Fight against hunger too slow and uneven

The Millennium Development Goal of halving the proportion of chronically undernourished people in developing countries by 2015 is within reach. But progress must accelerate by the end of this year

Almost 800 million people, or one in nine in the world, continue to suffer from hunger. The number of hungry people has declined globally by more than 167 million over the last decade, and by more than 200 million since 1991; 780 million of the chronically hungry are in developing countries, where their share has declined from 23.4 per cent in 1991 to just under 13.0 per cent at the end of 2014.

Thus, according to the latest State of Food Insecurity in the World (SOFI 2015) report, the Millennium Development Goal (MDG) of halving the proportion of chronically undernourished people in developing countries by 2015 is within reach, but only if progress accelerates sufficiently by the end of this year.

Progress too slow

At the 1996 World Food Summit (WFS), heads of government and the international community committed to reducing the number of hungry people in the world by half. Five years later, the MDGs lowered the level of ambition by seeking to halve the proportion of the chronically undernourished.

By the end of 2014, 72 developing countries had reached the MDG Goal 1 target. Of these, 29 have also achieved the more ambitious WFS goal. However, the number of hungry people in the world has only declined by a fifth from the billion estimated for 1991.

…and uneven

Overall progress has been highly uneven. Some countries and regions have seen only slow progress in reducing hunger, while the number of hungry has even increased in several cases.

In sub-Saharan Africa, more than one in four people remains chronically hungry, while Asia, the world’s most populous continent by far, is also home to over half a billion hungry people. Meanwhile, Latin America, the Caribbean, East and Southeast Asia have significantly reduced both the share and the number of undernourished. Most countries have reached the MDG target. West Asia and Central Africa have seen a rise in the share of the hungry compared to 1991, while progress in sub-Saharan Africa, South Asia and Oceania has not been sufficient to meet the MDG hunger target by 2015.

Lessons from experience

While there is no one-size-fits-all solution for how to improve food security, SOFI 2015 identifies several factors that have played a critical role in achieving the hunger target.

Growth needs to be inclusive to reduce poverty and hunger. Access to food has improved rapidly and significantly in countries that have experienced inclusive economic growth, notably in East and South-East Asia. Better performers in Africa met the MDG hunger target while those that made slow progress did not.

Raising the productivity of family farmers can be an effective way out of poverty and hunger by increasing net incomes and in town investments for further improvements. improved agricultural productivity, especially by small holder family farmers and incomes, leads to poverty and hunger reduction.

Economic growth is usually helpful as it can expand the fiscal revenue base, including to finance social transfers and other assistance programmes. In Latin America and South Asia, social protection has made the difference, especially for the rural poor, who comprise 78 per cent of the poor globally.

The expansion of social protection — cash transfers to vulnerable households, food vouchers, health insurance or school meal programmes — correlates strongly with progress in hunger reduction. Besides the direct impact on relieving hunger and poverty, social protection can enable those with fewer assets to boost their incomes, and invest more, thus enhancing their resilience.

SOFI 2015 estimates that some 150 million people worldwide have escaped extreme poverty thanks to social protection. However, more than two-thirds of the world’s poor still do not have access to regular social support. Transfers help households manage risk and mitigate shocks that would otherwise trap them in poverty and hunger.

With the number of undernourished people remaining “unacceptably high”, the need to strengthen the political commitment to eliminate hunger cannot be overemphasised. The pledges of the Community of Latin America and the Caribbean at its 2013 summit and of the 2014 African Union summit to end hunger in their respective continents by 2025 are very encouraging. In 2015, the governments of the world are expected to strengthen financing for development, commit to the post-2015 Sustainable Development Goals and ensure the needed collective action to address global warming. SOFA 2015 is a timely reminder of the enduring legacy of needless hunger and poverty which we must eliminate by 2030.

Seven Billion Dreams. One Planet. Consume with care.’

Seven Billion Dreams. One Planet. Consume with care.’

Environment Minister’s Message on the Occasion of
World Environment Day

Emphasising the need to alter consumption patterns in a manner that more and better can be done with less resources, Minister of State of Environment, Forest and Climate Change (Independent Charge), Shri Prakash Javadekar has exhorted people to make at least one change in their lives towards a more responsible resource consumption behaviour, or practice. In a message on the occasion of World Environment Day here today, Shri Javadekar said that business, as usual, was no longer an option.  The Minister emphasised that every individual has a responsibility in contributing to protect the environment and reduce the rate of depletion of natural resources.  He added that people could become agents of change, by being more conscious of the environmental consequences of their personal choices.   He pointed out that by the year 2050, with an expected population of 9.6 billion, it is estimated that three planets would be needed to sustain the ways of living and consumption. The theme of this year’s World Environment Day is “Seven Billion Dreams. One Planet.  Consume with care.”

Shri Javadekar also urged the industries and the society to adopt environmentally responsible practices such as the approach of three Rs – Reduce, Reuse and Recycle.   He said that while less than 3% of the water in the world is drinkable, one out of seven persons in the world do not have access to drinkable water.   Pointing out that dietary choices and habits affect environment, he said that 1.3 billion tonnes of food is wasted every year, while almost 1 billion people go undernourished and another 1 billion go hungry.  Food sector accounts for around 30% of the world’s total energy consumption and around 22% of total greenhouse gas emissions, the Minister added. 

