Arun Shouries Articles » economy

‘Lower CRR further, have orderly transitions for lower interest rates’

speekout — Mon, 20 Oct 2008 19:05:45 +0000

WALK THE TALK WITH ARUN SHOURIE

The Indian Express ::::Posted: Oct 20, 2008 at 0018 hrs IST

•My guest this week is an editor, author and economist, apart from being my friend and guide. Circumstances have changed quite a lot since we spoke last.

Thank you. There were great success stories. And the Maruti issues were oversubscribed 70 times. It has been a great success after that.

•There is so much talk about buying us out of the market or selling us out of the market.

It is one of those ‘deaths foretold’. In the sense that for one-and-a-half years, many of us have been saying that the way the Government is handling things — especially the complete stoppage of reforms for the entire period — can lead to problems in production. Then, the problem of Inflation would arise, compounded by the fiscal profligacy of the government. The populist policy in which there was no accountability and then to rein in inflation is like trying to use the axe of monetary policy to swat a fly.

•When the successive round of tightening and raising of rates happened, the then Reserve Bank of India (RBI) governor Y V Reddy was asked in a press conference : “why you are making money expensive?” He said, “If dal and rice have become dearer why should the rupee not become more expensive?”

We are seeing the consequence today. Raising interest rates does not bring down the prices of dal and chawal. What happens is you further constrain production. One of the great achievements of Yashwant Sinha was that the administered interest rate was brought down to 6 per cent from 12.5 per cent.

•But that was the global trend then…

Well, not really. But in India there was so much resistance. Even senior citizens were saying that their interest rate had been reduced (on fixed deposits), enabling firms to roll over their debts.

•If you meet a bank chairman who wants to fly, he will be talking of air cuts…

To second this, it led to a housing boom. Now all that was choked up and one can see the effect on the cement industry today.

•People who borrowed money at 7 per cent for housing loans have seen their rates going up to 13 per cent within seven months. It’s brutal.

The same thing is going to happen in the economy — this dal and chawal business of over-leveraged firms. Suppose a big company has borrowed a lot of money to acquire some big firms abroad… now with the prices of commodities falling, how will they finance their earlier commitments?

•Do you think that Tata and Corus would face this problem?

Quite a few companies are over-extended. Look at the copper prices, for example. Sterlite (which specialises in copper production) made a great success of Balco (mainly in aluminium) and also brought Hindustan Zinc Ltd. But now with prices falling, you can see that Hindalco’s issues have been devolved. Similarly, for Tata Motors, it’s Tata Sons that have to put in money, probably by disinvesting TCS. These are interconnected issues.The Finance Minister recently said that it’s not of great concern if some firms’ share values have come down in the Sensex. But actually it is not just firms, it’s millions of investors. And it took a long time to persuade people to invest after Harshad Mehta and Ketan Parekh-type scams. Because of this blasé attitude that nothing is happening, we have landed ourselves in further trouble.The FM keeps saying that “fundamentals are strong”. But nothing happened to the “fundamentals” overnight when South-East Asian economies and currencies collapsed. That affected the real economy, nothing had happened to the fundamentals.Has anything happened to the fundamentals of American and European economies overnight? But they realised that liquidity crisis leads to a fundamental crisis… investment institutions backing firms. Therefore, they are more desperate to save the situation. We think that if we ignore the problem, it’ll cease to exist.

• But the presumption is that there is a global crisis. You have to live with it and you have to do a little course correction. What else can you do?

I do not think that it is a global crisis in that sense. The crisis in India is not a reflection of what is happening there. Here, it is fiscal mismanagement that sucks out liquidity from the market. Our liquidity difficulties have nothing to do with the world equity crisis and what you now see in the index of industrial production. This is what all of us have been forecasting for quite some time. I hold not only the Government but the media responsible, since it did not adequately take up these issues. Then there are some industry people who are more interested in making deals with individual ministers instead of lobbying for reforms. They (industries) should have woken up and explained the impending situation to the PM and FM, but nothing was done.

