India

  • Why does farm production stagnate?

    India and the world population has doubled or tripled since the World War II. The world and India produces seven times more food than 60 or more years ago when many nations were in a shambles and farms were marred by mines and other hazardous chemicals in the aftermath of millions killed by bombs and gun battles, though not India, which was not a big theatre of war, but of the war of Independence. Imperial rulers were preoccupied with German and Japanese invaders and with conquering them. India was the fodder of the war machine with 2.5 million soldiers to fight on every front to defeat the Axis power. The war had seen the Bengal Famine with tens of thousands dying of hunger, but official records called it malnutrition, not starvation. That was the Imperial nomenclature, valid ever since until today. Yet in the bygone 20th century we have seen great strides, we have seen great visible progress in pursuit of Mahatma Gandhi's goal of wiping every tear from every Indian face. Irrigation dams by the score have been built and dry farms have had irrigation canals and channels supplying life-giving water. Where canals could not reach hand pumps or powered pumps have been installed to irrigate farms. Punjab, Haryana, western UP and many other States prospered, but not all areas. From 30 million tons of grain, India today produces as much as 210 million tons. For a long time, India was supposed to be self sufficient, not needing to import any grain, though for some years now, as part of the policy of food security a buffer stock has been built and wheat and rice have been imported. Sometimes exotic basmati rice has been exported and cheaper and large quantities of cheaper imported to try and feed Indians, but the exercise has not fully succeeded. In spite of the great Indian success story, when India's economy is one of the fastest growing at a clip of nine per cent per year why do we in free India, 40 per cent of us remain below the poverty line, sleep on an empty stomach, why 42 per cent of all children starve or are very poorly fed? Yet, literacy and education are fundamental rights, food is not. There are no free lunches, though midday school feeding programmes are much in place, yet honored more in the breach than in the observance, because 80 per cent of the money provided must be and is known to be siphoned off by the time it reaches the panchayat or the village or the city school into the pockets of all kinds of people, be they suppliers, petty or senior officials and politicians, down now to the village panch, leave alone the sarpanch. Is that the way of the Third World, if not all world, because corruption in the First Word is far more sophisticated; it runs into millions and billions of dollars, not in peanuts or a few rupees, hundreds or thousands of them. Such is the system, like it or not? Is that why 30 per cent growth some areas of the services sector and nine per cent overall, farm or grain production grows only at 2.6 per cent and in years of monsoon failure or excess of it, the growth is what in modern parlance is sophisticated jugglery of world negative as nobody wants to speak the truth that output has gone down or dropped. Management and official jargon has taken a new leap in falsehood and lies as truth is totally at a discount and invention and magic with words is the norm. That is Harvard or management school education, push the dirt under the rug, don't allow it to be exposed. Thanks to multinational producers and sellers of genetically modified seeds or biotechnology, salesmen push the hybrid seeds for well irrigated farms to grow more cotton whereas rainfed farms can take only ordinary seeds, cheaper and ten times costlier. At the time when farmers in Nagpur or Vidharbha and Andhra should be reaping a big crop, they find zero shoots. They have borrowed money to buy this costly seeds. They are deep in debt, of principal and interest. They have been cheated. Since they cannot afford to pay, the moneylender knocks at their men with musclemen in tow, throws them out of their hearth and home and occupies their parched farm. What does the poor farmer do now? He takes his life, next members of his family start doing the same. Thousands of farmers have been doing so for some decades now, although heartless money lenders have been doing this for centuries gone by. That is the story of Indian village, village after village. Now that a general election is less than 15 months away to choose a new Lok Sabha and three States in the north east are in the process to elect legislatures and six more States will do so before the end of the year or early next year, the Government is engaged in double quick time to line up doles for the voters, especially for the farmers, who are the backbone of a democracy, who hold the maximum number of cards. The magicians that the Prime Minister, his Finance Minister, and their boss, the Chairperson of the United Progressive Alliance are, have ordained that Rs.32,000 crores of buoyant government revenues must be dispensed with as debt relief to farmers to woo them for the grand old party. This is less than ten per cent of the bank loans of Rs.3,42,000 crores the farmers owe to the banks, but it is the government which will reimburse them so that they can balance their books and prudential banking does not receive a jolt. But the farmers at the mercy of private money lenders who charge 2 to 3 per cent are unlikely to benefit. Will they continue to die and starve as before? Only time will tell. God save them, for who else can? Lalit Sethi, NPA

