Saturday, February 26, 2011
India and Asia
India has signed four Comprehensive Economic Partnership Agreements so far and it isn’t a wonder that all of them are with Asian countries – Japan, Malaysia, Singapore and South Korea. The CEPAs reflect India’s deepening engagement within Asia. With the centre of the world’s economic gravity shifting to Asia, this is a step in the right direction. According to an Asian Development Bank report, Asia at present accounts for more than 35% of world GDP, up from less than 20% in 1980.
The region is expected to contribute as much as 45% of global GDP in purchasing power parity terms by 2020. Moreover, according to a recent study by the Organisation for Economic Cooperation and Development, along with the shift in global goods production towards Asia that is well documented, there will be a boom in consumer demand in the region. Asia accounts for less than a quarter of today’s middle class. By 2020, that could double. More than half the world’s middle class could be in Asia and Asian consumers could account for over 40% of global middle class consumption.
Given this scenario, it is surprising that India and other major powers in the region demonstrate slow progress on pan-Asian integration initiatives and prefer to engage with individual countries or blocs on a stand-alone basis. Take Indian exports for example. In 2007-08, the Association of Southeast Asian Nations (Asean) accounted for a 9% share and Northeast Asia for 14.8%. South Asia had a share of just 5.1%. For imports, Asean had a 9.5% share, Northeast Asia 18.6% and South Asia a mere 0.7%. In contrast, exports to the rest of the world were 71.1% and imports from the rest of the world, 71.2%.
Asian countries’ relations within the region can be bilateral, sub-regional, regional or inter-regional. Their contours range from political, strategic and economic to cultural interactions, with some being a mixture of these. India alone is involved in a plethora of regional and sub-regional groupings apart from the bilateral initiatives with individual countries.
The Look East Policy initiated by P V Narasimha Rao in the 1990s has not only led to closer collaboration with Asean but also to involvement in the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC). Another initiative in which India has played a major role is the Mekong-Ganga Cooperation (MGC). It aims at promoting tourism, transport and cultural linkages. Whereas Asean, Saarc and BIMSTEC are either Southeast Asian or South Asian initiatives, the Shanghai Cooperation Organisation (SCO) is mainly a Chinese initiative. India, Pakistan and Iran are observers at the SCO.
Some of these initiatives have had relative success and others have not really taken off. But what is noteworthy is that none has a pan-Asian vision. There are several benefits from regional integration in Asia. By increasing interdependence, integration will ensure peace and stability in the region.
As India and China move towards realising their economic potential, their energy requirements will inevitably rise. West Asia can provide the required energy security to the region. Similarly, some Asian economies are predominantly competent in manufacturing and hardware capabilities while others have complementary competencies in software and services. Regional production networks can be developed across Asia to take advantage of these synergies through vertical specialisation. Economic integration will be a key pillar – possibly the key pillar – of the region’s future development.
It is an irony that although nearly two-thirds of the world’s foreign exchange reserves are controlled by Asian countries, decision-making in the dominant global financial institutions is at present dominated by western countries. By evolving into a regional economic bloc, Asia will be able to claim its due in managing the international economic system and thus contribute to building a democratic and multipolar global economy.
The neglect in developing their own region by Asian nations is due to the interests of individual states; lack of political will; resource constraints; geopolitical factors including hegemonic ambitions; lack of leadership and vision; and weak institutional frameworks. Needless to say that any pan-Asian integration initiative will be shaped by the relations between the two largest countries of the region – India and China. Given their inconsistent strategic aspirations, however, India and China are likely to remain trade partners for the time being rather than become friends. It, therefore, makes sense for India to start by emphasising cooperation while working to narrow the gap with China.
China, India and Japan are the three pillars on which the architecture of an Asian union would have to be based, with provisions for a reunified Korea and also Russia to eventually evolve as the other supporting columns. These powers have a special role to play in leading a cooperative effort that supports stability, effective integration and strong representation of Asia’s common interests in global institutions and forums.
For a while now, Prime Minister Manmohan Singh has been making a case for an Asian economic community combining the Asean countries, China, India, Japan and the Republic of Korea. This would create an ‘arc of advantage’ across which there would be a large-scale movement of people, capital, ideas and innovations, thereby releasing enormous creative energies. In the larger interests of its own aspirations and that of the region, India must heed his words and take the lead.
Monday, February 21, 2011
Infrastructure and Population
India’s Silicon valley and tech hub Bangalore tops the list in a new Morgan Stanley report on How India's Booming Cities Cope With Problems From Infrastructure To Job Creation, with Mumbai, India's financial capital, trailing in 21st place.
Asia's third-largest economy is home to one-quarter of the world's 20 most densely populated cities but the slow pace of urban development has been a drag on economic growth.
Nearly one-quarter of India's top 200 cities have no car dealership, less than 10 percent have a 5-star hotel, and nearly two-thirds were still waiting for a large-scale retail store or hypermarket, the report found.
Its findings are based on a City Vibrancy Index (CVI), which looks at, among other factors, infrastructure, job opportunities, modern consumer services and a city's ability to mobilise savings -- what it calls key drivers of urbanisation.
Bangalore, India's "Silicon Valley", came in first place, with Pune in third and Hyderabad in fourth while New Delhi, India's capital, ranked eighth.
Over the next two decades, India is expected to see an urban transformation the scale and speed of which has not happened anywhere except China, with many cities becoming larger than many countries, in terms of population size and GDP.
By 2030 India's cities will be home to about 590 million people -- nearly twice the population of the United States today.
However, India is dwarfed by China on infrastructure spending. India spends a mere $17 per capita on urban infrastructure, compared to rival China's $116.
Poor infrastructure is estimated to shave a whole 2 percentage points off India's economic growth.
India's government is trying to bridge the gap and plans to double spending on infrastructure to $1 trillion in its next five-year plan, which runs from 2012-17.
Asia's third-largest economy is home to one-quarter of the world's 20 most densely populated cities but the slow pace of urban development has been a drag on economic growth.
Nearly one-quarter of India's top 200 cities have no car dealership, less than 10 percent have a 5-star hotel, and nearly two-thirds were still waiting for a large-scale retail store or hypermarket, the report found.
Its findings are based on a City Vibrancy Index (CVI), which looks at, among other factors, infrastructure, job opportunities, modern consumer services and a city's ability to mobilise savings -- what it calls key drivers of urbanisation.
Bangalore, India's "Silicon Valley", came in first place, with Pune in third and Hyderabad in fourth while New Delhi, India's capital, ranked eighth.
Over the next two decades, India is expected to see an urban transformation the scale and speed of which has not happened anywhere except China, with many cities becoming larger than many countries, in terms of population size and GDP.
By 2030 India's cities will be home to about 590 million people -- nearly twice the population of the United States today.
However, India is dwarfed by China on infrastructure spending. India spends a mere $17 per capita on urban infrastructure, compared to rival China's $116.
Poor infrastructure is estimated to shave a whole 2 percentage points off India's economic growth.
India's government is trying to bridge the gap and plans to double spending on infrastructure to $1 trillion in its next five-year plan, which runs from 2012-17.
Monday, February 7, 2011
Law of justice
The recent campaign in support of Dr. Binayak Sen has received much publicity. The mainstream media has enunciated his cause and dissected the evidence, conviction and judgment. Amnesty International argued that the case violated international standards for a fair trial. While Dr. Sen's conviction has received much attention, there is a need to foreground the context and to enunciate the larger issues facing the nation.
History and precedent: The ancient history of the Indian subcontinent is well recognised. However, the concept of an Indian nation state is much more recent. Diversity of traditions, cultural dissimilarity, religious heterogeneity, regional disparity and geographical variations divided the sub-continent. However, antipathy to British colonisation bound its diverse peoples and its numerous provinces, regions and kingdoms. The freedom struggle actually defined the nation.
Independent India is just over 60 years old. Its conceptualisation as a nation state is contemporary. Its federal structure and democracy are actually in their infancy. While its Constitution attempted to put together a broad framework of principles for an egalitarian society, its new rulers retained and continued many colonial traditions. The independence movement, led by the upper castes, the rich and landed gentry, morphed into its ruling class. All power over common and forestland was transferred from the Crown to the Indian government. The Indian Penal Code and other laws used by the British to rule the land were prescribed as statutes for the new India. The 19th century concept of sedition, employed by colonisers to control dissension and rebellion among the natives, is now employed to stifle legitimate debate and valid dissent among its citizens.
Developmental discord: The year 1991 was a watershed in India's economic history. Liberalisation of its economy resulted in an increase in the country's wealth and Gross Domestic Product. Nevertheless, the realisation that India needed to exploit its enormous natural resources to achieve global superpower status is not lost on its rulers and their corporate partners. The urgent need to clear forestland for mines and factories and to dam rivers to increase electrical power and water resources is obvious. The commons had to be exploited for national progress. India's indigenous peoples, the Adivasis and their ancestral lands, which had no recognised, registered and individual titles, were easy targets for displacement and acquisition. Such people, who were already marginalised with rates of malnutrition suggestive of famine, have had to pay the price for the country's development. The need for compensation and rehabilitation of livelihoods were minor irritants, best ignored. The structural violence against the poor and rural folk was dismissed as inconsequential. The armed rebellion by the Maoists is only viewed as a law and order problem. The plight of innocent civilians caught in security operations is considered unimportant in the national agenda. Human rights violations seem to be a small price to pay for a patriotic cause.
Simplistic world-views: Human rights and socialism tend to be bad words in the capitalist-development schema, as is dissent in the nationalist discourse. Simplistic world-views equate alternative perspectives and legitimate dissent as anti-national. Nationalism with its “You are either for us or against us” philosophy dismisses the discrimination of those already marginalised. Gross violations of human rights are considered as necessary evils. Human rights workers are hounded for voicing genuine concerns. The perception that those who fight for human rights have sold out to militancy is a common emotional response. Ancient statutes are employed to reign in resistance to the nationalist and development agenda.
Requiring review: Many 19th century precedents, traditions and laws in current use need serious reconsideration. Perceived threats to national security are often used to limit many freedoms guaranteed in civilised societies. Freedom of speech is often a casualty and tends to get stifled in times of war. Gag orders and prosecutions have been launched for genuine concerns, even in times of peace. The charge of sedition continues to be used in India to stifle dissent and disagreement. The use of such baggage reflects insecurity in a resurgent nation.
Many hundreds of thousands of people are currently in jail in India for minor and bailable offences. Their lack of access to legal advice and the slow and cumbersome judicial systems keep them confined for long periods and deprive them of their human rights, when bail is a valid alternative.
Studies, which have examined Supreme Court judgments on the death penalty, suggest the abuse of law and procedures, and of arbitrariness and inconsistencies in the trial, investigation, sentencing and appeal in capital cases. Contrary to beliefs that it is only applied in the rarest of rare cases, the death penalty is used disproportionately against ethnic minorities, the poor, the marginalised and the disadvantaged, all of which are factors that argue for its abolition.
India has yet to ratify the U.N. Convention Against Torture, legislate against inhuman and degrading treatment, and enforce it. Laws, which grant de facto impunity to the security forces are often prone to human rights violations and result in a complete lack of accountability. The Armed Forces Special Powers Act (1958), the Unlawful Activities Prevention Act (1967), the Chhattisgarh Special Public Security Act (2006) and sections of the Indian Penal Code need serious review. Deaths of “suspected terrorists” in staged encounters with the police are common in many parts of the country. National security is often employed to cover up major human rights violations. The security personnel involved in such extrajudicial killings are rewarded rather than punished.
