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Barking Up the Wrong Tree

Barking Up the Wrong Tree ON THE EVE of his departure for Japan, Finance Minister Morarji Desai reiterated his intention to evolve a comprehensive incomes and prices policy to tackle the difficult economic situation marked by budgetary stringency, the continuing price spiral and the industrial recession which is deepening. He was almost driven to make this statement by the threatened general strike planned for September 11 against his proposal to freeze the dearness allowance of Central Government employees till March 31, 1968. The statement was made at an informal chat with pressmen immediately after a heated debate in the Lok Sabha on the implementation of the Gajendragadkar Commission's report on the DA claims of Central Government employees. It is significant that in the course of the debate Morarii merely repeated his resolve not to make the DA payment in cash since the sum involved, accord- tng to him. would be as large as Rs 175 crores if the claims of Central and State Government employees and employees of local bodies were to be met. Pumping of that much money into the economy at this stage would push the inflationary pressures to unmanageable proportions so that he would rather risk a strike by Government employees than give in to their demand for DA.

If the Late Rains Fail

to look elsewhere for assistance for its projects. An important development in the chemicals industry has been the progress made in recent years by France and Italy independently of the international oil and chemicals cartels. Simultaneously, East Europe, particularly East Germany, has also made significant advances in this field. India should look forward to benefiting from these developments and using them to break the stranglehold of the established cartels in petroleum and chemicals.

Stymied at Every Step

the process increase its deposits as well. The increase in the assets of the commercial banking system could be either in the form of credit to the private sector or in the form of credit to the Government sector. When the demand for credit from the private sector is being only inadequately met by the commercial banks, an increase in commercial banks' holdings of Government securities may be interpreted as being at the cost of a potential increase in credit to the private sector. In other words, in this situation it is net Reserve Bank credit to the Government which constitutes the determinant of the final increase in money supply. Increased holding of Government securities by the commercial banks merely denotes a changed division of the deposits created in the commercial banking system as between the private sector and the public sector. In fact. the greater the share of such secondary increase in money supply which the Government is able to claim the less will be the requirement for Government to increase its access to Reserve Bank credit, and this in turn would hold in check the overall increase in money supply in the economy. Thus, given that the commercial banks would be able to exercise in full their credit creating potential without raising their investment in Government securities, increase in commercial bank credit to the Government sector would really be on balance contractionary in its impact on total money supply. Assume, for instance, that current deposits of commercial banks will increase by Rs 40 for every Rs 100 in currency in circulation. If Government raises Rs 100 from the Reserve Bank and Rs 30 from the commercial banks during a particular year, the net increase in money supply would be Rs 130. If the entire Rs 130 is raised from the Reserve Bank the banks would create deposits of Rs 50 by lending an- equivalent amount to the private sector thereby leading to a total increase in money supply of Rs 180, though net bank credit to the Government sector would be Rs 130 in both cases. Thus Government borrowing from commercial banks has the effect of mopping up funds which accrue to them from the Government's initial borrowings from the Reserve Bank, and the overall impact of such borrowing would thus be contractionist.

Politics and Economics of a Freeze

Politics and Economics of a Freeze THE IDEA of a wage 'freeze', which was revived by the recent Chief Ministers' conference, is rapidly becoming a major cause of tension within the Government. The Finance Minister, as was to be expected, took advantage of the views expressed at the Chief Ministers' conference against payment of additional DA to Central Government employees if State Government employees were to be denied a similar increase, to begin to toy with the 'freeze' idea. But for the fall of the Congress Government in Madhya Pradesh, which diverted attention for some time, differences on this question within the Government might have been by now headed for a showdown. As it is, the tension is steadily mounting and there may be a crisis soon.

Half-Hearted Reorganisation

Half-Hearted Reorganisation THE Jong delayed announcement of the Government's decision on the so-called reorganisation of the Planning Commission has come at last. The outcome of the prolonged, and often fierce, controversy that has surrounded this question, however, has been nil. No change of any significance has been made either in the structure or the role of the Planning Commission.

Where Does the Freeze Come In

 sition. It also provided evidence of differences within the Congress Assembly Party. The APHLC MLAs from the Khasi and Garo Hills warned the House that this might be their last presence in the Assam Legislature. The Treasury Benches were full of novices, and this put an extra burden on their senior colleagues in the Cabinet.

