Editorial 1 / Political Bazaar
Editorial 2 / Won’t pay
A void at the centre
Fifth Column / The return of the maharaja
How the numbers add up
Document / Removing the hurdles
Letters to the editor

Politicians, when they are bargaining for leverage, seldom mean exactly what they say. Statements then become moves in the negotiations; postures never reflect actual positions. Thus, there are good reasons not to accept at face value the statement of Ms Mayavati, the leader of the Bahujan Samaj Party, that her party would sit in the opposition in the newly formed assembly of Uttar Pradesh. The results of the assembly polls in India’s largest state have thrown up a fractured verdict. No political party commands the numbers required to form a government on its own. There exists the possibility of a viable government if the Bharatiya Janata Party and the BSP can come together on the basis of some kind of understanding. There are two possible scenarios. One, the BJP forms the government and the BSP supports it from outside. The other is the opposite: the BSP forms the government with BJP support from outside. Forming the government would mean controlling the plum post of chief minister. The bargaining is about who will form the government and who will support it. Or to put it in another way, who will play the second fiddle? To borrow a term from international relations, the BJP and the BSP are playing at brinkmanship. Each party is waiting for the other to blink first and to back off.

Ms Mayavati has informed the governor of UP, Mr Vishnu Kant Shastri, that her party has decided to sit in the ranks of the opposition. Her statement has a ring of finality about it. But it will be simpleminded to accept this statement as the BSP’s final word on the subject. In the slippery world of UP politics, many such “decisions’’ have been abandoned by the wayside. It is perfectly reasonable that if the BJP accepts the terms set by the BSP, the latter will reverse its decision. It is important to remember that negotiations between the BJP and the BSP are not over principles but over terms. It is conceivable that Ms Mayavati has articulated a public position which is a few degrees stronger than her real position. Such a hypothesis makes perfect sense in the tortuous logic that informs haggling in the political market place.

The existing impasse makes life difficult for Mr Shastri. As governor, he must decide how long he is willing to wait for the political parties to conclude their parleys. There is nothing in the Constitution to guide him in the matter. He has to use his common sense and also his sense of what is good for the political future of the state. Too long a wait may appear unfair in the eyes of those opposed to the BJP and the BSP, and an immediate decision might cut short ongoing negotiations. Mr Shastri will be justified if he thinks that he is caught between a rock and a hard place. However difficult the choice, he will have to make one since he cannot leave UP in political limbo for an indefinite period of time. The political future of UP remains uncertain. An understanding born out of a period of prolonged brinkmanship will inevitably be somewhat fragile. Decision-making and governance will be weak because of the perpetual fear of blackmail by the ally. If, of course, the brinkmanship continues indefinitely then UP will not have a government, and a vote-weary electorate will have to go to the polls again.


Protests against the chief minister’s cost-cutting measures have reached a new degree of solidarity in Kerala. The left trade unions and the Bharatiya Mazdoor Sangh had called a day-long general strike in support of the indefinite cease-work by government employees and teachers all over the state. That original strike has now gone on for almost a month. The latest protest now brings together unions associated with the Left Democratic Front and those aligned with the Bharatiya Janata Party. Government offices and educational institutions had to remain shut for the strike, and employees of all nationalized banks, insurance companies, major state and Central public sector units and the Kerala state electricity board also joined in. Government doctors have also put in their token bit. This total freeze reached the state assembly in a louder pitch. The LDF opposition members had boycotted proceedings for the second day and resorted to strident sloganeering throughout the discussion on the governor’s motion of thanks.

The high court’s promptings for dialogue seem to have been drowned in all this. The possibilities of a deadlock also loom. Mr A.K. Antony will not compromise on his notions of fiscal discipline. Delayed salaries and cuts in leave encashment and pension benefits would provide funds for necessary development in the state. He has even warned that the fall in revenue owing to the strike might result in the employees losing their coming month’s salaries. It is obvious now that Mr Antony’s position is not so much determined by his firmness as by the emptiness of the treasury. This makes the strikes even more futile, since there remains nothing with which to meet any of the demands. Paralysing the state machinery could never resolve such an acute crisis. The strikes must end, sensible and firm negotiations must begin. Long-term measures will also have to be devised to pull the state out of such a rut. Revamping of the KSEB and the state transport corporation, downsizing the government, the improvement of productivity, modernizing education and the labour and industrial laws, and reviving the agricultural sector are some other ways of avoiding such futile exercises as strikes.


