The audacity of hope? First, the country has only 2.6 Gw of solar capacity installed as of now, and the plan has been to take it up to 20 Gw by 2020 (revised later to 2022)

Among the dozens of announcements made by the Modi government in the less than six months that it has had, the most ambitious - indeed, the most audacious - is the plan to install 100,000 Mw (or 100 Gw) of solar power generating capacity. Audacious because of two things. First, the country has only 2.6 Gw of solar capacity installed as of now, and the plan has been to take it up to 20 Gw by 2020 (revised later to 2022). That was considered ambitious till now because of the nearly eight-fold jump. Second, the proposed 100 Gw target is for five years, that is, by 2019. In other words, what the Modi government proposes is a five-fold multiplication of an already ambitious target, along with a crunching of the time schedule. Such a scale change has never been attempted in India, in any field.

We need to see the numbers in context. A hundred Gw of solar power capacity over five years is the equivalent of about 30 Gw of coal-thermal capacity, because of the lower capacity utilisation delivered by solar (there is no sun at night, or in most of the monsoon months, and the winter sun is weak). Meanwhile, the total installed capacity for power generation is already 240 Gw; this is growing at 20 Gw annually, with only a marginal share for solar. Even the new solar plan will not, therefore, bring about a significant change in the country's energy mix, till many years have passed. Nevertheless, it is the boldest gambit yet for reducing the dependence on power based on imported fuels (coal and gas).

There will be technical challenges (to bring down the cost per unit of power), policy and production challenges (to produce the equipment at home rather than order them all from the Chinese and Americans, who are clamouring against protectionism); and, of course, financial challenges. The investment required for the 20 Gw plan was put at $19 billion (Rs 1,15,000 crore). A pro rata expansion of that number for 100 Gw means investing that much every year. Finally, there is the challenge of land - a solar power programme on this scale means covering thousands of sq km with solar power equipment. Land on that scale may be available in only two or three states (principally Gujarat and Rajasthan), both of which also get plenty of sun and are at a distance from coal pitheads.

The opportunities are equally outsize. A massive solar programme could give birth to new businesses, with assured demand - the annual spend will be bigger than the defence acquisitions budget, over which so many companies are salivating. If the cost of solar power drops to normal grid levels by 2017 (as is expected), and there is further improvement in the capacity utilisation factor (a 50 per cent improvement is feasible), the pay-offs would be substantial - especially in remote areas where it is expensive to reach grid power. Finally, the country would have taken a leap in the direction of a low-carbon growth strategy - and a chance to earn brownie points in the climate change negotiations.

The change being planned by the Modi government is very Chinese in scale and scope. Naturally, the key question concerns Chinese-style execution. Moving at great speed on multiple fronts is not something the government is known for, and this will be a test of whether Mr Modi can transform government functioning. Involving the private sector will be crucial - for building the equipment as well as setting up the utilities and running them. But even India's best-run companies will find it a challenge to scale up so fast. In setting such a bold target, Mr Modi is, therefore, challenging the entire system. One wonders what scale change will be attempted after this one. Wind power?

Black money and black holes Instead of chasing chimeras or politically motivated witch-hunts, we need to focus on the phenomenon of black money. The point is not how it is created but why

Ram Jethmalani was once asked why he defended obvious bad eggs. His disarming reply was he had to earn enough to afford to represent the virtuous poor. Since the exchange took place at a party and the questioner was an attractive young woman, Jethmalani was probably being gallant or facetious. But many a true word is spoken in jest, and his answer was a reminder that good and bad, legal and illegal,black money and white are often inextricably linked.

Most lawyers and doctors accept only cash payment without giving a receipt. Real estate - India's most vigorous activity after politics - both creates and absorbs black money. Hotels, restaurants, tourism, what are called events and valet parking revolve giddily on cash. No wonder the Raja Chelliah committee recommended milking the flourishing service industry with a special tax. Ramkrishna Bajaj's preface to Assocham's 1991 report on black money noted that the parallel economy was 21 per cent of India's gross domestic product. The economy might collapse if black money dried up. Hawala transactions and terrorism funding, as well as election budgets, would have to find other channels.

