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Advani’s advent Dying children US sneezes
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New challenges in
Sri Lanka
Good old days
Market
collapses are overreactions India’s softening
stand on agriculture Plenty
to chew on at Davos
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Dying children IN what is a continuing blot on a growing country touted as a new economic superpower, 5,753 children below five years die every day, 2.1 million in a year. The abysmal state of our health and nutrition services, and the consequent effect on maternal, newborn and child health, is well known. There is public agonising every time fresh figures are thrown up, but there is little substantive advance being made on the ground. While there is definitely a decline in the nation’s infant mortality rate (IMR), we are still not doing enough. While the IMR in India has declined by 34 per cent since 1990, neighbouring countries are doing much better. Even Bangladesh has managed a reduction of over 50 per cent. The Indian tally of deaths constitutes 21 per cent of the total in the world. Equally distressing is the fact that of the children who survive beyond the five-year milestone, a staggering 46 per cent are reported malnourished. Some 55 million children are underweight — around a third of the world total. Again, many least developed countries are doing a better job. These new figures are from UNICEF’s State of the World’s Children 2008 report, and are derived from the 2006 data. UNICEF has found that progress in providing better nutrition to vulnerable children has been slow, and states like Madhya Pradesh, Jharkhand, Bihar, Gujarat, Orissa, Chhattisgarh, Uttar Pradesh and Meghalaya are the worst offenders. It is significant that the number of child deaths in the world has dropped below the 10 million mark for the first time, halving the 20 million children who were dying in 1960. That is a major achievement, but the fact that so many are still dying, and from preventable causes, must make policy-makers and administrators sit up. In India, a growing economy and rising income in select sectors will not automatically make an impact on the underlying structural causes that are behind these figures. That will take a degree of commitment, energy and imagination that continues to be missing in babudom. |
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US sneezes THE Federal Reserve on Tuesday slashed the interest rates by 0.75 per cent to shore up stock markets, boost consumption and allay worldwide fears of US recession. It is rare for the US central bank to hold a meeting barely a week before the scheduled one on January 29-39, still rarer for it to intervene to stem a stock market fall. The immediate purpose of reversing the global downtrend in stock markets seems to have been achieved — at least for the time being — with the Asian and European stocks looking up. Wall Street fell 4 per cent initially but recovered thereafter to close 1.1 per cent lower. Stock markets move up or down on corporate performance. The present rate cut will take quite some time to show results. Even the prospects of good performance electrify stocks. Whether the Federal Reserve’s higher-than-expected rate cut lifts the investor, consumer and business sentiment will be seen in the days to come. Some expect, rather wish for, another 0.50 per cent rate cut at its month-end meeting. There are analysts who feel the Fed has panicked. George Soros, Chairman of Soros Fund Management, describes the global financial turmoil as “the worst market crisis in 60 years”. However, the Fed only sees some “downside risks to growth”. The present crisis has its origin in the bubble in US housing mortgages. Cheaper credit had led to a steep rise in housing prices and high-risk individuals took loans to cash in on the property boom. Soon banks were burdened with bad loans and lost billions as property prices plunged. The Fed is trying to bail them out by improving liquidity and boosting consumption at the risk of stoking inflation, which threatens to go beyond acceptable levels due to rising commodity prices worldwide. India has a limited exposure to the US, but financial institutions tend to book profits in the emerging markets when faced with losses back home. |
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Despair is the price one pays for setting oneself an impossible aim.
