Tuesday, December 30, 2008

Minutes of the Book Release Ceremony: ‘Ganga ke Mayke Mein’ (Ganges Amidst Her Own Family) and ‘Ganga Ki Bhrun Hatya’ (Killing The Foetus of Ganges)

Although the book release ceremony of the above mentioned books (mimeos) was a low profile affair, there is need to mention that the presence of the author Vimal Bhai (from Matu Sanghathan, Uttaranchal), Himanshu Upadhayay (my friend during my days in Jawaharlal Nehru University), and several others who were unknown to me previously, brought some warmth during the dull, wintry afternoon of 28, December 2008. First of all, one must know that 'matu' means soil (or mitti). The event took place in Room No. 311, Indian Social Institute (I.S.I.), Lodhi Road, New Delhi. Since I was the first person to have reached the venue before time, so I needed to catch a glimpse of the movie Raab ne Banaa di Jodi, which was being shown in another auditorium of I.S.I., simply to pass time.

There were various issues discussed during the book release ceremony, such as Ganga Action Plan (GAP), dumping of industrial wastages in Ganga, the pros and cons of constructing big dams and barrages et al. The importance of community participation in cleaning up and management of river Ganga was emphasized upon. The decision to declare Ganga as a national river was criticized since that would lead to a top down approach towards solving the problems related to the river. It was said that other rivers should be treated equally like Ganga. The discussion revealed that there are many tributaries of Ganga, which originate from several different glaciers. The problem of melting down of glaciers due to excessive presence of green house gases (GHGs) in the atmosphere and climate change too was discussed. The discussants wanted to know more about the basin approach and Central Government’s policy towards various rivers of India including Ganga. It was found that very often environmentalism is wrongly considered to be associated with right-wing politics. It was discussed that apart from the modern way of solving the problem associated with Ganga, there can be local, traditional and religious ways to understand and taking actions pertaining to the rivers. There are many seers in India who have taken voluntary actions in order to clean up rivers and oppose construction of dams, and tunnels in the name of Western type of development. However, it is increasingly becoming difficult to get support from the local people since there have been a change in their attitude and life-style. Local people nowadays want to lead the same kind of life as their urban counterparts. Although there is a role of religion in environmentalism, this should not become fundamentalist in nature so that it unfairly affect other minority religions. The people from the minority communities have often been blamed in the past as if they have degraded the Ganga. The controversies pertaining to Setu Samudram too was raised. The importance of minor irrigation, rain-water harvesting and watershed management was emphasized upon. It was mentioned that problems related to rivers are political, economic, technological and environmental in nature. The Central and State Pollution Control Boards were blamed for not taking actions against those industries, which are involved in polluting several rivers. It was found by the discussants that Central and State Pollution Control Boards are highly incompetent and corrupt authorities, and their roles in controlling pollution have reduced over the course of time. At the end, it was decided that there is a need for a broader forum and a strong team in promoting ecological movements. Finally, I would like to thank my friend Himanshu who informed me about this meet. His name has appeared in a recently released report titled ‘Mountains of Concrete: Dam Building in the Himalayas’ (NGO: International Rivers) by ex-IITian Shripad Dharmadhikary.

Friday, December 26, 2008

Review of Literature on Food and Nutrition Security

“Maximum City does not simply tell us a set of stories that we might or might not belief. Rather, it shows how cities are constructed not only through bricks and mortar, glass and steel, asphalt and concrete, but also through stories. Our plans and blueprints are stories. Our plans and blue prints are stories that we find convincing; our histories are stories we collectively believe to be true. There is of course, a politics to this storytelling that has been critical to all forms of scholarship within the social sciences: which stories are hegemonic? Which stories becomes history? Which stories becomes authoritative knowledge? But Mehta takes us a few steps further. Precisely because his stories defy the distinction between fiction and reality, he is able to show how the modern, capitalist city is constructed through fictions: the fictions of stock market speculations; the fictions of the Bollywood movie industry; the fictions of the big city that draws the desperate migrant; the fictions of the squatters hoping for the legislation of their settlements; the fictions of Hindu fundamentalists as they seek to create a homeland. These fictions are like Baudrillard’s simulera—copies, fakes, and exaggerations that cannot be judged against any authentic or original reality”.