It will be hard for the governments in Gujarat and at the Centre to live down the ignominy of letting the state plunge into sheer anarchy last week. For a day or two the administration was paralysed and rioting mobs were left free to indulge in an orgy of loot, arson and murder in Ahmedabad and a dozen or more other places, targeting Muslim families. From the moment news came in of the terrible provocation at Godhra where three coaches of a train were torched by a Muslim crowd burning 58 Hindus to death — an operation presumably planned and executed by terrorists — the danger of a violent backlash was all too apparent. Yet, instead of putting the administration on the highest alert, the state government went into a coma. Why were both Ahmedabad and New Delhi so casual and lax in dealing with this grisly tragedy?

No sulks or shrugs of the shoulder by those in power will be able to blot out this disgrace. The normal reaction even of a most slovenly government in the face of a looming carnage would have been to order the police to patrol the threatened areas and disperse angry mobs by force where necessary, and also call in the army to bring the situation promptly under control. But the Gujarat ministry lost precious hours before it sensed that its indifference was putting its own survival at risk.

Was it that some people in the ruling circles were out to give the lumpen elements in the state’s capital enough time to avenge Godhra? Whatever the reason, the inordinate delay in taking effective action to quell the riots has put in grave doubt the Bharatiya Janata Party regime’s capacity to govern and made most citizens wonder whether it can protect their life and property in the face of a dire threat, much less create the conditions in which the two major communities can live in amity.

What makes the story all the more horrid is that it is by no means for the first time that the country has been a witness to mass rioting on this scale. This gory business is indeed an inheritance from the pre-Partition days, and not a decade has passed since independence without carrying the scars of mindless mass killings in communal riots. Every time the ghastly tale is repeated, the old fears and anxieties return with a vengeance, the communal divide is deepened and the cherished ideals of secularism and national integration suffer new body blows.

In the present situation, when the army is mobilized on the borders with Pakistan and the relations between the two big neighbours in the subcontinent have touched a new low, such mass rioting can have even graver consequences. It can increase the space for both terrorist outfits and all other groups out to subvert the system already becoming increasingly vulnerable to disruptive forces because of a pluralism gone berserk. It may be that up to a point the government of an assortment of parties with different social bases and political agendas can be regarded as a sign of democratic vigour. But taken to extremes, this kind of coalition politics aggrandizes religious, caste and ethnic identities, fractures electoral verdicts, and produces governments incapable of making their decisions stick.

The slipshod working of the unwieldy coalition government at the Centre, the unseemly infighting between different members of the extended ideological family of the dominant partner in the Vajpayee government; the recent assembly election results in Uttar Pradesh, where the only choice is between an unstable opportunistic coalition between parties which detest one another and president’s rule; the yawning fiscal deficits both at the Centre and in the states, some of which are almost bankrupt, and the whopping increase in defence spending even as all social services are being starved of funds, are all warnings of a system which has come to the end of its tether. The danger of its falling apart is no longer the figment of a sick imagination. It is a dread reality.

For the BJP, its own past has come to haunt it in a way that it never reckoned with. The unwillingness of many of its allies to get embroiled in Hindutva politics and the demands of keeping communal peace at any cost, particularly after the experience of mass riots in Gujarat, points in one direction, while the stubbornness of the Vishwa Hindu Parishad, which is more committed to building a Ram temple at Ayodhya to give back to its Hindutva agenda the edge it has lost than to maintaining a government led by a BJP which has lost its identity, sends out a contrary signal.

After the loss by the BJP of Rajasthan, Manipur and Uttaranchal to the Congress, of Maharashtra, Assam and Punjab to the same party by three of the National Democratic Alliance allies, and of Tamil Nadu to J. Jayalalithaa by a fourth partner in the ruling coalition, the Central government’s support-base has shrunk badly. The loss of Uttar Pradesh, for long its main bastion in the Hindi belt, where its strength in the new state assembly has been reduced to a half of what it used to be, has been the final blow which has demoralized the BJP as never before. To cap it all, the rapid erosion of its base throughout the country and a showdown with the VHP have robbed it of what little remained of its old aura.

