If getting a private sector CEO can turn around a state sector behemoth, many of today&rsquo;s state sector enterprises would not have been in the shape they are. Yet, the idea of someone like former Vodafone chief Arun Sarin heading public sector telecom firm BSNL does look like &ldquo;out of the box&rdquo; thinking. Certainly the search committee set up by the Prime Minister&rsquo;s Office will recommend this name, or of somebody equally high profile and qualified &mdash; the committee is headed by Cabinet Secretary K M Chandrashekhar and has members like the telecom and personnel secretaries, a Stanford professor and HDFC chief Deepak Parekh. Both Parekh and the telecom secretary were members of the Sam Pitroda committee which had recommended an outsider, like Mr Sarin, be considered to turn around BSNL and be paid market salaries as opposed to the usual pittance that goes in the name of PSU grade pay.

Wrong number?

Business Standard

The outlook on inflation, says the Reserve Bank of India (RBI), will be shaped in the near term by three factors: the monsoon at home, trends in global energy and commodity prices, and domestic demand-side pressures owing to higher-than-anticipated growth. The monsoon still looks a bit iffy &mdash; good but not good enough. But any concern on this score is more than compensated by the slowing down of global growth, including that of China, and the consequent easing of commodity prices, especially energy. While global demand is unlikely to exert inflationary pressures &mdash; in fact, the concern in Europe is that deflationary pressures may be at work &mdash; the major source of inflation at home would remain domestic demand. This, RBI thinks, should be managed in such a way that inflationary expectations are kept firmly under check.

Staying the course

The National Development Council (NDC), which concluded its 55th meeting in New Delhi on Saturday, had the mid-term appraisal of the Eleventh Plan (2007-12) on top of its agenda. However, what hogged the limelight at the meeting was a host of other issues. They ranged from concerns over the launch of an integrated action plan to address developmental concerns in Naxalism-affected districts in the country and issues surrounding the introduction of the goods and services tax (GST) from April 2011 to the states&rsquo; complaint that they were asked to pay for central legislation for various entitlement schemes such as the right to education. Undoubtedly, all these issues were significant enough to have deserved serious attention at such a unique forum that, through its periodic meetings, also reinforces the country&rsquo;s oft-forgotten quasi-federal structure.

Concerns beyond the Plan

If there is one phrase to describe Air India&rsquo;s fresh turnaround plan till 2014-15, it is the triumph of hope over experience. Encouraged by the 28 per cent growth in passenger traffic in the first quarter of this year, the state-owned national carrier has eschewed its earlier focus on cost-cutting in favour of expansion. For most corporations, it makes sense to maximise growth impulses in the businesses in which they operate. But Air India isn&rsquo;t in the same place as most corporations, let alone other airlines. It&rsquo;s reeling from accumulated losses of Rs 14,000 crore &mdash; losses that were built up even before the 2008-2009 slowdown, when the airline business was flying high &mdash; and debt of Rs 18,000 crore. Despite this, the airline&rsquo;s management &mdash; endorsed by independent directors, several of whom function in the hard-nosed world of competitive businesses &mdash; has approved a plan that appears to defy logic.

A flight from logic

A study by the Comptroller and Auditor General of India (CAG) has brought out startling details of the manner in which several states are operating the value-added tax (VAT) system. Over half of the hundred thousand dealers covered under the CAG audit in 23 states were engaged in tax evasion. Tax evasion of Rs 873 crore was detected from the scrutiny of only 2,600 returns in 15 states.

CAG lessons for GST

For a country whose prime minister was willing to routinely skip the Commonwealth Heads of Government Meeting, till an Indian diplomat eyed the top job at its secretariat, it may have appeared odd that in 2003 India&rsquo;s national Capital raced against the obscure city of Hamilton, Canada, to win the bid to host the 19th Commonwealth Games. On the other hand, it could well be argued that after Malaysia became the first Asian country to host the Games, the &ldquo;jewel in the crown&rdquo; could not have shied away from trying seriously at least once. The decision of the Atal Behari Vajpayee government to underwrite the total cost of the Games reportedly helped India win the vote 46-22. It was estimated at the time that the Games would cost Rs 1,899 crore, with the government not required to shell out too much given optimistic projections of potential revenue from the event.

Games politicians play

US President Barack Obama has signed into law the US Financial Reforms Bill. The debate on the Bill has been going on for quite some time now and, as usually happens in such politically charged debates, the original purpose and objective of the Bill has gotten lost in various compromises. It was important for Obama to keep his promise of financial reforms and so he came forward with an Act that introduces some reforms. Unfortunately, as is the case in most democracies with less-than-strong and visionary leadership, what one ends up with is very different from what one started with. For example, the Act does nothing to restrict the size of banks, a major objective of the original reform proposal. Admittedly, while the US could regulate the size of its own banks, it could do very little to cap the size of foreign banks.

