government expenditure

‘We Need a Politics Which Is Inclusive, Rather Than Exclusive’: What Manmohan Singh Said in 1999

‘We need a deep change in the mindsets of our people, in their thinking, at all levels. And more so in the mindsets of those who constitute our leaders,’ the former prime minister had told Karan Thapar in an interview.

As former Prime Minister Manmohan Singh is likely to retire from public life, we take a look at one of his interviews, conducted by Karan Thapar for BBC on August 25, 1999.

In this interview, Singh delved into his political values and perspectives on the state of affairs in India. He discussed his transition to contesting the Lok Sabha elections, emphasising the need for politics to serve social change. He addressed challenges, such as social division and economic mismanagement, while outlining his vision for reform. He also emphasised the importance of restoring politics as a moral instrument.

The full transcript of the interview is reproduced below.

Hello and welcome to ‘Hardtalk India’, and the second of three interviews with top leaders of the three parties contesting these elections. Today we talk to the man that many consider the likely choice for prime minister if the Congress party is in a position to form the next government. So what are his political values, and how does he view the present state of affairs in India?

Here to answer those questions is former finance minister and the present leader of the opposition in the Rajya Sabha – Dr. Manmohan Singh.

Dr. Singh, after eight years in the Rajya Sabha, you have decided to stand for the Lok Sabha – something you consciously didn’t do in 1996 and you didn’t do in 1998. What has brought about the change of mind this time?

Well, I was initially very reluctant to contest this time also. But our party felt that in the interests of the party, and in the interests of our country, it would be good if I offered myself for election. Although I have been a member of the Rajya Sabha, I do believe that the quality of membership that goes with the membership of the Lok Sabha is superior. Because you are elected directly by the people. Therefore, though I was initially reluctant, when I thought it over, I felt: I have been in politics now for eight, nine years, I should go to the people to pronounce their verdict on what I am, what I have been and what vision, what views I hold.

So, in a sense, you are actually now seeking a mandate for the views you hold… That’s true.

Do you think, however, that you are suited to this sort of electoral politics?

Well, I had initial doubts, but I am learning very fast. And the last five or six days that I go campaigning every morning, every evening – I am finding it a very educational experience.

Let me put something that people say… Your admirers say that in stepping into the Lok Sabha arena, Dr Manmohan Singh may be in danger of losing the one thing that made him different. Earlier, he was above politics, today in a sense, he is becoming a bit like any other politician…

Well, I am in politics and I don’t claim any special virtues. All I can say is that in politics I have learnt that one has to compromise. But there is a limit to compromise. If you compromise at the cost of your conscience, I think there you should draw the line. And whether I am in the Rajya Sabha or in Lok Sabha, I hope I will have the moral courage to not cross that line. And that line is set by my own conscience.

So, will you still be able to do some of the things the country requires, speak out when you think the time has come, stand up for the views that you believe are correct, allow your voice to be heard in favour of the causes you have always supported?

I do believe we need a new type of politics. A politics of frankness, a politics that tells people things straight, things as they are. I think we cannot fool our people. As Abraham Lincoln once said: you can fool some people for all time, all people for some time, but not all people for all time. And I do believe that in the last 50 years, politicians have been taking our people for a ride. And I feel there is a great danger if the gap between what politicians say, promise, and what they do, grows the way it has been growing.

Let’s test that a little, Doctor Saab, because I think that in the seeds of that perhaps lie some of the hope for our country. Many people in India today feel a sense of alienation, a sense of disenchantment with Indian politics and Indian politicians. As a new man stepping into the Lok Sabha arena, can you understand?

I do very much understand that politics in this country has to be the servant of social sympathy. It has to mediate among the societal tensions that are built into the body politic of a poor country trying to modernise itself. And you can do so only if people believe in your credentials. And if you are telling things and you have no intention of doing them, I think you are now trading on trust, and you cannot last very long, I think. people become cynical – alienated, as you put it.

As you say, telling the truth – even if it is the bitter truth – is very important. One of the fears that people of India have as they look at our quarreling politicians, our hung parliament, our divisions of race, creed, religion, language is that we could face – if things are not handled properly – disintegration. We could be poised at the brink of anarchy.

Well, I have always felt that – if you read my speeches in parliament, I have warned the members of parliament – we should not assume there is a divine destiny which will ensure that India continues to flourish and prosper howsoever we mismanage our economy. Great nations like the Soviet Union have perished, they have disappeared from the surface of the earth. If the Indian polity is not well-managed, I think we ought to recognise that a similar danger can overtake us too.

So we could collapse, like eastern European countries and the Soviet Union?

I am not saying that that is on the cards right away, or that it is inevitable. But if we continue to mismanage our economy, if we continue to divide our country on the basis of religion, caste and other sectarian issues, I think there is a grave danger of that sort of thing happening.

And it is a serious thing…

It is a serious thing.

Let me push that thought a little further for a moment. Many people feel that although we have considerable achievements, nonetheless the sense of purpose we had 30 years ago is lost. Today, moral authority is eroded, political authority is questioned. Do you think that there is a danger that in fact that we could end up fragmenting the nation state that we have? Could [that] be in danger?

Politics, unfortunately, has ceased to be – in many ways – a vehicle of purposeful social change. It has become a ticket for power: power for the sake of power; not power as an instrument of doing something good for society. And that is, I feel, a great source of anxiety and danger for the future of our polity.

So, has politics become a vehicle for self-serving politicians, rather than a means for change or a means for reform?

Yes, I think that is very much true today.

Is that one reason why you have consciously decided to step into the arena and try to change things?

If I have an opportunity, I do hope I will, I think, [I’ll] be a small instrument of writing some new guidelines for the way political processes should be conducted in our country.

