‘Accounting and Budgeting in Government’ by Dr Subhash Chandra Pandey and Sri Mahendra Prakash Gupta, Gen Next Publication, 2021, is a welcome addition to the the rather rare ‘literature’ on the complex subject- one, which may not be on anywhere near the top of the interests of even educated common man.

It is an augmented version of the earlier edition of 1993. It seeks to ‘benefit readers who may not have undergone any formal education or training in accounting theory and practice and who may be mere users of government accounts rather than being actively involved in preparation of the accounts’.

The book elegantly captures the need for some of the significant changes in Government accounting system and practice such as the acceptance in ‘principle’ by Government to introduce ‘Accrual’ accounting (we are at least a decade if not more behind in this) and for introducing a new multi dimensional classification system to capture the ‘geographical nexus’, the class of persons who are beneficiaries and source of funding, in addition to the object and purpose of Government expenditure.

Chapter 1 and Annexure A explain at the beginning itself, in a very effective and simple manner all the basic concepts of Accounting with easy examples of cash book, journal and trial balance in commercial system of double entry book keeping. It highlights the fact that around 54% countries (2013) followed cash or modified cash basis of accounting—simplicity, prudence and absence of profit motive— are stated as reasons.

Chapter 2–‘Receipts, Payment and Accounting System’ not only introduces flow of accounting work in Government (including States)in a lucid manner but also takes the reader through some of the significant new initiatives such as, introduction of digital payments, Public Financial Management System(PFMS) and Direct Benefit Transfer( DBT).

Chapters 3 to 5 deal at length, with the form, system of accounts, role of Comptroller and Auditor General of India(CAG) in accounting system, classification of accounts into various heads, and consolidation of accounts. The subjects of special treatment are, however, an analysis of the ‘myth’ that Government accounting system is a single entry system, revaluation of outstanding external debt liability in a ‘footnote’ at current exchange rates and explaining with examples how Government accounts differ from commercial accounts. Chapter 3 also describes more than discusses, computerisation of the process of compilation and consolidation of Government accounts including the role of Accountants General(AG) in States and Controller General of accounts (CGA) in Government of India.

Chapter 4 deals exhaustively with ‘Budgetary System for Government Expenditure’ explaining the rationale of ‘Medium term Expenditure Framework’(MTEF), FRBM Act, Demand for Grants, Appropriation Act, Vote on account, New Service or New Instrument of Service, merger of Railway budget with General Budget and Contingency Fund. One significant finding of the authors is ‘lack of control on the ability to create new expenditure commitments in disregard of reasonable availability of funds in the Budget(current or future years)’ as one of the major problems of Government Expenditure Management. Another finding is that ‘the Government does not track and does not know the extent of such committed liabilities. Commitment control and monitoring has elbowed out expenditure management for long.’ Such conclusions could have been better appreciated with some specific examples, albeit in an Annexure.

Another significant comment that the authors make is that ‘when funds are advanced knowing fully well that the recipients cannot actually use all the amounts so transferred for final expenditure in the same financial year, the practice invites Audit comment and criticism as defeating the ‘parliamentary financial control’. Such Audit comments have been continuing since the last 50 years, have become more or less ‘routine’, in nature and these apparent technical infringements are rarely viewed seriously or severely reprimanded by the PAC. The solution would lie in working out a practical via-media, say by prescribing some monetary limits preferably though a separate legislation, beyond which these infringements would be subject to some visible or deterrent penal action.

The authors have indeed separately touched upon these matters in Chapter 8. PAC discussions on these deviations are seldom serious. Another serious practical issue that is discussed quite innovatively, is that ‘Finance wings don’t allow expenditure sanctions to remain valid beyond the financial year…the process of revalidation takes weeks if not months and the Finance Wing/Department has every incentive to delay revalidation, if they are facing resource/cash crunch’. Do the authors have any solution to this perennial ‘cat and mouse’ game or it is that they feel that the higher wisdom of the Ministry of Finance enforced through ‘instructions’ to Financial Advisers that should always prevail? The authors however, do prescribe a solution to another common issue of what constitutes a New Service, especially regarding what latitude is to be allowed to the Executive to start a New Service, in anticipation of the approval of Legislature. They clearly say that ‘the executive should not be allowed to substitute for a project approved by the Legislature by another project, the full cost of which will be considerably more, although in a particular year in which it is started the expenditure might not exceed the amount already provided for in the budget’. Similarly, the authors do highlight another area regarding Contingency Fund, where there would be a need to remove existing ambiguity. They say that when Contingency Fund can be used to finance totally unforeseen expenditure, it should certainly be possible to meet expenditure in line with Budget announcements and then seek Supplementary Grant to cover the advances from Contingency Fund. This is a no brainer in times of overwhelming parliamentary majority of the ruling party. Also, some specific examples or instances of grant of Vote of Credit would have explained the latter feature, better.

Chapter 5 deals with Cash Management. The authors have referred to the role of PAOs and AG in the reconciliation of a cash balances with RBI. Faster transmission of funds and eliminating the ‘free float’ that Banks used to enjoy with online monitoring of unspent balances are mentioned. While issues of incomplete reporting by bank branches and issue with Treasuries and Public Works/Forest Divisions in rendering complete accounts and not in time are well known, what are lacking in the authors’ analysis are

(i ) to what extent has the role of AG (as far as State Government accounts are concerned) and the role of CAG in compilation of Annual Finance and Appropriation accounts of Union Government including Combined Finance And Appropriation Accounts or CFRA), have been satisfactory either in terms of quality, timeliness or value addition to cash management by respective Governments or enhancing the effectiveness of MIS,

(ii) to what extent the exercise of Voucher level Computerisation(VLC) has been useful either to CAG in rendering meaningful and complete monthly accounts to States in time or in preparing the Finance and Appropriation Accounts. VLC application was developed and rolled out in pre-IFMS environment.

(iii) has the VLC system of CAG /AG been integrated with State IFMS- otherwise, the States would have diminished or no utility of monthly accounts of AG, leave alone any MIS value. There is a monthly lag or one or more months in State Finance Department receiving monthly accounts from AG, in general.

(iv) what is the utility of CFRA prepared so painstakingly by CAG, both to Union Government or State Government. Even Finance Commission or NITI AAYOG may not have much use from these dated outputs.

(v) the magnitude of the issue of outstanding balances in various ‘suspense’ or intermediate accounts heads, especially in States.

Chapter 6 discusses some issues in Public Debt and deficits. The authors stop at stating the known fact that subsidies are often implicit in public sector deficit which creates distortion in allocation of economic resources. Though they say that subsidies have to be targeted to be meaningful, they do not discuss how exactly this needs to be done either with reference to any international good practices or their own solution say, by providing these directly and upfront in the budget. Probably they intentionally left it unsaid. If the solution were so easy, wonder why successive Governments have found it meaningful to continue with the opaque system. It may not simply be a matter of lack of political will.

A detailed analysis of the history of FRBM legislation (1999, 2003, 2012, and 2017) and the rationale thereof is discussed rather well. How defacto SLR is lower than 11.5% could have been explained better. The authors do, however, acknowledge that universally there are escape clauses in fiscal rules and that FRBM targets need revision in cases of major changes of assumptions. It becomes clear that successive Governments have been seized of the importance of fiscal prudence and there have been a number of high level expert committees and even review committees that have examined all related issues in a holistic manner but it is entirely upto the Government in power at the relevant time to take the ultimate call and to approve a roadmap.

One needs to acknowledge that experts can only give their views and ultimately it is the Government of the day that would rightfully take the final call on what is the best way forward. Thus, it would not be clear when the authors repeat the recommendation of FRBM review Committee that there is a need to effectively utilise provisions of Art 150 of the Constitution to improve accounting and fiscal reporting of Central and General Government finances. The role and effectiveness of the institution of CAG in this effort would also need to be examined and commented upon instead of leaving it unexamined. It is relevant to mention here that the authors have gone ahead and given their views on the ceilings and sub ceilings of debt and on the ‘myths’ of low debt to GDP ratio and reasonable levels of external debt. They have,however, refrained from giving their take on what is the better or proper way to treat arrangements which increase government liabilities technically without the adverse effect of crowding out private investment through Open Market Operations by RBI. Similarly, they have mentioned a prevalent view on standardisation on aspects such as not reckoning non recurring windfall gains from asset sale and disinvestment of Government equity as part of fiscal deficit financing, without giving their take.

On the recommendation of FRBM Review Committee(2017) for creation of Fiscal Council, much on the lines of Sarma Committee (2000), the authors have refrained from expressing any opinion on whether such a Council is at all necessary though they say it may assist the Government in following up on CAG report, given the fact that CAG can always present an independent overview of the status of implementation of FRBM Act, without Government having to ask for it and which is being done. Some very interesting findings of CAG on implementation of FRBM Act have been enumerated (FCI subsidy funding, unpaid liability on annuity projects, transfer of cess to designated funds, impact on operation of NSSF and so on) along with the facts that Government has since come out with improved disclosures and/ or deviation statement.