--------Book Review on Building Blocks for a Methodology for Comparative Urban Political Research—Bas Deuters and Karen Mossberger in Urban Affairs Review, Vol. 41, No. 4, March 2006 on Suketu Mehta’s Book Maximum City: Bombay Lost and Found (New York: Vintage, 2005), pp. 560.

Article 47 of the Constitution of India states that “the State shall regard raising the level of nutrition and standard of living of its people and improvement in public health among its primary duties”. Successive Five-Year Plans laid down the policies and strategies for achieving these goals [Tenth Five Year Plan, 2002-2007]. Food security in the past referred to the overall regional, national or even global food supply and shortfalls in supply compared to requirements, but with increased observation of disparities in the sufficiency of food intake by certain groups, despite overall adequacy of supply the term has been applied more recently mostly at a local, household, or individual level and has been broadened beyond notions of food supply to include element of access, vulnerability and sustainability. There are two things which are essential for food security, production/import of foodgrain (i.e. physical availability) and household-level purchase of foodgrains (i.e. economic accessibility). Since household is the logical social unit, the question of access to food should be seen at the household level. Similarly, one should keep in mind that household food security should be considered a necessary but not sufficient condition for food adequate nutrition. Stated in a different way, food security at the household or even individual level is an “input” not an “outcome”—hence the distinction between food security and nutrition security. From the entitlement perspective, one can say that the problem of food security does not lie entirely on per capita availability of food, but also on the economic access to food or what is termed as entitlement.

The entitlement of a person stands for the set of different alternative commodity bundles that the person can acquire through the use of the various legal channels of acquirement open to someone in his position. In a private ownership market economy, the entitlement set of a person is determined by his original bundle of ownership (what is called endowment) and the various alternative bundles he can acquire starting respectively from each initial endowment, through the use of trade and production (what is called his exchange entitlement mapping). A narrow interpretation of ‘entitlement thesis’ would suggest that given the ‘endowments’ a household could access food from any place. In other words, entitlement could be equated to accessibility. Hence household’s economic access to food is directly related to income and indirectly related to the labour supply (initial endowment) or the employment status of the earning members. Speaking on the availability of foodgrain, one can say that in the case of India, the households can rely either on the public distribution system (PDS) or the open market. PDS in India has undergone major changes in the year 1992 (in the form of Revamped Public Distribution System) and in 1997 (in the form of Targeted Public Distribution System), thus converting the universal system into a targeted one. Some of the factors behind the reforms have been the weaker sides of the universal PDS such as: urban bias of the PDS, limited accessibility of the PDS by the poor, regional disparity in the PDS, inefficiencies of the PDS (in terms of mounting food subsidy) and leakages from the PDS.

In a number of developing countries, the IMF (International Monetary Fund) and the World Bank, have recommended cuts in government subsidies, including food subsidies, as part of a structural adjustment package. Under the Structural Adjustment Policy (SAP), the Government of India hoped for a phased withdrawal of the subsidies by targeting the PDS that would control the inflation. However, there are problems associated with the targeted PDS and other related arrangements such as the Antodaya and the Annapurna schemes. Identification of the poor household which comes below the official poverty line is a major problem of the TPDS. There have been reports of excluding the households which comes below the official poverty line and including those households which comes above the official poverty line, while issuing the TPDS ration cards. Cornia and Stewart (1993) attempt to measure the costs of switching from a universal system of food distribution to a targeted system. Universal schemes are associated with Type-I or E-mistakes, that is, mistakes arising from the inclusion of non-poor in the scheme while targeted schemes are associated with Type-II or F-mistakes, that is, errors arising from omission of the poor. Rise in net per capita availability of food grain at the national level do not ensure food security at the household level. But still there is a necessity to become self-sufficient in food production. There are limits to increasing production through area expansion as the country has almost reached a plateau in so far as cultivable land is concerned. Hence the emphasis has to be on productivity increase. Overall growth rate of foodgrains decelerated to 1.80% per annum during the decade of 1990s from 3.54% during the 1980s. This is a matter of concern taking into account the growth rate of population. There is a growing consensus among economists and social scientists to widen the connotation of food security by including the concept of nutritional security at the household level. Calorie based definition of food security has to be replaced by nutrition based definition of food security at the household level. Without an assurance of nutritional adequacy food security has very little meaning.