How much of the crisis our country faces is also a result of another crisis – a crisis of leadership? To what extent have our leaders, historically and even today, let us down?

Leadership is the crux of the matter. Look at China. After the disastrous results of the cultural revolution, there came the grand old man, Deng Xiaoping, at the age of 80 years. And he transformed the Chinese society beyond recognition. Leaders have to be leaders, they have to be pace setters, not leaders who just follow what is momentarily in the popular mind, look at the opinion polls every day and adjust their thinking to that. I once said in parliament about leadership, quoting a couplet: Insaan voh nahin hai jo hava ke saath badle, insann toh vohi hai jo hava ka rukh badal de [Man is not the one who changes with the wind; man is the one who changes the direction of the wind.]

I think that we need leadership of that kind.

Dr. Singh, the hallmark of leaders whom you admire was their conviction. It was their strength of belief in what they wanted to do that gave them courage. Do you, therefore, believe that what we need today is conviction-based leadership?

In the measure of strong conviction, Indian leadership cannot deliver the goods. And I say this in all sincerity, because at the present time, the aspirations of our people are rather modest. And if they have a leadership which is not sincere, which is not intent, which does not think how we all should work to meet those aspirations, then I think, tomorrow, it will be too late. The gap between aspirations and what is feasible – politically, economically, socially – will grow to a point that I think there will be a great danger of acute political stability in our country.

So, is it a question of now or never?

Yes, that’s very much the case.

You are on record as saying that what we need in our country is reform with big ‘R’ in every sphere, but you’ve added that the political mindset of our politicians does not recognise this. Where do they fall short?

Most politicians in our country do not adjust their thinking to the changing needs of our time. When I was a student at Nuffield College, Oxford, nearly 40 years ago, one of the persons who later became prime minister – James Callaghan – when he became the shadow chancellor of the exchequer, spent full one year at Nuffield College, taking tutorials in economics. He said: I could not function as an effective shadow chancellor unless I had a deep understanding of modern economic analysis. Our politicians feel that whatever they learnt in their childhood is adequate stock for them to pronounce on everything in the world. I think there is contempt for knowledge.

Professor Raj Krishna once said that Indian politicians are knowledge-free. And we live in a world where knowledge is power. So unless those politicians value knowledge, I think they cannot be a purposeful instrument of social change.

You also once said that international ideas of what constitute good policy are totally at variance with what our politicians think. Now, I think I understand what you are saying, but could you exemplify that?

Well, I was talking in the context of the management of the economy. In the 1950, the idea that the commanding heights of the economy must rest with the public sector; that if you nationalise an industry, you contribute to growth as well as to growth with social justice; if you restrict private investment that also brings about socialism; if you raise tax rates, that helps to reduce inequality.

Now, in all these matters, experience has shown that short-term solutions [are inadequate]. As Alfred Marshall taught at Cambridge many years ago, all short-term solutions have their limitations in social matters. Therefore, one has to change one’s thinking. The collapse of the Soviet Union serves as a compelling example of why a command economy simply broke down. However, ideas associated with a command economy persist in the thinking of many of our politicians even to this day. The world has changed, and if we do not change our thinking in accordance to the changing needs of time, we [risk being stuck with] have a Bradshaw, a railway timetable that is thoroughly outdated. And as a result, we may suddenly…

You are saying something more…you are saying that our politicians are prisoners of failed truths…

That is, in many ways, true

In fact, you are also implying that we have a dinosaur mentality, and we are in danger of the same fate that the dinosaurs met.

Well, there is indeed a danger, and I really believe it. How else can we explain the situation in this country where people can get votes based on religion? [How is it that individuals] seek votes on the basis of caste, even 50 years after India adopted a constitution that talks about a classless society? Yet, 50 years later, we find Indian society is so badly divided on the basis of religion and caste.

Dr. Singh, you’re not only saying that we are prisoners of failed truths, but you’re also emphasising that we not only fail to realise this but are actually proud of our folly.

Many politicians, I am sad to say, practice a very divisive politics for narrow sectarian reasons. It may be good politics for the moment, but it can be a source of disaster for our country. We need a type of politics which is inclusive, rather than a type of politics which is exclusive.

So today sitting before me, you are calling for far-reaching, I might even call it, dramatic reform and changes in the way we operate.

I am talking about change in the mindsets. I think institutional changes are necessary, but more than institutional change we need a change in mindsets. Of all those people who make critical decisions of our national life – be it in politics, be it in economics, be it in social engineering – we need a deep change in the mindsets of our people, in their thinking, at all levels. And more so in the mindsets of those who constitute our leaders.

Dr. Manmohan Singh, that [statement] is not just forthright; many would say it’s a stinging indictment of the political system as it exists today. I have to ask you, this is so different from the perception we have of the Congress party. Where do you fit in?

I came into politics by accident. I have stayed committed to the Congress party. And I do believe that there is a ray of hope. At Pachmarhi, many of these issues were discussed.

And forgotten?

Well, I would not say forgotten. I think there are momentary lapses. Politicians, before they become statesmen, want to be re-elected. And when electoral compulsions come, people do make compromises. But I have faith in the power of ideas. As Victor Hugo once said, no power on earth can stop an idea whose time has come.

Do you really believe that Sonia Gandhi is capable of representing the sort of dynamic, forward thinking, far-reaching change that you are calling for?

Sonia ji is a very dynamic person. Whenever I have conversed with her, she is acutely conscious of the moral imperatives, the moral foundations of our polity, more than many other politicians in this country. She has in many discussions with me mentioned some of the problems which I have mentioned. How politics has ceased in our country to be a purposeful instrument of social change. How we are all bereft of all the morals…

May I interrupt you for a minute – her appeal is emotional and passion-driven, yours is one of logic and reason. Where do the two of you meet?