  • FinMin mulled Rs 5,000-cr guarantee company before farm loan waiver

    Prior to announcing the Rs 60,000-crore farm loan waiver package, the finance ministry had toyed with the idea of setting up an Agriculture Credit Guarantee Corporation with a corpus of around Rs 5,000 crore to deal with bad loans. The entity would have insured lenders against borrower defaults with banks making less provisioning for such loans and continuing to offer farm loans. However, the plan was dropped after the amount of the waiver and relief package rose to a massive Rs 60,000 crore. "We then thought of giving direct subsidies to farmers as there will be no leakage in this scheme and the benefits will go directly to farmers,' said a government official. Cooperative banks account for Rs 37,000 crore or about 61 per cent of the Rs 60,000-crore package announced in the Budget. Regional rural banks and scheduled commercial banks account for Rs 12,000 crore and Rs 11,000 crore, respectively. The details of the farm package are likely to be finalised by March 25. As the government will implement this package over a period of three financial years, it may make a provision of up to Rs 25,000 crore in 2008-09. Part of the financial assistance due for restructuring of cooperatives according to the recommendations of the Vaidyanathan Committee is also likely to be part of the package, officials say. Cooperatives and banks may also have to share a little burden in case of default loan accounts, which have been written off for prudential accounting norms.

  • PM: Waiver picks up unpaid distress bill

    Prime Minister Manmohan Singh today claimed the political credit for making a speech that not only led to a Bharatiya Janata Party (BJP) walkout from the Lok Sabha but earned him applause from the Left parties. Days after the government declared it hadn't given up on the Indo-US civil nuclear agreement despite the Left's staunch opposition to it, and Congress President Sonia Gandhi announcing at a party rally in Tripura that the government was not in power because of any favours shown by the Left, the political message of the PM's speech today was: opposition to the BJP was not the Left parties' prerogative. In his speech in reply to the President's address to the joint sitting of Parliament, Singh charged the Opposition with ruining the lives of farmers and giving in to terrorist pressures when it was in power until 2004. Rejecting Opposition charge that the farm loan waiver was announced with an eye on elections, Singh said it was a historic initiative to meet the "unpaid distress bill' left behind by the erstwhile NDA government. "Doubts have been raised about the resources required for this write-off,' he said, referring to questions raised by Leader of Opposition L K Advani and other members asking the government how it could provide the whopping Rs 60,000 crore towards waiver of bank loans to small and marginal farmers. "Let me remind the Leader of the Opposition that what we have done is nothing more than picking up the unpaid distress bill which the NDA government left behind,' Singh said. If bankruptcy is permissible form of business outcome in industry, what is irrational about this waiver, he asked. "It will allow a fresh flow of institutional credit to farmers. It will clean up banks' balance sheets. It will stimulate economic activity in rural areas,' he said. Singh assured the House that the debt relief will be a simple exercise which will be completed by June-end. "It will not be a long drawn affair,' he said. Singh named Opposition leader L K Advani in his speech, leading to a walkout by the Bharatiya Janata Party (BJP) and its allies.

  • Sharks being killed: Cosmetic industry gains (Editorial)