The rationing system was first introduced in 1939 as a wartime measure to combat inflation in food grain prices arising out of shortages, in Bombay. This was later extended to six other cities and a few regions due to the shock of Bengal famine of 1943. The famine of 1943 led to the appointment of first Foodgrains Policy Committee, which recommended procurement of foodgrains from surplus areas, rationing for equitable distribution and statutory price control for checking the price rise. The Department of Food under the Government of India was created in 1942, which helped in food matters getting the serious attention of the government. However, before Independence the rationing system was confined to the urban areas. After Independence, Foodgrains Procurement Commission of 1950 besides making other recommendations suggested the rationing in all the towns with a population of more than fifty thousand, with informal rationing in other towns and some regulated supply of grains in rural areas. The Foodgrain Inquiry Committee of 1957 suggested maintenance of food buffer stocks and amongst other measures recommended setting up of a foodgrains stabilization organization to undertake purchase and sale operations of foodgrains. In order to tackle mass discontent on account of food scarcity, the government entered into the PL-480 agreement with the USA for the import of 31 lakh tonnes of rice in April 1956. Imports under PL-480 became a regular feature for a long period that did not help the government to build up sufficient buffer stock. India’s concern for food security led the policy makers to adopt measures for food availability—both physical and economic. For increasing the physical availability of foodgrain, India had to resort for the adoption of new technology. India adopted the high yielding varieties programmes during the mid-sixties. The government introduced an intensive development programme in 7 districts selected from 7 states in 1960 and this programme was named Intensive Area Development Programme. This programme was later extended to the remaining states by selecting one district from each state for intensive development. In October 1965, the net was extended and 114 districts out of 325 were selected for intensive development and the programme was labeled as Intensive Agricultural Areas Programme. In the face of skyrocketing food prices from the early 1960s the Congress government started a system of public procurement and distribution of foodgrains from 1965 aka Public Distribution System (PDS), and at the same time it pushed the HYV fertilizer technology in irrigated areas. The main agency providing foodgrains to the PDS is the Food Corporation of India (FCI) set up in 1965. The essential commodities supplied through the PDS are rice, wheat, sugar, edible oils, kerosene and coal (soft coke). A small quantity of coarse cereals and cloth is also distributed in some states. The objectives of PDS have changed from time to time. During the period 1945-1970s the main objective of PDS was to protect the urban consumer, ensure food availability through rationing in major urban centres, and thereby, to prevent speculation and undue rise in prices. From the 1970s onwards, the objectives have become rather ambiguous. One of the suggestions, which have come, owing to the inefficiency of the PDS, is to go for food stamps programme. The suggestion is to dismantle the PDS and FCI and move to a system of well-targeted food stamps whereby the beneficiaries pay a part of their purchases from the market in terms of these stamps. Thus the food stamps are redeemable for the purchases of foodgrains and other essential commodities at unsubsidized prices. Such a strategy has the advantages of higher food consumption effects and lower administrative and budgetary cost of operations. Since 1991, food subsidies in India have come under attack from the policy-makers. Arguments have been given to reduce food subsidies to control inflation. In the context of structural adjustment, suggestions have been made for altering the public food delivery. Most of the suggestions relate to methods of including or methods of excluding certain number of persons from the system of public distribution (Swaminathan, 1996). The Structural Adjustment Programme (SAP) induced the government to restructure the PDS by targeting specific areas with special reference to ‘the population living in the most difficult areas of the country, such as, drought prone areas, desert areas, tribal areas, certain designated hilly areas and urban slum areas’ The major objectives of the Revamped Public Distribution System (RPDS), introduced by the government in 1992, were: (i) to increase coverage of the population in the target areas; (ii) to improve the access of income poor consumers to the PDS; (iii) to increase the range of commodities supplied by FPSs, and (iv) to provide selected commodities at prices lower than in the general PDS. Adopting an approach, what could be termed as, help for all the people living in poor areas, the government shortlisted 1752 blocks under the RPDS to improve the food availability situation in these backward areas. The offtake of both rice and wheat has increased steadily from 1992-93 to 1996-97 under the RPDS. The offtake of cereals under RPDS aggregated to 3.5 million tonnes during 1993, 3.6 million tonnes during 1994 and 4.1 million tonnes in 1995, but it was considerably lower than the assessed requirement of about 8 million tonnes for these areas. The TPDS was introduced in June 1997 in an attempt to limit the mounting cost of subsidy, and at the same time, ensuring that the BPL population does get subsidized food grains. Under this system subsidized foodgrains are provided only to people to below the poverty line. There are arguments in favour of universalism and against targeting. First, there is the argument for universal entitlements on the basis that all individuals have certain basic rights. In a poor country, majority of people lack these basic rights. Secondly, targeting in itself involves private and social costs and these costs may be high. The most obvious costs are the costs of administration, and cost due to loss of quality. Social costs arise when targeting excludes the needy (what is commonly referred to as a Type-II error and termed ‘informational distortions’ by Sen). Targeting may also lead to ‘incentive distortions’ whereby people alter their behaviour in response to targeting, leading to losses in social output. Social costs can also be attached to the invasiveness of targeting (as the identification procedure can involve probing and policing people’s lives). In short, the costs of targeting can be sizeable and may outweigh the fiscal gains to be obtained from targeting.