•Do you think that we have crossed the hump?

Not yet. In the world, there can be four to five rounds. First comes the subprime crisis that is the trigger and then the institutions exposed to the problems, then the banks. Then, that will be compounded by the real firms that were leveraged, firms that are dependent on continuous orders, firms in other countries that are dependent on export. Our IT companies for instance. The real problem will come when everyone starts losing jobs. I fear there will be strong pressures from protectionism. Non-tariff barriers will be put up, leading to a ‘beggar-my-neighbour’ policy. That is when sovereign funds may move in to buy companies at lowest prices . This will be followed by another round of protectionism against the capital flow.

•These are the countries which have large sovereign funds — China has $1.8 trillion of reserves, Singapore probably $750 billion. The small Abu Dhabi has more than a trillion dollars in sovereign funds. You can imagine the reaction if Qatar starts buying up companies: “No, no we cannot sell to Middle Eastern countries.” Then everybody puts up barriers… this was the occasion for India to show leadership.

•Do you think that India could have taken advantage of it?

We need to keep our economies more competitive and show leadership to the world by giving them good ideas and participating in it. For instance, I feel that Gordon Brown has shown leadership to Europe. In fact, his methods are being adopted by Americans who are overturning their own plans in favour of his suggestions.

•You will agree that this is not the time for name-calling, particularly between the BJP and Congress. Are there ideas you can give to the Government and market consistently?

I think the BJP statement did not blame anybody. It was issued with constructive ideas that did not blame anybody. We felt that immediate relief was required for liquid mutual funds. That is what the people in the market told us. Second is to lower the Cash Reserve Ratio (CRR) much further.

•A CRR of 9 per cent was brutal?

Yes. It should be brought back to 5 per cent as was the case earlier. Third, you must have orderly transitions for lowering interest rate. Because bank rates had become 23 per cent, banks were lending to each other. Government-owned banks were not lending to government-owned Oil companies.

•Rather banks lend to the government?

Therefore, you lower the rate of interest and by March 2009, you could bring it down to manageable limits.

•What figure is prudent now? If it would come down by 200 basis points, then with CRR cuts and some other liquidity measures, the interest rate should come down at 300-400 basis points between now and March 2009.

Yes. That is one of the many things that needs to be done.

•Do you think it is desirable — with a combination of measures — for the interest rate to come down by 300 to 400 points by March 2009?

It is better that way. You should stimulate investment because it is drying up. Second, when government-owned banks are not lending to government-owned oil companies, just imagine who would be lending to small and medium enterprises.Even credit for kisan credit cards have been frozen and outlays that are required for the National Rural Employment Guarantee Scheme are not reaching the banks for making payment. These avenues for purchasing power going directly to the people should be opened. There are many opportunities in this. For instance, a suggestion was received that there is a cap on the amount of interest that can be given to NRI deposits. The cap is Libor plus 75 basis points.

•It has been raised now

Citibank in the US can get funds at Libor plus 400 basis points. So, who will put it here? But NRIs are scared we’re told. So remove this cap. Let the banks decide.

•Instead of putting money in foreign banks they’d rather put in Indian banks.

Yes, because NRIs know these are government-owned banks, take advantage of it.

•You would prefer the rates given to NRIs become Libor plus 400 basis points.

No. Why have a limit? If they want to deposit here, banks will pay them whatever they can afford. Remove these artificial constraints.

•You do not see an exchange risk tomorrow?

No. Today the rupee is under great pressure when inflows from NRIs come. This is what happened in the case of the Millennium Deposit Scheme and Resurgent Indian Bonds. We had begun to lose $200 – 300 million every month because of the decision of the previous government and the previous RBI governor told Dr C Rangarajan that he would try to hold the rupee at a particular level. We started losing the reserves. So it was then that former FM Yashwant Sinha decided to have these bonds. It eased the pressure.