Assocham also recorded that 21 schemes had failed in the previous 25 years to bring unaccounted funds into the mainstream. Why? The reasons for black money that businessmen who fund all parties give - high taxes, bureaucratic complexities and stringent exchange control - have gone. Yet, more funds are sent abroad now. Again, why?

Clearly, rich Indians have little confidence in India. Perhaps we are also chronically dishonest. Moral outrage, much of it simulated, and political one-upmanship will achieve nothing if that is so. Nor will new laws if action on the ground remains bumbling. My old friend Anand Bikram Shah, now long dead, was very worried once because the Central Bureau of Investigation (CBI) had summoned him with his passport. I advised him to reply though although residing in Kolkata, he was Nepalese and related to the then reigning King Birendra. He would be happy to comply if the CBI still wanted him. He heard nothing more.

Another anecdote. As my brother, a Canadian citizen, was once changing some dollars at the airport, I expressed surprise at the absence of forms to fill. "Nobody would change dollars here if they weren't legitimate!" the cashier replied without looking up from the notes he was counting. Yet, a CBI notice often arrived months after my brother paid for a purchase in Kolkata with a foreign credit card. My mother always wrote back to say he was a Canadian citizen and she was forwarding the notice to him in Montreal or Monrovia, wherever he was. There matters ended.

Instead of chasing chimeras or politically motivated witch-hunts, we need to focus realistically on the phenomenon of black money. The point is not how it is created but why. Answer that, and you've solved the problem. Meanwhile, as Pradip Burman's statement indicates, not every foreign account is illegal. Nor does money abroad have to be black. There are many reasons why Indians prefer to save or invest abroad.

Exploring those would be more rewarding than the Supreme Court's pursuit of the Holy Grail of integrity, Anna Hazare's bid to edge back into the limelight, or the middle-class envy and greed that TV crusades exploit. Jethmalani is carried away on tides of passion as on the eve of Bill Clinton's state visit when he urged Atal Bihari Vajpayee to sign a mutual defence treaty with the US.

When Manmohan Singh visited Singapore as finance minister and spoke of India's financial needs, a German-Swiss journalist told him there were too many rich Indians with Swiss accounts for Europeans to think of India as a poor country. I know, Singh replied, or words to that effect, that's why I hope to persuade some of them to invest in India.

Narendra Modi should also set himself that goal instead of playing to the gallery with farcical 100-day vows. As a politician, he is obliged to do what the Congress didn't. Yet he is probably as aware as Singh was that the economy would grind to a shuddering halt if black money were suddenly withdrawn.

Someone of his earthy common sense must know the solution lies in making India worth investing in, a country where Indians choose to retain their money, instead of buying car factories and steel mills in distant places. Punitive campaigns may catch some small fry but the big fish - who make and unmake policy - will buy their way out until Modi can restore Indian confidence in India.

Recalibrating India’s foreign policy

The new government is clearly defining Indian interests (‘India First’) in terms of technological and economic development with a greater focus on these goals in foreign policy

Prime Minister Narendra Modi has now interacted with the leaders of four of the five countries/regions — SAARC, China, Japan, Russia, and U.S. — on the list of foreign policy priorities mentioned in the President’s address to the opening session of Parliament. It is, therefore, an appropriate time to take stock of the underlying changes in the directions of India’s foreign policy. In other words, is Mr. Modi’s foreign policy likely to differ from that of Sonia Gandhi-Manmohan Singh?

Every country’s foreign policy has elements of continuity and change following a change in government. India’s policy under Mr. Modi is no different. The changes have not necessarily been explicitly articulated, but are implicit in the government’s actions and view of the world.

There are five areas of the emerging change: the centrality given to economic and technological development; the orientation of domestic and foreign policies toward this objective; the emphasis on national power including military power; and stress on soft power; and a reduction in self-imposed constraints on actions that other countries may construe as inimical to their interests.

Changes in foreign policy

The first change in foreign policy relates to the greater attention provided to economic objectives. This is not a mere reiteration of the economic development objective that has been India’s mantra since independence but recognition of the role of technology (broadly defined) in all aspects of economic development. This involves an implicit benchmarking of the technological capabilities of the Indian economy with the global best practices; having a perception of the gaps; and setting the goal of bridging these gaps.

The government’s divergence from the policies of the previous regimes is reflected in two initiatives, the Swachh Bharat Abhiyan and the Digital India campaign, both of which involve the use of appropriate technology.

