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Goons at work RBI gets proactive Three cheers! |
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Corporates in
agriculture
MNC muddle
Services’
contempt of civil authority is not casual China too hits
economic skids Inside
Pakistan
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RBI gets proactive
The
world over central banks are injecting more money in their financial systems to tide over the spillover effect of the US housing crisis and cutting interest rates to boost economic activity and avoid falling head-on in recession. India too faces the “ripple effects” of the global financial meltdown and “a temporary slowdown” as Prime Minister Manmohan Singh candidly admitted in the Lok Sabha on Monday. He also tried to reassure the people that their money in Indian banks was safe. It will be better if the government comes out with all the facts about Indian banks’ exposure to overseas markets and details of losses, if any. Finance Minister P. Chidambaram has been trying to boost the morale of the investor through television. The problem, however, is no longer confined to the stock or money markets. There is, no doubt, a serious liquidity crunch in the system as foreign institutional investors pull out, weakening the rupee. A weaker rupee has erased whatever gains have accrued from the falling oil prices. In handling the crisis the Reserve Bank of India has displayed unusual activism and taken aggressive money-infusing measures by drastically cutting the cash-reserve ratio and the rate at which it lends funds to banks, called the Repo rate in the banking jargon. The repo rate cut has lowered the cost of capital for banks and, hopefully, they will pass on part of the benefit to borrowers. The RBI will have to do more at its scheduled meeting on Friday before cheaper loans spur people to buy houses, cars and white goods, thus boosting manufacturing and industrial activity. The industrial production data for last August was quite dismal and the emerging global economic scenario is also very gloomy. To lift the sagging spirits, the RBI will have to give an extra push. Central banks all over the world are trying to provide easy loans to make people spend and step up growth. Inflation is coming down as commodity prices are falling due to slowdown or recession. |
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Three cheers!
IN the game of glorious uncertainties, the wizards of Oz may have been prepared for defeat. Yet, the crushing loss inflicted by an Indian team in magnificent form was something the world-beaters — as the Australians fancy themselves – was unforeseen. Indian bowlers and batsmen did a splendid job and this was no victory by default; it was well earned. Three cheers to stand-in captain Mahendra Singh Dhoni and his men, who were all through positive in their approach and have the right to feel triumphant. While questions, as to whether this is the end of Australia’s dominance of world cricket, are bound to be hotly debated, for now, India can glory in the dazzling performance and new milestones crossed during the Test in Mohali. Sachin Tendulkar overtook the legendary Brian Lara and moved up to the top of the charts as the highest run-getter of them all. Sourav Ganguly, India’s most successful captain ever, sustained the first innings with a splendid century. Opener Gautam Gambhir notched up his first century. While bowlers Zaheer Khan, Harbhajan Singh and Ishant Sharma deserve kudos, it was Haryana debutant Amit Mishra who left an indelible mark with his seven-wicket haul. The Australian line-up simply crumbled under the onslaught of the fierce Indian bowlers. The stunning rout of Australia would, in large measure, be attributed to the clutch of newcomers in the team. True, but their seasoned batsmen, too, fell easily. There was not even the semblance of a fight-back in the second innings. At the end of it, India leads the series 1-0. There is still some way to go and ensure that India prevails to win the series by denying the Australians the satisfaction of a draw. Celebration, yes, but it is not yet time for euphoria. |
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Improvisation is too good to leave to chance. — Paul Simon
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Corporates in agriculture Agriculture
in India is characterised as an area of small and marginal farmers, counting for over 83 per cent of the farmers of the country. Similarly, the retail market in agricultural commodities is dominated by the small stationary as well as mobile venders. Any intervention that hits at these entities adversely spells doom for the large majority of these small operators both in the production and marketing sub-sectors. Any juxtaposing of big businesses, corporates or otherwise, must, therefore, work as complementary interventions rather than cause replacements. Both small producers and retailers as well as corporate establishments must grow in consonance and serve their niche customers in a healthy competitive environment. In the production sphere, big corporate farms in India standing alone cannot serve as flagship enterprises and do not resolve the problems faced by the farm sector dominated by small and marginal farmers. Such enterprises will at best remain isolated examples and cannot be replicated on a large scale. The small farms sector in India, inter alia, suffers from the disabilities of extremely small scales of operations, capital-starved enterprises, small quantities of marketed surpluses and still lower or lack of real marketable surpluses, poor infrastructure, producer-sellers operating in the buyers’ market resulting into a vicious circle of low incomes and lack of investment capital. In this scenario, entry of corporates in the agriculture sector can be useful only if they do not engage themselves in production, but get the commodities produced by farmers according to what is demanded in the high-end markets inside and outside the country. The corporates here can promote scientific farming with improved technologies, proper seeds of the commodities in demand, balanced use of nutrients, rational