•You want the government to go to the world with another bond issue of that kind.

Yes. Get the depositors here.

•In the Indian establishment nobody wants the banks to set their own rates for NRIs’ deposits. So give them a range of 400 to 450 basis points.

Let the five banks decide. This financial crisis is an opportunity in for India. For instance, Yashwant Sinha, in one of his first Budget speeches, said that banks’ equity should be brought down to 33 per cent, even as the public sector character of the banks is maintained. Even then that was not possible. It is not possible now. So the idea is to use the occasion for rights issues of banks and strengthen the banks and enlarge their capital base. Let them get out and compete in the world.

•So enlarge their equity with rights issue but the government does not go below 51 per cent holdings.

But because of the problems of the legislation in Parliament, nobody will support it.

•So you can do rights issues by keeping the government at the same level up to 50 per cent.

Let’s assume it’s around 60 to 70 per cent. So in the rights issues of $10 billion. their total market capitalisation is $40 billion. Young economists have suggested that you do $10 billion. It is a brilliant idea. You do this, the government infuses money, they get liquidity.

•The government is infusing some money now.

Under desperate circumstances after sucking it all out. For instance, for the oil bonds they did not compensate oil companies, naturally they had to take cut on banks

•That is the funny part – one of failure to not sell oil companies (referring to the NDA rule). I see so much fighting between aviation and oil companies. Were these not public sector companies, would they have been allowed to build these outstandings?

No way. Today banks are saying that we cannot lend to oil companies, while oil companies are saying that we cannot give aviation fuel to aviation companies

•The whole system has become distorted.

I think because of one of the key reverses of reforms was that the NDA government, under great difficulty, had to fight to get back from the Administered Price Mechanism in the petroleum sector. Because as you know every 50 paise hike in diesel prices means an agitation.

•It was not easy.

It was a real fight. It was to the credit of Yashwant Sinha and Jaswant Singh that they advanced towards that. But Mani Shankar Aiyar maintained that the government must determine prices. He started dictating prices to the oil companies. Then the oil prices started rising. They inflicted enormous losses on oil companies. The oil companies were told that the government would give them bonds, but P Chidambaram did not include these bonds in the budget, so it was a deficit.

•We have made paupers of our children and are now borrowing from grand children.

It is Rs 1,50,000 crore of non-items which were excluded from the budget that were actually deficit. That is the basis of the current problem. Then you will say that you will raise interest rate to deal with the problem.

•So create liquidity by cutting CRR. Second, bring down interest rate so we see a fall of 350 to 300 basis points by March. This will allow banks to raise more capital through rights issues, which the government also subscribes to, so that its equity does not come down. Fourth, if you take one bond on budget what would happen?

Then you can use it for Statutory Liquidity Ratio (SLR).

•Then they became SLR compliant.

This allows the banks to be aggressive in market operations. Today you are squeezing them from all sides.

•They do not want the CBI around. They’d rather lend to the government.

This is a crisis with an opportunity in this sense.

•But constructive dialogue has died down. Nobody believes it can happen particularly with Congress and BJP.

Yes, that is true. But it is also necessary to move over discussion into some ideas. I would appeal to everyone. People do not need to be reminded of their problems. They need to be told that you have ideas to solve the problems.

•It’s not enough to abuse the government of the day and carry on.

Important institutions are not working. We cannot expect the reforms to come down from the political arena, since those in it are beneficiaries of the system. So it would either be the middle class or personalities like us who can inform the public discourse.

•You said that the PM is too busy to meet you. I hope he has time to meet you or read the text in The Indian Express…

Usse to apne guldaste ki raunaq se hi maksad hai/ kahaan gulchin ko fursat hai ki dard-e-gulistan samjhe.