Even if there is some patch-up with the more aggressive VHP, it will be an uneasy truce and it will do little to make up for the loss of face by the BJP or restore its authority. What is worse for the party, the steady reduction in its room for manoeuvre, and that of many of its allies with constricted social bases, will bring to the surface more glaringly all the contradictions inherent in the ragtag coalition. It will also impede further not only the economic reform process but also consensus-building at the national level on security issues with regard to both external and internal threats. What the country may have indeed to contend with is a void at the very centre of power.

This is by no means a false alarm. Such a void has indeed become quite a familiar phenomenon in many third world countries during the postcolonial period. The reasons for the likely emergence of a power vacuum in India are two. The free movement of capital across national borders, the shocks to which national currencies are prone due to a new frenzy of speculation, the overbearing presence of multinationals in scores of countries, and the unequal terms of trade, have all combined to erode the sovereignty of the nation-state. The steering capacity of the state has moreover suffered greatly because of internal systemic failures. There is no one today in a position to buck this trend.

Many small parties here have come to acquire a vested interest of late in political instability resulting from fractured electoral verdicts because it gives them an opportunity to demand a higher price for their support from those who fall short of a majority and are in desperate need of some help. This is why the political void at the centre of power is no temporary phenomenon. Whether the NDA stays in power or is out of office will only make a superficial difference to the internal balance of power, being not radical enough to give any party a clear majority in Parliament. Even with the accretion of new strength, the Congress cannot altogether counter the logic of a badly fragmented polity.

Thus, despite all the ups and downs in the fortunes of the various parties, there is no escape from a coalition of incompatible parties at the Centre. A small coalition may be somewhat easier to discipline. Yet, it will never acquire the degree of cohesion or be able to mobilize the kind of support which policies needed for sustained high growth rates or measures to eliminate external or internal security threats demand. Despite fake displays of national unity now and then, all recent developments go to confirm the trends which continue to deepen the communal, caste and ethnic divides.

Castigating those responsible for the gory events in Gujarat is not enough. The real challenge is to counter the forces which produce such countrywide traumas every few years and make people forget that nations are not built on shared memories, but as a modern thinker has pointed out, on an amnesia about the hurts and wrongs suffered by various groups in the past. By a quirk of irony in this country, it is not only the sharpening of small group identities but also the rewriting and reinvention of sectional histories which continue to act as a spur to the politics of vengeance.


After being forced into the wilderness for five years, the Congress has managed to ride back to power in Punjab. The celebrations, which began on the afternoon of February 24, are yet to get over. For many, they will go on for the next five years.

For Amrinder Singh, leading the Congress to victory could not have been sweeter. Punjab’s most famous royal had even floated a party in a bid for power in the 1992 assembly polls. The Congress won then and with it Beant Singh, his battle against terrorism. Had Amrinder Singh’s fledgling Akali Dal (Panthic) won more than three seats and formed the government, it is anybody’s guess what direction the state would have taken. Singh then hated the party for Operation Bluestar. Ten years later, he has led the same party to a remarkable victory.

The maharaja of Patiala has a relatively clean record. He does not look likely to end up facing charges of corruption. His performance in Surjit Singh Barnala’s post-Rajiv Gandhi-Harchand Singh Longowal Punjab accord ministry is past history. The people of Punjab only retain the memories of the promises he made in his campaign. And they want him to deliver.

Mr Clean

For Singh, it is a tall task. The previous Congress regime was shunted out by the people in 1997 for being too corrupt. Going by the Congress rhetoric now, the Shiromani Akali Dal-Bharatiya Janata Party combine was the most corrupt administration in the state’s history, which includes those years when Haryana and Himachal Pradesh had not been carved out of Punjab. The SAD chief minister, Parkash Singh Badal, had promised to deliver California to Punjab. California was delivered, but ironically in the form of allegations by the Congress of the Badal family’s alleged properties in the United States of America.

Vindictiveness has never been tolerated by the electorate in Punjab. When Badal took over as chief minister, he spoke of taking stern action against corrupt officials and ministers. Instead, he ended up as the accused. The first few moves of the new Singh government smack of revenge.

