Friday, September 5, 2014

Why Japan and not the USA?

Is it prudent for India to be more FDI dependent on Japan than on the US?

Abusaleh Shariff and Amir Ullah Khan

The comparisons are unfair. One country is led by a nationalist Prime Minister who has been a steadfast friend and a source of personal inspiration. The other country is led by a President who has been adversarial and a reluctant ally. Abeeconomics and Modinomics are remarkably similar. Japan has been investing in infrastructure and manufacturing both sectors dear to the Prime Minister’s heart. And most importantly, while the US President might be wary of China, he is overtly friendly to India’s mighty neighbour. Japan on the other hand makes no bones about its animosity towards a country India competes with on all fronts, including on serious border disputes. No wonder PM Modi is off to Japan on his first trip outside the subcontinent for bilateral discussions, and is also now spending an extra day beyond the three originally scheduled.

On top of the agenda will be manufacturing. Modi has advised Indian Industry to promote brand ‘(made in) India’ across the globe by producing and exporting quality products. However the impact of this high level budge can be lacklustre. Quality of the goods and services of day-to-day use, for example, has improved reluctantly and slowly over the years, upon the opening up of the economy during mid 1980s and decisively after 1991.  Yet R & Dexpenditure is poor and often considered wasteful due to weak association with immediate cash flow. The level of competition in manufacturing sector is meek and has not matured yet. The Indian industry and manufacturing must improve design, durability and safety besides being visibly pleasing and environmentally friendly, to define ‘Brand India’.

The rules of free trade and openness are supreme in the interplay of international investments,and India has to set its priorities correct, lest those trapped in poverty suffer.  So far the dominant FDI destinations are in the services sector and real estate; which must be redirected to massive infrastructure creation, power generation, oil and gas extraction, refining, health care including pharmaceuticals and food production and processing. Indian industry therefore will have to focus its attention on these core areas, with the aim of developing quality products that are innovative, efficient and differentiated. The new business models needs scaling up and reaching out to sectors that will define growth in the future.

Why do we however sense some procrastination on part of the Indian Industry? There are two sides to this - the demand and the supply.  Exposure to the ‘goodies of the new world technology’ is new and consumer has limited knowledge of consumer choice and rights. On the supply side in spite of assured returns of over  30 per cent per annum, the Indian industry is not motivated enough to improve product quality. The answers to such anomalies lies in the structure of industry defined in terms of manufacturing methods, technology and market segmentation. The root cause of inertia in Indian industry can be traced to constraints to funding needed for technological up-gradation and increasing the size of firm itself given the expanded domestic demand.  

Such constraints are reflected in cost of developmental capital which is far high compared to international standards.   There is a growing need for investable funds in almost all spheres of manufacturing and services sectors. Need for capital investment is in all areas of infrastructure (road, rail, port, rivers etc), power generation, oil and gas, refining, food production and processing and many more.  Banks are unwilling to lend especially to stalled projects. In other words the FDI and FII needs are immense. What is in India’s interest is assured source of investment funds serviced at a competitive or mutually agreed upon long-term rates.

It is in this context that Japan becomes relevant as the source of cheap investment capital for India’s infrastructural and industrial development.  Japan is considered a source of long-term and low-cost finances. ‘Japan International Cooperation Agency (JICA)’ has 60 % stake in creating Delhi metro-network one of the largest in the world and most recent. About $2.7 billion with rates less than 2 % and 22 % of this loan has been on no interest payment at all as per the DMRC annual report 2011-12. 

The cumulative total FDI stock has been $ 326.5 billion averaging between 8 to 9 billion dollars per annum during recent years. However the most interesting analysis is regarding the source countries – the UK accounts for 10 %, Japan 8 % and USA 6%. But the irony is that36 % of FDI comes from one country which is hardly known for its status as a global investor– Mauritius. This followed by 12 % from Singapore and 3% of FDI coming from Cyprus makes the quality of funding suspect.  Such opaque dealings especially at the international level appear to push India into an uncertain world of development funding.   It is in this context that efforts must be made to strike transparent deals directly with major economies of the world such as the USA and Japan.

A word of caution is important here. Firstly, FDIs are not just funds from a foreign nation to India. The virtuous FDI comes with technology, production and inventory managements and exports. Japan as a source of FDI appears good as a source of funds but not as a destination of exports. This may be one of the reasons why major Japanese investments are in infrastructural development as these do not have export components.  The USA is the largest consumer market in the world with a 30% share. It will be in its long term interest that India strategically enhances its engagement with USA that not only provides cheap capital and ultra-modern technology but also is the largest consumer markets in the world.

Secondly, there are two real constraints - Japan is facing an uncertain economic future and a depressed consumer market; and on the other hand, the US is reluctant to invest in India. It is imperative that India identifies factors for US procrastination and overcomes them. One caveat though is to find how much of American investment is routed through Mauritius, Singapore and Cyprus. Why does this happen? What is the role of NRI investments from US and Europe in this puzzle? The European Union should also be on India’s priority list, though it is still in recession. There is a dire need for reverse FDI from India especially into Africa that shows a palpable increase in average incomes with a growing size of the consumer market. India must quickly make its presence felt in this continent and not lag behind China and USA.

Wednesday, September 3, 2014

How Pro-poor is BJP government?