Transcript by Rupali Das

Quota is not the way: Arun Shourie

speekout — Thu, 29 May 2008 06:18:00 +0000

Quota is not the way: Arun Shourie

CNN-IBN

Published on

Sun, Jun 25, 2006

Karan Thapar: Hello and Welcome to Devil’s Advocate. My guest today is one of the sharpest critics of India’s reservation policy. In a book published this month Falling Over Backward, he exposes its intellectual hollowness and its moral two-facedness. But is he against reservation specifically for the Scheduled Castes? And if he answers this as yes, then how does he think India should respond to the centuries of discrimination they have suffered? Those are the two key questions that I would put today to Arun Shourie.

Mr Shourie, let me start with a simple question to establish your position. When you say you are against reservation per say, are you also including reservation for the Scheduled Caste?

Arun Shourie: Yes, I think so. Because reservations are not meant to compensate for historic wrongs. They are meant for helping people at the moment.

Karan Thapar: Well, that’s what I want to put to you. The Scheduled Castes have been treated as untouchables for centuries. In fact, even their shadow was considered to be polluting. Their dignity has been trampled upon. Their individuality and humanity has been questioned. Why do you believe that reservation is not an appropriate way of giving them confidence and status?

Arun Shourie: Firstly, these are clichés without particular examination of historical records. Because a passage occurs in something called Manu’s doctrine or Manu’s compilation, I mean I have not met a person who realises or who acknowledges the fact that this compilation was done over 700 years.

Karan Thapar: Let’s leave Manu Smriti out.

Arun Shourie: No.

Karan Thapar: When you are saying these are clichés, are you saying that in fact the untouchables have not been treated in the way that history acknowledges?

Arun Shourie: No. They have been in parts of India. Let’s say in some districts of the South. And the real remedy to that has been in modernisation. In overcrowded trains… Indians make five billion railway journeys every year. Five times of our population. In overcrowded buses, are you first verifying what is the caste of the person standing next to you?

Karan Thapar: But what happens when you get off the bus? It’s an argument in your book.

Arun Shourie: No. No.

Karan Thapar: Equality may be forced upon you in a bus, because you have no choice. But when you get off the bus, inequality reigns supreme. It is that inequality that I am talking about.

Arun Shourie: It doesn’t. That’s not the argument in my book at all.

Karan Thapar: I am not saying it is the argument in your book. I am countering your position that reservations are not justified for Scheduled Castes. I am asking you why you believe that centuries of discrimination should not be countered by reservations?

Arun Shourie: You asked me that and I gave you the answer that reservations were and are not meant in the Constituent Assembly as a compensation for historic wrong.

Karan Thapar: They can be used for that?

Arun Shourie: But… My friend, let me answer. Because there are better ways to lift people. Poor must be helped, they must be lifted. That’s the duty of society, but reservation is not the way and that’s why I argued.

Karan Thapar: Let’s come to the better ways in a moment’s time, I very much want to talk about them. But for most people listening to this interview, it will come as supreme shock that you believe reservations for the Scheduled Castes, who have suffered centuries of discrimination, are unjustified. Let me put to you why people disagree. Even today, Valmiki graduates are unable to get proper jobs and have to scavenge because they are considered untouchables. Even today, the Mushahars of Bihar are forced to eat rats and mice because they are too poor to access proper meal. Are you saying to me that reservations for such people are wrong?

Arun Shourie: Yes. Because the way to help them is to give them jobs and to give them access to education so that they don’t eat the damned mice. And the very fact that after 50 years of reservations, they are still eating mice is a conclusive argument against the compassion that you are showing.

Karan Thapar: Except for the fact that they don’t get jobs because they are untouchables.

Arun Shourie: Absolutely bunk. It is the other way round.

Karan Thapar: Why then are there Valmiki graduates scavenging for a living?

Arun Shourie: But there are Brahmin graduates who are doing it because of inadequacy of jobs.

Karan Thapar: But there is a difference. In one case, there is discrimination and in the other it is the inadequacy of jobs.

