[Ed] [Eco] How not to contain the fiscal deficit

The tendency to opt for poorly conceived expenditure cuts and use non-tax revenues to plug the gap must stop
India is in a precarious situation. More than eight months into the current fiscal, fiscal deficit is almost breaching the annual target; revenue receipts are not reaching even half the yearly target; and over Rs. 8 lakh crore are pending in direct tax recoveries. Future steps would demonstrate if the government has a long-term strategy in place for fiscal governance.

High levels of deficit give rise to structural weaknesses and are unsustainable for any economy. They not only cause sharp increases in the debt-GDP ratio, but also adversely affect savings and investment, and consequently growth.

Therefore, containing deficits is important. However, it must be noted that in doing so means are as important as ends. Use of unsuitable means, while providing short-term relief, compromises the ability of a country to develop a long-term fix.

The problem

While India has managed to contain deficits to budgeted levels, this has been achieved through incessant cuts in budgeted Plan expenditures, or through generation of non-tax revenues. This strategy is not sustainable.

Diversions of up to 20 per cent on either side as against the budgeted figures for revenue and expenditures have increasingly being noticed in recent years. Private sector investment plans are inextricably linked to priority areas set by the government. As a result of large scale expenditure cuts without really differentiating between important and unimportant sectors, the private sector is forced to alter its investment strategies midway, which is not a healthy sign.

Similarly, using non-tax revenues, in the form of disinvestment receipts and sale of natural resources to make up the shortfall in tax revenues, demonstrates a short-term mindset. Such revenues are not an annual fixture, and they provide a false sense of respite about the government’s ability to meet deficit targets.

Long term fiscal policyIndia needs a long-term policy on fiscal governance and an independent budget office to aid its implementation.

The policy must have a long-term objective to achieve sustainable levels of deficits by achieving a balance between expenditure and tax revenues, taking into account the unavoidable phases of growth and contraction in the economy.

The objectives must be set up, and periodically reviewed, in accordance with performances of central, state and local-level actors. The policy must prescribe for clear accountability mechanisms, and must not allow diversions from budgeted figures of expenditure and revenue beyond a prescribed ‘safe harbour’.

Revenue regimeTo augment tax revenues, the policy must set out a time-bound and focused roadmap to realise outstanding revenues. It must undertake a honest assessment of costs incurred in contesting the pending claims; drop the cases in which cost to contest is more than the amount claimed; engage with litigants in relation to other claims; and ensure receipts within a time-bound manner.

The policy must also initiate reforms in the revenue foregone regime. It must revisit unnecessary exemptions, deductions and rebates that do not serve any purpose today, suggest simplification and rationalisation required, and provide a transition path to implement its suggestions within a specified time.

The policy must avoid insalubrious reliance on non-tax revenues and a separate disinvestment strategy must be developed for generating and utilising revenues from sale of assets and natural resources.

Expenditure regimeThe long-term fiscal policy must take into account State-level considerations while setting out broad contours of expenditure planning, implementation, monitoring and evaluation.

It must put in place evidence-based expenditure regime, and the short and medium term plans of the Centre and States must be compliant with the policy. The policy must aim to build capacity of local level actors to facilitate execution, which would also aid in fixing accountability. The policy must make a clear distinction between merit and non-merit subsidies, with a roadmap to gradually reduce the latter.

Independent budget office

A successful adoption and implementation of a long-term fiscal policy for India will need to be supported by setting up an independent budget office.

The office should have expert staff to provide research, review and technical support for planning, execution, monitoring and evaluation of short and medium term revenue and expenditure targets.

This would ensure their consonance with the long-term fiscal policy. In line with the fiscal policy, the budget office must aim to build capacity of actors to better understand, develop and implement plans at the central, state and local levels. The advice of the budget office must be guided by ground level experience.

The budget office must coordinate with other central level institutions, such as the NITI Aayog, to take a holistic view in relation to optimal long-term fiscal governance strategy.

Consequently, we must not repeat mistakes of getting enamoured by annual budgetary exercise of setting and meeting deficit targets, which must be nothing but short-term targets in process of achieving the objectives set out by long term fiscal policy. The IBO would aid in development and achievement of such targets.

