DEAL STILL POSSIBLE THIS YEAR?

WTO Agriculture talk to resume

The month following the failure of world trade talks, trade ministers and world leaders have sought to ensure that the significant progress that was made before negotiations fell apart will not be lost in the aftermath of the collapse. Whether - or to what extent - that aim can be realised is far from certain.

For the immediate future, at least, a schedule has been set: senior-level talks (that is, below the ministerial level) on agriculture will resume at WTO headquarters in Geneva the week starting of 14 September. Key to those discussions will no doubt be the Special Safeguard Mechanism (SSM), which was at least the proximate trigger of the failure of the talks.

In the weeks following the collapse, WTO Director-General Pascal Lamy paid visits to both the Indian and US trade ministers - the primary players, along with the head Chinese trade official, in the SSM deadlock. In a speech to industry representatives in India, Lamy reportedly said that he was urging the two sides to "try to understand each other a bit more, at the political level, because this is a political discussion that has to translate into a technical discussion, not the other way around."

The SSM is a tool that would allow developing countries to raise tariffs temporarily when import volumes increase or prices fall suddenly. One of the main sticking points in the July talks was the question of whether, and by how much, developing countries would be allowed to raise tariffs beyond current 'bound' levels in order to protect domestic producers. India and China fought for more flexible terms for the use of the SSM, while the US was firm in its demands for predictable market access for its farm products.

Many involved in the talks expressed surprise that the SSM, a seemingly minor and technical matter, ended up playing such a critical role in the collapse. "It became a huge issue because of the politics on both sides," Lamy said in an interview with Reuters. "I wouldn't say if we solve the SSM, the rest will fall in place. But what I'm certain is if we don't solve this, the rest will not fall into place," he said.

Some trade observers now speculate that the US refused to yield on the SSM in order to avoid a discussion of its cotton subsidies, which the WTO has repeatedly ruled to be in violation of the US' word trade commitments. After the SSM, cotton was the next item on the negotiators' agenda.

"I know there are a lot of conspiracy theories running on this...To be frank, I don't suspect the US broke on the SSM not to have cotton on the table. They know cotton has to be there," Lamy said in an interview with Reuters.

Looking ahead

Whether progress can be made on the SSM and other outstanding issues remains to be seen. On his recent trip to India, Lamy met with trade minister Kamal Nath, who reportedly expressed his support for the resumption of high-level talks in Geneva. But speaking to reporters on the sidelines of a meeting in Singapore a week later, Nath made it clear that he thought that other players should take on more responsibility: the "key to the lock of the [WTO] deadlock is not in our hands. The key is with the developed countries," he said. Nath is expected to meet with EU Trade Commissioner Peter Mandelson on 12 September.

Less than two weeks after his visit to New Dehli, Lamy paid a call on US Trade Representative Susan Schwab, who also expressed her support for continued talks, telling reporters that a world trade deal was "still conceivable" this year. She cautioned, however, that whether an agreement can be reached "depends largely on the seriousness of purpose, commitment, flexibility of the key players, and grandstanding isn't going to do it."

Schwab called for senior officials to re-engage and work to establish a framework for further action at the ministerial level. "Our sense is we need to have a representative group of countries that are ready, willing and able to engage in good faith to try to find an ambitious outcome to this round," she said.

The US position has been somewhat complicated by opposition from its domestic manufacturing lobby, which disagrees with some language in a report on the status of the industrial goods talks put out by committee chair Don Stephenson in mid-August. The National Association of Manufacturers (NAM), the largest industrial trade group in the US, has argued that the report does not go into enough detail on the offers Members put forward on sectoral liberalisation initiatives, provisions that would rapidly cut tariffs to a low level, even zero, on specific sectors, such as bicycle parts or forest products.

In a statement released while Lamy was in Washington, NAM president John Engler made his organisation's demands clear: "balance for American manufacturers is only possible if the big emerging manufacturers of Brazil, China, and India are part of sector-specific agreements that would be aimed at eliminating tariffs in significant industrial sectors. These countries must open their markets."

While the US and Indian ministers did not go so far as to call for ministers to re-engage in negotiations immediately, Brazil and Australia were explicit in their calls for ministers to return to Geneva as soon as possible to try to hammer out the final terms of a deal. "I'm still hopeful that we can still make an effort, but it has to be very fast," Brazilian foreign minister Celso Amorim told reporters on a visit to Australia at the end of August. "Based on past experience, there are two possibilities. We either do it now, in September, or we will have to wait for a long time," he said.

Many people involved in the talks consider the US presidential election in early November to be a final deadline for the agreement of a world trade deal in the near future.

In a speech to the Australian parliament on 26 August, Trade Minister Simon Crean expressed similar optimism on the prospects of deal. "The amount of distance that we covered in July and the relatively short distance left to travel does offer hope that WTO members can get back to the negotiating table soon," Crean said. "With further and sufficient political will brought to the task, we have a real chance to move forward."

Meanwhile, trade officials from the G-33 group of developing countries, which lobbied hard on the SSM during the July talks, sought to construct a potential compromise on the sidelines of a recent meeting of the Association of Southeast Asian Nations (ASEAN) in Singapore.

"We're working hard to come up with a compromise which we think is doable," Indonesian Trade Minister Mari Pangestu told reporters at the meeting. She said she hoped that ministers would return to Geneva to continue discussions in September, stressing the importance of acting quickly. "When you have an economic slowdown as is being predicted in the US as well as Europe and Japan, then this is often the time when you have unilateral protectionism. We certainly would be very concerned about that," she said. (ICTSD)

World Trade Report 2008

The WTO launches World Trade Report 2008: Trade in a Globalizing World

Trade has allowed nations to benefit from specialization and economies of scale to produce more efficiently। It has raised productivity, supported the spread of knowledge and new technologies, and enriched the range of choices available to consumers। But deeper integration into the world economy has not always proved popular, nor have the benefits of trade and globalization necessarily reached all sections of society। As a consequence, trade scepticism is on the rise in certain quarters.This year’s World Trade Report, entitled “Trade in a Globalizing World”, is devoted to an examination of the gains from international trade and the challenges arising from higher levels of integration. Over many years, governments in most countries have increasingly opened their economies to international trade, whether through multilateral trade negotiations, increased regional cooperation or as part of domestic reform programmes. “Few would contest the benefits that globalization and trade have brought in terms of greater prosperity for hundreds of millions, as well as greater stability among nations. But many individuals in different societies across the world have shared little or not all in the benefits. The challenges facing governments in managing globalization are formidable, and success in spreading prosperity more widely requires a strong common purpose” says WTO Director-General Pascal Lamy in an introduction to the Report.The Report explores a range of interlinking questions, starting with a consideration of what constitutes globalization, what drives it, the benefits it brings, the challenges it poses and what role trade plays in this world of ever-growing interdependency. We ask why some countries have managed to take advantage of falling trade costs and greater policy-driven trading opportunities while others have remained largely outside international commercial relations. We also consider who the winners and losers are from trade in society and what complementary action policy-makers need to take in order to secure the benefits of trade for society at large. In examining these complex and multi-faceted questions, the Report reviews both the theoretical trade literature and empirical evidence that can help to give answers to these questions.

The causes and consequences of globalization
The Report notes that the key economic characteristic of globalization is deeper integration of product, capital and labour markets. Globalization is driven by technological innovation, political change, and economic policy choices, and this process of integration has caused significant structural changes in parts of the world economy. The increased fusion of product, capital and labour markets internationally has resulted in a more efficient allocation of economic resources. Economic integration has resulted in higher levels of current output and prospects of higher future output. Capital can flow to countries which need it the most for economic growth and development. Allowing workers to move across national borders can alleviate skill shortages in receiving countries or respond to the needs in rapidly ageing societies while alleviating unemployment or under-employment in countries providing these workers. Today’s industrialized economies were the early beneficiaries of globalization in the immediate post-war period, and more recently newly industrializing economies have been among the major winners from increasing economic integration. Trade has consistently grown faster than output in the world economy, and manufactures have accounted for an expanding share of total trade. Traded services have also grown significantly, although their importance is still poorly understood as a consequence of limited data. A major evolving feature of production is the fragmentation of production processes across multiple jurisdictions. International capital flows have played a vital role in the internationalization of production, and more generally in fostering globalization.