— Graham Greene |
New challenges in Sri Lanka Sri
Lanka’s Foreign Minister Rohita Bollagama announced on January 4, 2008, that the Cabinet presided over by the Prime Minister had decided on January 2 to abrogate the ceasefire agreement between the Sri Lankan government and the LTTE, which was signed by former Prime Minister Ranil Wickremasinghe and LTTE supremo Velupillai Prabhakaran. Bollagama averred: “The abrogation of the 2002 ceasefire agreement, which was fundamentally flawed, actually created space for a more inclusive peace process, which will guarantee sustainable peace in the country.” He said that Tamil groups other than the LTTE would be able to participate in the peace process. Mr Bollagama also said that as a result of the abrogation of the ceasefire, Norway, which was facilitating and monitoring the peace process, would have a different role, which has to be “redefined”. The Sri Lankan government has been unhappy about the Norwegian role in the peace process. There was a strong feeling that the Norwegians were more accommodating than necessary in dealing with LTTE transgressions. Moreover, like other European countries, which are largely monolithic in racial and religious terms, Norway had little understanding or appreciation of the imperatives of national unity in pluralistic Asian countries. Mr Bollagama said that while his government was still in favour of talks with the LTTE, the guiding factor would be the maintenance of the sovereignty and territorial integrity of Sri Lanka. “At all times the Sri Lanka government should run all parts of the island,” he asserted. On the very day that the ceasefire agreement abrogation came into force on January 16, the LTTE struck with a terrorist attack on innocent bus passengers in southern Sri Lanka. Not surprisingly, the abrogation of the ceasefire raised fears internationally that the ethnic conflict would escalate, as it became clear that the government was determined to destroy the LTTE militarily — a task its army may find is easier said than accomplished. There is now widespread consensus in Sri Lanka that given its commitment to the island’s unity and territorial integrity, India should play a more active role in building a climate for a political solution. India has, thus far, taken a back seat because the negotiations included the LTTE, which is a proclaimed terrorist organisation, while other moderate Tamil groups have been excluded. Indian interests can, however, hardly be safeguarded if distant countries are peddling their own formulae in dealing with a problem so closely linked to Indian security interests. By seeking to “redefine” the Norwegian role, so that “many countries” may get involved in the process, Mr. Bollagama was clearly signaling that Sri Lanka welcomed a more active Indian role in the quest for peace in his country. India will have to tailor its role and use its clout so that the Sri Lanka “Donors Conference”, comprising the US, the EU, Japan and the UK, can complement its efforts. Responding to a query on the abrogation of the ceasefire agreement in Sri Lanka, the External Affairs Minister, Mr Pranab Mukherjee, stated: “We have to see what impact it has. Of late, clashes between Sri Lankan forces and LTTE terrorists have increased. So far as terrorism is concerned, our position is that of zero tolerance (of terrorism). So, any country that takes action against terrorists is free to do so within its legal system.” Mr Mukherjee added that India wanted Colombo to arrive at a solution to the ethnic issue. He said: “So far as a solution to the problems of the ethnic minorities, including the Tamils, is concerned, so that their legitimate aspirations are fulfilled within the Sri Lankan system, that part should not be lax and efforts must continue to arrive at a solution.” The most crucial aspects of Mr Mukherjee’s comments are that India continues to regard the LTTE as a terrorist organisation and that a political settlement which meets the legitimate aspirations of the Tamils must be within the framework of the unity and territorial integrity of Sri Lanka. Sadly, Sri Lankan efforts in the past to forge a consensus for a political settlement failed because partisan considerations prevailed over long-term national interests. It now seems clear that the all parties’ conference will recommend implementation of the proposals for the devolution contained in the1987 Indo-Sri Lankan Agreement, which were incorporated in the Thirteenth Amendment to the Sri Lankan Constitution in 1988. Moreover, it would be essential for Sri Lanka to also legislatively implement the provisions of the “Constitution of the Republic of Sri Lanka Amendment Bill” of August 3, 2000, and end human rights violations of innocent Tamils. This Constitutional Amendment Bill was presented after extensive consultations by President Kumaratunga’s advisers G.L. Peiris and Neelan Tiruchelvan. It could not be passed and lapsed because of domestic opposition. The implementation of this Bill, together with the 1988 Constitutional Amendment will largely address Tamil concerns and aspirations. Tamil will join Sinhala as an official language of the country; there will be merger of the Northern and Eastern provinces, with a single provincial administration headed by a chief minister, enjoying powers akin to that of the chief minister of a state in India. The merger will remain in force till a referendum in the eastern districts is held to decide whether they want a separate province. At the conclusion of his visit to Sri Lanka on January 15, Japan’s Special Envoy Yasushi Akashi warned of the dangers of Sri Lanka seeking a military solution to the ethnic conflict. He urged the Sri Lankan government to come up with a credible devolution package to be offered to the “relevant parties, including the LTTE”. Given the demands of the LTTE and Prabhakaran’s intrinsic belief in ruling a separate “Tamil Eelam” as a one-party state, the LTTE will inevitably reject any package which does not meet its demands. New Delhi should work out a strategy of encouraging the Sri Lankan government, the opposition UNP, with whom it has maintained cordial relations, and moderate Tamil groups, to pass the August 2000 Constitutional Amendment Bill. A visit to Sri Lanka, possibly during the 60th anniversary of Sri Lanka’s independence on February 7, by Prime Minister Manmohan Singh, where such an understanding could be formalised, would enable India, acting together with the international community to isolate and mount pressure, including tighter international sanctions, on the LTTE, to fall in line. As many as 1195 soldiers of the Indian Peace Keeping Force laid down their lives to guarantee the unity and territorial integrity of Sri Lanka. Their sacrifices will not be considered as being in vain if Dr Manmohan Singh uses the occasion of his visit to inaugurate a memorial, which the Sri Lanka government is building in Colombo to honour these
soldiers.
