Sometimes I feel that just like celebrities and politicians, who move around with a force of bodyguards, Corporate bigwigs have deployed an army of economists and economic writers who at any given opportunity spring up on their feet to defend all the wrongs that the rich and the powerful indulge in. Well, I am not talking about unlawful activities, but what happens when you point a finger at the perks and freebies that the rich industrialists are provided by the government? The economic writers scream and try to drown the facts.
It has happened a number of times with me. Every time I raise the issue of 'revenue foregone' that in reality is the total amount of tax exemptions that the rich industries/business have been showered with all these years, the rebuttal is angry. Many a times, the TV anchor cuts me short, and shift the question to another panelist who will simply talk of something else. Other times, they express ignorance as if what I am saying is never heard of, and probably was figment of my imagination.
Only a few days back, when petrol prices was increased, I had on a TV show raised the question of feeding the big cats while taxing the poor and aam aadmi (common man). Qouting Noam Chomsky, I had said that governments all over the world, and India is no exception, follow the policy of "Tough Love": Tough for the aam aadmi, and love for the rich. At a time when the government provide tax exemptions to the tune of Rs 5.29 lakh crore to India Inc. I see no justification in making the poor pay for the rising petrol prices. Since 2004, if you add the 'revenue foregone' (provided in every Budget document), the total tax relief, including income tax for CEOs and senior executives, exceeds Rs 26 lakh crore !!
I am glad Arnab Goswami of Times Now had posed this question to economic writer Swaminathan S Anklesaria Aiyar. In his column in Times of India this Sunday (May 27, 2012), Swaminathan Aiyar has provided his answer. Tax exemptions: it's not just the fact cats who benefit (available at http://bit.ly/Kc04pQ), Aiyar says: "The notion that tax exemptions are aimed only at fat cats is false." He goes on to quote a study by Rajiv Kumar and SK Ghosh of FICCI (Federation of Indian Chambers of Commerce and Industry), which incidentally is a lobby organisation of the fat cats.
Arguing that tax cuts will stimulate demand, Aiyar says: "This is why taxes were cut in 2008-09 -- to generate a big stimulus for an economy hit by the Great Recession. At the time, the left Supported a strong stimulus to help the aam aadmi. Yet today, some tax cuts are being called 'revenue foregone' and decried as corporate loot."
I don't understand. All these tax benefits, with the basic idea of spurring growth, were expected to provide stimulus to the industry. In 2012, we find that the manufacturing sector is down to minus 3.5 per cent, industrial growth is stagnating, and exports are decreasing. Where has this stimulus gone? Kumar and Ghosh, says the article, calculate that another Rs 174,418 crore of the 'revenue foregone' comprises import duty concessions for inputs into export production. Exempting such inputs in standard global practice. It would be stupid to tax and maim exports. Well, if this is true, the exports should have increased. I am sure you will agree. But then why is it that exports in 2011-12 have halved compared to 2010-11?
Look at the other main argument. Rs 198,291 crore comprises tax breaks/duty for mass consumption goods like medicine, toothpowder, candles and kerosene. These are aimed directly at the aam aadmi. Revenue foregone also includes massive tax breaks for crude and petroleum products (an estimated Rs 58,190 crore) in 2012-13). So, in a sense, Arnab's wish has come true: the middle class is getting a big oil tax break ! Now this is interesting. Medicine prices in India have been steadily rising, and that is why the government is trying to bring price control on certain medicines whose consumption is higher. As far as tooth powder and candles, I don't know if there was ever a problem with its prices. Coming to massive tax breaks for crude and petroleum products, I am not sure when was this FICCI study done (probably before the recent price hike). In any case, the government has been subsidising diesel, LPG and Kerosene and the oil companies are not left to bear the loss. So where is the benefit to the aam aadmi?
If you are wondering why the fat cats are becoming obese, it is because of the tax exemptions that are being routinely provided. Let me make it very clear that the economic stimulus package, which included tax concessions to the tune of Rs 3 lakh crore plus, began after 2009-10, and still continues despite everyone agreeing that these should have been withdrawn in 2011.