Anthropometric indices (height, weight and BMI) are widely used for the assessment of the adequacy of energy intake. Body weights and heights of children reflect their nutritional and growth status; weights and heights of adults represent the cumulative effect of dietary intake over a long period. The BMI is the most widely used anthropometric index for the assessment of the nutritional status in adults as it reflects the effect of both acute and chronic energy deficiencies/excess. BMI, however, does not clearly bring out the entire extent of chronic under-nutrition. For instance those who are stunted and have low body weight may have a normal BMI. An increase in energy intake will result in improvement in BMI both in adults and in children, but in adults and children with severe stunting, improvement in dietary intake will not result in an improvement in height. Continued over-consumption of energy especially in stunted individuals could lead to over-nutrition, obesity and increased risk of non-communicable diseases. BMI has been used to assess energy deficiency as well as energy excess. The currently used norms (<18.5—undernutrition>25 overweight) were evolved on the basis of data from the developed countries where adverse health consequences of under-nutrition have been shown to be associated with BMI values below 18.5 and the health hazards of over-nutrition have been reported with BMI of over 25. Household food security and nutritional status are not the same things. This is because nutritional status depends not only on household level food security but also on gender norms and access to health care etc. Micronutrient deficiency—especially deficiencies in iron, iodine and vitamin-A—are even more widespread worldwide than that of protein-energy malnutrition. Besides being important causes of disability in themselves, micronutrient deficiencies often underlie other types of morbidity. Iron deficiency is the most common cause of anaemia worldwide. The consequences of iron deficiency are more serious for women. Iodine deficiency disorder (IDDs) occur when iodine intakes are less than physiological requirements (about 150 micrograms daily per person) over a long period. In India about 200 million people are estimated to be at risk of IDD. Vitamin-A deficiency (VAD) occurs when body stores are depleted to the extent that physiological functions are impaired. Depletion occurs when the diet contains over a long time too little vitamin-A. to replace the amount used by tissues or for breast-feeding. The South-East Asia Region of WHO (including India) has the highest prevalence of Vitamin-A deficiency, as well as the largest number of people affected.

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Image has been taken from:

Monday, December 22, 2008

Minutes of the lecture delivered by Prof. Joseph Stiglitz at the seminar titled ‘Crises Today and the Future of Capitalism’

The seminar titled ‘Crises Today and the Future of Capitalism’ was organized by Institute of Social Science (ISS), Planning Commission (Government of India) and Swiss Agency for Development and Co-operation (SADC). The seminar was held on 20, December 2008 at Mavlankar Hall, Rafi Marg (near Planning Commission). The discussion started on a remark on the 9/11 event by George Matthew from ISS. He pointed out the problem with the Lehman Brothers case in the backdrop of the current recession being faced by the United States (U.S.). He informed the audience that Prof. Stiglitz’s areas of research were on screening and asymmetric information. The importance of State cannot be ruled out according to Stiglitz, he said. He also informed that Prof. Stiglitz worked on how coercive institutions of the State can be constrained.