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Good old days December
31 midnight. In the house, just myself and the walls — everyone has gone to the City Club to party and dance frenzily. Being alone, invariably I travel to the times gone by. Those were, indeed, the good old days when we looked forward to “bare din ki chhuttian” so longingly. Those freezing December holidays would be a fantastic time. Alas! so short a break. Each one of us wished “bare din ki chhuttian” were for a longer span. Chilly mornings when frost would cover everything outside meant being confined to rooms, of course, cribbingly. How we gazed through glass windows and envied the “mali” moving around. Real fun to sneak out from the backdoor and enjoy playing on the freezing grass! Transparent beads of frost hanging from the projections of windows were a feast to the eyes. How we dared to swallow them, I wonder even now. Our early morning adventures would be rewarded with dripping nose and bouts of cough. And scoldings from all and sundry, of course. But who cared? Didn’t holidays mean a time of sheer fun and merriment? What about the dreams we had nurtured how to spend those unforgettable days ever since the earlier ones ended. Our only aim of coming to the native place would be freedom and fun ...... sans restrictions. Hence a unique spirit of deja vu we possessed. TV and computers being a later development, we had only nature to fall back upon. Roaming in the open fields and relishing sugarcane and jaggery were our pastime. Simple were rustic games like “shatappu” and “gulli-danda”. How madly fond of climbing trees and peeping into the nests I was. Nights would be much awaited. Early fifties were the time when bonfire graced every house at night. Nothing is more heartening than huddling around bonfire gossiping and munching “revari and gachak” (wow! the winter’s bliss)? It was the most cherished time of our holidays. Cracking jokes and relating titbits led to peals of laughter. Who would like to give up cosiness of bonfire and walk even till the dining table (even if rewarded heavily)? It was real fun watching and feeling each other’s cheeks that reflected the glow of bonfire. We would shout hilariously when grandpa too leaving his antique gramophone would join us in joke sessions. December 31 would be a special day for us without realising what it stood for. We simply played and gossiped more enthusiastically till sunset presuming we were to leave for our homes with a bagful of sweet memories about the immediate and yet to come “bare din ki chhuttian”. Anyhow, we felt it was a very special day as granny would cook rice in sugarcane juice enriched with plenty of dry fruit and serve us at midnight with prayers on her lips. We would seek blessings of the elders and the latter too would seek our grandparents’ blessings. But now, old time warmth and affection are washed... and I’m
lonely. |
Market collapses are overreactions
We
have been round this block before, haven’t we? Market turmoil, emergency rescue, looming recession. The important thing, when faced with any financial panic, is to distinguish between what is happening in the markets and what is happening in the real economy. The two are linked, of course: market crashes undermine economic confidence and may undermine growth and employment, while a strong economy will usually be reflected in buoyant asset prices. But you can have market crashes without a corresponding economic decline and vice versa. After the crash in October 1987, the world economy continued expanding for another three years, and the worst longer-term decline in world share prices for a generation, from 2000 to 2003, was associated with a relative mild global recession. By contrast, until about 18 months ago, the Chinese economic boom had taken place alongside a terrible stock market performance. Since then, it has shot up, but for many years the world’s fastest-growing economy had the world’s worst-performing stock market. So we should not assume that this sharp reaction in world shares prices, even if it persists despite the emergency cut in interest rates by the US Federal Reserve, is necessarily signalling that there will be a global recession this year. Some sort of slowdown is taking place and some countries, including the US and maybe, to a lesser extent, the UK, will suffer worse than others. But the world economy is still growing solidly and it will take some time for that momentum to come off. And there is no reason to suppose that the next global downturn will be more serious than the previous three, in the early 1980s, early 1990s and early 2000s. The thing to be clear about is that the US matters but it does not matter as much as it used to. Last year, for the first time in a couple of centuries, China added more demand to the world than either the US or Continental Europe. It is not immune from a recession in the US but its fastest-growing markets are elsewhere in Asia, not the States. As for the US, the fall in the dollar has already started to correct its current account deficit and the long boom has largely corrected its fiscal deficit. So, sure, there will be a rough couple of years there, which may or may not dip into the technical definition of recession: two successive quarters of negative growth. But there are things the Fed and the Administration can do, cutting interest rates and making some tax cuts, that will help the economy through these tougher times. Expect also a continuing flow of investment funds into the US to take advantage of the weak dollar. The States has to sell solid assets to pay for its past excesses and that is not very smart but it is still a huge and efficient economy. Other countries have problems too. Germany is the world’s largest goods exporter so, on that basis, should be hardest hit by a downturn in global trade. The high euro damages all European exporters. Spain has a worse housing bubble than even the UK. More than one-fifth of Japan’s