Following is the text of the message on the occasion of World Environment Day:

“Today we celebrate the World Environment Day, to raise awareness about the importance of a clean, green and healthy environment for human well-being and to encourage everyone for taking positive action in addressing challenging environmental issues. Celebrated each year on 5^th June, the Day marks the opening of the United Nations Conference on Human Environment in Stockholm in 1972.

The theme this year, ‘Seven Billion Dreams. One Planet. Consume with Care’ is very topical and relevant, as it reminds us of the enormous impact that our personal choices and decisions in day-to-day lives as consumers, have on environment. It also emphasises the responsibility each one of us has, in contributing to protecting the environment and reducing the rate of depletion of natural resources.

Changes in natural resource base due to human activities have taken place more rapidly in the past 50 years than at any time in human history, causing continued deterioration of environment. As a result, many of the Earth’s ecosystems are nearing critical tipping points of depletion, or irreversible change. By 2050, with the current consumption and production patterns and with a rising population expected to reach 9.6 billion, it is estimated that we would need three planets to sustain our ways of living and consumption.

We simply cannot afford this, as we have but ‘Only one Earth.’ Ironically, this was the theme for the first World Environment Day 42 years ago in 1973. We still have some time to transform the challenges of limited and fast depleting resources into opportunities that will enhance the quality of life for all, without increasing environmental degradation and without compromising the resource needs of future generations.

This, however, calls for altering our consumption patterns in a manner that we do more and better with less; less of water, less of energy, and less of all other resources. ‘Business as usual’ is no longer an option for us. By becoming more conscious of the ecological impact of our actions and environmental consequences of the personal choices we make, we can become agents of change.

Unsustainable patterns of consumption are one of the major causes of increasing environmental deterioration. That we can make a difference through our choices and decisions can be gauged from these facts relating to water, energy and food:

·                  Less than 3% of the world’s water is drinkable, of which 2.5% is frozen. Water is being polluted faster than nature can recycle and purify. More than 1 billion people do not have access to fresh water. Excessive use/wastage of water is leading to global water stress.

·                  Energy consumption has grown most rapidly in transport sector, followed by commercial and residential use. The cost of renewable energy is becoming increasingly competitive, with that being derived from fossil fuels. We can therefore, shift our consumption patterns with lower energy and material intensity, without compromising on the quality of life.

·                  Food sector, due to environmental impact in its production phase, accounts for around 30% of the world’s total energy consumption and around 22% of total greenhouse gas emissions. 1.3 billion tonnes of food is wasted every year, while almost 1 billion people go undernourished and another 1 billion, hungry.      Over-consumption of food is detrimental to our health, as well as to the environment. Dietary choices and habits, therefore, affect environment.

India has had a long cultural tradition of frugality and simple living in harmony with nature. As a result, conservation ethos is deeply ingrained in our people. However, unfortunately, the symbiotic relationship of man with nature gets debilitated as societies develop, risking the well-being of future generations.

In today’s times, when we look closely at the relationship between people and environment, though hard to see at first, we would be able to recognise unsustainable behaviours amongst most of us. Let us try asking ourselves some difficult questions.

-          Do I need everything I own?

-          What if I did not own this?

-          What are my real needs?

-          Am I aware of what I eat, how it is produced and how far it has travelled?

-          Is my house energy efficient?

-          How do I commute daily?

-          Do I know how to save on water, electricity, fuel etc.?

-          What are the social and environmental impacts of my lifestyle?

-          What can I do to be more sustainable?

Going by the likely answers that we may get to these questions, we would realise that we need to be much more frugal in the way we use natural resources, while also recognising that for us, inclusive growth and a rapid increase in per capita income levels are development imperatives. In this context, the Government’s policy on ‘Zero defect, Zero Effect’; the programme on ‘100 Smart cities’; the campaign on ‘Swachh Bharat’; and the mission on ‘Namami Gange’ are very apt and relevant.

            The challenge of production and consumption of environment friendly goods in India is huge. This would entail use of raw materials which are organic, locally produced or environment-friendly; and green-energy based technology. Though there are indications that impressive changes are taking place, the outlined factors are yet to be embedded fully with the production processes in India. These create two main challenges: firstly, the problem of availability and acquisition of green raw material and technology, which is a critical challenge for the producers in developing countries such as India, given the lower level of research and development (R&D) and issues arising from transfer of technology from other nations. Second, and a more important challenge is the high cost of production of green goods, since the inputs (raw material and technology) invariably cost higher than the ones used for non-green variants.

India, like other developing and emerging economies, has a tremendous advantage of knowledge about the adverse impact of earlier development paradigms and a vast array of new technologies. Significant reductions in environmental pressures can be achieved by appropriate private and public consumption patterns, to supplement gains achieved through better technology and improved production processes.

The 3Rs approach of Reduce, Reuse and Recycle should be the core of environmentally responsible practices that the industries and society at large should imbibe.

As we celebrate the 2015 World Environment Day, let us pledge to make at least one change in our lives towards a more responsible resource consumption behaviour or practice.

How apt was Mahatma Gandhi, when he said, ‘Earth provides enough to satisfy every man’s needs, but not for every man’s greed.’

Let us re-establish the link with nature, as did the ancients in India centuries ago, and take from Earth and the environment only so much, as one puts back into them.  The sages of Atharva Veda chanted in their hymn to Earth, I quote:

“What of thee I dig out, let that quickly grow over;

Let me not hit thy vitals, or thy heart”.”