This is probably the first time that an Indian Prime Minister has explained India’s economic and technological objectives abroad — ‘India First’; has identified the specific role each country could play in achieving these objectives — for instance U.S. and Japan; and has made that the centrepiece of his discussion with the leaders of that country. ‘India First’ means that India’s requirements — when it comes to various areas like basic sanitation, defence and space technology — will be expressed with greater clarity and specificity to other countries.

The second change relates to a much greater orientation of domestic and foreign policies toward those objectives. The Indian Prime Minister has been very explicit about Indian objectives with respect to economic development and technological catch-up and in exploring how domestic and international policies will be used to close the gaps across the entire spectrum. Its decisions will then be based on a cost-benefit analysis on a defined set of parameters, not on ideological considerations like that of non-alignment.

The third change is with respect to a greater emphasis on overall national power — recognising that economic power is its foundation, but also giving a greater role to military power.

The Modi government appreciates that economic power cannot be a substitute for military power in deterring aggression from the ideologically driven foes. On the contrary, economic assistance can be viewed by military ideologues as an expression of superiority to be resented. Economic relations can complement international security relationships by influencing the behaviour of non-ideological, economically rational players in the global system but only military strength can deter militaristic ideologues and ensure peace.

Operationally, this has two important implications. One is a clearer appreciation of all the dimensions of external threat, particularly unconventional threats. This requires a build-up of world-class equipment and skills over a much wider spectrum of warfare and covert capabilities and a willingness to boldly attack the aggressor in his safe havens. This is already happening both in terms of enhancing capabilities in counter-terrorism and in defence against non-state actors; and, more importantly, in doctrines incorporating a willingness to take calculated risks in using asymmetric capabilities.

On deterrence

Deterrence is however only effective if the adversary is convinced that the new government will respond to asymmetric warfare with appropriate action spread across a much broader spectrum of conventional and unconventional options. When diplomatic moves sent to our Western neighbour, like the track-2 dialogue, did not have any impact on ‘deep state’, it became necessary to bring about a change in the overall strategy through a heightened conventional response to border firing/ceasefire violations.

Similarly, unconventional psychological warfare and ‘creeping annexation’ tactics along the northern border are being countered by bolder plans — like the decision to construct a ‘McMahon highway’ along LAC in Arunachal — that have both conventional and symbolic components.

The second implication is a much greater focus on national capability to produce a broad range of defence equipment in India. ‘Self-sufficiency’ has been a slogan from the days of Nehruvian socialism, but it played second fiddle to the ideological goal of preserving public sector’s monopoly over the means of (defence) production. This is being decisively broken.

The ability and willingness to transfer technology and help build skills and research capabilities at lower costs will consequently play a much more important role in our relations with Japan, Russia, U.S. and EU countries. This reinvigorated approach to national security is likely to manifest itself in a reversal of the trend of decline in ratio of defence expenditures to GDP.

The fourth change is a greater emphasis on ‘soft power’. Mr. Modi’s speech to the Indian diaspora in New York was a successful attempt to inspire them to contribute to the country’s economic and technological development.

The fifth change is a freeing up of self-imposed, historical and mental constraints on developing the relationship with any country to its full potential. Thus, India’s economic relationship with potential adversaries can be independent of its security relationship. This is reflected in developments like the economic agreements reached between Mr. Modi and Chinese President Xi Jingping, the formation of the BRICS Bank and AIIB (Asian Infrastructure Investment Bank). Further, the relationship with one country will not constrain that with others — cooperation with China will not affect that with Japan. Both will be evaluated in terms of India’s objectives of building national power.

Pragmatic reset of policy

Mr. Modi’s pragmatic reset of policy toward the U.S. reflects this change in overall approach. The U.S. is still the sole superpower and stands head and shoulders above others in the depth and breadth of its strategic and defence technology. It is also a major source of technology, capital and export markets for the Indian private sector.

There are, however, inherent differences in perspective between a rich global power and a poor regional one: U.S. is a net exporter of technology with high per-capita pollution while India is a net technology importer with high incremental pollution.

A pragmatic approach seems to be emerging to resolving these differences and to minimise the negative fallout of unresolved differences and focus on areas of convergence like counter-terrorism and maritime security in and around the Indian Ocean.