Arun Shourie: No. No. You just don’t let me speak. In China, people are scavenging and eating rats. Not because of caste, but because of 110 million of floating population who have lost their jobs.

Karan Thapar: Chinese eat snails, they eat eels, they eat snakes. There is a different culture and cuisine.

Arun Shourie: No. Just one second. I am talking of the 110 million Chinese who have been dislocated by modernisation. You read any Chinese text and you will find that. The point there is that I am all for the stopping of eating mice and elimination of poverty and giving people jobs, but it is wrong to presume…

Karan Thapar: Aren’t you missing the point here? There is difference.

Arun Shourie: No, I am not missing the point. You are not letting me make the point here. But when they are being discriminated against, the persons who are doing that most, who are beating them, who are responsible for the massacres as reported by Mandal himself are the so-called OBCs, who own land.

Karan Thapar: But that’s not the question I asked you.

Arun Shourie: But that’s the question.

Karan Thapar: No, that is not the question. The question is this. There is a difference in dislocation because of modernisation that affects people of all classes, of all castes. I am talking about discrimination due to untouchability, due to a wall of prejudice, which has affected people for centuries. Surely, today modern India has a moral obligation to atone and to recompense for the way it has treated the Scheduled Castes. You are denying that?

Arun Shourie: Karan, I completely would put aside this moral outrage that many of you put on.

Karan Thapar: It’s not put on, it is a reality for the people who are affected.

Arun Shourie: Just a second. Yes, but the so-called modern people do put on this compassion. The fact of the matter is that great progress has been made by our social reformers. That is the real way for dealing with this. Swami Dayanand, Swami Shraddhanand, Sri Narayan Guru in the South…

Karan Thapar: I am afraid it hasn’t changed the situation at the ground.

Arun Shourie: You are absolutely…How do you know the situation? Will you please just let me speak?

Karan Thapar: Can I just answer that?

Arun Shourie: No. First let me speak. Let me first answer your question when you assert that the situation has not changed, that is what I call a cliché. You have to listen.

Karan Thapar: Can I justify that?

Arun Shourie: No. Just one second, let me complete it. I will give you the documentary evidence. You see what Sri Narayan Guru reported in Kerala at the turn of the century. You see what Gandhiji found in the 1920s and you compare that with things today.

Karan Thapar: Compare it with 2006. Name one village out of India’s 6,00,000 villages where the Dalits are permitted to stay in the centre of the village. Not only are they banished to the outskirts, but in most cases, they are required to live in the south side so that the wind that blows over them doesn’t pollute the village. That is the extent of discrimination they still suffer.

Arun Shourie: And the wind in all of South India comes from the south my friend. I don’t know where you get this nonsense from?

Karan Thapar: Chandrabhan Prasad, perhaps one of the few Dalit intellectual scholars, who can easily confirm the facts to you.

Arun Shourie: Well, maybe. We have all got impressions about India. India is a large country. Almost every statement about India must be true, but the south business is quite silly because if you come to Goa my friend, you see the wind coming form the south. You come to Kerala, you see the wind coming from the south.

Karan Thapar: Ok. Let’s approach this matter differently. Let’s not talk about it in terms of moral obligation or recompense and atonement. Let me put it like this. Do you believe that reservations are intrinsically wrong because they lower standards, because they sacrifice merit as a way of giving people access for the wrong reasons?

Arun Shourie: Yes, they are for all these reasons and many more. For instance, especially when they are caste-based, then they reinforce caste as they have done in South as they are now doing in the North.

Karan Thapar: That’s disputable. You can only fight caste discrimination in terms of caste. Leave the caste basis aside. Your concern is that it affects merit.

Arun Shourie: But why it is caste-based? All reservations in India are caste-based. How can you just put it aside?

Karan Thapar: Because you are correcting caste prejudice. If the Dalits have been discriminated against as untouchables, you have to be given reservation on that very basis to make up for it.

