July 6, 2009

Dr.Murli Manohar Joshi
Member of Parliament
Lok Sabha, New Delhi 110001.

Dear Dr.Joshi,

Thanks for the call. It was a pleasure talking with you again. I have always appreciated your approach of being connected to the common man, recognizing the talent, promoting it , and talking straight, no matter what!

As advised, I am sending my inputs not just for the Economic survey and the budget, but also on the overall situation facing the government.

I have been following the budget & the overall situation in India. Budget is a routine event. As I had expected, budget did not give any answers but only raised a few questions! As always, Congress has been known as pro-rich and propaganda-wise, pro-poor. Common man is just a slogan . Under the new tax structures, people who earn more will have to pay less tax. This is what Congress regimes have done since independence . That’s the reason , more than 60 % of the people are poor and cannot afford to spend more than Rs.20 a day . Budget was just to divert the attention from equally important issues, without addressing any concerns of the common man and this nation.

I must draw the attention of the powers that be, that, recently I read that Pakistan is a ‘failed state’. I must add that, India is a ‘failing state’. Let me put the points why I say this.

Every nation has three weapons ; Economic , political and military weapons, and every nation has three priorities i.e. domestic economic growth & employment , security of the nationals & healthcare , and peaceful relations with the neighbors & good relations with super powers . Let’s examine each

Economy: We are told that the economy is getting better, and that there are ‘green shoots’ because of the ‘Green shots’. I am rather surprised! Rising Sensex does not raise the GDP of the nation! I don’t think that the fundamentals have changed either in the domestic market or in the global scene in the last three months. Whilst, I believe that the current budget is based on ‘Hope’ & ‘Hype’, ‘Ifs’ & ‘Buts’ , but the realities can’t be ignored for long- we will make our condition irreversible .Oil prices have been cleverly increased before the budget. It is high time that people gave up the thought that, Indian population is a good shock-absorber with a short memory that believes in forgive & forget!!

The growth that we saw as 6.7 % in 2008 was due to the government spending and stimulus, and atleast, I cannot rejoice on that as a common man. Prices are still sky high for food items- retail inflation is around 12 %, loan rates are high and jobs are flying away. These three factors are adding to uncertainty and fear. The stimulus are like giving more drugs to a drug addict, so that he lives longer , avoids immediate pain , but weakens with every dose and time passing, and finally collapses’. Moreover, the stimulus that the government has given is in forms of tax cuts and subsidies & and not spending. I don’t understand one thing, why do we need ‘Bold’ steps in every budget despite 60+ years after the freedom? Is this not a failure of the planning commission & our British legacy systems that has lead to Adhocism? Why the hell do we not look at changing the way we envision and plan for our nation? I believe that we are still not independent in our thoughts. We are still bogged down with western concepts of growth and success!! We must see deeper in this statement. Our system is more wrong than corrupt! Inefficiency cannot tackle inefficiency!!

Exports are falling month on a month, companies are paring down the costs and people are losing jobs every day. Uncertainty and fear are the two harsh realities of the current Indian economy. I know that Dr. Manmohan ji is taking of 7.5 % growth, but has three riders; if US Economy bottoms out by September, Rains are adequate and Oil does not give a shock. I think this is a clever statement or trying to pull a fast one. If one of the three or all three goes wrong, then what is going to be growth of the Indian economy? Ideally an economist of his experience should table before the parliament the three best cases and worse case scenarios incase all goes wrong or two or just one factor fails us? We cannot be silent spectators in a time of such an unprecedented crisis. I see that global Economic intelligence; forecasting and contingency planning is clearly missing with our policy makers. We need proactive and pre-emptive policy makers! Thanks to India’s robust banking system and strong fundaments (as we hear often!) that India’s credit rating is currently one notch above junk status at BBB-.

My belief is that, India’s problems have been structural, and with Indian meteorological department predicting less than normal rains, cyclical problems will also add to the woes of the government and the vast suffering population. So India’s problems today are both structural and cyclical, all because of the misguided policies of chasing wrong targets and attacking non-existent problems. India has some ‘high propaganda’ and ‘high leakage’ schemes like the NREGA etc. So the final outcome is not as expected. Execution of such schemes benefits the ruling class and not the working class and remains such a statistics. We have seen in the last 15 days that farmers are mortgaging their lands due to delayed rains. I am afraid that, if the rains are below normal, we will start hearing about farmer’s suicides again. Economic or fiscal management is as important as good governance, which is decimating all the progress. If the measures are missing, we will be back to square one!