    Environmental management does not mean changing your light bulbs to use less energy. It means looking at everything you use to see what is beingdestroyed. Have you ever looked at the ingredients in your make up or lotions? Does your moisturizer or lipstick carry the word squalene in the ingredient list? If your answer is yes, then you are partly responsible for destroying the oceans. Squalene is oil derived from the liver of deep-sea sharks. 270,000 sharks are killed every day just for their fins and oil. The oil from their livers goes to the cosmetic industry and the fins go for soup. This enormous and mindless genocide has made 307 species of sharks endangered. In fact, the total number of sharks left in the ocean is ten percent of what they were in 1950. Deep-sea sharks (those living in ocean depths of 300 to 1500 metres) have especially large reserves of squalene since their livers comprise one-third of the weight of the entire animal. So, most deep-sea sharks are caught only for their oil. The excessive catching of these sharks has caused the dramatic population declines of certain species. Some repeatedly targeted shark species are the Aizame shark (dog fish) Leafscale Gulper Shark, and the Gulper, Kitefin and Portuguese dogfish which live between 1300 to 1500 m below sea level. Deep sea sharks grow very slowly, mature late in life and have only a few young in their entire lives. They take long breaks between reproductive cycles, rendering them extremely vulnerable to over-fishing. These sharks are a target species in many industrial fisheries and are frequently caught by fishermen targeting other species. As a result deep sea sharks are at extreme risk and their numbers will take long to recover. The ocean is a very fragile ecosystem. Sharks are apex predators and oceanic food chains are dependent on them. The ocean will implode without predators and our dependence on ocean creatures will impact us tremendously as well. It is immoral to let entire species disappear for the dubious benefits of personal skin specially when there is a renewable alternative in olives. The cosmetic industry has a duty to educate consumers about what they are putting on their faces. Squalene is an oil used in cosmetic products ranging from anti aging creams to lip-gloss to give them a smooth finish and make your skin glisten. It is found in all animals, humans and some plants. It is the sebum oil that your body produces at the root of its hair. In fact it is the same composition as ear wax so it would be cheaper to use that rather than killing such an important species and rubbing its liver oil into your skin. The point is, it is unnecessary. It is not a vitamin or a mineral, it is just oil. Shark-based squalene has a readily available substitute in the market that comes from a purely vegetable origin. Squalene can be obtained from olives and it is of better quality than animal-based squalene and is less expensive as well. Squalene is also found in amaranth seeds, rice bran, wheat germ, fungi and date palm. Vegetable derived squalane is cheaper to produce, more stable against oxidation, of a higher food grade and more compatible with skin than that produced from shark-liver. Oceana is the world's largest international ocean environmental group and is campaigning to end the use of squalene in cosmetic products. As a result some companies have promised to stop using it from this year. Unilever has promised to replace shark derived squalene with plant oil in Ponds and Dove by April 2008 ( However they will still use it in other products). With this decision, Unilever has joined other European-based cosmetic companies that informed Oceana that they do not use this product from threatened animals and prefer sustainable plant-based sources. L'Oreal is also phasing-out products containing shark-based squalene. Other companies are Boots, Clarins, Sisley and La Mer (an Estie Lauder brand. Squalene 'Health Capsules' are another scam. Fly by night companies use the internet to advertise 'pure squalene oil' and 'squalene capsules' making claims about its anti-oxidant properties something consistently debunked by scientists. Among the nonsensical claims made, are those saying that sharks defend themselves therefore their liver oil will make the human body defend itself (I actually read this on an Australian selling site). Other claims are that squalene helps protect against substances that weaken or damage our natural defense systems. There is no clinical evidence to support this. It is is an oil which keeps skin soft - mustard, coconut, olive and all the other oils do. When the cosmetic industry talks about corporate social responsibility, they should start with using ingredients responsibly. Here is no point killing part of the earth and then giving a few dollars to feed children in Ethiopia or creating AIDS awareness. (To join the animal welfare movement contact gandhim@nic.in).

  • Jute industry seeks ban on imports from Bangladesh

    The jute industry has urged the ministry of textiles (MoT) to impose a ban on the imports of A.Twill and B.Twill jute bags from Bangladesh as part of its qualitative restriction. It has also requested the ministry for quantitative restrictions, whereby imports from Bangladesh will be limited giving a breather to the domestic jute industry. The country imported around 55,000 tonnes of jute products from Bangladesh, Nepal, China and Pakistan during 2006-07 jute season. The government recently made jute and jute goods imports duty free. According to the industry, qualitative and quantitative restrictions are required to be maintained as rules on these line have already been laid down in the Jute Mandatory Packaging Act (JPMA). In a letter to A K Singh, secretary, MoT, the jute industry has pointed out the events leading to the adverse effect faced by it because of the withdrawal of import duty on the crop and items. Indian Jute Mills Association ( IJMA) chairman, Sanjay Kajaria said, quantitative and qualitative restrictions need to be imposed to plug loopholes on imported jute bags by certain vested interested persons. Moreover, the restrictions would also ensure the stoppage of import of cheap and non-standard quality of jute bags which are not in conformity with Indian and international standards. The industry feels, unrestricted import of the raw crop and jute goods would be disastrous and therefore should be stopped immediately.

  • Due provision will be made for waiver'

    Hitting out at the Bharatiya Janata Party, Prime Minister Manmohan Singh on Wednesday blamed the previous regime for the agrarian crisis and inflation, and said the UPA government's "unprecedented' initiative to waive farmers' loans was to meet the "unpaid distress bill' left behind by the NDA government. Replying to the discussion in the Lok Sabha on the motion of thanks to the President's address, he said: "We have done nothing more than pick up the unpaid distress bill, which the NDA government had left behind.' It was the distress of the peasantry that brought the United Progressive Alliance to power, while the NDA was talking of

