Jobs or Entitlements?

Jobs or Entitlements?

The emphasis on building infrastructure and boosting manufacturing in the recent Budget proposals is with a view to create millions of new jobs. Jobs that are needed by our huge working-age young population, both in urban and rural areas, but particularly in rural areas, which house 60% of the population.

The budget proposals on boosting infrastructure/manufacturing were further welcomed, particularly because an investment road map stretching over five years was also outlined. Combined with a reduction in corporate taxes, it will certainly boost our GDP, starting to seriously perk up already.
 

But with agriculture accounting for only 15% of GDP, farming and related services cannot properly support 60% of the population. It doesn’t do so in any developed country either, where a small few turn out prodigious amounts of food using technology and mechanization, and yes some seasonal labour. We need this to happen here too, along with considerable agro-industry and other value-addition. The percentages could then change along with the viability.

As it is today, those amongst the landless, who could, have already migrated to the cities, and constitute part of their population of the 40% remainder. Still, our unemployment and inadequate employment figures are very high, urban and rural alike, affecting at least 25% of the total population of 1.3 billion people.

Without changing this drastically, by providing, as far as possible, trained and skilled employment, this country cannot make any substantial and inclusive economic progress. The Modi Government is acutely aware of this fact. It is making strenuous efforts to get the economy, its blocked projects, its enabling legislation etc. moving again on an urgent basis.

But the culture of entitlement, the disregard for strengthening the economy versus populism, has  built-up over decades of socialist practice. It tends to get in the way at every turn. The resistance to a viable Land Acquisition Act is a case in point, wherein the ‘consent’ clauses could stop all acquisition, given the aggressive and polarised political stands taken by large sections of the Opposition.

If land acquisition is framed as ‘anti-farmer’, then industry and infrastructure cannot grow. It is another matter that farming is in itself a poor remunerator presently, dependent on subsidies and grants. The only profits of note being earned out of it are made by the many middlemen that take farm produce to market. Of course, because farming activity feeds us, it has a strategic dimension much beyond the commerce involved.

However, playing at killing two birds with one stone, providing so called rural employment  via the  inefficient, slow  and wasteful hand- building of rural infrastructure, at subsistence wages for manual labour, or less, plagued by corruption, is certainly not the answer!

That is why, the retention of MNREGA in this 2015 Budget, and the Rs. 34,000 crores allocated for it with a possibility of topping it up to Rs. 40,000 crores is an example of the ‘entitlement’ Raj we want to get away from.

Welfarism, particularly when carried to excess and extremes, prevents us from building a robust economy that works to banish poverty once and for all. Entitlements and welfare measures may seem fair and welcome, but they are not productive.

It is clear that the Modi Government did not abolish MNREGA, as it deserved, to prevent a socialist backlash. But the culture of subsidies, entitlements, grants and waivers are draining resources that could be put to much more productive use.

Also, after several years of a slowing economy, the recent turn- around has yet to show very many results on the ground. The core sector industrial statistics are still depressed, as are the manufacturing and construction indices. The only tangible growth seen so far has been in the stock markets and they are definitely signaling great optimism about the future.

And while the economy is gestating, there is a considerable churn in the popular attitudes. Traditional attitudes, many of which are out-of-date in the 21^st century, including oppressive views about the emancipation of women, are clashing with a modernist world view. The underclasses, unable to access the good life for want of money and sophistication are smashing and grabbing at it anyway. A majoritarian Hindu view is battling it out with a tolerant pluralistic outlook. Fringe elements, Hindu, Muslim, Christian, are creating as much hatred as they can with a view to radicalise their constituencies. The social fabric of this country is in flux, and trying subconsciously, to outgrow and discard its long-time Nehruvian moorings.

With the steep decline of the Congress Party and its share of the popular imagination, it was perhaps inevitable. A new India is forming, but right now it is still at the messy, under-construction stage. 

For: NitiCentral

(778 words)

March 8^th, 2015

Gautam Mukherjee

Come September

Come September

Come September was the name of a famous hit film from the long gone sixties (1961), a romantic comedy starring Rock Hudson, Gina Lollobrigida, Sandra Dee and Bobby Darin. It had a catchy theme tune, universally beloved countrywide, in the single screen movie halls of those days. It was played before the National Anthem, with which each screening began, and before the trailers, cartoons and the Government documentary. And again during the ‘interval’, de riguer for the sale of cigarettes, soft drinks, peanuts, and the like. It was generally followed by another piece of music entitled Tequila, but this latter, a latino influenced jazzy instrumental,  a dinner joint favorite too, was not from a popular Hollywood film.