And now let us understand as to what would be the gain for the country if these tax concessions to the fat cats were withdrawn:
1. Withdrawing tax exemptions under the category of 'revenue foregone' will wipe out the fiscal deficit that everyone croons about. The national economy will be back on its feet. Rs 5.29 lakh crore almost equals the fiscal deficit of 5.2 per cent or so.
2. With the government treasury fully packed, it will be easy to provide petrol, diesel, LPG and kerosene to the aam aadmi at affordable prices. And once the oil prices remain within reach, there will be no rise in bus and train fares, which hurt the lower strata of the society.
3. Inflation will also get moderated. Fuel prices hike plays a significant role in raising prices (besides providing the right kind of market sentiment).
4. It will make the industry/big business more cost effective. With no tax exemptions available (basically to strengthen their bottom line), they will be forced to tighten belt, and compete efficiently. #
A hungry nation exports food. It can happen only in a democracy.
At a time when the total food stocks are likely to swell to a record 75 million tonnes by June 1, out of which nearly 25 million tonnes of the stocks will be piled up in the open for lack of storage space, the demand for allowing exports is already growing. Ministry of Commerce has already started an exercise to know how much quantity of wheat can be allowed for exports.
It is a strange paradox of plenty. While on the one hand India is overladen with mounting food stocks, on the other nearly 320 million people go to bed hungry. The number of hungry and malnourished in India almost equals the entire population of America. When it comes to malnutrition, several studies have pointed out that nearly 50 per cent of children are malnourished. India fares worst than even sub-Saharan Africa. According to the 2011 Global Hunger Index India ranks 67 among 81 countries, sliding below Rwanda.
With the per capita availability of foodgrains – including cereals and pulses – sliding to 441 grams per day in 2010, from a high of 480 grams in 1991 when the economic reforms began, it is quite evident that the extent of hunger is growing. Although an impression is being given that as incomes are seeing a rising trend, more people have shifted from cereals to nutritious foods like eggs, meat and fruits. This is however not correct. According to a 2010 report of the National Sample Survey Organisation (NSSO), the consumption of cereals as well as nutritious foods like fruits, milk and eggs too is falling in urban and rural areas.
Continuously rising food inflation over the past several years has certainly widened the gap between the haves and have nots. Experts agree that for a large section of the population, buying two square meals a day is now becoming more difficult. In other words, hunger is becoming more acute. More and more people are going to bed hungry. I therefore don’t understand the logic of exporting food at a time when millions are living in hunger.
The mounting food surplus is essentially because the poor and needy are unable to buy foodgrains even at below the poverty line prices. Ironically, while the poor live in hunger, India is contemplating exports. In 2011-12, with India’s rice exports touching 7 million tonnes, it has emerged as the biggest exporter of rice in the world. Opening up the export of wheat (it is banned at present) India will certainly join the ranks of the major food exporters, and in the process earn some foreign exchange. But the bigger question remains as to who will feed the hungry living within the country?
There can be nothing more criminal for any hungry nation to export its staple food. It is the primary responsibility of the government, as enshrined in the Directive Principles, to ensure that every citizen is well-fed. Unfortunately what is not being realised is the declining fall in per capita availability of foodgrains matches the availability at the time of Bengal famine in 1943. Isn’t it sad that even after 70 years of Bengal famine, we still live in the shadow of hunger and starvation? How can any sensible nation therefore justify food exports?
Food management essentially means distributing the available foodgrains among the poor and hungry. Export of staple foods therefore must be immediately stopped, and all out efforts have to be made to take the foodgrains to the doors of the hungry millions. This is the primary responsibility of every government. #
Depreciating Rupee: Fault lies with our own policies.
Indian rupee is at a historic low. Every day the downslide of the rupee makes for headline news. Coming at a time when the Euro has crashed to a nearly two-year low against the dollar, and when the exit of Greece from the Eurozone looks imminent, the continuous sinking of the rupee has baffled me. I can understand when I read that rupee is sliding against the US dollar, but how come the rupee is also sliding against the sinking Euro?
Providing some justification, Chief Economic Advisor Kaushik Basu points out that currencies of several emerging economies -- South Africa, Brazil and Mexico -- are also on the downslide. This only shows how true my concerns have been over the faulty economic pathway being followed by the BRIC countries. Like the erstwhile Asian Tigers, who blindly aped the World Bank/IMF prescription, BRIC too is repeating the same mistakes. I wouldn't be surprised if sooner than later BRIC economies too collapse.