The BJP fought the 16th general elections on ‘development agenda’, so it claims yet it was obvious that communalism and anti-Muslim rhetoric was the flipside to the landslide.  The electoral slogans postured the middleclass who were craving for more and faster development as if it can be reaped from standing rice fields.  Development has to happen first before its benefits are realised, and it is a tough and long process.  However, while the urban middleclass was enamoured with BJP’s overtures, the catalytic was the communal undertones expressed in cryptic double meaning statements, body language including colour codes, surrogate sibling overtures (of VHP, Bhajrangdal and other ilks), and engineered communal riots. Sociological and applied economic analysis have supported a trend that religious assertion and glorification of social identity increases as the income levels increase.

The UPA was seen by this influential electorate as more pro-poor and pro-minority.  It is another essay as to why the Indian middleclass postures are anti-poor and anti-minority. Suffice to stress that the newly elected government cannot take such a stand not only due to the compulsions of constitutional guarantees but also demands of the development strategy itself.  Given the history of deep and extensive poverty incidence in India, the BJP government must follow and improve the well laid out policies of poverty alleviation, religious and social inclusion.

BJP’s good luck was the segmented voting behaviour in India. BJP won 280 or 51% of MPs with only 31% of popular votes. In many respects this is the fallacy of India’s democratic system. Although now that BJP is at the helm of power along with ultra-fringe parties such as the Shiva Sena; it cannot absolve itself from addressing the issue of poverty and inclusiveness head on.

The electoral victory speeches, the annual budget presentation and the customary Independence Day speech of the Prime Minister all taken together do highlight the vision of the BJP government with respect to poverty and inclusion. The importance of having toilets near homes cannot be overemphasised, yet culturally its usage is easy said than done. Similarly providing bank accounts to all in rural and urban area is a noble idea to effect inclusiveness, but such accounts are intended to distribute funds not accumulate savings and turn it in to investments.

However, so far there is a lack of emphasis on provisioning of quality and affordable health care to the masses, improving quality of elementary education. Extending educational infrastructure to minority (Muslim) concentrated areas is absolutely essential to achieve the dream of universal literacy. Given the dominance of agriculture, aspects of land reforms and property rights are not even mentioned let alone make it a priority which is essential to augment investments in agricultural and improve productivity.  There has to be clear emphasis on mechanism to improve the MG-NREGA and implementation of the Food Security Act requires greater government attention than the development rhetoric.  Often the deep excluded geographic areas are even excluded in the review and evaluation exercises - most of the government initiated and controlled studies do not meet the methodological standards of the modern evaluation and assessments.

Shooting down the planning commission and replacing it with a committee of economist will centralize the power in to bureaucracy and it a signal towards non-participation of state in nation building. The Planning Commission was amenable to interacting with domestic researchers and ideas carried forward from multi-lateral institutions. The Bhagwatis and Panagariays of this world I am afraid are too trigger happy to shoot down the equity polices of India. It is time that the new government must review immediately the progress in the millennium development goals, human development and poverty alleviation. Further such review and assessment must be undertaken at the level of the district and states.

It is therefore, essential that the BJP government understand unique and intricate relationship between poverty alleviation, inclusiveness and development and ensure that the future social and economic transformation must happen through the process of education and cultural change. In this context two noteworthy situations that inevitably evolve needs to be highlighted. Sectoral (economic) imbalances favouring the modern technology and large manufacturing will receive a much needed boost. Yet what will happen is that millions of workforce trapped in low productive sectors such as farming, traditional artisanship, small business and manual labour would face an extraordinary risk, should the new government ignore their plight in its immediate policy formulation. Secondly, the fiscal pressure and also some ideological difference may promote frugality of social services and social subsidies. This will be an immediate threat to millions of the vulnerable and deprived communities who will face increase in hunger, deepening of poverty amongst selected social groups and geographic areas as well as continued health vulnerabilities.

As a long term strategy the BJP government must initiate immediate actions to ensure inclusive decision making at the local levels namely the panchayats and town-municipalities with nominations of the excluded groups such as the minorities. Envisioning an ‘equal opportunity policy’ and establishing an independent ‘Equal Opportunity Commission’ will go a long way in dispassionately addressing the issue of exclusion in India. 

Wednesday, June 11, 2014

Indian Elections and Social Transformation

Recently concluded general elections practically made the two major parties polarized so much to the extent that the BJP has casted itself in Hindutva in an iron mould; whereas the Indian National congress party literally was made a party of the Muslims. While this type of polarization at the level of the religion is not only detrimental to democracy but also the development of the nation.
The political leadership should have no role in promoting or even supporting a religious identity. It must be made clear that religion as is manifest in rituals and place of worship must be set aside from the high ideals that come out of the grand Indian ethos and culture. It is a fact that all citizens irrespective of the religious affiliation are part of Indian culture and ethos and it is not feasible and also not warranted to differentiate between them.

Muslim mind set, however, still in the realm of protecting themselves and their identity. Their vision that Indian is a democracy and that their presence and democratic participation must herald a comfortable and respectable aura to others is not yet fully articulated and understood.  It is hard to find a political leader at any level of governance, especially at the national scene who could present the positive side of the Muslim community and their contribution to the nation building during the recent past.

Many believe that the ten years of UPA rule failed in promoting and sustaining economic development of the nation. While India was until recently at the incipient stage of ‘development threshold’ and that it has been crossed over only recently; the exogenous external factors have impacted India’s economic development during 5-6 years. Yet it is a feat of a sort that India could maintain a 6-7 per cent annual growth average during the difficult period of global recovery.  What is relevant, however, is as to how such a growth has impacted the psyche of the electorate. 