The executive and the judiciary are often on the same side of the development argument and sing from the same sheet. The inconsistencies and flawed interpretations of judgments by the lower judiciary demand a serious review of the process of training and audit. Such standardisation is mandatory to achieve a semblance of fairness. Issues of political pressure and corruption are too serious to be wished away and demand urgent solutions.
The practice-theory gap: It is generally believed that theory drives practice. This is a simplistic interpretation of ground realities. In fact, practice defines theory. The distinction between justice and law is an example. Justice is an agreed concept and value, which is implemented through law. However, laws often fall short of delivering justice and need to be constantly interpreted and rewritten in order to provide justice. Practice constantly engages with theory and retools it. It cites theory in specific contexts, modulating, redirecting, and even remaking it. The demand for justice brings a case before the law; this demand puts the law at issue. The demand for justice can exceed the law, bring new issues before it and consequently require an extension or a reinterpretation of it. Justice, then, renews the law and extends its hold. The law can never escape from this demand for justice since it is a demand that can never be fully met.
The demands of the new era, the different context and the call of justice, mandate a creative citing of the law in relation to the questions that present before it. Judges may opt to close off the call of justice, and renew the rule of the law in relation to the new question that is presented. On the other hand, they may take up the challenge and rethink, remake and cite the law as best as they can in a way that measures up to the call of justice. When judicial and legal practice is simply understood as an application of theory, its ability to renew and remake theory — to render it more accountable to the present, is undermined. Legal and judicial practice needs to cite and remake theory, and to be aware of its responsibility to do so in situations where laws fall short of the call for justice.
The way forward: Dr. Sen's case is but the tip of the iceberg. Many innocents languish in jail. Others serve much time as under-trial prisoners awaiting judicial review. Our slow, cumbersome and expensive judicial system needs urgent reform. Does the different context of independent India need more enlightened laws? Does our current legal and judicial practice reflect our concepts and values of justice? Do our standards of justice reflect the new resurgent India? Or are we prisoners of our colonial and insecure past? Can our legal practice change the principles of our jurisprudence? Will our experience give us the clarity and confidence to break out of the straightjackets of our current theory and practice?
The judiciary needs to reconsider laws, which conflict with fundamental rights guaranteed in the Constitution. The legislatures should fashion enlightened statutes for the 21st century. India needs to seriously reconsider its legal and judicial practice and jurisprudence.
History and precedent: The ancient history of the Indian subcontinent is well recognised. However, the concept of an Indian nation state is much more recent. Diversity of traditions, cultural dissimilarity, religious heterogeneity, regional disparity and geographical variations divided the sub-continent. However, antipathy to British colonisation bound its diverse peoples and its numerous provinces, regions and kingdoms. The freedom struggle actually defined the nation.
Independent India is just over 60 years old. Its conceptualisation as a nation state is contemporary. Its federal structure and democracy are actually in their infancy. While its Constitution attempted to put together a broad framework of principles for an egalitarian society, its new rulers retained and continued many colonial traditions. The independence movement, led by the upper castes, the rich and landed gentry, morphed into its ruling class. All power over common and forestland was transferred from the Crown to the Indian government. The Indian Penal Code and other laws used by the British to rule the land were prescribed as statutes for the new India. The 19th century concept of sedition, employed by colonisers to control dissension and rebellion among the natives, is now employed to stifle legitimate debate and valid dissent among its citizens.
Developmental discord: The year 1991 was a watershed in India's economic history. Liberalisation of its economy resulted in an increase in the country's wealth and Gross Domestic Product. Nevertheless, the realisation that India needed to exploit its enormous natural resources to achieve global superpower status is not lost on its rulers and their corporate partners. The urgent need to clear forestland for mines and factories and to dam rivers to increase electrical power and water resources is obvious. The commons had to be exploited for national progress. India's indigenous peoples, the Adivasis and their ancestral lands, which had no recognised, registered and individual titles, were easy targets for displacement and acquisition. Such people, who were already marginalised with rates of malnutrition suggestive of famine, have had to pay the price for the country's development. The need for compensation and rehabilitation of livelihoods were minor irritants, best ignored. The structural violence against the poor and rural folk was dismissed as inconsequential. The armed rebellion by the Maoists is only viewed as a law and order problem. The plight of innocent civilians caught in security operations is considered unimportant in the national agenda. Human rights violations seem to be a small price to pay for a patriotic cause.
Simplistic world-views: Human rights and socialism tend to be bad words in the capitalist-development schema, as is dissent in the nationalist discourse. Simplistic world-views equate alternative perspectives and legitimate dissent as anti-national. Nationalism with its “You are either for us or against us” philosophy dismisses the discrimination of those already marginalised. Gross violations of human rights are considered as necessary evils. Human rights workers are hounded for voicing genuine concerns. The perception that those who fight for human rights have sold out to militancy is a common emotional response. Ancient statutes are employed to reign in resistance to the nationalist and development agenda.
Requiring review: Many 19th century precedents, traditions and laws in current use need serious reconsideration. Perceived threats to national security are often used to limit many freedoms guaranteed in civilised societies. Freedom of speech is often a casualty and tends to get stifled in times of war. Gag orders and prosecutions have been launched for genuine concerns, even in times of peace. The charge of sedition continues to be used in India to stifle dissent and disagreement. The use of such baggage reflects insecurity in a resurgent nation.
Many hundreds of thousands of people are currently in jail in India for minor and bailable offences. Their lack of access to legal advice and the slow and cumbersome judicial systems keep them confined for long periods and deprive them of their human rights, when bail is a valid alternative.
Studies, which have examined Supreme Court judgments on the death penalty, suggest the abuse of law and procedures, and of arbitrariness and inconsistencies in the trial, investigation, sentencing and appeal in capital cases. Contrary to beliefs that it is only applied in the rarest of rare cases, the death penalty is used disproportionately against ethnic minorities, the poor, the marginalised and the disadvantaged, all of which are factors that argue for its abolition.
India has yet to ratify the U.N. Convention Against Torture, legislate against inhuman and degrading treatment, and enforce it. Laws, which grant de facto impunity to the security forces are often prone to human rights violations and result in a complete lack of accountability. The Armed Forces Special Powers Act (1958), the Unlawful Activities Prevention Act (1967), the Chhattisgarh Special Public Security Act (2006) and sections of the Indian Penal Code need serious review. Deaths of “suspected terrorists” in staged encounters with the police are common in many parts of the country. National security is often employed to cover up major human rights violations. The security personnel involved in such extrajudicial killings are rewarded rather than punished.
The executive and the judiciary are often on the same side of the development argument and sing from the same sheet. The inconsistencies and flawed interpretations of judgments by the lower judiciary demand a serious review of the process of training and audit. Such standardisation is mandatory to achieve a semblance of fairness. Issues of political pressure and corruption are too serious to be wished away and demand urgent solutions.
The practice-theory gap: It is generally believed that theory drives practice. This is a simplistic interpretation of ground realities. In fact, practice defines theory. The distinction between justice and law is an example. Justice is an agreed concept and value, which is implemented through law. However, laws often fall short of delivering justice and need to be constantly interpreted and rewritten in order to provide justice. Practice constantly engages with theory and retools it. It cites theory in specific contexts, modulating, redirecting, and even remaking it. The demand for justice brings a case before the law; this demand puts the law at issue. The demand for justice can exceed the law, bring new issues before it and consequently require an extension or a reinterpretation of it. Justice, then, renews the law and extends its hold. The law can never escape from this demand for justice since it is a demand that can never be fully met.
The demands of the new era, the different context and the call of justice, mandate a creative citing of the law in relation to the questions that present before it. Judges may opt to close off the call of justice, and renew the rule of the law in relation to the new question that is presented. On the other hand, they may take up the challenge and rethink, remake and cite the law as best as they can in a way that measures up to the call of justice. When judicial and legal practice is simply understood as an application of theory, its ability to renew and remake theory — to render it more accountable to the present, is undermined. Legal and judicial practice needs to cite and remake theory, and to be aware of its responsibility to do so in situations where laws fall short of the call for justice.
The way forward: Dr. Sen's case is but the tip of the iceberg. Many innocents languish in jail. Others serve much time as under-trial prisoners awaiting judicial review. Our slow, cumbersome and expensive judicial system needs urgent reform. Does the different context of independent India need more enlightened laws? Does our current legal and judicial practice reflect our concepts and values of justice? Do our standards of justice reflect the new resurgent India? Or are we prisoners of our colonial and insecure past? Can our legal practice change the principles of our jurisprudence? Will our experience give us the clarity and confidence to break out of the straightjackets of our current theory and practice?
The judiciary needs to reconsider laws, which conflict with fundamental rights guaranteed in the Constitution. The legislatures should fashion enlightened statutes for the 21st century. India needs to seriously reconsider its legal and judicial practice and jurisprudence.
Saturday, February 5, 2011
365 days Government
Indians love holidays. Secularism may be under threat, but not in respect of religious holidays. I have never heard people complain about holidays for the festivals of their co-religionists. In addition, an occasional bonanza comes in the shape of holidays to mourn the deaths of VIPs, local religious festivals, forced closures during hartals, etc. In Kerala, liquor sales shoot up on the eve of holidays. Since the government is the monopoly vendor of liquor, it is the biggest beneficiary of holidays as its coffers get filled up.
We love official policies — tomes of verbose and jargonistic government literature. But we have no holiday policy. Many commissions and committees have suggested reforms to prevent long shutdowns of the government machinery. But certain things never seem to change. It appears nobody has the guts to take on unionised bureaucracy. Status quo is the preferred option. For the politician, giving offence to anybody would mean less number of votes during elections.
So government offices are shut down continuously for four days for Onam in Kerala, for Pongal in Tamil Nadu, for Puja in West Bengal. Is it not time to rethink on this wasteful closure of the governmental system that denies basic services to the citizens, especially to the poor? Why should courts have holidays when crores of cases are pending disposal?
I am not advocating that people should be denied holidays to celebrate festivals. I don't want to enter into a statistical debate about the number of holidays. But when we envisage a greater role for the government in social and economic development of the nation, the services of the government should be available in an uninterrupted manner.
The government is already doing it in respect of essential services such as hospitals, electricity, water, railways, road, shipping and air transport. Are not the administrative wings of the government also essential in the sense that they deliver vital services?
Is it so complicated that a suitable mechanism cannot be evolved to provide at least skeleton services on holidays? What is lacking is the willingness to change and adapt to the growing expectations of the people for speedier services.
There will be practical difficulties in the beginning as is the case with any kind of reform. But these problems can be surmounted over a period of time. I am sure many employees will be willing to work on holidays provided they are compensated either monetarily or by other incentives. I know many government employees are committed to helping the public in letter and in spirit.
A governmental system that works on all days will help to improve the work culture of the employees and transform governance into a people friendly exercise. People's trust in their government will be enhanced and the politicians will be the ultimate beneficiaries during elections. But, our leaders should lead the way by setting an example of hard work. Frequent disruptions of Parliament and legislatures send a wrong signal to the people.
Telangana Issue: Root Cause
What’s the root cause of Telangana agitation?
What is the process for formation of a new state?
According to Article 3 of the Indian Constitution, Parliament can form a new state by separating a territory from any state, by merging two or more states or parts of states. Parliament can also diminish or increase the area or alter the boundary of any state or even change the name of any state. But first, a Bill on the matter has to be referred by the President to the legislature of whichever state (or states) is affected by the proposed change in area, boundary or name, so that the legislature can express its views on the matter. Thereafter a resolution is tabled before the assembly. After assembly’s nod to the resolution, a Bill creating the new state is tabled and passed in the assembly. Finally, a separate Bill is introduced and passed in Parliament on the recommendation of the President. The Bill is then ratified by the President and hence a new state is formed.