Nevertheless, Kaushik Basu told a private channel: "The current exchange rate problems that you are seeing .. the very sharp depreciation that is taking place .. i don't think it really has anything to do with our policy or policy mistakes being made over here, which is causing that." Of course, you don't expect the Chief Economic Advisor to admit that it is because of his faulty policies that the country is deep in economic crisis. So when the government suddenly gave a crude shock on May 24 -- raising the petrol prices by the steepest Rs 7.50 per litre increase in one go -- it became clear that all is not well. Congress spokespersons can justify the increase linking it to global prices, but the fact remains that crude oil prices are decreasing over the past few months. Even with the rupee depreciation, there is no reason why the consumers should be made to cough out extra for every litre of petrol.
Hindi daily Dainik Bhaskar has come out with an interesting front-page analysis. It says that the crude oil price in May 2011 was US $ 114 per barrel. The rupee-dollar exchange rate at that time was Rs 46, and therefore the import bill was Rs 5,244 per barrel. A year later, in May 2012, the crude oil price is $ 91.47/barrel, and even though the exchange rate is Rs 56, the import bill does not exceed Rs 5098/barrel. So why have the petrol prices been increased? I don't think any economist or a spokesperson for the government will like to respond to this. In simple terms, the rise in petrol prices is the austerity measure that Finance Minister Pranab Mukherjee talked about the other day.
Returning back to the issue of the rupee sliding with every passing day, I read an interesting article by senior economic journalist Paranjoy Guha Thakurta. Writing in the Deccan Chronicle (And the rupee wept on, May 22, 2012), Paranjoy tries to explain the complex reasons behind the rupee depreciation. "In fact, the principle reason why the value of the Indian currency has come down sharply in relation to the US dollar is the huge 56 per cent hike in the country's trade deficit (the difference between the value of imports and exports) in 2011-12 over the previous year." Although there are other factors also impacting the rupee downslide, including foreign investors shying from putting money in stock exchange, but the widening trade deficit seems to be more reasonable of the causes.
He further goes on to write: "This is because of the fact that while imports have risen by nearly a third , the rate of growth of exports in 2011-12 has halved from the 41 per cent growth achieved in previous fiscal year (2010-11)." I can understand that the rising import bill is primarily because of oil imports. As Paranjoy says: "Imports are not coming down because one-third of India's total imports currently comprises crude oil and 80 per cent of the country's requirements of crude oil are imported." And since the markets for Indian exports has shrunk abroad, especially in the west, Indian exports are down.
Now, come to think of it. Although Kaushik Basu does not hold the UPA policies to be responsible for the widening trade deficit, I don't understand the reason why India has steadily and systematically opened up the trade barriers by reducing and phasing out import tariffs to encourage imports. Crude oil has to be imported because we don't produce enough, but why should we be importing edible oil for instance. India is the 2nd biggest importer of edible oil, expected to import 9 million tonnes this year. You will be surprised to know that in 2009-10, India had imported 9.24 million tonnes of edible oil valued at Rs 38,000-crores (source: Financial Express, http://www.financialexpress.com/news/vegetable-oil-imports-touch-new-high-at-9.2-million-tonne/712217/). In the past 5 years, edible oil imports have almost doubled.
The outgo of Rs 38,000-crore in terms of dollars (it would be much more in 2011-12) could have been easily avoided if the government had followed the right policies. Why I am saying this is because it was in 1993-94 India had turned almost self-sufficient in oilseed production following the launching of Oilseeds Technology Mission by Rajiv Gandhi. It was then that the Commerce Ministry started reducing import tariffs, and have actually brought the import duties to almost zero. The imports picked up in the process, and the oilseed farmers were forced to move to other crops in the wake of cheaper imports. It was therefore a double whammy. Farmers suffered, and imports (and import bill) grew manifold.