The Long View on Steel

community interested in the maintenance of ordered life in the State find it increasingly difficult to view the situation with equanimity". "The strangest thing", the paper said in conclusion, "is that, instead of bending all their energies to an improvement of the situation, some of the members of the United Front Government are content to accuse the Centre and the Union Home Minister, Mr Chavan, of creating difficulties of the smooth functioning of their government!" The Tribune invoked what had happpened in the past, not only in Telegana but also in Pepsu, and said that "the danger of communist groups running parallel governments is certainly not a remote phenomenon". The reign of terror was "not a nuisance but a deadly menace", and if what was happening in Naxalbari was not a parallel government, what was? The responsibility for what was happening in Naxalbari, said 'the Tribune', was "inescapably with the Chief Minister*' who ruled over a coalition of as many as fourteen parties. "But'', it added, "few will sympathise with him because the predicament is of his own making. If he cannot prevent a 'reign of terror' anywhere in his State, the only honourable course for him is to resign. But dismissal has also its undeniable charms which he and his unrepentant colleagues can exploit to their hearts' content in an effort to show that the real enemy was not in Naxalbari but in New Delhi", Only New Age saw the intra- party conflict sparked off by Naxalbari. It laid the responsibility for the events there at the door of Left sectarianism. "If Naxalbari has focussed attention on infantile and, disruptive adventurism", said the Communist weekly, "much to the chagrin of even the CP(M) leadership, there are ideological and political causes which must on no account be papered over". Naxalbari, it said, was by no means the only foothold of this ultra Leftism. "Such trends", it went on, "inside the CP(M) are more and more coming into the open, though in varying forms. The CP(M) leadership seems to be almost at the end of its tether. After all, the ultras are the offspring of dogmatism and secta rianism which still continue to be dominant in the CP(M). To claim their right of inner-party revolt, the 'hard-core' elements in the CP (M) are citing what other leaders did four years ago". 'New Age' said "Naxalbari at least should cause serious re-thinking in the CP(M) leadership and ranks. Disciplinary action against the Naxalbari defiers and their like are no substitute for the ideological house- cleaning which the CP(M) badly needs".

Social Control of Banks

Social Control of Banks THE national preoccupation with the West Asian crisis and later with the diplomatic confrontation with China understandably shifted the focus of attention from the discussion of the budget in Parliament, the continuing deadlock in the preparation of the Fourth Plan and other economic policy issues on which a serious debate appeared to be brewing a few weeks earlier, especially after the Congress Working Committee's resolution on accelerating the pace of "democratic socialism". Now that the immediate objective of a ceasefire has been achieved in West Asia and the confrontation with China has abated somewhat, it is possible that the debate on economic issues might begin again.

Who Will Feed the Hungry

hold up the implementation of these schemes which have already been much delayed. LETTER TO EDITOR Politics of Ghera THE POLITICS of gheraos may not be as simple as you make them out to be in your editorial (May 20, 1967). The suggestion that Bangla Congress and the Congress could get together to form a government after the present coalition breaks up is far-fetched.

Towards Democratic Socialism

Towards Democratic Socialism THE REACTIONS evoked by the Congress Working Committee resolution, which lays down a set of directives and proposals for the Government to carry out in the field of economic policy and management, would seem to be more significant than the resolution itself. These range between militancy, among those who had assumed that official economic policy had decisively shifted away from traditional grooves and was definitely set on a new course favouring a larger role for the private sector for the market forces, and for dismantling State participation and initiative in economic development, and vast scepticism

Without Commonwealth Preference

Swatantra Party. This sets a dangerous precedent; for, a similar Committee dominated by leftist elements at a later date would feel free to recommend a leftward lurch in policy. C H Bhabha has other forums in which to expand on his economic philosophy. What is even more surpris- OUR DELHI LETTER ing is that some civil servants should have associated themselves with such recommendations. One is used to seeing civil servants joining the Swatantra Party only after their retirement! Bombay May 3.

Differences Narrowing Down

 out for his own political reasons. This dreadful sense of insecurity, rather than the conscience, makes cowards of us all. Perhaps villains too. Prafulla Ghosh and the F C I must know each other before anything effective can be done. Politics and vested interests permeate the whole scene; the latter are inconsolable over the downfall of the Congress but feel that the successor, because of its diversity, may be as "manageable". We will have to wait to see who manages whom. Meanwhile, apparently, the people have the fundamental freedom to starve to death. The Government still makes special provisions for giving extra-fine rice for certain religious occasions. But the hour is last approaching when the U F Government must make up its mind. The carrot of a higher procurement price has not succeeded. The sticks have not been brought out yet.


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