Towards making a Corruption-Free Government

he Narendra Modi Government has completed one year in office on May 26 this year and during this period, there have been enough moves by the NDA Government to remove corruption from the administration. One of the 2014 Lok Sabha election promises was to root out corruption and bring back black money stashed abroad. Modi Government,  in one year, certainly has not ended these two major evils that have been afflicting Indian economy right from independence, but the measures taken so far, have given enough confidence to the people that the new Government is serious in rooting out corruption from the administration..

            There are no short-cuts. But even skeptics cannot deny the fact that there are no 2G, Commonwealth games or coal scams during the last one year and it goes to Modi’s credit that his image is not tarnished unlike his predecessor Manmohan Singh, who despite being personally honest, seems to have done very little to stop mega scams running into lakhs of crores of rupees right under his nose. None can dispute the fact that Prime Minister Narendra Modi has begun in right earnest to make the system transparent as we have seen in recent coal auction or the 2G spectrum auction which together fetched a little over Rs 3 lakh crore to the exchequer, which would also be shared with states where the coal mines are located. Modi may not have fulfilled his promise to put Rs 15 lakh in every bank account holder by bringing back trillions of ill-gotten money stashed abroad, but he has certainly ensured some beginning is made to ensure Swiss authorities cooperation to get into the bottom of some of the black money stashed abroad.

Corruption is deep-rooted in the country and various studies show that at least $8 billion, inflation indexed, is siphoned off every year and one estimate suggests that over $620 billion has been siphoned off since independence due to ambiguity and loopholes in policies, which is a major breeding ground. Transparency International has estimated that the black money stashed abroad by Indians could be as high as $1.4 trillion including the ill gotten money secured in major scams, which surface periodically like Bofors, Jaguar and other defence deals besides mega scams like coal and 2G.

The money that is siphoned off in scams is no doubt large but the money made in petty corruption is not smaller though they are not stashed abroad. The money made through corruption starting from driving licence, MNREGS, PDS system, subsidies, public procurement, bribing lower staff to push files, paying money to taxmen for getting their returns scrutinized and securing genuine refunds, real estate registration, bribing the cops for traffic and other violations and so on hit hard the common man most and stunts economic development. The parallel economy, which could be as much as 50 per cent of GDP contributes greatly to inflation, delay in decision making and at times stalls development activities because some vested groups are not able to make money.

            Business guru C K Prahalad had estimated that India lost at least $50 billion worth of investments annually because of corruption. This is because corruption made investors change their mind in investing in the country. It is well established that lower the corruption like in Singapore, higher and faster is the economic development. India is not the only country which has high rate of corruption, the problem is there in other emerging economies as well but the type of corruption that exists in India afflicts day to day activity more and perhaps drastically slows down bureaucratic decisions leading to huge time and cost overruns in projects.

Corruption might not be the only factor but certainly a contributory factor for the huge number of projects stalled in the country. At one point of time during UPA-ll, as much as Rs 18 lakh crore worth of projects were stalled. Lately, Modi government has ensured that these stalled projects started moving, some of them held up because of corruption According to Coal and Power Minister Piyush Goyal, the transparent coal e-auction, which has potential for Rs 3.35 lakh crore revenue going to coal bearing states, especially in eastern India, will help greatly in reducing corruption. Modi has already decided to crackdown on corruption and his office has directed all central department on time-bound action within 60 days to enforce rule of law. Ministers have been asked to sanction prosecution or order disciplinary action within 60 days against officials found to have indulged in corruption or misconduct respectively, after vigilance inquiry.

            In sectors and services where public interface is high or which impact the daily affairs of the masses, the direction is that there should be zero-overhand of licence or other application beyond a prescribed time period. These instructions are fine. But the question how far these would be implemented by the concerned agencies in right earnest. The new Government has to be really strict to enforce its instructions. One of the reasons for policy paralysis during the second half of UPA regime was because government officials did not want to take any decision for fear of being accused or prosecuted at a later date. So they used to keep on pushing files after seeking some clarifications. This ensured that they are not accused of not working but at the same time ensured no decision was taken. The PMO has also instructed officials to identify and crack down on areas where middlemen were suspected to be operating. In an open letter to the nation to mark the completion of one year in office on May 26, Modi said his government has acted to tackle “unabated corruption”. Uncompromising adherence to the principle of purity, in action as well as intent only ensures corruption-free society.

            More time is needed to judge whether these have helped in reducing corruption. One area where government should concentrate is bringing about systemic changes and automation, which would help in minimizing corruption if not eliminate it. For example computerisation and automation of railway ticketing has virtually eliminated touts and reduced to a large extent corruption. But there are several other areas in railways where corruption is rampant like contracts, catering, procurement, scrap disposal and so on, which are not yet fully transparent. Smart cards in metros have virtually eliminated ticketless travel. Likewise digitalization, a pet subject of Modi, will minimize corruption in movement of files, tenders and so on as it would introduce transparency.

            The root cause of corruption in this country is that too many people are chasing too few things, so without progress and honesty among politicians and business cutting across all parties, corruption will remain. Complicated laws too add to the problem as it leads to discretionary powers with politicians and bureaucracy, a breeding ground for corruption. Government should also attempt cleaning up of laws including that of taxes, make government procurement transparent and impart moral education to all so that in the long term, India becomes somewhat like Singapore as far as corruption is concerned and day to day life became easier. Modi Government has started the process with great zeal, but it has to be sustained for getting long term benefits.