Singh could do with some advice. No leader in Punjab can match Badal’s stature and Singh stands a fair chance of rising to a similar eminence now that he is chief minister. No one denies that corruption must be tackled effectively, but only by appointing officials with a clean record.

Struggle for survival

Singh’s first royal battle is yet to begin. Besides delivering the state from corruption at all levels, he has to fight his own comrades-in-arms, Jagmeet Singh Brar and Rajinder Kaur Bhattal, both of whom are sore at not being made chief minister. While Singh has accommodated Bhattal in his cabinet as the deputy chief minister, it is yet unclear what he intends to do with Brar. The Congress’s knack of giving rise to dissidence, seemingly from thin air, is amazing.

Besides keeping his flock of 62 legislators together, Singh also has the arduous task of streamlining the agriculture sector in the state. Farmers in Punjab have been taking a beating for several years, and many have committed suicide to end their suffering. The Congress is known more for its pro-industry bias than for helping farmers. Singh is said to be hard at work to change the perception and garner funds to pay the promised Rs 30 bonus over last year’s minimum support price for paddy. But as soon as he delivers on this promise, he will have to face the burden of another crop in two months’ time. If he does not take the Akalis along with him on this issue and explain to farmers the difficulties of the World Trade Organization regime, Punjab could well be headed for a period of turmoil, something the Akalis are waiting for.

For the Akalis, the defeat at Singh’s hands was a rude shock. People had flocked to hear the maharaja speak even in areas considered Akali strongholds. It was Singh’s singular efforts that helped the Congress get nearly 40 per cent of rural votes, a feat the party had never managed even in the best of times. It is now time for the parties to stop politicking and try to revive the state’s economy. Punjab is crying out for change and Singh’s leadership could well be the catalyst to bring this about.


The 2002-03 budget is by no means a populist budget. The price of an LPG cylinder is up by a hefty Rs 40 and kerosene by Rs 1.50 a litre. Postal rates have gone up on top of hikes in second class rail fares. Chemical fertilizer prices will increase. Interest rates on small savings are down by another half-a-per cent following the 1.5 per cent cut in the last budget. All these measures are going to reduce the real income of the common man, even if he is not an income tax payer.

More bad news for the income taxpayer. Income tax surcharge is up by another 3 per cent to meet the costs of the proxy war with Pakistan. Income tax deductions (under section 88 of the Income Tax Act) through savings in provident fund, life insurance, national savings certificates and infrastructure bonds have been drastically brought down for people earning more than Rs 1.5 lakh a year. This section could get a tax deduction upto Rs 16,000 by investing Rs 80,000 in such avenues. From now on, it can get a maximum deduction of Rs 8,000 by investing the same amount. If a person’s income exceeds Rs 5 lakh a year, then his tax deduction would be zero, in addition to losing the standard deduction which other salary-earners get. Dividends from companies and mutual funds which were non-taxable would attract taxes at the same rate as other incomes in the hands of the investor.

There are more unpopular announcements. There will be private management of major ports and airports. Disinvestment in more public sector enterprises will follow. Service tax at the rate of 5 per cent will be extended to 10 new areas.

There are a lot of misgivings about all this. What is the logic, if any, behind such unpopular moves by the government?

First the prices of LPG and kerosene. Successive governments have announced that cross-subsidization of different petroleum products under the administered price mechanism will have to end. For example, the revenue from taxing petrol (apparently used by richer sections) has, for a long time, been used to subsidize diesel (used to run pump sets and public transport like buses, trains and trucks), kerosene (poor man’s fuel) and LPG. Over the years the subsidy on diesel has been gradually reduced, one of the arguments being that a lot of diesel is nowadays used by new diesel-engine cars. As the economy moves towards dismantling APM and prices based on market cost, the price of petrol will have to fall and that of kerosene and LPG will have to rise. That is happening.

