Professor Vinod Anand

OUR country has been in a fix, because of the fact that, on the one hand, lowering of various interest rates (as a short-run way out) to control the rising inflation has gradually reduced the liquidity of money, and therefore, the demand for various goods and services, but, on the other hand, this remedy has also added to the recession in terms of lesser employment, and retrenchment of already employed persons in the various sectors of the economy. The dilemma is, therefore, linked with inflation and unemployment. When inflation comes down because of reduced demand for goods and services, it leads to lesser production, and eventually it leads to unemployment. In fact, there are strong links between macroeconomics, central bank policies and the financial innovations that contribute to growth and also to sudden collapse in global markets as is happening now. These links have to be fully explored. India is no exception to this. In the case of India, domestic consumption makes up 60 per cent of the GDP, and as such, the key to ending a slowdown lies in the hands of the consumer. Hence the hypothesis that “when the consumer starts spending, companies start spending” is quite true in the context of our country. But the question is how best to persuade the reluctant consumer to spend? This is also linked with the “paradox of thrift” as introduced by John Maynard Keynes in the 1930s. Put simply, the concept means that if everyone decides to save, consumer spending will fall, causing the total demand to slump, along with the total income, which will ultimately mean that people will have less to save. This means that everyone is worse off and a recession can become self-reinforcing. Keynes also provided a remedy to this problem through intervention in the markets. We have, therefore, to work out an optimal trade-off between inflation and unemployment so that the end result leads to the well-being of the people. How exactly will this be done is a difficult proposition. The Government has to find a solution for this paradoxical situation.

In this context, the Government has recently unveiled a stimulus package to revive the slowing economy by encouraging additional spending. The agenda envisages:
• Reduction in CENVAT- Central Value Added Tax- ( from 4% downwards);
• Measures to Support Exports;
• Financing Housing, especially for Middle and Low Income Groups;
• Highest Priority to MSME (Medium, Small and Micro Enterprises) Sector;
• Additional Allocation to Textiles;
• Other Programs like Elimination of Import Duty and Export Duty on a Few selected Products;
Beyond all these, The Government plans to take a few other additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity. Besides the above-detailed package, there is another package that is on its way.

To what extent will these programmes succeed is not certain. There are still many doubts about this stimulus-bailout route for rescuing the free market. Many people are skeptical because these steps would increase the budget deficits (especially in the forthcoming Union Budget) from enhanced government spending programmes as listed above. This will also have its repercussions on Fiscal Deficit scenario.

Much depends on the strong will of the concerned authorities. Let us hope for the best, and look beyond the gloom and wish that the country will soon be out of this web of recession and inflation. With inflation easing, the stimulus package is well aimed at managing growth. It is also well targeted at distressed sectors. If we compare our country with other countries, it can be asserted that there have been no large-scale lay-offs, and hence no loss of income. There is no reason for India’s growth trajectory to slip too far. The silver lining is that our economy remains fundamentally sound with relatively low foreign trade dependence, tremendous manpower, a growing middle class, a robust corporate sector, and public-private collaboration. But still, we have to effectively work out an optimal trade-off between inflation and recession believing that an optimal balance amongst given options is a way of life too. We must also have faith in our strengths and opportunities in various spheres. Despite the world wide recession and the emerging dark shadows all over, India is still shining, and will keep on shining for ever.

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Chandigarh, the deficient democratic quotient

Gobind Thukral

OVER a million Chandigarh citizens are privileged people. They earn the highest in the country and spend the highest, perhaps. Per capita income, though a not very correct way to judge the real wealth of the people last year was over Rs one lakh, highest in the country and beats even Delhi, the national capital. Its literacy rate of over 84 per cent should provoke its neighbors. Over 90 per cent live in urban areas. There are over 1.1 million telephone and mobile connections. Over lakh internet connections speak about the connectivity the people enjoy. It also prides itself to be capital of Punjab and Haryana.

This city state boasts of over eight lakh vehicles and the number is ever increasing. Amentias like air conditioners, cars, cell phones and visits to restaurants and cinemas are not luxuries, but necessities for the middle and higher income group people. Same is true about liquor consumption. In terms of education and health services also, majority of the citizens are luckier than their counterparts elsewhere in the country. It is another matter that 40 per cent or so people live in slums and slum like conditions. They provide essential support system; domestic helps, rickshaw pullers and street hawkers or other sundry workers.

The citizens are privileged in another way too. The city state has a total budget of Rs 1547.65 crore, almost highest for its size of population and geographic area. The non plan side claims Rs 1,243 crore and the plan Rs 304.65 crore. This is meant to improve human development, infra structure and environment. Rs 438.59 crore goes as salaries to over 24,000 employees. And, the citizens pay as much as 1,467 crore or even more as taxes. The budgetary surplus of Rs 577 crore this year indicates the pink health of the economy. It is another issue that no other state in terms of democratic institutions is treated in this manner.

The economic status and the educational standards [Chandigarh should have highest number of graduates and post graduates] should mean full political participation. It is here that the privileged citizens draw a near blank.

The city no doubt elects one member for the Lok Sabha and has a nearly elected Municipal Corporation. The current Member of Parliament, Mr. Pawan Bansal is a minister of state for finance and hence funds should be no problem. It is another privilege indeed. Yet we find the seasoned politician mostly in tears. He has been sending missives to the city administrator who is also governor of Punjab, complaining of totally ignoring him and the citizens. Every week, as his complaints mount and he feels crestfallen. May it be the cause of farmers whose lands have been virtually usurped by the administration all in the name of development or the plight of the poor the underprivileged slum dwellers and small shopkeepers? Indeed he is worried as he ought to be as elections are a few months away. The Congress Party has now donned the role of the opposition. Why should a democratically elected leader feel ignored? Some body has to provide an answer.

There is, one hears the argument, another democratically elected institution, the municipal corporation that has a swank office in sector 17, the high prize sector. It too is having a running battle with the Chandigarh Administration. Partly it is packed with nominated councilors and partly because its powers are limited and circumscribed by the officialdom. This should not mean that the councilors are performing well all the time and the officials block their good work. At times, the councilors too lag behind and demonstrate partisanship. Yet is it not a negation of democratic norms that a deputy commissioner or a secretary or even a police superintendent is more important than an elected mayor of this privileged city?

One reason for which the citizens are agreeing in a big way is that the administrator is also the Governor of Punjab whose accessibility to the citizens is limited because of the constitutional position he holds. The present setup was created because of terrorism in Punjab and the neighboring areas. It was felt that proper coordination of the law and order agencies and the civil administration, there was need of one person as commander. This worked since Punjab during that harrowing period was mostly under the central rule where the governor called all the shots. [Yet we must not forget that Punjab regained normalcy because of an elected government under Mr. Beant Singh]. Like earlier posting of the chief commissioner as head of the Chandigarh Administration is considered more conducive for day to day running of the administration. His accessibility is greater than that of a governor.

Yet would that ensure better democratic functioning? Democratic system would suffer if the peoples’ day to day participation in the decision making processes is not ensured. The Constitution guarantees them the status of masters as it is “We, the people of India, having solemnly resolved to constitute India into a sovereign socialist republic and to secure to all its citizens liberty.

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