I am a small entity in the Congress party. And Sonia ji is the acknowledged leader of the Congress party. She was elected leader of our party at a time when our party was in deep crisis. And that she sways the minds and hearts of our party was certainly displayed in May 1999.

So, [does] she provide the vote-winning edge? [And] would you, in a sense, be the moral, principled backbone?

I am not the only one, I am only a small entity in this large organisation called the Congress party. I am not saying that I have the monopoly of virtue, or that I am the only one who knows…

But you are the strongest, clearest voice today calling for reform and change. The strongest voice pointing out that if we don’t correct ourselves, we may lose the opportunity to forever do so.

There are many young people in our party who feel the same way.

They don’t have the opportunity and advantage that you have today, of being a frontline leader. You are for them the first person in the line.

I do not know what line you are talking about. As I said, now I am only seeking election to the membership of the Lok Sabha. All the rest is in the realm of speculation.

Absolutely, and I don’t want to embarrass you by forcing you to make modest disclaimers about what will happen after the elections. Let me ask a hypothetical question instead. If you were to be the head of the government after the elections, do you think you would be capable of pushing through the far-reaching reforms that you are talking about, in a constructive, cohesive, proper, forceful way? Or would it be piecemeal, would it be one step forward, one step back? Would it be ad hoc?

Let me say who will head the government – that is a hypothetical question. We will cross that bridge when we reach there. But I sincerely believe that whosoever is the head of the government, ought to implement a coherent programme of action if our country has to move in the desired direction in the desired way. We cannot have a system – as my esteemed friend P.N. Dhar used to say: in this country, we can have growth only through stealth, we cannot do it the straight way. I think that time is over. We must do things the straight way, tell our people what are the options, what are the costs, what are the benefits and then tell them why we consider, on balance, a particular course of action is the best [choice overall].

Level with Indians, to tell them the truth as you see it, and if it is bitter, then it is bitter.

I think that we cannot carry forward the social and economic transformation that our country needs to realise the vision of the founding fathers of our republic.

Such as the financial, because you also have to sell to them the essential message that we must learn to live within our means, that we have to tighten our belts today for a better tomorrow. And those sometimes are difficult things to say.

They are difficult. And I often used to say in my budget speeches that money does not grow on trees. And therefore, I think there is such a thing as resource constraint. If there were no resource constraints, then money could be simply printed for all purposes. Every society would be a rich society today. The fact that most of the countries are poor is because of a shortage of resources. So, you are, therefore, correct that a political or economic leadership, which tells the people that there is no such thing as a resource constraint, [can lead to] this is a concept of disaster.

It is also a political leadership of lying…

Of course, it is lying.

But it’s not just the challenge of telling the people the truth that you are going to face. Should you happen to be in that position – the other challenge is of convincing the Congress party that the reform, that the change in the mindsets, that telling the people the truth even if it is bitter, even at the cost of popularity has to be done. Can you carry your party with you?

Well, let me say, if you read our election manifesto…. People have compared the Bharaiya Janata Party (BJP) or the so-called National Democratic Alliance manifesto and our manifesto. I think most people will say that we have spelt out [our agenda] far more clearly than the BJP has done.

Let me say, we have, I think, spelt out these things for the first time in great detail – sector- wise. Where our system is really weak is about bringing about a fiscal correction. There [in that aspect] all political parties, I think, suffer from a lack of vision, a sense of purpose, and a lack of adequate commitment.

And do you believe you’re in a position to put fiscal correction back on the table, pursuing it doggedly, even if it makes you unpopular?

Look at my record. In 1991-92, when this country was in a desperate economic situation, on the verge of collapse, I came up with a budget which cut the fiscal deficit in a single year – in fact in eight or nine months – by 2% of the GDP. We slashed subsidies all round.

But what happened after Babri Masjid…?

After the Babri Masjid [event], the political agenda overtook the economic agenda.

Might that not happen again?

I cannot say that events will not overtake… I think you cannot predict social evolution. The process of social evolution is never a linear process. I think exogenous events sometimes derail the process. It has happened before, it may…

But will your personal determination to stay on course always be there?

Of course. If I have anything to do with managing our economy and polity, we will try to erect safeguards that will not derail the inherent rhythm of the reform process that our country needs to realise the vision of our…

Just a couple of points… If you were to be in charge in the next government, would you, for instance, continue with fairly sizable and dramatic disinvestment so that the state is freed from tasks it shouldn’t be doing, and concentrate on areas where it is needed?

We do want privatization, but not privatization all along the line. We believe that where public sector enterprises are running efficiently, there is no reason to privatise them. But the public sector has no business to be in hotels or other low priority activities, so we will get them out of those. And the resources that we save, we will put in education, health, and in areas we feel the state ought to be more actively involved.

What about government expenditure? Would you be able to curb it from running away?

If cannot be curbed overnight. We need a perspective of three to four years to bring about an orderly adjustment of government expenditure. We will work to that purpose.

And will you rigidly stick to that purpose? You won’t let yourself be blown off course by adverse reaction or unpopularity?

No, I think we would make every effort to ensure that expenditure aligns with broadly agreed-upon national priorities; that the overall government expenditure pattern conforms to national priorities; and that the level of expenditure remains consistent with the limits of fiscal prudence.

Will you scale the government down?

We will do that. I think the government is too bloated. I think areas that the government has no business to be in… I think there are far too many ministries in the central government. Now we do not want to create, overnight, unnecessary unemployment in the public sector, but over a period of time, we must restructure our government.