Similarly, I find that despite the 2009 global economic meltdown, India has not drawn any lessons. While all industrialised countries are pushing for export markets, India is merrily opening up its economy to unwanted imports. First under WTO, and now under the Free Trade Agreements (the two most recent and damaging bilateral trade treaties are the Indo-Asean and Indo-EU FTA still to be completed), that India is bowing to pressure to open up for imports. Well, if you are encouraging imports in areas where the country has enough production capacity don't blame the global economic crisis for the depreciation of the rupee. It is our own doing, and we must accept responsibility. It is high time India makes an immediate correction in its trade policies to ensure that it does not become a dumping ground.
Providing some justification, Chief Economic Advisor Kaushik Basu points out that currencies of several emerging economies -- South Africa, Brazil and Mexico -- are also on the downslide. This only shows how true my concerns have been over the faulty economic pathway being followed by the BRIC countries. Like the erstwhile Asian Tigers, who blindly aped the World Bank/IMF prescription, BRIC too is repeating the same mistakes. I wouldn't be surprised if sooner than later BRIC economies too collapse.
Nevertheless, Kaushik Basu told a private channel: "The current exchange rate problems that you are seeing .. the very sharp depreciation that is taking place .. i don't think it really has anything to do with our policy or policy mistakes being made over here, which is causing that." Of course, you don't expect the Chief Economic Advisor to admit that it is because of his faulty policies that the country is deep in economic crisis. So when the government suddenly gave a crude shock on May 24 -- raising the petrol prices by the steepest Rs 7.50 per litre increase in one go -- it became clear that all is not well. Congress spokespersons can justify the increase linking it to global prices, but the fact remains that crude oil prices are decreasing over the past few months. Even with the rupee depreciation, there is no reason why the consumers should be made to cough out extra for every litre of petrol.
Hindi daily Dainik Bhaskar has come out with an interesting front-page analysis. It says that the crude oil price in May 2011 was US $ 114 per barrel. The rupee-dollar exchange rate at that time was Rs 46, and therefore the import bill was Rs 5,244 per barrel. A year later, in May 2012, the crude oil price is $ 91.47/barrel, and even though the exchange rate is Rs 56, the import bill does not exceed Rs 5098/barrel. So why have the petrol prices been increased? I don't think any economist or a spokesperson for the government will like to respond to this. In simple terms, the rise in petrol prices is the austerity measure that Finance Minister Pranab Mukherjee talked about the other day.
Returning back to the issue of the rupee sliding with every passing day, I read an interesting article by senior economic journalist Paranjoy Guha Thakurta. Writing in the Deccan Chronicle (And the rupee wept on, May 22, 2012), Paranjoy tries to explain the complex reasons behind the rupee depreciation. "In fact, the principle reason why the value of the Indian currency has come down sharply in relation to the US dollar is the huge 56 per cent hike in the country's trade deficit (the difference between the value of imports and exports) in 2011-12 over the previous year." Although there are other factors also impacting the rupee downslide, including foreign investors shying from putting money in stock exchange, but the widening trade deficit seems to be more reasonable of the causes.
He further goes on to write: "This is because of the fact that while imports have risen by nearly a third , the rate of growth of exports in 2011-12 has halved from the 41 per cent growth achieved in previous fiscal year (2010-11)." I can understand that the rising import bill is primarily because of oil imports. As Paranjoy says: "Imports are not coming down because one-third of India's total imports currently comprises crude oil and 80 per cent of the country's requirements of crude oil are imported." And since the markets for Indian exports has shrunk abroad, especially in the west, Indian exports are down.
Now, come to think of it. Although Kaushik Basu does not hold the UPA policies to be responsible for the widening trade deficit, I don't understand the reason why India has steadily and systematically opened up the trade barriers by reducing and phasing out import tariffs to encourage imports. Crude oil has to be imported because we don't produce enough, but why should we be importing edible oil for instance. India is the 2nd biggest importer of edible oil, expected to import 9 million tonnes this year. You will be surprised to know that in 2009-10, India had imported 9.24 million tonnes of edible oil valued at Rs 38,000-crores (source: Financial Express, http://www.financialexpress.com/news/vegetable-oil-imports-touch-new-high-at-9.2-million-tonne/712217/). In the past 5 years, edible oil imports have almost doubled.