Pascal Lamy to focus on Agri and NAMA

TRADE NEGOTIATIONS COMMITTEE
Lamy urges “maximum effort” for July meeting of ministers
Director-General Pascal Lamy, at an informal meeting of the Trade Negotiations Committee on 27 June 2008, urged “maximum effort from everyone over the next weeks” to ensure a productive meeting of a number of ministers scheduled for the week of 21 July 2008. He said the immediate challenge is to make progress that “will provide a basis for improved texts in Agriculture and NAMA”.
Exerpts of speech
The focus now is, as I said earlier, to create convergence on Agriculture and NAMA so that the Chairs can prepare texts for ministerial consideration, either with areas where full convergence has been achieved, or with straight choices for Ministers. This means a very intensive phase of work in these areas which should culminate in the circulation of the revised texts. Obviously once the texts are out, you and your capitals will need some time to consider them. There will also be an opportunity for the full membership to react to them before we move to the final intensive phase of preparing issues for consideration by Ministers.
In particular, I believe that it will be important for me to continue with my process of consultations, which will increase in intensity and move from being more of an information exchange, towards focusing more on the substance of the topics, to adequately prepare for a ministerial discussion. I see these horizontal consultations with ambassadors and Senior Officials as key to proper preparations for a successful outcome.
Now, the timing. We are now at the end of June, so the end of July is in one month. We need a timeline to manage expectations if we are to do the deal in July, and in my view, we have to plan on a number of Ministers meeting here in the week starting 21 July. I would recommend that they be here a couple of days before in order to warm up, have bilaterals and prepare the ground.
In line with the importance we all attach to transparency and inclusiveness, the process that week will follow the pattern that has worked in the past — concentric circles of consultations with constant communication among them. This means that there will be informal meetings at the level of Head of Delegation, which will serve both to guarantee transparency and to help build consensus. I will supplement them with continuing dialogue with the regional and other groups as well as with the green room. Time will also be set aside for Group meetings and consultations.
27 June 2008

Highlights of China

OVERVIEW
China's economic growth has moderated to a more sustainable pace.
Headline inflation is receding even as non-food price pressures emerge.
Amidst weaker and uncertain global prospects, China's growth will be supported by strong international competitiveness and a robust domestic economy.
On current growth forecasts, there is no need to ease the overall macroeconomic stance, although global uncertainty calls for vigilance and flexibility.
Reducing China's very large external surpluses remains a key policy challenge.
RECENT ECONOMIC DEVELOPMENTS
In line with slower growth elsewhere, China's GDP growth moderated so far in 2008.
The moderation of growth in 2008 in part reflects less buoyant investment.
External trade volumes have decelerated, but sharp increases in import prices are inflating import values.
The large decline in the terms of trade reduced China's trade surplus from a year ago in the first five months.
More detailed external trade data seems consistent with a slowing global economy and a still robust domestic economy.
High food price increases pushed up overall consumer inflation, but the worst of the food price hikes may be over.
Surges in other commodity prices had until recently had less impact on China's consumer prices.
Higher prices of food, oil, and industrial raw commodities have started to spill over into some other prices, although spill-over to core consumer prices has remained limited.
Foreign reserves accumulation breaks new records.
The balance of payment surpluses complicate monetary policy, but money growth remains under control.
Motivated by the need to rebalance the economy and to dampen price pressures, China's RMB has continued its gradual exchange rate appreciation.