The first point that Prof. Stiglitz mentioned was that the world is facing depression. The problem is similar to the crisis that happened in the 1930s. He informed that what started in the United States (U.S.) has spread worldwide. He asked what is the nature, the consequences and the responses to the present economic crises. He emphasized upon the required reforms to tackle these kinds of crises. He said that the Central Banks are too much worried to curb inflation at the cost of growth and fiscal expansion. He asked for the need of better monetary policies. The crisis is similar to the Great Depression in the era of 1930s, he informed. 75 years back the banking system was relatively easier. Today, the banks are more into complex financial and business relations. The banks are more into gambling like buying derivatives, which is risky, Prof Stiglitz said. He emphasized upon the point that financial system is a means to an end for a steady and sustainable economy. The financial system should look at raising gross domestic product (GDP) and productivity. The banks in the U.S. did not mobilize savings. Instead, they created risks. There was a contradiction between private investments and social returns. The CEOs and management of these banks have walked out with the money that belonged to the society. The Central Bank took the credit of low inflation. There was no attention on the asset market. There existed loose monetary policy. It was the housing bubble that led to consumption boom. The savings rate in the US has gone down to zero. There is short sightedness in the policies pursued by the U.S. In the early 1990s, banks in the U.S. used to engage in securitization. There was under-estimation of the problem of price decline. Students of Stiglitz often forgot to understand the warnings that he delivered. The U.S. has sold many toxic mortgages to Europe in the past, Prof. Stiglitz informed. Diversifications of asset do not help in the time of recession. There is a notion that has cropped up, which is called self-regulation. But this thing would not work in the present scenario. The credit rating agencies need to be criticized. There is a need to understand the present macroeconomic problem. One has to understand the bubbles created by the U.S. economy in the past. The U.S. is facing both social and economic tragedy, according to Prof. Joseph Stiglitz. People do not have money to educate their children. But why bubbles?—asked Stiglitz. The reason: the Central Bank thinks there should be lesser regulations for achieving more economic growth. The U.S. in the past faced consumption led boom. The tax-cut for the rich Americans is a bad decision by Alan Greenspan. There is need to give tax-cut to the poor. President George Bush (junior) made a mistake to go for the Iraq war, according to Prof. Stiglitz. There was a price associated with war, he informed. In the decade of 1970s, there was a depression. The import bills of the U.S. used to be high due to high value of petroleum and petro-products. Latin America used to survive just by borrowing during those days. However, in the 1980s L. America faced poverty, recession and unemployment. In the present scenario one should mention that the problem started in August, 2007. The problem related to bail-outs should not be ruled out, he said. Almost 50 million Americans do not have health insurance. There was a Bill to ensure them health insurance. But it was due to President Bush the initiative never materialized because he vetoed the Bill. Recovery of the banking system is necessary but not sufficient. The U.S. is going to face national debt, Prof. Stiglitz informed. Fiscal responsibility in itself is not enough. He also talked about the case of Freddie Mac. He informed that initially AIG said that it owns a debt of US$ 20 billion but later it increased the amount to US$ 80 billion in order to get debt relief from the U.S. government. It is quite important that the money given for debt relief is spent well. In fact, the United Kingdom wanted such kind of regulation but it was the U.S. which opposed a mechanism for monitoring the spending of the money given as debt relief. Prof. Stiglitz informed that the trickle down policy is not working at all. It is good news that Obama has been elected as President. Obama has promised creation of 2.5 million jobs. But there is need for creating 8.0 million jobs because due to recession unemployment has increased. The banks have gambled enough. They have not kept their balance sheets well. If the US$ 700 billion is used to create new accountable institutions rather than supporting old, corrupt institutions, then that would have been good. The present crises would change the entire debate on sustaining capitalism. The World Bank and the IMF need to look at the problem in a different way. Probably, the Congress men have been bribed in the recent case of bail-outs, he alleged. There is need for regulations in the derivative market. The U.S. has privatized profits at the cost of social losses, which is against the basic theory of capitalism. In the Economics classes, much is lectured on 19th century capitalism, rather than on 20th and 21st capitalism. Many Central Bankers were using excessively simpler models. The entire economics profession has failed. Today, everybody claims to be a Keynesian. But there are various kinds of Keynesians. Globalisation has failed because of pursuing failed economic ideology. The Washington Consensus has failed. People have not understood market failures. Money is leaving developing nations to the U.S., where the crisis is taking place. Globalisation is managed in an asymmetric way. India and China need not feel shy. The United Nation has some level of legitimacy. So, it has to be brought into the picture. The problem has to be solved at the global level. There is insufficiency in global effective/ aggregate demand. Many countries have learnt from the problem that happened in 1997. Money has gone to the people who do not have needs. There is need for regulatory arbitrage. The offshore secret banks need to be exposed. There are companies who evade taxes. The kind of lending, which the U.S. is giving is not fair. Corporations in the developing countries should have access to credit. There is need to address the governance problem. Capital outflows are taking place from the developing countries to the U.S. Not only global equity but also global stability is required. The fall of the Berlin wall indicates the end of Communism. There was problem with the Communist system. September 15, 2008 can be regarded as the defining moment of market fundamentalism. The invisible hand is invisible because it is not there at all. There is a need to make globalization work for all.

