Editorial 1/ Old hat
Editorial 2 /Got a new master
A stunning upset
Fifth Column / What’s work got to do with it?
Getting the targets right
Letters to the editor

After the collapse of world communism a spectre haunts all left manifestos. This is the spectre of confusion. Thus it is not surprising to find this particular attribute writ large over the poll election manifesto released by the Left Front in West Bengal. The confusion stems from the contradiction between the clichés and the rhetoric that the left in the state has spouted for over 23 years and the new direction that Mr Buddhadeb Bhattacharjee is trying valiantly to give to state policies. The manifesto recognizes some aspects of the latter. Mr Bhattacharjee, since he took over the mantle of the chief ministership, has been trying to make the state government, its policies and its bureaucracy, more capital-friendly. In tune with this the manifesto promises all assistance to any private initiative to revitalize the sick industrial units in the state. This promise can be read without any prejudice to its spirit as a step towards disinvestment of public sector units and as a statement of intent to take business out of government hands. Similar in purpose, is the desire expressed to reduce state subsidies to units directly under the state. There is a veiled reference here to a kind of exit policy which has not been explicated because this, after all, is an election manifesto. Whether the left will have the courage eventually to bell the cat is, of course, another matter.

The clichés and the rhetoric are evident in the attacks the manifesto makes against the policies of the Central government. It is the premise of the manifesto that there is a conflict of class interests between the policies of the Centre and those of the state government. It follows this up with the statement that the policies of liberalization have constrained the economic and administrative initiatives of the Left Front government. It will be recalled that in the Eighties, before liberalization was a twinkle in anybody’s eye in India, the left in West Bengal used similar arguments against the then Central government. Like communists in a bad play, communists in real life continue to spout self-evident nonsense. The fact of the matter is that since the inauguration of economic reforms the Centre’s dominance over the disbursement of funds has been reduced. Now state governments are in competition with each other and West Bengal, in the last few years, has joined that race. If, as the manifesto claims, investment in the state has increased then it has done so because of economic reforms and liberalization. Moreover, the policies being propounded by Mr Bhattacharjee are no different in spirit and in intent than those advocated by successive Central finance ministers from Mr Manmohan Singh to Mr Yashwant Sinha. The only antidote to confusion is a good dose of reality. The reality is no longer red or pink. The left in West Bengal knows this but refuses to admit it in public.


It takes a very brutal society to foster a fear of freedom. Bihar has managed to compel about 600 people to return to some form of bonded labour after they had been freed from that predicament in the early Eighties. This regression is entirely the consequence of political short-sightedness and bureaucratic irresponsibility. And this could be said of many schemes of social reform in the country. The Supreme Court had supervised the freeing of more than 2,000 bonded labourers in Deoghar district in 1984, outlining in detail the entire process of their rehabilitation. However, prohibitive red tape has made it extremely complicated for most to avail themselves of the low-income housing, most of which have become quite uninhabitable by now. Also, the pittance of a monthly pension given by the state government reaches them irregularly, if at all. Hence, a large proportion of the freed labourers are again selling themselves, practically on the same terms, in Deoghar’s labour market.

Bonded labour has been legally abolished in India in 1976. An important provision of the Bonded Labour Abolition Act is a government machinery facilitating the economic and social rehabilitation of the freed labourers. But Bihar, Uttar Pradesh and Andhra Pradesh remain states in which men, women and children continue to be gruesomely exploited in the agricultural and the unorganized sectors in gross violation of the law. Child labour, and the sexual and economic exploitation of women are the inevitable corollaries to this phenomenon. Generations of servitude, chronic illiteracy, malnourishment and caste oppression had already destroyed the will to liberty in these labourers. But a new spurt of agitation in the Eighties, particularly in the Deoghar region, had resulted in the building up of a new awareness which culminated in the freeing of a large batch of labourers. But the complete lack of an infrastructure of support and development has now resulted in this unfortunate regression. Late last year, the Bihar government had claimed that there was no bonded labour in the state, and had not bothered to respond to the Centre’s proposal regarding a new scheme for tackling this cognizable offence. Most nongovernmental organizations and social workers complain about the bureaucratic obstacles that invariably impede the implementation of the numerous schemes that are routinely put together by the Central or state government. Social development in India’s corrupt, backward and caste-ridden states is hindered by the paralyzing gaps between law and social attitude, between governmental policies and bureaucratic disorganization, lethargy and lack of will. Hence extreme poverty and brutal degradation seem to be more comforting than continual harassment and uncertainty.