The Modi-led government is changing the emphasis of India’s foreign and national security policies. These involve a clearer definition of Indian interests (‘India First’) in terms of technological and economic development; a greater focus on these goals in foreign policy; and a consequent integration of domestic and foreign policies.

There is also a greater effort to enhance military power, including through asymmetric warfare. Self-imposed constraints of ideology and misplaced fears of offending other countries are being jettisoned. Overall a much more confident, credible and effective national security and foreign policy is predicted to emerge over the next five years

congratulatons !! to all who qualified CAPF-2014 WRITTEN EXAM,SAMVEG IAS ,DEHRADUN

CENTRAL ARMED POLICE FORCES (ASSISTANT COMMANDANTS) EXAMINATION, 
2014 – DECLARATION OF RESULT OF WRITTEN PART
The Central Industrial Security Force (Nodal Authority nominated by 
Ministry of Home Affairs) will intimate to the candidates about the date, time &
venue of the Physical Standards Test/ Physical Efficiency Test (PET) & Medical
Standards Test, to be conducted by them. In case, any candidate does not receive
the call letter for Physical Standards Test/ Physical Efficiency Test (PET) & Medical
Standards Test (MST) by the 20th November, 2014,

http://www.upsc.gov.in/exams/written-results/cpf/2014/CAPF2014_WrRslt_list_Final_English.pdf

A constitutional impropriety

The Public Accounts Committee chairman’s recent remark that the CAG must not report notional losses goes against the Constitution that allows the CAG to decide the audit’s scope

At a Conference of Accountants-General, K.V. Thomas, Chairman of the Public Accounts Committee, is reported to have observed that the Comptroller and Auditor General (CAG) should report on financial improprieties, but should not talk about notional losses or report large figures and sensationalise the report.

There has always been a close relationship between the PAC and the CAG. The PAC is an august Parliamentary body that enforces the accountability of the executive, and the CAG as the constitutional instrument of accountability has repeatedly been referred to as the friend, philosopher and guide of the PAC. One is therefore somewhat surprised at the admonition that the Chairman, PAC, has chosen to address to the CAG.

Constitutional responsibility

In the observation made by Mr. Thomas, assuming that the report is correct, there is a constitutional impropriety. This lies in telling the CAG what to do and what not to do in the discharge of his constitutional responsibility. The Constitution lays down his functions in very general terms, to be spelt out by an Act of Parliament, and Parliament has done so — again, in rather broad terms — in the CAG (Duties, Powers and Conditions of Service) Act 1971. Within that broad framework, it is for the CAG, as a constitutional authority, to determine the scope of his audit.

“The cancellations of licences and allocations of 2G spectrum and coal blocks by the Supreme Court vindicates the CAG’s audit reports”

The PAC proceeds on the basis of the report of the CAG; it cannot say how the report should be written or what its contents should be. It may ignore some reports of the CAG, treat certain objections as relatively less important, fail to discuss certain reports, or even disagree with some of the observations in the Reports; but its point of departure is the Report produced by the CAG.

Secondly, it is fallacious to regard the idea of ‘notional loss’ as an impermissible extension of the audit function; there is also a fallacy in the very term ‘notional’. Consider the following cases: a decision based on wrong or inadequate premises or facts or numbers; a decision arrived at by following a patently wrong route; or a decision based on a choice of one of several possible routes. In all these cases the decision can have financial consequences which may be different from those that would have arisen if different premises or facts or numbers had been the starting point, or if a different route or method had been followed. It is not only legitimate but obligatory for the CAG to indicate those financial consequences. There is nothing ‘notional’ or ‘presumptive’ here. In so far as choice ‘A’ and choice ‘B’ are bound to have distinct outcomes, the CAG has a constitutional duty to point this out.

The problem here is of two kinds. Firstly, the quantification of the different outcome (forgone revenue or extra cost incurred or an unintended benefit, i.e., state patronage or largesse, conferred on particular parties) is extremely difficult and fraught with uncertainty; and secondly, the choice that the government in fact made in a certain case might have been a deliberate one on certain grounds, in which case, the CAG cannot say that the government could have made a different choice.

Where the quantification is problematic and might involve different assumptions, the right course for the CAG would be to make calculations on different assumptions and by different methods and give different numbers with the caution that none of them is definitive. That does not mean that there has been no financial consequence; it only means that a precise number cannot be put on it. This is what the audit report on 2G spectrum allocations said.