While a long-term fiscal policy was laid down in 1985-86, the time is ripe now to modify it to suit the current times. A long-term vision for fiscal governance, with clear mid-term targets, aided by an independent budget office to ensure implementation, will make much-needed contribution to revitalise India’s growth story.

The writer is the secretary general of CUTS International. This article is co-authored by senior policy analyst Amol Kulkarni

Source - Business Line

[PIB] Election Commission of India to Host 5th National Voters’ Day on 25th January

Theme for this Year NVD: ‘Easy Registration, Easy Correction’ 

The Election Commission of India is celebrating 5th National Voters’ Day ( NVD) across the country. The theme for the 5th NVD is‘Easy Registration, Easy Correction’.

The National Function will be held at Weight Lifting Auditorium, Jawahar Lal Nehru Stadium, New Delhi and presided over by Hon’ble former President of India, Dr. A.P.J. Abdul Kalam. The Chief Guest will give away Awards for the Best Electoral Practices to Chief Electoral Officers and District Election Officers. Awards will also be given to Media Houses and Civil Society Organizations for best campaign in Voters’ Education and Awareness.

25th January is also the foundation day of the Commission, which came into being on this day in 1950. The Commission's objective through NVD is to increase enrolment of voters, especially of the newly eligible ones. The National Voters' Day is also utilized to spread awareness among voters regarding effective participation in the electoral process.

Source - PIB

[Ed] Dispute over ICC intervention

The recent decision of the Prosecutor of the International Criminal Court (ICC), Fatou Bensouda, to open a preliminary examination of alleged war crimes committed during Israel’s military offensive on Gaza in June 2014 is once again stirring up Israel-Palestine relations, and polarising the global politics around it. This decision of the ICC follows Palestine’s accession to the Rome Statute earlier this month and its acceptance of the jurisdiction of the ICC over crimes committed “in the occupied Palestinian territory, including East Jerusalem, since June 13, 2014”. Palestinian President Mahmoud

Abbas as well as Hamas have welcomed this move, while Israel, which has signed but not ratified the Rome Statute, has strongly denounced it. Until Palestine joined the ICC, Israel was principally in favour of the Court, but is now clearly infuriated by it. Israeli Prime Minister Benjamin Netanyahu has rejected the ICC’s move outright and is lobbying with states such as Canada, Australia and Germany to withhold their funding to it. Attempting to delegitimise the Court, Foreign Minister Avigdor Lieberman told an Israeli radio station: “This body represents no one. It is a political body… There are quite a few countries that also think there is no justification for this body’s existence.” Israel has frozen tax funds it collects on behalf of Palestinians.

Some of the points of criticism against the ICC are in fact valid. These are that the juridical nature of the ICC tends to hinder the peace process rather than build it, and that with an arguably grim record the Court has been ineffective and slow in investigating crimes. Also, Israel claims to be fighting the war against Hamas that it considers a terrorist organisation; so the move of the ICC, it argues, amounts to an absurdity. Such reasons, although partly true, still do not trump the need for an international criminal justice system to adjudicate war crimes. First, the role of the ICC must be clearly understood. The ICC is not meant to be a political body mediating a peace process; it is envisaged as a judicial body meant to end impunity and hold accountable those who have committed the gravest of crimes. Given this, even if the ICC may harm a peace process, which in the case of Israel-Palestine is anyway in deadlock, the politics of peace cannot prevail over justice, accountability for heinous crimes, and the upholding of dignity, women’s rights and other human rights. Second, even if the ICC is a slow and ineffective mechanism, holding those responsible for human rights violations in war crimes is necessary. Third, the investigation is against any person who may have committed war crimes during the conflict. So, both Hamas and Israel would be under the ICC’s investigation.