use of other inputs and management practices (Good Agricultural Practices or GAP) that would optimise the production of appropriate qualities demanded by the consumers, at the lowest costs of production. For the marketing of these commodities, the corporates may arrange assembling, grading, packaging and sale of the produce direct in the high-end markets and/or through processing into products for domestic and international markets. The entry of a corporate will serve better if the hub and spokes system of dissemination of technology, knowledge and input supplies as well as monitoring on the one hand and assembling of produce on the other is created that can help reach a large number of medium, small and marginal producers. This will create strong complimentarity between large corporations and small-scale farms in the country The system can work only if the economic interests of both the corporates entering the sector and the farmers producing the commodities are intermeshed to their mutual advantage. In the absence of such an economic environment, no arrangement for the produce flowing from the farmers to the corporates will work smoothly. Even the legal contracts executed between the parties will not work because it is virtually impossible for the corporates to resort to legal action against such a large number of small farmers, and also quite difficult for the small farmers to do so against the corporations. Pepsi’s entry into tomato processing and the company’s failure in Punjab is an example before us. In spite of the company’ introduction of improved technologies that more than doubled the yield and advanced the production season by a couple of weeks, the farmers did not deliver the produce when market prices were high in the early season and pressed for lifting the produce when there was a slump during the main harvesting season. The company could not resolve the problem and sold off the plant. Another flop case is of Mohindra Shublabh entering into a contract with farmers through Punjab Agro for the production of maize. They sold the seed, got the extension costs, but never visited the farmers and the scheme failed miserably. There was no remedy in the hands of the farmers because there was no stake, financial and otherwise, of the company. There is a multiple number of such examples where the system has failed and created an environment of distrust among the farmers. For such contracts or arrangements, the companies must have some financial stakes; may be in the form of free supply of seeds/plant material and extension services to be charged later from the sale proceeds of the commodities sold by the farmers to the companies. The contracts have to be an open-ended arrangement wherein the producer sees a distinct advantage if he remains committed to the company. Such contracts work better in the production of novelty products, which do not have extensive demand in the local markets. Production of baby-corn, sweet corn, pop-corn, novelty vegetables and salads, mostly demanded in the high-end markets, flowers and medicinal plants are a few of the examples. Yet taking up the production of these commodities by the farmers will depend upon the distinct margins of profit the producers will get compared with what they get from their extent undertakings. When it comes to the producer’s share in what the consumer pays, the retail market is the main culprit. The wholesale markets, especially in the regulated markets, ensure a fair degree of transparency in transactions. Yet, just outside the premises of these markets the retailers charge the consumer at least double the prices at which they purchase the commodities from the same market. At longer distances in the cities, consumer prices are escalated by still wider margins. The mobile venders also charge the same way. Retail prices do not prevail any lower even in the Apni Mandis that are supposed to be farmers’ markets, because the retailers there are not producers and the produce is obtained from the wholesale markets by the vendors operating in these markets. These markets provide only a facade of farmers’ markets. In the absence of fresh fruit and vegetable marts in the retail market, there is no alternative available to the consumers and no competition to these retailers; hence fierce resistance by these vendors to the entry of the corporates in the retail segment of the market. However, the situation is settling down and getting stabilised by and by, and both components of the retail market have started catering to different segments of the consumers. Although very well-packed price-marked, the commodities in these sophisticated markets are not cheaper or more fresh than those offered by the traditional retailers. The lower middle class and low income consumers prefer to stick with the retailers in their local markets. It is mostly the rich and upper middle class consumers that visit the modern fruit and vegetable marts. The small retailers are very well placed to cater to the personal idiosyncrasies of their customers, whereas the retail marts are designed to operate in an impersonal manner. This way both segments of the retail market have created their niches and play supplementary roles in a competitive environment. Competitive in the sense that none of these markets can afford to raise their prices in a free-hand manner, because of the apprehension of the customers shifting their preferences to the other segment. As the turbulence created by the entry of corporates in the retail market settles down finally with time, this dual system will serve the producers, consumers as well as retailers and corporates with optimal pay-offs. It is, therefore, desirable as a policy to encourage and promote the entry of the corporates into the production as well as retail marketing segments of the agriculture sector under a properly envisioned and effectively monitored environment wherein the interests of all the entities operating in this sector derive optimal and equitable pay-offs without any attempt at replacing anyone of these entities, either in the production or the marketing sub-sectors of the agricultural economy of the
country.