Very few finance ministers in India have had to face as much criticism as Yashwant Sinha. An important reason for this has been his relatively long stint as finance minister — this has been his fourth budget presentation. Expectations about the new budget were very pessimistic because his adverse reputation was combined with the general perception that the economy is currently in a relatively bad shape. Many people expected that Sinha would impose a stiff dose of taxation in a last-ditch effort to restore some semblance of fiscal health. Others expected him to follow Mamata Banerjee’s footsteps and prepare a populist budget with disastrous consequences for the economy. Certainly, no one expected him to break new ground.

Sinha has pulled off a stunning upset. The new budget is a remarkable document because it spells out Sinha’s economic philosophy in crystal clear language. In various fora, Sinha has been talking about the need to step up the rate of growth and the concomitant need to usher in second-generation reforms. In Sinha’s scheme of things, the government should get out of production as far as possible and be more of a facilitator, removing hurdles so that the private sector can flourish.

He has also been talking about the dire necessity of practicing fiscal prudence. But most people have tended to dismiss these pronouncements as mere political window-dressing — they did not really think he had any intention of sticking out his neck and actually implementing any concrete measures for unpopular reforms. His friends were obviously more charitable. They did not doubt his intentions, but were sure that he did not have the political space in which to push through reforms.

The budget contains an ambitious package of economic policies designed primarily to stimulate growth by releasing the shackles on the private sector in numerous ways. There are incentives for the manufacturing sector in general as well as tax breaks for specific industries such as automobiles. Although he has not released a large quantum of additional resources for the agricultural sector, he has admitted that the reform process had bypassed agriculture and several new measures to redress this lacuna. Above all, he has given primacy to the need to practice fiscal discipline by lowering the fiscal deficit target to 4.7 per cent of the gross domestic product in 2000-2001, the corresponding figure for the current year being 5.1 per cent.

A fair amount of rationalization of the indirect tax structure has already been achieved during the previous decade. This has left little room for drastic innovation. What Sinha has done is to take this process forward by a small extent. He has proposed a further consolidation and simplification of excise duties, with most industries to be now taxed at a single rate of 16 per cent. The budget also contains some changes in direct tax rates. While the overall tax rates have not been changed either for individuals or for the corporate sector, all surcharges except for the recent one imposed on account of the Gujarat earthquake have been removed. There has also been a reduction in the dividend tax from 20 to 10 per cent. An important change has been the introduction of more services into the tax net. The services sector has been expanding rapidly and the tax base cannot be broadened unless the scope of the tax on services is enlarged.

He has not increased the overall burden of taxation. In fact, the tax revenues lost on account of tax cuts will probably exceed the tax revenues gained on account of fresh impositions. He proposes to do this without endangering the health of the exchequer. Indeed, the budgeted fiscal deficit for the next year is lower than the estimated one for the current year. Sinha firmly believes that stable and “fair” tax rates, backed by proper enforcement to check evasion, will give sufficient buoyancy to tax revenues. He has achieved some degree of credibility because he has managed to contain the fiscal deficit to the targeted amount.

However, one black mark against him is that this target has been achieved by disproportionately larger cuts in plan expenditure. The current budget promises to be different. It actually sets out a clear road map for downsizing of government — recruitment in the Central government is to increase by only one per cent annually against the normal retirement rate of three per cent. Hence, there will be a reduction of two per cent per year in the size of government employment. (Will Atal Bihari Vajpayee also follow suit and reduce the size of the cabinet?) Sinha has also announced the government’s intention of collecting more revenue by increasing user charges for at least some of the economic services provided by the government.