Chapter 7 on Fiscal Transparency and Accounting reforms, explains very cogently the issue arising out of inefficiencies and drawbacks in the publications and products emanating from the stables of Ministry of Finance, CAG9 (somewhat scantily) and RBI including scope, reporting parameters, formats and ease of access. Delays in availability of the reports are also mentioned. The authors have attempted to bring in some salient aspects of International accounting Standards, International Federation of Accountants and International Public Sector Accounting Standards Board, too in this Chapter. Each of these require a full chapter to do justice to the subject as well as to the reader, though the attempt here appears to be to introduce these features to the reader for further study as one may desire. On Government Accounting StandardsAdvisory Board (GASAB), the later developments in CAG may need to be updated. CAG appears to have approved adoption of cash based IPSAS in financial statements which would be a stepping stone towards proper accrual accounting. Reports of pilot study on gaps of Finance Accounts also appear to have been circulated amongst Accounts offices of CAG. NITI would appear to be working on a project separately based on GASAB experience for transition to accrual accounting. GASAB has notified 3 standards— Guarantees, Loans and Advances and Grant in Aid. 4 standards appear to be pending with Ministry of Finance for possible notification (Fixed Assets, modified one on Loans and Advances, modified one on Grant in Aid, Government Equity, Foreign Exchange transactions and Public Debt and other liabilities). GASAB is working on cash based IPSAS — prior period adjustments, contingent liability, external assistance and revenue recognition. CAG also appears to have completed Asset Accounts on Minerals and Energy Sources in all 28 states and J&K. On accounting reforms, the authors not only referred to recommendations of Lahiri Committee(2004) and Sundaramurthy Committee(2012) but given a clear recommendation that Government needs to invest in a multi dimensional accounting classification through advanced IT based data base management systems. The status of recommendations of Sundaramurthy Committee is missing from the Chapter, unless probably the recommendations are being tossed around among various stakeholders.

The last Chapter 8– Public Finance Reforms: Budget 2021-22 and Beyond captures the developments and salient features of the progress of reforms right upto the Budget presented in February 2021. Some significant refinements and improvements are that the corpus of Contingency Fund has been augmented, a new disclosure statement has been introduced for Extra Budgetary Resources especially for the controversial loans provided by Government to FCI from NSSF and possibility of having a non lapsable modernisation fund for Defence and Internal Security(under discussion?). GASAB has already worked on modified standard on Public Debt based on recommendation of 15th Finance Commission to provide for servicing of off budget borrowings from Government budget. Impact and status of Treasury Single Account System(TSA) needed to be updated. Perhaps, the more significant but likely to be relegated to last pages, is the recommendation that all data and information relating to fiscal operations, budget, policy documents etc should be made available to public in a reliable, timely and comparable manner.

Also equally if not more significant, is the emphasis provided by the authors to a recommendation of 15th Finance Commission that there is room for improvement in timelines of audited financial reports of Governments, ensuring that these are prepared within 6 months of the end of the year and audited within 9 months with specific responsibilities for maintaining such timelines at each stage of preparation of audited financial statements. The authors are charitable when they state that audited accounts of a financial year are presented to Legislatures generally after a lapse of more than 10 months from the close of the concerned financial year. Though they have mentioned delays in consolidation, audit and presentation by Government too Legislature, they have not commented upon specific delays at each stage, say in a sample of Governments, or the severity of the nature of deficiencies or frauds or very significant errors in Government accounts. Audit comments generally pertain to understatement or inadequate disclosure of liabilities, inflating figures of growth, suppressing fiscal deficit through creative accounting or off balance sheet borrowings, overspending with reference to limits sanctioned by Legislature, some sort of window dressing to show superior performance in macro parameters, unspent balances, rush of expenses in March and so on. It is seldom that major instances of defalcation, misappropriation, wrong accounting or fraud are highlighted in audited reports on annual financial statements.

Most of the procedural matters and issues of propriety are settled by respective PACs after oral evidence or replies of Government departments. These instances get repeated more often than not, indicating some inadequacies in monitoring in Governments. The authors have highlighted yet another recommendation of the 15th Finance Commission that lays responsibility on Ministry of Finance in Union Government to launch stakeholder consultation and prepare a time bound plan for implementation of comprehensive PFM reforms at all levels of Government and the need for a PFM Act to replace administrative rules, regulations and orders that presently govern PFM in the country. This is by far the most significant original input one gets to note, in the book.The authors must also be complimented for underscoring the need for

• abolition of the concept of charged expenditure,
• modification of the format of Appropriation Act to minimise recourse to supplementary
  grants,
• limiting use of Vote on Account,
• introducing permanent or multi year appropriations for certain expenditures,
• moving from gross to net budgeting,
• new metrics for measuring public debt,
• incentivising recovery of user charges for services rendered by allowing flexibility in
  retention and use of certain non tax receipts without first taking these to Consolidated Fund
  and
• monthly fiscal reporting in line with budget documents.

Some of these refinements or rationalisations have already been acted upon or introduced in some form or then other and some more would be in the pipeline as Union Government is fully aware and seized of the issues. Once Legislature does not get into micro management say, by regularisation of excess expenditures and changes in demand at sub head level infructuous work all around can be avoided.
The moot point is why these apparently uncomplicated rationalizations cannot be carried out speedily. The authors end their book on the note that a National Fiscal Council, on the lines of GST Council, should be constituted and empowered to articulate concerns and issues with stakeholders on a continuing basis without having to wait for the once-in-five-year report of Finance Commission.
To conclude, the authors have indeed succeeded in not only providing introduction to basics in accounting (including double entry or mercantile system of accounting) in general and Government accounting system in India but also highlighting various reforms that are on the anvil. The book is doubtless a valuable addition to the rather rare literature on what many consider a dreary and technical subject and the authors have brought the subject closer to many young and not so young minds as well as seasoned practitioners of the challenging art of preparing and understanding Government accounts.

Sri Lanka is facing its worst economic crisis since independence in 1948. It plunged into deep political crisis as protesters stormed Presidential palace after setting ablaze PM’s private home. Months of raging public anger against rising prices and shortages of food, fuel, medicines and other essentials culminated in these scary scenes of anarchy.

After Sri Lanka emerged from a 26-year long civil war in 2009, it showed healthy GDP growth of 8-9% pa till 2012 but then growth rate almost halved after 2013 as global commodity prices fell and trade deficits rose.

The island country of 2.2 crore people is heavily dependent on foreign exchange earnings by way of tourism, remittances from overseas workers and tea /rubber/apparel exports.

Country’s tourism-dependent economy was badly hit after Easter bomb blasts of April 2019 in churches in Colombo and later the Covid led to serious drop in tourist arrivals.

The problem was further compounded by build-up of huge government debt, rising oil prices and a ban on import of chemical fertilisers (due to shortage of foreign exchange to finance imports) last year that devastated agriculture.

President Gotabaya Rajapaksa had promised lower tax rates and subsidies for farmers during 2019 election campaign and quick implementation of these ill-advised promises exacerbated fiscal deficit. Big tax cuts introduced in 2019 led to government losing more than $1.4bn a year.

In 2021, all fertiliser imports were completely banned and it was declared that Sri Lanka would become a 100% organic farming nation overnight. This overnight shift to organic fertilisers heavily impacted food production. In part, the ban was imposed to save dollars needed for fertiliser imports ! and dollars were needed for servicing foreign debt, notably to China!

When Sri Lanka’s foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertiliser. The fertiliser ban (reversed in November 2021) also seriously hurt tea and rubber exports.
The government has incurred huge foreign debts to fund what critics call unviable infrastructure projects.

Sri Lanka’s total external debt is estimated to be about $51bn and annually needs over $6bn for debt servicing. In contrast, Sri Lanka had $7.6bn in foreign currency reserves by end of 2019. By March 2020, reserves fell to $1.93bn. Recently the government said it had just $50m left.

Sri Lanka earned about $4bn from tourism in 2019 which dropped by 90% due to the pandemic! Its foreign exchange reserves dropped to just about $1.6bn by the end of November, only enough to pay for just a few weeks of imports. The government was forced to restrict import of essential commodities including food in a desperate bid to save dollars.

High global oil / food prices and cost of shipping especially after Russia Ukraine conflict tripped Sri Lanka totally off balance.

Debt to GDP ratio rose from 94% in 2019 to 119% in 2021. Over 10% fiscal deficit in 2020-21 in covid-hit, import dependent and heavily indebted economy resulted in over 15% inflation and serious shortages of food and fuel. A few days’ petrol/diesel left, not enough to even run essential services.