Is there a case for continuing the subsidy on LPG and kerosene? LPG is used even by low-income families in urban areas, but not in rural areas where the infrastructure for a steady supply of LPG cylinders does not yet exist. So, subsidization of LPG would amount to subsidization of the urban rich, middle class and the low-income group families by the rural people. It is not possible to supply LPG at differential prices to the relatively poor in urban areas as the shifting of cylinders between households is so easy. The case is not like supplying foodgrains at subsidized prices to people below the poverty line. There the subsidized grains supplied through ration shops are of such inferior quality that affluent people would not generally be willing to consume the product.

One may argue that a higher price of LPG may encourage low-income families in urban areas to switch back to coal, which was one of the main factors behind high air pollution and smog in cities, especially in winter. So one can argue in favour of the subsidy on LPG on environmental grounds.But since it is not possible to continue this subsidy for the poor without giving the same benefit to the rich, the case for subsidization of LPG becomes weak.

But kerosene is a different story. It is used as fuel by mostly the urban poor who cannot afford LPG. It is also more environment-friendly than coal. So the case for subsidization of kerosene on equity and environmental grounds is much stronger. The only problem with maintaining a price differential between diesel and kerosene is that kerosene can be mixed with diesel. But this a technical problem which can be tackled by having coloured kerosene and other means. All considered, if any fuel has to be subsidized, it is kerosene. From that angle, the budget proposal about kerosene is not well-advised and may well be partially rolled back. This is a case where good politics may also be good economics. But then the finance minister may point out that even after the price hike the subsidies remain 15 per cent for LPG and 33 per cent for kerosene.

Several considerations lie behind the reduction in interest rates. Government borrowing at high interest rates has increased the interest burden and is now eating up nearly half the government revenue. This leaves increasingly less money for developmental and social expenditure. Any reduction in the interest cost would release more resources for other productive activities. Moreover, this is the opportune time for reducing the interest rates as the inflation rate is at an all-time low after many years.

What should matter to the investor is the real interest rate, which is the difference between the money interest rate and the rate of inflation. Most people only look at the money interest rate without considering what the money can buy in terms of goods — which is determined by the inflation rate. For example, if the interest rate is reduced from 12 per cent to 9 per cent while the inflation rate climbs down from 10 per cent to 5 per cent, the investor is better off. Since something like that is happening in India right now, the small investor need not worry so long as the inflation rate remains low. Problems could arise if the inflation rate shoots up after a person has invested his money in, say, a six-year NSC at low money interest rate. So keeping the inflation in check should be an important component of the entire package. But no one can guarantee that.

Income tax payers may grudgingly accept the logic of a 5 per cent surcharge for national security. But some experts would express concern about the possible adverse effect on savings because of the drastic reduction of tax relief under the different savings schemes. Empirical evidence, however, suggests that total savings are not affected by tax concessions in specific savings instruments. It only changes the composition of savings. Hence the withdrawal of concessions should not reduce the total savings but would definitely increase tax revenue. A desperate finance minister, trying to keep fiscal deficit under control in the face of a huge shortfall in revenue from indirect taxes, mainly due to low industrial growth, had very little option left. Further, this increased tax payment by income tax payers would neutralize, to some extent, the adverse fiscal effects of the “excessive” pay hikes granted by the fifth pay commission.

But the real complaint is that in India it is essentially the salaried people who pay taxes because it is only they who cannot evade it. The rest of the population ends up paying no direct taxes. So most of the efforts at additional resource mobilization fall on the shoulders of the salaried people. This inequity can be mitigated only if more people can be brought under the direct tax net. Extension of service tax to more areas is therefore a welcome move.

Most users of facilities at airports and ports would welcome privatization of management and various services, if not wholesale privatization. This would improve efficiency simply out of the fear that the management contract would not be renewed in case of non-delivery. The first test of a country, to foreign tourists and businessmen, is the quality of service at the airport.

Finally, a word about subsidies in general. People used to subsidies forget that all subsidies have a cost in terms of the alternatives foregone. For example, when students at state-run engineering colleges pay the ridiculous amount of Rs 30 as tuition fee per month, they are basically denying blackboards to rural primary schools. But I know there will not be many takers for this argument when people can actually see the massive bungalows and enormous perquisites that government officials and politicians enjoy by paying token fees in New Delhi and elsewhere.


