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.

Giving new life to Aadhaar

The imperatives of governance have a tendency to make political parties think differently once they are in power and revisit earlier misgivings. Nothing illustrates this better than the Narendra Modi government’s decision to go ahead with the ‘Aadhaar’ scheme aimed at giving unique identification numbers to residents. The Bharatiya Janata Party had on some occasions in the past voiced its reservations about the viability and desirability of the scheme and questioned the legal basis of the Unique Identification Authority of India (UIDAI) set up by the previous United Progressive Alliance regime. Many had questioned the lack of statutory basis for the project, voiced concern over the security implications of the possible enrolment of non-citizens, and argued that collecting biometric data without enabling legal provisions violated constitutional rights. However, the Modi regime views the scheme as a possible means to meet its own policy goals. It appears to have come round to the view that having a unique identification number may improve efficiency and targeted delivery of services. The Home Ministry has in a letter to the States come out in support of the Aadhaar scheme, saying it is a sound way of authenticating beneficiaries of government schemes and services.

The NDA government is now targeting universal coverage of the entire country under the Aadhaar project by June 2015. Latest statistics show that as many as 70 crore Aadhaar numbers have been issued, making it the world’s largest biometric database, and that over 50 crore people are yet to be covered. The government will have to reckon with multiple challenges before it can translate its policy goal of using authentic identification as the driving force behind delivery of benefits and services. The scheme is under challenge before the Supreme Court, and by an interim order the government has been restrained from making Aadhaar numbers mandatory for availing any benefit or service. To overcome the judicial challenge, the government needs to put in place a sound legal framework. This requires provisions for digital identity protection and steps to ensure that different kinds of personal, demographic and biometric data are truly disaggregated and do not fall cumulatively in the wrong hands — transnational databases, for instance. Secondly, the physical process of enrolling people with both demographic and biometric data remains cumbersome, and it needs to be made simpler and more accessible. Thirdly, the government must always preserve alternative means of identifying individuals and verifying their addresses so that a particular form of identification does not become restrictive or mandatory.

The venom online Facebook, Twitter, WhatsApp and others have done us a world of good but they also unleash the worst of human nature. Can the law offer a middle path

Show me, show me," said the mother of an 11-year-old girl to another mum at a gathering earlier this month. The son and grand-daughter of two of India's biggest film stars had reportedly been taped while making out. One woman was passing the video clip to the other. I pointed out that forwarding it on WhatsApp is probably a crime especially since those two kids are minors. Also, how would she feel if someone were to circulate clips of her daughter's indiscretions. The lady with the clip deleted it and the other one said, "That's true."

Late one night last week my husband got a message on WhatsApp. Somebody needed O+ blood urgently. Since he is the right type, he called the sender. She had no clue who needed the blood and whether they had got it. The message had been forwarded so many times, that no one knew. Another friend called the patient's numbers. It turned out to be a hoax.

Just as an experiment, post a comment that questions anything that Prime Minister Narendra Modi and his government is doing and watch the reactions. You will be roundly abused.

Social media such as Facebook, Twitter, WhatsApp and others have done us a world of good - by making communication cheaper, easier, quicker. But it has also brought out the worst in humanity - voyeurism, hatred, bile, slapdash opinions, intolerance. Never has the need for instant gratification of every little feeling been so easy. And never have so many millions of people gratified themselves, emotionally, intellectually and morally with such abandon and so publicly - without checking facts, without bothering with right or wrong and without worrying about the harm they may be causing someone else. It is a bit like the hippie culture of the mid-sixties - let it all hang out, man.

If you were at a gathering and disagree with someone you would probably argue with them, gently, then forcefully. And if there is no consensus you might agree to disagree or just drop the subject. But many online discussions begin from the shouting, screaming stage - figuratively speaking. There is no intermediate phase. Everybody wants to talk, nobody wants to listen. And almost everybody who wants to talk has a strong and not always erudite opinion.

In response to analytical pieces I wrote on corruption in media, I have been accused (on Twitter and on email) of trying to up Business Standard's ad rates. This is nothing compared to what celebrities face online - the threat of rape, dirty pictures and verbal abuse. Under pictures of Priyanka Chopra standing with folded hands to greet people coming to mourn her father's death, somebody posted a comment saying she was posing to show the tattoo on her wrist that read "Daddy's lil girl".

While discussing this with a lawyer, we debated whether it was anonymity that encouraged bad behaviour or just the nature of the online medium that breeds so much hatred. And how does this sit with the whole freedom of speech argument?

The only restriction on freedom of speech, granted under the Indian Constitution, is when it threatens national security and public order. The controversial section 66A of the Information Technology Act (2000) criminalises the sending, through a computer device, messages that are, "offensive or false or created for the purpose of causing annoyance or inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred or ill-will." This led to a spate of arrests in 2012, including that of a couple of teenage girls in Maharashtra for criticising the bandh after Balasaheb Thackeray's death. This led to a directive, in 2013, that restricts its indiscriminate use. There is now an entire campaign (rightly) to have Section 66A scrapped.