Amidst depreciating currency and rapidly depleting forex reserves an economic emergency as declared to contain rising food prices.
After taking a $2.6 billion loan from the IMF in 2009, it again approached the IMF in 2016 for another US$1.5 billion loan.

Some ill-informed, rather irresponsible and politically motivated commentators have been (rather gleefully!) quick to suggest that India may also witness such scenes soon. Such fear mongering is absolutely baseless.

India had indeed landed in a somewhat precarious economic crisis in 1991 when at one point we had less than 1 billion US dollars in our reserves; just enough to pay for 15 days of imports!

We were on verge of default on international loans but we rose to the occasion. We were quick to rise on our feet. We pledged gold to raise emergency loan followed by IMF loans and have since travelled a lot of distance on the path to progress.

India’s foreign exchange reserves stood at $588 billion on July 1. No doubt all emerging economies are under pressure. Our forex reserve dipped by $5 billion in the week ending July 1 prompting RBI to launch fresh remedial measures. However, our granaries are overflowing and we are slowly switching energy mix and decarbonising economy to slowly reduce dependence on imported crude oil and foreign debt is less than 5% of total public debt.

India is trying to help Sri Lanka by extending credit lines, selling food and fuel on credit and also outright aid. India has signalled its willingness to go beyond the $4bn in loans, currency swaps and aid already provided to Sri Lanka when about $5bn are needed in the next six months to cover basic necessities for people struggling with long queues worsening shortages and power cuts.

So any suggestion that India is in the same boat as Sri Lanka is patently mischievous political propaganda. India is indeed part of the rescue team.

Under the Agnipath scheme announced on Tuesday for restructuring the recruitment of soldiers/sailors/airmen into the 3 Defence Forces, about 50,000 persons in the age group of 17.5 to 21 years can expect to be recruited annually as AGNIVEERs initially for a four-years’ tenure with six months’ training. Of these, 25% AGNIVEERs will be retained for longer tenure of 15 years as part of regular service and remaining 75% would be discharged.
Those serving only 4 years initial tenure called TOUR OF DUTY will not be entitled to pensionary benefits but a severance package/contributory fund corpus. However, the government has assured that they will be re-employed in other government jobs, especially preferential absorption in central paramilitary forces.

The scheme will help cut the salary and pension bill of the armed forces and will therefore actually help speed up recruitments that are otherwise getting delayed for want of funds. Annual recruitments are expected to be about 45000-50000.

From the job aspirants’ viewpoint, the move obviously is disappointing. Instead of being assured of a pensionable service from the first day of joining Army/Navy/Air Force, these aspirants have to compete with fellow entrants for first 4 years in the hope of being part of the 25% lot that gets to serve longer. 75% elimination after 4 years training and active service is a tough competition for those seeking long-term jobs with the Defence Services.
However, the alternative to AGNIPATH scheme is status quo ante which means slower recruitment.

The Armed Forces of a country typically comprise of 3 segments; those in ACTIVE MILITARY SERVICE, those forming part of MILITARY RESERVE and those serving the PARAMILITARY FORCES.

According to data accessed from the World Population Review, China’s active military strength (21.85 lakh) is the largest followed by India (14.56 lakhs). However, including reserve forces and paramilitary forces, India has the largest armed force level (51.38 lakh) followed by China (40.15 lakh).
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So India has one of the largest volunteer Army while many countries have to depend on system of conscription – legally mandated obligation of all youth to serve the military for minimum number of years.

We all know that India is a young nation, 65% under age 35 and may be the youngest nation by 2030. That there are unemployed, under-employed and unemployable youth cannot be denied. What do we offer to them? How do we keep them engaged to contain frustration arising out of expectations in the face of overwhelming numbers?
On Tuesday, the Centre also announced plans to recruit 10 lakh persons over the next one-and-a-half years. Both the moves are aimed at increasing public employment.

Livelihoods will come from new investments, revival of businesses and labor reforms that pit organized workers interest against unorganized workers, from skill upgradation, efficiency, quality and productivity. Abusing the job creators and hoping that government will keep doling out freebies will not get jobs – white collar jobs, blue collar jobs and collarless jobs – is not going to help armchair critics or to those who look up to them.

The policy dilemma on State vs youth is not new. We would like to wean away youth from the path of self destruction, from drugs and delinquency and despair. How?

We have several schemes in place to engage the youth in constructive work till they get regular employment and even as a parallel voluntary effort, both for national development in civil arena and as feeder to Armed Forces. We have developed several education-employment bridge systems – mechanisms and institutions – to channelise youth energy for voluntary action and shaping them before they take the plunge. We have Internship, Research Associates and Young Professional type engagements in White collar jobs. We have Apprenticeship Act to prepare them for blue collar work in manufacturing premises. We have Sainik schools, NCC, NSS, BSG, SSC to those inclined for disciplined community service.

National Service Scheme was launched in 1969. Dr. S. Radhakrishnan, our former President, had recommended – as head of UGC – the introduction of voluntary national service in academic institutions Commission. In 1958, Pd Nehru wrote to the chief ministers floating the idea of social service as a prerequisite for graduation. The NSS programme aims to instil the idea of social welfare in students, and to provide service to society without bias. It is purely voluntary effort under Ministry of Youth Affairs.

Nehru Yuva Kendras were established in the year 1972 with the objective of providing rural youth avenues to take part in the process of nation building as well providing opportunities for the development of their personality and skills. In 1987-88, Nehru Yuva Kendra Sangathan(NYKS) was set up under the Ministry of Youth Affairs and Sports.

Scouting for native Indian students was started in 1913 by Justice Vivian Bose, Pandit Madan Mohan Malaviya, Pandit Hridayanath Kunzru, Girija Shankar Bajpai, Annie Besant and George Arundale. Bharat Scouts and Guides was formed in 1950 by merger of the Boy Scouts Association and the Hindustan Scout Association. In 1951, the All India Girl Guides Association joined this new organisation. BSG has over 57 lakh members.

The National Cadet Corps, NCC under Ministry of Defence is world’s largest uniformed youth organization. It was formed the NCC Act of 1948. Its history can be traced back to the ‘University Corps’ created under the Indian Defence Act 1917 to make up for the shortage in the Army. NCC has over 13 lakhs members.

Some countries have mandatory military service (conscription) for youth. We don’t have such a system. Ours is a volunteer Army. The scheme of Short Service Commission gives many an opportunity to serve for minimum 10 years with options to either leave or opt for Permanent Commission or to opt for an extension of four more years of service. The SSC officers neither get pension nor the medical support under the ex-servicemen Contributory Health Scheme and almost all who opt for permanent commission get it.

In general, those with background of Defence Forces have brighter chances of acceptance and success when they join business or any civil arena. Some business houses have said they welcome ex Defence personnel.

Army job aspirants have understandably reacted with frustration. Public anger is palpable at denial of pensionary benefits when they point out that MPs and MLAs get lifetime pension with shorter service period. Some Army officers have also opined that 4 years is too short a period for short-term contract in Defence Services and it will strain the training infrastructure and perhaps the morale and quality of fighting forces.

However, experts also agree that the Defence Forces need rationalisation and modernisation, correction in the teeth and tail ratio. Reforms are not popular precisely because status quo is disturbed and change is resisted.

It is reported that roughly 80% of service personnel in the US retire without a pension. Also, China did much more over the last 8 years, pruning its land-based army by 50% while boosting its Navy and Air Force. PLA retrenched 3 lakh troops. By these metrics, India’s recruitment reform is not radical. India will need more resources than what it saves from rationalised recruitment.

In 2022-23, the total budget of Ministry of Defence is Rs.525,166 crore including about Rs.120,000 crore on defence pensions. The Ministry’s budget is about 1/8th of total Central government budget.

AGNIPATH scheme is a balancing act between the interests of past, present and future defence personnel. If salaries and pension burden for past and present personnel becomes burdensome to exchequer, it will reflect in either slower recruitment or thinned down entitlements for future personnel.

Youth are angry because it is essentially an issue of inter-generational equity: Present generation living at the expense of future generation. There are no easy answers because the action lies with the present generation.

Anybody who is pushing the youth to the alleys of darkness and despair through negative politics needs lot of prayers to regain sanity. Let us be constructive/helpful and stop spreading negativity, especially when dealing with the youth.

Choice is stark: recruitment with lower benefits or no/low recruitment. Details can be quibbled but not the need of such reforms.