Apart from the promise of stable tax rates, there have been two important incentives offered to the corporate sector. Accepting the advice of the economic advisory council to the prime minister, Sinha has slashed the rate of interest on small savings by 1.5 per cent.

This will usher in a lower interest rate regime — the Reserve Bank of India has already reduced the bank rate, and commercial banks will soon follow suit by offering lower lending rates. So, the cost of investment for the private sector will come down. This has been an important demand of industrialists who have been complaining about the exorbitantly high real rates of interest. The other incentive constitutes major reforms of labour laws. Retrenchment will now be easier (though costlier). Companies will also find it easier to recruit employees on a contractual basis.

Both these steps will take Sinha and the entire National Democratic Alliance government straight into a political minefield. The cut in interest rates on small savings will obviously have an adverse effect on pensioners, since they depend on interest incomes. The argument that the lower rate of inflation will mean the real rates of interest will remain unchanged even after the reduction in the nominal rate of interest cuts little ice with them. Similarly, any reform of labour laws will be staunchly resisted by trade unions and the leftist parties. Indeed, even the opportunistic opposition parties will surely join forces to stir up trouble. With elections due in several state assemblies, the Bharatiya Janata Party will have to exhibit a lot of political resilience to back these reforms.

Another major initiative in the budget is a package of incentives for the agricultural sector. There is a proposal to ensure greater flow of rural credit at cheaper rates. Rural infrastructure is sought to be strengthened by the construction of rural roads and improvements in irrigation, water management and electrification. Another move in the right direction is the suggestion to step up construction of rural godowns — this will improve marketing facilities and enable farmers to get better prices for their produce. This objective will also be achieved by the removal of restrictions on inter-state movement of agricultural products.

The budget has been welcomed by the corporate sector as well as all pro-reformers. It has been compared to P. Chidambaram’s so-called “dream” budget of 1997. Unfortunately, on that occasion, the government of the day could not implement the back-up measures which were required to derive the full benefits from the dream budget. One can only hope that the same mistakes will not be repeated now.


The results of the latest census conducted by government agencies in the largest democracy and the second most populated country in the world will have at least one revelation to make. It will present India as a country where sex workers are non-existent; there are only beggars or singers and dancers.

A profound sense of embarrassment, leading to state-sponsored hypocrisy, is at work in the government’s decision to first classify sex workers as beggars, and then, under severe duress, as singers and dancers. Why else would a group of underprivileged women be elevated to the status of “sex workers” from being mere “prostitutes”, and then be dismissed as non-workers for not contributing in any way to the national economy?

Two questions arise at this point. First, what qualifies as an economic activity, and second, in what way does one contribute to a nation’s economy? If demand and supply are the two pillars of an economy, then sex workers, by the single virtue of meeting one of the oldest and most consistent demands of the world, can lay claim to performing an economic activity. As Nimmi Bai, a sex worker from New Delhi, puts it: “Bhikhari hum nahin, woh mard hai jo hamare paas aate hain” (The beggars are not us, but those men that seek our company.)

Count no evil

Sex workers across the country have organized themselves with help from non-governmental organizations, and have responded to health awareness campaigns by using, and urging others to use, condoms. They have also volunteered to donate generously for relief when a calamity has struck the country. According to the president of the Indian Sex Workers’ Union, “The government has issued them identity cards and health cards. Apart from that, some even pay taxes.” A Sonagachi sex worker elaborates: “Our work has always been part of the mainstream, and it is more taxing than many others, as it involves both the mind and the body. Why is it that when it comes to an acknowledgement of it, a wall of invisibility is built around us?”