Obama's window dressing

At a relatively impressive 7.4 per cent, India&rsquo;s national income growth for 2009-10 indicates that the economy has bounced back from the post-Great Recession low of 6.7 per cent in 2008-09. This revival of fortunes was partly on account of manufacturing output growing at a spectacular 16.3 per cent in the last quarter, taking the sectoral growth rate for the year to a healthy 10.8 per cent.

Broad-based growth

The decision by the Mainis to exit Reva, India&rsquo;s pioneering high profile electric car venture, coming close on the heels of the sale of the domestic formulations business of the Piramals to Abbott, indicates something new may be brewing on the Indian technology front. Even two swallows, not to speak of one, do not make a summer and the present deals may simply be the result of very high prices being offered.

Innovation ecosystem

Planning Commission Deputy Chairman Montek Singh Ahluwalia&rsquo;s comment that serving/retiring secretaries should not become the heads of regulatory bodies pertaining to their ministries has set the cat among the pigeons, given how this appears more the norm than the exception. For good or bad, successive governments have opted for retired or retiring civil servants, mostly from the Indian Administrative Service, to head various regulatory bodies. There have been few honourable exceptions like S L Rao, who has served as an electricity regulator in the past. Of course, Mr Ahluwalia has raised several substantial issues in inviting comments on the draft regulatory reform Bill, going beyond the issue of the professional qualification of a regulator. The most dramatic change suggested is giving the power to issue licences to the regulator instead of retaining it with the ministry concerned.

Regulating regulators

It may well be that more committees, commissions, advisory groups and groups of ministers (GoMs) have been constituted by the government of the United Progressive Alliance (UPA) in the past six years than all previous governments put together. The time has come for a department of committees, commissions and advisory councils to be created to keep track of who is saying what to whom and what is being done about it. At last count, over a hundred GoMs have been estimated to have been created in the past six years. An interesting innovation of Prime Minister Manmohan Singh has been to create subject-specific committees comprising ministers, other officials (including Planning Commission members) and non-government experts. Thus, there was the Trade and Economic Relations Committee (TERC), the National Manufacturing Competitiveness Council (NMCC), the agricultural and energy coordination committees (ACC &amp; ECC), the National Council on Climate Change, and such like.

Advice and dissent

These days it is not often that ministers offer to resign, accepting moral responsibility for a lapse on the part of their ministry. So, one must commend ministers like P Chidambaram and Praful Patel for setting a good example in the recent past. It is not always necessary for the prime minister to accept such resignations. However, there are many who believe that in the case of Mr Patel there was a good case for his resignation being accepted given the facts of the Mangalore air crash on May 22. As investigations thus far have shown, it is the civil aviation ministry&rsquo;s negligence that was partly responsible for the crash, so Mr Patel was right to accept moral responsibility, and the prime minister would have been right to concede it.

Stopping the buck

Water, water everywhere, and so many committees to deal with it. On top of so many ministries and committees that think about water, the government has decided that India needs a Water Mission. Apart from the water resources ministry, the ministries of rural development, agriculture and environment and forests are actively involved in water conservation work. Besides, the river basin authorities are also supposed to look after water management in their respective areas. In addition, a National Rainfed Area Authority has been created under the joint chairmanship of the ministers of agriculture and rural development for promoting rainwater harvesting. The immediate task entrusted to the proposed water mission is to put all the data on water in the public domain to create better awareness of the issues concerning water and to mobilise mass-scale action on water conservation and augmentation.

Missionary position

The local elections in West Bengal could well prove to be a turning point in the political history of the state. After over three decades of Left Front (read CPI-M) rule, the people of Bengal have signalled a desire for change. Finally, the anti-incumbency factor is catching up here too. The mood in Bengal may be more than just the normal anti-incumbency. It seems to be like the mood in India in 1977 when, after three decades of Congress party rule, the electorate gasped for change. In Bengal too, we are witness to the steady erosion of popular support for the one party that has dominated the state&rsquo;s politics for over three decades now. It is this mood of the people that Mamata Banerjee, leader of the Trinamool Congress and Union railway minister, has so convincingly tapped. One can only hope that Ms Banerjee understands the foundation of her victory.

The Mamata Express

BP has already spent over a billion dollars in trying to clean up the Gulf of Mexico spill and, with it no closer to success, estimates are the final clean-up bill could be around $14 billion or so, all of which will have to be paid by the company &mdash; as US President Barack Obama has said, BP created the problem and BP will pay for it. The issue after this is what about the civil liability &mdash; payments, for instance, for the loss in tourism earnings due to the oil spill? This could potentially run into several tens of billions of dollars but whether BP will pay this is now the billion-dollar question since the current cap on such liability is, hold your breath, $75 million (and some made fun of the Rs 500 crore cap in the Civil Liability for Nuclear Damage Bill!). Which is why there is a Bill in the works to raise this cap to $10 billion. Assuming the Bill goes through, there will be the inevitable fight over whether this can be applied retrospectively.