How were states organised after Independence in 1947?
During the British Raj, most of India was divided into 600 princely states which after Independence were given the option to join India or Pakistan. Based on geographical and religious factors, states joined either India or Pakistan. Bhutan chose to become independent and Hyderabad was taken into the Union by sending in the army. States of Mysore, Hyderabad, Bhopal and Bilaspur became independent provinces.
What changes were made when India became a republic?
When the Constitution came into force on January 26, 1950, India became a union of states (earlier called provinces) with extensive autonomy and Union territories administered by the central government. Under the Constitution, there were three kinds of states — 9 Part A states, 8 Part B states and 10 Part C states. Part A states were former governors provinces in British India — Assam, West Bengal, Bihar, Bombay, Madhya Pradesh, Madras, Orissa, Punjab and Uttar Pradesh. Part B states were the former princely states such as Hyderabad, Saurashtra, Mysore, Travancore-Cochin, Madhya Bharat, Vindhya Pradesh, Patiala & East Punjab States Union and Rajasthan. Part C states included a few princely states as well as former provinces governed by chief commissioners such as Kutch, Himachal Pradesh, Coorg, Manipur, Tripura and so on. Jammu and Kashmir had special status.
How did language become the basis for organizing states?
The movement to create states based on language gained momentum in the early 1950s starting with the demand for a separate state for Telugu-speaking people. A railway employee and Gandhian, Potti Sriramulu, started a fast to press the demand. Nehru chose to ignore Sriramulus fast. On the 56th day of his fast, Sriramulu died and violence erupted. After Sriramulus death, the States Reorganisation Commission was appointed for the creation of states on linguistic lines. On the basis of its report, the States Reorganisation Act of 1956 was passed. Under the Act, which came into effect on November 1, 1956, the distinction between part A, B, and C states was eliminated and state boundaries were reorganized and new states and UTs were created or dissolved. There were 14 states and 7 UTs.
When did the demand for a separate Telangana start?
In 1948, the Nizam was ousted and Hyderabad was formed as a state of India. After the movement for a state on a linguistic basis, Andhra Pradesh was formed by merging the Telangana part of Hyderabad with the then Andhra state, carved out of Madras presidency. Andhra was socially and economically more developed. Supporters of Telangana movement felt the merger would only increase their misery. The first mass scale separate Telangana movement was started by students of Osmania University in 1969.
Security lessons from history & geography
Security lessons from history & geography
India should help Pakistan and Afghanistan find ways to move towards a healthier economy, a more stable and stronger polity and a freer society, because it would be in our own interest, says Rajmohan Gandhi
FOR long, parts of what is now Pakistan and India faced dangers and invasions from northwest. Today the subcontinent again faces a threat from the northwest, with Pakistan facing even more of it than India, with some elements in Pakistan, as we know all too well, contributing fresh force to it. That threat is from an ideology that worships hate, celebrates death and destruction, and dismisses the value of life. This ideology of violent extremism or violent radicalism uses phrases from Islam but it is actually anti-Islam.
Afghanistan and the tribal lands between Afghanistan and Pakistan seem to contain many of this ideology’s dedicated believers, but it would be absurd and risky to think that the northwest of the subcontinent is the only place where the banner of violent extremism or violent radicalism is being raised today. Historical, economic and psychological reasons have always existed for the appeal of violent extremism. But all of us in India and Pakistan must daily ask ourselves whether we are doing enough to defeat, around us, the ideology of extremist violence. While it is the state’s task to defeat militancy, it is the citizen’s task, and the thinker’s task, to explore avenues more intelligent than violence.
Dr Saifuddin Kitchlew, Badshah Khan and Dr Zakir Husain were in a minority among the subcontinent’s Muslims when they expressed scepticism about Partition. Opinions have now changed. While some Hindu extremists openly say that nothing as good as Partition ever happened to the Hindus, some in Pakistan voice disappointment at its results. After decades of rejection, Dr Kitchlew stands vindicated, but his soul desires nothing less than friendship between India and Pakistan. Given the widely-held Indian view that Pakistan is India’s actual or potential enemy, a view for which history seems to offer some justification, we should ask whether India’s security is enhanced or endangered by a rise in violent extremism in Pakistan, by a growth in Pakistan’s enmity towards India, and by a weakening of Pakistan’s economy, polity and society.
It is natural, perhaps, for Indians injured and angered by Pak-sponsored violence to wish murderous attacks in Pakistan on Pakistani targets. This wish has been granted. Yet, it is not clear that the rise in extremist militancy in Pakistan has helped India, except perhaps by reminding the Pakistani people that violent extremism is South Asia’s common danger and foe. If the situation in Pakistan worsens, if the country begins to disintegrate, if a vacuum is created in our neighbourhood and lawlessness takes over, then, by the inescapable logic of geography, a troubled and endangered India will be forced to examine the risks of intervening or not intervening in its neighbour’s agonising affairs.
May Pakistan and India never reach such a scenario. If Pakistan can find ways to move towards a healthier economy, a more stable and stronger polity, and a freer society, that would be very much in India’s interest. Meanwhile, we in India must remind ourselves that Pakistan’s governing agencies and its people are two very different entities, and we must ask whether as a people and a government we have done what we can to reach both entities, especially the more important one, the people of Pakistan.
India’s enemies in Pakistan need to know that if attacked India will fight back hard. It is probable that they know this. But India’s friends there, who greatly outnumber our foes, need to know that they have a place in our thoughts, including the thoughts of our Prime Minister. Unfortunately, they do not know this. And the people of India do not know that Pakistan today witnesses a courageous, untiring and growing effort for tolerance and pluralism, and for strong, unwavering and uncompromising opposition to violent extremism.
AT PRESENT,India seems by and large to be liked by the Afghans, Pakistan by and large disliked. But such inclinations are unlikely to cancel the realities of geography — the physical joining together of Pakistan and Afghanistan; or the realities of religion; or the reality of family ties. Not that active hostility between Pakistan and Afghanistan is impossible. If Pakistan is India’s enemy, such hostility may seem desirable in a short-sighted view. But India’s true and long-term interest in Afghanistan is in the well-being of the Afghan people. That interest is also linked to Central Asia’s oil and gas, and to Afghanistan’s own untapped mineral riches. Any active hostility between Afghanistan and Pakistan would cripple India’s trade route to Afghanistan and beyond. That cannot be what we wish to promote.
We should of course continue with our effort, India’s effort, to assist with Afghanistan’s roads, electricity, and hospitals. But picking tribes or ethnicities to back in Afghanistan is a thankless exercise and a hazardous one as well. This is a truth for India and Pakistan both, and for the US too. Like his fellow-Kashmiri, Jawaharlal Nehru, Dr Kitchlew was a staunch believer in India’s non-alignment. And nonalignment remains a sound policy for our region, for India and for Pakistan.
We do not know when will come the day on which India becomes a permanent member of the UN Security Council. Amending the UN Charter in order to achieve a reformed UNSC, in which India would be included, will be a complicated exercise. Yet it is not a given that India’s elevation will diminish Pakistan, or injure China, or upset regional equilibrium. Our leaders, diplomats and commentators should do all they can to indicate that India would want to represent not just itself but the region as a whole.
As we did during the final phase of our freedom struggle, as we did year after year following independence, but as we have regrettably not done for several years now, we must now speak up again for the rights of the Palestinians. And we should do so also for the ears of President Obama, for he too has failed to speak up for the freedom of the Palestinians. Speaking up for Palestinian rights will indirectly help with India’s and South Asia’s security. In fact, it will also win us wider support in the United Nations for our permanent seat bid. But we should do also it for moral reasons. For, our history, from Asoka to Akbar and down to our freedom struggle, challenges us to bring to the international table not gold, or oil, or missiles with nuclear warheads, but the human conscience.
Right to Education
Five reasons to scrap this right
The Right to Education Act may be a well-meaning step, but it suffers from a number of serious flaws that will poison the ecosystem by sabotaging other ways to get India educated, says Manish Sabharwal
IT IS said that one of most damaging virtues of George W Bush was his steadiness; he believed the same thing on Wednesday that he believed on Monday — no matter what happened on Tuesday. Unfortunately, the well-meaning or self-interested people — these are the only two kinds pushing for swifter implementation of the Right to Education Act (RTE) — seem to share this dangerous steadiness despite new information. As state governments start codifying the details or plumbing of RTE, I’d like to make the case that the RTE must be scrapped or substantially modified before it causes permanent damage because of five reasons; capacity, cost, competition, corruption and confusion. As a company at the exit gate of the education system — we have hired somebody every five minutes for five years but only 5% of the kids who came to us for a job — we see and suffer the tragic consequences of India’s education emergency. True impact in public policy — unlike election campaigns — does not lie in poetry but in plumbing. So let’s look at the plumbing of RTE through its consequences:
Lower capacity: RTE timetables the extinction of 25% of India’s 15 lakh schools that are ‘unrecognised’. These mostly low-cost schools have been an entrepreneurial response to parental choice — the antibiotic reaction to dysfunctional government schools chronicled in The Beautiful Tree by James Tooley. Our demographic dividend — 10 lakh people will join the labour force every month for the next 20 years — would have been a bigger nightmare if these private schools had not substituted for the missing state in the last 20 years. And while it is a lie that all these schools deliver quality, it is true that a bad school is better than no school. To paraphrase a beheaded French queen, this provision of RTE effectively says “if you can’t have cake, don’t eat bread”. Higher cost: RTE essentially mandates a huge rise in school fees. It micro-specifies salaries, qualifications and infrastructure. Delhi schools that don’t pay a minimum of . 23,000 per month to teachers will not receive recognition and specifies that primary teachers must have a two-year education diploma; this means that 33% of teachers have to be fired. RTE specifies that every school must have a playground; Delhi specifies 900 sq yards but I know a state that is considering 1,500 sq yards. The 25% children from disadvantaged groups will require massive cross-subsidisation because state governments propose to reimburse way below cost, e.g. Karnataka caps it at . 7,000 per student per year. All this micromanaging of schools — to the delight of teachers and the real estate mafia — hits middle class parents with higher prices for essentially the same quality product.
Lower competition: A big driver of higher quality and lower costs in higher education has been competition. The 50% vacant seats of 1 lakh capacity UP Technical University are forcing engineering colleges to offer free hostels, English training, only MTech faculty, and much else. About 15,000 of the 45,000 Karnataka MBA seats are vacant; these colleges are reducing fees, guaranteeing internships and embedding soft skills in their curriculum.
RTE makes it impossible for education entrepreneurs to compete on price since many states propose to regulate fees and uncertainty has paused the Cambrian explosion of energy in school entrepreneurship. This means lower capacity and lower competition. And that means schools don’t have clients, but hostages.
HIGHER corruption: RTE mandates schools to take 25% students from ‘poor’ backgrounds. Some states are going overboard — Karnataka requires schools to conduct household surveys to create and maintain records of all children in a 1-3 km area from birth till 14 years of age to identify the poor. But who is poor? If the Indian government can’t decide whether 24% or 42% of India is poor, how will a BEO (block education officer)? In reality, he or she won’t; they will auction their certification of poor to the highest bidder. What constitutes appropriate efforts to bring back dropouts? How will teacher student-ratios be calculated? The BEO, long a thorn in the flesh, now has powers to be a dagger in the heart. RTE provides the BEO’s the ability to convert every school into a personal ATM. Not all, but most will.
More confusion: Does changed evaluation mean no exams? What does immunity for government bureaucrats mean? Is incompetence good faith? How will mid-day meals be handled for the 25% in private schools? Where will these 25% go after Grade VIII? Will the 75% parent-populated government school management committees have the power to hire and fire teachers?