My last question Dr. Singh: you have sketched out a very effective agenda for reform. You have committed yourself to the need for conviction for change. The major question people want to know is, will your party agree to this? Or whether it will have the courage to persist with it. But let me ask a personal question: Should you lose the Lok Sabha election, will you throw in the towel, or would you continue to fight – in some other way – for what you believe in?

Well, there is no question of throwing in the towel. I am in the fray. I am in politics. And my politics does not end with winning or losing the Lok Sabha election. I have come to politics in the belief that we must restore politics to its original purpose of being a purposeful instrument of social change…

And a moral instrument.

And a moral instrument. Ultimately our politics must be rooted – as Gandhi ji used to say – in fundamental human values.

[Since] you mentioned Gandhi ji, if you happen to lose, will you continue as leader of the opposition in the Rajya Sabha or will you feel the moral compunction to step down?

I do feel that I will have the moral compunction… In that situation, probably, it would be wise for me not to stay as the leader of the Rajya Sabha, if we are in opposition.

Even if your party insists, will you step down?

Yes, that is my intention. If I lose, for example, the Lok Sabha election – having gone to the people, not having won their verdict, and then still staying in power as leader of my party in the Rajya Sabha, I think that probably will not be a desirable course of action.

Dr Manmohan Singh, many would hope that that does not come to pass. Obviously, that’s not something for me to comment on. Thank you very much for talking so openly and so frankly.

Thank you very much, Karan.

Thank you, sir.

Transcribed by Daman Singh.

A Challenge to the 15th Finance Commission’s Credibility

The Additional Terms of Reference were issued at the fag end, when the commission had presumably completed all required processes.

On July 29, the president of India issued an order extending the date of submission of the report of the 15th Finance Commission (FC) to November 30, 2019. The same order also includes one additional term of reference (AToR). The commission is required “to examine whether a separate mechanism for funding of defence and internal security ought to be set up and if so, how such a mechanism could be operationalised”.

Incidentally, consultative process and close examination of finances of both the levels of government provide the foundation of a finance commission’s recommendations. This is what has contributed to its high credibility and its image as an independent and non-partisan institution. The AToR is issued at the fag end when the commission has presumably completed all the above processes.

The ToR of an FC is constitutionally defined under Article 280: Distribution of the net proceeds of the sharable taxes between the union and the states and allocation among the states; the principles that should govern grants in aid of revenues of the states out of the Consolidated Fund of India and later the 73rd and 74the amendment of the Constitution added the measures needed to augment the consolidated fund of a state to supplement the resources of the panchayats and municipalities on the basis of the recommendations of state FCs. However, under 280 (d) the President may refer any other matter in the interests of sound finance.

Beginning from the first FC, additional issues were in fact referred to successive FCs. These reflected one or the other concerns relating to sound budget and fiscal management. The AToR which relates to protecting defence and internal security expenditures of the Union government does not fit in the framework of the constitutional provision, Article 280 (d).

Similarly, defence is in the Union list and therefore the responsibility of the Union government while internal security is largely the states’. Even when states requisition para military forces, they bear the expenses. It is not, therefore, an issue that should legitimately come under the domain of the FC.

Also read: The 15th Finance Commission May Split Open Demographic Fault Lines Between South and North India

In any case, the original ToR itself incorporates a consideration to have regards to, “The demand on the resources of the central government particularly on account of defence, internal security, infrastructure, railways, climate change, commitments towards administration of UTs without legislature and other committed expenditure and liabilities.”

There could be two reasons why this AToR is added at this stage. One, the defence expenditure declined from 2% of GDP in 2014-15 to 1.48% in 2018-19 and even lower at 1.45 % in 2019 -20 budget. Similarly, defence expenditure as a percentage of the government’s expenditure declined from 14.3% in 14-15 to 11% in 20i9-20. The other is that with the slowdown of the economy, it would be a challenge to even ensure this low level of allocation provided in the budget for 2019-20 while maintaining the fiscal deficit at 3.3%. Hence, the attempt to ring-fence the defence expenditure.

Having been referred to, what could the 15th FC do?

As noted earlier, the FC is already required to, under the original terms of reference, take into consideration the defence and internal security needs. While assessing the requirements of the Union government, the 15th FC should explicitly take into consideration the fact of the declining defence expenditure as a percentage of its total expenditure and make appropriate provisions in its expenditure projection.

The 15th FC could also recommend that the Union government reallocate expenditures wherever possible and eliminate wasteful expenditure. Further, it could suggest that the government mobilise more resources from sources such as the following: first, it should take measures to raise the tax-GDP ratio which has slumped to 11.7% in 2019-20 (Budget Estimates) as compared to 11.9% in the Revised Estimates to augment its resources to meet its expenditure requirements.

Second, it could minimise undisputed tax arrears which stood at around nine lakh crore at the end of 2017-18 and non-tax arrears of about 2 lakh crore in the same year. Similarly, the government could rationalise the tax incentives given to the corporate and non-corporate sectors – for the corporate sector alone, it was estimated at 1.39 lakh crore in 2018-19, which perhaps would decline following the recent policy decision if the corporate sector avails the lower rate of corporation tax, by giving up the incentives and exemptions they have been enjoying. Third, the Union government could monetise the huge chunk of government land under the ministry of defence, the railways etc., which the thirteenth commission, indeed, had recommended.

Also read: On Finance Commission Allocations, Modi Is So Far off the Mark, It Isn’t Even Funny

What should the 15th FC not be doing?

Over the years, the FC has established itself as a non-partisan institution of fairness and neutrality in which states repose a great deal of trust. It should not do anything that has an adverse impact on the divisible pool. In any case, the divisible pool is under significant stress. First, the 15th FC may not be able to increase states’ share beyond 42% that the 14th FC recommended.