The other question is - do we need the law for this or is it just another "Indian" trait. We spit, we litter, we drive badly, treat the underprivileged like scum - similarly we behave badly online. That, however, does not answer why Monica Lewinsky or Jennifer Lawrence face offensive behaviour online in the US where freedom of speech in practised in the real sense and where online is a robust market.

Human nature perhaps? And if so, does online hatred help reduce violence on the ground? It will take several decades of online existence to answer these questions accurately.

---

The right questions

Twenty-eight leading and not so leading Indian economists wrote a letter to the prime minister a couple of fortnights ago expressing concern over the possible dilution of the rural employment guarantee scheme, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). It is difficult to disagree with them without sounding like a heartless right-wing monster. Yet some questions need to be asked and I hope that, at least, 28 other economists have similar queries in mind.

I would like to begin with a general question. The ruralemployment guarantee scheme is part of a broader policy approach, redistribution through rights and entitlements(RRE) - to borrow an acronym from the new chief economic advisor to the finance ministry, Arvind Subramanian. Thefood security Act and the minimum support price (MSP) scheme are other elements of this approach. Many of us have persistently opposed this RRE approach arguing that it might bring short-term gains but would stand in the way in the way of long-term growth, fiscal viability and more productive employment. I would not like to revisit the arguments here, but I wonder if what the MGNREGA supporters are offering is a limited endorsement of the employment scheme, or whether their plea or counsel is part of a more general support for the RRE model. If it is, then I have a more serious bone to pick with them.

But let me stick to the MGNREGA and ask my second question. Is the MGNREGA scheme indeed a cheap way to "buy" a lot of welfare as the 28 suggest? The letter points that the MGNREGA involves expenditure of a seemingly minuscule 0.3 per cent of gross domestic product (GDP) but creates jobs for 50 million households. However, 0.3 per cent of GDP might not be that small in budgetary terms. As a percentage of total Budget expenditure, for instance, it works out to 2.5 per cent. If one bears in mind that capital expenditure of the central government last year was just 12 per cent of the total spending of the Centre, the number might not appear that small in relative terms. It is also worth remembering that many of the efforts to check the fiscal deficit in the last years of the United Progressive Alliance (UPA) regime involved a compression of capital expenditure, while protecting the allocations to the RRE schemes.

Question three comes next. Would I be wrong in pointing out that a persistent decoupling of productivity and real wages in a major segment of the economy is bound to lead to large-scale macroeconomic imbalances manifested in things such as persistent inflation. Let me present some simple statistical facts and analysis that I have partly borrowed from a Reserve Bank of India (RBI) working paper by G V Nadhanael (RBI Occasional Papers, Volume 33, 2012) to make my case. First, there was a sharp (five-fold increase) in money wage growth in rural areas from 2007, the year in which large scale implementation of the MGNREGA scheme took place. Is this just coincidence?

Mr Nadhanael's analysis suggests that in the period between 2007 and 2012, wages became a determinant of inflation rather than catching up with inflation. It also set off a wage-price spiral that intensified as the MGNREGA wages began to be indexed to consumer price inflation. But here's the most important bit. Between 2007-08 and 2011-12, rural real wages grew at 6.8 per cent annually. The latest data for growth in productivity for agricultural workers that I could lay my hands on is from the KLEMs (Capital, Labour, Energy and Material Services) project sponsored by the RBI. It turns out to be 2.59 per cent for the period 2000 to 2008. Thus, for parity to hold between wages and productivity, the latter should have doubled in the ensuing period. Even if one assumes some diversification away from farm activities, is it possible to explain a virtual doubling of productivity in the rural economy in the post-2008 period?

Again, as many MGNREGA supporters like to claim, are wages under this scheme far too low to matter in setting market wage rates? The RBI study found that in all the major labour-supplying states (Odisha, Chhattisgarh, Maharashtra, Madhya Pradesh, Bihar and Uttar Pradesh), the wages received under the MGNREGA were significantly higher than the wages received in the labour market. There was the inevitable fall in agricultural employment that followed.

This brings me to a related question. Is it fair to describe the somewhat sharp increases in minimum support prices in the post-2007 period essentially (as some do) as fiscally reckless pandering to certain interest groups? Here are some facts.

Wage costs on average constitute about 50-60 per cent of production costs in farming. Rising wages, thus, automatically pushes up the cost of production. The MSP follows a cost-plus approach and, thus, it is not surprising that with sharply rising wages, the MSP, too, climbed up. Those who like to blame the rise in the MSP for our inflation ills should perhaps take a step back and see exactly what caused a rise in the MSP.

Finally, is it unfair to ask what the impact of rising rural wages has had on manufacturing and construction companies? My sample might be small, but I have heard dozens of companies in labour-intensive manufacturing sectors complain not just about the sharp increase in their wage bill, but the fact that labour was simply not available even at significantly higher wages. By allowing this wage escalation, are we not jettisoning a process (that has been painfully slow in our country) of moving workers from the farm sector to more productive work in industry? Is it incorrect to argue that continuously accelerating rural wages would encourage more contract labour and perpetuate the low employment elasticity of manufacturing in India?

I have nothing against a robust employment scheme that works well in the poorest of the poor districts. But when it comes to supporting a nationwide entitlement programme of this kind, I have my questions.

A response to the 28 economists defending the employment guarantee scheme