RTE prohibits schools from admission procedures and forces them to select students on a random basis within a policy that “includes criteria for the categorisation of applicants in terms of the objectives of the school on a rational, reasonable and just basis”. By definition, don’t random, rational, reasonable and just mean different things to different people? Why take away the right to detain or expel till Class VIII? Can we be equal and excellent?
RTE does not pass the Hippocratic Oath of every doctor , ‘above all, cause no harm’, and has three birth defects. First the doctors in this case — civil servants — are unwilling to take the medicine they prescribe as they shamelessly and explicitly exempt the government schools they run (70% of all schools) and the walled gardens where their children study (Kendriya Vidyalas and the elite Sanskriti that is now going national) from RTE. Second RTE values hardware over software but what can easily be measured may not matter. Third as enrolment ratios cross 100% it fights yesterday’s war of quantity and fails to focus on quality and learning outcomes. We don’t need more cooks in the kitchen but a different recipe. RTE not only fails this test but poisons the ecosystem by sabotaging other ways to get India educated.
Discontent in the Arab world
The official response to unrest on Tunisia's streets comes straight out of a tyrant's playbook: order police to fire on unarmed demonstrators, deploy the army, blame resulting violence on “terrorists”, and accuse unidentified “foreign parties” of fomenting insurrection. Like other Arab rulers, President Zine El-Abidine Ben Ali seems not to know any better. For this murderous ignorance, there is less and less excuse.
The trouble started last month when Muhammad Bouazizi, 26, an unemployed graduate, set himself on fire in protest at police harassment. Bouazizi's despairing act — he died of his injuries last week — became a rallying cause for disaffected legions of students, impoverished workers, trade unionists, lawyers and human rights activists.
The ensuing demonstrations produced a torrent of bloodshed at the weekend when security forces, claiming self-defence, said they killed 14 people. Independent sources say at least 50 died and many more were wounded in clashes in the provincial cities of Thala, Kasserine and Regueb.
Despite Ben Ali's assertions, there is no evidence so far of outside meddling or Islamist pot-stirring. What is plain is that many Tunisians are fed up with chronic unemployment, especially affecting young people; endemic poverty in rural areas with no tourism; rising food prices; insufficient investment; corruption; and a pseudo-democratic, authoritarian political system that gave Ben Ali, 74, a fifth term in 2009 with an absurd 89.6 per cent of the vote.
In this daunting context, Ben Ali's emergency jobs plan, announced this week, looks to be too little, too late.
Across the region
If this tally of woes sounds familiar, that's because it's more or less ubiquitous. Across the Arab world, with limited exceptions in Lebanon, Palestine and Iraq, similar problems obtain to a greater or lesser degree. Indeed, until recently, Tunisia was held to be better than most. In Algeria, days of rioting after sharp food price rises this month forced the government to use some of its $150bn gas export stash to boost subsidies. In Egypt, the problems dwarf Tunisia's but are similar: the population is booming, youth unemployment is soaring, 40 per cent of citizens live on under $2 a day, and a third are illiterate.
Add to this a growing rich-poor divide, a corrupt electoral system that bans the country's largest party, the Muslim Brotherhood, and President Hosni Mubarak's apparent determination to cling to power indefinitely, and the picture that emerges is both disturbing and largely typical of the illiberal, unreformed Arab sphere.
Failing or failed Arab governance across an arc stretching from Yemen and the Gulf to North Africa is not new, nor are the likeliest remedies a mystery, except perhaps to rulers such as Ben Ali.
Seminar
A discussion last month at the Carnegie Endowment identified high unemployment triggering social unrest, rapid population rises and slow growth as the key challenges facing poorer, oil-importing Arab states. Governments were urged to seek new export markets, increase manufacturing, and enhance competitiveness and jobs via education and labour market reform.
But analyst Marina Ottaway suggested the political will for reform was lacking as regional governments openly flouted calls for change. Other experts deplored a trend towards “authoritarian retrenchment” as Arab leaders used the west's preoccupation with terrorism, its energy dependence, and the Palestine stalemate to deflect external and internal reform pressures.
The striking under-performance of many Arab governments has been expertly charted in the past decade by a series of U.N.-sponsored reports. Ben Ali and his ilk would do well to study the 2009 Arab Knowledge survey produced by the Al Maktoum Foundation.
It says, in part: “Stringent legislative and institutional restrictions in numerous Arab countries prevent the expansion of the public sphere ... The restrictions imposed on public freedoms, alongside a rise in levels of poverty, and poor income distribution, in some Arab countries, have led to an increase in marginalisation of the poor and further distanced them from obtaining their basic rights to housing, education, and employment, contributing to the further decline of social freedoms.”— © Guardian Newspapers Limited, 2011
Problems of chronic unemployment, endemic poverty in rural areas with no tourism, rising food prices, insufficient investment, corruption and a pseudo-democratic, authoritarian political system are more or less ubiquitous across the Arab world.
Creating jobs for inclusive growth
INDIA’S economic performance over the last decade has been phenomenal and has surprised the world. Inching back to 9% GDP growth rate after experiencing only a slowdown rather than a recession in the worst global economic crisis in decades, being recognised as an emerging player in the new knowledge economy, home to ambitious firms beginning to transform themselves into successful MNCs, there is even talk of India becoming an economic superpower.
But then comes the reality check. We have more absolutely poor people than the 20 poorest countries of Africa. We have more people without access to clean toilets than with access to mobile phones. We have more people without electricity than the whole of Africa. Malnutrition and hunger are harsh realities warranting the quest for food security measures. There is the uneasy apprehension that growth may not yet be inclusive enough.
In this context, it is necessary to have the conceptual clarity that anti-poverty welfare measures such as MGNREGA and food security do not in themselves take people into the trajectory out of poverty. They do not directly generate the economic activity that would push millions out of poverty. They only mitigate the condition of being ‘poor’ and make it a bit more bearable. This recognition need not dilute the moral imperative for such programmes. The analytical challenge is one of understanding the nature of market, policy and regulatory ‘failures’ or ‘distortions’ that are coming in the way of genuinely inclusive growth and the faster movement of the millions out of poverty.
That there is a real problem is apparent to most students of the history of economic development. The normal pattern has been one of benefitting from globalisation through the advantage of cheaper labour by producing relatively simpler labour-intensive products for the global market; creating a competitive business ecosystem of entrepreneurs, managers and workers; and then gradually moving up the value chain. India presents the unusual picture of appearing to skip the first phase of being globally competitive in simpler labour-intensive production. In Asia, Japan was the first country to successfully industrialise and as it moved up the value chain to the level of the US and western Europe at the end of the 1950s and during the 1960s and 1970s, labour-intensive manufacturing for global markets moved to the East Asian tiger economies of Taiwan, South Korea, Hong Kong and Singapore. India, then being at a similar stage of development, was completely bypassed.
In the next phase, China opened up its economy and over the last 30 years has become the factory of the world and has practically eliminated poverty as we in India understand it. India was then at a similar stage of development and was again completely bypassed. The other Asean countries also experienced the benefits of labour-intensive manufacturing. Now that China has prospered and its wage costs are beginning to rise, the global supply chains for labour-intensive products such as garments, leather, toys, etc, are looking at new cheaper locations. A recent New York Times story reports that Vietnam, Cambodia and Bangladesh are emerging as the choices for relocation from China for the global garment supply chains. India was not even mentioned. It may, alas, be again being bypassed.
THIS, surely, should be a wakeup call. Where will the poor of India go, where and when will they get jobs that take them out of poverty? The Maoist problem illustrates the huge costs of the failure of inclusive growth. The question that we need to ask ourselves is why, after almost two decades of economic reforms and liberalisation, India is still not perceived by investors, domestic as well as foreign, as being attractive enough for labour-intensive manufacturing. The answer, if we are to be candid, lies in the prevailing perceptions regarding the politico-economic realities on the ground. The onerous burden of the regulatory requirements of labour welfare legislation with the associated rentseeking behaviour of the multiple faces of the inspector raj is difficult enough. When this is combined with the perception of risk of labour unrest increasing proportionately with the size of the labour force, then risk-averse capital prefers capital-intensive outlets like real estate, IT, BPO, entertainment, etc. to labour-intensive manufacturing.
There is consensus about the need for inclusive growth across the political spectrum. Yet, the champions of inclusive growth need to recognise the necessity of the environment appearing attractive enough to globally mobile capital for labour-intensive manufacturing. This means having the political motivation to seek pragmatic options of simplifying and rationalising the regulatory burden for ‘labor welfare’ without diluting the real objectives of existing legislation. This is doable. Many provisions in our labour laws go back to the early period of industrialisation and have become dated with technological progress. The merger of different reporting and inspection requirements would be of great help. Certification through credible accredited third parties is an option that offers immense potential. It has begun to deliver significant results in other segments of regulation.
The real need, however, is to bring in labour market flexibility as the potential for labour-intensive manufacturing lies in being able to serve the global markets. Entry into global markets for mass produced labour-intensive products is tough. For new entrants, business is volatile with the order book position going through huge ups and downs. The absence of labour market flexibility makes investment for this purpose go elsewhere. With the almost complete opening up of the Indian market through trade liberalisation, the domestic market for labour-intensive manufactures is actually being taken over by Chinese imports and resulting in job losses.
Introducing labour market flexibility in identified segments, combined with unemployment insurance/benefits, is probably the only way to generate the political consensus that is required. To the extent manufacturing jobs are created, the claims on MGNREGA would come down. There is no other option if the promise of inclusive growth is to be fulfilled.
But then comes the reality check. We have more absolutely poor people than the 20 poorest countries of Africa. We have more people without access to clean toilets than with access to mobile phones. We have more people without electricity than the whole of Africa. Malnutrition and hunger are harsh realities warranting the quest for food security measures. There is the uneasy apprehension that growth may not yet be inclusive enough.
In this context, it is necessary to have the conceptual clarity that anti-poverty welfare measures such as MGNREGA and food security do not in themselves take people into the trajectory out of poverty. They do not directly generate the economic activity that would push millions out of poverty. They only mitigate the condition of being ‘poor’ and make it a bit more bearable. This recognition need not dilute the moral imperative for such programmes. The analytical challenge is one of understanding the nature of market, policy and regulatory ‘failures’ or ‘distortions’ that are coming in the way of genuinely inclusive growth and the faster movement of the millions out of poverty.
That there is a real problem is apparent to most students of the history of economic development. The normal pattern has been one of benefitting from globalisation through the advantage of cheaper labour by producing relatively simpler labour-intensive products for the global market; creating a competitive business ecosystem of entrepreneurs, managers and workers; and then gradually moving up the value chain. India presents the unusual picture of appearing to skip the first phase of being globally competitive in simpler labour-intensive production. In Asia, Japan was the first country to successfully industrialise and as it moved up the value chain to the level of the US and western Europe at the end of the 1950s and during the 1960s and 1970s, labour-intensive manufacturing for global markets moved to the East Asian tiger economies of Taiwan, South Korea, Hong Kong and Singapore. India, then being at a similar stage of development, was completely bypassed.
In the next phase, China opened up its economy and over the last 30 years has become the factory of the world and has practically eliminated poverty as we in India understand it. India was then at a similar stage of development and was again completely bypassed. The other Asean countries also experienced the benefits of labour-intensive manufacturing. Now that China has prospered and its wage costs are beginning to rise, the global supply chains for labour-intensive products such as garments, leather, toys, etc, are looking at new cheaper locations. A recent New York Times story reports that Vietnam, Cambodia and Bangladesh are emerging as the choices for relocation from China for the global garment supply chains. India was not even mentioned. It may, alas, be again being bypassed.