Arun Shourie: That was the argument my friend. That is how things were rationalised in the end when the Constitution specifically forbade caste-based reservations. Then there has been discrimination on the basis of residence. There has been discrimination in India, it has been alleged, on the basis of language as in every other society. On the colour of one’s skin.

Karan Thapar: Quite right.

Arun Shourie: Just one second. So why not have reservations on the basis of the colour of one’s skin?

Karan Thapar: Well let’s not talk about hypotheticals. I am trying to understand your concern about reservations.

Arun Shourie: I am not talking about hypotheticals. You said that there is discrimination on the basis of caste.

Karan Thapar: It’s a fact.

Arun Shourie: So I said there is discrimination on the basis of the colour of one’s skin. Why not have reservations for that? You are not answering it.

Karan Thapar: Because I am saying to you that the level of discrimination that has been practised on the basis of caste and because of untouchability is infinitely and incomparably greater. The comparison doesn’t arise.

Arun Shourie: How do you say that, my friend? Where is the basis?

Karan Thapar: Let’s come back to the question that I began with. The real reason, if you are not accepting the moral obligation, that you find reservations wrong because they undermine merit, that they sacrifice standards?

Arun Shourie: Yes. That is one of the reasons.

Karan Thapar: But can I then point out to you that special concessions on the grounds that we are talking about have been granted to Indians since at least the 1850s, upper castes were beneficiaries. Let me give you an example. When the first college was set up in Madras in the late 1850s, British records show that the pass marks had to be reduced form 40 per cent to 33 per cent and a whole new concept of third division was introduced to help the sons of Tamil Brahmins. If it can be done for them in the 1850s, why can’t the same concession be given to the Dalits today?

Arun Shourie: Firstly, we are in 2006. The demand for proficiency is much greater. You look at the range of jobs at that time and the skills required for those jobs and…

Karan Thapar: But the problem is the same?

Arun Shourie: No. Firstly if that was the case, it was wrong. Second, if I have to learn typing and you give me a concession on that as in the case of N M Thomas vs. State of Kerala, then it is one thing. But if the job that is required is a highly skilled job in a medical institution and you lower the standards, the consequences are much greater. It’s not typing that you are lowering the standards for.

Karan Thapar: But talking about lowering standards to give them admissions and entrance, we are not talking about lowering standards of graduation. What we are talking about is just creating an opening field.

Arun Shourie: My friend, you have just not studied the Constitution in which it has now been provided that standards will be lowered even for promotions and standards have been lowered for post-graduate courses for reservations.

Karan Thapar: No, I am not questioning the extent…

Arun Shourie: You are. You just said this and then you run away.

Karan Thapar: No, I am not. I am not questioning the extent to which reservations have been taken. I am questioning the position you began with which is that reservations at the very outset for Dalits and Scheduled Castes is wrong. I am putting to you that similar concessions were given to Tamil Brahmins. Let me add. As the Indian University’s Commission says they were even given in 1935.

Arun Shourie: To hell with Tamil Brahmins, man. I am not defending. Dekho Tum baat hi nahin karne detein. Tamil Brahmins be damned. I wouldn’t care two hoots of what the British did. My whole argument is that the British sowed many of these things like separate electorates to divide Indian society.

Karan Thapar: All right. Let me give you a modern example. Yogendra Yadav did a study this month (in June) of 315 key positions in journalistic organisations and he chose 37 national journalistic organisations — both television and print — and he discovered that not one of the top 315 positions is manned by a Dalit. That is an example surely of the manner in which discrimination keeps out people of talent only on caste.

Arun Shourie: Absolute bunk. I cannot believe that Karan Thapar is not going to employ a proficient person whether it is for camera or for assisting him just because of caste. Karan Thapar is not like that.

Karan Thapar: Then how do you explain 315 top organisations and 37 media houses, including the papers you have worked for?

Arun Shourie: Because it takes time for that kind of competence to be acquired. Journalism is one of the freest professions as sports are, as entertainment industry is.