If the government chose a certain path deliberately for policy reasons, one would expect contemporaneous evidence to that effect: a note or other document setting forth the alternatives and their implications and a governmental decision deciding on one alternative for stated reasons. If there were any such documentation, it would not be for the CAG to question the decision. In the absence of any such documentation, the presumption is that the Government was unaware of the implications of their decision. If so, the CAG must, in terms of his constitutional responsibilities, point this out.

Charge of ‘sensationalisation’

Thirdly, there is the charge of ‘sensationalisation’. The audit reports do not sensationalise anything; the media do. The figure of 1.76 lakh crore in the 2G report was not put forward as a definitive figure; it was one of three different figures calculated in three different ways, and it was not privileged over the other figures.

The three different routes through which the quantification was attempted are as follows: by comparing the actual revenue received by the government with the revenue that might have been received by inference from such relevant data as were available, i.e., 3G prices; the high prices at which a few of the allottees resold a part of their equity soon after the grant of licences; and a higher offer which was received by the government but was not accepted for certain reasons. The three routes gave a wide range of values from Rs.57,666 crore to Rs. 1.76 lakh crore, but it was clear that in all three cases a large loss of potential revenue was indicated.

Rationale of the numbers

However, the figure was large and the media pounced on it. The CAG kept explaining the rationale of the numbers but the figure of 1.76 lakh crore captured the public imagination and became a real figure in the minds of the public. Does it follow that the CAG should have avoided that figure, when he was clearly stating his three different calculations? Is it fair to accuse him of deliberately sensationalising the case?

Let us suppose that he had refrained from mentioning that large figure; he would also have had to refrain from mentioning the other two numbers. The report would then have talked about the financial implications of the route followed by the Government but without any numbers. What impact would such a report without any numbers have had?

Think of all the consequences that the CAG’s Reports on 2G and coalmine allocations have had, and the final denouement of cancellations of large numbers of licences and allocations by the Supreme Court. Does that not vindicate the audit reports and establish that the CAG was indeed drawing attention to major lapses?

Would such a denouement have followed if the CAG’s reports had not made a stir, and would they have made a stir if the figures had not been large? Would it have been adequate for the reports to say blandly that there were procedural lapses in the 2G and coalmine allocations, without any indication of the magnitude of the lapses? How could that indication be given without numbers? All that one can ask for is that the figures be given with due caveats, and the reports do so.

The point made here is not that large figures must be mentioned to secure attention to the report, but that large figures must not be refrained from to avoid the charge of sensationalism.

Govt. cuts non-Plan spending by 10%

The Finance Ministry on Thursday ordered a mandatory 10 per cent cut in the Centre’s non-Plan expenditure for 2014-15.

The cut does not cover interest payment, repayment of debt, defence capital, salaries, pension or Finance Commission grants to States, says a circular.

Subsidies will face the brunt of the cuts.

The UPA government too had in place austerity measures. For 2013-14, former Finance Minister P. Chidambaram rolled out cuts of 15 per cent on average across both Plan and non-Plan expenditures. Union Finance Minister Arun Jaitley has spared Plan expenditure from his 10 per cent spending cut.

A Finance Ministry release said the objective of the fiscal prudence and economy measures was the need to rationalise expenditure and optimise available resources. The Ministry revived its standard measures, including curbs on conferences abroad or in five-star hotels, purchase of vehicles and staff cars, travel curbs on flying first class and ban on new posts.

Modernising the monetary policy

Since monetary policy takes time to act on output and inflation, a forward-looking assessment is essential

The Finance Minister in his maiden Union Budget speech had observed that “it is also essential to have a modern monetary policy framework to meet the challenge of an increasingly complex economy. Government will, in close consultation with the RBI, put in place such a framework.” Indeed, the government, according to press reports, is working on modernising the monetary policy.

Varying objectives

The objective of monetary policy varies in different countries. In the U.K., the objective of monetary policy is to deliver price stability — implying low inflation — and, subject to that, to support the government’s economic objectives including those for growth and employment. Price stability in the U.K. is defined by the government’s inflation target of two per cent.

In the U.S., monetary policy has two basic goals: to promote maximum sustainable output and employment, and to promote stable prices.