The government should act fast, or else, the public would conclude having voted in haste, and we will see the change in the assembly elections that are due shortly

Recent survey from National Sample Survey (NSS) shows that, 60.5 % of the population were capable of spending only Rs.20 a day

National commission on enterprises in the unorganized sector had suggested that 77 % of the total population in the 2004-5 could spend less than Rs.20 / day / person

More glaring to note from the National Sample Survey (NSS) of 2004-5 that, only 24.4 % of the rural Indians used the Public distribution system (PDS) for rice and only 11 % used for wheat! Increasing outlay will not just solve problems.

Imagine this with the following facts:
Today , Tomato costs Rs. 15 K.g , Potato Rs.10 per K.g., Onion Rs. 12 per K.g. Rice cost more than Rs. 20 per K.g , Pulses are above Rs. 40 per K.g. Ginger is Rs. 100 per K.g. Do request our P.M. that BPL (Below poverty line) should be changed as a terminology to FSTD (Families fast starving to death). BPL is a very charitable word today seeing that, majority population of this nation cannot even earn enough to eat one decent meal a day!

I have not seen the recent Economic Survey in detail, but have been following it through media and press. The above stated facts do make one shudder at the thoughts of how many people would have died of starvation by the time you finish reading this note!!!

I am yet to see our learned politicians talking about the global environment in the budget. So I must educate our politicians on that as well. In the month of May, I was in Europe and this is what I discussed with various people.

Germany’s economic output will shrink by 6 %

UK.’s economic output will shrink by 4 %

French Economy will decline by 3 %

Italian economy will decline by 3.5 %

Romania’s Economy will decline by 4 %

Latvia’s economy will shrink by 13.1 %

Slovakia’s Economy will decline by 2.6 %

Of the 27 nations in EU, only Cyprus will grow. European Union expects its recession to last till 2011 & 8.5 million Europeans will lose jobs over the next 2 years.

With unemployment hitting 10.9 % in EU & 11.5 % in Euro area in 2010, EU has revised its GDP estimates for 2010, predicting a 0.1 % drop rather than a small rise.

This data is stated by Jaquin Almunia , Economic & Monetary Affairs Commissioner , European Union.

Germany’s boom has been due to sales abroad. Which reached 40 % of its total output because of China & India buying heavy machinery, but when growth in China & India collapsed due to economic down turn – Germany’s exports collapsed?

Facts of the US economy need not be mentioned – in June 09, US unemployment rate moved highest in the past 25 years US has already lost 6.5 million jobs since the recent recession. We are reading how many companies are going bankrupt!!

Bank of International settlements (BIS ) States in its 79th Annual report released on 29th June 09 that, there is a significant risk that recovery in emerging market economies will be delayed . Further BIS said that, foreign reserves in the first quarter fell to 80 % in Korea and India.

Given the possibility that external shocks could persist, such depletions raise questions about the reserve adequacy. A severe economic downturn and a delayed recovery in capital inflows could produce future episodes of market instability that could lead to a much faster draining of the reserves than suggested by these indicators.

Economic growth in developing world will be 1.2 %, the world bank had said on June 22. Developing nations in eastern Europe and Central Asia will be amongst the hardest hit, the world bank has stated. The region’s economy is likely to shrink by 4.7 % this year.

The World Economy will contract 2.9 % this year, as global trade slumps 9.7 % according to the Washington based Bank.

My belief is that , though the economies may not have a free fall any further, but will deteriorate slowly for two- four quarters. Growth will start only after one year, and that too, slowly. I don’t expect miraculous growth in the next two years . Miraculous growth is nothing but the growth that was at the start of 2007. So there is enough pain for the common man for the next one to two years.

Dr.Joshi, the issue is not of growth alone, it is about uniform growth. High growth and low distribution is not the solution, neither is low growth & high distribution. We are looking at in this budget high growth and wider distribution across all segments. Budget must address this issue .The growth of 6.7 % that we see is from 20 % of the Indian population. Our policy makers are all so glued to Mumbai and Delhi that we forget smaller towns.

What to address: E.g. one of the ‘Gem’s ‘is food processing sector. Of the total agricultural produce, India just processes only 5 % annually. In contrast, countries in the South East Asia process at 60 % of their food produce. This will not only create employment, but also give more income to farmers, thereby, raising their financial status and spending capacity. Perishables would not be lost, adding to the nation’s food bank. This would also enhance India’s share in the global food trade from 1.5 % to 3 % thereby increasing the forex . India has vast natural resources, we need to use them, generate employment.