THIS, surely, should be a wakeup call. Where will the poor of India go, where and when will they get jobs that take them out of poverty? The Maoist problem illustrates the huge costs of the failure of inclusive growth. The question that we need to ask ourselves is why, after almost two decades of economic reforms and liberalisation, India is still not perceived by investors, domestic as well as foreign, as being attractive enough for labour-intensive manufacturing. The answer, if we are to be candid, lies in the prevailing perceptions regarding the politico-economic realities on the ground. The onerous burden of the regulatory requirements of labour welfare legislation with the associated rentseeking behaviour of the multiple faces of the inspector raj is difficult enough. When this is combined with the perception of risk of labour unrest increasing proportionately with the size of the labour force, then risk-averse capital prefers capital-intensive outlets like real estate, IT, BPO, entertainment, etc. to labour-intensive manufacturing.
There is consensus about the need for inclusive growth across the political spectrum. Yet, the champions of inclusive growth need to recognise the necessity of the environment appearing attractive enough to globally mobile capital for labour-intensive manufacturing. This means having the political motivation to seek pragmatic options of simplifying and rationalising the regulatory burden for ‘labor welfare’ without diluting the real objectives of existing legislation. This is doable. Many provisions in our labour laws go back to the early period of industrialisation and have become dated with technological progress. The merger of different reporting and inspection requirements would be of great help. Certification through credible accredited third parties is an option that offers immense potential. It has begun to deliver significant results in other segments of regulation.
The real need, however, is to bring in labour market flexibility as the potential for labour-intensive manufacturing lies in being able to serve the global markets. Entry into global markets for mass produced labour-intensive products is tough. For new entrants, business is volatile with the order book position going through huge ups and downs. The absence of labour market flexibility makes investment for this purpose go elsewhere. With the almost complete opening up of the Indian market through trade liberalisation, the domestic market for labour-intensive manufactures is actually being taken over by Chinese imports and resulting in job losses.
Introducing labour market flexibility in identified segments, combined with unemployment insurance/benefits, is probably the only way to generate the political consensus that is required. To the extent manufacturing jobs are created, the claims on MGNREGA would come down. There is no other option if the promise of inclusive growth is to be fulfilled.
Political Reform
Our Moral Universe
Without political reforms, the benefits of economic liberalisation won’t reach the poor
Has our moral universe shrunk? Not the aam admi’s. He struggles to keep body and soul together in the face of rising prices and falling values. His moral code has remained constant. The moral universe which has visibly shrunk is the politician’s and that of his complicit associates: bureaucrats, policemen and an army of faceless but brazenly corrupt officials. The government’s proposed anti-corruption ordinance begs the question: why does it not first enforce the existing Prevention of Corruption Act against its tainted ministers? It has forced several to resign but has not prosecuted even one.Economic reforms will be 20 years old this July. Without political reforms, however, the full benefits of economic liberalisation won’t reach the poor. The nexus between vested political and business interests, fused by lobbyists and middlemen, erodes those benefits. The reason poverty remains intractable in India is that good economic governance needs the protective umbrella of good political governance. Without that, both privilege and poverty will persist.
A fish rots from the head down, never from the tail up. The top political leadership sets the standard of governance. If that standard is set low, corruption infects the entire body politic. Every recent public scam involving leaders of the Congress and other parties can be traced to this systemic rot. Three key political reforms – police, judicial and electoral – are necessary to cleanse our public institutions.
In 2006, the Supreme Court directed the government to implement police reform. Make the National Police Commission autonomous, the court ordered, and give it a structure that is independent of political control. The National Police Commission would independently decide salaries, promotions, transfers, weaponry. Political control would go. Law enforcement, capricious today, would become professional and accountable. Successive governments – both in the states and at the Centre – have ignored the Supreme Court directive. They continue to do little for police welfare. Officers
are badly paid and have become institutionally corrupt. They serve the wrong master – politicians. In the process, they betray those they are paid to protect: ordinary citizens. Unless we have an independent, professional police force, law enforcement will continue to work against the public interest, not for it.
An exasperated Chief Justice of India, Sarosh Kapadia, last month finally ordered the chief secretaries of Maharashtra, West Bengal, Karnataka and Uttar Pradesh to implement the 2006 Supreme Court directive on police reform. After defying this directive for five years, the states have now promised to fall in line. But will they? History suggests they will not. The full-bodied police reform the Supreme Court wants may remain a chimera. On cue, the Centre on January 10, 2011 asked the court to dilute some provisions of the 2006 directive. Clearly, the government will relinquish control over the law enforcement machinery only if it is compelled to by being cited for contempt, a stick the Supreme Court may yet have to wield.
Judicial reform is the second systemic political change needed to restore the credibility of our institutions. The Judicial Standards and Accountability Bill (and the under-preparation Right to Justice Bill) must be implemented in letter and spirit. Too few judges sit in our courts. Lawyers are complicit in the endless adjournments that bedevil the entire legal system. Just as the police owe primary allegiance to politicians and not the public (which pays for both but gets good service from neither), the judiciary frequently ends up serving the interests of the powerful, not the deserving.
The proposed Indian Legal Service (ILS) and Indian Judicial Service (IJS) could advance several reforms: fast-track courts, a separate stream of specialised courts for financial disputes, strict penalties against lawyers for serial adjournments and a performance rating system for the promotion of judges. The IJS will add 25,000 judges to the 27,000 lower-court judges currently weighed down by 25 million pending litigations. Without sweeping judicial reforms, the average citizen will continue to be a victim, not beneficiary, of the law.
The third key reform is electoral. Black money and criminality combine to send to Parliament several men and women unfit for public office. The Election Commission (EC) should follow two lines of action to disinfect the system. First, legally debar candidates with criminal charges against them (murder, rape, kidnap) from standing for election. Will that punish a few ‘innocent’ victims who have been falsely implicated by political enemies? Not if the EC reviews the chargesheets against such candidates and makes an independent, robust decision. Chief Election Commissioner S Y Quraishi recently publicly backed this move.
The EC, in its second reform, must frame rules to make donations to political parties transparent. Each candidate would be entitled to a fixed quantum of state funding. He would be allowed private funds only under strict audit through declared private donors. This transparent funding model will cut the advantage cash-rich candidates have over poorer, but cleaner, candidates.
Systemic corruption is a symptom of failed governance. Political reforms that remove our key public institutions from government control can make 2011 the definitive year for sweeping institutional change just as 1991 was the inflection point for economic liberalisation. That would greatly expand our moral universe.
Governance: The positive side
Thinking clearly about governance
Breakthrough in governance can only happen when the ability of all branches of government to punish incompetence and violation of the law for personal gain is drastically improved, says Arvind Panagariya
Are these fears justified? To be sure, the monetary magnitudes associated with corruption scandals have escalated with rising incomes, many more scandals than in the past have come to light recently and the central government appears largely paralysed. Yet, the reality on governance is more complex, requiring careful analysis before jumping to doomsday scenarios.
While governance has surely deteriorated in some dimensions, there is compelling evidence that it has also seen improvements in other dimensions. If we wish to come out of our current mess, we must recognise and learn from successes achieved to-date rather than focus exclusively on the failures.
Thus, begin with the telephone service. Today, the idea that you would have to bribe your way to speedily acquire a telephone and then maintain a constant flow of baksheesh to a low-level official in the local telephone exchange for continued availability of the dial tone seems ludicrous. We take the ready availability of a mobile phone that works in all places at all times as a given. Yet, generations of Indians suffered from a governance system that treated a wellfunctioning telephone as luxury and denied access to it to the common man.
Until the 1980s, you also had to pay a bribe or stand in a multi-year-long queue to buy the outdated models of Ambassador and Fiat cars. As late as 1990-91, licensing restricted the automobile production to just 1,80,000 units, ensuring that this “luxury” would be available only to the privileged few. Today, India produces more than two million cars per year and the consumer can walk into a showroom to instantly buy a world-class car of virtually any make. The transformation in two-wheelers has been even more dramatic: with the production exceeding 10 million, they can now be bought in even the remotest corners of India.
The common man’s life has improved in other walks of life as well: railway, bus and airplane tickets can be bought without bribes and the service in air travel and at the banks is dramatically improved. Among other improvements is the near-absence of harassment of tourists coming in and out of the country by customs officials; disappearance of the limousines of industrialists lined up at the ministries of industry and commerce to obtain investment and import licences, respectively; and the much-improved tax administration. The number of income tax payers has steadily risen with the share of this tax in the GDP rising from less than 0.4% in the first half of the 1990s to nearly 2% currently.
At least three factors have helped bring about these improvements in governance. First, pro-market reforms have scaled back the interference of the government in the provision of many goods and services, allowing the private sector to fulfil the demand. Second, judicious use of information technology has helped reduce the scope for government discretion. For instance, with computerisation, it is much harder to tamper with ticketing for railways, buses and airplanes. In the same vein, the establishment of Tax Information Network has greatly improved direct tax administration and helped curb tax evasion. Finally, the Right to Information Act has been instrumental in both bringing to light corruption scandals and restraining the government officials still fearful of losing their reputations from breaking the law.
DRAWING upon these successes to achieve further improvements, we must continue to shift the provision of goods and services from the public to the private sector wherever possible, creatively expand the use of information technology and encourage ever-widening use of the Right to Information to expose corrupt government officials and politicians. In this context, the provision of a unique identification number for each citizen, championed by Nandan Nilekani and now being implemented under his guiding hand, is perhaps the most important initiative under the present government.
While further steps along these three avenues will undoubtedly help, big breakthrough in governance requires progress in an area in which we have entirely failed to-date: punishment to officials when they fail to deliver the service for whose delivery they are hired, but provide such service only upon payment of a bribe or violate the law to reap large bribes, as in the recent scandals. The ability of the executive, police and judiciary to punish incompetence, wilful non-performance and violation of the law for personal gain has progressively deteriorated in India. As a result, the only time public service is delivered with any effectiveness is when the provider behind the desk happens to have a conscience, a circumstance encountered only infrequently.
Respite from the rapidly declining ability of the government to do its part has principally come from increased income, which has allowed individuals to successfully seek private sources of supply of what are essentially public goods. Thus, the citizens are now increasingly sending their children to private rather than public schools, seeking the services of private medical providers rather than public health centers and installing in their homes inverters to combat the erratic supply of electricity and filtering systems to clean up contaminated water supply flowing in the taps. From a rarity even 20 years ago, bottled water can now be found in even rural areas. But these are socially highly costly solutions and cannot go very far, especially in areas such as electricity and water supply. The true solution, as in any well-functioning country, is the introduction of accountability in the executive, judiciary and police through appropriate punishments for the failure to perform one’s duty under the law.
Remove the shield of the corrupt
Remove the shield of the corrupt
The government needs to do more than just pay lip service to anti-corruption measures — a lame Lokpal Bill is the latest example. With public opinion building up, redrafting the Bill to strengthen anti-graft public offices looks the only way forward
ARVIND KEJRIWAL
WHY IS IT THAT NO ONE GOES TO JAIL despite overwhelming evidence against corruption in public domain? Because we have such anti-corruption laws and agencies that are effective on paper alone.
At the Centre, we have the central vigilance commission, which, though independent, is an advisory body. Predictably, advice against a senior officer is rarely accepted. According to a former central vigilance commissioner, during his tenure, whenever he felt that an officer ought to go to jail or needed to be dismissed, all he got was a warning. The CBI, though independent, is completely under the control of the government. Before starting an investigation or before prosecuting an officer or politician, it has to take permission from the government, which often runs on the support of those who have to be investigated or prosecuted. The anti-corruption machinery at the state level is similarly compromised. It is either in the control of the state government or merely advisory in nature.
