All Monetary and Economic systems are a ‘struggle’ between ‘borrowers’ who favour inflation and ‘creditors’ who are determined to maintain the purchasing power of the currency. Creditors have the money, resulting their having a clout with all hues of Politicians across the political spectrum, and Borrowers have the Votes. Both are vulnerable to our country’s economic and political stability. One Finance Minister wrote off agricultural loans amounting to Rs 70,000 Cr, 2% of the nett Credit granted by Banks.
Our Planning Commission especially and the Financial experts crowding the First Floor of North Block at Delhi have been repeatedly plodding the Government to rein in subsidies, which is distorting fiscal adjustments and its direct consequence is the soaring fiscal deficit. Government is slowly plucking up courage to free prices in the oil economy, according to a news paper and instead ringfence those under the poverty line with subsidized coupons to buy from the market.
Food Security Programme like the Compulsory 100 days work is another flagship programme of UPA II is another whiff in the fresh air of the uncertain governance which has dogged the tenure of Dr Manmohan’s second term. Not a day passes without a skeleton falling from the hidden cupboard. The team of Ministers do not bind themselves as a team and look like India’s Cricket team members who look at different directions instead of concentrating on the 66 yards. Disasters and impediments must not shake the spirit of veteran political heavy weights like Prnab Mukherjee, P Chidambaram, A K Antony, who must guide the Government and the party with sync.
Below the Poverty Line is a convenient political tool to garner votes. It is an economic arsenal to get the sympathy from the have-nots. As many Schemes are conceived for their benefit and betterment, the incidence of poverty should come down. But it goes up in the case of figures of BPL population. It goes without saying that Governments should find the wherewithal to liberate these people from poverty and improve their livelihood opportunities. But with inconsistent statistics, Planning Commission figures do not match that of central Government; the states have different statistics, while NCAER provides a totally different figure. When there is a mismatch between basic figures, how would you rate the Scheme, conduct an audit amongst the beneficiaries regarding their economic and livelihood improvement?
Food Security programme is trying to tie up a number of items which would be part and parcel of it. It looks as though, instead of helping the BPL to really come out of the woods, Government seems to tend to Populist objectives to create vote banks and instead of objectively designing a Programme to obliterate poverty, and create opportunity to help them to have a meal a day. The Government should try to neutralize fuel price, which would reduce the artificial price differential between subsidized and non subsidized fuels. 39% of the Public Distribution System Kerosene is diverted by retailers and of the total value diverted, 18% is used to adulterate diesel. Due to heavy subsidizing, Oil Companies are slated to incur huge under recoveries of around Rs 28,225 Cr in 2008-9 alone.
With the increase in electrification of villages, consumption of kerosene for lighting purposes in rural areas has fallen. Dr B K Chaturvedi Committee found rural use of kerosene for lighting has fallen to 40% from 51% in 1990-2000 and 1% among the BPL uses it for cooking purposes. 24% of rural kerosene consumption goes to states which have achieved 100% electrification. Subsidized fuel reaches the hands of the unintended that use it for various other purposes other than for what it was intended.
Government has no control over the import of edible and Crude oil, which it is importing from a number of Countries at grossly nil Customs duties (Crude) and 7.5% for refined. It has been reported that the Crude is refined and put to edible uses. 80% of the 80 lakh tones of imported oil is palm oil. This 80 lakh tones imported last year was over and above India’s edible needs by +30%. This excess is stored in the State Trading Corporation Godowns. Edible Palm oil is also distributed through Public Distribution System by paying for every one litre of Palm oil purchased, Rs 15 is released. Imported Oil, Customs duty waiver (Rs 24,000 Cr loss), and subsidy through PDS (1 litre= Rs 15/-). All the exports of edible oil, ground nut, castor, coconut, gingili, olive, saffola, etc are ‘Prohibited’ for Export. Government want to keep the prices of imported oil below the domestic market price so that indigenous made edible oils will suffer as they are not price competitative.
If India has to withstand global recession, India needs to focus on labour intensive growth rather than capital intensive manufacturing growth. There is a huge shack of money in the Bank chests. The low inflation of the last three/four years have been due to reckless spending by the middle class and lower middle-class that enjoyed fat pay, improved living conditions, separation from Joint families. Cash handouts like improvement of salaries of Government staff through 6th Pay Commission also increased spending. Multiplexes and ten story mega malls made huge profits from brisk sales. Concomitant export growth also was responsible for the higher economic growth. Pump priming cannot work longer, it is like double dip.
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