Sociological and applied economic analysis has supported a trend that religious assertion and glorification of social identity increases as the income levels increase. This is neither good nor bad in itself. Households with money to spare do perform religious rituals as well self-assert themselves in the local environment. The cumulative effect of such social and economic interaction is a concoction for social segregation and competitive religious assertion. Yet a country as diverse and as large as India has to deal with this situation with great care so as to ensure a peaceful coexistence of people professing varied religions and multiple social classes as expressed in the Indian caste system. It is also hypothesised that this intricate relationship between household income and social assertion will change for better as economic transformation continues and sustains itself for a longer period of time. The relationship can be described as an inverted U shaped curve – that is the religious assertion which increases as income increase and reaches a peak and then declines before normalizing itself at a certain lower level. Essentially continued economic development will be the driving force for secularization of communities since not only will the competition for resources are subdued but also that the labour market gets harmonized based on the transformations of the skill sets that will evolve over time and some of them could become essential and therefore subject to no competition.

The unfortunate situation however is when politically and electorally the voters are charged in directions which polarize communities and then supported by the new found income growth the dominant view not only prevails but also damages the ethos of the Indian culture and society.  Let us recollect that it is the modern education, and associate technological and scientific skill sets which led to modernization and secularization of the developed world as we know today. During this process of transformation the religion got separated out from civic and public life and governance became independent of the religious influences.  On the other hand, it appears that in India, the electoral democracy in fact is pushing communities in the direction of religious confrontation and the mechanism of education and scientific temper can wield only limited impact thus leading to a situation of chaos and annihilation. This situation can snowball in geometric proportion at various lower levels of governance and electoral process such as the elections of the States, panchayats and municipalities, community participation in program implementation and civil society formations. 

It is therefore, the responsibility of the new government to understand this unique and intricate relationship and ensure that the future social and economic transformation must happen through the process of education and cultural change. In this context two noteworthy situations that inevitably evolve needs to be highlighted. Sectoral (economic) imbalances favouring the modern technology-based and large manufacturing will receive a much needed boost. Yet what may happen is that millions of workforce trapped in low productive sectors such as farming, traditional artisanship, small business and manual labour would face an extraordinary risk, should the new government ignore their plight in its immediate policy formulation. Secondly, the fiscal pressure and also some ideological difference may promote frugality of social services and social subsidies. This will be an immediate threat to millions of the vulnerable and deprived communities who will face increase in hunger, deepening of poverty amongst selected social groups and geographic areas as well as continued health vulnerabilities. After all the so called Gujarat model of development could not deal with such issues to the satisfaction of the electorate either.

Sunday, April 27, 2014

Policy Diplomacy: A Brush with Popular Political Leaders in India

Policy Diplomacy: A Brush with Popular Political Leaders in India

The Policy research framework steer academics to some rare circumstances and which can be described as opportunities. Besides being able to engage the policy makers in formal situations such as scheduled public lectures, inaugural and valedictory address, panel discussions and even book releases; a few experts such as this author do get to meet the top policy makers and select constitutional heads to meet in private. It is not uncommon to find that the academics and policy analysts get caught in the complex political push and pulls and that is risk they bear to hold their ground firm so to speak.

‘PM ne chai pe bulaya hai’, match this rhythmically with a popular song among the teenage girls ‘daddy ne chai pe bulaya hai’ – a daavatnama. Six in the evening of the publication of an OPED – (attached), this author was high on ‘tea’ with the UPA-PM at 7 Racecourse Road. Gripping conversation with a person of convection, ideologically inclusive, highly motivated, visionary and appreciative of what he read in the morning Times of India on October 10, 2004. This date is the origin of now popular Sachar Committee. Most important practical message of ‘this tea-party’ was that Muslim community must find-a-spot of their own in the local socio-political and economic space through mainstream involvement while government acts as a facilitator.  There were many more occasions since then to meet the PM in private, exchange views and policy approaches to favor development of Muslims in India.

This reputation also attracted the attention of the President and current Vice President of the Indian National Congress; had the privilege of privately meeting, briefing and making presentations on the issues of human development, poverty alleviation and inclusive development paradigm for India. Commendations must be made as to immense desire to know, understand and articulate policy responses to ensure physical security to India minorities especially the Muslims and Christians. An evidence can be found in organizing a draft a ‘targeted violence and bill’ by the ‘national advisory council’ (  &; and the author was on their advisory committee to deliberate, debate and articulate a policy framework during 2009-2011.  For an opposing view of this bill read: What is appreciated about these leaders is there strong desire to know, understand and take reasonable actions on policy advice. However, often such actions face failure due to larger socio-political opposition as well as deficit in ‘the number game’ that the Indian Parliament has become to be characteristic; almost as if in the United State of America – the razor thin margins. Note that the Indian Prime Minster does not a right to veto as is the case of the President of United States.

It was in 1999 that the author published a landmark monograph through the Oxford University Press. The relative positions in human development were brought to the knowledge of the people at large according to the socio-religious communities; with data at the level of India and all major state.  The human development profile of the Muslims for the first time in the history of India was compared with other religious and social groups and the finding were debated more at the level of the media.  The government was not enthusiastic but it did not hamper or tried to stop the publication of the book itself; although the research itself was conducted on behalf of the National Planning Commission.  It was during this period, the then NDA-PM would argue with the author that communities will develop only when women were educated and empowered. A bachelor PM believer in gender equality, although this position was divergent with the party and associated ideologies which he represented. It appears often individual beliefs and philosophical undertones matter in policy formulations, as is evident from both the above citations of the authors experience with the Prime Ministers. This NDA-PM indeed inaugurated many conferences including an international on Gender and Poverty which was organized by the author in 2004. During this period, on many occasions this author was invited for private by many cabinet ministers (including human resources ministry, home ministry, finance ministry), and the National Security Council of India.

