1)MNS goes solo, but backs Modi
In a move that could have an impact on the prospects of the BJP-Shiv Sena alliance in Maharashtra, the Maharashtra Navnirman Sena (MNS), headed by Raj Thackeray, said on Sunday that the party would contest the Lok Sabha election independently, but would support Narendra Modi for Prime Minister.“I support Narendra Modi as the prime ministerial candidate. All my MPs will support him in the Lok Sabha,” Mr. Thackeray said at a function marking the eighth anniversary of the party.Mr. Thackeray’s stand could strain the equation between the BJP and its alliance partner, the Shiv Sena, a rival of the MNS. Earlier, former BJP president Nitin Gadkari had met Mr. Thackeray and asked him not to contest the elections.The first list of candidates released by Mr. Thackeray showed that the MNS would field six candidates against the Shiv Sena and only one against the BJP. In the 2009 elections, the MNS played spoiler for the Shiv Sena-BJP combine. It cut into their votes, especially in Mumbai, where the saffron combine lost all six seats to the Congress-NCP front.The Shiv Sena was not pleased. Its spokesperson Rahul Narvekar said, “The MNS move is an attempt to confuse voters. They will see through these tactics. Whether to include the MNS in the NDA is a decision which should be taken jointly,” he added.Mr. Thackeray criticised Mr. Modi in January, saying he was too Gujarat-centric and that he should step down as Chief Minister if he wanted to be a prime ministerial candidate.However, Mr. Gadkari welcomed the MNS stand. “This will not affect our alliance with the Shiv Sena,” he said. The NCP said the “secret understanding” between the MNS and the BJP could backfire on them. Among the candidates declared by the MNS is actor-director Mahesh Manjrekar, who will contest against sitting Congress MP Gurudas Kamat from Mumbai North West. MLA Bala Nandgaokar will contest against sitting MP Milind Deora from Mumbai South.In other developments, the BJP complained to the Election Commission against Congress vice-president Rahul Gandhi for linking the RSS with Mahatma Gandhi’s assassination.
2)Need to reset focus to rev up Indian economy
Economic issues are set to dominate the agenda for the coming elections, more than any other in the past. As the major political parties prepare to release their manifestos, three eminent economists along with political commentator, S. Gurumurthy, came together on a common platform to examine the current scenario, and think up ideas for the next government.The panel discussion, featuring Arvind Virmani, Former Chief Economic Adviser to the Government of India; Rathin Roy, Director, National Institute of Public Finance and Policy; Ajit Ranade, Chief Economist, Aditya Birla Group; and S. Gurumurthy, Corporate Adviser and Commentator on Political and Economic Affairs, was thought-provoking, and threw up refreshing ideas.The ball was set rolling by the introductory remarks by N. Ravi, Editor-in-Chief of The Hindu , who moderated the panel discussion. Mr. Ravi laid out the questions: What reforms remain to be done? How far can India go with this rights-based and entitlement approach? How can the trade account be made more sustainable? How can the rent-seeking opportunities in the economy be checked?Mr. Virmani identified malnutrition as one of the biggest problems facing the country. The corporate sector needed to be revived in order to sustain high growth, and the regulatory environment should be made conducive for promoting investments, he said. Using empirical evidenceMr. Virmani showed that the maximum catching up was required in the area of malnutrition. “The malnutrition problem has to do with sanitation rather than food and poverty,” he said. “India is an outlier only on sanitation, and has more or less caught up on poverty and food,” he pointed out. Mr. Virmani said empowerment had suffered as the focus of the Government was too much on budget allocations. “Nobody is fighting to produce results or outcomes,” he said.The successful reforms in the past had triggered catch-up but sustaining the process for decades was a different ball game, Mr. Virmani said, adding that the learning from countries that had grown fast was that high growth in one decade was no guarantee of high growth in the next.To ensure sustainable high growth, Mr. Virmani recommended