The solution lies not in unilaterally banning trade, but rather in transferring technology and offering prices to developing countries for commodities, which would not then necessitate their overexploitation or jeopardize their development priorities. In an effort to remove the anti-export bias of existent policies, improve the efficiency of resource allocation as well as the competitiveness of domestic markets, India has made steady progress in eliminating quantitative restrictions, licensing, and discretionary controls over imports since 1991. Imports of capital goods, raw materials, and components have been de-licenced, tariffs on such imports have been reduced substantially, and tariff categories have been streamlined and simplified. As a result, all goods can now be freely imported and exported, except those belonging to two negative lists. In accordance with the provisions of the World Trade Organization, a country is required to lift QRs on imports imposed for balance of payments reasons when the position improves. As the position of foreign exchange reserves is comfortable, India has decided to phase out QRs in respect of all items where such restrictions were maintained for BoP purposes.

With the objective of accelerating the pace of reforms, sustaining high export growth, and enhancing the opportunities for the domestic economy’s participation in the dynamics of foreign trade, the export-import policy 1992-97 has been reviewed and revised in several ways... to further phase out quantitative and qualitative restrictions... The trade policy components of the Indian reform process... have been motivated by a full recognition of the important role that trade can play in promoting sustained economic growth in the context of sustainable development. Restrictive trade barriers and practices must be curtailed, and tariffs...on exports of products and services from developing countries reduced so that the benefits of global economic growth are equitably distributed among all countries. Greater trading opportunities can enable developing countries to invest more in environmental protection.

It need not be emphasized that poverty is intrinsically related to both trade and investment. In the last World Bank meeting in December 1999 at Seattle, due to lack of understanding of the need of the poverty-stricken population by the planners the meeting could not progress further. At the international level linkage between trade and poverty is addressed in India’s contribution to the discussions in the committee on trade and environment of WTO regularly.

The Environmental Impact Assessment programme of the Ministry of Environment and Forests, government of India is intended to indentify “hot spots” in the integration of trade and environment issues.

The expanded scope for specializing in areas of comparative advantage is manifest in the improved growth performance of the economy. Furthermore, while exports have responded to the removal of the anti-export bias of a protectionist environment, domestic industry appears to have been stimulated by the expanded availability of imports and capital goods, and the challenge of competing in the international market place. The positive response of Indian industry to deregulation is amply demonstrated by the capital goods sector. It witnessed a negative growth of 12.8 per cent in 1991-92 and registered an average growth of about 23 per cent during 1994-96. The main agricultural commodities exported from India are rice, tobacco, spices, cashew, oil meals, fruits and vegetables fresh and processed, marine products, tea and coffee. As regards imports, the main items are pulses, unprocessed cashewnuts, vegetable oils and sugar. Export, as a percentage of gross domestic product at constant prices is less than 1 per cent in India. Hence, local or national environmental problems in India are more associated with domestic production. Trade, as a percentage of GDP, has more or less remained constant at about 20 per cent in India.

To be concluded



No codes for redressal

I Sir — The shocking incident of the molestation of a girl in a school in Patna witnessed the imposition of a rigid dress code for women by the Rabri Devi government (“Molestation prompts dress code for girls”, March 3). The step taken by the authorities following a spate of eve-teasing and other harrowing incidents deserves to be criticized for the indifference it shows towards the women of the state. Instead of bringing the culprits to book, the government has chosen to impinge on the rights of women. This is not the first instance of such a dress code being imposed in this country, the sangh parivar being the most infamous for passing such diktats. But as history has shown, such diktats never succeed in providing a solution to the myriad problems faced by the women of the country. Nor do such “precautionary” measures deter anti-social elements from carrying on with their activities. It is time the Bihar government stopped playing the role of moral police and tried to empower women instead of imposing taliban-like injunctions on them.

Yours faithfully,
Neha Jha, Patna

Taxing times

Sir — In this budget, the finance minister, Yashwant Sinha, has ruthlessly envisaged tax proposals of Rs 10,5000 crore (“Surcharge Sinha strikes”, March 1). What is galling is that he chose to direct his ire against the middle and salaried classes.

By imposing a security surcharge of 5 per cent on income tax, Sinha expects to mop up Rs 2,750 crore from taxpayers. But has he calculated the administrative cost involved in collecting the tax? Salaried persons will be the worst hit, since the tax exemption ceiling too has been halved to 10 per cent, compelling them to pay an additional tax of Rs 3,250 crore to Sinha’s kitty. This will act as a disincentive to any forced savings, and in turn, will decrease the state government’s share in small savings collections.

