NITI Aayog: States demand greater financial devolution, flexibility

New Delhi: Demands for greater devolution of funds to States from non-NDA Chief Ministers dominated the first meeting of the Governing Council of NITI (National Institution for Transforming India) Aayog Prime Minister Narendra Modi chaired on Sunday at his 7 Race Course Road residence.

Tamil Nadu Chief Minister O. Panneerselvam pitched for higher flow of funds from the Centre to the states and demanded that States’ share of funding of flagship programmes be limited to 25 per cent only. Uttar Pradesh Chief Minister Akhilesh Yadav sought 90 per cent grants for central schemes saying Prime Minister Modi’s new mantra of ‘Sabka Saath, Sabka Vikas’ was not possible without provision of adequate resources to economically weaker states.

Kerela Chief Minister Oommen Chandy demanded that the Aayog continue with the functions the erstwhile Planning Commission performed — of determining, in consultation with the Union Finance Ministry and State Governments, the amount of resources to be made available to the States for Plan and Budget preparation. Mr. Yadav also stressed on continuation of Five Year Plans and said that the need in fact was for making even longer-term plans of 10- 15 years duration.

Noting that India cannot advance without all its states advancing in tandem, the Prime Minister said that he envisioned different states competing with each other in promoting governance initiatives, in a spirit of cooperative, competitive federalism, according to the official release. Mr. Modi said that though the world had started looking at India differently, the biggest challenge for the country still was how to eliminate poverty. He said jobs cannot be created, and poverty cannot be removed without growth. “First and foremost we should aim at a high rate of growth,” he said at the meeting, according to the official release.

Briefing reporters after the Council meeting, Union Finance Minister Arun Jaitley said: “States emphasised greater financial financial devolution from the Centre and greater flexibility in use of funds.”

He also said the Prime Minister announced that the Aayog would constitute three sub-groups of Chief Ministers. One, for recommendations of the 66 Centrally Sponsored Schemes which should be continued, transferred to States and shelved all together. A second sub-group for suggestions on how can the Aayog promote skill development in States. And, finally a third one for evolving a proposal on institutional mechanisms required for ensuring success of his pet project Swachh Bharat by way of integration into everyday life.

The Prime Minister also asked each State to set up two task forces under the aegis of the Aayog--one for focusing on the alleviation of poverty, and the other on agricultural development at the state-level with Central assistance.

The members of the sub-groups will be decided later, after Chief Ministers indicate their preferences.

Mr. Modi also urged States to build and upgrade toilets during the upcoming school vacations with the aim of ensuring that the target of toilets for all schools is achieved. He also suggested that a portion of the funds under the MPLAD and MLALAD schemes can be earmarked for cleanliness-related activities, until 2019.

The interaction was coordinated by Mr. Jaitley, and the opening remarks for the meeting were made by the Aayog Vice Chairman Arvind Panagariya.

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Aberrations don't alter India's history of tolerance: Jaitley on Obama criticism

New Delhi: The ruling BJP on Friday responded to US President Barack Obama's criticism of religious intolerance in India when finance minister Arun Jaitley pointed out that no less a person than the Dalai Lama had found it comfortable to make a home in the country.

"India has a huge cultural history of tolerance. Any aberrations don't alter that history," Jaitley told a news conference in Delhi when he was asked about Obama's critical remarks about religious intolerance in the country.

"And the best example of (that) tolerance was sitting next to President Obama when he made the statement. That is His Holiness the Dalai Lama. It is part of that tolerance that he found it comfortable and India found it comfortable to absorb him in the society here."

Obama has expressed his concerns about religious intolerance in India twice since last week.

On Thursday, speaking at the National Prayer Breakfast, an annual event, he said: "Religious faiths of all types have, on occasion, been targeted by other peoples of faith, simply due to their heritage and their beliefs - acts of intolerance that would have shocked Gandhiji, the person who helped to liberate that nation."

The US president first raised the issue shortly before he wound up his visit to India on January 27. Addressing a town hall meeting at Siri Fort, he had said, "India will succeed so long as it is not splintered along the lines of religious faith - so long as it's not splintered along any lines."

Radical Hindu groups said Obama's sharp parting shot was aimed at pleasing Christian missionaries and Islamic clerics. Union home minister Rajnath Singh was the first BJP leader to publicly comment on the issue on Monday, when he endorsed Obama's warning that an India divided on religious lines would not progress.

Singh also condemned the Sangh Parivar's conversion campaign, saying there is "no scope for any activity like ghar wapsi in the nation".

During the news conference, Jaitley too acknowledged the importance of tolerance in society. "That any society should be a tolerant society is a fact that each one has to accept. It is good to be tolerant," he said.

Following the strong reaction in India to Obama's remarks at the town hall meeting in Delhi, the White House had insisted that the comments had been "misconstrued".

Obama starker and more direct criticism at the National Prayer Breakfast, however, left no room for misinterpretation.

Mark Stroh, National Security Council spokesperson, clarified that Obama's message was that "freedom of religion is a fundamental freedom, and that every nation is stronger when people of all faiths are free to practice their religion free of persecution and fear and discrimination".

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CBFC row: Congress hits out at Jaitley

New Delhi: Congress on Saturday hit out at I&B Minister Arun Jaitley for making government's "problems with Censor Board into UPA versus NDA issue" and asked what stopped it from sacking the Board members over the last eight months if it felt that the appointments were politicised.