• Allotment of 11 plots (FH -3 & FH-19/164, FH-4 & FH-18/164, FH-2 & Fh-20/164, FH-5/164, FH-6/164, FH-17/164 and FH-1 & FH-20/165) was made on 30 March 2011 to the companies/entities of the same group (Anil Kumar and Company).
• Allotment of four plots (FH-2, 3, 4, 5 sector 131) was made on 27 July 2009 to a group of companies with the same promoter/director (Rajiv Kumar).
• Allotment of seven plots (FH-15 & FH-18/128, FH-25 & FH-26/128, FH-27, FH-28 & FH-29/128) was made on 30 October 2009 to four companies of the same promoters (Sanjeev J Aeren and Sunita S Aeren).
• Allotment of seven plots ( FH-16 & FH-17/128, FH-11 & FH 22/128, FH-23, FH-24 & FH-33/128 was made (two on 26 March 2010 and five on 30 October 2009) to three companies of same promoters (Ankur Chadha and Geetu Arora).
• In two cases it was observed that four plots ( FH-11 & FH-22/128, FH-12 & FH-21/128) of sector 128 of two companies allotted on 30 October 2009 were transferred to the same individual, Smt. Vichitra Lata, on 28 September 2010.

37. The CAG has stated that multiple allotments to applicants on a single date were given and front companies were used for allotment of plots through different applications. There is evidence of dereliction of duty by the members of the PAC whereby fraudulent actions have been permitted by the officials of NOIDA.
38. Thus, the land of farmers acquired at lower rate, invoking the urgency clause for industrial development was allotted on discretionary basis to affluent and influential individuals/companies for their personal/leisure use at a highly subsidised rate.
39. CAG also highlighted undue favour given by NOIDA to private firms. NOIDA allotted 134 plots ranging from 1000-5000 sqm each, covering an area of 2,41,072 sqm at the rate of Rs.7800 per sqm for the corporate offices of the private companies/firms in 2008-09 treating them as Institutions rather than commercial, profit-making firms. As these companies are run on commercial basis with profit motive, they should pay for the plot of land @ commercial rate. In fact, NOIDA used to charge commercial rate from them earlier. However, the Authority changed the status of these commercial companies to Institutional in October 2008 thereby giving undue benefit of Rs 6600 per sqm to these private companies.
40. Therefore, the decision of NOIDA to change the status of Private Companies to Institutional category was injudicious, selective and without basis. Thus, the land of farmers acquired at lower rate, invoking the urgency clause for industrial development was allotted at a highly subsidised rate on discretionary basis, thereby affording undue benefits of Rs 161.75 crore to 134 Private companies.
41. NOIDA kept relaxing[2] the eligibility conditions for consortium bidding from time to time, which led to financially weaker companies, who were ineligible and had not participated in bidding process, garnering bigger plots disproportionate to their capabilities. As a result, large plots allotted to qualified bidders were sub-divided between developers without any basis including to those who would have ab-initio not qualified to execute the project. As a result, numerous projects were lying incomplete causing untold distress to homebuyers who had invested their entire lifesavings in such projects and accumulation of huge debts towards the Authority.
42. NOIDA allowed transfer of sub-divided plots to third parties which further weakened the commitment of the builders to complete the projects. As a result, the 67 allotments made by NOIDA from 2005-06 to 2016-17 have been sub-divided into 113 properties.
43. The CAG has pointed out that in 12 cases, the allotted plots were sub-divided into 32 plots. Out of the 32 plots, in 24 cases the value of the sub-divided plots exceeded the net worth of the sub-lessees.
44. It is thus, evident that NOIDA’s decision to allow sub-division of plots without having any regulatory mechanism in place to ensure completion of projects, served effectively only as a backdoor entry for transfer of valuable property into the hands of ineligible builders.
45. Illegal Sale of plots (Transfers) through Change in Shareholding of Allottees was objected by Audit. NOIDA imposed charges for Change in Shareholding (CIS) of allottees in proportion to changes in shareholding pattern of the companies. NOIDA issued an office order on 27 October 2010 abolishing the CIS charges and the requirement of deed for registering changes in shareholding pattern of a company as it was stated that the changes in shareholding could not be considered as transfer of property of a company. This order was ostensibly based on GoUP order (11 October 2010). This order facilitated the allottee company to transfer the plot in favour of another set of shareholders, without any charges, who otherwise may not have been qualified for the allotment of plot.
46. The said order of GoUP was rescinded on 04 February 2020 after initial audit memos were issued to them, to stop tax evasion through this route.
47. There were instances of grabbing plots through web of subsidiaries/shell companies. Noida allotted a GH plot (GH-03/143) measuring 1,00,166.30 sqm to a consortium having Silverado Estates Private Limited (SEPL) as Lead Member and five Relevant Members in June 2011 for Rs 236.09 Crores. On 06 July 2011, the Authority granted permission for sub-division of the plot to two sub-allottees led by SPCs namely Three C Estates Pvt Ltd and Kindle Infra Heights Pvt Ltd both subsidiaries of Three C Universal Developers Pvt Ltd.
48. Fresh Allotments were made inspite of outstanding dues. The CAG has pointed out that NOIDA continued to make allotments despite knowing that the allottees had been defaulting in making payments in cases of previous allotments made to them. In a test check conducted, it was found that the officials of the Authority apparently connived and colluded with the allottees while making allotments to Amrapali and Unitech group of companies for the plots of land in Sectors 76, 120 and 144 during 2009-2011 even when there were significant outstanding dues against them. It was therefore no wonder that many if not the most projects of these allottees remain incomplete and there are thousands of crores of outstanding dues even after ten years of allotment. In its response, the State Government agreed (September 2020) to investigate and fixed responsibilities on those found responsible for omissions.
49. Mortgage permissions were granted even to defaulting allottees having outstanding dues. As per Rules, allottee of commercial plots can mortgage the property after making full and final payment and upto date lease rent. Audit observed that in 65 out of 76 cases where allotments had been made before 01 April 2010 (ten years prior to 31 March 2020), there were amounts outstanding against the allottees. Against the allotment value of Rs 9,302.22 crore, the outstanding amount was Rs14,817.89 crore (as on 31 March 2020). Thus, NOIDA had failed to take action against the builders even after lapse of the tenure of ten years for payment and in the meanwhile, the outstanding amount has increased substantially.
50. Discretionary allotments of Farm Houses were made at prime locations at throwaway prices. In 2009-2011, NOIDA allotted 157 plots for farm houses of 10,000 sqm each aggregating 18,37,340 sqm in prime sectors of NOIDA at one-fifth of market rates in an arbitrary manner mostly to big business houses, large real estate developers/builders, politicians, prominent lawyers and their family members without following any transparent bidding process under schemes which did not have any objective criterion. Several companies, their directors, family members etc cornered multiple plots at throwaway prices based on the recommendations of the Plot allotment committee (PAC) constituted by the Noida Authority. The C&AG has stated that multiple allotments to applicants on a single date were given and front companies were used for allotment of plots through different applications. There is evidence of dereliction of duty by the members of the PAC whereby fraudulent actions have been permitted by the officials of NOIDA.

[1] Ace Starlit of Star Landcraft Pvt Ltd; Lotus Yardscape Phase-1 of Three  C Green Developers Pvt Ltd; ATS Pictureshque Phase-1 &2 of ATS Home Pvt Ltd, NeoWorld Phase 1 & 2 of Logix Infradevelopers Pvt Ltd

[2] Share of the single largest shareholder, tenure of the Lead Member’s shareholding etc

Since April last year, WPI has been above 10% every month.

This is not the first year when the country has faced double-digit inflation but sources and duration have been different.

Prices can rise due to multiple reasons. A drought, flood or pandemic affecting production/supply of goods can create demand-supply mismatch. An abundant supply of cheap credit can fuel demand-push inflation –too much money chasing too few goods. Emergence of monopoly producers with pricing power can push up prices. High taxation can push up prices. High cost of imported crude oil can push up prices.

While many of these factors were already at work, the Russia-Ukraine conflict, resultant food shortage and crude oil price hike has resulted in global inflation surge. There are dominant concerns on inflation despite some other short-term gains. Inflation is indeed causing worry now.

As the pandemic ebbs, there has been heavy demand surge while the production and logistics that got stalled during pandemic is yet to pick up fully creating a demand supply gap. Inflation on the inputs side is being passed on by manufacturers to the output prices.

As the margins of the manufacturers have been under pressure due to rising input costs, transportation, and logistics, they are passing on these into their output prices leading to higher inflation in manufactured products. The higher input costs, especially of raw materials, have aggravated due to the Russia-Ukraine conflict.

Who can remedy the situation and how?

The Reserve Bank of India controls the extent of supply of money/credit in the market keeping in mind several factors like the foreign currency exchange rate and inflation.

To some extent, the RBI can control demand push inflation if it is caused by excessive money supply.

However, if the production fails, if the logistics fails or if the monopoly producers dictate prices or if the prices go up due to taxation, there is little that the RBI can do.

This is a short comment on the ‘inflation targeting’ by the RBI.

In 2016, the Reserve Bank of India Act, 1934 was amended and a whole new chapter was added on ‘Monetary Policy’.

One of the newly inserted provision in the Act (Section 45ZA) introduced a system of Inflation target. It mandated that tThe Central Government shall, in consultation with the RBI, determine the inflation target in terms of the Consumer Price Index(CP)I), once in every five years. A Monetary Policy Committee and a mandatory Monetary Policy Report was introduced.