1961 may be shrouded in nostalgia, but the Sixties were both traumatic and eventful for India: the Chinese invasion in 1962, Jawarharlal Nehru’s passing in 1964, the war with Pakistan in 1965, and so on.

Cut to the present day. After six months, it will be September.  Budget 2015 has laid a solid foundation, on which the Government, particularly its infrastructure building arms, such as the ministries in charge of roads, ports, power, mining, the Indian Railways etc. will have to raise several multiples in additional resources, in order to succeed.

Two days after presenting the Union Budget, the Finance Minister Arun Jaitley, on a private visit to America, said as much in New York, probably hoping to spur huge American investment.

There is little doubt that additional money from various sources will be raised. This, alongside a vigorous implementation programme, to run concurrently, and quell all the criticism. The Railways are already tapping into domestic monies from insurance behemoth LIC. This is an example of the creative sources of funding the Government will tap, along with attractive incentives to make it worth the while of the investor.

Six months completed from now, the efficacy of this power budget will be evident on the ground, and become, in some measure, undeniable.  It will lead also to a sharp burst of GDP growth.

Side by side with this economic development, came the historic alliance Government of J&K, born just one day after the Budget was presented in the Lok Sabha. And this, on a ‘lucky’, rainy, blustery Sunday, in Srinagar. It was composed of a saffron and green alliance, which will also complete six months, come September.

Building upon this great democratic dividend is very likely. There is great scope to revive and rediscover cultural synergies of the healing kind. With links India has always had, to the inclusive Sufi influenced strain of Islam, with some of its traditional roots in Kashmir. It is a benign, peaceful form, that refuses, despite strenuous efforts by the Pakistani ISI and its proxies, to let the heartless jihadi poison take hold.

And it has traditionally been complemented by the tolerance of moderate Hinduism, though all attitudes, on every side, fallen into disuse through years of acrimony, will need a bit of dusting off. It will be greatly helped, if the Pandits, essential to the warp and weft of the Valley, are reinducted into their homelands once again. With a Hindu Deputy CM, this might indeed be facilitated.

The Separatists and Wahhabi influenced radical sections, both domestic and across the border,  may be persuaded by the CM, likewise, to see that the Indian democratic process has much to offer, as epitomised by the remarkable change-of-heart in BJP’s Sajjad Lone.

This Government, in the course of its six year tenure, will surely find the solution of the long festering insurgency and terrorist problem fostered by Pakistan in the Valley. It will solve it, because the main initiative for it will come from the suave Mufti Mohamed Sayeed led State Assembly, ably backed by coalition partners BJP, both in Jammu and Kashmir, and at the Centre.  

This collaboration will prove to be politically enabling for the BJP, because it can change long held ideological positions under its coalition compulsions, as it has done to achieve a common minimum programme (CMP), with the PDP. There are already some statements indicating the stalled bilateral talks with Pakistan are about to resume.

The changes in the big picture are also of great help. With India drawing closer to both the US and China, Pakistan is likely to be keen on finding a solution, given its own internal problems with runaway terrorism and economic pressures growing ever bigger. This, even as American involvement in Afghanistan reduces, along with its dependence on Pakistan; and China recalibrates its relationship with India.

Some new movements are expected as early as April 2015, when Modi goes to China on his return state visit. The long-standing border issues between India and China are also likely to be settled soon, probably by formalising the LaC  into a border, and thereby forming a template for the LoC with Pakistan also turning into the pukka border. This will end the controversy of the  historical Indian claim on PoK, in favor of a necessary realism. This Government has also been dealing sternly with Pakistan’s cease-fire violations, making them far costlier than heretofore.

There may also be a UNSC seat for India in the offing, with both the US and China backing it. Neither were so keen before, but the geopolitics seems to have changed.  India’s relationship with other SAARC countries has also been revived recently, and continues to get better every day. An impending membership of APEC will also draw India closer to China.