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MNC muddle A
senior minister of the Union Cabinet recently confessed in the Lok Sabha that he quite did not know what the famous, or rather the infamous, abbreviation “MNC” stood for and one can sympathise with him in his dilemma. In an age where acronyms are coined at the mere drop of a Gandhi cap, it is unfair to expect a mere mortal, even an honourable minister of the Government of India, to be abreast of the avalanche of abbreviations. Well, what is an MNC? You ask a communist and he will go red in the face (of course, he is “red” already) and splutter with incoherent rage. “MNCs are a diabolical tool of the western capitalistic countries to plunder and loot the poor third world countries, reduce their people to poverty, penury and slavery and undermine their socialist economies”. That profound answer in hand, you approach a capitalist. After a long wait in his posh outer office, you will be ushered into his august presence. “MNCs?” he will query politely, striking a match to his gold-plated pipe, “they’re the most effective tool for transferring technology from the advanced to the developing countries and for achieving accelerated economic progress with social justice and equity.” There you are. You have heard from Ho Chi Minh Sarani and from Dalal Street, but it still is not clear what is an MNC. When the post-war history of the world is written and buried in a time capsule to be exhumed after a thousand years (or in the case of India, after three days), the period we are living in will surely be known as the “Golden Age of Acronyms”. “Don’t worry,” bureaucrats, economists and national planners who run (and ruin) the lives of the common man, keep telling one another. “If we can’t solve the problems facing the country, we shall abbreviate it and that should do the trick”. The world Bank is a past master at coining acronyms and it has come up with a sure winner that will not offend the prickly pride of the poor, famished countries of the Third World. No, insists the bank, they’re not poor. It’s just that they’re LDCs or Less Developed countries. How’s that for a sugar-coated palliative? Old folks are notoriously touchy about their geriatric condition and so why rub the old dears on the wrong side by callously calling them old. Why not senior citizens? So, instead of calling a spade a spade, we shall call it a trowel. When American astronauts landed on the moon to collect lunar rocks, National Aeronautics and space Administration (NASA) — a venerable acronym in its own right — did not say that they were collecting rocks. No, it said, the astronauts were engaged in EVA or Extra Vehicular Activity. When our students descend from their first floor classrooms to collect rocks to pelt at passing buses, they are engaged in ECA or Extra Curricular Activity for which bonus marks are given in job interviews. If the Hon’ble Communications Minister is ever asked in Parliament, “What’s QMS?” I wish to be permitted to answer. “It’s Quack Mail Service.” So we are back to square one. What is an MNC? Well, your guess is as good as
mine.