exports go to the US and the mood there is just as bad as in the rest of the developed world. However, in calibrating all the mass of economic junk that is flooding out at the moment, you have to remember that the world has just had one of the fastest-growing years it has ever experienced. So it would be pretty amazing if things did not ease back a bit. In the UK, we have this particular problem of a large and growing fiscal deficit but we also have, at the moment at least, record employment and we have just had a year of growth of more than 3 per cent. The latest surveys of industrial opinion are gloomy but not that gloomy. Everything points to a slowdown rather than a collapse. So why are the markets collapsing? The short answer is that they always overreact and at the moment are having one of their periodic mood swings from greed to fear. Three months ago, shares worldwide were at an all-time high. Despite the fact that here they just failed to reach their previous peak at the Millennium, we have still had five years when shares ended the year higher than they started. So you can explain the present falls in terms of a natural and inevitable reaction, if a delayed action one, to the other financial strains of last year, in particularly the pressure on the banks. Bankers, like the rest of us, make mistakes, but the scale of the mistakes, particularly in US banks, has been enormous. We won’t fully understand for some time quite how they could persuade themselves that bundles of housing loans to clearly uncreditworthy borrowers should be ranked as almost as good as government securities. The legitimate question now seems to me to be whether the continuing banking weakness has become so serious as to transfer what is still a financial market problem into a more general economic problem. I cannot believe it will for three reasons. One is that core loans on which the banks have made these large paper losses are still going to be worth something. Two is that interest rates can and will continue to come down and that will cut bank funding costs. And three, as we have learned with Northern Rock, we taxpayers have to support any bank that gets into trouble. Banking troubles will be a drag on the world economy, slowing it down. But they won’t stop it in its tracks. By arrangement with The Independent
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India’s softening stand on agriculture Indian
agriculture has been protected from competition with the help of a high tariff wall in the past, though the tariffs have been scaled down considerably in recent years. The biggest agricultural producers in the world — the US and EU — are not protected by high tariffs but they give huge subsidies to their farmers. The result is that India cannot compete with the farmers in the developed countries. India and other members of the Group of 20 and the Group of 33 have been insisting that developed countries have to reduce their subsidies substantially. In return, the developed countries have demanded that countries like India have to allow greater market access for their agricultural products. Though India’s commerce minister Kamal Nath has in the past taken a tough stand at the WTO on agriculture, India softened its stand on the WTO deal late last year which means that Indian agriculture may have to open up and become more competitive. India now wants to see a conclusion of the Doha Round of Multilateral Negotiations soon. India is adopting a more ‘flexible’ approach which means it could reduce tariffs for certain agricultural imports from the US and other developed countries. The flexible approach has been adopted in view of the predicted global slowdown and a likely downturn and recession in the US in the next few years. With oil prices reaching nearly $100 a barrel, the WTO deal is being perceived by India as an ‘antidote to global slowdown’. The softening of India’s stand may also be due to India’s own interest in its IT exports and services to the developed countries and to the US in particular. The WTO deal would be good for the service sector (which contributes nearly 60 percent to the GDP) as it would lead to greater access to the American market especially for business process outsourcing, communications, financial , legal, transport, travel, audio visual and port services. There already has been some hardening of stance towards outsourcing of services from India by American companies. Further access could be problematic if protectionist forces in the US can legislate a ban. Opening up agriculture may be problematic for India too because a large section of the population (65%) of the population is dependent on it. If the WTO goes through there would be freer food imports and this would impact the livelihoods of millions of small and medium farmers even though it may benefit millions of consumers. In any case, India has to prepare for more open trade in agricultural products in the future. But this could be difficult in the short term as India currently has one of the lowest yields per hectare for wheat, seed cotton, ground nut and rice and Indian agriculture is monsoon dependent. If India is to compete with developed countries in the world which not only have a much higher productivity in agriculture but also whose governments heavily subsidize farmers, another Green Revolution would be needed. Work has already begun under the government’s Agriculture Knowledge Initiative (AKI) which was signed between India and the US in tandem with the Nuclear Deal in 2005. The AKI has been hailed as an instrument for starting the second Green Revolution. Biotechnology is at the heart of AKI and since China has worked wonders by growing Genetically Modified (GM) crops, India too can do so in order to prepare for the food requirement of a growing population in the next decade. But many details of the AKI have not been made public and people are not sure of what it entails. It has on board some famous multilateral