India, is inexorably headed into a period of high growth economically, the highest in percentage terms in the world presently, complemented by a proactive global diplomacy, led by the Prime Minister himself.

Come September, there will also be little doubt in the minds of supporters and detractors alike, that the Modi Governent is beginning to deliver on its economic promises by means of substantial implementation. The country will be headed towards 8.5% GDP growth in 2016, and on to sustainable double-digits for years to come, particularly if this Government wins a second term. And the main reason for being certain of this is because of the massive emphasis on fresh investment in enabling infrastructure, manufacturing for jobs, and farm-related modernisation to uplift some 60% of the population.   

India is, as old India-hand Ian Jack put it recently in GRANTA: ‘A country beginning to change fundamentally, preparing to say goodbye to its old self’. Jack thought it was happening already, 50 years on, in 1997. But that was just the trailer. Come September 2015, the main movie is going to start.

For: The Pioneer

(1,091 words)

March 3, 2015

Gautam Mukherjee

The Union Budget 2015-Come Fly With Me

 

 The Union Budget 2015- Come Fly With Me

 The budget is not just a collection of numbers, but an expression of our values and aspirations-Jacob Lew

The Finance Minister said, after setting the context for this budget, that it was ‘India’s chance to fly’. Long in the anticipation, this first full budget of the Modi Government has brought together many of the promises of the electoral campaign with the traction of delivery.

There is growth with jobs, combined with infrastructure projects expected to boost the GDP by at least 3%.  In fact, the GDP is expected to be at 7.5% in 2015, going up to 8.5% in 2016, and on to double- digits, thereafter.

Similarly, the fiscal deficit, maintained at 4.1% this year, is projected to reduce to 3% over the next three years. The Current Account deficit, presently at 1.3% , is likely to go into a surplus soon.

The Consumer Price Index (CPI) will be contained within 5%. The RBI, may start cutting interest rates afresh. Industry would like to see it reduce by at least 4%, with the first 1% in 2015.

The economy, as Arvind Subramanian put it, is in a ‘sweet spot’, caused in some measure because of soft petroleum prices and global deflation.

Nevertheless, the Centre now only keeps 38% of Government revenues, while the States, in line with Modi’s emphasis on greater autonomy and federalism, get 62%.

There is a crack-down on black money, with jail terms of up to 10 years, and punitive 300% penalties. The parallel economy may now think it wise to start merging with the official one. Benami property buying too will be fraught with danger because the Government intends taking a very dim view of it.

Incentives have also been announced to monetize an estimated 20,000 plus tonnes of gold held in private hands, via Gold Bonds, India’s own gold coins etc.

Individual PAN will now be recorded for transactions above Rs. 1 lakh. This flavour of accountability is continued with the corporatization of ports with their substantial land banks, and disinvestment, including loss-making PSUs, to the tune of $6.7 billion.

There is a push to deepen the debt market to boost the foreign investment under all heads from its present $ 55 billion. There is a bankruptcy law coming up and A Debt Market Board with greater integration with SEBI.

The Government will invest an additional Rs. 70,000 crores into infrastructure and raise far more via a slew of newly announced tax free bonds. There is also a $ 40 billion ambition for Defence, but this will have to be enhanced, in both money and technology terms, by foreign collaborators.

For the first time ever, there is a real effort to establish a universal social security foundation for the poor, inclusive of health insurance, life insurance and a pension.

Foreigners are delighted. This thrust is coming from the one ‘bright spot’ in the global economy as international rating agency S&P put it.

A prospective GAAR has been kicked down the pike by 2 years.  GST, the indirect tax structure that will both raise the revenue intake and reduce corruption and evasion, will be implemented by April 1, 2016.

Wealth Tax stands abolished. Corporate taxes will be reduced from 30% to 25% over the next four years. Income tax exemptions have been raised to add up to Rs. 4.42 lakhs if availed in full. This, after the tax slabs themselves were raised in the ‘half-budget’ of June 2014.

In welfare schemes, the  approach is to cut leakage and not the subsidy itself via massive direct transfers and digitization. Old UPA schemes like MNREGA  have not only been continued but funded generously.

Rural credit has been enhanced right down to the micro level and the vast post-office network will be organized into ‘payment banks’. The mission to provide housing for all has been given definition. There will be 2 lakh urban homes and 4 lakh rural homes of about 800 sq.ft size that will be built by 2022. All will have round-the-clock water, electricity, and access to a road.