A few decades ago, this double-think would not have been surprising. But it surprises now, when it is politically incorrect to use the word, “prostitute”. The hypocrisy became evident when the census agreed to categorize this profession under singing and dancing, thereby attempting to undo one wrong with another. Here sex workers are being deliberately confused with baijis or tawaifs — the once-flourishing, but currently waning, community of singer-dancers, some of whom were courtesans. In the 18th and 19th centuries, it was common to brand as “fallen women” those daring to enter the staunchly patriarchal realm of the performing arts. More often than not, the baijis were more involved in training in music and dance than in providing sexual services.

Begging for more

Indian sex workers today, concentrated in the urban areas, are far removed from the world of music and dance inhabited by the baijis. The most striking difference is that while the baijis often enjoyed the patronage of native royalty and the colonial masters, their poor descendants get the state’s indifference, double standards and oppression. As a face-saver, the census authorities have put forward the argument that since prostitution is illegal in India, sex workers cannot be categorized as “workers”.

The problem lies elsewhere. The Immoral Traffic Prevention Act and the Indian Penal Code have become “more mocked than feared”. They are rarely evoked, and almost always only when minor girls are caught being smuggled across the borders. Given the initiative shown by the sex workers themselves to stop all forced prostitution, it is difficult to accept that legalizing prostitution will lead to a flocking of women in this “immoral” trade. In fact, the 2001 census could have taken a right step by including sex workers and their children within the general category, or in the category of self-employed persons. This would have prepared the ground for a move towards legalization.

Policy-makers have preferred to project India as untainted by such “evils”, at the cost of turning a blind eye to a community whose growing awareness has helped in lowering the incidence of HIV/ AIDS in the country. And so the purity of the state remains untarnished till heads are counted again, in yet another census.

The author is an economist at the Indian Statistical Institute, New Delhi    

P. Chidambaram’s budget in 1997 was welcomed. Then the sums began to come undone, and politics interfered. The dream faded away and we were left with an unruly economy in an almost ungovernable democracy in which political parties and much of the administration pursue their self-seeking paths. Will Yashwant Sinha’s budget suffer the same fate?

Sinha has been much wiser this year. He has carefully read and listened to the numerous suggestions made to him and accepted nearly all of them. He has made much of India’s business and economic leadership accessories to this budget. The main concerns that the budget had to address were the fiscal deficit, inflation and growth. The business and economic leadership wanted investment to be pumped up, particularly in infrastructure. Agriculture needed much closer attention. They wanted urgent protection against the expected competition following the removal of quantitative restrictions.

They wanted interest costs to come down, as also the various surcharges on incomes to be removed. They wanted a revival of the primary market, and much greater investment in the infrastructure. They regarded public sector disinvestment as the litmus test of the government’s commitment to reform. They felt that small scale reservation was eroding competitiveness, especially with the removal of QR’s. Restrictive labour laws were seen as a millstone around the Indian industry in an open economy. Other restrictive laws like the Essential Commodities Act and many other constraints on the manoeuverability of industry had to be eliminated. The government needed to be downsized.

The finance minister’s opening remarks faithfully echoed most of these objectives. His subsequent proposals tried to give effect to them. The budget speech touched on several different ministries. It is not clear whether the concerned ministers are in agreement, especially given the diverse coalition. In any case, many of the announcements made by the minister were mere statements of intention.

For example, disinvestment, labour laws, dereservation of some items from the small scale sector, changes to restrictive laws, and so on. These have to be agreed to by the coalitions partners concerned. Ministers must give their full support, the bureaucracy must support them, and in many instances the Rajya Sabha, where the government is in a minority, must also support the changes. So the euphoria over these announcements is premature.

There is much else in the budget that is specific and deserving of the many cheers from industry. Some of these are: a coordinated attempt to attack the declining public investment in agriculture and enabling private investment in storage, while providing for public investment in roads; further substantial increase in agricultural credit, especially to small farmers. The other remarkable features are acceleration of the national highway development programme; developing and deepening of the debt market; greater autonomy to banks, especially in recruitment; raising foreign direct investment limits; forward trading in sugar and some other commodities; greater focus on technical education; halving the dividend tax; signalling a regime of lower interest rates by sharply reducing interest on small savings; excise duty reductions on consumer products with high multiplier potential for stimulating the economy like automobiles and two-wheelers; raising select import duties to afford protection to industry; removing all except the Gujarat surcharge; reducing the duty on gold imports.