With the increase in the number of people opting for voluntary retirement schemes, the 0.5 per cent reduction in interest rates on small savings will further add to their woes. As if these were not enough, Sinha has announced a Rs 40 increase in the price of LPG, besides increasing the prices of sugar, kerosene and fertilizers. This will put the middle classes and the farmers in a tight spot. Also, the unusual increase in postal rates will inconvenience the common man.

The small consolation of the reduction in the prices of petrol and diesel will benefit the rich only. It will not reach the poor and the middle class by way of a proportionate decrease in transport fare. Perhaps the lowering of the prices of computers, cement and life-saving drugs will be of some help.

But what could be the rationale behind collecting Rs 6,700 crore through excise increases, only to give away Rs 2,200 crore in customs duty cuts, thereby allowing the invasion of the Indian market by cheap foreign goods? With the yawning fiscal deficit of Rs 1,35,000 crore, Sinha should have announced measures like cutting government expenditure and other non-plan expenses to avoid getting into a debt trap like Argentina.

However, with higher allocations for the core sectors, Sinha is very much on the reform track. His real challenge will be to implement the labour reforms he has proposed. Before that, he needs to re-evaluate the budget he has just presented and try to make everyone share the tax burden.

Yours faithfully,
Susanta Biswas, Calcutta

Sir — Shubhashis Gangopadhyay, while analysing the Union budget, 2002-03, talks about Yashwant Sinha’s stress on investment in agriculture (“The FM’s best foot”, March 1).

The Economic Survey indicated that India’s industrial growth has hit a 10-year low, mainly owing to the slowing down of demand growth. This trend can be reversed by broadening the consumer base. One of the ways to do this is to unleash the potential of the rural market, to turn the millions living below the poverty line into consumers with adequate purchasing power. Purchasing power can be increased through agricultural development, hence Sinha’s agriculture policy is welcome.

However, as the Green Revolution favoured mainly irrigated areas — and such areas are overcrowded in terms of farmers per unit land — agricultural operations need to be extended to rain-fed areas to generate more employment among rural people. Innovations in dryland farm practices like rain-water harvesting and adopting drought-resistant seed varieties are needed for increasing agricultural production in rain-fed areas. To attain the agricultural growth rate required for reducing poverty, development of agriculture may be extended to animal husbandry, fisheries and so on. Following these, it will not be difficult to reverse the trend of slow demand growth.

Yours faithfully,
B.C. Dutt, Calcutta

Sir — The annual budget for 2002-03 can be best described as pedestrian, unlike the budgets of the previous years (“Welcome to ISI tax”, March 1). But to accuse Yashwant Sinha alone for the disappointment would be unfair. The corporate sector in India is the prime offender. It has failed to channelize the profits in the form of investments to bolster growth and create more jobs. The finance minister has only admonished them mildly, when he should have rapped them hard on the knuckles. As always, the hapless middle class has been left to bear the burden. Recession is therefore here to stay for one more financial year.

Yours faithfully,
Sush Kocher, Calcutta

Sir — The increase in the allocation for science and technology in this year’s budget proposal will no doubt boost the scientific research and development programme in the country. But reversing the trend of scientific and research institutions enjoying duty-free import benefits for the import of modern scientific equipment, this year’s finance bill has proposed the imposition of customs duty on such imports. Given that Indian R&D units are already faced with a serious resource crunch, this additional burden is surely going to impede R&D in the country. Besides, this duty is also unlikely to fetch any significant revenue. The government may therefore reconsider its decision on the proposed levy of customs duty on such imports.

Yours faithfully,
Sanjay Prasad, Calcutta

Sir — The slash in the prices of petrol and diesel by Re 1 and 50 paise per litre respectively has put the transport operators in a fix. On earlier occasions, whenever fuel prices were hiked, they did not waste any time to demand a raise in public transport fares. Will they be honest enough to demand a reduction in fares now that petrol/diesel prices have been slashed?

Yours faithfully,
Ashim Dasgupta,Calcutta

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