Inflation and common man

MOUNTING INFLATION AND THE COMMON MAN
Ruddar Datt

The wholesale price index (WPI) touched the high level of 226.0 by end March 2008 as against 210.4 end March 2007 (1993-94=100) signaling 7.4% rise in WPI during the year, highest witnessed during the last ten years. It crossed the limit of 5 percent comfort zone specified by RBI. Consequently, UPA government was upset due to the inflationary rise of prices.
Critics, however, raised issues about the flawed measurement of WPI. Parliamentary Standing Committee on Finance headed by BJP leader Ananth Kumar recommended revised price indices, but the Government has shown inordinate delay in adopting its recommendations. Similarly, in 2005, Taskforce headed by Dr. Abhijit Sen, member, Planning Commission recommended updating the base year, instead of continuing 1993-94 as the base year; increasing the number of commodities and making changes in weightage given to different commodities. Such changes would give a higher rate of inflation and thus, the Government is holding back its revision of WPI. The Committee had recommended 2004-05 as the base year.
However, there is a gap between the perception of the Government and that of ‘aam admi’ (Common man) who is experiencing a much higher retail inflation. The Government, was experiencing a sharp rise in prices of foodgrains, especially rice and wheat and pulses and besides that of vegetables and fruits. The Common man was experiencing double-digit inflation and according to one estimate, about another 10 crore people have been pushed below the poverty line due to the impact of recent price inflation.
The Government tried to take shelter behind the plea that inflation in India was part of global inflation. During the short span of 8 months between August 2007 and March 2008, global price of coconut oil has risen by 61%, groundnut oil by 71%, maize by 54% and Thai rice by 72%, US wheat by 74%, bananas by 76% and sugar by 35%. According to World Bank data, between August 2007 and Mrch 2008, low and middle income countries have witnessed 73% rise in the prices of agricultural products, 88% in foods; 71% in fats and oils and 105% in grains. But all this was cold comfort for the poor people and the plea of the Government did not cut much ice.
To douse the anger of the common man, Government adopted ‘Fire Fighting Approach’ to tackle inflation. The following measures were announced:
*Scrapped import duties on edible oils
*Banned export of basmati rice
*Reduced duty on maize imports from 15% to zero
*Extended ban on export of pulses for one year
*Banned export of edible oils
*Withdrew export incentives in steel and cement.
The principal objective of the Government was to make available supply of foodgrains, pulses, edible oils for domestic use and to facilitate the import of these commodities to reduce the impact of supply constraint. But these measures did not produce the desired effect.
Another problem is the wide gap in the prices of food items in the wholesale mandis as revealed by the figures of Agricultural Produce Marketing Committee and those charged by retailers. The Government should have set up distribution centres or used the PDS shops after making bulk purchases from wholesale markets and thus provided a competitive and countervailing structure to provide relief to the consumers which it has failed to do. Such a firefighting measure would have mitigated the hardship for the consumers and tamed the middlemen who are making huge profits taking advantage of the prevailing scarcity.
Failure to improve growth rate in agriculture
Basically, the present inflation, which is driven by the prices of foodgrains, pulses, vegetables and fruits is not a demand-driven inflation, but is the result of failure government policy on the agricultural front to raise output. It is the supply constraint that has fuelled inflation.
During the last 4 years of UPA government (2004-05 to 2007-08), production of foodgrains, especially rice, wheat, pulses, potato has shown stagnation, whereas the population has been growing at the rate of 1.5% per annum and reached a level of 1,130 million. Overwhelmed by the GDP growth rates during 2004-05 to 2006-07, driven by high growth in industry and services, the Government neglected agriculture. This is evidenced by the fact that public investment in agriculture, especially irrigation, stagnated to 0.4% of GDP during the 4-year period (2002-03 to 2005-06).
There is a dire need to raise productivity in states where yield levels are low in agriculture. For the extension of seed-fertilizer technology to secure better yields, irrigation is a basic necessity. But facts stare us in the face that during 2000-01 to 2005-06, there has been very little increase in irrigated area, specially in two major crops, viz., rice and wheat.
As data reveals that irrigated area under wheat ranged between 23 to 24 million hectares and that under rice oscillated within the narrow range of 24-25 million hectares and that of pulse ranged between 3 to 3.7 million hectares during 2000-01 and 2005-06. This was the result of a fall in public sector investment during the post-reform period. There is a concomitant need for better utilization of water, whether made available due to rains or melting of snow. This requires a major compaign for water-shed development so that the utilization of water is significantly stepped up. This is specially important for regions which have sufficient rainfall. The two measures extension of irrigation and watershed development can trigger a second green revolution in poor and backward states, and also save soil from the dangerous effects of water logging and soil depletion. Both will require substantial step up of public sector investment. Government seems to have realized its mistake and is making efforts to raise the level of investment in agriculture.
Minimum Support Price for Farmers
Another problem which has affected agriculture is the Minimum Support (MSP) for farmers. Since the cost of production in agriculture is increasing, there is a need to increase MSP for farmers. Till 2007-08 it was Rs. 850 per quintal in case of wheat and Rs. 745 per quintal for rice. It was alleged that the Government is paying more for imports in the international market, but is not paying a higher MSP to its own farmers so that it can have more foodgrains for its buffer stocks. Only recently, the Government has revised MSP for wheat to Rs. 1,000 per quintal, but has not done so for rice so far.
Fuels, Cement and Steel
Besides foodgrains, other commodities which are exercising an upward pressure on WPI, are fuels, cement and steel. The price of petrol in the international market has reached an unprecedented level of $ 114 per barrel. Via rise in transport cost, it pushes up the price level. But this is an exogenous factor on which the government has no control. Recently, there is a diversion of certain foodgrains towards the manufacture of bio-fuels. This has resulted in pushing up international prices of foodgrains by over 80 percent, thus raising the cost of imported foodgrains. In the domestic economy as well, the diversion of foodgrains to bio-fuels is aggravating the supply constraint. To mitigate the situation, the Government should impose severe restrictions on use of foodgrains for bio-fuels as a temporary measure till such period that foodgrains output growth is accelerated by the measures initiated to reach the target of agricultural growth by 4% per annum.
In case of controlling the prices of steel and cement, the Government has been dilly-dallying action against cartelization in these two industries. Experience the world over reveals that cartels are not tamed by issuing advisories. The tendency to exploit the market is so strong that industrial magnates refuse to listen. Grilled by the opposition, Finance Minister P. Chidambaram stated in the Lok Sabha on April 16, 2008: “I have no hesitation in repeating that cement manufacturers are behaving like a cartel.. There are signs that even steel manufactures are behaving like a cartel… If they do not understand the gravity of the situation and behave responsibly, Government will not hesitate to take tough administrative measures.” It is really strange that when the country has created Competitive Commission of India (CCI) in place of MRTPC, the Government should have asked the CCI to initiate action much earlier. It is bad policy first to allow much damage to be done, and take very belated action.
These appears to be divergence of views within the Government. As against the Finance Minister’s strong view warning tough measures against cartel-like behaviour by steel and cement manufacturers, the Minister of State for Steel Mr. Jitin Prasad in a written reply to a query in the Lok Sabha stated: “the steel prices are determined by market forces, such as demand and supply and international prices… However, no evidence on cartelization by steel companies in determining steel prices has been brought to the notice of the ministry of steel.” With such divergent views within the Government, chances of breaking cartels appear to be very poor. The Government following USA and European Union should have used ‘the leniency principle” – an application of the ‘approver principle’ in the economic domain to break cartels. There does not appear a strong resolve by the government to do it. Even if the CCI initiates action suo motto, it will not be effective in view of confusion within the Government.
Ban on Future Trading in essential items
The alliance partners in Congress-led coalition Government have been voicing strong views on future trading in essential commodities. CPM leader Sitaram Yechury pleaded for imposing a ban on future trading of 25 commodities, since the left maintains that large scale speculation in futures trading in grain has been the main factor responsible for rises of prices. To quote Mr. Yechury: “The only way to insulate ourselves from international speculation is to reverse the process of liberalization in commodity trade and prohibit future trading in essential commodities.” But Mr. Sharad Pawar, Minister for agriculture, food and civil supplies is not convinced about the correlation between future trading and increase in essential commodity prices. However, he conceded that ban on future trading in rice did help to stabilize prices, in urad and tur, it did not happen. The Minister would like to wait for the Abhijit Sen Committee to submit its report on the subject. It may be noted that in 2007, under pressure from its allies, the government had banned future trading in wheat, rice, urad and tur.
Abhijit Sen Committee has decided to take an escapist route and not provide an answer to the question of banning future trading. Dr. Abhijit Sen mentioned: “the evidence we have found is not unambiguous. Based on data that we have analysed, it is neither possible to say that future trading in agricultural commodities leads to price rise in the spot market, nor is it possible to say that there is no impact.” (Business Line, April 24, 2008) The Committee could have on balance, drawn some conclusion, but preferred to run with the hare and hunt with the hound.
The terms of reference of the Committee mentioned: “To study the impact of future trading on commodity prices and suggest measures to minimize such impact.” There is enough scope in this term of reference to express an opinion on the ban on future trading of essential commodities as a measure of minimizing the impact of future trading on commodity prices.
It is really strange that Ministers within the government voice divergent views on the question of controlling price rise in essential commodities. To be effective, the government should bring about a clear policy to control inflation after due deliberation within the cabinet. It should state the short-term measures to alleviate the suffering of the common man and also state the long term measures to increase supplies of essential commodities, more especially foodgrains. Among the short term measures to augment supply, the government announced the import of one million tonne of edible oils and subsidize it at the rate of Rs. 15 a litre for sale through the public distribution system. Also 15 lakh tonnes of pulses are being imported to mitigate the situation.
To sum up: it is vitally necessary to build a market information system which should reflect the changes in the prices of essential commodities accounting for 60 to 70 percent of the expenditure of low income groups. For this purpose, revision of price indices is essential after considering the recommendations of various committees. Secondly, there is a need to take timely action so that the hardship of the common man by way of erosion of his income with sharp increase in the prices of essential commodities, can be reduced. Thirdly, the government should give top priority to the development of agriculture. Fourthly, the government must take measures to reduce the use of multi-crop land for non-agricultural purposes, like Special Economic Zones. Last, but not the least, efforts should be made to undertake a second green revolution, with a special focus on agriculturally backward states. The country should follow a policy of self-sufficiency in food and essential commodities. That way lies hope for the common man and progress towards inclusive growth. In this connection Mr. Prashant Goel concludes: “The sustainable way out of the current mess is to increase food production and productivity and this cannot come without right prices. If the farmer does not get remunerative price for his produce, even the loan waiver package may not deliver. Given our large arable land and favourable climate, and rising global food prices, a proper policy framework could ensure that India becomes world’s food bowl.” (Food Inflation offers an opportunity, Economic Times, 18th April 2008).