  • BrahMos test-fired

    BrahMos, the supersonic cruise missile, on Wednesday lifted off from the Indian Naval ship "Rajput' speeding in the Bay of Bengal and destroyed a target on an uninhabited island in the Nicobar group of islands situated in the Andaman and Nicobar archipelago. It was the 15th launch of BrahMos but this was the first time that the missile was fired from a ship towards a target on land. "We kept a target on the sand dunes of the island. It was hit. It was a precision-mission. This is an important mission for us because the Navy is acquiring the capability, with the same BrahMos, to destroy targets on the coast,' said A. Sivathanu Pillai, Chief Executive Officer and Managing Director, BrahMos Aerospace Private Limited. The previous 14 flights of BrahMos were from ship to ship, land to ship, and from land to land. Dr. Pillai, who spoke from the Campbell Bay island, called it "a fantastic test.' The launch was executed by trained Naval personnel on board the Rajput. The test-firing took place at 10.30 a.m. BrahMos travels at a speed more than three times that of sound and can hit targets 290 km away. It is a joint product of India and Russia. Dr. Pillai said Defence Minister A.K. Antony phoned him up to congratulate the missile technologists of BrahMos Limited, the Defence Research and Development Organisation and Russia on the success. Mr. Antony said it was a major breakthrough in enhancing the capability of BrahMos.

  • Farm loan waiver: a closer look and critique (editorial)

    A. Vaidyanathan Loan waivers are at best temporary palliatives to the problems facing rural India. Regrettably, the powers that be and the powers that want to be have rarely been willing to confront the difficult and complex problems. The decision to waive farm loans on an unprecedented scale announced in the latest Budget has attracted widespread comment. Almost all political parties have welcomed the move. In fact, most of them were vociferously clamouring for such a measure to relieve the farm sector from a "crushing' burden of debt. The Budget speech has announced the decision to waive farm loans and also estimated the cost (Rs. 60,000 crore) that government has to bear. It does not spel l out the basis of the estimate nor of the institutions, loan categories, and class of borrowers that will be covered by the scheme. Several aspects need to be clarified: 1. By definition, the scheme can apply only to those who have outstanding loans with institutions. Nearly three-fourths of all rural households and 60 per cent of farm households report that they do not have any outstanding debt. All households with outstanding debt may not have outstanding institutional debt. Thus the large majority of even farmers will not benefit from the waiver. If only farmer loans are eligible, the proportion of beneficiaries will be even smaller. 2. Both access to institutional credit and the proportion of outstanding debt are skewed in favour of larger farms. Cultivator households with less than 2 hectares account for 85 per cent of all farm households; and report a lower incidence of debt (46 per cent) and of outstanding debt (30 per cent) than the overall average. 3. Institutional loans include direct lending (to meet needs production as well as consumption) and "indirect lending' for allied activities (such as input distribution, trading, transport and processing of farm produce). The latter comprise about half of outstanding loans of cooperatives; 55 per cent in regional rural banks; and a little under half in scheduled commercial banks. There is hardly any justification for waivers on indirect loans. 4. The magnitude of outstanding debt of rural households, going by National Sample Survey (NSS) data, is less than outstanding debt reported by the institutions in the cooperatives and substantially so in regional rural banks. Since both are intended to lend mostly in rural areas, this difference suggests that they also carry a sizeable portfolio of non-household, non-rural loans. 5. The basis of the estimate that the waiver will cost Rs 60, 000 crore is far from clear. There is good reason to believe that a generalised waiver of all overdues will benefit non-rural borrowers to a considerable extent; that the large majority of rural households, including those in the below 2 hectares category will not benefit; and that the magnitude of benefit accruing to them will be considerably less than Rs.60, 000 crore. Benefits in rural areas will accrue to a rather small fraction of households and the magnitude of relief to the beneficiaries is likely to be considerably less than the cited figure. Larger adverse effects These considerations argue for a close second look at the rationale, scope, and intent of the scheme. But it is also necessary to warn the public of the larger adverse effects of waivers on the rural credit system. Supporters of the scheme argue that this one time relief is a necessary measure to address the current agrarian crisis and that it would enable farmers to restart on a clean state. But this has been said every time in the past when such waivers were announced. Experience shows that waivers encouraged borrowers to presume that they can sooner or later get away without repaying loans. It reinforces the culture of wilful default, which has resulted in huge overdues and defaults in all segments of organised financial institutions. The deterioration in the cooperative credit system is, in large measure, due to the conscious state policy of interference in the grant and recovery of loans. Cooperatives have by far the greatest reach in terms of accessibility, number of borrowers, and delivery of credit to the rural population. Concerned by their near collapse, the Central government set up a task force to suggest ways to arrest the trend and revive them. The task force suggested radical changes in the legal and institutional framework essential to enable and induce cooperatives to function as autonomous and self-regulating entities. It emphasised the need to eliminate government interference in grant of loans, recovery processes, and waiving of dues from borrowers. Against spirit of reforms The Central government accepted the recommendations. Extensive consultations with States led to a political consensus to accept and implement the reform package. The Central government has committed to provide around Rs. 18,000 crore to clear accumulated losses over a period of time and linked to actual fulfilment of specified conditions. Most States have since given their formal commitment to this effect and agreed to abide by the conditions for availing of Central financial assistance. Supervised implementation is under way and has made significant progress in several States. This programme thus already covers a significant part of what is being attempted in the current waiver scheme. It is ironical that the decision to go for a general waiver comes even as the above reform programme is under way. It obviously goes against the central thrust and spirit of the reform programme. Since the proposed general waiver is wholly underwritten and funded by the Centre, the need for the kind of restructuring and conditionality attached to central assistance is likely to be questioned. Doubts will be raised and pressures will build to dilute or even to override the programme. It is very important that the government clarifies its position on the status of the current reform programme and how such pressures can be contained so that apprehensions about the prospect of much-needed institution reform in cooperative credit institutions are to be allayed. Loan waivers are at best temporary palliatives to the problems facing rural India. Significant and sustained improvement in the welfare of the rural population is not possible without a faster pace of growth in the rural economy and an improved quality of education and health services. Increased public spending will not achieve this. It is essential to address deeper problems rooted in the overexploitation and degradation of land and water; government policies that encourage wasteful use of resources; the inefficiency of public systems responsible for implementing programmes, regulating the use of common service facilities, and ensuring quality infrastructural and support services. Regrettably, the powers that be and powers that want to be have rarely been willing to confront and address these difficult and complex problems. The chances that their attitudes will change are far less in the current state of intense and contentious competitive politics. That does not augur well for the future of rural India. (Dr. A. Vaidyanathan, a development economist, is Honorary Fellow of the Centre for Development Studies, Thiruvananthapuram.)