Also, that we need 92 million jobs as identified by the 11th Plan. A report from the working group on skill development and training points out that 8% growth can create employment opportunities for about just 30 million people and special employment generation programmes can add another 20 million job opportunities . We must take into account that we add around 12.8 million are added to work force every year. Need is not just of job creation but the right skill development. Over 40 % of the government expenditure on education goes towards elementary education!! Will this work to help the nation??

Dr.Joshi, you must tell Dr.Singh that he is driving his car seeing the rear view mirror of another person’s car (China). He needs to look and drive his own car, and carefully look sideways and more importantly, the road below and ahead!! Integrity & good image of the PM is not a question but competence to steer the nation is! . He might be an intelligent Professor , a honest man but not a successful Prime Minister. He has so far failed as a PM . I do not wish to comment whether he is a ‘weak PM’ or ‘Strong’ & that does not matter here. But for sure , India has become weaker under his regime in the last five years . He will not be remembered for what he did in 90’s, but how he steers 09. That is the test of his leadership. You all must realise India is a world in itself & act accordingly.

Now coming to Military: This is our weakest link ! Most of the fighter planes are ‘flying coffin’s- every fort night, we have a crash. Agni missile is a ‘paper missile’, and out of 39 squadrons, only 9 work. Our submarines are in bad shape- top defense officials know this in the heart of heart- To conceal these secrets , the parties appoint army men on diplomatic or gubernatorial assignments . No comments on the nuclear arsenals! India is not at all strong militarily . We have seen Kargil; we see deaths in Kashmir, terrorists attacking. So Military- wise, we are a failed state. It is not that we cannot attack Pakistan; we know that we cannot defeat them! That’s the reason; we only bark at Pakistan and not bite!! Had US been in place of India, Pakistan would have been sanitised years ago for its mischievous demeanor & misadventure!!

How will this government ensure the safety of Indians!!

Security of the nation- Diplomacy :

Neighbors: We are surrounded by all the neighbors who are hostile.

China is raising the issue of Arunachal Pradesh and Dalai Lama.
Sri Lanka is resolutely hostile and we have just seen the end of war against Tamil Tigers.
Pakistan , less said the better.
Burma is known to patronize ULFA etc.
Bangladesh infiltration and our issues in North east is not a hidden issue. It is believed without doubt, that the Muslims from Bangladesh have increased in Guwahati & North east to such an extent that Hindus are in minority compared to Muslims. In the next election, we will not see victory of any other than Muslims – if the issue is not tackled now!
Nepal has already expressed its discontent and accused India of meddling in its internal affairs.
America is not the same as it was before signing the nuclear deal. It is doling out aid to arm Pakistan
Russia : has also agreed to supply arms to our neighbours

Now, having cleared the air about the failure of India’s diplomacy, I have nothing more to tell. Anyone can conclude a total failure!! We have failed to build friendly relations without neighbors.

Finally, Economically, we are clueless about the solution. We are one status above junk , having a huge fiscal deficit , rupee at a new low of Rs.48 to US $, Poverty is 60.5 % of the population , We have not built any shock absorbers in our economy . Defense is doing badly, Neighbors are hostile and we are weakest , waiting only to be attacked and defeated. Our foreign policy is a total failure. Are we not a failing state? Who to blame? The government, obviously. I don’t want to shift the focus due to this budget which is nothing more than a mere ‘Eyewash’.

Dr.Joshi , please do express the common man’s dilemma & pain in these unprecedented times of ‘fear’ and ‘uncertainty’ when you speak in Lok Sabha, and do inform our leaders that , we are not at all amused by the long speeches in the budget or ‘eye wash budget’ to pacify us till the next budget. We need outcomes drawn from each investment (Which is our own money given as direct and indirect taxes ), outcomes have to be measured in a time bound manner. We don’t just need to fix the problems but also fix the accountability. We need an outcomes based budget with a plan that addresses the three issues , Youth , Economy and Security of the nation, and creates enough jobs , eliminates corruption in judiciary and creates social security and safety for all staying within the borders of the nation without any discrimination based on caste , religion or economic stature.

Hope we will not be left to believe that we wasted another five years for a promise

Waiting to hear you in parliament

As always, with best regards

A common man
Rajendra Pratap Gupta
Email: rajendra.india@gmail.com