Mostly stable indirect taxes, have been augmented with a consolidated Service tax at 14%, up from the earlier 12.36%.

Tourism, long on its indifferent growth path, was vastly boosted in 2014 with Modi’s initiative to allow 43 countries to avail of a visa on arrival. This is now going to be enhanced to 150 countries.

Ease of doing business is demonstrated by consolidating 14 different clearances required at one window.

 Higher educational institutions and health facilities have been announced, with special care to target those states where the BJP expects to  make  new inroads, such as Assam, West Bengal, Orissa, Bihar, as well as those where a thank-you is in order, such as Arunachal Pradesh and J&K.

Youth loans, R&D, clean energy, incentives for the local electronics industry, the laundry list is long and deep, but it has to said: This is a comprehensive Growth Budget.

For: NitiCentral

 (818 words)
February 28^th, 2015
Gautam Mukherjee

 

The Union Budget 2015- Your Lust As Her Will

 

The Union Budget 2015- Your Lust As Her Will

Your Lust As Her Will- Gaius Valerius Catullus

 For lovers, a tight confluence of mutual Lust and Will makes for powerful frisson. Long in the anticipation, this first full budget of the Modi Government has brought together many of the promises of the electoral campaign with the traction of delivery. The Indian media did not take too long before dubbing it a Super Budget.

The key take-aways are in terms of growth with jobs, both rural and urban, combined with development of infrastructure that should boost the GDP by at least 3%.  In fact, the GDP is expected to be at 7.5% in 2015, going up to 8.5% in 2016, and on to double- digits on a sustainable basis, thereafter. And even at the projected 7.5%, India becomes the fastest growing economy in the world, albeit on one-fifth the base of China.

Similarly the fiscal deficit, maintained at 4.1% this year, is projected to reduce to 3% over the next three years. The Current Account deficit, presently at 1.3% , is likely to go into a surplus perhaps in the course of the latter quarters of 2015 itself.

The Consumer Price Index (CPI) is expected to be contained within 5%, and inflation being a major obsession with the RBI, may prompt it to start cutting interest rates afresh very soon   now. Industry would like to see it reduce by at least 400 basis points, or 4%, in the course of this administration, with the first 1% in 2015. Let us see if these wishes do become horses to do their bit for the revival of the investment cycle.

The economy may not be roaring like a ‘tiger’, as yet, as Arvind Subramanian put it yesterday while presenting the annual Economic Survey, but it is headed that way. Subramanian too spoke of double-digit growth, and being in a ‘sweet spot’, caused in some measure because of soft petroleum prices and global deflation.

In the Budget, a crack-down on black money, held domestically and abroad, with jail terms of up to 10 years, and punitive 300% penalties, was announced. The parallel economy may now think it wise to start merging with the official one. Benami property buying too will be fraught with danger because the Government intends taking a very dim view of it.

There is also some talk of a voluntary disclosure scheme coming up before the necessary laws are enacted, and this may provide a new revenue stream to the cash-strapped Government. The Centre now only keeps 38% of Government revenues, while the States, in line with Modi’s emphasis on greater autonomy and federalism, get 62%.

Incentives have also been announced to monetize an estimated 20,000 plus tonnes of gold held in private hands, via Gold Bonds, India’s own gold coins with the Ashok Chakra motif, Government administered loans against physical gold etc., all designed to tap into this massive resource for the benefit of the economy.

Individual PAN will now be recorded for transactions above Rs. 1 lakh. This flavour of accountability is continued with the corporatization of ports with their substantial land banks, and disinvestment, including loss-making PSUs, to the tune of $6.7 billion.

There is a push to deepen the debt market to boost the foreign investment under all heads from its present $ 55 billion, and grow it manifold. There is a bankruptcy law coming up and A Debt Market Board with greater integration with SEBI.

The Government itself will be investing an additional Rs. 70,000 crores into infrastructure and raising far more via a slew of newly announced tax free bonds. There is also a $ 40 billion ambition for Defence, including ‘Make in India’ for the sector, but this will have to be enhanced considerably, in both money and technology terms, by foreign collaborators.

There is also the long and somewhat detailed emphasis on integrating the facilities for Bharat with those offered to India. For the first time ever, there is a real effort to establish a universal social security foundation for the poor, inclusive of health insurance, life insurance and a pension.