The Act stipulated that if the RBI fails to meet the inflation target, it shall set out in a report to the Central Government— (a) the reasons for failure to achieve the inflation target; (b) remedial actions proposed to be taken by the Bank; and (c) an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions.

For the five years 2016-21, the government notified consumer price inflation target of 4 percent with toleration deviation in the range of 2 percent to 6 percent. The same target has been extended for next 5 years.

The CPI has now breached 6%. As per the law, the RBI has to ‘explain’ to the government why it is so?

CPI has a large weight of food and fuel prices which are out of the control of RBI. RBI cannot control either international crude prices nor petrol products’ taxation nor food supply disruption due to bad weather. Food and fuel demand is not much influenced by cost and availability of bank credit! (Does one buy more food and fuel if more low-cost bank credit is available? No)

WPI pertains to only goods, not services. So, the WPI basically captures the average movement of wholesale prices of goods and is used for comparing changes in Gross Domestic Product (GDP) at current market prices.

GST collections have been growing in recent months sowing the success of government in cracking down on tax evasion. One fall out of this crackdown is that prices go up because what was being sold earlier without tax on kutcha bills is now being forced to be sold on pucca bills. So in a way tax evasion and inflation are inversely related.

Let us hope that increased tax collections, increased tax compliances nudges the government to lower tax rates. A beginning has been made by reduction in Central taxes on petroleum products. Rationalisation of GST rates is awaited.

To begin with, Mr. Patnaik sets for himself four objectives: why do government programmes fail or those that succeed do not auto-replicate elsewhere; why is there poor participation in programmes that are otherwise economically sound: how to enlist, sustain and increase participation; and how important is the role of an institutional champion, who is the grass-root facilitator?

In order to meet these objectives, Mr. Patnaik frames an ex ante model, based on his critical appraisal of the existing literature on institutional change, and tests this model through four thick case studies. In doing so, he builds upon the work of Dorado, one of the leading workers in the area of institutional convenorship. Mr. Patnaik explains institutional convenorship as the process for radically changing the very institutional field in which the actors including the institutional convener is embedded. Mr. Patnaik however distinguishes his work from Dorado, terming as fallacious Dorado’s conception that institutional convening is a process of jumpstarting institutional change. According to Mr. Patnaik, the process change is achieved incrementally and not, as conceived by Dorado, in the form of a quantum jump, which may be more relevant to an entrepreneurial setting. Mr. Patnaik then brings in the role of the Institutional Champion, who in the entrepreneurial context is the person who mobilises resources to exploit an opportunity but in our context (rural India) is an actor who triggers a long-term institutional change. Mr. Patnaik underlines that in order for the institutional convening to take place in a rural context, there has to be an institutional champion, whose role includes identifying collaborators, assessing their incentives, negotiating to discuss the shared problems, and finding a mutually acceptable solution.

Mr. Patnaik proposes that the root cause that poses a major challenge in the success or otherwise of a developmental programme is the power asymmetry in rural India. According to him the asymmetries arise across multiple bases. He lists eight of them: ownership or access to assets: (1) economic, (2) political-linked to political power, (3) social-linked to social status, (4) cultural-as distinct from social, (5) informational-linked to ownership or access to information, for example, the village teacher; (6) technology and skill, which is skewed in favour of the haves; (7) opportunities-some have more than others; and (8) capabilities. Mr. Patnaik constructs an octagon on these eight bases and calls it the Power Asymmetry Octagon. He posits that the size of the octagon and its individual bases will vary depending upon the extent of the individual asymmetries-economic, political, social etc. It is for this reason that the octagon will not be a regular or symmetrical polygon but asymmetric and irregular.

In Mr. Patnaik’s model the institutional change, that embodies overcoming the power asymmetries, is brought about by the Institutional Champion, who spearheads the Convening process. Not everyone, however, can become an Institutional Champion in the rural Indian context, Mr. Patnaik clarifies. He lists 9 attributes of a Champion: (1) level of embeddedness or the extent to which the champion is wedded into the rural structure, (2) level of involvement, (3) level of selflessness (as opposed to the selfishness that drives the corporate setting), (4) level of empathy, which makes the champion feel the same amount of pain as the community, (5) level of organizational ability, (6) level of education, (7) social position, (8) economic position and (9) political strength.

Mr. Patnaik tests his model of Power Asymmetry Octagon and Institutional Champion on four case studies. The first one focuses on Bharati Kabi, a scheduled caste woman of Tambakhuri village in the Mayurbhanj district of Odisha who, with the help of the NGO Unnayan, succeeded in giving voice to the women of her village through their economic and social empowerment, after seven years of struggle and challenges. Mr. Patnaik traces her journey from a nobody to the exalted status of a Thaku ma (grand-mama) and kaki (aunt) and provides analysis of the village situation in the framework of his Power Asymmetry Octagon and the attributes of a Champion and explaining in the process how the power asymmetry was resolved by Bharati Kabi.

The second case relates to the Bahalpur village in the Ganjam district of Odisha. Kumari Sahoo, a distiller by caste, with a broken marriage had endeared herself to the villagers because of her selfless, straightforward, social service- oriented behavior, and astuteness in spotting problems and finding ways to resolve them. She championed the cause of water and sanitation, taking head on the scourge of open defecation. Gradually, over a period of 12 years, the village is able to resolve the problem of water and sanitation which, in its wake, has weakened the caste system and untouchability (everyone gets water from the same pipe). The village has transformed from a caste ridden to a progressive village and is trying to overcome poverty with reduced power asymmetries. Here also, Mr. Patnaik analyses the case in the framework of his Power Asymmetry Octagon and the attributes of a Champion.

The third case belongs to the Bolaniposi village in Keonjhar district of Odisha where Aparajita, the Champion, takes up the cause of children’s rights, with support of an NGO named PECUC. Aparajita, born and brought up in the village, is a graduate and is described as a compassionate, patient and hard-working woman. She impresses upon the villagers the children’s right to education, safety, life and development, and spearheads the implementation of the programmes planned and funded by PECUC. The efforts gradually lead to children of different castes, economic status and communities coming together, eventually weakening these socio-economic barriers, which were the sources of power asymmetry. Aparajita also facilitated bringing government programmes closer to the deprived class and enhancing their economic capability. The case is again analysed and explained well by the Power Asymmetry Octagon. The role of Aparajita has been analysed on the required attributes of a Champion.

The fourth case is from the Dasingbadi village in Kandhmal district in Odisha inhabited primarily by scheduled caste and tribes, with some upper caste people. Alcoholism was a common problem. Bastina Singh (the Champion) is the wife of a teacher in a postgraduate school, who was dismissed from service due to his addiction to alcoholism, and later died leaving behind his family in destitution. Bastina, with the support of the NGO Jagruti, is successful in forming a core group of people and espousing the cause of anti-alcoholism building a powerful narrative around her own experience of drudgery and domestic violence despite belonging to an educated and affluent class. Bastina and her fellow supporters are eventually successful in significantly reducing various bases of the power asymmetry octagon winning popular support in struggle against alcoholism. Soon it becomes a movement that transcends all barriers of caste, religion, education, wealth and gender.

On the basis of these cases, Mr. Patnaik concludes that Convening is 15 stages process. He also makes a cross comparison of the attributes of a Champion. His main conclusions on the Convening Process are that it creates space for participation/ collaboration, reduces social, economic, political and other asymmetries, is an iterative, continuous, non-linear and positivistic process, is slow and time consuming (as opposed to jumpstarting the process as held by Dorado), is invariably helped by an outsider (NGO, government agency etc.) who facilitates and handholds, and the champions pick up the collaborators and partners as the process of Convening progresses. The crucial attributes identified for the Champions are a high degree of involvement, high to medium degree of embeddedness, high empathy, high commitment, and high to medium degree of selflessness. He concludes that the institutional position of the champion need not be high. Another significant conclusion is that the women have more convening power and therefore are preferred candidates for being institutional champions.

Mr. Patnaik’s study presents a rigorous and logical framework for analyzing the challenges in implementing India’s developmental programmes, especially in rural India. His experience as both evaluator and implementer of government programmes has given him the right perspective and his cases studies drawn from the impoverished KBK region of Orissa present the right canvas on which to analyse the implementation challenges. The findings present an interesting array of inputs, which deserve more debate for influencing the policymaking process, which majorly remains a top driven process. As the 3 Es of implementing government programmes and schemes gain more and more prominence and the demand for more focus on the outcomes rather than outputs increases, there will be increasing demand for finetuning policies. Studies such as this present valuable input for policymakers as well as the accountability institutions like the Comptroller and Auditor General of India whose reports are replete with instances of inefficiency, and lack of economy and effectiveness in implementing government programmes. Perhaps the auditors and evaluators themselves can contribute to the validation of the proposed model through their future evaluations.