After nine members put in their papers protesting alleged government interference, Jaitley today rejected the charge saying "it is regrettable that the UPA appointees have decided to politicise routine issues".

"Well it is extremely unfortunate and regrettable that the Finance Minister has sought to politicise their problems with the CBFC (Central Board of Film Certification) and turn it into a UPA vs NDA issue," party leader and former I and B Minister Manish Tewari said reacting to remarks by Jaitley, who also holds the Finance portfolio.

"The fact is, if the Finance Minister believed that the UPA had politicised these appointments, they should have sacked the board right away, why wait eight months for them to resign," he said.

Tewari said that Jaitley's charge was nothing but an "excuse for their own incompetence".

"They have not been able to have a working relationship with the Board and therefore they are now trying to put the blame and the responsibility on the shoulders of the UPA," he said.

He said that the fact is that if the government had thought that UPA had done something wrong, there is nothing which stopped it from sacking the Board or replacing the members.

"So, this is completely hocus-pocus and it is an attempt to deflect attention from their own incompetence," he said.

Tewari's reaction came as Jaitley insisted that government maintains an arms length in all matters relating to film certification and charged the members with politicising the issue.

Censor Board Chairperson Leela Samson and some other members have resigned amid a controversy over clearance to Dera Sacha Sauda chief Gurmeet Ram Rahim Singh's film "Messenger of God".

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CBFC row: 9 more members resign; Arun Jaitley says UPA appointees politicising issue

New Delhi: There were more resignations in the Censor Board with nine members putting in their

papers protesting alleged government interference, a charge rejected by I&B minister Arun Jaitley saying the government maintains an "arm's length distance" from functioning of the Board.

Jaitley further said, "It is regrettable that the UPA appointees have decided to politicise routine issues" while reacting to the resignations of some of the members.

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RBI governor Raghuram Rajan cuts interest rates, puts onus on Modi govt to fix budget

Mumbai/New Delhi: In cutting interest rates and giving a boost to the government's efforts to revive growth, RBI governor Raghuram Rajan displayed the pragmatism and flexibility familiar to those who work with him.

Rajan's surprise quarter-point cut not only acknowledges that inflation is easing sharply, but also marks a concession to a government that has repeatedly, if politely, demanded monetary policy relief.

By explicitly tying future rate cuts to "high quality fiscal consolidation", the former IMF chief economist has put the ball back in Prime Minister Narendra Modi's court while showing enough independence to preserve his credibility with markets.

Finance minister Arun Jaitley now needs to deliver cuts in subsidies, boost tax revenues and invest more in India's rotten infrastructure when he presents his first full-year budget to parliament next month.

"There is an assurance from the government that fiscal prudence will be followed," said one policy maker familiar with Rajan's thinking. "So what was the harm in cutting the rate before February?"

The decision, hatched between Rajan and senior policymakers over recent weeks, could ease the relationship between Jaitley and Rajan, who was hired by the last, Congress-led government.

Jaitley, clearly delighted, said the rate cut would put more money in the hands of consumers and help revive investment.

"If there is a deal between Rajan and Jaitley, that's very very positive," said said Surjit Bhalla, chairman of emerging markets advisory firm Oxus Investments and a leading commentator based in New Delhi. "Monetary and fiscal policy should be coordinated."

The central bank is not statutorily independent from the government, but it enjoys broad autonomy in setting monetary policy. For Modi, relief for the economy cannot come soon enough, with some global CEOs venting frustration at a recent investment summit that, eight months into his rule, doing business in India is as hard as it ever was.

There is mounting evidence too that rural India is struggling as Modi curbs aid schemes championed by the last government, compounding the impact of last year's bad monsoon and a slide in prices for farm exports.

With India's $2 trillion economy yet to emerge from its longest spell of sub-par growth in a generation, sources in both Mumbai and New Delhi see room for some slippage on deficit targets as long as Jaitley puts together a credible spending plan for the fiscal year to March 2016.

"It's about the quality of spending," said one government source familiar with the budget preparations. "We need to reduce wasteful spending and spend more on building the capacity of the economy."

Jaitley, sources say, might get away with revising up next year's deficit target - to around 4 percent of gross domestic product from the 3.6 percent now envisaged - without endangering future rate cuts.

For now, the powerful forces braking inflation - not least a 50 percent fall in world oil prices - have handed Rajan the justification to cut rates without appearing to bow to government pressure.

"The pressure has always been there. Now we are noting a structural change in the inflation trajectory due to a 5-month decline in oil prices," said a second policy maker familiar with his thinking.

Rajan is playing a longer game to establish inflation as the central bank's main formal policy target. He appears to have buy-in from key government aides who want to avoid another boom-bust cycle like the one that followed the 2008 global crash.

"The goal is to achieve faster growth which is non-inflationary," deputy finance minister Jayant Sinha told Reuters after the rate announcement.

Inflation targeting will help make India's policy framework more predictable after Thursday's move, which was timed auspiciously to coincide with the Hindu harvest and kite-flying festival of Makar Sankranti.

While welcoming Rajan's pragmatism in ordering the rate cut between policy meetings, one investor said he would prefer not to have too many surprises.

"Care should be taken to maintain the sanctity of policy meetings," said A. Prasanna, an economist at ICICI Securities Primary Dealership, otherwise "markets could be in a perpetual state of froth".

The RBI holds policy meetings every two months, with the next one on Feb. 3.

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