also ensured that the interest rates on home, auto and personal loans decline further. Since mid-September 2008, the RBI has reduced repo rate (the rate at which RBI lends to other banks) by 350 basis points from 9 to 5.5 per cent. Reduced the reverse repo rate (the rate at which RBI borrows from banks) by 200 bps from 6 to 4 per cent and CRR (the portion of deposits banks have to keep with RBI) by 400 bps from 9 to 5 per cent. The cumulative amount of liquidity made available to finance system through these measures is over Rs 3,00,000 crore. In future, to ensure this outcome India will have to further continue to invest in education, skill building, rural development and agriculture and in making the infrastructure and manufacturing sectors globally competitive.

One important point to keep in mind is that last year the oil prices were directing and leading the Economic activities. This year the focus will shift to gold. To be on the safe side and reduce risk, the investors should concentrate on wealth management and distribution of their surplus wealth in different asset class and not to keep all their eggs in one basket.

(The writer can be contacted at gopalagarwal@hotmail.com)

The Threat to Globalisation

 The Threat to Globalisation

By Gopal K Agarwal,

Few years back, globalisation was the buzzword around the world. It assumed everywhere that with globalisation, economic development will come automatically. All countries were looking toward means of integrating their domestic economy to the world economy, basically US and European Economies.

How could India be left behind, we also that the world economies have to be integrated. We have to globalize. With the fall of communism, the path became more imретаtive. There was no alternative.

Although in hushed tone, we did talk of alternative ways, but it was not defined. The path was not clear; it was only conceptually delved upon. We were all confused. We formed the opinion that the lofty ideals of Swaraj and Swadeshi had more of a social relevance than economic foundations 

We are at a crossroads now. With failure of capitalism and current global financial crisis, we need to go in details the pitfalls of American Economic Model and how to engage our economy from the current global crisis.

The fundamental difference between US and other economies that the western economy works on consumerism, they are based on high consumption rate and successively increasing it to the tune of even financing it through debts. Currently US have a net debt of five trillion dollars. 

What US is doing is buying Produce from other countries by paying dollars, and this payment of dollars is being met through indiscriminate printing of currency. They have built a system of economic structure through mega institutions like World Bank, IMF, etc. Through this structure, the reserves of other countries are being kept in dollars and invested in US Treasury Bills. The currency, which was issued by US to buy produce from other countries, comes back to US as investments in its treasury bills.

Further, US successively resorting to deficit financing. It has huge budgetary deficit. Annual US budgetary deficit me from 162 billion dollars in 2007 to 455 billion dollars in 2008. On one hand, it's economists' adrese other countries to abstain from deficit financing, but it itself is nothing to deficit financing, we need to analyze the purpose behind. Then successively devalues its currency. Thi devaluation helps US to being down value of investments of other countries.

World is supplying produce to US in dollars and then investing its surplus in dollars. The money received by US being loaned to its population with nut proper credibility assessment, which is now being called Subprime lending, in lending without proper security assessment. Which was bound to fail and has failed. This indiscriminate lending itself was helping US to leverage its capital and create asset bubble, which has now buried, and the world has lost trillion and trillions of dollars in capital.

Further US has loose regulasury pro visions with regard to bankruptcy laws and leveraging h has accounting pro cedures and financial instrumens like Over the Counter (OTC) products, which helps it to camondlage the identity of lender and borrower, and helps in asod ing provisions and doclosures of mark to market losses, till the time it chooses to do so.

On the other hand, India is a savings economy. We save more than 35% of our GDP. We have huge domestic market and a very large population. Sixty-five percent of our population is young and working Non-payment of debt is a stigma our country and we have stringent anti-bankruptcy laws.

Fall of America is very certain. Dollar is very weak, but it is holding back only due to its being owned and bought by other countries.

We need to understand Americisuruation and its fall and to take correc ove measures, however difficult and hard they may be Because the konger we wait the situation will be further worsened.

Need of the hout in to desengage our economy from global economy Preserve out domestic market at all cost, take up massive infrastructure development projects, reduce merest rates, reducc indirect taxes, which form a very high consponent.