This budget was named a rich man’s budget by the left. I would instead call it a budget for the consuming classes. This budget recognizes a stark reality. Industry and services now account for almost 75 per cent of the economy. The consumers of manufactured products provide the stimulus to the economy. They are both urban and rural. They pay the taxes (some also evade them).

The rest of the economy has to depend on what can be got out of these classes, which can be then spent to provide better opportunities to the destitutes, the aspirants and the climbers who form the majority of the population, and who also desire to consume manufactured consumer products.

The strategy is to provide them opportunity to improve their standards. But the consuming classes are the golden goose that must be nurtured to grow and contribute the resources to invest in the rest. The recognition of this reality is probably the cause of the euphoria over this budget.

By itself, the budget is not going to lead the Indian economy to nine per cent growth. A great deal of politicking is involved. It has taken 10 years for a government to declare, for example, that contract labour must be allowed. It is the state governments, to take another example, who must bite the bullet if our power sector is to be viable.

The Rajya Sabha, to take another example, must concur in amending the Essential Commodities Act to permit free movement of foodgrains. A scheme has yet to be worked out for handing over procurement and distribution of food grains to the states. The attempt to rationalize fertilizer subsidies is unclear and calls for more work.

But the budget will stimulate the economy to some extent, unless there is a war, or a crisis in the world economy, or a drought, or some serious law and order problem in the country. When the euphoria dies down, what will be left is a better policy framework than before, taking our drunkard’s walk on the path to faster growth a little farther.

The author is former chairman, National Council for Applied Economic Research    


Animus to peace

n Sir — The BBC is latest in a series of victims (including the MI6 building) of Irish terrorism. (“Chilling signal at BBC doorstep”, Mar 5.) A strife lasting 30 years has revealed no solutions to the problem. Ultimately, religion seems to be severely antagonistic to world peace. It is impossible to determine the legitimacy of the claims of the Catholics in Northern Ireland. The Real IRA’s demands for a Catholic Northern Ireland may well be justified because the Catholics would like to enact their own laws on a variety of issues, including abortion. There is a belief among many social scientists, ever since Samuel Huntington’s thesis about the “clash of civilizations”, that the Christian world is somehow homogeneous. This assumption also enables a scenario where most attention is devoted to areas with ethnic or communal conflict. But we must understand that an equally unresolvable crisis can emerge within the white, Western, Christian world — as has been demonstrated by the trouble in the United Kingdom.
Yours faithfully,
M. Roy, via email

Bengal junction

Sir — Until this year’s railway budget, India had known Mamata Banerjee only as a hot-headed political leader. However, her fine railway budget proves her ministerial acumen as well (“Bengal rides on Mamata mail”, Feb 27). There is no doubt that the sops to West Bengal have been granted keeping the impending assembly elections in mind. But those who criticize her on this count would do well to remember how passenger fares have remained stable for the last two years. It can be contrasted with how Nitish Kumar increased them by leaps and bounds every year during his tenure.

The baseless allegations of the Orissa-based Biju Janata Dal that the budget has a West Bengal bias, should be slammed. One can never forget how K.C. Lenka, as minister of state for railways, went all out to put Orissa on the railway map. He seemed to have a particular fascination for the Chennai-bound Coromandel Express.

As a result, it was made to stop additionally at Balasore, Cuttack and Bhubaneswar (and often at an unscheduled stop at Khurda Road under some pretext or the other). When the train passed through Orissa, the hawkers who entered the compartments did not let in-house railway staff sell anything, and, at night, hordes of people entered the reserved compartments and slept on every inch of the floor space that they could find. The BJD leader, P.K. Samantray, should therefore check previous records before levelling unjust allegations.