Foreigners, who are expected to put in the big money much beyond what this budget can afford, are delighted. This is nearly comprehensive and forward looking, a growth budget coming from the one ‘bright spot’ in the global economy as international rating agency S&P put it.

A prospective, as opposed to retrospective, GAAR has been kicked down the pike by 2 years at least. The UPA’s Direct Tax Code has been mined for its gems and given a quiet burial. GST, the indirect tax structure that will both raise the revenue intake and reduce corruption and evasion, will be implemented by April 1, 2016.

Wealth Tax stands abolished. Corporate taxes will be reduced from 30% to 25% over the next four years. Income tax exemptions have been raised to add up to Rs. 4.42 lakhs if availed in full. This, after the tax slabs themselves were raised in the ‘half-budget’ of June 2014.

Almost every section of the Indian public has been addressed including the disabled. The emphasis on pensions for the poor is part of what Finance Minister Arun Jaitley called ‘Banking the unbanked, funding the unfunded’. The abolition of the essentially vindictive Wealth Tax, a dinosaur from classic socialist theory, in favour of a modest surcharge of 2% for taxable income above Rs 1 crore per annum is a sagacious move.

A greater emphasis on health care for the middle class with an exemption of premium of Rs.25,000/- up from Rs. 15,000/-  recognises the increasing cost of private healthcare run for profit.

In welfare schemes, the laudable approach is to cut leakage and not the subsidy itself via massive direct transfers and digitization. Old UPA flagship schemes like MNREGA to provide minimum employment for the rural poor, have not only been continued but funded generously.

Rural credit has been enhanced right down to the micro level and the vast post-office network across the country has been pressed into service  as a ‘payment bank’. The mission to provide housing for all has been given definition by specifying 2 lakh urban homes and 4 lakh rural homes of about 800 sq.ft size that will be built by 2022, all with round-the-clock water and electricity, and access to a road.

Mostly stable indirect taxes, have however been augmented with a consolidated Service tax at 14% up from the earlier 12.36%.

Tourism, long on its indifferent growth path, was vastly boosted in 2014 with Modi’s initiative to allow 43 countries to avail of a visa on arrival. This is now going to be enhanced to 150 countries.

Ease of doing business is demonstrated by consolidating 14 different clearances required at one window.

Higher educational institutions and health facilities have been announced, with special care to target those states where the BJP expects to  make  new inroads, such as Assam, West Bengal, Orissa, Bihar, as well as those where a thank-you is in order, such as Arunachal Pradesh and J&K.

Youth loans, R&D, clean energy, incentives for the local electronics industry, the laundry list is long and deep, but it has to said: This is a good budget.

For: Swarajyamag.com
 (1,187 words)
February 28^th, 2015
Gautam Mukherjee

The Union Budget 2015-Let's Invite Something New

The Union Budget 2015- Let’s Invite Something New

 

Let’s invite something new/by unifying our silences- Rainer Maria Rilke

The key problem with this Government’s soaring ambition is a lack of resources. Not only did it inherit a scorched earth economy, but it had made a bushel full of promises. Over the last nine months, it’s been probing the possibility of raising finances from friendly foreign countries. There are billions in pledges. But nobody feels comfortable if you won’t put in quite a bit of your own lolly. It makes one feel touched and insecure. But the money required is vast. And letting the fiscal deficit run away with you doesn’t work for anyone except  America.

But the health report is suddenly good. Growth; deficits under control, inflation contained, interest rate cuts in prospect.

One of the hidden messages of this Union Budget 2015, hiding in plain sight, is also an ambition. But it is to merge the black economy with the white one, and unlock the value of the Indian obsession with gold. If this happens, you’ve got a force multiplier that could put triple the resources, free and clear, on the table. This is a rich country disguised as a poor country after all.

Can it happen? A proportion of ambition is always realisable. How much, is, of course, the difference between destiny and fate. Economist Omkar Goswami, on the other Goswami’s show, kept hollering that 7 % of GDP , allocated to this and that, was lying unutilized in Government coffers. This needs to be put to work, he said. I thought the Government knows all about this, and uses this money tucked away in its biscuit tins on the upper shelf, to take care of its shortfalls and miscalculations. It is kept unutilized for a purpose. If Goswami knows about it, so does the Sarkar. Everyone needs discretionary money.