  • Loan waiver: Cheer without fear

    Holding down inflation and interest rates, energising the production function, pushing investments, saving livelihoods, and raising incomes and consumption became the principal objectives of the Budget. The waiver of farm loans is a means to the accomplishment of these goals. G. Ramachandran First things ought to come first. There is an exaggerated view that the waiver of farm loans is senseless and indefensible. The waiver has been criticised on the grounds that it would vitiate the credit culture and exacerbate moral hazard in banking. The critics have no such views when commercial and industrial loans remain unpaid or are waived and written off. The waiver of farm loans is a wholly sensible and defensible decision. The waiver at its worst estimate is expected to cost the exchequer a big sum of Rs 60,000 crore. But it will most likely trigger an increase in gross domestic product (GDP) of over Rs 3,72,000 crore over the next three years. The exchequer will earn at least Rs 44,000 crore if the tax-to-GDP ratio is 12 per cent. The nominal net loss could at worst be Rs 16,000 crore. But there may be no loss at all. The loss could turn into a sizeable profit. There are three reasons for this optimism. First, the loss to the exchequer would be lower when the other robust stimuli to growth act upon the economy. Second, the waiver would break the logjam in the fallow farmlands. It will put crops back on cultivable lands that have remained fallow. A spurt in output will kill inflation. Third, lower inflation will keep interest rates low. Nonperforming assets of banks will rebound smartly. Therefore, law-abiding taxpayers and conscientious borrowers that repay loans have nothing to fear. Smartly managerial The Finance Minister has acquired a reputation for smart and conscientious fiscal management since 2006. He has managed India's fat fixed costs of running government pragmatically. He has outrun the beastly costs by taking a managerial view of tax revenues. He has stimulated tax inflows by lowering the unit excise duty rates. He has raised the threshold of the service tax. The raising of the personal tax threshold level and the slabs expands incomes that can be allocated to consumption. It expands the size of the indirect tax market as a result. Yet, it ensures that the good times of ordinary people will continue. The cut in excise duties applicable to many consumption goods and consumer durables deserves special attention. Compliant and conscientious The boost to consumption may appear scandalous. But the Finance Minister has stayed steadfastly on course to meet the requirements of the Fiscal Responsibility and Budget Management Act (FRBMA). Ernst & Young, a global accounting confirm, has aptly commented that India has

  • Wildlife lobby seeks fresh review of Act

    In a hardening of stance, some powerful wildlife NGOs and conservationists have written to the Prime Minister against the government implementing the Forest Rights Act without a fresh review. Wildlife NGOs and individuals who are part of the National Board of Wildlife (NBWL), which is headed by the PM, have complained that the government has not set up a committee to review the Act. "The decision taken at the fourth meeting to have the adverse impacts of the Forest Rights Act looked into by a subcommittee (of the NBWL) was totally ignored (by the environment ministry) and no such sub-committee has been formed,' the letter says. While the members have claimed the PM had agreed to a review, the minutes of the meeting record that a committee would be formed merely to

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