Source - The Hindu

The science of saving tigers

India is unique in having a significant number of tigers in the wild, in spite of growing population and resource extraction pressures on their habitat. The latest estimate of tigers in various landscapes published by the Ministry of Environment and Forests claims an appreciable rise in numbers of the big cat. That there could be as many as 2,226 tigers in the country — up from 1,706 four years ago — in nature reserves ranging from the hills in the Northeast to central Indian forests and the Western Ghats, besides the mangrove-rich Sundarbans delta, gives India a special place on the global conservation map. Clearly, some States deserve credit for strengthening the protection of wild tigers since the notorious wipeout in Sariska a decade ago. Such conservation measures, notably the extension of protected area boundaries, must continue. Yet, as credentialed scientists are pointing out, the numbers available from the latest count may merely indicate the presence of tigers in a given area, rather than serve as the conclusions of a definitive census. What they highlight is the need to improve those aspects of the ecology that lead to a rise in numbers — voluntary relocation of forest-dwellers from core forests, a severe crackdown on the hunting of prey animals, improved patrols against poaching, safeguards against harmful land-use changes and constant monitoring using scientific methods.

The science of conserving tigers, arguably the most charismatic animals on the planet, is increasingly focussed on saving ‘source populations’ of the cat. These are defined in the literature as sites where more than 25 breeding females can be hosted, in turn embedded in a larger landscape that can potentially have more than 50 female tigers and which enjoy protection. By some accounts, 70 per cent of the world’s tigers are to be found in such sites; in India, 90 per cent of the population is part of 30 or 40 major source populations. As the Wildlife Conservation Society has pointed out, conservation of this stock holds the key to achieving a significant rise in their numbers in the coming years — potentially, India could have several thousand more if it provides them the requisite space and the connected landscapes that facilitate dispersal. In the current counting exercise, the Centre has done well to include non-governmental experts and rely on improved methods such as camera trapping, although it is yet to move to continuous monitoring and annual assessments. The government must be open to the idea of more intensive research within forests to protect the tiger and other endangered species, and adopt a liberal approach to permit bona fide independent scientists to work in protected areas. The encouraging status report on tigers awaits refinement and confirmation in March.

Source -The Hindu

[Ed] An ‘India exception’ for climate talks

If the U.S. partners with India for more efficient industrialisation, it could be the kind of investment that cements ties between the two countries
As India and the U.S. build closer ties, they should pursue a win-win agreement on climate. It is in the U.S.’s strategic interest that India grows into a regional power, which can only be accomplished if India is given sufficient development space to grow its economy and eliminate poverty. It is in India’s interest to diversify its energy portfolio — a prospect that can be strengthened with the U.S.’s assistance. The way to achieve these objectives is to forge an “India exception” at the global climate talks in Paris; doing so is the only realistic pathway to a global climate deal and will cement the growing ties between the two critical actors in an evolving international order.

A unique dilemma
India faces a predicament which previous countries that used energy to grow their economies did not face. It stands on the cusp of industrialisation just as the world may finally be willing to take multilateral action to reduce carbon emissions. As it possesses vulnerable coastlines and is reliant on the monsoon and glacial melt, India is as susceptible as any other country to the consequences of collective action failure on climate. But for India, the tradeoffs between environment and growth (and poverty elimination) are harsher than perhaps anywhere else. India’s overall size of both population and emissions makes it the most critical low-income country at the Paris climate talks.

Despite India’s importance to the climate debate, it continues to pollute below its weight. Though India’s emission intensity would be expected to rise in the coming decades, it has committed to reducing emission intensity by 20 to 25 per cent by 2020 (from 2007 levels). Prime Minister Narendra Modi’s victory has created the opportunity for all of India to benefit from the renewable energy-friendly policies he pursued as Chief Minister of Gujarat and has opened up the possibility for it to become a leader in cost-competitive renewables. India is already the world’s largest biomass, third largest solar and fourth largest wind energy producer.

“If India chooses to grow through the traditional carbon-intensive pathway, there will be no credible prospect for global carbon reduction”

There is a strong strategic imperative for the U.S. in supporting India’s role in Asia. A successful India can play a major role in stabilising Asia during an otherwise turbulent transition, and can be a vital partner to the U.S. India could act on climate change on its own by reprioritising spending away from its planned naval expansion or other defence expenditures, but as China’s defence budget soars, nations around the region are becoming more invested in a balance of power that includes India. It is profoundly in the U.S.’s interest that there be a strong India — an India that is prosperous and contributing to a stable Asia and Indian Ocean.