Second, with a slowdown of the economy, the divisible pool would be adversely impacted. Third, with seven state taxes being subsumed in the GST, the states’ ability to mobilise resources from their own sources has been constrained. Fourth, the GST has yet to emerge as a buoyant tax.

On the contrary, CAG (Report no. 11 of 2019) noted that its yields declined by Rs one lakh crore in the revised budget of 2018-19 as compared to the original budget for 2018-19. It might further decline until the slowdown of the economy is reversed. States’ GST revenue with 14 % growth would be protected till 2022-13 but not for the entire award period of the 15th FC.

Fifth, cess and surcharges that are outside the divisible pool have increasingly become important instruments of revenue mobilisation. Just to illustrate, while the total transfer to states and UTs were Rs 4.1 lakh crore in 2017-18, revenue mobilisation by the central government through cess and surcharge stood at 3 lakh crore or 15.7 % of Centre’s gross tax revenue.

This went up to 5.12 lakh crore in 2019-20 (BE) accounting for 21.03% of the Centre’s gross revenue as against the total transfer to states and UTs to only 5.2 lakh crore in 2019-20 (BE). Last but not the least, even after rationalisation and restructuring of the centrally sponsored schemes, there remain 28 core schemes in which the general category states are required to contribute in 40% for their costs and three optional schemes requiring states to contribute 50%. Increasing states’ contribution to Core and optional schemes has clearly led to reducing states’ fiscal space and autonomy.

Also read: Debate: The Fifteenth Finance Commission is Vital for Economic Equality Within the Indian Union

For all these reasons, the 15th FC should deal with the AToR in a way that would have no adverse impact on the divisible pool which is already under great stress.

Atul Sarma is the chairman of the OKD Institute for Social Change and Development and was a member of the 13th Finance Commission.

Mamata Asks Modi to Call an All-Party Meeting on Public Funding of Elections

Referring to a report of the International Institute for Democracy and Electoral Assistance, Banerjee said 65 countries have direct public funding and 79 have indirect public funding for elections.

Kolkata: West Bengal chief minister Mamata Banerjee on Thursday requested Prime Minister Narendra Modi to call an all-party meeting on public funding of elections, expressing concern over reports of high expenses in this year’s Lok Sabha polls.

In a letter to the prime minister, she said, “The issue is broadly of electoral reforms and specifically to prevent corruption and criminality in our democratic polity. The time has come for government funding of elections, which is the norm today in 65 countries in the world.”

Banerjee’s Trinamool Congress had flagged the issue in its manifesto of 2014 and 2019 elections.

“I urge you to call an all-party meeting with the single agenda of public funding of elections in India, with an objective of rooting out corruption. For a free, fair transparent election in India, we urgently need electoral reforms which include government funding of elections,” Banerjee wrote in her three-page letter.

She also expressed concern over reports citing high expenses during this year’s Lok Sabha elections.

Also read: Central Agencies Threatening TMC Leaders, Asking Them to Join BJP: Mamata

The Centre for Media Studies, a New Delhi based think-tank, claimed in a report last month that about Rs 60,000 crore was spent in the 2019 elections, and the formal expenditure component, i.e. the amount spent by the Election Commission (EC) is nearly 15-20% of that.

“May I point out that the combined expenditure in the USA for presidential and congressional elections in 2016 was $6.5 billion. In other words, in a developing country, like ours, the elections in 2019 became the world’s most expensive election. Going by the current spending figures, it is apprehended that in the next 2024 general elections the poll expenditure could cross Rs one lakh crore,” the letter read.

Political parties spent lavishly on publicity and logistics and are said to have even distributed cash for votes; she said adding that the EC has imposed limits only on the expenditure incurred by candidates on their election campaign and not on political parties.

Referring to a report of the International Institute for Democracy and Electoral Assistance, an intergovernmental organisation, Banerjee said 65 countries have direct public funding, and 79 have indirect public funding.

Also read: Opposition Says Budget Benefits Corporate Sector, Ignores Common People

The countries where political parties receive direct public funding include major developed countries like Germany, France, the UK, Japan, Italy and Canada and developing nations such as Argentina, Brazil, Thailand and Namibia, she said.

A total of 71 countries such as Belgium, Brazil and Canada are entitled to free media access for political parties, while in India, free broadcasting and television time is allowed only in state-owned All India Radio and Doordarshan, she said in the letter to Modi.

(PTI)

When the Chief Minister Is Also a Media Owner

Chief minister K. Chandrasekhar Rao’s family is associated with two newspapers and a TV channel. Since his party formed the government, these media houses have been receiving disproportionate amount of government advertisements.

If the newspapers and television channels run by a chief minister’s family receive overwhelming advertising support from the state, should we describe it as a conflict of interest, or corruption, or abuse of power?

K. Chandrasekhar Rao, the chief minister of Telangana, launched Namasthe Telangana in June 2011 at the height of the separate statehood movement. His son, K.T. Rama Rao, was on the initial board of the Telangana Publications Private Limited, a position he quit after becoming a minister in the state cabinet. His wife, Shailini Kalvakuntla, along with Damodar Rao Divakonda is now on the board. Another paper, Telangana Today, launched in 2016, is also run by Telangana Publications Private Limited.

TNews was started by K. Chandrasekhar Rao, with Damodar Rao Divakonda, Gandra Mohan Rao, Santhosh Kumar Joginipally, on the board registered on January 12, 2010. He has since resigned from the board after becoming the chief minister but Damodar Rao Divakonda, Gandra Mohan Rao and Joginpally Rohini are now on the board. In public perception also it is seen as the chief minister’s channel.