In India, according to the Reserve Bank of India (RBI) Act, 1934, the objectives of the Reserve Bank are “...to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.” The formulation, framework and institutional architecture of monetary policy in India have evolved over time around these objectives — maintaining price stability; ensuring adequate flow of credit to sustain growth; and securing financial stability.

Modernising monetary policy framework should not be confused with another approach popularly called inflation targeting (IT) just because over the years, from 1990 to 2008, about two dozen countries adopted it, prominent amongst them being Australia, Canada, New Zealand, and U.K. IT assumes that price stability is explicitly the mandate and a quantitative target for inflation is publicly announced.

“Models which are used for forecasting inflation should be placed in public domain to establish credibility and inspire confidence”

Overall, monetary policy is based on a wide set of information that includes an inflation forecast; transparency in operations; and accountability mechanism. As can be easily noted, the IT approach mounts blinkers on the central bank and absolves it from other responsibilities: IT was in disrepute after the onset of the great recession in 2008. India resisted adopting IT all these years as it binds the central banker, and, after minting its own Multiple Indicator Approach in 1997, demonstrated its efficiency by following it meticulously to stave off the Southeast Asian Crisis as well as the great recession.

The monetary policy framework can be modernised by a number of initiatives which are successfully followed in other countries. In the U.K., every month, the Agent’s Summary compiled by the Bank of England’s (BoE’s) 12 agents, following discussions with 700 businesses, is published to assist the monetary policy makers in conjunction with intelligence from other sources. Similarly, in the U.S., the Beige Book, published eight times every year, is based on anecdotal information on current economic conditions collected by each of the Federal Reserve Banks in their respective districts through reports and interviews with key business contacts, economists, market experts, and other sources. The Beige Book is an important source of real time market intelligence for the Federal Open Market Committee (FOMC).

Another key component of modern monetary policy is Monetary Policy Committee (MPC) which consists of members from within the central bank and experts in the country. In the U.K., the external members of the MPC are appointed for three years by the Chancellor and such appointments of independent members are designed to ensure that the MPC benefits from expertise in the area of economics and monetary policy. Each member of the MPC has a vote to set interest rates and the MPC’s decision is not based on a consensus of opinion.

The standard practice in the advanced countries is to disseminate research and models that are being used for forecasting. Since monetary policy takes time to act on output and inflation, sometimes more than two years, a forward-looking assessment is essential. This forecast can be prepared with the help of large macro-econometric models. As the BoE has been actively engaged in IT, the modelling experience in the U.K. can serve as a good illustration.

The history of large macro-econometric models used in the BoE dates back to 1970s and though perfected over the years, the BoE still follows a multi-model approach to project inflation nine quarters in the future.

Initially, the BoE used to supply the projected path of inflation exclusively to the Treasury. Since adopting IT in October 1992, the BoE has been placing quarterly inflation report in the public detailing its assessment of inflation and growth along with methodology of computing fan charts, and assumptions and models used in forecasting. The inflation report helps the BoE share its thinking with the public, explaining the reasons for the decision.

Transparency, clear communication and forward guidance are other pillars of modern monetary policy framework. To enhance transparency in operations, the U.S. Federal Reserve Bank (FRB) prepares a quarterly report on balance sheet developments in addition to semi-annual reports to the Congress discussing the conduct of monetary policy and the future prospects along with a testimony from the Federal Reserve Board Chair. In the U.K., minutes of the MPC meetings, with the voting pattern are also released to public within a fortnight.

Forecasting inflation

To modernise the monetary policy in India, to begin with, regional report like the Beige Book can be initiated. As inflation impacts everyone in the country, appointments to the Monetary Policy Committee (MPC) should be made by the Government. As with Mission Mars, which took a year to complete, impact of changes in interest rates can be felt in an economy only a few months later. Hence, it would be useful to estimate the transmission mechanism and the time lag that a change in interest rate would take to impact inflation, investment and growth.

Therefore, models which are used for forecasting inflation should be placed in public domain to establish credibility and inspire confidence. In absence of such robust and trusted models, the markets would face uncertainty, misinterpret RBI’s initiatives and yield contrary results. Once these relationships are quantified, and after wider and informed public discussion, India can consider adopting Inflation Targeting to yield effective results.