Having said all this, Modi and Jaitley did a humdinger of a job with what they apparently had. They boosted infrastructure, laid out a road map to enhance the dignity of the poor, spread the money around over all their concerns and hobby horses, cut taxes, boosted defence, health, education, clean energy, and encouraged India Inc. too.

Thoughtful people who don’t want to praise this Government, ended up calling it a good budget, even a first class one. Nobody called it big bang. Maybe Hawking has stolen that particular metaphor. But there is a great hope in the air again. Talk of double-digit growth, low deficits, poverty elimination. No luddite inheritance tax, no wealth tax. Cut in corporate tax.

Sunday, the J&K Government is being sworn in. The budget has promised it manna. A week from now, will the union budget still contribute towards Modi’s aura dented by Kejriwal?

Nobody is accusing this budget of hot air. Strange, considering some persist in calling it anti-poor, but not with too much confidence. Between Prabhu’s spirited performance two days ago, Subramanian’s nerdy assertions yesterday, and Jaitley’s hard working evidence today, the Modi train is firmly back on track.

 For: The Quint

(500 words)
February 28^th, 2015
Gautam Mukherjee

 

 

Demystifying The Land Aquisition Ordinance: RELIEF & REHABILITATION

 

 Demystifying The Land Acquisition Ordinance

 Part Three:  Relief and Rehabilitation

Indians and MNCs operating in India (remember Union Carbide in Bhopal), are notoriously slack when it comes to liability, after-sales service, warranty, guarantees, and other such sticky nicety, once the goods are sold.

Organisations, institutions, the Government, tacitly rely on our slow legal system. So sue and be damned is in the small-print slyness. Besides, life is cheap in India and the poor are routinely shafted.

So, in reaction, the UPA Government made a land acquisition law in 2013 so tight that it is impossible to live up to.  

On paper the Relief and Rehabilitation Clauses (R&R) are very good. Subsistence allowance, a job or money in lieu, transportation allowance, resettlement allowance, a new home to replace one lost, developed plots in newly urbanised areas, profit sharing on land sales of acquired land, additional benefits for scheduled castes, community infrastructure etc. But, the Indian track record on R&R is not good. Babus tend to be corrupt and interpret all provisions meanly.

Watching foreigners learn from our home-grown callousness. NGOs do make a fuss, but the media soon gets bored. Governments, convinced the pragati is worth the pain, don’t budge. That is why you had Medha Patkar of Narmada Dam fame sitting in with angry Anna at Jantar Mantar. Modi will have to walk the talk well beyond just passing the ordinance into law.

The hysterical sticking point today: infrastructure/industry projects worth Rs. 20 lakh crore are stuck. The ordinance has effectively got rid of the consent and social impact road blocks. The compensation and elaborate relief and rehabilitation clauses are solid. But these will vastly inflate the cost of acquisition. Will the Government be able to afford it down the road, let alone the privates?

The touchy-feely Land Law to replace its imperial 1894 predecessor was clearly passed in haste. There was silly-season bipartisan support for it, everyone outdoing the other to demonstrate how much they loved the farmer.

What our MPs forgot in their opportunism then, is that farming earns 15% of GDP and houses 60% of the 1.3 billion population. It is now unviable for so many people to be involved with it. They need to migrate to other jobs. These have to be created. That’s what the Modi Government is trying to do. A course correction on the land law was inevitable. And it has come, despite all the out-of-date jai kisan noise.

In the abstract, this R&R plus the compensation is more than fair. It is miles better than what went before. Everything depends on the implementation though. But it covers only land owners, when most rural people are actually landless, labourers, or working in the unorganised sector.  They will get nothing by right.

If only this R&R was all fun and games. That Rest and Recreation ((R&R), was the US Armed Forces/leisure industry euphemism for GI Joes doing some very innovative partying. Sunny Saigon or safe Pattaya put on a lot of neon and lipstick during the Vietnam War fifty years ago.

 (497 words)

For: The Quint
February 27^th, 2015
Gautam Mukherjee

Gautam Mukherjee is a plugged-in commentator and instant analyser.