The response of the Information and Public Relations Department of the Government of Telangana to an RTI application seeking details of ad expenditure reveals some interesting facts about the way the Telangana state is being run under the Telangana Rashtra Samithi government. The list below has omitted newspapers from Delhi etc. that no longer receive any ads from the government, therefore the omitted serial numbers.

This information obtained under RTI shows that both the newspapers run by the family of the chief minister have seen a sharp growth in advertising receipts from the state government. Namasthe Telangana has shown an increase of 387.4% from 2016 to 2018. Telangana Today, the English newspaper, has seen an increase of 1749.2%. There is a big percentage increase in the case of Namasthe Telangana, starting from a very high base to begin with compared to the others.

Among the Telugu papers, Andhra Jyothi has seen an increase of 296.8%, from Rs 45.6 lakh in 2016 to Rs 1.8 crore in 2018, which is a bit mystifying. Andhra Jyothi is owned by Vemuri Radha Krishna. He is believed to have a long association with the chief minister of Telangana when KCR was a Telugu Desam Party legislator. However, when Telangana state was formed, there was a brief falling out between them when cable operators boycotted ABN Andhra Jyothi channel for the anti-Telangana slant in its programmes and Radhakrishna blamed KCR for curbing free speech in Telangana. In public perception, both the paper and the channel, ABN Andhra Jyothi, are pro-Telugu Desam Party, headed by Chandrababu Naidu.

Andhra Bhoomi saw an increase of 1148.7% in the advertising given in 2017-18 over the previous year, but starting from a low base in 2016 of Rs 88,000 to Rs 11 lakh in 2018. The owner of Deccan Chronicle Holdings Limited Tikkavarapu Venkatram Reddy, which runs both Deccan Chronicle and Andhra Bhoomi, was a Congress MP. Deccan Chronicle group has withstood severe challenges to both its internal stability and to its market share. The group papers are an important presence in the political space in Telangana. The relatively smaller Telugu newspaper Andhra Bhoomi received marginally more ads while Deccan Chronicle took a 30% cut. Still, Deccan Chronicle remains the second highest in ad receipts from the government, after Telangana Today, among the English papers with Telangana/Hyderabad editions.

Nava Telangana, a paper run by the Communist Party of India (Marxist) has seen a cut of 67.5%, from Rs 17.9 lakh to Rs 5.8 lakh. Mana Telangana, edited by K. Srinivas Reddy, the former editor of Visalandhra (Communist Party of India), faced a reduction of 88.2%, from Rs 47.8 lakh to Rs 5.7 lakhs. Srinivas Reddy has since resigned.

All the other papers have faced cuts ranging from 2% to 94%. All the papers in Hindi, Urdu and English have faced a secular cut across the board. Among the English papers, all except one have taken a reduction, ranging from 6% to 36%. Interestingly, even as the national Indian Express got a 725% (Table 2) increase starting from a low base of Rs 40,ooo in 2016 to Rs 3.6 lakh in 2018, advertising for the local New Indian Express (Table 1) was reduced by 29%.

Advertising to the Economic Times, which has a Hyderabad edition, is reduced by 92%, while The Indian Express has received an increase of 725%. The other three national papers without Hyderabad editions have not been allocated any advertising.

None of this explains the rise in receipts of Namasthe Telangana from Rs 2.6 crore in 2016 to Rs 12.8 crore (387.4%) and the increase to Telangana Today from Rs 4.7 lakh in 2016 to Rs 87.3 lakh (1749.2%) in 2018. Neither Telangana Today nor Namasthe Telangana is certified to be the highest circulated papers in Telangana.

Even if the government wishes to say that it is implementing some unannounced austerity measure, the people of Telangana would like to know why some papers have not only been exempt from it but instead saw a sharp increase in their earnings from government advertising.

A similar scenario seems to prevail in the television sector. A random check with the Broadcast Audience Research Council of India website shows that among the entertainment channels, STAR Maa, Zee Telugu, ETV Telugu, Gemini TV and Gemini lead on most weeks in terms of viewership/TRP. Among the news channels, it is TV9, NTV, V6, TV5 and TNews leading, in that order.

Both in terms of revenue earnings and the number of spots TNews leads the board.

The channel which occupies second place, V6, is promoted by a TRS legislator and industrialist (Visakha Industries Limited), Vivekanand Gaddam. In Telangana, much has been written about people from various political persuasions and direct political affiliations owning newspapers and television channels.

If ETV news channels listed separately here are taken together, the group’s advertising amounts to Rs 159.3 lakh. TV9 group, including TV9 and TV1, received Rs 166 lakh. That places them second and third in receipts, after TNews.

Eenadu has a record of challenging irregularities in advertising allocations; once against the Channa Reddy government, and again during Y.S. Rajasekhar Reddy’s tenure.

The first case challenged the GO that made the Department of Information and Public Relations of the government of the then Andhra Pradesh the nodal agency for releasing ads saying that the GO violates the right to free speech under Article 19(1)a and Article 14 of the Constitution as it places discretion in the hands of a single agency, potentially depriving newspapers of advertising and therefore their ability to reach a larger public.

Though the judgment in the case sets aside the claim of a violation under Article 19(1)a, citing the attorney general’s views, it argues that the GO violates Article 14 of the Constitution: “In the course of its administration the government realises revenue amounting to crores of rupees. The government which derives these amounts from people is bound to use it for the benefit of the people without any discrimination … It should not use the large sums in its hands either to favour an individual or a particular group of individuals or refuse to make those funds available on illegitimate grounds …

The purpose of issuing advertisements is to educate the public about the activities of the government, to promote its policies, and in cases where the government or government companies are carrying on business or trade, to advertise its wares. It is not expected of the government to exercise this power in order to favour one set of newspapers or to show its displeasure against another section of the press. It should not use the power over such large funds in its hands to muzzle the press or as a weapon to punish newspapers which criticise its policies and actions. It has to use the funds in a reasonable manner consistent with the object of the advertisement viz. to educate and inform the public about the activities of the government.”