It was early 2013 that the author delivered a lecture at Ahmedabad to a select group of Muslim business men organized by institutions promoting entrepreneurship, backward and forward market linkages: & This was also the time when a meeting was organized with the Chancellor of the ‘Gujarat Vidya Peeth’ an university established by Mahatma Gandhi himself at Ahmedabad. The author is familiar with Gujarat as he worked at Ahmedabad between 1988-1994.  It was during this visit and a result of the media coverage, a special request came -  ‘CM ne chai pe bulaya hai’.  As professional and policy expert especially in the context of Sachar Committee, it was a responsibility to positively respond and exchange ideas and advise the constitutionally backed-elected representative of a state.  It was in this meeting a discussion happened as to why the Muslim community would value education relatively less than other communities. There was no easy answer to this query; it is too complex – such as serious demand and supply issues, quality, type and language of education are too prominent and they are not easy to address especially in fast changing political ideologies at the grassroots level. An important dimension of social life that was agreed in this meeting, to be important was the need for participation of communities including the Muslims in the local panchayats and municipalities. This advise was appreciated and in the context of soon to be conducted panchayat elections in Gujarat.

The privately invited meeting with the current Chief Minister of Karnataka yielded a highly positive bureaucratic response; so was the case with the two erstwhile Chief Ministers of Andhra Pradesh who made commitments to increase annual budgets favoring the Muslims in grand public meetings organize at the Jubilee Hall. These commitments were indeed found to be put in action subsequently about which the communities in Hyderabad and other areas in the undivided Andhra Pradesh appreciated. The Andhra Pradesh and Karnataka political systems are favorable to the cause of Muslims and they are amply heralded through a number of policy actions including Acts of the State Assemblies.  The Chief Minister of Maharashtra for example expressed a special mention to send him my policy papers for closer scrutiny and assimilation. There have also been occasions when a State Chief Minister was at logger head abusing and accusing this author in public such as during television interviews, and that was before the last state elections in West Bengal although there is evidence to the fact a 10 % quota reservations was announced by him on an earlier occasion soon after a mass-public lecture of this author on the streets of Kolkata. 
Not the least, the brush with the most recent (Ex) Chief Minister of Delhi has been more on par as members of International Committees on finding alternative solutions to Indian’s high incidence of poverty and low levels of human development.  The National Planning Commission organized and United National Development Program supported committees on assessing impact of ‘direct cash transfers’ in India.  Often such events are debating-tables, including rhetorical and high emotions but then the data and analysis becomes handy to ensure unsubstantiated views are suppressed. It was on such occasions that author received concurrence support of this Ex CM of Delhi endorsing this author’s point-of-view and evidence. Such support structures are essential in policy circles and policy debates that do take place in a formal – structured environment.
  March 12, 2014
  Dr. Abusaleh Shariff, Ph.D
  Executive Director, US-India Policy Institute, Washington D. C.

Altruism, Philanthropy and Development:

Altruism, Philanthropy and Development:

Data needs for enhancing the poverty impact

Abusaleh Shariff, Ph. D
Executive Director and Chief Scholar,
US-India Policy Institute, 110 Maryland Av NE, Suite 508, Washington DC, 20002.

Key Note Presentation at the Opening Session of the Global Donor’s Forum – 2014:  ‘Celebrating Philanthropy in Emerging Economies’; held at Gaylord National Resorts and Convention Centre, Washington D. C.

April 14, 2014

Altruism with a purpose to build communities through production of public goods is a philanthropic idea leading to national development. Philanthropic spending puts additional pressure on the government to do the right thing. Philanthropy therefore must focus attention issues and sectors that matter to alleviate poverty and improve human security. Philanthropy must undertake successful pilots which are often not undertaken by the government systems; thus help in building expectations form the electorate.

Altruism – a virtue and a traditional value and Generosity is an obligation. Altruism with a purpose to build communities through production of public goods is a philanthropic idea leading to development.  While altruism may limit or favour kin or close community, philanthropy goes beyond borders and recognizes local problems around the world.

Philanthropy aims for lasting change as opposed to Charity which focuses on immediate relief, although there is certain degree of overlap. Philanthropic investments in social infrastructure promoting education such as through public libraries, computer education, legal education; health such as through maintaining water bodies, preventive care; diversity and human rights.

Wealth Creation in new hi-tech sectors is promoting new types of mega-philanthropy at earlier ages, creating large foundations. Yet major share of philanthropic funding may come from modestly rich people for example, a recent study has found that about 4.2 per cent of annual income is given in philanthropic donations amongst those with annual income of over $100,000/year. Better still; those with annual income of less than $100,000/year contribute much higher share of their income.