Likewise, our anti-corruption laws are highly inadequate. You will be shocked to know that even when someone is convicted of corruption, there is no provision to recover the loss he caused to the government or to confiscate his ill-gotten wealth. He can actually come out of jail and enjoy the bribe money! Therefore, we need complete overhaul of our anti-corruption setup if we are serious about tackling corruption.
Many people ask me, “Can India turn around?” Indians are by and large honest, intelligent and hardworking. They are victims of a rotten system.
Corruption in the 1970s Hong Kong was much worse than what we have in India today. Collusion between police and mafia increased and crime rate went up. Lakhs of people came on the streets. As a result, the government was forced to set up an Independent Commission Against Corruption (ICAC), which was given complete powers. In the first instance, ICAC sacked 119 of the 180 police officers. This sent a strong message to the bureaucracy that corruption would not be tolerated. Today, Hong Kong has one of the most honest governance machinery.
India can also turn around if we have a similar anti-corruption body.
One thought that so much public anger was a great political opportunity for a sincere government to push for radical reforms of anti-corruption systems. However, public criticism seems to have made little difference to the Manmohan Singh government. For the Lokpal Bill drafted by the government, which is being touted as an antidote to corruption, is an insult to the whole nation.
It proposes to set up an institution of Lokpal to enquire into complaints of corruption against politicians. But Lokpal will neither have powers to suo moto initiate enquiry into a case directly, nor can it accept a complaint from the public. One could make a complaint to the Speaker (or chairperson). Only the complaints forwarded by the Speaker could be enquired into by the Lokpal. Speaker, being from the ruling party, will naturally forward only those complaints that are against Opposition party MPs.
After conducting an enquiry, Lokpal will not have the power to take action. It will forward its report to the Speaker and the Prime Minister. If the complaint is against a Cabinet minister, the Prime Minister will decide whether to take action against the minister on the basis of Lokpal’s report. In the coalition era, would the PM have political courage to act against his ministers? For instance, if such a Lokpal had recommended A Raja’s prosecution, would Manmohan Singh have had the courage to prosecute Raja? In the case of PM and MPs, the Bill says that the decision to prosecute will be taken by the House. So, if Lokpal made a report against the PM or an MP of the ruling party, will the House ever give such a permission?
On the face of it, the government’s Bill sounds absurd. It is meant to completely insulate the political class from any kind of action.
In contrast, civil society has drafted an alternate Lokpal Bill. The first draft was prepared by Prashant Bhushan, Justice Santosh Hegde and myself.
The Bill was subsequently discussed widely at several public platforms and improved on the basis of public feedback. It has been vetted and is being supported by Kiran Bedi, Fali S Nariman, Shanti Bhushan, Anna Hazare, National Campaign for People’s Right to Information (NCPRI) and many others.
It suggests a Lokpal completely independent of the central government. The part of CBI that deals with corruption should be merged with the Lokpal. The CVC and the vigilance setup in the central government should be merged with the Lokpal. The Lokpal shall have jurisdiction over bureaucrats, politicians and judges. The Lokpal shall have powers to initiate investigations and prosecution without needing permission from any agency.
If charges are proved and conviction takes place, loss to the exchequer caused by his wrongdoing shall be recovered from all those convicted. Public grievances are often linked to demands and expectations of bribery. The Lokpal shall act as appellate authority and supervisory body for grievance redressal systems in all central government departments.
The Lokpal shall be responsible for providing protection against physical and professional victimisation of whistleblowers. Members and chairperson in the Lokpal shall be selected through a transparent and participatory process. The functioning of the Lokpal shall be completely transparent to avoid it from becoming a hub of corruption. A complaint of wrongdoing against an official of the Lokpal shall be investigated and acted upon within a month through a transparent enquiry process. Similar independent bodies called the Lokayuktas have been suggested for states. The existing Lokayuktas in some states are advisory and ineffective.
Although a copy of this Bill was sent to the government about two months ago, there has been no response so far. The government does not seem to be in a mood to take genuine steps. The Opposition would be well advised to stall Parliament for the enactment of civil society-drafted Lokpal Bill than for JPC.
The Hong Kong government enacted ICAC Bill because lakhs of citizens took to the street. In India too, people will have to take to the street.
To demand an effective and strong Lokpal, thousands of people in Delhi will march from Ramlila Grounds to Jantar Mantar on January 30. Such marches are taking place in more than 20 cities in India and in some cities in the US. India must come on streets on January 30 to shout ‘Enough is enough’.
RELEVANT ARTICLES
RELEVANT ARTICLES
ARTICLE 14 : Equality before law – The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.
However, the Constitution allows the following exceptions to the rule of equality before the law :
* The President or the Governor of a State is not answerable to any Court for the exercise and performance of the powers and duties of office;
* No criminal proceeding is to be instituted or continued against the President or a Governor in any Court during his term of office;
* No civil proceeding in which relief is claimed against the President or the Governor can be instituted during his term of office in any Court in respect of any act done by him in his personal capacity, before or after he entered the office of President or Governor, until two months expire after notice in writing has been delivered to the President / Governor stating the nature of the proceedings, the cause of action,- and other details.
2. These apart, other exceptions, such as in favour of foreign rulers and ambassadors, also exist in accordance with international standards.
ARTICLE 15 : Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth.—(1) The State shall not discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them.
(2) No citizen shall, on grounds only of religion, race, caste, sex, place of birth or any of them, be subject to any disability, liability, restriction or condition with regard to—
(a)access to shops, public restaurants, hotels and places of public entertainment; or
(b)the use of wells, tanks, bathing ghats, roads and places of public resort maintained wholly or partly out of State funds or dedicated to the use of the general public.
(3) Nothing in this article shall prevent the State from making any special provision for women and children.
(4) Nothing in this article or in clause (2) of article 29 shall prevent the State from making any special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and the Scheduled Tribes.
ARTICLE 27 : Freedom as to payment of taxes for promotion of any particular religion.—No person shall be compelled to pay any taxes, the proceeds of which are specifically appropriated in payment of expenses for the promotion or maintenance of any particular religion or religious denomination.
Friday, February 4, 2011
SUBSIDY LEADING TO ADULTERATION?
How is kerosene produced?
Petroleum or crude oil is the liquid which comes straight out of the oil wells. This liquid is of little use because it is a mix of various hydrocarbons, each having a different boiling point and ignition temperature, and hence it is necessary to separate them for more efficient use. The separation is done by a simple process known as fractional distillation. Thankfully, these hydrocarbons have progressive boiling points, so they can be easily separated by distillation — heating the oil and pulling out different products at different vaporizing temperatures. Using this method, petroleum gas (LPG), petrol, kerosene, diesel and lubricating oils are separated from each other. The residual is further processed to extract asphalt, tar, waxes and so on.
How are petroleum product prices determined in India?
India has to import about 80% of its total crude oil consumption. Given the very high volatility in international oil markets, the government continues to control prices of petrol, diesel, kerosene and LPG despite several past attempts to decontrol some of these.
Pricing is based on the presumed users. Petrol, for instance, is an item of final consumption and an increase in its price will have very little impact on inflation. So there is little pressure to subsidize it. Diesel, on the other hand, is a product whose price will have an impact on inflation. Trucks account for about 37% of overall diesel consumption in India and another 12% is used for agricultural purpose. The railways also are big users. An increase in diesel prices will have a cascading effect, hence the pressure to control its price. Kerosene is highly subsidized and the main objective is to provide lighting for the poor as it is estimated that 60% of kerosene consumption in India is for lighting purposes. Apart from kerosene, LPG is also highly subsidized. The subsidy is aimed at promoting a cleaner source of energy rather than the traditional practice of using firewood or dung cakes, which adds to pollution and has a negative impact on health.
Why do some people oppose the subsidy?
Studies have shown that about 35 to 40% of PDS kerosene never reaches its intended target. This diverted kerosene is used for adulterating diesel. The diversion means the government is not only subsidizing the petroleum mafia, but adulterated diesel is increasing the carbon footprints of the country. A lesser price difference, it is believed, would reduce these practices. Calculations show that at the present price level of the Indian basket of crude oil, which is about $92 per barrel, the price of petrol should be Rs 55.61, diesel Rs 43.76, kerosene Rs 34.23 and LPG about Rs 575.42 per cylinder. In reality, petrol is being sold at higher prices while the other three are subsidized. Kerosene is sold at Rs 9.23 per litre — a huge incentive for the oil mafia to use it in adulterating diesel.
What has the government done to check diversion of PDS kerosene?
The first attempt to detect the diversion of PDS kerosene was done in the 1980s, when the government introduced a blue colourant in PDS kerosene, but the petrol pump owners soon discovered a neutralizing chemical and the scheme was withdrawn. In 1989, a coupon system was introduced in Mysore. The consumer was supposed to give the coupon to dealers, which the dealer had to submit to the higher authorities for getting his payments. The system was withdrawn for unknown reasons. In 2005, global positioning systems were fitted on kerosene delivery tankers to check diversion, but itfailed. It is hoped that diversion will significantly dip after full implementation of UID-based smart cards.
Petroleum or crude oil is the liquid which comes straight out of the oil wells. This liquid is of little use because it is a mix of various hydrocarbons, each having a different boiling point and ignition temperature, and hence it is necessary to separate them for more efficient use. The separation is done by a simple process known as fractional distillation. Thankfully, these hydrocarbons have progressive boiling points, so they can be easily separated by distillation — heating the oil and pulling out different products at different vaporizing temperatures. Using this method, petroleum gas (LPG), petrol, kerosene, diesel and lubricating oils are separated from each other. The residual is further processed to extract asphalt, tar, waxes and so on.
How are petroleum product prices determined in India?
India has to import about 80% of its total crude oil consumption. Given the very high volatility in international oil markets, the government continues to control prices of petrol, diesel, kerosene and LPG despite several past attempts to decontrol some of these.
Pricing is based on the presumed users. Petrol, for instance, is an item of final consumption and an increase in its price will have very little impact on inflation. So there is little pressure to subsidize it. Diesel, on the other hand, is a product whose price will have an impact on inflation. Trucks account for about 37% of overall diesel consumption in India and another 12% is used for agricultural purpose. The railways also are big users. An increase in diesel prices will have a cascading effect, hence the pressure to control its price. Kerosene is highly subsidized and the main objective is to provide lighting for the poor as it is estimated that 60% of kerosene consumption in India is for lighting purposes. Apart from kerosene, LPG is also highly subsidized. The subsidy is aimed at promoting a cleaner source of energy rather than the traditional practice of using firewood or dung cakes, which adds to pollution and has a negative impact on health.
Why do some people oppose the subsidy?
Studies have shown that about 35 to 40% of PDS kerosene never reaches its intended target. This diverted kerosene is used for adulterating diesel. The diversion means the government is not only subsidizing the petroleum mafia, but adulterated diesel is increasing the carbon footprints of the country. A lesser price difference, it is believed, would reduce these practices. Calculations show that at the present price level of the Indian basket of crude oil, which is about $92 per barrel, the price of petrol should be Rs 55.61, diesel Rs 43.76, kerosene Rs 34.23 and LPG about Rs 575.42 per cylinder. In reality, petrol is being sold at higher prices while the other three are subsidized. Kerosene is sold at Rs 9.23 per litre — a huge incentive for the oil mafia to use it in adulterating diesel.
What has the government done to check diversion of PDS kerosene?