 

Prabhu Presents A Reformist Rail Budget 2015

Prabhu Presents A Reformist Rail Budget 2015

The Railway Budget presentation 2015 had a completely new, vigorous and modernist ring to it.It had the Modi stamp of cleanliness, digitization, better design, food and bed linen, revamped stations, high speed trains, incremental gains in user-friendliness for the blind and differently-abled.

There are new helplines, easier ticketing, stress on safety, increased speed of existing trains, better designed passenger wagons, 17,000 more bio-toilets, and vacuum toilets too. The high speed corridors are also firmly on the anvil. Some new coastal tracks of about 1,200 km length will also be added.

But Rail Minister Prabhu confidently spoke of nothing less than transforming the Indian Railways over the next five years.

The Opposition, including several former Rail Ministers seemed a little jealous even as they were clearly miffed with the newness of it all. To cover up their confusion they promptly complained that there was no clarity on how the many announcements would be financed. Most were probably dwelling on how little they had accomplished in their time, and missed the traditional dwelling on petty lists of facts and figures that used to stand in for the big ideas. Never before has a Railway Budget concentrated so boldly on how it would revive its fortunes from the mess they have long been in.

For the first time, there were no politically motivated new trains and routes announced, with a clear thrust instead on bringing the existing network up to speed, despite being severely strapped for cash.  

And yet there were no hikes in passenger fares for the Opposition to pounce upon. This marked the one populist move, given that the Railways still lose Rs. 26,000 crores every year on passenger fares alone! But, with the fall in diesel prices, it would have been difficult to justify so soon after the over 14.2% hike in June 2014.

Suresh Prabhu delivered a staunchly reformist budget speech, with robust plans to make sweeping changes for the better in the existing network. He intends to raise much of the financing needed on his own, as opposed to praying for all funds from the Ministry of Finance (MoF).

The Indian Railways, will however, to kick off, have access to more than Rs. 6 lakh crores in pension funds courtesy the MoF. It also plans to collaborate with various States and PSUs, according to a template used to finance the Konkan Railways in the past. This, in addition to partnering with foreign countries and financing agencies. Prabhu indicated that he had received expressions of interest from many quarters, without elaborating further.

Mr. Prabhu’s budget speech concentrated largely on plans to consolidate and better the consumer experience, and allocated 67% of its available funds to this end. It raised freight rates, expected to yield a modest Rs. 4,000/- crores. The Indian Railways will, it is calculated, raise another Rs. 17,655 crores on its own. The operating ratio is expected to be 88.5% in 2015-16.

Budgetary allocation towards capital expenditure however has been enhanced 84% over the previous year. 800 km. of track will undergo gauge conversion. Seventy-seven projects, involving doubling, tripling and even quadrupling of track over 9,400 km. along with its electrification will be taken up this year, representing an incredible 2,700% rise over allocations in 2013; at some Rs. 96, 182 crores! 

Just goes to show how the infrastructure of the Indian Railways has been neglected in the past.

Over the next five years, Prabhu indicated that at least Rs. 8.5 lakh crores will be invested in upgradation of facilities.  This then, is to be seen as the first stage of a five year jigsaw with some infrastructure initiatives that will extend even beyond this time-frame.

The key shift in emphasis for the moment which went down well with the public all over the country, is in terms of plans to sharply improve the customer experience by way of security, safety, comfort, hygiene, catering, design, and so on.

The Indian Railways will raise part of the finances necessary for its capital expenditure via multiple strategies including the leveraging of its land banks, some of which have been encroached upon, public-private partnerships, special purpose vehicles (SPVs) etc.

While this crucial area has not been detailed in the budget presentation, perhaps for strategic reasons, the tone of the Railway Minister indicated he had quite a few aces up his sleeve.

Over 70% of the common people interviewed by the various TV channels were happy with the Railway Budget, volubly appreciating the many people friendly efforts, even as the stock market seemed to signal its disappointment, probably because the project financing and timelines were not defined.

Besides, the Stock Market is far more concerned with the Union Budget, coming up on the 28^th. Investors are probably not used to regarding the Indian Railways as a driver of GDP growth and infrastructure.  But Suresh Prabhu, with his emphasis on better management practices, faster decision-making, greater accountability, etc. may be on his way to change this perception too.

For: NitiCentral

(826 words)

February 26^th, 2015

Gautam Mukherjee