World Environment Day this year highlights the importance of careful consumption that minimises waste

The man who plants a tree is one who is giving a lasting gift to humanity, says the Rig Veda. The Father of our Nation Mahatma Gandhi says ““Earth provides enough to satisfy every man's needs, but not every man's greed.”  Again, as an African proverb reminds us “We do not inherit the earth from our ancestors; we borrow it from our children.

World Environment Day (WED) is celebrated every year on 5 June to raise global awareness about environmental action for protecting nature and the Earth. It is primarily an initiative of the United Nations Environment Programme (UNEP). It also serves as the ‘people’s day’ for doing something positive for the environment, galvanizing individual actions into a collective power that generates an exponential positive impact on the planet.

The day is being celebrated all over the world and it has enjoyed relative success in achieving carbon neutrality, focusing on the forest management, reducing greenhouse effects, promoting bio-fuels production by planting on degraded lands, use of hydro-power to enhance electricity production, encourage common public to use solar water heaters, energy production through solar sources, developing new drainage systems, promoting coral reefs and mangroves restoration in order to get prevented from flooding and erosion including other ways of environmental preservation.

Seven Billion Dreams

Many of the Earth’s ecosystems are nearing critical tipping points of depletion or irreversible change, pushed by high population growth and economic development. By 2050, if current consumption and production patterns remain the same and with a rising population expected to reach 9.6 billion, we will need three planets to sustain our ways of living and consumption.

Against this back ground the WED theme for this year is "Seven Billion Dreams. One Planet. Consume with Care."

In simple words this means living sustainably. Just changing your routine so that the use of your car can be reduced and become part of a car pool; or better still, use public transport as far as possible! Carry a cloth bag with you in your brief case so that the use of plastic bags when shopping can be minimised as far as possible. Walk to the nearby shopping complex, the milk booth or the local library! All these are small activities that any contentious citizen can add to their own life styles!

Living within planetary boundaries is the most promising strategy for ensuring a healthy future. Human prosperity need not cost the earth. Living sustainably is about doing more and better with less. It is all about becoming increasingly aware that rising rates of natural resource use and the environmental impacts that such usage invariably beget are not the invariably necessary by-product of economic growth. The well-being of humanity, the environment, and the functioning of the economy, ultimately depend upon the responsible management of the planet’s natural resources. And yet, evidence is building that people are consuming far more natural resources than what the planet can sustainably provide.

A personal anecdote

Saraswathi Ammal, of Sulur, near Coimbatotre, Tamilnadu, is a person who personifies the ethos of this year’s WED theme. Every day begins for her with the watering of a small cluster of thulsi (basil) plants that adorn her small but colourful garden, filled with various flowering plants as well as fresh vegetables.

Vegetables for her daily consumption are usually got from this garden. She also has developed the quaint, but charming, habit of presenting neighbours with a bunch of fresh flowers and vegetables on their birth days, marriage anniversaries etc!

Every Action Counts

WED is the opportunity for everyone to realize the responsibility to care for the Earth and to become agents of change. As U N Secretary General Mr Ban Ki Moon exhorted, "Although individual decisions may seem small in the face of global threats and trends, when billions of people join forces in common purpose, we can make a tremendous difference."

Through decades of WED celebrations, hundreds of thousands of people from countries all over the world and from all sectors of society have participated in individual and organized environmental action. WED 2014 received a total of 6,437 pledges and over 3,000 activities were registered online, resulting in a total of about 9,700 which is triple to the previous two years.

The DFP

The Directorate of Field Publicity Units of the Ministry of Information and Broadcasting are conducting rural programmes on WED on a nationwide level. These activities are largely based on rural schools and colleges. Quiz programmes, exhibition of short films on nature preservation, seminars and lectures with power point presentations on environmental friendly living habits etc will form the focal theme of the awareness programmes.

Every year June 5 is being observed as World Environment Day.

GST: Good for business, snag for federalism?

The GST is a tax reform that has been on the cards for more than a decade. In principle, it is the same as the Value-added Tax (VAT) — already adopted by all Indian States — but with a wider base. While the VAT — which replaced the sales tax — was imposed only on goods, the GST will be a VAT on goods and services.

In the current tax regime, States tax sale of goods but not services. The Centre taxes manufacturing and services but not wholesale/retail trade. The GST is expected to usher in a uniform tax regime across India through an expansion of the base of each into the other’s territory. This is why a constitutional amendment was necessary — to give concurrent powers to both the States and the Centre to make laws on the taxation of goods as well as services.

Not surprisingly, the economic arguments trotted out in favour of the GST are basically the same as were given two decades ago for the introduction of VAT. These are twofold.

First, the GST, by subsuming an array of indirect taxes under one rubric, will simplify tax administration, improve compliance, and eliminate economic distortions in production, trade, and consumption. Second, by giving credit for taxes paid on inputs at every stage of the supply chain and taxing only the final consumer, it avoids the ‘cascading’ of taxes, thereby cutting production costs, and making exports more competitive. According to the Union Finance Minister Arun Jaitley, thanks to these efficiencies, the GST will add 2 per cent to the national GDP.

Only time will tell whether the GST will have a positive impact on the GDP. But there is one thing the GST will not have a positive impact on: the States’ fiscal, and therefore, political autonomy.

A losing proposition for the States?

Things don’t look all that dire on paper. As per what’s being referred to as the GST Bill – which is actually the Constitution (122 amendment) Bill, 2014 — passed in the Lok Sabha last month, India will have not a single federal GST but a dual GST, levied and managed by different administrations. The Centre will administer the central GST (CGST) and the States, the SGST. The monitoring of compliance will also be done independently at the two levels.