(The writer is National Convener, BJP Economic cell.)

Economic Downhill

 Economic Downhill

By Gopal K Agarwal,

Monthly economic round-up

The month of August witnessed several important events having serious economic implications. The first was the economic outlook report of the Government of India for the year 2005-09. This report gives mixed indications on economic front the overall picture is not very healthy The highlight of the report estimates the economy to grow at 7.7 per cent in the next year as against nine per cent in 2007-08. The growth in the agricultural sector is to fall at two per cent as against 4.5 per cent last year. These are because of sharp inflation in global commodity prices and tightening in credit following sub-prime crisis in the US. These factors are leading to lowering of growth and causing pressure on our fiscal system through larger subsidy bills and supply constrained in physical and social infrastructure like electricity, water, road/rail transportation and agriculture. The investment rate is expected to remain the same, but savings are projected to decline. The capital inflows are also expected to fall to $70.9 billion from $108.03 billion last year. Inflation will remain the prime cause for concern in spite of all the efforts of the government. The government is also faced with an uphill task on the focal front, Its fiscal deficit target will overreach from growing off-budget liabilities, which are estimated to be at five per cent of GDP.

India's high credit growth is a cause of concern, according to IMF's latest Global Financial Stability report, and is one of the areas of potential concern. It said that swapping dollar debt for yen. which led to the forex derivative mess, although high, but manageable and not a cause for concern. In its report, it said that even after some efforts made by the central bank to rein in loan growth through a series of monetary and prudential measures, credit continues to grow at close to 25 per cent. In order to arrive at risks in the financial markets of the emerging market economies, IMF assessed fundamental conditions in those countries that are separate from those related to sovereign debt. One of the major indicators that are looked at is the growth in bank credit. Other indicators are the current account deficit as a percentage of GDP. the ratio of bank credit as a percentage of GDP and external position as percentage of GDP Though there is no potential threat on other parameters for India. Credit growth poses a potential threat.

Under this background, there was some relief to the exporters when rupee breached 44 marks. This is good news for exporters, but importers specially oil companies will have to face the pain of expensive dollars. According to a Nasscom study, this trend will help software company's earnings. The Indian software sector is expected to register 10- fold increase in revenues over the next seven years.

The government announced on August 15 a change in the provident fund investment policy, where the government has allowed private sector-managed provident funds and superanmat ing trusts to have greater exposure in stock markers. They can now directly invest up to 15 per cent of their investible funds in shares of companies on which derivatives are available in BSE and NSE. The other changes made in the investment patiers include merger of central government se curities, state government secun ties and units of gilt mutual funds into a single category and allow ing investment up to 55 per cent of the investible funds; providing a flexible ceiling for various category of instruments, instead of fixed investment ceiling as a present. This policy change will provide more liquidity to the equity market, but allowing private players to manage provident fund investments in capital market in dangerous.

(The writer is National Convener, BJP Economic Cell.)

UPA Has no Charity

 UPA has no Charity

By Gopal K Agarwal,

Income tax amendment affecting donations to charitable organizations

Imposing tax on these charitable organisations by the Government is injustice to the people and is absolutely unfair. On one hand, Government gives subsidies to many commercial organisations and on the other hand, it is taxing these organisations, which run gaushalas and other charitable projects for the welfare of all.

Social service has been an important aspect of our life. Our scriptures have motivated people to devote their resources and energy for the welfare of our fellow men guiding us to a life of austerity. This path has led to establishment of many charitable and religious institutions in the country. It has been one of the main reasons for our social fabric to remain intact, in spite of being devoid of any regulatory mechanism for social security. Whether as the welfare of the destitute and incapable or the old people stray animals etc., these institutions depended on the donations from the influential and wealthy people since centuries. Now slowly and steadily, the government is putting cuts on these channels without establishing an alternative welfare mechanism.