The outgo of Rs 38,000-crore in terms of dollars (it would be much more in 2011-12) could have been easily avoided if the government had followed the right policies. Why I am saying this is because it was in 1993-94 India had turned almost self-sufficient in oilseed production following the launching of Oilseeds Technology Mission by Rajiv Gandhi. It was then that the Commerce Ministry started reducing import tariffs, and have actually brought the import duties to almost zero. The imports picked up in the process, and the oilseed farmers were forced to move to other crops in the wake of cheaper imports. It was therefore a double whammy. Farmers suffered, and imports (and import bill) grew manifold.
Similarly, I find that despite the 2009 global economic meltdown, India has not drawn any lessons. While all industrialised countries are pushing for export markets, India is merrily opening up its economy to unwanted imports. First under WTO, and now under the Free Trade Agreements (the two most recent and damaging bilateral trade treaties are the Indo-Asean and Indo-EU FTA still to be completed), that India is bowing to pressure to open up for imports. Well, if you are encouraging imports in areas where the country has enough production capacity don't blame the global economic crisis for the depreciation of the rupee. It is our own doing, and we must accept responsibility. It is high time India makes an immediate correction in its trade policies to ensure that it does not become a dumping ground.
Eurozone Crisis: Why doesn't EU scrap the CAP subsidies?
When I look at the fallout of the Greek Tragedy on the global economy, including India, and at the same time try to make a sense of the economic crisis by sitting in front of the Business TV channels, I must admit I am left baffled. At a time when Sensex has gone below 16,000, and the Indian rupee has slid 22%, hitting a new low, and Finance Minister Pranab Mukherjee mulls austerity measures, what intrigues me is to find the land prices soaring, consumer spending increasing manifold, sales of cars and automobiles increasing amidst reports of 84% Delhiites planning a beach holiday this summer, there is something that I cannot understand.
First let us take a look at the fears emanating from the prospect of Greece quitting the Eurozone. Greece President Karlos Papoulias has already termed it as 'fear that could develop into panic'. In the last 24 hours (May 16), roughly Euro 700 million has been withdrawn from the banks. This has created a scare. I can understand how the stock markets will play this up, but I wonder why no one is talking of doing away with the wasteful expenditure that European Union indulges in year after year. Well, I am talking of the annual budget of EU, of which nearly 50 per cent or Euro 60 billion goes for what is called Common Agriculture Policy (CAP). Much of the remaining 50% budget also goes as subsidies for building infrastructure. Even at times of the 2008-09 economic crisis, and the emerging chaos, no one has ever mentioned the damage done by CAP. As if this is not enough, the proposal is to further enhance the spending under CAP in 2014-20 to Euro 400 billion.
If withdrawal of Euro 700 million from Greece banks can cause panic, I have failed to understand why the European heads cannot stop subsidising its agribusiness companies (my estimates show that more than 90% of the total spending under CAP goes to MNCs and top agribusiness companies). So in a way the state coffers are being emptied for the rich corporates and the austerity measures that are being spelled out would hit the middle class and the poor. It is here that I find the French President Francois Hollande's poll promise of 75% tax on the income of the rich makes terrible economic sense.
Now look at India. The same virus afflicts the Indian policy makers. Yesterday I sat watch the NDTV Profit channel, one of India's leading business channels. At a time when everyone is talking of tightening the belt, the channel had a programme on where to make the investments in real estate in Bangalore. The anchor talked of three real estate options -- each above a package of Rs 1-crore -- where you could invest. Similarly, when you surf the channels, you find programmes which talk of hot commodities where investments could be made, the increasing investments in gold despite its price going through the roof, and so on. Whether it is gold or real estate, the prices have not come down despite the slump that is feared. Why?
Economic disparity that has been created over the years by neoliberal economics is actually the bane of the present crisis. The rich have become richer and the poor have been driven against the wall. Not only the bank executives, lavish pension and perks are being given to Presidents, Prime Ministers and parliamentarians (former French President Sarkozy is to receive lavish post-retirement perks, and the salary/perks of Indian parliamentarians have gone up manifold), As unemployment soars, mainline economists and policy makers suggest strong austerity measures, which in simple words means withdrawing social security nets.
I think the time is ripe for a radical overhaul of the economic structures. Politicians know what needs to be done, but it is the business leaders and the economists who will not let them use the axe.