The U.S. could reapportion part of its international development budget towards India’s green modernisation, create a way for U.S. cities that have successfully used clean building techniques to work with Indian cities, and invest in Indian efforts on energy-efficient urbanisation. It can help ensure that the Green Climate Fund and the World Bank support and crowd in private sector and other investments towards this end.

There would have to be a generational partnership between the U.S. and India. Challenges in aligning the private incentives of U.S. financiers with public incentives in India can be solved by a high-level agreement between President Obama and Prime Minister Modi on public monies through bilateral or multilateral tools.

India as an exception
India’s unique circumstances necessitate specific exceptions. Any climate agreement must exclude India from obligations that do not befit a country in an earlier stage of development. It must be allowed lifeline energy at affordable prices. India cannot agree to a peaking date; Indian poverty cannot be frozen by a dateline. A global peaking date will depend on other nations taking on mitigation commitments to account for India’s exceptional challenge. However, certain pathways could be pursued that would allow a U.S.-India partnership to contribute to the global effort. These could include: continuing and supporting India’s voluntary emission intensity reduction goals that move its economy from a ‘business as usual’ trajectory; focussing the spending of the Green Carbon Fund and similar instruments, including technology transfer, on Indian energy options; following common but differentiated responsibility within India, requiring rich states and cities to develop further mitigation methods; initiating a universal agreement on corporate emissions mitigation that would involve large Indian companies on equal footing with developed country corporations and mandating sectoral efficiency goals for these large corporations; and a decadal review of India’s development status, as no exception should outlive its rationale.

Such a deal is the only way to maintain climate progress. If India chooses to grow through the traditional carbon-intensive pathway, there will be no credible prospect for global carbon reduction and India will soon add another European Union to the world’s carbon emissions budget. India has a veto on a global climate agreement — both in the room, and more importantly in how any deal is implemented. India has walked away from global deals like the World Trade Organization, when they are perceived to be counter to its core interests.

If the U.S. partners with India for more efficient industrialisation and supports an “India exception” in global climate talks — using bilateral ties and the Major Economies Forum on Energy and Climate to help build a clean energy ladder for India — it could be the kind of investment that cements ties between these two countries. From the perspective of a stable international order, it would be a big deal; from the perspective of global climate talks, it is the only realistic path forward.

(Samir Saran is a senior fellow and vice president at the Observer Research Foundation and Bruce Jones is deputy director of the Foreign Policy Program at the Brookings Institution. This is an adaptation of an article published by the authors for Brookings and ORF earlier this month.)

Source - The Hindu

[Ed] Going beyond bonhomie

A Modi-Obama summit provides an opportunity for an all-encompassing look at geopolitics and geoeconomics across the region and beyond. This option should not be foreclosed by concentrating on the smaller items
Visits to India by world leaders are routinely high profile events. A visit by the President of the United States has the added attraction of high expectations. President Barack Obama’s coming visit — the second during his Presidency — has raised expectations by several notches and greatly raised the stakes, coming as it does so soon after Prime Minister Narendra Modi’s highly successful visit to the U.S.

U.S. Presidents, in their second term, tend to be generally more expansive in their attitude towards India than during their first term. Presidents Bill Clinton and George W. Bush demonstrated this in ample measure. Mr. Obama did not, however, wait for his second term to demonstrate his desire to strengthen the relationship with India. The effusive welcome that he afforded former Prime Minister Manmohan Singh in 2009, including holding his first State Banquet in honour of the Indian leader is part of diplomatic folklore in Washington and New Delhi.

Mr. Obama would no doubt retain warm memories of the tumultuous reception he received when he addressed the Indian Parliament during his visit in 2010. The visit, in effect, demonstrated that the era of estranged democracies had come to an end and the era of engaged democracies had come into being. This time, if anything, a warmer welcome awaits him, as the first U.S. President to be the chief guest at the Republic Day celebrations on January 26.