Mr. Somnath Chatterjee, Speaker, Parliament of India, thanked Prof. Stiglitz and said that the pitfalls of globalization need to be understood. He said that public sector banks in India are relatively more insulated from the current global crises. He said that there are needs for more regulations. He asked for more transparency and accountability in governance. He added that India pursued mixed economic planning in its early days after Independence in order to avoid the pitfalls of extreme communism and extreme free market.

Finally, Mr. A.N. Roy from ISS thanked the panel.

Wednesday, December 17, 2008

SME scenario in India

The small-scale industrial (SSI) sector accounts for 95% of industrial units in India. The sector accounts for 39-40% of value-addition in the manufacturing sector. Not only that, SSIs account for more than 30.0 percent of total exports from India. SSIs also account for 6-7% of Gross Domestic Product (GDP). More than 190 lakh persons have been employed by the SSIs. The sector produces roughly around 7500 items. Information technology (IT) is perceived to play a crucial role in transforming not only big but also small-and-medium enterprises (SMEs). Enabling policies on the part of government in order to provide incentives to SMEs for usage of IT is quite essential. It is expected that the National Manufacturing Competitive Council (NMCC), Limited Liability Partnership Bill, Micro, Small and Medium Enterprises (MSME) Bill and OP Bhatt and SP Gupta Committee Reports, are geared towards strengthening the SME sector. Some argue that instead of protection being given to the SMEs, the government should help the SMEs by providing them opportunities to access technology and capital. But how far the SMEs can succeed at the global level when there is cut-throat competition is a moot question in the backdrop of trade liberalization, particularly after the creation of World Trade Organisation in 1995. The proposed Limited Liability Partnership Bill brings in the much required capital infusion, which does not spoil the texture of the SMEs and is designed to have the best elements of corporates with the flexibility of partnerships. The Limited Liability Partnership Bill is expected to provide the right framework and the vehicle in order to encourage investment in innovations. During October, 2008 the Limited Liability Partnership Bill was introduced in the Upper House of the Indian Parliament. The provisions relating to no limit on number of partners, one partner’s liability not affecting another and the easy walk out are considered to be highly enabling and encourage entry of professional management into the SME sector. The three business segments likely to benefit most from this Bill include professionals such as accounting and law firms, small businesses--both proprietary and partnership firms, and the knowledge and innovation industry, which is dependent on this legislation. One must add here that during the recent times, it is the knowledge process outsourcing (KPO) industry, which has gained edge against business process outsourcing (BPO) industry.