Though the petition was dismissed, the Court order ruled in detail the need for specific criteria based on which the ads are given out. The judgment recognises that though “circulation must be the sole criterion for the advertisement as the object of the government is to reach the maximum number of readers. But at the same time, it cannot be ignored that if circulation is the only criterion, the smaller newspapers will be completely denied all government advertisements. It is also the petitioners’ case that advertisement is one of the important sources of revenue for a newspaper. If this source is denied, all the smaller newspapers will be wiped out of existence resulting in the monopoly of a few newspapers only.”

But the allocation of advertising largesse in a seemingly arbitrary manner in this instance points to two kinds of problems. Both serious.

The most obvious reading is that public money is being transferred to favour enterprises directly connected to one’s own family or enterprises with close political affiliations. In other words, a serious case of conflict of interest, abuse of public trust and nepotism.

The less obvious issue is the process of systematic starvation of diversity of opinion through the arbitrary allocation of advertising, giving support to voices friendly to the government and starving the others.

Padmaja Shaw is a media analyst and a former professor of communication at Osmania University.

This article was originally published in The Hoot. Read the article here.

Centre Considers Extra Spending of Rs 500 Billion to Halt Economic Slowdown

Growth slowed to a three-year low of 5.7% in the quarter that ended in June, and finance minister Arun Jaitley has said that the government is looking for ways to speed it up.

An India Rupee note is seen in this illustration photo June 1, 2017. Credit: Reuters/Thomas White/Illustration/Files

New Delhi: India‘s government is considering a plan to loosen its fiscal deficit target to enable it to spend up to Rs 500 billion more to halt an economic slowdown, two government officials with direct knowledge of the plan said on Thursday.

Growth in Asia’s third-largest economy slowed to a three-year low of 5.7% in the quarter that ended in June, and finance minister Arun Jaitley said on Wednesday that the government was looking for ways to speed it up.

The officials, who declined to be named as the measures have not been made public yet, said the extra spending was estimated to widen the federal fiscal deficit for the financial year ending next March to 3.7% of GDP from a budgeted target of 3.2%.

“The fiscal deficit is not a sacrosanct number,” one of the officials told Reuters.

The official said that the economy was passing through a “transitory phase” after the government’s decision late last year to outlaw old high-value banknotes and after the launch of a nationwide goods and services tax in July.

India‘s benchmark ten-year bond rose 2 basis points to 6.68% after Reuters reported on the extra spending plan.

Although growth was already slowing, Prime Minister Narendra Modi’s decision last November to scrap the old banknotes, in a bid to flush out money hidden from tax officials, wiped out about 86% of the currency in circulation almost overnight.

The decision hurt consumer demand in an economy where most people were paid and spent in cash, analysts said.

Labourers work at the construction site of a commercial complex in Kolkata February 28, 2015. Credit: Reuters/Rupak De Chowdhuri/Files

With the economy still reeling from the cash clampdown, the faulty implementation of the goods and services tax then made doing business far more complicated for many companies.

Jaitley has held a series of meetings with cabinet colleagues and other government officials this week to explore ways to revive the economy.

“The government could ask parliament to give its approval to defer the fiscal consolidation path this year,” the second government official said.

With the extra money, New Delhi is looking to spend more on bank recapitalisations, rural jobs programme and rural housing.

A final decision on stepping up the funding and breaching the fiscal deficit target will be taken by Modi, the officials said.

The faltering economy has given the opposition Congress party an opening to regain political ground against Modi, although the next general election is not due until 2019.

Even though industrial output posted a modest recovery in July, 15 of 23 manufacturing industries recorded a contraction, adding to concerns over the state of the economy.

Sluggish economic activity has also buffeted public finances. Finance ministry officials last week said the revenue shortfall in 2017/18 could be at least $13 billion if the economy failed to recover.

(Reuters)

Why the Budget Doesn’t Tell Us Much about a Government’s Priorities

Back of the envelope calculations show that only about 30%-35% of the total budget is available to any sort of tinkering, which means the budgetary allocations can make only incremental changes.

With so many features of the Government’s spending becoming non-negotiable, do different political ideologies really translate into different economic ideologies? Credit: Sudipto Sarkar. CC BY 2.0/Flickr

The near-doubling of spending on farmers in the 2016-17 budget made big news, indicating that the government’s laissez-faire stance had mellowed to a more socio-rural one. This increase meant that the share of Agricultural ministry in total expenditure had shot up from 1.29% in 2015-16 (RE) to 2.25% in 2016-17 (BE), a big change by any measure.

Soon, however, informed commentators pointed out that this was a sleight of hand. In fact, Rs. 15000 crore under interest rate subvention had merely been shifted from the finance ministry to agricultural ministry. Strictly speaking, the share of agricultural ministry has gone up to only 1.59%, a much more modest increase compared to its sophist counterpart.

Allowing a tiny bit of digression, it is interesting to note that the share of spending on agriculture crashed from 2.35% in 2000-01 to 1.04% the very next year, and stayed around that level throughout Vajpayee’s term. It was the UPA that slowly brought it up to around 2% during its second term. Could that have been a major reason behind Vajpayee’s unexpected defeat, and a motivation for Modi to raise spending on agriculture?

Coming back, the pattern of spending on different ministries/departments raises an intriguing question: can ministerial/departmental allocations in the union budget really bring about a significant change from the previous year(s), or even signal the incumbent government’s priority areas?

The short answer is: yes, but to a very limited extent. A more detailed discussion follows.