However, as Kavita Rao, professor at the National Institute of Public Finance and Policy (NIPFP) and member of one of the Working Groups constituted on GST by the Empowered Committee of State Finance Ministers, points out, when you move to a GST regime in a federal set-up, some curtailment of the State’s freedom is inevitable. “All goods and services will be divided into certain categories. The rates will be fixed by category, and if I am a state, I cannot shift a commodity from a lower to a higher rate, or put it in the exempt category.”

This is not the only limitation. The rates for both, the CGST and the SGST, will be fixed by the GST Council, whose members will be State finance/revenue ministers and chairman will be the Union finance minister. Once the rates are set by the GST Council, individual States will lose their right to tax whichever commodities they want at the rates they want.

This development needs to be viewed in the context of a steady erosion in the states’ freedom to decide on taxes and tax rates. The economist Prabhat Patnaik points out, “According to the Constitution, the States have complete autonomy over levy of sales taxes, which, on average, accounted for 80 per cent of their revenue. An attempt was made to curtail this autonomy with the introduction of VAT. But it did not totally succeed because the VAT still had four different rates that states could play with. But with the GST, which mandates a uniform rate, even this limited autonomy would be gone.”

In other words, while the loss in revenue of the States may well be compensated by the Centre (as provided for in the GST Bill), how does one make good a State’s loss of the political right to fix its own tax rates?

Ms. Rao believes this is not necessarily a bad thing. “Individual States are always catering to some interest group or another. By placing limits on what they can do, we are effectively empowering them to resist interest group politics, where someone or other is always lobbying for concessions or exemptions.”

But this is a problematic argument. “The underlying assumption here,” says Mr. Patnaik, “is that political representative bodies are irresponsible. So give them less power, less discretion. This is a fundamentally anti-democratic vision of development.”

Moreover, the restrictions imposed by a uniform tax regime could adversely impact States that may be more committed to welfare expenditures. “The AIADMK or the Left Front or Mamata Banerjee may have their own development philosophies,” says Mr. Patnaik. “In order to express these philosophies, you have to be able to control your tax revenue. Why should I give up this right which I already have — and be sitting in some Council where I will be outvoted by other states or the Centre telling me what I can or cannot do?”

Perhaps it is to allay this concern that the draft GST bill speaks of the GST Council fixing not just rates but “rates including floor rates with bands”. A band would, at least on paper, give some room for states to vary their rates depending on their need.

A floor-rate-with-band model (as opposed to a uniform rate) of GST is also what Ms. Rao is rooting for. “To my mind, it is the procedures, definitions, and credit rules that should be uniform for a harmonised tax regime. We should let the States figure out what rates they want.”

However, a GST regime where each State has a different tax rate for different goods and services doesn’t sit well with the industry demand for a single national market with a uniform tax regime. Besides, if rates will be different, the taxes will be dual, and the dual taxes will be administered independently by the States and the Centre, why not just streamline the existing tax architecture instead of erecting a new one?

The social dimension

The answer to this question leads us to the other aspect of the GST, to do with why it started to get widely adopted (as VAT) from the 1970s, paralleling the rise to global dominance of neo-liberal economic thought.

The GST, even in the diluted version proposed in the GST Bill, would still accomplish one thing: widen the tax base and make it identical for both the Centre and the States. That is because, unlike, say, an excise duty (whose base consists of manufacturers) the GST is paid only by the final consumer. The seller of the good or service remits this GST to the State after deducting the taxes already paid by him earlier in the supply chain.

In other words, while the GST, like all indirect taxes, is a tax on consumption, in seeking to institute a uniform rate on all forms of consumption, it tightens the tax net — currently riddled with numerous holes in the form of multiple rates and exemptions and classifications — in addition to widening it.

Many countries that have embraced the GST have also exempted essential commodities from it, or kept lower rates for select goods. But the very logic of GST is such that it works best when the exemptions are zero or minimal. New Zealand comes closest to the GST purist’s dream — with very few exemptions. Once implemented — in however compromised a form — this is the direction GST regimes gravitate toward: fewer exemptions, higher rates. New Zealand introduced GST at 10 per cent — today it is 15 per cent. In the countries where the GST rate was reduced over time, it was made possible by a broadening of the base by minimising exemptions.

This brings us finally to the question that has monopolised the GST debate of late: what should be the taxation rate? The report of the 13th Finance Commission’s Task Force on GST recommended 12 per cent (7 per cent for SGST and 5 per cent for CGST). That was in 2010. In 2014, a panel of State government representatives mooted a revenue-neutral rate or RNR (rate at which tax revenues for states and the Centre will remain the same as before GST) of 27 per cent ( 12.77 per cent and 13.91 for CGST and SGST respectively.

Both these rates might be unrealistic. A 12 per cent GST will most definitely mean substantial revenue losses for states, as the general VAT rate for many states hovers around the 13-14 per cent mark. And from this week, the service tax (levied by the Centre) has gone up from 12.36 per cent to 14 per cent, a move, ironically enough, intended to smoothen the transition to a GST regime.

A GST rate of 27 per cent, on the other hand, would impose an enormous tax burden on the wage-earning classes, and could prove fatal for any elected government. Understandably, Mr. Jaitley has been quick to clarify that the GST rate would be much lower than 27 per cent.