First let us take a look at the fears emanating from the prospect of Greece quitting the Eurozone. Greece President Karlos Papoulias has already termed it as 'fear that could develop into panic'. In the last 24 hours (May 16), roughly Euro 700 million has been withdrawn from the banks. This has created a scare. I can understand how the stock markets will play this up, but I wonder why no one is talking of doing away with the wasteful expenditure that European Union indulges in year after year. Well, I am talking of the annual budget of EU, of which nearly 50 per cent or Euro 60 billion goes for what is called Common Agriculture Policy (CAP). Much of the remaining 50% budget also goes as subsidies for building infrastructure. Even at times of the 2008-09 economic crisis, and the emerging chaos, no one has ever mentioned the damage done by CAP. As if this is not enough, the proposal is to further enhance the spending under CAP in 2014-20 to Euro 400 billion.
If withdrawal of Euro 700 million from Greece banks can cause panic, I have failed to understand why the European heads cannot stop subsidising its agribusiness companies (my estimates show that more than 90% of the total spending under CAP goes to MNCs and top agribusiness companies). So in a way the state coffers are being emptied for the rich corporates and the austerity measures that are being spelled out would hit the middle class and the poor. It is here that I find the French President Francois Hollande's poll promise of 75% tax on the income of the rich makes terrible economic sense.
Now look at India. The same virus afflicts the Indian policy makers. Yesterday I sat watch the NDTV Profit channel, one of India's leading business channels. At a time when everyone is talking of tightening the belt, the channel had a programme on where to make the investments in real estate in Bangalore. The anchor talked of three real estate options -- each above a package of Rs 1-crore -- where you could invest. Similarly, when you surf the channels, you find programmes which talk of hot commodities where investments could be made, the increasing investments in gold despite its price going through the roof, and so on. Whether it is gold or real estate, the prices have not come down despite the slump that is feared. Why?
Economic disparity that has been created over the years by neoliberal economics is actually the bane of the present crisis. The rich have become richer and the poor have been driven against the wall. Not only the bank executives, lavish pension and perks are being given to Presidents, Prime Ministers and parliamentarians (former French President Sarkozy is to receive lavish post-retirement perks, and the salary/perks of Indian parliamentarians have gone up manifold), As unemployment soars, mainline economists and policy makers suggest strong austerity measures, which in simple words means withdrawing social security nets.
I think the time is ripe for a radical overhaul of the economic structures. Politicians know what needs to be done, but it is the business leaders and the economists who will not let them use the axe.
'When Paris sneezes, Europe catches cold."
No sooner results of French elections were announced, the markets went volatile. The new President, Francois Hollande, who loves calling himself 'Mr Normal', has already caused enough panic. With France losing its AAA credit rating, and also promising a socialist turn, the mood is certainly down. The reason is obvious. While the French see the emergence of the socialist Francois Hollande as a bacon of hope, the financial markets are upset. And once the financial markets are upset, you can be sure the mainline media and mainline economists will stand depressed.
Writes The Times of India in its balanced editorial, captioned French Evolution (May 8, 2012): "Hollande paints a roseate vision of the French economy -- promising thousands of new public sector jobs, lowering the retirement age, boosting social services -- but is yet to explain exactly how it will all happen. France's fiscal deficit is huge, causing Standard and Poor's to have downgraded its credit rating. Hollande promises closing this deficit by taxing the super-rich, a plan that may just lead to a flight of the panicked capital." Giving workers to right to retire (and earn pension) at the age of 60, if they had begun to work at 18, investing in French schools, and creating 1,50,000 new jobs besides pulling the French troops out of Afghanistan before the year end are some of the promises he has made.
Well, I am not an expert in foreign affairs nor am I am a keen follower of European politics. But over the last few years, the economic collapse of 2009 followed by the Eurozone crisis, has made me sit back and understand what is going wrong. I always thought Germany's misplaced emphasis on budget-tightening measures, better called austerity measures, were planned and promoted by the financial markets. The idea was to bring more money into the hands of rich, turn them into super-rich, and then believe some of it will trickle down to the poor. This is what Noam Chomsky had once termed as 'tough love' -- tough for you and me, and love for the rich.