The first attempt to detect the diversion of PDS kerosene was done in the 1980s, when the government introduced a blue colourant in PDS kerosene, but the petrol pump owners soon discovered a neutralizing chemical and the scheme was withdrawn. In 1989, a coupon system was introduced in Mysore. The consumer was supposed to give the coupon to dealers, which the dealer had to submit to the higher authorities for getting his payments. The system was withdrawn for unknown reasons. In 2005, global positioning systems were fitted on kerosene delivery tankers to check diversion, but itfailed. It is hoped that diversion will significantly dip after full implementation of UID-based smart cards.
New Contries
BLURRING BOUNDARIES Since 1990, 33 new countries have been created; South Sudan will be Africa’s 54th nation
1991 | 15 new countries after dissolution of USSR: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan
Early 1990s | Yugoslavia dissolves into 5 independent nations: Bosnia-Herzegovina, Croatia, Macedonia, Serbia & Montenegro and Slovenia
Mar 21, 1990 | Namibia freed by South Africa
May 22, 1990 | North and South Yemen merge to form unified Yemen
Oct 3, 1990 | East and West Germany create unified Germany
Sept 17, 1991 | Marshall Islands and Micronesia freed by US
Jan 1, 1993 | Czech Republic and Slovakia become independent as Czechoslovakia is dissolved May 25, 1993 | Eritrea gains freedom from Ethiopia Oct 1, 1994 | Palau freed by United States May 20, 2002 | East Timor gets independence from Indonesia
June 2006 | Montenegro, Serbia go separate ways
Feb 17, 2008 | Kosovo declares independence from Serbia
1991 | 15 new countries after dissolution of USSR: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan
Early 1990s | Yugoslavia dissolves into 5 independent nations: Bosnia-Herzegovina, Croatia, Macedonia, Serbia & Montenegro and Slovenia
Mar 21, 1990 | Namibia freed by South Africa
May 22, 1990 | North and South Yemen merge to form unified Yemen
Oct 3, 1990 | East and West Germany create unified Germany
Sept 17, 1991 | Marshall Islands and Micronesia freed by US
Jan 1, 1993 | Czech Republic and Slovakia become independent as Czechoslovakia is dissolved May 25, 1993 | Eritrea gains freedom from Ethiopia Oct 1, 1994 | Palau freed by United States May 20, 2002 | East Timor gets independence from Indonesia
June 2006 | Montenegro, Serbia go separate ways
Feb 17, 2008 | Kosovo declares independence from Serbia
_____________________________
Sudanese Civil War
The First Sudanese Civil War was a conflict from 1955 to 1972 between the northern part of Sudan and a south that demanded more regional autonomy. Half a million people died over the 17 years of war.
However, the agreement that ended the fighting in 1972 failed to completely dispel the tensions that had originally caused the civil war, leading to a reigniting of the north-south conflict during the Second Sudanese Civil War (1983–2005).
The Second Sudanese Civil War started in 1983, although it was largely a continuation of the First Sudanese Civil War of 1955 to 1972. It took place, for the most part, in southern Sudan and was one of the longest lasting and deadliest wars of the later 20th century.
Roughly 1.9 million civilians were killed in southern Sudan, and more than 4 million southerners have been forced to flee their homes at one time or another since the war began. The civilian death toll is one of the highest of any war since World War II. The conflict officially ended with the signing of a peace agreement in January 2005.
Origins of the conflict
Until 1946, the British government, in collaboration with the Egyptian government administered south Sudan and north Sudan as separate regions. At this time, the two areas were merged into a single administrative region as part of British strategy in the Middle East.
This act was taken without consultation with southerners, who feared being subsumed by the political power of the larger north. Southern Sudan is inhabited primarily by Christians and animists and considers itself culturally sub-Saharan, while most of the north is inhabited by Muslims who were culturally Arabic.
After the February 1953 agreement by the United Kingdom and Egypt to grant independence to Sudan, the internal tensions over the nature of the relationship of north to south were heightened. Matters reached a head as the 1 January 1956 independence day approached, as it appeared that northern leaders were backing away from commitments to create a federal government that would give the south substantial autonomy.
Inflation and liquidity
CURTAILING liquidity to curb inflation may be counter-productive in the long run. During 2010, crude oil, metals and commodity prices, including foodgrains, had been moving upwards due to both demand-supply gap and global commodity market speculation. Six months before onion prices spurted in India, the price of Texas onion rose sharply due to insufficient supply. Cotton prices doubled in India and corn prices rose sharply following price hikes in global future markets. Wall Street banks and hedge funds had been steadily buying up much of the commodity stocks traded at the London futures markets, along with the supply chain infrastructure from warehousing and storage facilities to supply pipelines.
Commodity mutual funds and exchange traded funds in metals, agricultural commodities, gold and oil were being set up rapidly by the big global investment banks like J P Morgan, Deutsche Bank, Goldman Sachs and Barclays that would allow investors to hold commodities without taking physical possession of the inventories. For commodities sold as asset class had become the investor’s favourite instrument in 2010 outpacing stocks, bonds and currency transactions, both at the London and the New York exchanges.
In July 2010, following reports of insufficient Russian wheat crop, the prices of wheat shot up by nearly 50%. With Prime Minister Vladimir Putin’s ban on wheat exports announced for the second successive year, Arabian and African nations, which largely depended on Russian wheat, were the first to be hit. Egypt, the world’s largest wheat importer, had to scramble up its deficient stockpiles by buying US hard wheat at much higher rates. This prompted banks, hedge funds and investors to corner foodgrains on forecast of future shortages and higher profits.
In September, the first of the food riots broke out, leaving 13 dead and hundreds injured in Maputo, the capital of Mozambique, when its government increased the price of wheat by over 30% after a 10% rise in price of energy and water price. This was followed by an FAO warning of imminent global food crisis leading to further speculation and rise in prices of corn, soy, millet and sugar, besides vegetables, meat, eggs and dairy products.
As food inflation raised its ugly head over Africa and Asia, central banks of the emerging economies hiked interest rates to curb liquidity. The US Federal Reserve, meanwhile, eased liquidity resulting in the Wall Street banks and traders cornering all available stocks in metal, oil and foodgrain markets, and taking dominant positions, especially in London’s deregulated commodity markets. Was it right for central banks in Asia to curb liquidity and raise interest rates for its industries and trading community when the US Federal Reserve empowered its buyers?
The inflationary pressure on emerging economies increased, especially as they had to buy crude from spot markets at higher prices with high cost funds as against zero interest advances to US buyers. This hurt them, especially in the critical energy sector where Brent oil and Asian crude advanced to nearly $100/barrel. The US has been able to increase its strategic crude oil reserves at Cushing to over 60 days of storage, a record all-time high that pushed down the WTI to below $90 a barrel over the last six months, making it easier for the US consumer.
India, on the other hand, has been forced to buy spot at peak prices due to low liquidity and strategic storage capacity of its refiners and stockist. Of late, we have started building a grossly inadequate strategic crude storage capacity of two weeks compared to the 60-day storage capacity of US and 90-day capacity of Germany, France and Italy. China, which has completed of the first phase of 20-day of reserves of 102 million barrels in 2009, has embarked on a project to store 90 days of oil by 2020 to meet its energy security.
As US Fed chairman Ben Bernanke released the first instalment of QE2 of $75 billion in December for easing liquidity to the US domestic SME, retail and housing sector, the funds found their way to the London commodity markets, resulting in a frenzied buying by traders. This saw a sharp 30% rise in metal prices at the LME where single traders cornered 90% of the copper and 80% of aluminum stocks, besides 50% to 70% of stocks of zinc, nickel and tin. Whereas China has already stockpiled in 2009 when it created a strategic reserve for copper, Indian manufacturers are getting hurt by high prices and raising of interest rates in the domestic markets.
Curbing inflation by reducing liquidity has its limits and could hurt the growth of the Industry if the Reserve Bank of India continues the traditional response instead of bringing in new micro economic initiatives to tackle inflation.
Commodity mutual funds and exchange traded funds in metals, agricultural commodities, gold and oil were being set up rapidly by the big global investment banks like J P Morgan, Deutsche Bank, Goldman Sachs and Barclays that would allow investors to hold commodities without taking physical possession of the inventories. For commodities sold as asset class had become the investor’s favourite instrument in 2010 outpacing stocks, bonds and currency transactions, both at the London and the New York exchanges.
In July 2010, following reports of insufficient Russian wheat crop, the prices of wheat shot up by nearly 50%. With Prime Minister Vladimir Putin’s ban on wheat exports announced for the second successive year, Arabian and African nations, which largely depended on Russian wheat, were the first to be hit. Egypt, the world’s largest wheat importer, had to scramble up its deficient stockpiles by buying US hard wheat at much higher rates. This prompted banks, hedge funds and investors to corner foodgrains on forecast of future shortages and higher profits.
In September, the first of the food riots broke out, leaving 13 dead and hundreds injured in Maputo, the capital of Mozambique, when its government increased the price of wheat by over 30% after a 10% rise in price of energy and water price. This was followed by an FAO warning of imminent global food crisis leading to further speculation and rise in prices of corn, soy, millet and sugar, besides vegetables, meat, eggs and dairy products.
As food inflation raised its ugly head over Africa and Asia, central banks of the emerging economies hiked interest rates to curb liquidity. The US Federal Reserve, meanwhile, eased liquidity resulting in the Wall Street banks and traders cornering all available stocks in metal, oil and foodgrain markets, and taking dominant positions, especially in London’s deregulated commodity markets. Was it right for central banks in Asia to curb liquidity and raise interest rates for its industries and trading community when the US Federal Reserve empowered its buyers?
The inflationary pressure on emerging economies increased, especially as they had to buy crude from spot markets at higher prices with high cost funds as against zero interest advances to US buyers. This hurt them, especially in the critical energy sector where Brent oil and Asian crude advanced to nearly $100/barrel. The US has been able to increase its strategic crude oil reserves at Cushing to over 60 days of storage, a record all-time high that pushed down the WTI to below $90 a barrel over the last six months, making it easier for the US consumer.
India, on the other hand, has been forced to buy spot at peak prices due to low liquidity and strategic storage capacity of its refiners and stockist. Of late, we have started building a grossly inadequate strategic crude storage capacity of two weeks compared to the 60-day storage capacity of US and 90-day capacity of Germany, France and Italy. China, which has completed of the first phase of 20-day of reserves of 102 million barrels in 2009, has embarked on a project to store 90 days of oil by 2020 to meet its energy security.
As US Fed chairman Ben Bernanke released the first instalment of QE2 of $75 billion in December for easing liquidity to the US domestic SME, retail and housing sector, the funds found their way to the London commodity markets, resulting in a frenzied buying by traders. This saw a sharp 30% rise in metal prices at the LME where single traders cornered 90% of the copper and 80% of aluminum stocks, besides 50% to 70% of stocks of zinc, nickel and tin. Whereas China has already stockpiled in 2009 when it created a strategic reserve for copper, Indian manufacturers are getting hurt by high prices and raising of interest rates in the domestic markets.
Curbing inflation by reducing liquidity has its limits and could hurt the growth of the Industry if the Reserve Bank of India continues the traditional response instead of bringing in new micro economic initiatives to tackle inflation.
By tightening liquidity in order to fight inflation, emerging economies have only hurt themselves
The inflationary woes exacerbated as the economies had to buy crude oil from spot markets at higher prices
Instead of relying on liquidity, India needs to put in place new micro economic initiatives to rein in inflation
The inflationary woes exacerbated as the economies had to buy crude oil from spot markets at higher prices
Instead of relying on liquidity, India needs to put in place new micro economic initiatives to rein in inflation
Financial Inclusion
Financial inclusion lies with MFIs
Public sector and rural banks have not achieved the goal of financial inclusion because of their high human resources costs. Only MFIs provide a low-cost platform to achieve it, says Saurabh Tripathi
WE BETTER not let politics destroy our fledgling MFI industry. While many players speak for the poor, this industry has demonstrated a sustainable business model dealing with the financially excluded. In this article, I argue that contrary to popular perception, financial inclusion is not a technology challenge but is, in fact, a low-cost HR challenge. And MFIs (and some NBFCs) have shown how to operate sustainably at a very low cost of HR. Technology is a crucial facilitator. High street banks — both in the public and private sectors — will not be able to solve the HR riddle unless they pick crucial business model lessons from these firms. They hold the key to addressing exclusion.