In fact, the ideal way to bring down the GST rate without incurring revenue losses is to widen the base by including as many goods and services under its purview as possible. But this could mean that some essential goods currently taxed at a lower rate could end up being taxed at a higher rate under a GST, but it would hit the lower income groups harder.

This might explain why in some developed countries, including Canada and Australia, the introduction of the GST was opposed fiercely by the local working classes, especially the trade unions. The resistance to it was so strong in Canada that the then Prime Minister Brian Mulroney had to invoke an obsolete, colonial era provision of the Constitution — drawing on special powers of the Queen — to get the law passed in the Senate.

At any rate (pun unintended), the GST can only be implemented, believes Ms. Rao, by “a leap of faith”. She elaborates, “You can’t do a calculation to the last penny and say only at this revenue-neutral rate will I implement GST. It has to be acceptable to the masses, because at the end of the day, it is the average citizen who has to cough up the money.”

The shift towards indirect taxation

Around the world, governments, faced with declining tax revenues, and too fearful that higher corporate taxes will lead to capital flight (or capital slumber), have been turning their attention to indirect taxes, which have a wider base than direct taxes, are more difficult to evade, easier to administer, and not income-dependant beyond a point.

It’s because the poor and the working classes spend a greater proportion of their income on essential consumption compared to the classes that are better off, that indirect taxes are considered regressive compared to direct taxes, which are typically proportional to the ability-to-pay. India isn’t immune to this global shift in favour of indirect taxation, accompanied by lower taxes on capital and reduced social spending.

The National Democratic Alliance government has already ticked two of those boxes. The 2015-16 budget, which fixed a roll-out date for GST (April 1, 2016), also abolished the wealth tax, and announced a lowering of corporate tax rate from 30 per cent to 25 per cent over a four-year period. According to Mr. Patnaik, the same budget also grants direct tax concessions to the tune of Rs. 8,315 crore, while planning to raise Rs. 23,38 crores through indirect taxes.

This is despite that fact that India’s direct taxes contribute only 37.7 per cent of total tax revenue, according to a 2013 study by the Center for Budget and Governance Accountability — which makes India’s taxation regime already more regressive than that of other emerging markets such as South Africa (57.5 per cent from direct taxes) or Indonesia (55.85 per cent). When the third box, the GST, is ticked, it could become even more so., it could become even more so.

GST: The Arguments

 

The business argument

--> Simplifies tax administration 
--> Makes compliance easier 
--> Prevents 'cascading' effect 
--> Could add to GDP

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The political argument 

-->Reduces States' fiscal and political autonomy 
--> States can't exempt some goods and services 
--> Lowers States' source ability to raise money for welfare 
--> Indirect taxes burden lower income groups more 

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What's a right GST Rate? 

--> In 2010, the 13th Finance Commission recommended 12 per cent GST. This will mean revenue loss for States, as VAT is already 13-14 per cent 
--> In 2014, State government representatives mooted a revenue neutral rate of 27 per cent. This will be an enormous tax burden on wage earners 

Under-armed and underprepared

Last week, the government announced the appointment of S. Christopher as the new head of the Defence Research and Development Organisation (DRDO). His predecessor, missile scientist Avinash Chander, was unceremoniously dumped on January 13 this year, with 16 months still left of his tenure. It took the government over four months to find his replacement. Reportedly, most of the other senior Director Generals of the DRDO are also on extension, unsure of when the axe may fall.

The DRDO was set up in 1958 as the fulcrum of India’s indigenous defence production. However, its performance, or the lack of it, must count as one of the biggest uninvestigated scandals of independent India. Among its notable failures is the production of the Light Combat Aircraft (LCA), which was commissioned over a decade ago but ran years behind schedule with a cost overrun of over Rs.5,000 crore. The aircraft’s Kaveri engine was commissioned over two decades ago; it ran over 15 years behind schedule with similarly high cost overruns. Other projects allocated to the DRDO, such as the Airborne Early Warning and Control (AEW&C) System, the naval version of the LCA, the Long Range Surface to Air Missile (LRSAM), and the Advanced Lightweight Torpedo (ALWT) have all missed deadlines by several years.

Nothing to cheer about

The performance of our public sector units handling defence has been equally scandalous. Hindustan Aeronautics Ltd. (HAL) could not rectify simple design faults in the HPT-32 basic trainer aircraft, forcing the Indian Air Force (IAF) to import propeller driven trainers. The Intermediate Jet Trainer (IJT) prototype is nowhere close to flying, and the Light Combat Helicopter and the multi-purpose civilian aircraft, Saras, have forever been in the pipeline. Our ordnance factories are similarly languishing. The Nalanda ordnance factory, in collaboration with an Israeli company, is reportedly only a fourth complete. The commitment to indigenously supply 1,000 T-90S main battle tanks to the Indian Army could not be met because the project failed. Indian-made 125 mm smooth bore barrels for the T-72 tanks also reportedly failed because the barrels blew up during field trials.

The DRDO had set itself the aim of producing 70 per cent of our defence needs by the year 2005. Today, a decade later, its production is still lackadaisically hovering around 30 per cent — and much of what emerges from its factories is put together with “screwdriver” technology. In 2008, the Rama Rao Committee had recommended that the DRDO should only focus on 8 to 10 critical projects of strategic importance. Such recommendations have been thrown to the winds, and the country’s premier defence production company continues to focus its energies on esoteric products like dental implants and mosquito repellents!