‘Never doubt that a small group of thoughtful committed citizens can change the world. In fact it is the only thing that has…’  Margaret Mead

Virtuous Coalition for Poverty Reduction
Government: Provisioning of public good, safety, security & human welfare
Business:    Investments for private good, focusing on material prosperity
Philanthropy: Private Initiatives for public good with a focus on quality of life

Case Study – Modern India:

Philanthropy is not new to India:

a.       Corporate philanthropy:  The Tatas    vs    The Birla is most discussed. Over 100 year journey. They are differentiated through the approach ‘Neighbourhood Development’ Vs. Construction of Mega Temples. Can we call it White Vs.  Black Philanthropy?
The mechanism of moving around large amounts often unaccounted for through religious (temple) trusts and religious endowments are most prevalent.

b.      In India, giving to the poor in general Vs. giving to poor kith and Kin

c.       The left hand should not know what the right hand gives – principle often generates humility but precludes evaluation and measurement of development impact.

d.      In the modern context the legal bottlenecks galore. The Foreign Contributions Regulation Act (FCNRA) emerged out of a fear against conversions, especially the rich missionary tempting the poor Adivasis kind of arguments.

e.       New age philanthropy: Azim  Premji’s focus on education; Rohini and Nandan focus on sanitation. Such philanthropies are amenable for measurements and evaluation and therefore transparent and generate durable impact. In India, in the health sector for example, philanthropic funding is less than 1 per cent of the total government spend. Other sectors attract little and there is lack of information and data. 

f.        Philanthropic spending puts additional pressure in the government to do the right thing. Philanthropy must focussed attention to the right issues and sectors, undertake successful pilots which are often not undertaken by the government systems; and help in building expectations form the electorate. The most recent examples are the way philanthropic funding forced government to recognize the existence of  HIV AIDS and enhance allocations for its containment. Another example is the contribution of philanthropic donates in eradication of Polio from the face of this earth.

g.       Philanthropic funding must therefore build successful pilots which can be scaled-up and replicated.
Data Needs for Evidence Based Policy Making:

Decentralized Approach will lead to better targeting, coverage and efficiency
      Community groups
      Sample household
      Civil society institutions

Ideology: promote economic value generation while being
  Pro poor
  Pro business
  Pro self-employed

Understanding Demography & Geography of markets. 
    Market segmentation; local, exclusive
    Global - all encompassing
    Modern methods, tools – IT enabled online, advertisement based and futuristic and youth
Organize occupation based production systems. 
Networking disparate entities to achieve a common goal useful to all - is one way to establish inroads to modern markets.  Can bargain investments, infrastructure, credit and assured returns to marketable goods and services. 

Turning donations
- in to jobs
- in to networking & 
- in to enrolment  & education
- woman  & child health
- into economic opportunity
- into Smiles ;)-

Collection of Information 
  * Data, records, talk to people, case studies
  * Newspaper reports 
Opinion making - debates, discussion groups 
Policy Influence - review, lay out future directions, negotiate policy directions
Review Budgets on time and even before budget presentations. Address the issue of 'where is the money'. Be a Watch Dog : consistent monitoring of policy performance. Galvanize community to be watchful. 