Dismal Experience of NREGA: Lessons for future

-Ruddar Datt-

The National Rural Employment Guarantee Act came into force on February 2, 2006 and was implemented in 200 of India’s most backward districts. The Ministry of Rural Development described it as a revolutionary measure to transform the rural economy. In 2007, it was extended to another 130 districts and with effect from April 1, 2008, the Act is to cover all districts.
For its progress and the weaknesses during its implementation, two kinds of reviews are available – (i) the implementation of NREGA has been reviewed by the Controller & Asuditor General (2007) and (ii) Certain NGOs, especially the National Consortium of Civil Society Organisations (CSOs), have also undertaken several reviews.
The CAG Report underlines the fact that the guidelines indicated in the NREGA have not been followed. The Report specifically mentions lack of provision of professional staff to implement the scheme.
(1) Lack of professional staff – Every State government was required to appoint in each block, a full time Programme officer, exclusively responsible for the implementation of NREGA. The state Government, however, directed Block Development Officers (BDOs) to take “Additional charge” to implement NREGA. CAG report finds that 19 states had not appointed these officers in 70 percent of the blocks surveyed. The point which needs to be highlighted in that NREGA is not a programme that can work of on “additional charge”
Besides this, one employment guarantee assistant (ESA) was to be appointed in each gram panchayat. According to CAG report, 52% of the 513 gram panchayats surveyed had not appointed ESA.
In addition, the state government was to create panels of accredited engineers at the district and block level. They were expected to undertake costing of works to be undertaken, to make measurements of the works done to release payments to labour as stipulated in NREGA. The CAG found that the panels were missing in 20 states it surveyed.
As a consequence of shortage of staff, there were delays in execution of works and payment of wages on account of lack of measurements; delays in wages payments of two to three months were noticed. Consequently, labour households preferred to undertake other jobs, even if the payments were relatively low, but prompt.
All this resulted in a situation where out of 20.1 million households employed in NREGA, only 2.2 million (i.e. 10.5%) received the full 100 days employment and wages as promised by the Act. The average employment per household was 43 days in 2006-07 and 35 days in 2007-08, as revealed by the Ministry of Rural Development.
(2) Lack of proper project planning – NREGA specifically mentions the creation of durable productive assets, in the form of roads, improving rural infrastructure, drought-proofing, watershed development, water conservation etc. The survey found that the focus is on rural connectivity and wells. Other meaningful projects for rural transformation were conspicuous by their absence.
(3) Bureaucratic resistance to NREGA – CSO found that whereas Panchayati Raj Institutions leaders are keen to implement NREGA, secretaries and executives officers of gram panchayats were seen to be working overtime to convince these leaders of the “Perils” of getting entangled in NREGA. On account of the detailed procedures and rules under NREGA, an impression has been created that it is much more difficult to make money under NREGA. Given relatively few chances of corruption, it is better to go in for other programmes that are relatively less strict. In Rajnandgaon district, Chhattisgarh, according to NGOs Reports “Sarpanches fear that getting work done under NREGA is tantamount to going to jail and that the unemployment allowance will have to be given out of the sarpanch’s pocket”.
(4) Lack of transparency and absence of social audit – Although NREGA has provisions for transparency in the process of implementation, in actual practice, data on work done and payments made for various kinds of jobs is kept as a closely guarded secret. As a consequence, there is a mockery of social audit. Even some of the fake NGOs are prepared to verify social audit by charging a ridiculously low fee per panchayat. As a consequence, the most radical provisions of NREGA are violated with impunity.
(5) Inappropriate Rates of Payment – NREGA stipulates that projects shall not be implemented by employment of contractors, because contractors do not pay labour statuary minimum wage and get most of the work done by machines. Muster rolls are faked, labour is underpaid, bogus workers are shown as paid workers while actual work is done by machines. The schedule of rates is not observed in practice. Studies by NGOs reveal that employment guarantee assistants (EGAs) employed by panchayats themselves work as contractors. Besides this, in Chattisgarh, the Study of 50 percent of NREGA works supposed to be implemented by rural labourers and other staff are invariably found using machinery.
CAG report (2007) has brought out glaring deficiencies of NREGA in the following words:
“The main deficiency was the lack of adequate administrative and technical manpower at the block and gram panchayat level. The lack of manpower adversely affected the preparation of plans, scrutiny, approval, monitoring and measurement of works, and maintenance of stipulated records at the block and gram panchayat level. Besides affecting the implementation of the scheme and provision of employment, this has also impacted adversely on transparency, and made it difficult to verify the provision of the legal guarantee of 100 days of employment on demand. Planning was inadequate and delayed, which resulted in poor progress of works. Systems for financial management and tracking were deficient, with numerous instances of diversion/ misutilisation, and delay in transfer of state share. … Maintenance of records at the block and gram panchayat level was extremely poor, and the status of monitoring, evaluation and social audit was also not up to the mark.” (CAG (2007), Draft performance audit of implementation of NREGA, p. 95)
Besides these deficiencies which require remedial action, the NGOs also found in their studies, wherever social mobilization of rural workers was successful, public pressure led to improved implementation of the scheme, reduction in the use of contractors and machines, reduced corruption in bureaucracy and also resulted in better payment of minimum wages. Obviously, continuous mobilization of rural poor is a basic necessity for securing the intended benefits of NREGA.
A study by the Centre for Environment and Food Security (CEFS) about the progress of the programme in Orissa revealed that the Government had claimed that out of a budgetary provision of Rs. 890 crores for 2006-07, the state government was able to utilize Rs. 733 crores (i.e. 82.4). As a result 57 days of wage employment was provided during the year. Not a single household was denied wage employment in 19 NREGs districts. The government also claimed that 1.54 lakh families in the State completed 100 days of wage employ during 2006-07.
However, the research team of CEFS revealed the hollowness of these claims. Out of Rs. 733 crores spent under NREGS, more than Rs. 500 crores was unaccounted for, probably siphoned off and misappropriated by government officials. The research team also found that not a single family in the 100 sample villages was able to secure 100 days of wage employment. Very few families got 20-40 days, the rest mostly between 5-20 days, if at all. Fake job cards and fabricated muster rolls exaggerated the benefits of the scheme. The social audit was non-existent. Thus, the ground reality was highly distressing despite tall claims of the government of the success about NREGS implementation.
At the same time, it also necessary to take the following measures to strengthen the support structure of the NREGA.
(i) Appointing full-time professionals for implementing NREGA at all levels which is vitally necessary to implement the scheme.
(ii) Provision of full-time employment guarantee assistants at the panchayat level to make rural people aware of the benefits of the scheme and induce them to take advantage of the scheme.
(iii) Specific efforts should be made to reduce the time gap between work done and payment received by rural lobourers in NREGA.
(iv) To use Management Information System (MIS) and improve the system of monitoring of the scheme as also to check leakages and misappropriation of funds.
(v) To undertake a massive programme of generating awareness about the scheme with the help of information technology.
(vi) To revise the schedule of rates periodically so that changes in statutory minimum rates of wages are made consistent with their revision.
(vii) To prepare a shelf of projects at the district levels with the help of programme officers and other technical staff as well as Panchayati Raj Institution leaders so that projects cleared at the district level can be implemented at the grassroots level.
(viii) To make a study of various states with a view to learning from their experience of implementing NREGA and thus develop a spirit of competition among the states to take advantage of the scheme.
(ix) NREGA payments should be made through post-office accounts. Andhra Pradesh Government has made use of this method. The state had 6 lakh accounts till 2005. By 2008, the number of accounts jumped to 70 lakhs and authorities are being forced to strengthen the postal infrastructure so that it can handle the new responsibilities. This can also limit to a large extent fake muster rolls and corruption in the scheme.
(x) NREGA is a comprehensive employment programme. This implies that other employment generation programmes should be merged with it so that the alternative of shifting to another attractive programme from the point of view of misappropriating funds is closed. This will also help to rationalise various employment generation programmes.
The report card of the UPA government towards the implementation of NREGA reveals that as against the budgetary provision of Rs. 10,800 crores for 2007-08, the actual utilization was of the order of Rs. 4,196 crores i.e. only 39 percent of budgetary provision. This is really a sad commentary on the implementation of a flagship programme of the UPA government.
There is no denying the fact that NREGA is conceptually a very important national programme initiated at the level of the Central Government, but its record of implementation reveals that there are widespread complaints of corruption and pilferage of funds and very low level of utilization of budgeted provision. It has not succeeded in creating sufficient productive assets for strengthening rural infrastructure. It has, therefore, failed to impact on the poor rural households and if deterioration is not checked, the programme will lose the enthusiasm and momentum generated for the programme in 2006, describing it as a revolutionary project to impact on the life of the poor.
(Posted by Vidyanand Acharya)