A recent announcement in the Budget 2008-09 has amended section 115 BBC of Income Tax Act, incorporating taxation on all anonymous donations at a flat rate of 30 per cent. It will affect lakhs of charitable institutions across the country. It is unthoughtful and inhuman on the part of the Government that it has imposed 30 per cent tax on guptadan received by the charitable trusts. As a result of such a tax, a large number of small and big non-governmental organisations engaged in charitable activities for the underprivileged would be left with lest resources. These institutions will now have to pay 30 per cent tax on the entire quantum of their receipts compris ing anonymous donations.

Imposing tax on these charsta ble organisations by the Gover ment is injustice to the people and is absolutely unfast On one hand, Government gives subsidies to many commercial organisations and on the other hand, it is taxing these organisations, which run gaushalas and other charitable projects for the welfare of people.

Unlike foreign countries, India does not have any comprehensive policy on social security. In this situation, at least Government should not impose tax on these charitable organisanons, because all these institutions are for the support of the needy people. Guptadan in itself is a sonakar for the people. Our Shatrus preach donations for charitable causes without expecting any name or fame in return.

A petition has been filed before the  Petition Committee of Rajya Sabha, under the Chairmanship of Shri M. Venkaiah Naidu, against the imposition of this tax.. The petition was admitted on April 16. 2008. The petition is for considering grant of exemption from payment of income tax to certain categories of charitable organisations. The types of charitable organisations being recommended for Income tax exemption are orphanage, old age home, neat house and cow pen (Panjrapole and Gaushala) institutions which are related to handicapped people, hospitals for birds and cattle, institutions which provide free treatment for deadly diseases, inshunans dich pro Vide free shelter to oppressed people, institutions which serve meal free of cost, institutions which are meant for providing humanitarian assistance in case of natural calamity and disaster and institutions which are related to wadow and boyvoted women. The petitioner has prayed that since the aforesaid categories of charitable organizations take care of the safety, well being and survival of the oppressed and destitute persons, take care of the treatment of terminally ill patients, protect cattle and livestock including infirm animals, especially draught cattle and help translate the ideals of the Constitution, they should be exempted from payment of Income tax

The categones of charnable institutions mentioned in the petition, working for physically challenged bird and animal hospe tals, institutions treating comical disease like canoer free of cont providing fome relief to the victures of any calamity providing Ince meals and the organisations work ing for widows and destinite should not be saved rather they should be encouraged by the government.

We need to build public opinion in favour of this petition and request the committee to with hold the Government from imposing this tax.

Spiritual Quotient in resurgent India

Spiritual Quotient in resurgent India  

By Gopal K Agarwal,

Three great social movements are simultaneously taking place presently in India and will have long-lasting effect on India's future. There is a sort of revolution that is taking place.

The mass movement by Swami Ramdev is transforming ordinary person's way of living on a daily basis, making him aware of healthy benefits of Yoga Pranayam and Ayurveda. He has created a revolution among people where persons from all walks of life are getting aware of big benefits from daily practices of yoga and Pranayam. The mass appeal of his movement is so effective that from a rickshaw-puller to a housewife and to a professional or a businessman, all are being benefited from his teachings and have started practising it in their daily routine and adopting it in their lifestyle.

The yoga programmes are being held across the length and breadth of the country. Even in Europe and other foreign his sessions are attended by large gathering. It is a seven-day urse in the morning from 0500 AM to 0730 AM with attendance in thousands Millions of people watch these sessions live on television channels, adopt these techniques and are being benefited.

The second important mass movement, which is transforming Indian life, is the Sudershan Kriya by Art of Living Foundation of His Holiness Sri Sri Ravi Shankar. The Kriya is being taught in a seven-day basic and advance courses and involves a breathing technique. Along with this technique his message of love, peace and positive thinking is appeal to the intellectual mind and influence effluent middle-class to a great extent. It is transforming their life, creating a bonding among his followers.