Friday, July 26, 2013

How Socially Inclusive is the Union Budget 2013-14

This article is jointly written with Jawed A. Khan of Centre for Budget and Governance Accountability (CBGA), New Delhi Immediately after the Independence, India committed to serve the disadvantaged sections through a development planning process. The policy-driven benefits envisaged earmarking funds and physical benefits in the Union and State Budgets. Backed by the Constitutional provisions, the Planning Commission during the 1970s formulated the Scheduled Caste Sub Plan (SCSP) and the Tribal Sub Plan (TSP) with the objective to channel Plan funds for these communities in accordance with their share in population which for all-India was 16% and 8% respectively (2001 Census). Other strategic designs and affirmative action policies to enhance the developmental impact to benefit the SCs and STs were also devised. This approach was a departure from the past when the government benefits flowing down to marginalized communities was only ‘incidental’ Twenty Seven ministries and departments earmarked Plan funds through exclusive budget heads (budget code 789 for SCSP, and budget code 796 for TSP) which were also identified in the ‘detailed demand for grants (DDGs). Area-oriented outlays to benefit SC/ST- dominated hamlets were also incorporated into the DDGs. All the allocation mechanisms were mandated to be non-divertible and non-lapsable by law. The union budget statements-21 and 21A accounts for total expenditures along with budgeted and revised estimates in favor of the SC and ST schemes managed by each department. The respective allocations in the union budget 2013-14 accounted for 9.7% and 5.8 % of total Plan funds. As a follow-up to the Sachar Report, first time in the 11th Plan, the Union government explicitly committed to address deprivation, inequality and exclusion of the Muslims and other minorities within the stated ‘faster and inclusive growth’ model. Since 2006-07 program focus was placed on ‘education and economic empowerment, access to public services, strengthening of minority institutions and area development programme’. Two exclusive Plan strategies favouring religious minorities were - the PM's new 15 point programme (15PP), and the Multi-Sectoral Development Programme (MSDP). The 15PP envisaged earmarking 15% of total allocations and achieving the physical targets under select flagship programmes for development of minorities. There were two other commitments; one by the ‘department of personal and training’ with a promise to ensure 15 % share in public employment; and ‘department of financial services’ with targets to disburse 15 % of the annual ‘priority sector lending’ (PSL) to favour minorities. The 15PP operational since the eighties were never seriously implemented and reviewed; yet the revamped 15PP in 2006 intended to focus the vital concerns of (a) education, (b) employment and skill development, (c) living conditions, and (d) security among minorities. The mechanism was by incorporating major concerns within the ambit of select flagship schemes. Currently, eleven Union ministries/departments claimed to be involved in implementing the 15PP, including Ministries of Rural Development, Urban Development, Housing and Urban Poverty Alleviation, Labour and Employment, Minority Affairs, Home, Finance, Women and Child Development, School Education and Literacy, Personal and Training. Selected schemes are Indira AwasYojana (IAY), Ajivika, National Rural Drinking Water Programme (NRDWP), Urban Infrastructure and Governance (UIG), Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT), Integrated Housing Slum Development Programme (IHSDP), Basic Services for Urban Poor (BSUP), SwarnaJayanti Gram (KGBV), Priority Sector Lending to Minorities, Integrated Child Development Services (ICDS), SwarozgarYojana (SJSRY), Industrial Training Institutes(ITIs), SarvaShiksha Abhiyan (SSA), Kasturba Gandhi Balika Vidyalaya, and Madrassa Modernisation Programme. The Centre for Budget and Governance Accountability (CBGA), an independent think tank, estimated that around 6 % of the 11th Plan allocations were accounted for the minorities and 70 % of allocation was spent through Jawaharlal Urban Renewal Mission (JNNURM). Yet a review of the extent of inclusion of Muslims in JNNURM, found no flows at the state and district levels. Thus such allocations made under this mission are notional; and actual expenditure and beneficiary data on minorities are not available. Further, the share of schemes and programs directly benefiting the minorities such as the MSDP, scholarship schemes, IAY, SGSY, ITIs and SJSRY have been allocated meager shares of the total outlays. Minorities’ involvement in the budgetary processes is a stated objective of 12th plan. Yet no separate budget statements or schemes for minorities are found in the mainstream ministries/departments; nor have ‘major and minor accounting heads’ been created to channel funds meant for minorities in the DDGs system. There is no mechanism to capture allocation for minorities by mainstream ministries at time of budget presentation except by the Ministry of Minority Affairs (MMA). The ministry of Human Resource Development (MHRD) provides details of allocation only on Madrasa Modernization Program. Even allocations for minorities under the ‘SSA’ are not made available by the MHRD. Only 0.23 % of total Union Budget 2013-14 has been earmarked for minorities, whereas they constitute about 19 % of population of the country (Census 2001). During 2012-13, the national level flow of PSL to minorities was reported to be 1, 71,960 crore, which was more than 15% of the total PSL. Yet there is a no mechanism for providing information on beneficiaries and purpose of lending. Similarly, percentage share of minorities in total government recruitment is accounted to be 11.5 % in 2010-11, again unsubstantiated – a non-transparent disclosure. Both these data are not further disaggregated by the minority identities, and therefore not possible to know as to whether the representation of Muslims in the PSL and recruitment has improved over time. Sachar report highlighted huge gap of representation of Muslims in government and public sector employment and also very low credit flow. It is therefore essential that the government make the recruitment and PSA data public and with proper definitions and accounting system for a fair public audit. The ‘People’s Budget Initiatives’, a civil society budget group requested the Ministry of Finance twice to bring out a budget statement on programs and schemes on the line of the SCSP and TSP; but for no avail. Whatever expenditure with respect to benefits/entitlements for minorities/Muslims which is reported now is based on retrospective calculations, often superficial, could be labeled as guestimates undertaken without planning and need identification. Additionally, Ministry of Minority Affairs itself remained unconvinced that the data reported by several ministries on 15PP are reliable. The minority oriented policy initiatives will not yield results and show measurable impact unless there is a commitment on the part of the Union Government expressed in the form of ‘separate budget statements’ on minority related programs; as is now a common practice in case of women, children, SCs and STs and environment (for expenditure reporting). Such a reporting should also reflect through a ‘dedicated heads of accounts’ meant for minorities/Muslims in the DDGs for mainstream ministries. The funds meant for minorities need to be made non-divertible and non-lapsable as well.

Sunday, December 30, 2012

Multi-Brand FDI! Should we celebrate?