India Moving towards Debt Trap

INDIA’S EXTERNAL DEBT FOR THE QUARTER ENDED DECEMBER 2007
India is gradually moving towards the debt trap as its external debt has increased up to eight lakh crores at the end of December 2007. The import is overshadowing export in each quarte of financial year. India's external debt outstanding at the end of December 2007 was US$ 201.4 billion (Rs.794,017 crore), reflecting a rise of US$ 10.3 billion over the quarter. As compared to the level of US$ 169.7 billion at end-March 2007, India’s external debt at end-December 2007 increased by US$ 31.8 billion. Valuation change, due to the depreciation of US dollar vis-a-vis major international currencies and Indian Rupees, accounted for US$ 1.1 billion of the increase during the quarter and US$ 6.0 billion during April-December 2007. The increase in external debt was mainly brought about by commercial borrowing and short-term debt. Based on original maturity, long-term debt accounted for 82.6 per cent and short-term debt comprised 17.4 per cent. Long-term debt rose by US$ 6.3 billion to US$ 166.2 billion and short-term debt by US$ 4 billion to US$ 35.2 billion over the quarter. Amongst the components of long-term debt, commercial borrowing increased by US$ 4.9 billion (9.4 per cent) to US$ 57 billion. While NRI deposits declined by 1.5 per cent (US$ 0.6 billion) to US$ 43 billion, multilateral debt, bilateral debt and export credit increased marginally to reach US$ 37.9 billion, US$ 17.3 billion and US$ 8.9 billion, respectively, at end-December 2007. Rupee debt continued to remain around the level of US$ 2 billion. Under short-term debt, while trade related credits rose by around US$ 4 billion, FII debt investment in Government papers rose by US$ 262 million over the quarter. In the endeavour to improve the analytical content of the report, the external debt stock at end-December 2007 is provided in terms of residual maturity as well, for the first time in the quarterly debt data release. Based on residual maturity, long-term debt accounted for 64 per cent of total debt at end-December 2007. Short-term debt by residual maturity, consisting of principal repayments due during a one-year reference period under medium and long-term loans, and short-term debt with original maturity of one year or less, accounted for 36 per cent of the total external debt. The share of government debt in total external debt stood at 26.3 per cent (US$ 53 billion). Correspondingly, the share of non-Government (private) debt was 73.7 per cent (US$ 148.5 billion). At end-December 2007, India’s foreign exchange reserves which include foreign currency assets of the Reserve Bank of India, gold, SDRs and Reserve Tranche Position in the International Monetary Fund (IMF) stood at US$ 275.3 billion, providing a cover of 137 per cent to total external debt, while the foreign currency assets of the RBI at US$ 266.6 billion provided a cover of 132 per cent. The share of US dollar in India’s external debt portfolio has showed an increasing trend over the last few years. It further increased to 54.5 per cent at end-December 2007 from 52 per cent at end-March 2007. -Vidyanand Acharya

Budget 08-09: Aam Adami Ignored

BUDGET, FARMERS AND SOCIAL SECTOR
Ruddar Datt

Finance Minister Mr. P C Chidambaram presented his 2008-09 budget on 29th February 2008. The budget was hailed as ‘revolutionary’ by the Congress leaders, but ‘irresponsible’ by others who felt that the Finance Minister to satisfy a large section of the farmers has proposed a huge package of Rs. 60,000 crores of relief. So far as the marginal and small farmers (with holdings less than two hectares) are concerned, full waiver of outstanding loans has been promised, while for other farmers there will be one-time settlement (OTS) for all loans that were overdue on December 31, 2007. Under OTS, a rebate of 25 % will be given against payment of balance of 75 percent.
Many questions have been raised by the critics. Firstly, the loan waiver was used during Mr. V P Singh regime and it impacted on the culture of credit. The defaulters were rewarded and honest farmers who repaid their due installments were penalized. Moreover, the defaulters would be eligible for fresh loans after the waiver and they would continue to default and wait for a waiver package in future. Thus it creates a moral hazard since farmer-borrowers are likely to assume that the future outstanding loans will also be written off.
The Government had appointed a Committee headed by Mr. R. Radhakrishna to study the problem of agricultural indebtedness. This Committee, as Mr. Chidambaram himself admitted, did not recommend such a waiver. According to the Report of R. Radhakrishna Committee, 48% of the farmers surveyed were indebted. For more than 49% of the indebted farmers – with holdings up to 2 hectares, also the target of Chidambaram’s waiver – the sources of loans were non-institutional agencies. The package promised by Mr. Chidambaram will thus be available to a little more than half of the marginal and small farmers.
According to the National Sample Survey Organization 59th Report, 43 percent of the farmers obtained loans from non-institutional sources, mainly money lenders. 53 percent of the loans carried an interest rate of more than 15%. The more distressing fact is that 16 percent of the loans from non-institutional sources were burdened with an interest rate of 30 percent. Since the loan-waiver covers only institutional credit taken from commercial banks, rural regional banks and co-operatives, a big proportion of the most vulnerable group of farmers has been left out of the benefit of loan waiver. The Finance Minister intended to produce a dramatic effect for his political adventure of loan waiver in view of the impending general election, rather than take more enduring measures to remove the deep distress of farmers. It would have been far more prudent to take up the non-dramatic measures recommended by Radhakrishna panel.
Radhakrishna Committee had recommended “formalization of non-formal credit of farmers” who have taken loans from moneylenders. The banks could be used to provide one-time long term loans to farmers to enable them to repay their debt to moneylenders. This could be achieved by taking the help of Panchayati Raj institutions, NGOs and farmers organizations to negotiate settlement of loans by the moneylenders. Simultaneously, the committee had recommended the creation of Moneylenders Debt Redemption Fund with a corpus of Rs. 1,000 crores to begin with. But instead of providing more enduring relief to the most vulnerable section of the farmers, the Finance Minister, being in a hurry to produce a ‘magic effect’ opted for a blanket waiver for all loans from banks and co-operatives. Need it be mentioned that two lakh suicide deaths of farmers during the last decade were mainly due to the crushing burden of moneylenders loans on the farmers, according to the Study of Tata Institute of Social Sciences.
Secondly, the National Commission on Farmers had recommended that agricultural credit should be provided at 4% rate of interest. Nothing seems to have been done to move towards this goal so that the poor farmers could be helped on a longterm basis in reducing the burden of debt.
Thirdly, the Finance Minister did not make any distinction on the nature of land i.e. whether it is irrigated or dryland. States like Chattisgarh, Maharashtra, Madhya Pradesh and Rajasthan with 53% to 75% of the small and marginal farmers would be adversely affected. Such a distinction was made while fixing ceiling on agricultural holdings in the seventies. This legitimate distinction should have been made by the Finance Minister in view of social justice criterion.
Fourthly, there is a need to improve the minimum support price (MSP) for farmers. The Government is faced with the problem of stagnation of foodgrains production, especially that of wheat, during the last few years. Consequently, the government is forced to import 5 million tonnes of wheat at much higher international prices in comparison with the minimum support price to farmers. As a consequence, our food security is being threatened and a larger proportion of food subsidy will be consumed for food imports. It is, therefore, desirable that MSP for farmers should be raised keeping in view the rising costs of cultivation with an escalation of the prices of agricultural inputs – seeds and fertilizers.
Fifthly, a major cause of suicides, more especially in Vidharbha and other cotton producing regions was due to the very low prices of international cotton. The Government of USA is providing huge subsidies to its cotton producing farmers. As a result, international cotton prices are depressed. There is a strong need to protect Indian farmers against this unhealthy competition.
Last, but not the least, is the decline in public investment in agriculture after the introduction of economic reforms in 1991. Although it was expected that private sector investment would increase, yet it was observed that private sector investment was concentrated in diesel pumping sets, tractors, harvesters etc. which led to the mechanization of agriculture. Excessive use of diesel pumping sets resulted in a decline in water table, even in agriculturally better off state like Punjab which also reduced increase in foodgrains production. Public investment in irrigation and watershed development declined in the post-reform period. Consequently, gross capital formation in agriculture which was 2.45 percent of GDP in 1999-00 indicated a decline to 2.1 percent in 2002-03 and it further declined sharply to 1.61 percent in 2006-07. However, 58% of the population was dependent on agriculture for its livelihood in agriculture. There is a need to reverse this trend, more especially, in agriculturally backward states to improve the lot of farmers.
Although the Finance Minister announced a loan-waiver package of Rs. 60,000, he did not make any provision in the budget to compensate for the loss to the banks. There was speculation among the top bank executives that the Government may be issuing bonds so that the banks can writer off the loans and clean their balance sheets of the non-performing assets created by the defaulter farmers-borrowers. Business Line in its editorial dated March 5, 2008 clarifies the point: “what does this magical figure represent? The entire outstandings of the scheduled banks’ credit to the sector upto December 2007 or are the NPAs a fraction of that – Rs. 7,637 crores by March 2007. The Finance Minister’s figure is the total outstanding credit due to all the three entities – banks, co-operative banks and RRBs.”
But the Prime Minister clarified in the Parliament that the government will pay the lending institutions out of the expected increase in tax revenues over the budgeted provision. There is, therefore, uncertainty about the budgetary provision for loan waiver scheme even now.
From an analysis of the loan-waiver scheme, it follows that the scheme was politically motivated. That is why the opposition described the 2008-09 budget as an “election budget.” The government opted for a dramatic measure of debt relief for all marginal and small borrowers and partial relief for other farmer-borrowers. It was restricted to institutional borrowers and 43% of the non-institutional borrowers were left to shiver in cold. Keeping in view the vulnerability of non-institutional borrowers and the high rate of interest ranging from 15 to 30% charged by the moneylenders, they deserved to be bailed out first. Moreover, an illogical decision was taken to have a uniform cutt-off of less than 2 hectares of landhording, irrespective of the fact whether the holding was irrigated or unirrigated. This runs counter to the concept of social justice. No effort has been made to adopt the recommendation of Radhakrishna Panel to create Moneylenders Debt Redemption Fund and help farmers to come out of the clutches of the moneylenders. Neither did the Scheme emphasize reduction in rate of interest to a level of 4% as recommended by the Swaminathan Commission on National Farmers.
It would have been far better to adopt more enduring measures to improve the plight of farmers, but since the UPA Government seemed to be in a hurry, it presented a half-baked loan waiver scheme intended to have an electrifying effect on farmers. Whether it will be able to provide relief to 4 crore farmers by 30th June 2008 as targeted by the Finance Minister is also considered very doubtful, given the past record of our bureaucracy. The experience of loanwaivers in our country in 1990 underlined the lesson that such schemes are recipes for disaster, rather than becoming instruments in structural change in agriculture.
Social Sector in 2008-09 Budget
The Finance Minister in his budget speech mentioned: “The revenue deficit is estimated at Rs. 55,184 crore, which amounts to 1.0 percent of GDP…. However, because of the conscious shift in expenditure in favour of health, education and the social sector, we may need one more year to eliminate the revenue deficit. In my view, this is an entirely acceptable deferment” (Budget Speech 2008-09, p.22).