reviving the corporate sector where investments and productivity had ‘collapsed’. Citing the example of the infrastructure sector, Mr. Virmani said that the focus of government was more on getting funds for the sector, rather than providing a regulatory and policy environment that was conducive. “The problem in the infrastructure sector is not funds; if the policy and regulation problems are addressed, tonnes of funds will come automatically,” he said.Different takeMr. Gurumurthy presented a different perspective based on his understanding of Indian society and anecdotal evidence from the field to challenge the convention of using theories and wisdom of the Western economies to address Indian problems. He emphasised the need for expertise and research to be India-centric rather than be inspired by Western approaches. One example he cited was the lack of discourse and research, and, therefore, policy ideas for the diamond cutting industry of Saurashtra. “There is a disconnect between institutions and economic agents…where is the study on diamond cutting when nine out of ten diamonds in the world are cut in Saurashtra?” he asked.He decried what he called as the “Wall Street approach” to policy formulation that was focused excessively on the corporate sector and stock markets. “In the U.S., 55 per cent of families are linked to stock market compared to a minuscule percentage in India. We cannot transplant those policies here,” he said. Dishing out further data to support his arguments, Mr. Gurumurthy said: “only 11 per cent Japanese savings are invested in the stock market, while in the case of Germany, it is 7 per cent.” He pointed out that the market capitalisation of the 30 Sensex companies taken together did not account for more than 1.5 per cent of GDP.“Even if one takes the BSE 500, which accounts for 90 per cent of India’s listed companies, its market capitalisation is less than 5 per cent of the country’s GDP. Why, the contribution of the total corporate sector to GDP is just around 15-16 per cent. Yet, policies are focussed more on the corporate sector. There is something basically wrong about our approach here,” Mr. Gurumurthy pointed out. Mr. Roy came up with an interesting observation. According to him, States were better in their fiscal policies. Pointing to data, he declared that the states had completed the process of fiscal consolidation. He said that institutions needed to be able to translate ideas into results. According to him, the fiscal deficit problem today “is not as visible in the States as it is with the Centre’’.“With consistently improving quality of management of public finances despite their continued demonstrated ability to give hand-outs, the States have completed fiscal consolidation,” he pointed out. “India does not even spend as much as small countries such as Kenya and Nepal on education and health,” Mr. Roy said. “Through the plans, we are spending more on health. It is still not enough. And, whatever we are spending is not delivering any results,” he pointed out.Of the 30 Millennium Development Goals targets set in the 11th Plan only two — roads and infrastructure and forest cover — were achieved. Given the fact that the States were proving to be better fiscal managers than the Centre, the solution, Mr. Roy said, was to shift to greater devolution of funds and responsibilities to the States. This idea, however, would not find takers in New Delhi, he said, adding that the impulse for it would have to come from the States. “The Centre is a well-meaning institution but the assumption that it is capable of delivering either human development or take care of tax payers money can be questioned,” Mr. Roy said.In response to a question from the audience, Mr. Roy said the reason for the superior fiscal performance of the States could be their proximity to, and, therefore, better understanding of the ground realities.“States know better about the ground realities. So, the efficiency is better,” he said. In his estimate, about 60 per cent of the fiscal consolidation in the States could be attributed to expenditure controls prescribed by the Fiscal Responsibility and Budget Management reforms.The balance 40 per cent of the fiscal improvement could be explained by the efficient generation of States’ own tax revenue through genuine superior management, he added.