Karan Thapar: So, you are saying to the Dalits wait a century? Wait two centuries? Do you think time is on their side? You don’t think they need a helping hand?

Arun Shourie: Of course they do. But you don’t let me tell you what the helping hand has to be. Not reservations.

Karan Thapar: Why?

Arun Shourie: Because I have answered it 10 times and you keep going back to the same question. Repeating the very words. Just look at your own recording Karan, you are just repeating. You are taking up time.

Karan Thapar: You have answered it in terms of the moral obligation. Let me point out to you the efficacy between ’47 and ’97. In those 50 years alone, the number of Dalits who as a result of reservations went to schools and colleges grew from 1.74 million to 27.92 million. During the same period, the number of Dalit graduates jumped from 50,000 to over 5.5 million. That’s an example of how reservations have helped and you are denying this to them.

Arun Shourie: You have just picked up a few statistics.

Karan Thapar: Very meaningful ones.

Arun Shourie: Just one second. For the total number of persons going to school, what is the statistics from 1947 to 2006?

Karan Thapar: What do you mean the total number?

Arun Shourie: Irrespective of Dalits. The total number of school-going population in India from 1947 and now. Tell me.

Karan Thapar: I don’t know the answer, but the point that I am making is that the percentage of both has increased. I am saying the percentage of Dalits has increased because of reservations. Otherwise the system would have kept them out.

Arun Shourie: How do you say the last sentence?

Karan Thapar: I will illustrate it by taking government employment.

Arun Shourie: No. But firstly, you did not know what was the total growth.

Karan Thapar: Do you know it?

Arun Shourie: No.

Karan Thapar: You don’t either. You are simply trying to question whether the two have increased equivalently. I am saying that in fact the reason why the Dalits have increased. It’s because of reservations and not because of general improvement in society.

Arun Shourie: That is just an assertion of yours.

Karan Thapar: It is a fairly valid one that most people would accept.

Arun Shourie: How do you say this? Then we have two contradictory assertions.

Karan Thapar: So you neither accept the logic in terms of morality or in terms of efficacy?

Arun Shourie: Yes.

Karan Thapar: On both grounds, you think reservations are wrong?

Arun Shourie: Absolutely.

Karan Thapar: Arun Shourie, since you are implacably opposed to reservations for the Scheduled Castes, what is your preferred way of tackling the discrimination they have suffered for centuries?

Arun Shourie: Firstly, I am not against reservations only for the Scheduled Castes, but for everybody. Second point is yes, if they have suffered that kind of discrimination and we have got good records of this kind of thing happening in the South, for instance in many parts of Tamil Nadu, then the best way is social reform and these great reformers who have made an enormous difference to India in the last 200 years as testified to by the Christian missionaries themselves.

Karan Thapar: Is there a second way beyond social reforms?

Arun Shourie: Yes, there is. Second is economic growth and modernisation.

Karan Thapar: Third?

Arun Shourie: Third is to find out what is the real reason for the poor performance of the child. For instance, he cannot retain what he learns in class because of poor nutrition, give him four free meals a day.

Karan Thapar: Individual attention?

Arun Shourie: Yes, absolutely.

Karan Thapar: Is there a fourth?

Arun Shourie: Yes. There are many things. He doesn’t have a place to study, make free dormitories. He needs free textbooks, he needs training and education.

Karan Thapar: That’s all part of individual attention. But is there yet another measure you would like to implement to help the Dalit? Because let me tell you why I am asking you all the things you have talked about — social reform, economic growth, individual attention, they are very slow. They are unenforceable, they are difficult to monitor, they are certainly not transparent and in most cases, they are voluntary. The reason why people prefer reservations is because they are transparent, they are enforceable, and they are monitorable.

Arun Shourie: And for 50 years you have not monitored them? Even the government.

Karan Thapar: But that’s not the failure of reservations? That is the failure of the administration.