Since total expenditure of the budget has increased from Rs.6,80,521 crore in 2007-08 (BE) to Rs.7,50,884 crores in 2008-09 (BE), it implies 10.3% increase in overall expenditure. Total social sector expenditure in the budget has increased from Rs. 61,137 crore in 2007-08 (BE) to Rs. 72,093 crore (BE) – an increase by 17.9%. Due to the overall increase in expenditure by 10.3%, the social sector has been provided 7.6% more than the normal expected increase. In absolute terms, the budget increase in social sector expenditure for 2008-09 works out to be Rs.10,956 crore which is only 19.9% of total revenue deficit of Rs.55,184 crore. The Finance Minister has, therefore, over-estimated the impact of increase in social sector expenditure as the principal cause of revenue deficit. FM should, therefore, find other factors responsible for the remaining 80 percent increase in the revenue deficit.
As a proportion of total budget expenditure, social sector expenditure was 9.0% in 2007-08 (BE) and it has been increased to 9.6% in 2008-09 (BE). This is a very marginal shift in the proportion of social sector expenditure, which cannot be described as “conscious shift”.
However, it may be noted that while Rs. 61,137 crore were budgeted for social sector in 2007-08, the revised estimates now place it at Rs. 57,050 crore – Rs. 4,087 crore less than the budgeted expenditure. This implies that the utilization rate of social sector of the budget provision was 93.3 percent. Consequently, social sector expenditure (revised estimate) accounts for only 8% of total expenditure in 2007-08 (BE). The biggest slippage was in education in which the utilization rate was only 88.7%, followed by health & family welfare 94.8%. The upshot of this analysis is that providing large increases in two major items of social sector – education and health – should also be accompanied by improvements in the utilization rate, failing which the intended objective of higher allocations may not be achieved. It is necessary to improve the absorptive capacity with higher provisions under various heads.
Under-estimation of the Revenue and fiscal deficits
Unlike the Railway Budget (2008-09) which has made a provision for the escalation of expenditure as a consequence of Sixth pay Commission recommendations, the Central government budget has not made any provision for the purpose. However, it has been estimated that this may require Rs. 20,000 to 25,000 crores. Besides this, Rs. 20,000 crores to be paid to commercial banks and co-operative banks due to the loan waiver scheme in 2008-09 have not been provided. Taken together, there is a demand for Rs. 40,000 to 45,000 crores likely to arise due to both these expected expenditures.
Even if it is conceded that as a consequence of better tax compliance, an additional Rs. 15,000 crores becomes available, it still leaves a gap of Rs. 30,000 crores.
The Government is toying with the idea of raising it by marginal disinvestment of public sector enterprises, but due to strong opposition from left parties and trade unions, it may not succeed or achieve its target of generating Rs. 11,065 crores only partially.
Keeping these factors in mind, the inevitable conclusion is that there is an under-estimation of revenue deficit. The Finance Minister has already pleaded for post-ponement of FRBM target of attaining zero revenue deficit by one more year, i.e. instead of 2008-09 to 2009-10. The whole purpose of reducing revenue deficit to zero as per the FRBM target in 2008-09 was to obtain more resources for governments’ capital expenditure. (Fiscal deficit minus revenue deficit is the amount of borrowed money available for capital expenditure, mainly infrastructure) which is very necessary for promoting and sustaining high GDP economic growth.
To conclude, budget (2008-09) has mainly focussed on short-term gains and by a populist measure like the loan waiver, it aimed at reaping political dividend in the forthcoming general election. Obviously, politics has taken precedence over economics in the budget. Professor Shyamal Roy of IIM Banglore is right when he draws the following conclusion: “The 2008-09 budget thus runs the risk of being dubbed as a budget with a short term focus.” (Economic Times, March 4, 2008).
Note:
The Government has now realized the flaws in the Scheme and has been forced by its critics to modify it. The Finance Minister has submitted a proposal in the supplementary budget to provide Rs. 10,000 crores for the debt waiver scheme. The Government is also reconsidering the size of the holding in irrigated and dry areas and thus may cover holdings upto 4-6 hectares for the purpose in dry areas.