‘Natural allies, global partners’

In contrast, visits of Indian Prime Ministers to Washington have generally been low key and strictly limited to the business on hand. Mr. Modi broke this mould during his September 2014 visit to the U.S. His was a visit rich in symbolism and, at times, as in the case of his Madison Square Garden appearance, a high profile media event. This was among the many departures from established practice and protocol that Mr. Modi effected with excellent results.

“The coming two years are critical if India and the U.S. are to achieve the full potential in terms of their relationship.”

It is difficult to see how the rhetoric employed by both sides during the Prime Minister’s visit to the U.S. can be bettered. On his part, Mr. Modi went much beyond former Prime Minister A.B. Vajpayee’s reference to India and the U.S. as being “natural allies,” and substantially raised the bar when he said that India and the U.S. are “natural global partners” embodying the enduring and universal relevance of their shared values. The Prime Minister further added that the complementary strengths of India and the U.S. could be used for inclusive and broad-based global development to transform lives across the world.

There is considerable scope, however, for fine-tuning many of the issues that were discussed in Washington — which require satisfactory closure — such as clean energy, the Bilateral Investment Treaty, climate change issues, WTO-related matters, foreign direct investment (FDI) and Intellectual Property Rights. None of these items is however likely “to set the Jamuna on fire.” Renewal of the Defence Framework Agreement (first signed in 2005 as a prelude to the visit of Dr. Singh to Washington) and the Defence Technology and Trade Initiative again will hardly amount to a breakthrough in relations that both sides seek. This is the age of teleology, and the second Modi-Obama summit will in all likelihood be judged by the quality of the dialogue rather than the number of agreements signed.

Visits and the results

There are certain inherent risks connected with high profile visits and summit diplomacy. Seldom do they lead to anticipated results. India-U.S. relations are replete with instances of this kind. Old-timers will recall the excitement concerning U.S. President Eisenhower’s visit to India in 1959, only to be followed soon thereafter by a U.S. “tilt” towards Pakistan, and a stream of military and other forms of aid to that country. Mr. Clinton’s visit to India during his second term did lead to a perceptible thaw in India-U.S. relations, but the visit itself did not produce a new dawn in terms of the relationship.

On the other hand, low key visits do sometimes produce dramatic results. Dr. Singh’s visit to Washington in 2005 hardly compares with that of Mr. Modi’s in 2014 in terms of coverage and publicity, but the results were near transformational. The first significant breach in the “nuclear Great Wall,” leading to the dismantling of the nuclear apartheid regime occurred during this visit.

Likewise, the visit of President Bush to India in 2006 hardly compares with the kind of adulation showered on his successor, but it produced a critical breakthrough relating to the Separation Plan (viz., separation of India’s strategic military weapons programme from its civilian nuclear programme), an essential component for finalisation of the India-U.S. nuclear deal. The personal involvement of the U.S. President and the Indian Prime Minister was crucial for this, as at one stage negotiations had virtually collapsed.

Dr. Singh’s visit to the U.S. in 2009 — another low key visit — led to taking the final step, thus paving the way for India to trade in nuclear materials with countries across the globe. This was a one-of-a-kind international agreement, seldom seen in the diplomatic history of nations.

It is not often in a generation that an opportunity for a meeting of minds of this kind occurs. Mr. Obama and Mr. Modi must, hence, set their sights high, to try and produce a transformational impact. Without belittling the efforts needed to sort out prickly issues such as the “Nuclear Liability Law” (which has been holding up India-U.S. nuclear cooperation), as also other steps required to enhance the political and military dialogue further by renewing the U.S.-India Defence Framework Agreement for another ten years, the opportunity provided by the Summit should be utilised for some “big ticket” items.

The world is, today, at a tipping point. At one level, geography and nationalism are striking back with renewed vigour. Across continents, nations appear to be reverting to the syndrome of fractured smaller States (already evident in West Asia). There is a growing arc of violence and upheavals in regions like West Asia. As radicalist ideas and beliefs gain ascendancy in the region and beyond, the spectre of asymmetric warfare and terrorism haunts many regions.