In his Foreword, Professor Dean Williams of the Harvard University has quoted Herodotus, the Greek father of history, that you never step in the same river twice. That reminds me of another similar quote I had read many years back, that you cannot cross the chasm in two leaps. Perhaps it is time to build upon the past experience and prepare for a major leap of faith. As Professor Williams has rightly said, Mr. Patnaik’s focus on the Champions of institutional change is a unique contribution, offered in an elegant and empirically tested framework. We see such Champions all around us- selfless, highly inspired and full of empathy for the under-privileged. The question that we need to ask is whether we have recognized their role and potential and given them their due place under the sun. Leveraging their role in the complex socio-economic milieu of rural India could provide the right momentum to the development process and catapult the country into its rightful place. Mr. Patnaik’s book offers extremely useful input for further informing our development models. As Professor Amar Nayak of the Xavier University has commented in his Foreword, the book provides a holistic framework to the process of institutional convening towards resolving power asymmetries.

The book has been written in an easy to understand lucid style. It offers a new, empirical way of looking at our developmental approach, and yet rests firmly on the complexities of real-life rural India, making it a recommended read for policy planners, administrators, academics and programme evaluators. However, many readers may find the cost of the hardback edition a bit prohibitive, which underscores the need for a more affordable paperback edition that will help ensure a wider readership. Also, the photographs in the book, in black and white, do not look very sharp and may disappoint a reader who may want to have a closer look at the real-life heroes, who are quietly bringing about a transformation in the socio-economic landscape of rural India, winning over social taboos and improving the lives of the downtrodden.

This book is a riveting read on poverty –  assessing its causes, extent and impact.. The authors bring out deficiencies in prevalent poverty alleviation schemes.

The book is based on extensive survey of ‘extremely poor’ and ‘poor’  in18 countries . In Part I, the authors classify and analyse role of Food, Health, Education and Population  on the perpetuation or alleviation of poverty in any country In Part II, the authors analyse the roles that Fund managers, entrepreneurs, policies and politics play and their impact on  realities of poverty in any country.

The book raises important questions.Do the poor need a nudge or push to lift themselves out of abject poverty? If so, where and when ? Why are the poor unable to come out of their poverty levels? Is it the cost of getting started, or is it the difficulty in sustaining the effects once the effort started?   The book seeks to explain why many “magic bullets of yesterday ended up as today’s failed ideas”, and discusses areas of hope.  The authorsskillfully  examine the lives of poor people to see what impacts their status of poverty.

Aids and subsidies as important tools of poverty alleviation are greatly supported by advocates like Jeffry Sach, who believe in the existence of poverty trap. Several communities and governments have staunchly followed this theory and there are innumerable instances of short term and long-term subsidies. Advocates of anti-aid theory (led by economists like William Easterly and Dambisa Moyo  refute the effectiveness of subsidies, and maintain that anything that is given free is not valued and is likely to promote wasteful consumption. The anti-aid theorists also caution that if freebies are encouraged at a large scale, the vendors of such freebies may end up having no buyers should these become fiscal unsustainable and have to be stopped or scaled down.

According to the authors the issue is not whether aids and subsidies are good or bad. They express concern about the debate obscuring what really matters: the destination rather than the source; whether poverty is only about not having money, or if it includes rendering the poor incapable of realising their full potential.

 FOOD:

Tackling the most important need of life for all, food, the authors present both sides of the concept of food aids and food subsidies. Questions like, are food subsidies and aids solution to lift the poor from abject  poverty? Is there a poverty trap, that too,  nutrition-based? Do the poor people choose anything else over food? Do they need only cheap food grains as food policies claim?

The authors find  that food consumption among extremely poor is 36%-79% (rural) and 53%-74%(urban). They discovered that even the poorest of poor, given a chance, prefer tastier and more expensive food that is not necessarily  nutritious. Staples are already a primary part of budget even among the poorest and households getting subsidies for rice or wheat started consuming less of these and spent more on tastier food . The subsidies made them happier  and not healthier, contrary to the declared rationale of food subsidies intended to  make the poor healthier and more productive. With increase in money, merely the food choices and preferences changed.

The authors observe that consumption of food itself had declined over the years for everyone due  decline in heavy physical work Mechanised transport vehicles, farm implements, electric appliances, , motorised mills replacing physical pounding of grains, and cooking gas etc.   have all reduced physical labour in homes and fields. Moderate or light activity instead of heavy work has led to decreased preference to calorific staples. Preference of taste over nutrients by the poor could be also due to the fact that the effects of nutrition are not instantaneously visibleThe authors highlight  how poor people in the developing world spend large amounts on weddings, dowries, christenings, funerals etc. The need for anything that makes life less boring is a basic human need.

The authors wonder about the reality of ‘nutrient based poverty trap.’  They perceptively note that there is no steep jump in productivity or income once the poor start eating enough.  While hastening to clarify that they are not finding the theory of hunger-based poverty trap flawed, they state that the relevance of the same could have been larger in the past historically, and limited to some places and circumstances now.

The authors infer that most food policies are based on an archaic idea that the poor need only subsidies on cheap grains supplying calories rather than nutrients. Hence, giving more grains to the poor does little to increase their productivity or income; nor does it help to provide them money aids, as they are likely to spend it on more pleasurable consumables than on staples.

B: Health

Health, according to the authors, is one of the most frustrating areas in spite of being of primary importance. The book presents analysis of factors like clean drinking water, sanitation, doctor-accessibility, psychological satisfaction, desire for instantaneous cures, absenteeism and apathy in public health centres, and ignorance and lack of awareness among poor. They tend to completely ignore prevention of sickness. The authors found, that in countries where piped chlorinated water was not available and people were required to buy chlorine even at negligible cost, they chose not to spend on it.

Similarly, many parents were reluctant to immunize their infants when there was no current sickness, and they were incapable of foreseeing prevention of a future ailment. Even when they were provided with incentives for immunising their children, many dropped out before finishing the course. Even in villages where special camps were held, while the success rate of first shot was 77% of children, that of those who completed the course was an abysmal 6%-17% only.

The authors talk about reluctance of poor mothers in many countries to accept the simple and inexpensive oral rehydration therapy for diarrhoea against a belief that injectables, preferably of antibiotics, will give them better and immediate cure. They are also reluctant to trudge to public centres to find them locked or without a doctor, and prefer to approach private doctors, even unqualified ones.  This in effect automatically renders redundant the triage system that public centres provide, where the small village unit staff (even a compounder or a nurse) refers the patient to the next level unit only when the sickness is severe.

Interestingly the authors deduce that ‘unqualified’ private doctors were the worst and qualified private doctors were the best. They surmise that the public doctors come somewhere in the middle.

The authors also found during their survey that it was very common for doctors to under-diagnose and over-prescribe. Unnecessary administration of antibiotics and steroids, was commonly prevalent. The concept of sterilisation took a back seat, especially in the rural areas. The book mentions about a doctor infecting an entire village in Udaipur with Hepatitis-B by using an infected needle again and again.

The authors caution against the horrific risk of emergence of drug resistant bugs, and premature ageing due to over-prescription and consumption of steroids.

The authors blame the absenteeism, inefficiency and apathy in rural and urban public health centres for inept service. At the time of a one-year survey, checking randomly at working hours in 100 facilities in Udaipur, they found 56 % of the time the facilities closed due to the single nurse manning them being absent. They quote a World Bank survey on absenteeism in Bangladesh, Ecuador, India, Indonesia, Peru and Uganda placing the average as 35% (India had 43%). The book quotes a survey result of a 3-3-3 rule: The doctor spent 3 minutes with the patient, asked 3 questions, and prescribed 3 medicines. Worse, many times the doctor asked for a diagnosis from the patient, and prescribed medicines for such self-diagnosis!

The authors conclude that when factors like immunization, sanitation, and hygiene are concerned, poor people tend to procrastinate acting on these as the results are not visible immediately.  They opine that a combination of creating essential awareness, small incentives as nudges to adopt preventive healthcare can jump-start a positive feedback loop. They also recommend that after the nudge pushes the poor to adopt preventive care, its quality should be regulated. They say that another over-looked factor is of not only making essential medicines available to the poor, but also to make the non-essential ones not available.

C: Education:

The authors observe that contrary to general belief, schools, at least at primary level, are available in most countries. However, the rate of child absenteeism ranged from 14% to 50%. The authors caution against tenability of the implicit assumption that learning would follow enrolment . They refer to the World Absenteeism Survey conducted by the World Bank by sending surveyors unannounced to sample schools in Bangladesh, Ecuador, India, Indonesia, Peru and Uganda. They found that the teachers were absent from the class at the ratio of one out of five days. A survey conducted by Pratham, the largest NGO in India, volunteers visited 1000 children each in randomly selected districts, covering 7,00,000 children. A shocking discovery was that 35% of the children in the 7-14 age group could not read a simple paragraph and 60% could not read a simple story. Only 30% could do simple arithmetic. The authors wonder whether the schools were making the children unlearn their capabilities of helping in calculations in their parents’ shops and stores.