General trends

This author has looked at the ministry/department-wise expenditure between 2000-01 and 2016-17 (BE), leaving out the relatively insignificant ministries/departments. All data are for real accounts, except for 2015-16 (RE) and 2016-17 (BE).

The only major calculation involved was finding out spending on each ministry/department as a percentage share of total expenditure (GDP was not chosen because it’s not really under government’s control, and small changes in this humongous number could skew percentage shares). This revealed some interesting trends for each ministry/department, the most major of which is that share of spending on any particular ministry/department varies very little, even over the 15-year period I looked at.

The first graph below indicates the range of spending shares (maximum share in any year – minimum share in any year) attained by each ministry/department since 2000-01. The maximum range, an impressive 7 percentage points, has been attained by the petroleum and natural gas ministry. However, this is because the petroleum ministry incurred hardly any expenditure in 2000-01 and 2001-02, after which heavy subsidies were disbursed via this ministry. Its share has again dropped in light of falling oil prices.

Alongside petroleum ministry, the top-ranking ministries/departments as per range of spending share are all those that include significant subsidies. Their share has fluctuated with the quantum of subsidies given. The only exception is Rural Development ministry, whose share was bloated by the introduction of MGNREGA, thereby clearly indicating the erstwhile government’s priorities. The Defence ministry also shows a relatively big range of 3.57 percentage points, but that’s mostly because of the huge share of spending taken up by this ministry.

The range of spending on health is as low as 0.55 percentage points, whereas that on education is a bigger 2.53 percentage points. For all the hue and cry over the modest expenditure on education, it has actually gone up from 2.15% in 2003-04 to 3.64% in 2016-17 (BE). However, this is still minuscule, and has itself dropped from the peak of 4.68% in 2012-13.

The graph below depicts the maximum and minimum share of each ministry/department since 2000-01.

Committed expenditure

It is interesting to ponder over why there is so little fluctuation in spending despite the passing of several governments, claiming opposing economic ideologies, during this long period.

In reality, the government doesn’t control the whole budget. As the graph below shows, anywhere between 25%-30% of the total expenditure is taken up by interest payments – a form of committed expenditure. This share had dropped to under 20% in 2009-10, but the huge deficits India ran after that period have made sure that interest payments are back to the 25% mark.

Besides interest payments, the majority of budgetary expenditure is devoted to salaries, pensions, and other forms of committed expenditure, which renders the budget largely an incremental exercise (desperate to meet the fiscal deficit targets, the government seems to be reneging on even some of the committed expenditure).

Moreover, subsidies have come to be almost a non-negotiable feature of the budget, even under the supposedly reformist current government. The share of subsidies touched a high of 18.66% in 2012-13. Though the total subsidies in 2016-17 (BE) – pegged at 12.66% of total spending – are Rs. 8250 crore lower than those in 2014-15, this is almost solely because crash in oil prices has reduced petroleum subsidies by Rs. 33,000 crore over this two year period. Most of this breathing room has been used by the government to hike food subsidies. That said, the current government must be credited for lowering subsidies from 2015-16 (RE), since the change in petroleum subsidies isn’t significant from last year.

Back of the envelope calculations show that only about 30%-35% of the total budget is available to any sort of tinkering, which means the budgetary allocations can make only incremental changes.

Impact of 14th Finance Commission

2015-16 was the first year that saw recommendations of 14th FC being put in place. The huge devolution to states meant partial or complete axing of funds allocated to most of the CSS initiated by UPA government. Naturally, this lowered the share of spending on ministries under which the affected Centrally Sponsored Schemes (CSS) fell. This impact is most starkly visible in case of Panchayati Raj ministry, whose allocation went from Rs. 7000 crore in 2014-15 to almost nothing the very next year, largely due to scrapping of Backward Regions Grant Fund (BRGF). The share of Ministry of Drinking Water and Sanitation also dropped considerably in 2015-16 due to huge cuts in spending on National Rural Drinking Water Programme (NRDWP).

Some of the CSS, such as Pradhan Mantri Gram Sadak Yojna (under Ministry of Rural Development), have seen renewed spending in 2016-17 (BE), thereby restoring the share of the respective ministries.

Current government’s priorities

Clearly, infrastructure is being prioritized. The combined share of roads and railways ministry is the highest ever at 5.19% in 2016-17 (BE). It has beaten the high of 4.43% in 2015-16 (RE). The combined share was a paltry 3.54% in 2013-14.

Infrastructure spending might also be a way for the government to create jobs, as the revenue expenditure component of road and transport ministry has gone up while the capital spending component has dropped.

Department of Women & Child development and Drinking Water & Sanitation have also drawn the government’s attention, as is evident by the sharp increase in the spending on them in 2015-16 (RE), as well as their allocations in 2016-17 (BE).

The allocation to the newly rechristened Ministry of Environment Forests and Climate Change has skyrocketed nearly 20 times from 2015-16 (RE), which might be reflective of India’s ambitious renewable energy targets for the near future.

The complete picture

The budget is not the only medium of government expenditure. PPP, FDI and Special Purpose Vehicles (SPVs) are just some of the off-the-budget means for the government to spend/invest, or get others to do it. Modi government is using these means to spend mainly on infrastructure. M. Govinda Rao and Indira Rajaraman talk about some of these issues here and here, respectively.

To get a good idea of the incumbent government’s priority areas, merely looking at the budget is an incomplete exercise at best, and a futile one at worst. It must be accompanied by a close reading of the spending done through extra-budgetary resources. Besides the spending, the policy decisions made during the course of the year are critical, too.

Prabhat Singh works for the Finance department of Andhra Pradesh government. He tweets at @singhK_P