If we had a BP here

When William Burns, the United States under-secretary of state, told a Washington DC audience last week, on the eve of the India-US strategic and economic dialogue, that &ldquo;India&rsquo;s strength and progress on the world stage is deeply in the strategic interest of the US&rdquo;, he was echoing the decade-old words of former US secretary of state, Condoleeza Rice. Ms Rice had famously written in Foreign Affairs in 2000 that the time had come for the US to invest in India and favour its rise. That view defined the Bush doctrine on India and shaped the India-US civil nuclear energy agreement. If the Indian economy has to grow at upwards of 8 or 9 per cent per year over the next decade and more, India needs access to new and non-conventional sources of energy and so opening India up to normal trade in nuclear power became the lynchpin of that strategy. The Democratic Party was never convinced.

Obama digests Rice

Economic doctrines and trends in fashion are both known to have limited shelf lives. It is as difficult these days to produce someone who wears bell-bottomed trousers as it is to deliver a die-hard votary of central planning. The recession in the western world seems to have squeezed the lifespan of the &ldquo;big ideas&rdquo; in economics even further. As the world economy teetered on the brink of a crisis towards the end of 2008, in the wake of the Lehman collapse, old-fashioned pump-priming came back with a bang. The ghost of John Maynard Keynes, the father of deficit financing, walked once again through the corridors of national treasuries as finance ministers spent their way out of the crisis.

From Keynes to Gladstone

As was to be expected, the three-day Indo-Pak water talks in New Delhi last week failed to deliver any positive outcome. Pakistan had raised the pitch on the water issue in recent months, and it was not about to lower it after a routine meeting of the Permanent Indus Water Commission. Admittedly, the Pakistan delegation when in India did indicate a mellowing of its objections to some of the proposed hydro-power projects in Jammu and Kashmir. But, once back home, it harped again on alleged non-compliance by India with the Indus Water Treaty of 1960. It is also apparent that Pakistan has not learnt any lessons from the dispute over the Baglihar project, on which it sought neutral arbitration but received an adverse verdict. Otherwise, it would not have threatened to move for international arbitration on other projects in Jammu and Kashmir.

Futile water wars

Even though 25 years have already elapsed after the Bhopal gas tragedy, which claimed over 10,000 lives and left around five lakh affected, yesterday&rsquo;s minimalist verdict convicting eight accused doesn&rsquo;t represent anything near closure. While activists have been correct in labelling the verdict a betrayal since the maximum jail sentence is two years and the fine a mere Rs 1 lakh for the worst industrial disaster India has ever seen (Rs 5 lakh for Union Carbide), the accused, who include the then Chairman of Union Carbide Keshub Mahindra, will appeal against the ruling. So, it will go to the high court, possibly to a division bench after that, and finally, to the Supreme Court. In other words, it&rsquo;s safe to assume another couple of decades will go by in the judicial process.

Bhopal's ongoing tragedy

When Yukio Hatoyama of the Democratic Party of Japan (DPJ) swept the polls last year, political analysts dubbed his victory a &ldquo;regime change&rdquo;. Defeating Japan&rsquo;s long-standing ruling party, the Liberal Democratic Party (LDP), Mr Hatoyama promised fundamental change in Japan&rsquo;s domestic and external policies. Japan and the world heaved a sigh of relief in the hope that this fundamental shift in Japan&rsquo;s political equilibrium would begin the process of Japan&rsquo;s economic recovery. More than a decade&rsquo;s economic stagnation had virtually paralysed Japan. While remaining the world&rsquo;s second-largest economy, it watched China&rsquo;s rise with part anxiety and part greed. In hoping to revive its own economic fortunes by trading and investing in China, Japan, in fact, contributed to China&rsquo;s rise and its own growing marginalisation in Asia.

Land of a setting sun?

Any measure aimed at increasing the number of shares available for public trading enhances liquidity and depth of the stock market and is desirable. In that sense, the amendment to the Securities Contracts (Regulation) Rules 1957 (SCRR) by the central government to provide for a minimum 25 per cent threshold level of public holding for all listed companies is a very welcome move. The use of the words &ldquo;all listed companies&rdquo; is to say the least heartening. The presumption is that the word &ldquo;all&rdquo; would imply that there will be no exemption to any one. The earlier dispensation of rule 19 2(B) of the SCRR, however, has much the same intent. But the practical difficulties have bedevilled its implementation all these years.

A good measure, but...

Incisive columns and editorial comment by top opinion leaders

Page 542 - Editorial Comment