I am not sure whether mainline economists and the mainline media will let Hollande wear his surgical gloves, and undertake some radical reforms that turns French economy for the benefit of its majority population. After all, US President Obama's rant of "a change you can believe in" remained a hollow promise. Corporate America didn't let me him perform the surgery he needed to. In the process, America has been left bleeding. It therefore relies more on 'quantitative easing' -- printing of currency notes, and bullying developing economies and other developing countries to open up for American products. It will not last long. We all know.
French President Hollande doesn't have to follow the stock markets to know what he is doing is right or wrong. The moment he disconnects with the financial markets, I can see a bright future for France. And as an Austrian statesman, Klemens Wenzel von Metternich, once said: "When Paris sneezes, Europe catches cold," I can only hope the cold Europe catches spreads like a virus across the globe. All that Hollande needs to focus on is how to convert his poll promises into action. Forget about fiscal reforms and rebuilding French competitiveness, as economists will go on suggesting, focus more on social turnaround. France needs to create mass employment, and spread the benefits of economic growth equitably among the masses. It needs a radical overhaul of the macro-economic policies that have brought the world to a brink. Hollande can surely lead the world out of dark woods. He has the mandate to do so. He cannot waste this opportunity.
Writes The Times of India in its balanced editorial, captioned French Evolution (May 8, 2012): "Hollande paints a roseate vision of the French economy -- promising thousands of new public sector jobs, lowering the retirement age, boosting social services -- but is yet to explain exactly how it will all happen. France's fiscal deficit is huge, causing Standard and Poor's to have downgraded its credit rating. Hollande promises closing this deficit by taxing the super-rich, a plan that may just lead to a flight of the panicked capital." Giving workers to right to retire (and earn pension) at the age of 60, if they had begun to work at 18, investing in French schools, and creating 1,50,000 new jobs besides pulling the French troops out of Afghanistan before the year end are some of the promises he has made.
Well, I am not an expert in foreign affairs nor am I am a keen follower of European politics. But over the last few years, the economic collapse of 2009 followed by the Eurozone crisis, has made me sit back and understand what is going wrong. I always thought Germany's misplaced emphasis on budget-tightening measures, better called austerity measures, were planned and promoted by the financial markets. The idea was to bring more money into the hands of rich, turn them into super-rich, and then believe some of it will trickle down to the poor. This is what Noam Chomsky had once termed as 'tough love' -- tough for you and me, and love for the rich.
I am not sure whether mainline economists and the mainline media will let Hollande wear his surgical gloves, and undertake some radical reforms that turns French economy for the benefit of its majority population. After all, US President Obama's rant of "a change you can believe in" remained a hollow promise. Corporate America didn't let me him perform the surgery he needed to. In the process, America has been left bleeding. It therefore relies more on 'quantitative easing' -- printing of currency notes, and bullying developing economies and other developing countries to open up for American products. It will not last long. We all know.
French President Hollande doesn't have to follow the stock markets to know what he is doing is right or wrong. The moment he disconnects with the financial markets, I can see a bright future for France. And as an Austrian statesman, Klemens Wenzel von Metternich, once said: "When Paris sneezes, Europe catches cold," I can only hope the cold Europe catches spreads like a virus across the globe. All that Hollande needs to focus on is how to convert his poll promises into action. Forget about fiscal reforms and rebuilding French competitiveness, as economists will go on suggesting, focus more on social turnaround. France needs to create mass employment, and spread the benefits of economic growth equitably among the masses. It needs a radical overhaul of the macro-economic policies that have brought the world to a brink. Hollande can surely lead the world out of dark woods. He has the mandate to do so. He cannot waste this opportunity.
Policy paralysis: Is it an economic term for exploitation?
"India no longer Mittal's priority" screamed a headline in The Economic Times (April 30, 2012). Having seen the Steel tycoon occupy the dias with Prime Minister Manmohan Singh at the inauguration of the Bathinda refinery in Punjab a few days back, I was obviously curious to know the reason. I read the news report more carefully. The sub-head itself made it quite clear: Policy paralysis forces steel tycoon to go slow. Further, I read: "My success lies in giving returns to shareholders. If decisions are slow (referring to India), we will go slow on investments."
So that's the truth. Mittal is not here to partake in India's growth, but to ensure better returns to his shareholders.