companies on the American side like Walmart and Monsanto. On the Indian side, there is a chicken breeding company, ITC and Indian Council of Agricultural Research. According to the AKI there would be an exchange of biotechnology research between the two countries. But big multinational companies like Monsanto are likely to also further their business interests in India and they can garner for themselves a monopoly position. Monsanto seeds are not only costly but their impact on ecology has to be examined carefully. Also, only big farmers may be able to afford such seeds which can only be bought from outlets of this giant corporation. Their terminator seeds are just ‘one time use’ seeds. The AKI also has an agreement on sharing of gene banks and there could also be a change in the patent laws in the future. It would mean that American and Indian researchers could patent seeds –something which is not allowed at present. It would mean that farmers may not have the right to keep the seeds for their own use after the harvest. Naturally the poorer farmers would be badly hit. American companies would also have access to India’s huge biodiversity and gene pool which is invaluable for any future research in India. While the US has not committed any financial resources for the initiative, India has committed Rs 400 crore for research on genetic engineering and biotechnology products. The latest gene technology from the US can benefit big farmers but may be it would be of little use for small farmers. India has millions of small and marginal farmers who may not be able to afford such technology. The introduction of Bt cotton has for example, had mixed results specially in places which have water scarcity. Bt cotton seeds are moreover four times more costly than local varieties but where they have been successfully grown, the farmers have become richer. Where such experiments failed, farmers have committed suicide. In any case, the AKI is politically very sensitive and transparency is required at every stage. There is no doubt that biotechnology is important for higher productivity but it has to be affordable and safe. More Indian scientists can also be encouraged to research on plant genetics. How to make it more affordable is thus key to its success and secondly, how it affects ecology and the human body are also important. (Many countries in Europe have banned Genetically Modified food.) Clearly it is because of the huge subsidies that developed countries give for biotechnology research and to farmers that their productivity is so high and prices are so low. Can India compete with such countries which are at the cutting age of GM food production techniques? There is very little time to catch up because the WTO deal when completed would mean intense competition in the near future.
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Plenty to chew on at Davos Blackberries beeped, mobile phones buzzed and all manner of other hand-held devices suddenly exploded into action. As the snow fell on Davos, with a full-scale blizzard blowing at the top of the mountain which closed all but a few of the resort’s myriad ski lifts, the news was filtering through of the Federal Reserve’s “emergency” interest rate cut of three quarters of a percentage point. Suddenly the agenda of the World Economic Forum gathering here, already likely to be dominated by the credit crisis, fears of recession and the gyrations in stock markets, had been well and truly set by this out-of-the-blue decision from Ben Bernanke, chairman of the world’s most powerful central bank. Will the Fed’s move signal a determined effort by policymakers around the world to avoid economic catastrophe? Or is it a sign of panic which indicates that central bankers have lost control of events? There is no better place right now than Davos, with its extraordinary concentration of brain power, wealth and government muscle, to answer these questions. The danger of yesterday’s interest rate cut, much larger than anticipated and enacted at an unscheduled meeting of the Federal Open Markets Committee, is that it will be seen as a panic decision which indicates that things are very much more serious than the still relatively benign consensus among economists on the outlook for the world economy. Bankers, business leaders and policy makers assembling for the forum’s annual meeting today are already asking whether there is something the Fed knows that the rest of the world doesn’t n possibly a major bank running into difficulties or a steeper economic deterioration than suspected. At Davos this year there will be intense soul searching among bankers about the extent to which unregulated credit structures and products contributed to the present crisis and the explosion in debt. Private meetings throughout the forum have bristled with fevered discussion about the now potent risk to bankers of a fierce regulatory backlash, with politicians on both sides of the Atlantic calling for a crackdown on investment banking practices and pay. Not since the forum’s 2002 meeting, held in the aftermath of 9/11 and uniquely moved to New York as a gesture of solidarity, has the mood seemed so sombre. America at that time was already sliding into recession, as it may be on this occasion too. Opinion among economists here is still deeply divided over whether what we are experiencing is merely a sharp US slowdown which, after policy action of the sort just announced, will soon dissipate, or which presages a serious recession with job losses, bankruptcies and severe repercussions around the world. The timing of this year’s event could hardly be more fortuitous or auspicious. Leading figures from the world’s older economies are being joined in unprecedented strength by the movers and shakers from the rapidly growing emerging market economies of the developing world, especially those of China and India. By arrangement with The Independent |
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