China’s assertiveness

At another level, the world has to take note of China’s increasing assertiveness — not only in dealing with issues directly affecting its territorial claims — but going well beyond the “Nine-dash-lines” that it had historically limited itself to. There are again signs of a growing rapprochement between Russia and China, with “oil diplomacy” paving the way for reinforcement of military ties. The intention is possibly to counter the U.S. pivot towards Asia, but the Russia-China axis will have an impact elsewhere as well, including in West Asia, of eroding the influence of countries like the U.S. and India. Internal developments in China, even as President Xi Jinping seeks to emerge as China’s most powerful leader since Deng Xiaoping, also merit careful assessment.

A summit of this nature thus provides an opportunity for an all-encompassing look at geopolitics and geoeconomics across the region and beyond. This option should not be foreclosed by concentrating on the smaller items. A comprehensive discussion of this nature would be a significant outcome worthy of a summit of this nature. The Prime Minister’s statement that India and the U.S. are “natural global partners” would then ring true.

Possibly what is most important for the two leaders is to establish an exceptional level of trust, and reinforce their personal chemistry going beyond mere bonhomie. This is vital if they are to cut through bureaucratic tangles at critical junctures. The India-U.S. nuclear deal is a prime example of what can be achieved when two leaders have full trust in each other, for it was this level of trust that led to the resolution of extremely difficult issues when the respective bureaucracies appeared adamant in holding fast to their viewpoints.

Mr. Obama has two more years in office, while Mr. Modi will have more years thereafter. The coming two years are critical if India and the U.S. are to achieve the full potential in terms of their relationship. It is, hence, important that the leaders are not deflected from the key task of strengthening their personal bonds for this could well be the most valuable asset in their armoury to sort out not only mutual problems, but also a range of global issues.

(M.K. Narayanan is a former National Security Adviser and former Governor of West Bengal.)

Source - The Hindu

[Ed] Reasserting a friendship

The visit by Sri Lankan Foreign Minister Mangala Samaraweera to New Delhi, days after the new government in Colombo was sworn in, sends the clear message of an enduring friendship between the two countries. As with all such friendships, there have been phases of turbulence, but the impression that ties had hit rock bottom under the previous government in Sri Lanka is not correct. New Delhi remained deeply engaged with the Rajapaksa government until the end. There were difficulties for sure, and these have not disappeared. Sri Lanka’s list of complaints against India is probably long, and these would include baiting by extremist Tamil groups in Tamil Nadu and trespassing by Indian fishermen into its waters. Differences over the former President’s reluctance to address post-war political and human rights issues relating to the Tamil minority led to India voting against Sri Lanka twice at the UN Human Rights Council and abstaining once. There was also concern when a Chinese submarine docked in Colombo twice in a span of two months last year. Statements by Mr. Samaraweera that his government would correct the “pro-China tilt” in foreign policy have gladdened India. At the same time, any suggestion of a “pro-India tilt” by the new government is likely to make it unpopular at home, and will be in neither side’s interests in the long term. What the two countries can do is to maximise the advantages of their geographic proximity and age-old bonds to further common economic and strategic interests.

India’s foremost expectation from the new government would be an early settlement of the Tamil question. The top priority that President Maithripala Sirisena has committed to give to the abolition of the executive presidency should ideally go hand in hand with plans to address the political aspirations of the Tamil minority, even as it comes up with a plan to address allegations of war crimes, disappearances and other violations of rights of Tamil civilians. This is likely to come up when the Sri Lankan President visits India next month. Secondly, New Delhi is hopeful that Colombo would upgrade the existing Free Trade Agreement with a Comprehensive Economic Partnership Agreement, for which a draft was finalised in 2008. Sri Lanka is reluctant to sign off on it, fearing India would swamp its economy. Given that Sri Lankan businesses only recently began to accept that the FTA has benefited them, a turnaround will come on CEPA too — if India is not seen as exerting pressure. Third, the two sides finalised a draft defence cooperation pact in 2003. Domestic political compulsions in India ensured it did not progress. It could be revisited given the potential for maritime security cooperation in the Indian Ocean region.

Source - The Hindu