Elaborating the theories of why quality of education was low, the authors make an attempt at comparing the supply-demand concept. Terming the policy makers in most of these countries as ‘supply-wallahs’ they call the poor parents as ‘demand-wallahs’ who see the benefits of education as low. They also observe that just as technical education became more attractive after the Green Revolution in India, the rural areas saw a spurt in schools attendance by girls after the establishment of BPOs, opening up a new avenue for increased earnings. According to the authors, those who back up the demand-wallah theory insist that if businesses required educated labour, education will become more sought after.

The authors observe that at the core of the above theory, the assumption is that education is a form of investment. But the flaw in this assumption is that if parents do not value education for its sake, the risk of their taking out their wards and sending them to earn is more.

The authors observe that persuasive power of policies at time worked in randomized experiments like cash transfers as incentives (Mexico) in some countries. When the experiment was repeated in Malawi, it emerged out that the percentage of dropouts was maximum where there was no incentives, but was the same in two groups which received cash transfers conditionally (enrolment) or unconditionally. The authors deduce from this that parents need not be forced to send children to school, they actually needed help financially. The inference is that public-supply policies are needed as long as income disparities are there, as talented poor children may not be able to access education like even an untalented rich child, if left fully to market forces. They quote India’s Right to Education Act in 2009, which resulted in increasing the percentage of enrolment and reducing that of dropouts in the following years.

The authors say that while there are detractors to top-down education policies, their research showed that it worked in some countries like Indonesia (where the government went on a school construction spree) and Taiwan, where education was made compulsory as early as 1968.

An important argument in support of basic education is that people who read newspapers and billboards have a bigger opportunity of learning about policies and programmes that could be beneficial to them. The authors caution that the debate about supply vs demand misses the point that all top-down policies do not work as efficiently as they should, and that having them still helps in filling up a hiatus.

The authors surmise that several factors like absence of competitive pressure in poor regions, parents being ill-informed about what is best or what the schools provide, poor performance of government school teachers, all lead to education being not as effective as it should be for the poor. Expectations from education distort what parents demand, what both public and private schools deliver, and what the poor children actually achieve. All this ensues in a colossal waste, according to the authors. Added to the fact is that expectations often comprised of acquiring wealth, or getting government jobs which did not translate into reality except in a negligible percentage. An imaginary poverty trap is also created by parents, who tend to support educating boys or a smartest child, whom they perceive as capable of best returns.

The authors make an important observation that so long curriculum and teaching is designed to suit the elite, the poor children will not actually learn anything, as their parents are not equipped to monitor it. More often than not, schools are more interested in showing a perfect pass record at high school level.

They note that parental or familial pessimistic biases, tendency of teachers to focus on brighter children, elevated expectations with little faith, faster rates of enrolment not matching resources, poor incentives to teachers resulting in their seeking other professions, are maladies that afflict the education system.

The authors conclude that scaling down expectations, using core competencies and technology to complement absence of good teachers, and setting more proximate goals could help a stable and productive education for the poor.

D: Population:

It is an old argument since the time of Rev. Thomas Malthus in eighteenth century, that as resources of a country are generally fixed, any increase in population will make it only poorer. After the AIDS/HIV epidemic in Africa, Alwyn Young from LSE predicted that fertility rate will drop due to direct reasons of abstinence from unprotected sex, and indirect ones of women preferring jobs to babies.

The authors point out that the advent of technology made more unexpected types of resources available, and counties with large population actually grew faster. The authors argue that even in countries where fertility rates were higher, it cannot be proved that poverty was due to this. It was also seen that in most countries families started having less children when growth accelerated, probably because they were too engaged in work to take care of more children.

Debunking the theoryof poverty trap being created by inter-generational transmission of poverty, the authors found no evidence that children born in smaller families were more educated in  countries like India, Bangladesh, and China and concluded that the ‘quantity-quality’ relationship was absent. However, they say that having a smaller family benefits women enormously, as they have to abide by familial and societal expectations of producing more children/sons as investment for old age.

They infer that women do not have access to external factors, policies and projects reaching them at their homes and educating them about reduction in fertility rates. They found that where any suggestion of women even asking about family planning would be viewed with suspicion, they actually found it easier if, for instance some neighbours from the same religion have resorted to it.

They infer that even young girls among the poor, in most countries, are now able to make conscious decisions about their fertility. The authors make interesting observations that even entertainment media like television produced ‘telenovelas’ had an effect on Brazilian women who wanted to be less burdened like the characters in the soap operas!

Women having a title in the family property impacted fertility decisions too. Complex family dynamics played an indisputable role in the size of the family.

The authors make an interesting observation that where poor families had lesser children, their assets like jewellery, land, house increased, and they also became less dependent upon children when they grew old. This refutes the theory that children are financial investments for future. In most countries, daughters were not looked upon as assets, and in turn, they also did not feel bound to look after their old parents.  Girl babies were weaned from being breast fed earlier than boy babies, also because breast-feeding acted as a natural contraceptive and by stopping that the women could conceive again hoping to get a male-child.

Another interesting finding is that if a village is economically stronger, and if the possibility of a daughter marrying a rich man in the village increase, then the girls are better tended to in childhood; in poorer villages, the mortality rate gap was wider, as girl babies were neglected or ignored in infancy and early childhood.

The authors make an inference that contrary to popular belief, families did not know what was best for them and more often than not, poor families wasted their resources. As societal or government rules are long lasting and many times do not sync with reality, the poor become the victims of their own wrong decisions.

The authors opine that families were bound together by loose contracts that coarsely defined each member’s responsibilities towards the others and by best ability to utilise resources and suggest that policies should be made more effective and safeguard families, with inbuilt financial security for futures and no pressure to have many/male children.

PART II Role of Institutions

A: Risk mitigation mechanisms

The authors highlight that , the poor are liable for 100% risk when their tiny enterprises or jobs collapse  and no hedge fund manager carries such high risk. A drought can push out casual agricultural labourers out of work for months together. Poorer the country, greater is this risk. The poor also suffered greater separation from their children, who often migrated in search of unsustainable jobs.  Any man/Nature induced bad calamity hurts the poor more than the less poor. The poor diversify their activities, but in an inefficient manner. The authors suggest that working more to overcome financial risk is not always effective, as it simply increases competition among themselves and reduces wages.

The authors say that the poor form networking among relatives, friends and neighbours which acts as an informal insurance during difficulties. While this networking is useful, they are self-limiting during illness and death as those are very expensive. Insurance fails because of maladies of corrupt practices (e.g.: unnecessary tests by doctors), fraud (fake claims by insurer), government interventions only in large-scale disasters, and the reluctance of poor to invest today for a future calamity.

B: Lending

The authors note that lending to the poor is always is fraught with mistrust as the rate of default as well as cost of lending, like verifying, following, and covering the risk of default are high. Wherever formal institutions are mandatorily required to lend to the poor, the rates of write-offs being high, such loans are not economically motivated. Also, borrowers get stuck with lender monopoly, as any change is viewed with suspicion by new money lenders, who increase the interest further with fresh due diligence. Governments and banks many times are forced to write-off for reasons like ensuing elections, and not wanting bad publicity.

C: Savings: 

The authors note that it is not true that the poor do not make efforts to save. They also create a network of group to help them provide buffer in case of disaster. But ignorance about best yielding tools, not anticipating disasters, not exercising self-control over money if kept at home, and temptation to yield to immediate visceral needs affect their savings. The authors suggest a social safety net, health insurance, a secure job, better education for their children, that will make the goals nearer as possible solutions.

D: Entrepreneurship and Microcredit:

While many poor people are self-employed, they lack enough entrepreneurship to avail of credit that Microfinancing institutions offer. The authors observe that while MFIs have random success stories, they cannot pave the way for exit from poverty. The poor have tiny enterprises with tiny incomes, without staff or assets, and nothing to differentiate from hundreds of similar businesses around them, have no tangible goals, and are not motivated to borrow. Added to it, migrant poor are not considered indispensable, and do not manage to get attention in areas of education, healthcare or housing.

E: Policies and Politics:

The Authors observe that in most countries, there is a gap between intention and implementation. They note that all implementation starts with randomized control trials which dilute the policies, and that corruption and poverty are vicious circles. They suggest that if corruption perpetuates poverty trap, the only answer is to raise the living standards of the poor to mitigate its ill-effects.

The authors emphasise on the need to understand how the poor save (they do save consciously for what they perceive as their necessity, like, for a wedding, or for buying a gadget). As this is based on how much awareness they have, the information they can access, the education they can receive, our own perspective towards the poor has to take a different focus. They surmise that many times policies failed not due to bad intention or corruption, but merely due to wrong models being applied to wrong places or situations. Those failed due to imagining poverty traps where none existed, and missing where they did.