Important organisations associated with small-scale industry are: Small Industries Development Organisation (SIDO), Small Scale Industries Board (SSIB), National Small Industries Corporation Ltd. (NSIC), Confederation of Indian Industry (CII), Federation of Indian Chamber of Commerce and Industry (FICCI), PHD Chamber of Commerce and Industry (PHDCCI), Associated Chamber of Commerce and Industry of India (ASSOCHAM), Federation of Indian Exporters Organisation (FIEO), World Association for Small and Medium Enterprises (WASME), Federation of Associations of Small Industries of India (FASII), Consortium of Women Entrepreneurs of India (CWEI), Laghu Udyog Bharti (LUB), Indian Council of Small Industries (ICSI), Indian Institute of Entrepreneurship (IIE), National Institute of Small-Industry Extension Training (NISIET), National Backward Caste Finance Development Corporation (NIESBD), National Institute for Entrepreneurship and Small Business Development (NIESBUD), Small Entrepreneurs Promotion and Training Institute (SEPTI), Small Industries Development Bank of India (SIDBI) etc.

It is perceived that registration of companies (those which come in the SSI and SME sector) becomes essential in order to raise capital via the stock market. IT or Internet-enabled environment helps in fast and accurate decision-making by the SMEs due to increased mobility. The critical components before SMEs are speed of services, access to information, empowering employees in terms of skill and delivering highest valued services at competitive cost. SMEs need IT-based solutions in terms of multi-tasking, expanding customer base, raising productivity, controlling cost, working remotely, fast and accurate decision-making and facilitating collaboration. SMEs have various needs in order to function in an aggregative manner to reach out for value addition by keeping in mind the variable cost model. IT usage by the SMEs raises productivity of the sector in particular and the economy in general. Product leadership, operational excellence and customer relationship, which SMEs look at while using IT-based solutions is essential. SMEs have to be good decision-makers, planners and strategy-makers regarding the type of technology, which they are adopting. There is the need for best manufacturing practices in the SME sector. Innovation, design development and validation by the SMEs in the face of globalisation and rapid technological advancement, to stay afloat during competition are the essentials. There is also the need for investment in infrastructure i.e. roads, ports and power, and effective fiscal interventions by the government so as to promote SMEs. Instead of IT use being limited to accounting or some in-house activities, there is the need to use IT to look at inventories and capacity utilization. TQM, TPM, 6 sigma, ISO et al are essential for effective standardization of the SMEs. The framework has to move beyond built-to-print to art-to-part, where ERP (enterprise resource planning) has a possible role. SMEs instead of adapting to proprietary software like Microsoft Office can rely upon free and open source software (FOSS) like Open Office, Linux Red Hat et al for cost reduction. It has been found ERP software such as NAVISON can reduce operational cost drastically. Other web-enabled ERP vendors are BaaN and IFS. ERP is considered as an integrated system, which allows information to enter at a single point in the process and update a single, shared database for all functions that directly or indirectly depend on this information. ERP solutions cover human resource, corporate finance, production planning and control, materials management, quality management, plant maintenance, services management, quality management, plant maintenance, services management, and sales and distribution. Accounting softwares like Tally helps in financial management of an organization. Integrated Transactional Information Systems such as Radix, MakeESS, Octopus-E, Tech Solutions etc. can also help the SMEs. SCM (Supply Chain Management) software help in raising productivity and efficiency of inventory controls. KM (Knowledge Management) systems help to organize and share the knowledge of its employees. CRM (Customer Relationship Management) is considered to integrate people and technology to maximize external relationships. The emphasis should be not only on cost efficiency and quality, but also on speed and innovation. However, SMEs need to invest in clean and efficient technologies. The role of SME cluster formation cannot be ignored at all but it is essential to take into consideration issues like environment impact assessment (EIA), displacement of local people, dispute settlement between management and labour etc. Re-utilization of industrial wastage by the SMEs becomes an important strategy to overcome environmental degradation.