As arms importer

To see a nation with global aspirations blundering so egregiously when it comes to meeting critical defence requirements is nothing short of treason. As a result of our woefully inadequate defence production, India has become the world’s largest importer of arms. In contrast, China, with a much bigger arsenal, has dropped to fourth place because its internal defence production has been efficiently upgraded. Apart from the exorbitant burden arms imports place on our exchequer, an overdependence on imports has grave security implications. In his book on the Kargil war, General V.P. Malik, who was then the Army chief, mentions that two years before the Pakistani invasion, the Army had finalised imports of AN/TPQ-37 Firefinder radars from the United States. “Prices were negotiated and just before purchase, DRDO offered to manufacture them at half the price and within two years. The government shot down the army’s plans to buy those radars. In 1999, during the Kargil war, the radars were desperately needed. Neither had the DRDO manufactured them nor could they be purchased from the US (post the 1998 Pokhran nuclear tests there was an arms embargo). Several lives were lost in Pakistan shelling (as a result).”

A decade and more later, nothing had changed. Another Army chief, General V.K. Singh (who is now a Union Minister of State in the government) was compelled to write in March 2012 a letter directly to the then Prime Minister in which he bluntly stated that the war-waging capability of the Army had been “seriously degraded” because of delays in critical procurements. According to him, reserves of vitally needed anti-tank ammunition had fallen below critical levels because the Israeli firm supplying them had been blacklisted because of alleged kickbacks; artillery equipments were stalled for a similar reason, and emergency replacements sought to be obtained from the U.S. Army were still awaiting approval from the Ministry of Defence’s bureaucracy. At that time, the nation was facing a peculiar double jeopardy: we could not produce what we needed internally, and we could not import — in time and efficiently — what we needed to buy from abroad because of a “morality paralysis” that sought to ban every major foreign supplier on the basis of uninvestigated allegations. Obviously, defence purchases must be corruption-free but, equally, defence ministers must have the guts not only to be concerned about their own personal integrity but also about the crucial security interests of the nation.

Comparison with China

Our lack of offensive and defensive weaponry becomes even more glaring when compared with that of our potential enemies. For instance, China’s arsenal of Intercontinental Ballistic Missiles (ICBM), battle tanks, latest tactical aircraft and armoured infantry fighting vehicles far outnumber ours, as does its border infrastructure. The importance for us to keep this gap within sustainable limits is self-evident, especially since we cannot rule out a war in the future in which China and Pakistan work in tandem. Opponents of adequate investments in armaments argue that a country with such a huge number of the poor should be spending more on development than on defence. It is the old guns versus butter argument. The obvious riposte to this is that India needs to pursue both development and defence efficiently and it cannot be one or the other. A country’s security is imperilled if its economy is suboptimal and the deprivations of the poor are not attended to. Equally, development cannot exclude security imperatives because we are in one of the most hostile nuclear weapon regions of the world. We have 4,057 kilometres of a disputed Line of Actual Control (LAC) with China; a 778-kilometre-long disputed Line of Control (LoC) with Pakistan; a total of 15,106 kilometres of international borders with seven countries, and a 7,516-kilometre long vulnerable coastline. It would be suicidal for any nation to ignore security concerns in such a situation.

The fact of the matter is that we neither pursue development nor security efficiently. China spends more than twice what India does on its armed forces, yet its defence expenditure, as a percentage of its GDP, is lower than that of India (1.3 against 1.89, as per revealed figures). The Chinese economy has grown at a faster pace, and its defence budget, although larger, is more efficiently used. Arms imports have come down dramatically. Russia and Ukraine are the only outside suppliers of China’s weaponry, most of which is now produced at lesser cost at home. If India had pursued its indigenous arms production effectively, we could have had by now one of the world’s largest military-industrial complexes, and could be exporting arms and using that income for development.

Not much impact

The new Bharatiya Janata Party-National Democratic Alliance (BJP-NDA) government came with a muscular resolve to strengthen India’s defence abilities. This resolve was particularly evident in its strident critique of the United Progressive Alliance (UPA) regime. However, for five months after the new government assumed power last year, the country did not even have a full-time Raksha Mantri, with Mr. Arun Jaitley inexplicably holding the dual charge of both finance and defence. The government did announce an increase from 26 per cent to 49 per cent for foreign direct investment (FDI) in the defence production sector but this may not be very attractive to investors who will seek majority control. Moreover, the Defence Technology Commission, set up as a commercial arm of the DRDO to attract investments, is yet to take shape. The “Make in India” slogan for defence production means little unless it is part of a credible policy framework. It is also not known whether the national technology council to be chaired by the Defence Minister with representation by private companies engaged in the production of arms and defence equipment, as was recommended by the Naresh Chandra Task Force, is going to see the light of day. According to estimates, some Rs.30,000 crore is required only to end the perennial shortage of artillery and ammunition. Where is this money to come from if the government’s priorities are to spend double this amount on bullet trains? Important steps also need to be taken to create a more effective procurement policy. The Rafale fighter aircraft deal is, I believe, an outright purchase and does not involve the transfer of technology. And, finally, it is time that specialists from the armed forces have a much greater say in the entire defence production process, but there is no sign that this is happening. The short point is that, whatever the rhetoric, India lacks a strategic mindset to tackle its defence preparedness and this government has been, thus far, not any different, and certainly much too slow in changing past approache

Achievements of the Ministry of Water Resources, River Development and Ganga Rejuvenation

Achievements of the Ministry of Water Resources, River Development and Ganga Rejuvenation

India is endowed with a rich and vast diversity of natural resources, water being one of them. Integrated Water management is vital for poverty reduction, environmental sustenance and sustainable economic development. The Ministry is working for sustainable development, maintenance of quality and efficient use of water resources to match with the growing demands on this precious natural resource of the country.