The authors highlight how the three ‘I’, ideology, ignorance and inertia on the part of the experts, aid workers and local policy makers can adversely affect the effect and efficient implementation of policies.

The authors point out that sympathy for a cause is greater if it is of a lesser magnitude, and lesser if it is of a greater magnitude. The authors further surmise that we are reluctant to contribute if we know that our contribution will be only a drop in the bucket; worse still, if we suspect that the bucket is leaky!

The authors suggest that accumulation of small changes one at a time will lead to a greater transformation than government induced comprehensive overhauls. They argue that good policies when implemented well will reduce low expectations, thus breaking the vicious cycle of several factors that impact perpetuation of poverty.

That all the aspects of poverty raised by Professors Abhijit Banerjee and Esther Duflo continue to remain relevant is highlighted by the  World Inequality Report 2022. WIR 2022 explains galloping growth and progress in many countries in the last couple of decades, along with simultaneous inequality of wealth-distribution. WIR 2022 also focusses on newer areas like global carbon inequality, redistributing wealth with a sustainable approach, and raises the question of taxation justice making WIR2022 an exce, which aspects were not intended to be covered in the book. The presllent complementary read though this  review is restricted to the 2011 vintage book. .

The book aims at inviting the readers to think again and again, and instead of looking at poverty as an overwhelming problem, “start thinking of concrete issues that should be identified, understood, and solved one at a time. The book does not take sides and present a most balanced view on all aspects related to poverty, offering views based on factual observations by the authors.

The reader is presented with survey-based data and findings to offer interesting insights into the dynamics of poverty. Highly recommended for all practitioners of public administration and policy makers.

A barrage of news about rising electricity consumption, rising international price of coal and shortage of coal with power plants have raised fears of an impending power crisis. Hundreds of regular passenger trains have been cancelled to fast track movement of coal. Post-pandemic surge in electricity demand, soaring temperature and import disruption all have contributed to a near panic situation.

The first thing to note that there is neither shortage of domestic coal production nor electricity generation. The scenario is result of temporary spike in electricity demand supply gap. Low coal stocks with thermal power plants does not mean shortage of coal in the country.

Here is the big picture; facts that speak for themselves. There is absolutely no shortage of power if people are willing to pay its price, both in terms of cash and health.

At end February 2022, India had 181 coal based power plants with total capacity of 204 GW. Coal & lignite based electricity generation capacity was 210 GW out of the total capacity of 395 GW ( about 53% ) at end March 2022. We plan to reduce the share of coal & lignite based thermal projects to 32% of total capacity by 2030 to reduce carbon emissions.

Energy demand has shot up worldwide as economic activity picks up post-pandemic. As vaccination gathers pace and pandemic restrictions are whittled down, people and nations are playing catch-up.

During April-September 2019, India’s electricity consumption was 68100 crore units (kwh). It fell down 62500 crore in April-Sept 2020, mainly during the lockdown months of April-May 2020.

However, electricity consumption during April-Sept 2021 jumped to 71500 crore units, more than the pre-covid level even though there was a distressing second wave in April-May 2021 and the tour/travel/hospitality industry is not yet back to pre-covid level. Air/rail travel was not by then fully restored. Since then, there has been steady revival and acceleration of travel and other economic activities leading to a surge in electricity demand.

Increase in electricity demand is a positive sign indicating economic recovery. Increased coverage of households with access to electricity connection have brought new electricity consumers in the market. Growing digital economy also contributes to rising demand.

A welcome surge in electricity demand has raised supply concerns especially as all indications are further increase in electricity demand in coming months.

Since 2013, total primary energy consumption in India has been the third highest in the world after China and the United States.

Total power generation installed capacity in India has increased from 243 GW in March 2014 to 320 GW in March 2017 to 395 GW by March 2022. Out of this, 210 GW is coal/lignite fired thermal power (52%), 25 MW Gas-based thermal, 46 GW is from large hydroelectric projects, 45 GW from Solar, 40 GW from Wind power and 6.8 GW Nuclear

Renewable energy capacity is about 37% of total and India will reach 40% renewable energy capacity well before 2030 as per target accepted under 2015 Paris Climate Change agreement.

Although coal-based power plants contribute only about 53% of installed electricity generation capacity, these plants meet almost 75 per cent of total electricity demand.

(Renewable energy generation cannot be sustained on 24×7 basis unless big investments are made in electricity storage technologies. It also has limitations on ability to supply steady-voltage continuous supply required by specialised manufacturing industries.)

So even though we have made impressing gains in expanding solar power, we are still largely dependent on coal for electricity.

Our domestic production of coal is about 730 MMT and we annually import over 300 MMT. Electricity sector accounts for about 2/3rd of total coal consumption.  About 550 MMT domestic and 50 MMT imported coal is used by thermal power plants every year. In 2021-22, coal imports have drastically come down (about 23MMT during April 21-January 22).

India is the second largest coal consumer after China. International prices of coal have risen recently for two reasons. Sharper increase in gas prices mean that countries are increasing dependence on cheaper coal-based thermal plants.

China is facing increased electricity demand in post-pandemic economic recovery and in a trade war with Australia, China stopped coal imports from Australia, one of the major exporters of coal.

Coal makes up nearly 60% of China’s energy consumption. Increased coal/power demand from China has set coal prices soaring high and many coastal power plants depending on (previously cheaper) coal imports are now switching to domestic coal in India.

For import dependent Indian power producers, it is costlier to import longer haul Australian coal than shorter haul Indonesian coal that is increasingly getting diverted to China.

The net result of all this is higher demand for coal, higher price for coal and resultant financial stress on power generating companies.

There have been temporary supply disruptions (monsoon-related) in coal mining and transportation. The coal supply position is steadily improving but there are basic issues to be addressed to ensure long term health of the power sector which is victim to populism. That basic issue is of financial distress on power generating companies.

Coal supply is a temporary problem. There is enough coal and production/transport will increase once monsoon woes are over.

In October 2021, power generating companies owed about Rs.20,000 crore to Coal India Limited alone.

Thermal plants are expected to have stock of 20 days requirement but many power producers don’t have money to stock coal because they have themselves not been paid by discoms for power supplied. Discoms are cash starved because tariffs don’t cover all costs, many consumers don’t pay their bills or delay payment. Power theft and leakage through unmetered supply continues to be rather high.

This is all reflected in discoms inability to pay to power producers.

Power producers give 45 days’ credit to Electricity Distribution companies (discoms). If the dues are not cleared in 45 days, outstanding dues are called ‘overdues’ liable to charge of penal interest.

As per yesterday’s report by the Power Ministry, the power distribution companies owed as much as Rs.102,006  crore at the beginning of April 2022 which increased to Rs. 108,751 crore by yesterday. The outstanding was Rs. 95,717 crore at end December 2021.

So if coal companies have to recover an amount in the range of Rs.20,000 crore from power generating companies, will it make sense for it to produce more coal and supply on credit? If power generating companies have to recover 5 times more amount from power distribution companies, can they continue production? Does it make sense for them to improve plant load factor and produce more electricity to supply on credit?

That is THE REAL problem.

The discom reform scheme UDAY ended in 2019-20 with most of the states failing to meet their stipulated targets.

On 1st July, 2021 Centre has launched a new scheme of ‘Reforms-based and Results-linked, Revamped Distribution Sector Scheme’ to provide conditional financial assistance to discoms for strengthening of supply infrastructure. The scheme with total outlay of Rs.3,03,758 crore will involve Central government budget support of Rs.97,631 crore by 2024-25.

All existing power sector reform schemes namely DDUGJY, IPDS, PM-KUSUM scheme would be subsumed into this new umbrella program.

Among the many contemplated reforms is a measure to create separate feeder for agricultural electricity supply, expansion of network of solar run irrigation systems. Other pending electricity reforms are removal of cross subsidies and open access, introducing competition by allowing consumers choice of electricity supplier.

States are presently administering two types of cross subsidy arrangements. One is between high-end and low-end household consumers and the other is between household consumers on one hand and industrial/commercial consumers on the other.

There are just too many consumer categories and tariff lines – slabs and fixed charges, making electricity pricing quite complex and non-transparent. On top of tariffs fixed by ‘independent regulators’, States levy Electricity Duty (as it is not subsumed in GST) which ranges from 0% to 70% for certain categories of consumers.

Cross-subsidy burden on industry is particularly problematic because it adversely affects cost competitiveness – manufacturing and exports and resultant job creation.

The installed power generation capacity in the country is more than the total demand but power producers are forced to cut production because they are not getting paid in time for power supplied. The action for clearing the consumer dues for electricity supply rests with the State governments.

It is frustrating that these reforms are getting delayed and deferred. Any myopic politics will sap the nation of energy in the long run.