The world is cautious after a recovery, albeit meek, from the global gloom of economic meltdown of 2008-9 and its reappearance during 2011-12 rivaling only the depression of the 1930’s. Some recovery has occurred by resilient growth in China and India and large bailout and economic restructuring packages offered by the US and European economies. While China has pushed down Japan to take second place next only to the US, India has also found a place in the top ten or trillion dollar economies and poised to take 5th position much before 2030. India indeed has come a long way to create a niche for itself in the global economic space. The world foresee a demographic advantage that India can harness, given young age structure and a fast and consistent pace of income growth in GDP which is propelling shifts in consumption classes generating huge domestic demand for practically all types of modern goods and services. The markets for such products in the west are close to saturation and at the most meager. The investors world over, look into India as the power house to manufacture and export goods and services through cost effective contracts. There is also an expectation that India during the next 20-30 years will continue to provide trained manpower to the firms and business in the western world due to its relatively higher fertility levels and larger young age population. Recently, the National Government in India has made it easy for the international corporates to invest in multi-brand retail. The policy has secured assent of the parliament, yet still remains controversial and many taking opposing positions and agitating. One of the main concerns is that FDI will push small traders out of business and hurt domestic markets, therefore the policy is exclusionary. Given traditional division of labor, specified communities are involved in unorganized small business and trade, therefore, the policy is also accused to be discriminatory. Structural Issues: To understand the inclusive development strategy, especially mainstreaming of the excluded and marginalized, one must understand the development frame of India in the modern context. The paradigm of economic and social development in India has evolved from out of the socialistic pattern, to the one, of openness and private-public partnership. This transformation is an ideological reversal took shape since mid-1980s and more specifically from 1991, and thereafter Indian economy has seen formidable levels of growth, nearing 10% annual, which is nothing but magical. Ideologically socialistic performance of the government soon after the Independence ensured that private corporate and other vested interest could not appropriate national resources such that the masses could have been adversely affected. Although the trigger happy economic evangelists did abuse the older economic system, what should be recognized at the time of the Independence, fresh with the influence of Gandhian thought and preaching, there could not have been any other choice to socialistic thought, which promoted a sense of equality although the private ownership was suppressed. Government’s control over resources did accord a sense of safety and that they are not overexploited or looted. The Nehurivian concerns therefore during the first few decades after Independence appear not only relevant but necessary. At a philosophical plain such a social and economic ideological frame provided an illusionary feeling of inclusiveness, and the minorities and marginalized believed that newly formulated democratic structure would protects their social identity and economic interests. The safeguards and special provisions enshrined in the Indian Constitution added further to a psychological equilibrium that the excluded such the SCs/STs and minorities intended to achieve soon after the trauma and turbulence that preceded and succeeded the Independence. During this phase of governance and development, marginalized groups had little knowledge as to the relative position they occupied in the complex web of diversity amongst the population which was explicit in terms of the caste, ethnicity and religion in India. During the early period after the Independence, the overall governance and bureaucratic structure was heavily represented by highly educated upper caste Hindus and the welfare schemes and poverty alleviation programs were in the league of pilot projects or at the most in the genre of relief programs. It is now a recorded history, however, that socialistic pattern of economic policy did not facilitate fast pace of economic growth rather it was characteristic of rigid state control and bureaucratic overbearing. A reminiscence, of the process of development in India during the eighties, invokes a considerable amount of satisfaction that India indeed has gone through a transformation from the highhanded license raj to opening up towards promoting private initiatives to exploit resources, in a way at the right time, although such a change was forced upon due to the technocratic and purely fiscal prudence. The recognition and promotion of the private initiative in development as a policy response to fast growth has been commendable. The current state of mixed economy with a clear bent over to the privatization of resources and sectors of the economy is a game changing process. It is, therefore, timely and essential to find out what kind of inclusive space has been carried forward or what new opportunities have become available to the marginalized and those in the periphery of the social and economic domain in the present ‘new-deal Indian economic policies? It is necessary to ponder upon as whether lopsided development and growth can occur; should the government continue to absolve the role of the ‘trustee’ of the national and natural resources, while the private sector engulfed with the forces of free economy and competition (often export lead) penetrates to such economic domains that were thus far insulated from exploitation, mostly due to lack of demand and also due to lack of investments which governments could not bring. Therefore, the economic processes which are private but in principle endorsed by the public systems, also claim to be ‘inclusive’ can damage the very fabric of nationhood and nation building. The economy and markets must therefore operate and indeed promote the concepts of nationhood and national integration, while making profits by exploiting local natural and human resources and adding value to the GDP. The caste system and religious discrimination are dominant of the causes for communities with specified identities to be poor and continue to remain poor even after 65 years of the Independence and democratically guided governance. In a pluralistic and diverse society that India is, it is important, therefore, to find out as to how different groups of people such as those identified based on caste, ethnic origin (tribes), religion, occupation, place of residence (rural- urban), remote, hilly and forested areas and so on are able to overcome deprivation. Important also is to know as what role the social system and culture has either to promote or inhibit communities overcome inequality and what proactive initiatives are needed from the government systems. Another issue which has relevance to equity emanates from regional differentials. Thus the communities which are excluded from the mainstream are found concentrated in states and regions which are less developed. There is a sort of double whammy faced by deprived groups and further the depth of deprivation and exploitation emerges from other factors such as occupational and work related exploitation, child labor and gender bias. Therefore to understand mechanism to address deprivations amongst the SCs/ STs and Muslims it is essential to lay bare all such dimensions which are a type of whirlpool or a sort of trap from which those affected have to be rescued and rehabilitated not only on the basis of empathy but with the aim of empowering whole communities so that they make their rightful claim of equal citizens of India. The social backwardness has the inbuilt disadvantage inhibiting access to equal opportunities. Socially backward groups face problems in access to natural resources as well as the resources created by the public at large. Since the senior positions of administration are dominated by the upper caste, those in the lower levels of the caste ladder have serious educational and skill-set dis-advantage. It is important note, that equity, equality, inclusion and mainstreaming is possible only when there is a pie to share and that the size of the pie keeps on increasing to meet the growing demand. Demographic Dividends: Notwithstanding the above narrated background of the Indian societal and economic spheres, it would now be appropriate to ponder over the role of international ‘foreign direct investment’ (FDI) in multi-brand retail in India. Key question is as how such investment will affect the lives and livelihood of the marginalized. India is an expanding consumer market, bound to expand for many more decades during the 21st century. The hallmark of the Indian growth story is an extraordinary increase in domestic demand, the demand created by millions of consumers making billions of small purchases per annum, however, small or trivial the purchases are, they adds up huge amounts and quantities. Such demand creates huge supply constraints. India is facing a kind of puzzle, where even a small increase in income pushes up demand of practically all sorts and types of goods and services one can imagine. While this happens, if there is no concomitant increase is supply of the good and services, the economy can enter into a trap of price inflationary spiral which India has never experienced so far. Remember the 1980 Latin America where inflation reached 50% or more per annum. The key to sustaining growth in a fast growing economy, therefore, is increasing investments across the board – infrastructure, agriculture, industry, trade, including retail and so on. Financial investments are also needed for technological up-gradation which is essential to increase the efficiency of investments for mass production of quality goods and services at costs which are affordable. Remember the mobile revolution of the last about one half decade. This is the result of a prudent mix of investment and state of the art technology. Today, it is far cheaper and affordable to use mobile phone services in India, than for example, in the USA and Europe. The IT enabled technological revolutions in India was made possible by FDI and associated technology. Multi-brand International FDI: One of the major causes for low income growth amongst the Indian poor is because over 85 of the labor force is unorganized and self-employed in highly divers sectors of the economy. Such a labor force can be helped only when there are consistent efforts on the part of the governments to provide organized production, supply and marketing opportunities across the country. India already has a number of domestic organized retail chains and shops. Why and how then, an international company harms our markets and trade - can someone explain? In the following is a series of benefits which will emerge from organized retail irrespective of whether such trade is funded by domestic Indian rupees or international dollars and yens. 1. Game changer - promotes transparent consumer marketing practices. 2. Helps small producers, entrepreneurs and even farmers to organize and integrate into lager organized market system. 3. Bulk purchase helps small traders and retailers higher profits. 4. Eliminate irresponsible and exploitative middle man – who is neither a producer not a trader just a middle man, largely responsible for jacking up prices. 5. Create organized sector jobs. 6. Good and better paid front desk and floor level jobs. 7. Better quality jobs at the level of the sourcing of products. 8. Outsourcing of products and sub-contracting will create a new type of employment. 9. Help create an entirely new set of skill development. 10. Reduce transaction costs in product and goods trade. 11. Improve product quality and standards. 12. Promotes consistency in quality. 13. Certainty in availability of required goods both to the small trader and individual consumer. 14. Pre-measured package improves accuracy in weights and measures. 15. Increase the shelf-life of many products, much of it through the use of climate control technology. 16. Reduction in wastage at the place of sourcing and during transportation. 17. Reduces at home wastage due to better selection and sorting of products and goods. 18. Reduce the unit cost of practically all goods, products and services. 19. Promotes ‘return back’ policy, at the moment unknown in India. 20. Promote easy payment and advance purchase systems in trading. 21. State-of-the-art technology will become common in India. 22. Shopping becomes an experience for the whole family, promote happy family. 23. Increases consumer satisfaction. 24. Improves consumer information. 25. Reduces unnecessary and unhealthy road side advertisements. Note that this is not the end of the list. Unless India adopts global standards and adapts the global business and marketing strategies, there is a danger of losing out from a race in which it is already in. Indian economy is now vibrant enough such that both the modern and traditional economic schemes not only co-exists but thrive. The government however, must put in place a relief and rehabilitation program for those who would get adversely affected due to multi-brand modern markets. Another policy option is to provide financial incentives for businesses who promote sourcing local products, conceptualize new lines of products and services to meet the local tastes and preferences and enhance local employment. The demographic dividends are expected out of labor supply potential that India has over other emerging economics of the world. However, it is also important to note that India’s population will also generates domestic demand in such a way that a substantial labor and skill pool is required to sustain domestic markets thus thrusting a considerable pressure on the global demand for labor either through fewer leaving India for other greener pastures; or though increase in exports of manufactured goods and services. The structure of global competitive economy is such that India was the seventh largest in terms of volume of output at the time of its Independence; but in spite of the apparent high growth trajectory it is nowhere closer to that ranking presently. However, at the beginning of the 21st century the world is taking India seriously, mostly due to the imminent demographic advantage that this country is demonstrating to the world. India has many puzzles and dualisms: for example the debates over ‘India’ versus ‘Bharat’ or the urban rural divide; the unorganized versus organized workforce; continuance of abject poverty and hunger when the growth rates are best in the world; and issues revolving around social and income poverty.