Yamuna Pollution : Who is Responsible

According to a study conducted by the Central Pollution Control Board (CPCB), the stretch of river Yamuna between Wazirabad and Okhla in Delhi is among the most polluted stretches of major rivers across the country. It has been reported that the volume of wastewater generated from Delhi accounts for about 79 per cent of the total wastewater generated from major towns located along the banks of river Yamuna. Due to large scale extraction of water from the river upstream of Wazirabad barrage at Delhi for various uses, the flow of river in Delhi stretch mainly comprises of the wastewater flow from the surrounding areas during the non-monsoon period. The groundwater quality monitored by CPCB at the selected locations of Delhi area indicates that at Prahladpur, the concentration of toxic metals exceeds the drinking water quality standards prescribed by the Bureau of Indian Standards (BIS) during the pre-monsoon period. However, the groundwater quality improves in the post monsoon period due to recharge. Government of India has launched Yamuna Action Plan (YAP) for the abatement of pollution in river Yamuna with the assistance of the Japan Bank for International Cooperation in a phased manner. YAP, Phase-I was launched in April, 1993, and declared closed in February, 2003. The second phase of YAP was commenced in December, 2004. The total approved cost of both the phases of Yamuna Action Plan is Rs.1339 crores and expenditure incurred so far under both the phases is 719.76 crores. In addition to the YAP, the Government of NCT of Delhi has also taken up large scale pollution abatement works for river Yamuna from its own resources. A total of 269 schemes have been implemented in 21 towns of the three States of Delhi, Uttar Pradesh and Haryana and 753.25 million litres per day of sewage treatment capacity has been created so far under both the phases of YAP. The works completed under YAP include interception and diversion of raw sewage, setting up of Sewage Treatment Plants, creation of low cost sanitation facilities, setting up of electric/improved wood crematoria and River Front Development. This information was given by the Minister of State for Environment and Forests Shri Namo Narain Meena, in a written reply to a question by Shri Ekanath K. Thakur in the Rajya Sabha today.

Vidyanand Acharya

Vital Stats
Legislative activity in Parliament
Parliament passes about 60 Bills every year. It devotes 20 - 25% of its time on legislative
business. The time spent on debating each Bill varies widely. In 2007, 30 - 40 % of Bills were
passed without significant debate. About one in every four Lok Sabha MPs and one in every
two Rajya Sabha MPs participated in some legislative debate in 2007.

Number of Bills passed by Parliament Emergency Election years Since 1952, Parliament has passed an average of 60 Bills every year.In recent years, legislative activity has dipped during
election years, as Parliament functions for fewer days. Between 2000 and 2006 (except the election year of 2004), on average, 65 Bills were passed every year. Parliament passed 46 Bills in 2007 as compared to 65 in 2006.
Percentage of total time spent on legislative debate Finance and Appropriation Bills are not included Lok Sabha is scheduled to work for 6 hours and Rajya Sabha is scheduled to work for 5 hours in a day.
In the last three years, Lok Sabha spent approximately 20% of its total time each year debating legislation other than financial business. During the same period Rajya Sabha spent an average of
25% of its total time debating legislation other than financial business.
Time spent in debating a Bill: Lok Sabha
Finance and Appropriation Bills are not included In 2007, Lok Sabha passed 41% of Bills (not including Financial Bills) with little or no discussion. In the last three years, the percentage of Bills passed with almost no discussion increased from 17% to 41%.
During the same period the number of Bills on which substantial debate (2 hrs +) took place reduced from 39% in 2005 to 24% in 2007.
Time spent in debating a Bill: Rajya Sabha
Finance and Appropriation Bills are not included In 2007, Rajya Sabha passed 32% of Bills (not including Financial Bills) with little or no discussion. The percentage of Bills passed with almost no discussion in Rajya Sabha increased from 26% in 2005 to 32% in 2007. During the same period the number of Bills on which substantial debate (2 hrs +) took place reduced from 29% in 2005 to 24% in 2007.

Posted by vidyanand acharya

courtsy- prs

Corrupt Rulers are scuttling the process of self-reliance of the country

Corrupt Rulers are scuttling the process of self-reliance of the country

Important Economic Events of the Year 2007 and Prospects for The Year 2008' was the topic of discussion conducted by Swadeshi Vichar Kendra in its continuing series of monthly group discussions. Discussion was held on 28th of Jan 2008, at its central office "Dharamkshetra" Sector-8 RK.Puram. Sh.R. Balashankar, editor of the Organiser, presided over and a large number of intellectuals, professionals and social activists participated in the enlightened exchange of views. Sh. Vidyanand Acharya, the editor of Swadeshi Patrika Hindi welcomed the participants and gave them a brief introduction of the monthly activity of Swadeshi Vichar Kendra.

Initiating the discussion, he said that the year 2007 has been a year full of economic activities. The year will be remembered for a long time to come because of the impact of several incidents that took place in 2007.He mentioned different reports that were published during the year amidst euphoric shouts of high growth rate. Vidyanad Acharya in particular referred to Arjun Sengupta report on unorganised sector and its conclusion that over 77% of Indian population was forced to live on an average income of below Rs. 20/- per day. This, he said, exposed the claims of poverty reduction propagated by the government. This vindicated the stand of people like proponents of Swadeshi that the economic policies followed were not helping the common man. Now every body including the PM Dr. Man Mohan Singh is talking about inclusive growth. Vidyanad Acharya also mentioned Singur and farmer suicides throughout the country in general and in Vidharba in particular.

Sh. Balashankar Ji took the discussion forward and underlined several issues of importance. Recalling some important media events now being held regularly in the country, Balashankar ji pointed out how political leadership across the spectrum was behaving in unison. Issues concerning common people never figure in these conclaves. He also mentioned the increasing gulf between the rich and poor. Criticising the neglect of infrastructure projects, Balashanker said that Gujarat has demonstrated how a simple road link to villages spurts the economic activity there.

Others who participated in the discussion is presented in brief hereunder along with some of their views.

Sh. Harsh Aggarwal: inclusive growth is imperative and GDP growth not a dependable measuring rod. Raw material based export policy and import of high cost capital goods not in the long-term interest of Indian Nuclear Deal a compulsion.

Sh. Shiva Ji Sarkar: Priorities of policy planners shocking. High cost projects like Delhi Metro preferred in spite of better alternatives available. Parallel Highway NH2 in UP pure loot of public money. Concept, cost and utility of the 1400 km NH2 questionable. Repairing and redeveloping GT Road would have been much better option. cost of the project revised to 40,000 crores from initially talked 30,000 crore, should by liberal estimates not exceed Rs. 10,000 crore @ standard cost of construction( Rs 5 crore/Km.)

Energy policy of the government faulty. No basic research in energy sector. No thought given to the crisis that will emerge after 2015. (Year when petrol products will peak). Large numbers of workers returning from gulf will be a huge task. A future looking proper energy policy needed.

Sh Pradeep Ji : New Metro projects developed in standard gage format where there is no experience in this country. Desirability of metro at a cost of Rs. 30 crore per metre needs a study.

Niloranjan: Indian economy being destroyed deliberately. A strong national agitation not visible. Integration of smaller protests a must.

. Ajay Bharti: communal angle introduced by the incumbent government into economy through Sachar Committer report, wheat imports policy and global warming will impact economy adversely

Dr. Devinder Sharma (renowned Agriculture and food security expert)

People including policy makers fail to understand economic terms like growth & GDP. China, accepting its mistake and is talking about reducing growth rate to about 7%. A higher growth rate means nothing to the country if it continues to widen gap between rich and the poor.

Agriculture policy of successive governments at centre, irrespective of the parties to which they belonged, has been to push farmers out of farming. It is exit policy for farmers. Decision makers and the ruling class believe only be 20% population should be dependent on farming to sustain the economy. Accordingly Agriculture patterns of west particularly the US, being imitated. 40 crore Indians that will be displaced from villages by the year 2015 because of these policies not discussed by rulers. This is going to be the largest displacement in history of mankind and will lead to uncontrolled social, Political and economic repercussions.