WATER RESOURCE MANAGEMENT

The Ministry has identified Inter-Linking of Rivers (ILRs) as a priority. National Perspective Plan envisaging inter-basin transfer of water from surplus basins to deficit basins is being actively pursued.

• Implementation of Ken-Betwa project on fast track.

• Detailed Project Report (DPR) of Damanganga –Pinjal completed. DPR of Par-Tapi-Narmada link project being finalised.

• Mahanadi-Godavari flood moderation project being pursued.

• Intra-State link Projects: DPR of Burhi Gandak - Noor - Baya - Ganga link Project (Bihar) and Kosi - Mechi Link Project (Bihar) completed. Special Committee on Interlinking of Rivers set up - for time bound implementation of ILR projects. High level task force constituted for addressing the technical issues in interlinking of rivers.

• Agreement with Nepal for speedy implementation of Pancheshwar Multi-purpose project proposal on river Sarda. Pancheshwar Development Authority set up for expeditious implementation of the project.

• Polavaram project being implemented asa National Projection river Godavari, to create an annual irrigation potential of 4.36 lakh hect. in East Godavari, Vishakhapatnam, West Godavari and Krishna districts in Andhra Pradesh.

• Work initiated on 9600 MW Middle Siang Project for flood moderation in Arunachal Pradesh and Assam.

• Dam safety Project taken up with World Bank assistance at an estimated cost of Rs. 2100 crore, 233 dams in four States identified for rehabilitation.

• Brahmaputra Board being restructured for focussed attention on North-Western Region of Ganga Basin.

• Flood protection - Flood forecasting network strengthened - 4772 flood/inflow forecast were issued during the flood season 2014.

• Regional office of Ganga Flood Control Commission opened at Lucknow in March, 2015, for greater focus on North Western Region of the Ganga Basin.

• New flood forecasting website launched as part of the E-governance initiative, for timely dissemination of flood warnings.

• During 2014-15 a total of 47 (20 major and 27 medium) projects under general monitoring and 143 (77 major, 49 Medium and 17 ERM) on-going projects under Accelerated Irrigation Benefits Programme (AIBP) were taken up for monitoring.

WATER CONSERVATION

PER DROP MORE CROP

• "Hamara Jal – Hamara Jeevan" organised in 485 districts to engage scientists, engineers, water communities, Panchayati Raj Institutions, NGO's and other stake holders to address issues of water resources planning at village level to generate awareness for water conservation.

• National Aquifer Management project undertaken for optimal utilisation of groundwater with community participation. 5.89 lakh sq. km area mapped - partly through innovative heliborne surveys.

• Web based application system for issuing NOC for ground water extraction launched.

• Master Plan on Water harvesting and conservation prepared and circulated to all States.

Simplification of guidelines for centrally sponsored schemes, viz. AIBP and Flood Management Programme (FMP) on the basis of consultations in 'Jal Manthan' - resulting in faster release of funds – from Rs. 800 crore. in the first six months of the year to Rs. 4800 crore in the next six months.

National Hydrology Project launched at a cost of Rs. 3600 crore. This project will establish and upgrade Hydro-met network in all the river basins and bring the entire hydro-meteorological data on a standardized central database for easy storage, validation and dissemination for development of Decision Support Systems for flood forecasting, reservoir operations, water resources planning and management, conjunctive use, etc. following a river basin approach. The project will also enhance the capacity of the States in these issues.

WATER POLLUTION ABATEMENT

Namami Gange • "Namami Gange" - Integrated Ganga Conservation Programme approved at the cost of Rs. 20000 crore to be implemented by year 2020.

• Two meetings of National Ganga River Basin Authority (NGRBA) held - one under the chairmanship of Hon'ble Prime Minister.

• 76 Projects approved at the cost of Rs. 4974.79 crore for creating treatment capacity of 678.23 MLD and Sewer network of 2546 KMs.

• Clean Ganga Fund established - contribution of around Rs. 51 crore received.

• Programme to conserve aqua life and bio-diversity in collaboration with Forest Research Institute, Dehradun.

Moving Forward with New Initiatives

• Special Purpose Vehicle to be set up for implementation of priority ILR projects.

• Strengthening of Participatory Irrigation Management and involving public participation in Ground Water management and rain water harvesting

• Rejuvenation of Yamuna River.

• Expeditious implementation of Pancheshwar Multipurpose Project and middle Siang project.

• Launching of 'JAL KRANTI ABHIYAAN'

• National Bureau of Water Use Efficiency is proposed to be set up to control and regulate efficient use of water.

• All efforts for timely completion of Polavaram Project

• Efforts are underway to upgrade all the three Research Stations namely Central Soil and Material Research Station, Central Water and Power Research Station and National Institute of Hydrology into “Centers of Excellence”.

• National Water Informatics Center to be set up for institutionalizing India Water Resources Information System.

• Modernization and expansion of Flood Forecasting Network of Central Water Commission.

• Development of inundation based flood forecast system.

• Installation of telemetry system for dissemination of hydro-meteorological data on real time basis.

• Setting up of North East Brahmaputra River Rejuvenation Authority by restructuring Brahmaputra Board