Sunday, July 15, 2012

Forthcoming Event

Regional Dynamics, Economic Growth and Welfare Two day conference scheduled on 15th and 16th September 2012, Mt. Abu, Rajasthan Center for Research and Debates in Development Policy (CRDDP) and the US-India Policy Institute, Washington DC are jointly organizing a conference on “Regional Dynamics, Economic Growth and Welfare in India during the First Decade of 21st Century” at Mt Abu, Rajasthan, India on 15th and 16th September, 2012. Recent Indian Economic Growth story (notwithstanding more recent economic troubles) can be understood only if one disentangle the diversity of its economy in terms of sectoral growth and competitive environment within which India’s large states perform in terms of economic production, distribution, trade and welfare programs. The emphasis of this conference will be to highlight inter-state issues from Utter Pradesh, Bihar, West Bengal with relatively progressive states of Andhra Pradesh, Maharashtra and Gujarat. It would be ideal if pairs of states are compared such as ‘Uttar Pradesh and Maharashtra’, ‘Bihar and Gujarat’ and so on. There will be two main sessions in this conference: Session I, will have one invited paper – ‘Inter-State and Inter-Regional Markets and Poverty Profiles’; and four contributed paper presentations. Session II, will focus on ‘Economic and Social development in Bihar and Gujarat: Role of social movements and economic philosophy in a comparative perspective’. There will be one invited and four contributed papers in this session as well. Expert participants will be invited to make scheduled interventions during the sessions and there will be ample time to discuss and debate all the presentations and emerging issues. Those interested can send a 300 word summary/abstract containing the focus of the paper, hypothesis, data and methods and expected findings by 27th July 2012 and register with Mr. B. L. Joshi at Accepted participants will be provided with local hospitality at Mt. Abu, Rajasthan India.