He travels and teaches internationally, reminding us that great spiritual traditions have common goals and values. His talks programmes and Sudershan Kriya have helped people in reducing stress, experiencing physical and emotional healing, and developing a sense of belonging. His work is getting recognition in all parts of the world. Art of Living Foundation has its offices in 157 countries around the world, and the teachings are being adopted by all without any distinction of caste, creed or religion. He is a strong contender for Nobel Peace Prize

The third slow and steady movement having potential of a spiritual revolution is Vipasana. The observation technique, which is a Pali word meaning insight, i.e. seeing things as they are, encourages people not to react to external stimulus. The reaction to external stimulus by an individual takes away his calmness, peace of mind, thereby causing exhaustion. By observing these external and internal stimulus and its effect on human body and analysing their nature of impermanence, a person acquires a balance whereby slowly his reactions subside. He stops reacting to external stimulus, and slowly this process helps him overcome internal disturbances caused by past actions and situations Vipasana is one of India's most ancient techniques of meditation Some 2500 years ago. It was rediscovered by Gautam Buddha and taught by him as a universal remedy for universal ills. It is now being propagated by Shri S.N. Goenka through a ten-day course. During the ten days, participants remain within the area of the course site, having no contact with the outside world. They refrain from reading. writing and all forms of communication and get into deep meditation and contemplation. The process of Vipasana has worked profound changes within oneself, which persist even after the end of the course. The mediator finds that whatever mental strength was gained during the course can be applied in daily life for the good of others and for one's own benefit. Life becomes more harmonious, fruitful, and happy.

Shri S.N. Goenka says "I do not wish to convert people from one organised religion to another. But conversion is involved: from misery to happiness, from defilement to purity, from bondage to liberation, from ignorance to enlightenment." He has never sought publicity, preferring to rely on word of mouth to spread interest in Vipasana For these reasons he is less widely known than he deserves to be.

I think the three main move ments along with the economi cally resurgent India are creating a mindset that is preparing India for the role it well deserves in the future.

The second important movement that is tansforming Indian life is the Sudershan by Art of Living Foundation of Holiness of his Sri Sri Shankar.

In search of lost pride

 In search of lost pride

By Gopal K Agarwal,

Why the politician feels free to disregard Hindu sentiment

Years of subjugation and Hindu philosophy have created a mindset which does not react to aggression or exploitation. There are circumstances that call for collective wisdom to dictate action-when castes, creeds or religious communities must revolt against any act on the part of an individual or institution causing hurt to its pride or identity. I think the Hindus have lost this capability.

Every politician and many institutions in the country are competing to hurt Hindu sentiments in the race to appease other groups. This is being done with the clear intent to gain in votebank politics. Who is to be blamed for this shameful disregard to Hindu sentiment? Any community which cannot stand up for its institutions or its symbols, or is a silent spectator to the ridicule of its pride, must go down unsung in history. It is better for it to perish than to lead this shameful existence.

Petty politicians like Jayalalithaa have become bold enough to act in concert to malign a 2500-year-old Hindu institution. This institution represents the greatest philosopher and unifier of the country. Shri Adi Shankaracharya had a clear vision to establish Shankar Mutts in the four corners of the country as seats of knowledge, public service and national integration.

They say nobody is above the law. Only fools buy this argument. In our country, not only do criminals roam free but they also occupy seats of power. Else, how can you explain persons like Shibu Soren occupy- ing high positions and Raja Bharyya, who is a hardened criminal, be-coming a minister in the government? Yet this argument is being used to arrest a respected personality without proving his guilt and staging his trial by media through selective leaks.

In the Mahabharata, it is said that public ridicule of any respected person is a punishment worse than killing him. Yet what have so-called leaders done with Shankaracharya ji? We are all mute spectators to this heinous crime.

The law was bent in the Shah Bano case to appease one community. A religious leader of the community was not taken to court because it may have created a difficult law and or- der situation and the case against him was dropped. But then, those were treasured vote banks.

It is a good thing to be liberal in one's thoughts and deeds. Indeed, "Vasudhaiva Kutumbakam" (the world is one family) is a great philosophy. But when this very philosophy becomes our weakness, then it is the duty of every thinking and proud individual to set it aside and fight for his rights and demolish those demons who are creating a divide and rule politics. "Arise awake and stop not till the goal is reached thus spoke Swami Vivekananda. He further said, "Say with pride that I am a Hindu".

The writer is a member of the BJP's Central Intellectual Cell.