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Services’ contempt of civil authority is not casual
The
first decade of the 21st century is almost over and what had started as a new era full of promise and optimism, today appears to be a disintegrating mirage with a lumpenised society resorting to violence and mayhem throughout the country and a bizarre and terrifying lack of concern by the political establishment, busy as it appears to be with the pettinesses of its politics. In the clamour of bomb blasts, the unearthing of terrorist groups, murders, ethnic cleansing, the killing of industrialists by workers, the rampaging of mobs baying for the blood of villagers in Assam, Orissa and Karnataka, the international financial crisis and its impact on the country, the uncontrolled rise of the Talibanisation of a nuclear-armed Pakistan, an insidious and underestimated danger which has raised its venomous head, are being overlooked. It all started fairly innocuously with the armed forces protesting against the perceived discrimination against them in the recommendations of the Pay Commission; the Cabinet decided that the recommendations should be implemented on October 1, 2008; the three Chiefs of Staff led by the Navy Chief sent an unclassified note to their ranks not to implement the decision of the Cabinet by not submitting their pay slips on October 1. This is the version of events that have appeared in the press and have not been contradicted. If these are facts, the danger of our armed forces going against the Constitution they have sworn to uphold has caused consternation, dismay and apprehension among many. The issue is not whether the armed forces have a case or not, maybe they do. The issue is that however grave the provocation, the Constitution places governance in the hands of the civilian authorities, not of the military. The ramifications of their action must have been known to the service chiefs and an explanation to the country is essential. Sections of our forces have frequently, perhaps with some justification, complained about the venality and self-serving nature of not just our elected representatives but of the civilian establishment as a whole. They have chafed at not being consulted on issues of strategic and military interest. Again, perhaps there is room for improvement here. At the same time, envious eyes have been cast across the border to the privileges and power of their counterparts. While most of those serving today would have grown up after Independence, it is after all only 60 years ago that these officers belonged to the same institutions. Such envy would be natural, but nonetheless dangerous. Today the Pakistan army, in a bizarre twist to the old fable, is like a monster child eating away at the innards of its mother. The Pakistan army and its ISI are destroying the country they are supposed to be serving—that is, of course, after decades of being in power, both political and economic, in the country. It has so far been a matter of pride for Indians to acknowledge that their armed forces were different; not only did they stay away from politics and political power, but they accepted the primacy of the civilian decision-making on issues of national interest. The storm that has arisen today clearly has its roots in a general, if widespread, contempt of the forces for their civilian masters and counterparts. It does not appear to be simple and casual rivalry but a deeper feeling that the military could handle things better— if there are mistakes it is due to the corrupt politician and the “babus”, who “mislead” them when the latter are not in actual cahoots with the former. The most dangerous aspect to this is that should the forces feel that they can get away with challenging the civil authority, showing “defiance” by not following a decision taken by the duly constituted government of the day, other adventures might arise, and as now, India’s middle classes, irate and despairing of the political class, might support these adventures. So might India Inc as it would, in their imagination, lead to better governance and better opportunities for them to conduct their businesses. The general reaction to the Emergency, when the “trains ran on time” would support this thesis as would, and one had to admit that Marx sometimes got it right, Marx’s thesis that after a period of misrule by the lumpen proletariat, people would crave for law and order even if it meant dictatorship and facism. Of course, after the Emergency, elections were called; would that situation occur again? Perhaps, one is being alarmist and overreacting to what was an inadvertent conjunction of events. The apprehension remains, however, and the onus lies in the first place on the three service chiefs to clarify their stand. Then the politician and the civilian establishment has to draw lessons from this episode: if such deep resentment is permitted to continue to exist, the fabric of our polity will come under threat. It would be pointless then to apportion blame to any one section of the
state.
The writer is a former Ambassador of India to the UN at Geneva
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China too hits economic skids The
Chinese government said on Monday that economic growth in the third quarter slowed sharply to an annualised rate of 9 percent, the lowest level in more than five years. China's economy expanded by 11.9 percent in all of 2007. But weakening demand for Chinese factory goods from U.S. consumers and the slumping Chinese property market have taken a toll on exports and investments -- two big engines of China's economy. "China's latest economic numbers will be disheartening for observers who hoped that China's growth would substitute for slowing demand from developed countries," said Jing Ulrich, managing director of China equities for JPMorgan Chase & Co. in Hong Kong. Analysts said the slowdown was worse than they had expected and probably would spur China to take measures to address the threat of rising joblessness and social instability. The State Council, or Cabinet, issued a statement over the weekend that the government would focus on "rapid and stable economic development" in the fourth quarter, whereas in the past greater or equal priority was given to controlling inflation. Although specific measures were not announced, state-run media reported that they would include increased