A day later, on May 1, the Indian Express had another interesting report. Captioned: "No direct benefit to state from Rs 21,500-crore Bathinda refinery (http://bit.ly/IDq4Zt)," it set me thinking. Now you will ask me what has this news report to do with policy paralysis? Well, to understand what does the term 'policy paralysis', which is so often used, actually mean, I am using this illustration. I have often heard the term policy paralysis from almost all the mainline economists and policy makers, and also from the TV panelists. And that makes me wonder why is that when the Bathinda refinery got its approval, and that must be several years ago, Laxmi Niwas Mittal never complained of policy paralysis. Why?
After Mittal came on board in 2007 (it is a HPCL -- Mittal Energy Limited (HMEL) joint venture -- he demanded more fiscal concessions. And he got it. Let us see the freebies the then Punjab government had doled out for the project. Before Mittal came on board, it acquired 2000 acres of land in Phulkhari, Kanakwal, Ramsra and Raman villages in Bathinda district. According to the report, the cash-starved State gave Rs 1250-crore in interest free loan spread over 5 years and on top of it gave a tax holiday for 15-years. Why this largess, no one tells us. Still worse, what is shocking is that all these concessions do not bring any benefit to the State, all benefits accrue only to the stakeholders of LN Mittal. Wah ! this certainly is some economic growth !!
Is this what in reality the word policy paralysis actually connotes? If the State doles out fiscal concessions, the business environment is perfect. But when the State is unable to shower concessions, and open up the State exchequer for the private companies, policy paralysis sets in.
You will also see that the debate on policy paralysis is accompanied by beating of the drums by the propaganda machinery. One such Oped article that drew my attention was in the same edition of the Economic Times that had Mittal on the front page. The article The Regulatory Chakravyuh by Pradeep S Mehta called for the urgent need to do away with cumbersome rules that hurt business growth. Well, the underlying message is clear. Business must be allowed to exploit ruthlessly. All bottlenecks that come in way of such unregulated exploitation must be cleared.
If you don't let business exploit, you will be accused of policy paralysis.
So that's the truth. Mittal is not here to partake in India's growth, but to ensure better returns to his shareholders.
A day later, on May 1, the Indian Express had another interesting report. Captioned: "No direct benefit to state from Rs 21,500-crore Bathinda refinery (http://bit.ly/IDq4Zt)," it set me thinking. Now you will ask me what has this news report to do with policy paralysis? Well, to understand what does the term 'policy paralysis', which is so often used, actually mean, I am using this illustration. I have often heard the term policy paralysis from almost all the mainline economists and policy makers, and also from the TV panelists. And that makes me wonder why is that when the Bathinda refinery got its approval, and that must be several years ago, Laxmi Niwas Mittal never complained of policy paralysis. Why?
After Mittal came on board in 2007 (it is a HPCL -- Mittal Energy Limited (HMEL) joint venture -- he demanded more fiscal concessions. And he got it. Let us see the freebies the then Punjab government had doled out for the project. Before Mittal came on board, it acquired 2000 acres of land in Phulkhari, Kanakwal, Ramsra and Raman villages in Bathinda district. According to the report, the cash-starved State gave Rs 1250-crore in interest free loan spread over 5 years and on top of it gave a tax holiday for 15-years. Why this largess, no one tells us. Still worse, what is shocking is that all these concessions do not bring any benefit to the State, all benefits accrue only to the stakeholders of LN Mittal. Wah ! this certainly is some economic growth !!
Is this what in reality the word policy paralysis actually connotes? If the State doles out fiscal concessions, the business environment is perfect. But when the State is unable to shower concessions, and open up the State exchequer for the private companies, policy paralysis sets in.
You will also see that the debate on policy paralysis is accompanied by beating of the drums by the propaganda machinery. One such Oped article that drew my attention was in the same edition of the Economic Times that had Mittal on the front page. The article The Regulatory Chakravyuh by Pradeep S Mehta called for the urgent need to do away with cumbersome rules that hurt business growth. Well, the underlying message is clear. Business must be allowed to exploit ruthlessly. All bottlenecks that come in way of such unregulated exploitation must be cleared.
If you don't let business exploit, you will be accused of policy paralysis.
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