3)High inflation requires immediate tackling
Inflation is the biggest immediate challenge that the new government will face, according to Ajit Ranade, Chief Economist, Aditya Birla Group. He spoke in some detail on the strengths of India as also the mixed signals from different economies of the world at the panel discussion on the economy titled Economists on the Economaze, presented jointly by SASTRA University and The Hindu in Chennai on Saturday.“We are in midst of election season. For the 16th time, a major transfer of power in a large country, which has 17-18 per cent of humanity, is to happen in a largely peaceful way. In no other country, be it small or large, there was such frequent major transfer of power in such a peaceful mode,” he said, adding that “it’s a modern miracle that a large country like India with extremely diverse flavours is together. But it’s majorly due to its civilization.”India had many challenges, he said. Among the key ones, which hade been bothering the nation over the past 2-3 years, was zero growth in manu facturing or close to zero industrial growth. ``Yet, we have very, very high inflation,’’ he pointed out.``The Number 1 challenge to tackle immediately is inflation,’’ he said. Control of food inflation would require even more attention because about 60 per cent of budget of most Indians went for food, he pointed out. ``You may call it non-core area in the U.S. and Europe, where food and fuel account for less than 10 per cent of their budget. But in India, it is core, and it needs to be tackled immediately,’’ he pointed out.Focusing on the ‘maze’ part of the panel discussion topic, Mr. Ranade illustrated four mazes in the global economy that gave confusing signals to the world. Firstly, he presented a case on Japan and its economy. Japanese Prime Minister Shinzo Abe was celebrating the first anniversary of his government. He won on a thumping majority a year ago after making a single biggest promise. It was “Vote for me, I will give you inflation.”He guaranteed high and stable inflation for the Japanese, Mr. Ranade said. ``So, there is a peculiar situation in the modern world where one country is desperately seeking inflation to end deflation, while in India we have been struggling with very high inflation — unimaginable levels in our history. We never had persistent double-digit official inflation (headline WPI) for 3-4 years in a row,’’ he said. “Thus, in an integrated world or increasingly integrated world, inflation is high in one part. The other part, however, is struggling with deflation,” he pointed out.The second maze he highlighted was the European situation. ``The European Union has been battling with debt crisis. Greece and many other countries have been struggling with sovereign debts, and their governments are indebted with no clear clue on repayments,’’ he said.There was a fear that the debt crisis would lead to collapse or break-up of the EU. ``But the impact of such unstable situation on the Euro is surprising and intriguing. Yes, the Euro is strengthening amid debt concerns,’’ he pointed out.The third maze was surrounding the U.S. economy. Standard & Poor downgraded the U.S. economy from AAA to AA on August 2, 2011. ``Normally, after such a downgrade, one would expect the bond market to crash. But, a day after the downgrade, there was a huge bond rally in the U.S.,’’ he said.The fourth maze, he pointed out, was the debt-to-GDP ratio concerns. ``With debt crisis, Greece’s debt-to-GDP ratio is 100 per cent or slightly above. Other countries such as Italy, Belgium, Spain and Portugal are also having debt-to-GDP ratios over 100 per cent. It is about 40 per cent for the U.S. and China. In India, it is 80 per cent. While there are concerns over sovereign debt crisis in the EU and other countries, there is, surprisingly, no mention about one country that has the highest debt-to-GDP ratio in the world. It is Japan … and that has the ratio of about 350 per cent. Not only the ratio is high, large portion of debt is held by Japanese themselves not foreigners,’’ he said.There were the signals in the modern world that were so mixed and confusing, he said. ``You can’t draw anything through conventional conclusions,” he concluded.
4)Lacklustre growth on the eve of elections
The road to economic recovery appears to be long, and the big question, on the eve of national elections, is whether the sluggish growth will impact the fortunes of UPA II. More basically, do economic issues — whether GDP growth estimates or inflation or trade figures — matter at all in current politics?Answers to the second question will provide clues to the first. It is a fact that the average man on the street is getting glued to economic issues in a way that did not seem possible until a few years ago. This is partly due to the spread of economic literacy and partly due to the fact that market forces rather than government have a say on things which affect him/her the most.Take, for instance, the rupee-dollar rate. Whereas previously exchange equations mattered very little to the common man, today they do now not the least because he/she had developed a vested interest. A falling rupee, for instance, can make hike in petrol bill. Besides, the average citizen travels more frequently abroad, and, therefore, is interested in how many more rupees he/she has to shell out to buy a fixed quantity of dollar. While thousand other examples can be given for a citizen’s participation in the economic process, the key