Financial exclusion is an HR problem. People costs account for over 65% of a bank’s operating costs. Technology accounts for less than 10%. The search for low-cost banking is a search for lowcost human resources. Those who believe that innovation in technology can replace human resources are as mistaken as those who had written off bank branches many years ago. Bank branches with their reassuring presence and human touch are back at the centre stage now and are considered crucial to win customer trust. If educated customers need the human touch, why shouldn’t the poor man with his precious savings?
MFIs are interesting because they operate profitably at such a low-cost of human capital that they can provide the human touch even for businesses with a low-ticket size. The average cost per head of MFIs is about . 1 lakh per annum compared with . 5.6 lakh for PSU banks, . 5.3 lakh for private sector banks, and . 3.8 lakh for regional rural banks (RRBs) as depicted in the graph. MFIs operate their branches, evaluate credit, make collections, manage technology and maintain accounts at an average cost of manpower equal to a peon’s salary in a public sector bank. The MFI business model is not yet the full answer (and recent issues have highlighted the areas to improve), but it definitely bears the seeds of low-cost banking required for inclusion.
Despite the many regulatory interventions, high street banks will find it difficult to do inclusive banking as profits are too low and the ‘hassle’ is too high. It has been known for quite some time that a conventional high street bank’s cost structure is too high to be able to serve a low-ticket business in rural areas. The regulator has pinned its hopes on outsourcing the costly last-mile customer touch point. The business correspondent (BC) model was envisaged to help commercial banks in the last mile to reach the financially excluded. However, the progress has been slow.
For a long time, the reigning paradigm was that the poor should not be exploited and no profits should be made at their expense. So, only non-profit entities were allowed to be business correspondents. Gradually, the regulator acknowledged that ‘for-profit’ entities are required in the last mile. ‘For Profit BC’ guidelines were introduced some time ago. We have, however, not yet seen any significant adoption of the BC model by ‘for profit’ entities. The reason is that the ‘for profit’ entities like corporate houses with rural distribution do not find this business financially lucrative.
THE regulator has to appreciate that the profits are very low and risks too high, to interest any organised entity to venture into this. In fact, the entities who would actually be interested as they have the customer contact and are used to the operational issues — the MFI and rural NBFC — have been barred from becoming BCs.
Public sector banks will not succeed in bringing inclusion due to the inherent constraints of their character. Despite their noble intent, the public sector is most ill-equipped to create inclusive banking. Most people do not appreciate that the public sector is the highest cost business model in the Indian banking system today in terms of average manpower cost. Despite very low compensation at senior levels, the HR cost per head in the public sector is the highest. Given the nature of industrial relations in public sector banks, this trend is unlikely to be arrested.
The RRBs are a sitting example of this phenomenon. RRBs were a bold public sector initiative to create banks for rural areas with local low-cost HR. The costs within RRB have crept up gradually and today they are considered inadequate for their mandate. Further, the work environment in the public sector is hardly encouraging for experimentation required to innovate and create new low-cost models. Innovation involves risks of failure and many public sector executives will admit in private that one of the good ways to thrive in public sector is by not taking any decisions and hence avoiding making mistakes.
Banks who are serious about inclusion will need to create separate subsidiaries or business units that will pick tips on HR from the MFIs. Banks shudder at the thought of having to manage two different set of employees with different service conditions and costs. They could, however, learn from the airline industry. Budget airlines have been very successful. Many full-service airlines that entered the budget airline space successfully created a separate subsidiary with a distinct brand, employees, fleet and infrastructure. I will not be surprised if these bank subsidiaries look like MFIs in terms of HR strategies.
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Financial Inclusion has whetted the speed of development of banking industry in India. In order to face the bouts of non banking financial institusion, financial inclusion is being treated as an important weapon.The Committee On Financial Inclusion,2008,chairman,Dr. C. RANGARAJAN defined it as
"the process of ensuing access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker section and low income groups at an affordable cost."
Basically, it means that even lower strata of society with less disposable income should also have bank accounts, can get immediate credit as well as avail the benefits of financial advisory services.The people who have been covered for this are
- underprivileged people in rural areas like farmers
- underprivilaged people in urban areas like labourers,domestic help
- unemployed
- physically challenged
Reserve Bank Of India, has taken a lot of measures to ensure that proper banking facilities is provided to all. It has started many such programmes like
- Opening of RRB's (regional rural banks)
- Self help Groups
- Cooperative movement
- liberalised branch expansion
- overdraft facilities even in savings account
But it lacks in proving to be a huge success because of lack of any proper business model,technology and poor delivery modes.In 2007, total accounts per 100 person stood at a meagre of 54 accounts!
If given due importance this will help in reducing the dependence of people on non-banking financial institutions and indigenous bankers.
________
______________________
___________Financial inclusion is the availability of banking services at an affordable cost to disadvantaged and low-income groups. In India the basic concept of financial inclusion is having a saving or current account with any bank. In reality it includes loans, insurance services and much more.
The first-ever Index of Financial Inclusion to find out the extent of reach of banking services among 100 countries, India has been ranked 50. Only 34% of Indian individuals have access to or receive banking services. In order to increase this number the Reserve Bank of India had the Government of India take innovative steps. One of the reasons for opening new branches of Regional Rural Banks was to make sure that the banking service is accessible to the poor. With the directive from RBI, our banks are now offering “No Frill” Accounts to low income groups. These accounts either have a low minimum or nil balance with some restriction in transactions. The individual bank has the authority to decide whether the account should have zero or minimum balance. With the combined effort of financial institutions, six million new ‘No Frill’ accounts were opened in the period between March 2006-2007. Banks are now considering FI as a business opportunity in an overall environment that facilitates growth.
The main reason for financial exclusion is the lack of a regular or substantial income. In most of the cases people with low income do not qualify for a loan. The proximity of the financial service is another fact. The loss is not only the transportation cost but also the loss of daily wages for a low income individual. Most of the excluded consumers are not aware of the bank’s products, which are beneficial for them. Getting money for their financial requirements from a local money lender is easier than getting a loan from the bank. Most of the banks need collateral for their loans. It is very difficult for a low income individual to find collateral for a bank loan. Moreover, banks give more importance to meeting their financial targets. So they focus on larger accounts. It is not profitable for banks to provide small loans and make a profit.
Financial inclusion mainly focuses on the poor who do not have formal financial institutional support and getting them out of the clutches of local money lenders. As a first step towards this, some of our banks have now come forward with general purpose credit cards and artisan credit cards which offer collateral-free small loans. The RBI has simplified the KYC (Know your customer) norms for opening a ‘No frill’ account. This will help the low income individual to open a ‘No Frill’ account without identity proof and address proof.
In such cases banks can take the individual’s introduction from an existing customer whose full KYC norm procedure has been completed. And the introducer must have a satisfactory transaction with the bank for at least 6 months. This simplified procedure is available to those who intend to keep a balance not exceeding Rs.50,000 in all accounts taken together. With this facility we can channel the untapped, considerable amount of money from the low income group to the formal economy. Banks are now permitted to utilize the service of NGOs, SHGs and other civil society organizations as intermediaries in providing financial and banking services through the use of business facilitator and business correspondent models.
Self Help Groups are playing a very important role in the process of financial inclusion. SHGs are usually groups of women who get together and pool money from their savings and lend money among them. Usually they are working with the support of an NGO. The SHG is given loans against the group members’ guarantee. Peer pressure within the group helps in improving recoveries. Through SHGs nearly 40 million households are linking with the banks. Micro finance is another tool which links low income groups to the banks.
Yet, banks are fighting to fulfill the Financial Inclusion dream. The main reason is that the products designed by the banks are not satisfying the low income families. The provision of uncomplicated, small, affordable products will help to bring the low income families into the formal financial sector. Banks have limitations to reach directly to the low income consumers. Correspondents can be considered to be an excellent channel which banks can use to distribute their product information. Educating the consumers about the financial benefits and products of banks which are beneficial to low income groups will be a great step to tap their potential.
Banks are now using new technologies like mobile phones to reach low income consumers. It is possible that the telephone providers themselves will start basic banking services like savings and payments. Indian telecom consumers have few links to financial institutions. So without much difficulty telecom providers can win the battle with banks. Banks should therefore be proactive about transferring this technology into an opportunity.
The Indian Government has a long history of working to expand financial inclusion. Nationalization of the major private sector banks in 1969 was a big step. In 1975 GOI established RRBs with the same aim. It encouraged branch expansion of bank branches especially in rural areas. The RBI guidelines to banks shows that 40% of their net bank credit should be lent to the priority sector. This mainly consists of agriculture, small scale industries, retail trade etc. More than 80% of our population depends directly or indirectly on agriculture. So 18% of net bank credit should go to agriculture lending. Recent simplification of KYC norms are another milestone.
Financial inclusion is a great step to alleviate poverty in India. But to achieve this, the government should provide a less perspective environment in which banks are free to pursue the innovations necessary to reach low income consumers and still make a profit. Financial service providers should learn more about the consumers and new business models to reach them.
In India Financial inclusion will be good business ground in which the majority of her people will decide the winners and losers._______________________
Who can take part in financial inclusion?
The Indian Government wishes that the poor people should be benefited by financial inclusion. They have to be given loans for trading activities or paying back the loan from money lenders. The Reserve Bank of India permits for financial inclusion by allowing banks to grant loan to non-registered bodies, subject to certain norms. By watching the functioning of group activities, the loan may be sanctioned to individuals or groups. The savings, repaying capacity and cash flow are the main criteria.
The weaker section of India, still hesitate to take part in financial inclusion. The low income people should be approached by banks personally. They should be asked to open bank account for saving purpose. Small loans may be granted for them to encourage cash flow. At an affordable cost, the low income group should be allowed credit facility. The financial facilities should be arranged for poor people living in rural and semi urban areas. The poor people in urban area should not be left out. By opening microfinance branches in urban areas, the needs of poor people there may be considered favorably.
Growth due to financial inclusion: The world is watching eagerly the growth in Indian economy. The growth rate is increasing year after year. The Government of India is very keen on financial deepening. There is a slight decrease in population growth in India. The common people in India enter share market and start investing money. The economic grow is healthy in India now. Due to globalization, many people involve in trading activities. A rapid growth is noticed in corporate sector. The rich people in India have become more rich. The medium range people are striving hard to find place in the list of rich people. Most of the common people in India have got some arrangement for livelihood and due to grant of housing loan, many people in India are living in own house. We have to see whether there is growth of small and medium enterprises and whether they are able to withstand in tough situations. The financial deepening bothers about these issues. The needs of every citizen should be considered and fulfilled by the Government. That is the main aim of financial inclusion.
Still banks are trying to accelerate the rate of deposit mobilization. The momentum in financial inclusion activities will increase only when there is a steady growth of deposit mobilization. The Government of India is concerned about triggering financial inclusion in rural areas, in particular. The development activities should be spread evenly throughout the country. The encouragement of banking habit among less privileged people should be given top priority.
Financial inclusion plays a major role in driving away poverty from the country. In India, a day will come when all the Indians will have bank account and everybody will take part in financial inclusion.
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