Districts under Naxal control went up to 200 from 161 at the time Prime Minister Dr. Man Mohan Singh took over. central government promising liberal help to states to tackle the naxal menace without addressing the basic issue responsible for the growth in Naxal problem.

Referring to the wheat imports, he added, that government was about to import paddy as well. 2008 will be the year when we will be dependent on wheat imports, he added further and critised the over all policy thrust of the government. Citing the example of oil seeds, the learned speaker explained that the government focus was to import oil seeds by bringing down the duty to 0%. It is help to the industry and not to the farmers who could have been encouraged to cultivate oil seeds within the country. Underlining yet another strange aspect of government policy, Devinder Ji said, argument forwarded in case of wheat import was to check the rising price in the interest of consumers, but fall of prices in sugar is being checked ignoring the very interests of the consumer". "It is simply the way to help industry at the cost of poor farmers and the Aam Aadmi in every situation".

Political class not in a position to provide solutions. Contract farming and future tradinghas not helped farmers in USA. Farmer's income in US down from 70% to 4% in a short span of time. The reduced income going to new breed of middlemen. Destruction of Indian Agriculture is being done in a panned manner and there is unanimity in the ruling class across the political spectrum on this count.

Dr. J.K Bajaj : A large number of people including several well-meaning friends think differently. They believe economy is going in right direction and it will take a little time to ensure that the change trickles down. Change taking place can't be denied.. Therefore a discussion with the people who think differently is needed

Reward System in the country has broke down. Present reward system dividing the country. core Jobs getting neglected. Huge disparity between wages of an MBA and a PhD scholar. Incentives needed to attract talent to basic sciences. Laws related to Agriculture have been weakened. Ruling class, it seems, has found a way to eliminate 40% population of the country that it believes are excess in number. India has 40% more people than needed has been belief of ruling elite since Independence

Sh. Ajay Ji (Precharak) : Rulers( both present and past) culprits of scuttling the process of self reliance and regeneration. self reliant and independent villages threat to corrupt governments. Gandhi's doctrine espoused in Hindu Swarajya rejected by congress led by Pt. Nehru on this premise.. Time to develop some models, one in every district to begin with, to show case the possible alternative path.

Sh. B.K. Keayla Ji,: people in government agree with you when you meet them, but they do nothing when it comes to action.. Conclusions of the discussions should be taken to the people in position who can deliver. Utility of WTO for USA decreasing. FTA route by that country being used increasingly. India finding it difficult to have F.T.A with countries like Sri Lanka. As these countries are already committed to USA. need to address the issue related to FTA and IPR as apriority.

Sh. Kashmiri Lal ji: There have been people who have delivered. Kinkari Devi a legend. Swami Viveka anda's vision and inspiration behind establishment of Tata's Indian Institute of Sciences. Need to make the conclusions of such discussion part of election manfestos of political parties. Continuos effort needed.

Vidyanand Acharya

Household Consumer Expenditure in India, 2005-06

“Household Consumer Expenditure in India, 2005-06”- Report No. 523 based on the data of 62^nd round survey of National Sample Survey Organisation (NSSO) in the Ministry of Statistics and Programme Implementation, Government of India, has been released. The field work of the survey was carried out during July 2005-June 2006. Data collected included commodity-specific information on 148 items of food, 13 items of fuel, 28 items of clothing, bedding and footwear, 18 items of educational and medical expenses, 52 items of durable goods, and about 85 other items. The present report contains the information on distribution of households and persons by 12 classes of household monthly per capita consumer expenditure (MPCE), average MPCE , composition of MPCE by item category (cereals, pulses, clothing, etc.), quantity and value of per capita consumption of different cereals, distributions of households or persons by other characteristics such as educational level, structure and area of dwelling unit, and energy sources used for cooking and lighting etc. The estimates are provided separately for rural and urban sectors at State level as well as for all-India. No separate estimate is provided for small States & UT’s due to small sample size, instead, in such cases the estimates have been provided for a group of States/ UT’s.

The survey covered the whole of the Indian Union except (i) Leh (Ladakh) and Kargil districts of Jammu & Kashmir, (ii) interior villages of Nagaland situated beyond 5 kilometres from the bus routes and (iii) villages in Andaman and Nicobar Islands which remain inaccessible throughout the year. The survey was spread over a randomly drawn sample of 39436 households spread over 4750 villages and 5120 urban blocks,

The earlier survey on the same subject was the NSS 61^st round quinquennial survey (2004-05) spread over 7999 villages and 4602 urban blocks covering 1,24,644 households (79,298 in rural areas and 45,346 in urban areas) and enumerating 6,09,736 persons. The main characteristics associated with household consumer expenditure are broadly comparable at the national level. However, at State/UT level comparison of the results of this round with the quinquennial round on some of the characteristics needs to be attempted with due caution.

Some of the important findings of the survey are given below:

· In 2005-06, nearly 19% of the Indian rural population belonged to households with monthly per capita consumption expenditure (MPCE) less than Rs.365, that is, spending less than Rs.12 per person per day on consumption, at 2005-06 prices.

· In urban India, 22% of the population belonged to households with monthly per capita expenditure less than Rs.580 (about Rs.19 per person per day).

· Average monthly per capita consumer expenditure (average MPCE) in 2005-06 was Rs.625 in rural India and Rs.1171 in urban India at 2005-06 prices.

· Out of every rupee spent in 2005-06 by the average rural Indian on consumption, 53 paise was spent on food. Of this, 17 paise was spent on cereals and cereal substitutes, 8 paise on milk and milk products, 6 paise on vegetables, 5 paise on sugar, salt and spices, and 4 paise on beverages, refreshments, processed food and purchased meals.

· Out of every rupee spent in 2005-06 by the average urban Indian on consumption, 40 paise was spent on food. Of this, 9 paise was spent on cereals and cereal substitutes, 7 paise on milk and milk products, 6 paise on beverages, refreshments and processed food, and 4 paise on vegetables.

· Value of average food consumption per person in urban areas was within the range Rs.451-Rs.500 per month in 7 out of 17 major States. In respect of rural food consumption, 13 major States belonged to the range Rs.251-400.

· Average quantity of cereals consumed per person per month in 2005-06 was 11.9 kg in rural areas and 9.8 kg in urban areas.

· About 19% of rural households lived in katcha structures (both roof and walls made of katcha materials). About 50% lived in pucca structures (both roof and walls made of pucca materials). The remaining 31% of rural households lived in semi-pucca structures, that is, structures of which either the roof or the walls (but not both) were made of pucca materials.

· In urban India, the percentage of households using LPG as the major fuel for cooking was in the range of 40-75% in all the major States. In rural India, 74% of households continued to depend on firewood and chips as their major cooking fuel. About 9% used dung cake and another 9% used LPG.

· About 56% of households in rural India used electricity for lighting while 42% used kerosene.

The average rural and urban MPCE for major States and All India is given in the Annex.

This report is also available in the website (www.mospi.gov.in) of Ministry of Statistics and Programme Implementation.

Annex

Average rural and urban MPCE in the major States and at All India level, 2005-06

State	Average MPCE (Rs.)
	Rural	Urban
(1)	(2)	(3)
Andhra Pradesh	704	1304
Assam	626	1352
Bihar	465	684
Chhattisgarh	429	1214
Gujarat	684	1105
Haryana	743	1156
Jharkhand	469	1093
Karnataka	573	1154
Kerala	1056	1566
Madhya Pradesh	487	982
Maharashtra	697	1342
Orissa	460	900
Punjab	1010	1520
Rajasthan	701	1004
Tamil Nadu	688	1171
Uttar Pradesh	570	908
West Bengal	583	1233
All India	625	1171