question is whether he/she will be judgemental at the time of casting the vote.The important points here are: Issues such as food security, economic governance will influence voters. Here again, perceptions matter. Is there really good governance in Gujarat under Narendra Modi? Will the food security legislation be better targeted to avoid leakages? The hardship caused by rising prices is more certain. Inflation and inflation expectations are bound to play a significant part in the electoral battles ahead. What about economic growth? Here, the UPA II finds itself on a sticky wicket. Elections are being held at a time when the economy has decelerated substantially, and what is equally important is the near-term prospects are not very bright either.Over the past decade, 2002-03 to 2012-13, the annual growth rate has varied from 4 per cent (2002-03) to 9.6 per cent (2005-06). Last year (2012-13), it was at a low 4.5 per cent. The average annual rate of growth over the past decade has been at a commendable 8.29 per cent. However, the UPA II cannot rest on its laurels as the recent growth figures are disappointing.On Friday last, the Central Statistics Office released GDP data for the December quarter of the current year (2013-14). The economy grew by 4.7 per cent. The significance of this data release is that it will be the last before elections. The next CSO data release will be in May-end.Earlier, in its advance estimate for the current year, the CSO had estimated GDP growth to be at 4.9 per cent. This was contested by the government, which is eyeing above 5 per cent growth. Finance Minister P. Chidambaram hoped that growth during the second-half would be at least 5.2 per cent to reach the full year’s growth of 4.9 per cent. The expectation from the yet-to-be released GDP data for the January-March quarter has, therefore, gone up substantially. A new government will decide on the strategies taking into account the growth data.Meantime, the last pre-election data release points to a continuance of the economic slowdown, and offer very little comfort to a government hoping to proclaim recovery ahead of the elections. It ought to be quite disconcerting that having witnessed annual growth rates above 9 per cent in a few years during its two terms, the UPA will be facing elections with the economy stuck in a sub-5 per cent growth trajectory.A new government will do well to interpret the latest data in proper perspective. There are well entrenched weaknesses in specific sectors. The investment scenario remains weak notwithstanding the recent efforts of the government to fast-track certain large projects. Both mining and manufacturing have been weak throughout this year. Policy logjam and environmental as well as judicial activism have impacted adversely on mining output, and this has had major negative consequences for the current account of the balance of payments. The outlook for the near future is not bright. Barring an unexpected turnaround, the government is on a weak wicket.The message is clear. Over the past ten years of the UPA I and II, economic growth has flattered but only to disappoint. Near-term trends are not encouraging.
5)Kohli reclaims No. 1 ranking; India set to retain No. 2 spot
India’s Virat Kohli has reclaimed the No. 1 position in the latest ICC Player Rankings for ODI batsmen, which were released on Sunday after the conclusion of the Asia Cup.Kohli had entered the Asia Cup, trailing No. 1 ranked South African batsman AB de Villiers by two ratings points.Kohli’s tournament aggregate of 189 runs in three innings with 136 against Bangladesh as his series best earned him 12 ratings points, which has put him ahead of South Africa’s ODI captain by nine ratings points.Following his knock of 136, Kohli had achieved his career high rating of 886 but finished with 881 ratings points after scores of 48 (against Sri Lanka) and five (against Pakistan).He didn’t bat against Afghanistan.Kohli was last ranked No. 1 just before the ODI series against New Zealand in January.Other Indian batsmen to head in the right direction include Shikhar Dhawan in eighth (up by three places), Rohit Sharma in 22nd (up by one place) and Ravindra Jadeja in 50th (up by 12 places).Thirimanne’sbig progressStrong batting performances in the Asia Cup have resulted in a reshuffle of the positions, with Sri Lanka’s Lahiru Thirimanne, who won the player of the tournament, making the biggest progress. The left-handed opener has jumped 29 places to a career-best 39th position.In the ICC Player Rankings for ODI bowlers, India spinners — Ravindra Jadeja and R. Ashwin — are the biggest gainers inside the top 20.Jadeja has earned four places and is now in fifth position after claiming seven wickets in four matches, while Ashwin’s nine wickets in the series has given him a lift of seven places that has put him in 14th position.Amit Mishra has also gained five places to be at 36th.Meanwhile, Indian team has been guaranteed to retain its No. 2 position in the ICC ODI Team Rankings at the April 1 cut-off date.India finished with 113 ratings points, just one ahead of third-ranked Sri Lanka, to walk away with a prize of $75,000.There was no other change in the table with all sides retaining their positions.Australia was assured of the No. 1 ranking on the cut-off date in January after India lost its ODI series against New Zealand 0-4. The Aussies will receive the ODI Shield as well as a cheque of $175,000.
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