Yours faithfully,
Santanu Ganguly, Calcutta

Sir — The politics of recent years has no relevance to the nation’s well-being. The aim of all political leaders seems to be the fulfilment of their sectional political goals. To this end they will go to any extent and if in the bargain, the nation’s economy goes to seed, it does not affect them.

The latest rail budget presented by the railways minister, Mamata Banerjee, has not only corroborated this but has also been an exposé of Banerjee’s lack of common sense. At a time when everybody agrees that stringent measures are needed to bring the railways back into shape, the railways minister seems not to be concerned about this.

The railways urgently requires strategies for the improvement and upgradation of the existing system. The railways minister instead of doing that, proposed 24 new lines at a cost of Rs 1,000 crore which will be paid out from market borrowings of Rs 4,000 crore. Banerjee obviously cares more about the political prospect of her party, the Trinamool Congress, in the forthcoming assembly elections in West Bengal, than about anything as inconsequential as the railways. Therefore, at this stage, she has left the passenger fares segment completely untouched. But it must not be forgotten that an avenue for a review of this decision is still left open.

For the generation of additional revenue to the tune of Rs 500 crore (projected last year), freight charges are going to be increased by about three per cent. When compared with other countries, the freight charges in India are already too high. This recent proposal will certainly encourage the producers of commodities like coal, steel, cement and so on to seek out other alternatives — like Tata Steel, which transports nearly half of its goods by road. The railway budget will thus put the brakes on Yashwant Sinha’s endeavour to kickstart the growth process by striving for more infrastructural investments.

Yours faithfully,
Abhijit Roy, Tatanagar

Sir — It is time the railways minister realized that people are now much more politically conscious than ever before. Why doesn’t she understand that she is the minister for the whole nation and not for West Bengal alone? It was not necessary for her to continue what has been practised by previous railways ministers. Isn’t she the one to continuously shout for fair distribution, fair election and so on? Her campaign for the assembly elections should not be mixed up with the budget.

Banerjee’s biased budget can break the unity of the National Democratic Alliance at the Centre. Moreover, it can also create problems for her party before or after the assembly elections because the chairman of the railways board is planning to review the passenger fares and freight rates later.

Yours faithfully
Rajarshi Ghosh, Calcutta

Sir — Mamata Banerjee is being criticized for presenting a “populist” and “soft” railway budget, instead of being congratulated for taking the bold stand of not increasing passenger fares and only marginally increasing freight rates. She may not be a financial expert, but she has courage and common sense in abundance. She has taken the right initiative by attempting to mobilize resources from non-traditional sources like optical-fibre lines, commercial use of railway properties, corporate publicity and so on.

There is also no need for panic because the railways can rely on both internal and external borrowings for development work. The debt burden of railways is still within manageable limits. Internal borrowings can be serviced out of revenue generation, and external borrowings can be serviced through the export of railway goods and services. As any rail passenger will testify, there has been a significant improvement in passenger amenities, but there is need for a lot more improvement in the standards of safety.

Yours faithfully,
M.G. Goel, via email

Sir — It is really surprising to read Nilotpal Basu’s criticism of the railway budget (“Headed for bankruptcy”, Feb 27). He tries to point out the decline in the proposed expenditure in development projects. Basu should remember that the railways is continuously spending on development projects, and, for one particular year, there might be a little less allocation because of other priorities like passenger amenities.

Yours faithfully,
Subir Sil, via email

Sir — Even if the commercial utilization of railways land and publicity targets were realized, it would not have made any difference to the enormity of the problem that faces the railways. About Rs 15,000 crore is needed by the railways to acquire safety equipment. Mamata Banerjee’s assertion that she is neither an economist nor an expert seems logical enough.

Yours faithfully,
Provash Chandra Neogy, Calcutta

Sir — Mamata Banerjee’s heavily biased budget is dangerous. She has given West Bengal an inch. Bengalis will now start asking for miles. Every year and in every ministry she heads she will have to keep up this performance.

Yours faithfully,
Prahlad Goenka, via email

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