rebates for exporters and support for loans to small and medium-size businesses. Still, after Monday's economic report, analysts lowered their forecasts for the fourth quarter. And some economists say China's economic growth could fall to 7 percent next year. Although that's still fast by global standards, it would be a big comedown for China, which has sustained an average annual growth rate of 10 percent over the past three decades. China's boom in recent years has been a key driver of global economic growth, lifting oil and metal prices, spurring trade in other nations and boosting revenues for foreign companies that have invested tens of billions of dollars annually. Commodity prices already have fallen, hurting big resource-export nations such as Australia. With the global financial crisis darkening the outlook in the developed world, companies as diverse as General Electric Co. and as focused as Cold Stone Creamery have been pressing ahead with their China expansion plans in the hopes that the world's most populous country will deliver. GE recently set up five regional headquarters across China to sell more wind turbines, diesel engines and medical equipment. Cold Stone Creamery plans to open 20 to 25 stores in the Middle Kingdom. "China will be our No. 1 market we are developing," said Lee Knowlton, president of the international division of Kahala Corp., the Arizona franchiser of the ice cream brand. Tens of thousands of Chinese factories have shut down this year. Two weeks ago, China's biggest dye producer for the garment industry closed, leaving 4,000 people jobless. Last week, one of the nation's largest toy makers, a onetime supplier to Mattel Inc. and Hasbro Inc., went out of business, casting away 6,500
workers. — By arrangement with LA Times-Washington Post
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Inside Pakistan Islamabad, it seems, has realised that its strategy of entering into peace deals with the Taliban cannot help in containing terrorism. What may be the new strategy? The subject was discussed extensively when President Asif Ali Zardari, Prime Minister Yousuf Raza Gilani and Army Chief Gen Ashfaque Parvez Kiyani met on Saturday primarily to finalise the agenda for talks with US Assistant Secretary of State Richard Boucher, visiting Pakistan. According to The Nation, “top military and political leaders have expressed their resolve to continue fighting the militants who are challenging the writ of the state and negotiate only with those prepared to lay down arms.” The National Assembly (parliament) is also discussing the security situation in Pakistan to devise an anti-terrorism strategy. The goings-on among the political and military bigwigs point to a change in the anti-terrorism strategy. Whether the development has come about owing to pressure from Washington or because of internal factors is not known. As The News says, “The current insurgency in Afghanistan and the insurgency in Pakistan have some similarities; and both are open to similar solutions. The Taliban are not homogenous… Some of them will never give up fighting, but the others of a more pragmatic frame of mind could be brought to the table. Those who want to fight will have to be fought….” This approach takes care of the latest opinion of both the US and British military commanders in Afghanistan. Role of drug
money President Zardari, in the meantime, has highlighted the role of Afghanistan’s poppy crop in the failure to tame the Taliban on both sides of the Durand Line. According to The Daily Times, he is believed to have told US Assistant Secretary of State Boucher “if the war against terrorism has to be won the allied forces in Afghanistan must stop drug production in Afghanistan.” The Pakistani leader has, in his own way, hinted at the flaw in the US policy in Afghanistan which earlier aimed at buying tribal chieftains to take on the Taliban. These warlords have used their connection with the US and other allied forces and promoted the cultivation of the poppy crop in a big way. “This has affected governance in Afghanistan. The warlords have jealously guarded their territories and not allowed the Karzai government to extend its outreach from the city of Kabul.” The drug money is reaching the Taliban and Al-Qaeda too. “The Taliban run their own government (in Afghanistan), taking their cut from the smuggling activity going on in the areas under their control”, The Daily Times pointed out. According to one estimate, the total poppy production in Afghanistan is worth $4 billion today. If the authorities in Pakistan are to be believed, 28 of Afghanistan’s 34 provinces are engaged in poppy cultivation. What is more surprising is that even “the government (in Afghanistan) has got involved in the smuggling of drugs or facilitating it for a cut because funds are scarce or are monitored so strictly by the donors that the rulers have problems of personal liquidity”, adds The Daily Times. Musharraf’s
plans What is former President Pervez Musharraf doing these days? Is he only spending his days with family members, relatives and friends? He, of course, is free to enjoy life in the company of his near and dear ones. But he is also busy these days with fine-tuning his future political plan. According to a report in The Nation, the former Chief of Army Staff is preparing to take a plunge into full-time politics after the end of two years of his post-retirement period. This is a constitutional requirement for a government servant if he wants to contest elections. As a top associate of Mr Musharraf told the paper, the former President is anxiously waiting for the day when he will have completed two years after his retirement on November 28 last year. He has already started expressing his opinion on the performance of the government. He is not scared of doing this. His associate told The Nation, “Doing full-time politics and expressing one’s political opinion are two different things”. Mr Musharraf is working on bringing together all the Pakistan Muslim League factions excluding the one led by former Prime Minister Nawaz Sharif. He may also ignore the famous Chaudharys of Gujarat —- Chaudhary Shujaat Husain and Chaudhary Pervez Elahi. But the former President’s advisers want him to take the help of the influential Chaudharys, too, in launching the All-Pakistan Muslim League. |
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