Arun Shourie: No. No. You don’t understand. Reservations are going to be implemented by whom? By the Americans in India?

Karan Thapar: Reservations have been implemented badly. That’s not an argument against reservations per se?

Arun Shourie: That is the usual argument of Five-Year Plans. Plan was good, but was not implemented properly.

Karan Thapar: But in this case, it is the truth?

Arun Shourie: It is not the truth. It is an assertion that you keep making. The fact of the matter is that these free lunch programmes, midday meals have helped a great deal in reducing dropout rates, in retention of what is learnt. We should do that. That is what requires painstaking work and the very fact that things are not being monitored…

I will give you an example if you please permit me. Recently in the Standing Committee of the Parliament on Social Welfare, there was a report available in May, in which the Secretary of Social Welfare was asked: “You have a backward classes of financial corporation, how do you distribute the money between he states?” He said: “Madam, we distribute it according to the proportion of OBC population in different states.” She said: “How do you know the number?” He said: “We don’t know the number.” She said: “What is the total number of OBCs in India?” He said: “We don’t know.” “What is the total number of Scheduled Caste people?” He said: “We don’t know.” If we don’t know the number, we don’t know the distribution, we are not monitoring who is getting what.

Karan Thapar: It is a little facile to knock down reservations on the ground that the administrators who are responsible for administrating them are fools. That’s what you are proving. You are proving the administration, not the policy of reservations, is wrong.

Arun Shourie: I am saying more. Many commentators are just assertives. I will not listen to…

Karan Thapar: The assertion could be on fact?

Arun Shourie: What is the fact?

Karan Thapar: I can argue that your refusal to accept this is based on prejudice.

Arun Shourie: No. The caste people…

Karan Thapar: I being the asserter, you could be the prejudiced.

Arun Shourie: Could be. The Scheduled Caste people are saying that the benefits of reservations are being hogged by a Creamy Layer within Scheduled Caste.

Karan Thapar: But at least they are getting it. The Creamy Layer didn’t have it 50 years ago.

Arun Shourie: It is impossible to argue with that.

Karan Thapar: Why? It is a fact.

Arun Shourie: What is the Creamy Layer?

Karan Thapar: Once the Creamy Layer has benefited, you can remove them, but let them benefit before you remove them.

Arun Shourie: But you can benefit the people by having an economic criterion for identifying the individual. Why not?

Karan Thapar: You know that each time milk boils, it forms a Creamy Layer. You just remove it. Each boiling brings a fresh layer to the top.

Arun Shourie: Milk could be made to boil many time over, provided you identify the state policy by the unit of the individual and you identify the beneficiary individual by economic criteria. You would then not be fortifying precisely the types of regressive institutions within Indian society like caste, which you want to get rid off.

Karan Thapar: Except that the people who are untouchables were not created untouchables because of their individual character but because of the group. That’s why the group is being focused upon.

Arun Shourie: It reinforces the kind of group. This was Panditji’s view. I believe that this has been vindicated by time that we have reinforced that group identity to the great evil of society, to the ill results of society.

Karan Thapar: This will unfortunately have to be my last question. That many Dalits listening to you will say that ‘he may be a liberal in many matters, but he is a hard-hearted, callous man who simply doesn’t understand what it’s like to be oppressed under centuries of discrimination.’

Arun Shourie: They said that to me when I wrote about Bhindrawala. He is a Hindu, Arya Samaji, does not…

Karan Thapar: The two situations don’t equate.

Arun Shourie: They do. When I wrote about the Shariat and the consequences of Shah Bano, everybody said he is communal, he is Hindu. And now? So wait for time.

Karan Thapar: So the verdict of your peers or the verdict of the majority of society is water off a duck’s back as far as Arun Shourie is concerned.

Arun Shourie: I don’t know what the majority of the society. Karan Thapar doesn’t speak for them either.

Karan Thapar: Arun Shourie, a pleasure talking to you.

Arun Shourie: Thank you.