Local small-and-medium enterprises (SMEs) are essential because they can help alleviate poverty by increasing income levels and creating jobs. SMEs are expected to be labour-intensive compared to the big businesses. Governments in developing nations should thus promote the growth of SMEs in order to avoid monopolistic and oligopolistic markets with the right kind of policies and regulatory frameworks. Since the global economy becomes increasingly reliant on information communication technologies (ICTs) in order to receive, process, and send out information, SMEs in developing countries are expected to go for ICTs. It is said that SMEs face competition from global giants due to which they ask for protection, and technological and financial support from the State. SMEs in the developing nations should integrate into the global supply chain, bid for outsourcing businesses, and increase their own productivity. In the course of time, however, their reliance on the informal sector of the economy for fetching raw material and informal goods should not become exploitative in nature. SMEs have great potential to drive economic growth, so governments should remove constraints and create an enabling environment. In the backdrop of global financial crisis, the Reserve Bank of India has taken several steps in order to promote economic growth and avoid recession, which include easy credit facilities and appropriate credit pricing for SMEs. It has cut cash reserve ratio (CRR), and short-term lending and borrowing rates in the recent past so as to infuse liquidity in the financial market despite the problems of food and fuel price inflation.

Wednesday, November 12, 2008

A Brief Note on Delhi

The National Sample Survey Organisation (NSSO) in the Ministry of Statistics and Programme Implementation, Government of India has released the report of a nationwide survey carried out by it during July 2002-December 2002 on the condition of urban slums. For the purpose of the survey, a slum was defined as a compact settlement with a collection of poorly built tenements, mostly of temporary nature, crowded together usually with inadequate sanitary and drinking water facilities in unhygienic conditions. Such an area was considered as non-notified slum if at least 20 households lived in that area. Area notified as slums by the respective municipalities, corporations, local bodies or development authorities were treated as ‘notified slums’. In India, slum areas have been defined under Section 3 of the Slum Areas (Improvement and Clearance) Act, 1956, as areas which are for reasons of poor quality of housing, sanitation and absence or near-absence of other infrastructural facilities, are deemed ‘unfit for human habitation’. However, there is little consensus on the exact number of people living in slums or slum-like conditions. Depending on the criteria one uses, the estimates of slum population in Delhi can vary anywhere between 20 to 40 per cent of the city’s population. There are different categories of slums according to the opinions of government officials and experts[1]:

. Legally Notified Slum Areas: The notified areas are those which have declared/ notified as slum areas under Section-3A of the Slum Areas (Improvement and Clearance) Act 1956. Such slum areas are scattered all over Delhi. An estimated 20 lakh population is believed to be living in the areas which are legally notified as slums.

. Jhuggi-Jhompri Clusters (JJ Clusters): The rural migrant in Delhi who belong to lower income groups generally accept whatever accommodations are available, or can be quickly erected with waste materials or with those which can be procured on low costs on open spaces which are unusable or lying unused. According to a survey conducted in the year 1983 by the City Planning Wing, DDA (Delhi Development Authority), there were 534 JJ Clusters comprising of 1,13,386 households in the NCT (National Capital Territory) of Delhi. With the continuous flow of migrants on the one hand and lack of affordable housing particularly for the poor, the settlement in the form of JJ Clusters prior to 1970 remained within manageable limits and accordingly most of such households (43,000) were resettled. The post 1970 migration trend speeded up along with a massive increase in JJ Clusters in Delhi.

. Unauthorised Colonies and Harijan Bastis: The emergence of the unauthorized colonies is the result of shortage of houses and house plots in properly planned and approved residential colonies. There are about 1000 unauthorised colonies in Delhi at present. Besides there are113 harijan bastis in Delhi i.e. slums meant for the lower-caste people.

. Urban Villages: The urban villages in Delhi have been de-notified vide Notification No. LB 2106/2 dated 28-08-1985. These villages experienced slums like environment due to fast growth of population. At present there are about 135 urban villages in Delhi. A plan scheme to improve the civil services in these urban villages was started in 1979-80. Since then amount of Rs. 166.82 crore (plan funds released) has been provided to MCD (Municipal Corporation of Delhi) and DJB (Delhi Jal Board) upto March, 2002.

. Pavement Dwellers: There is another part of squatters who do not have even a roof over their head and they resort to the pavements of Delhi at night to sleep. According to the DDA, Slum Wing, about 70,000 population of Delhi live on pavements.

. Resettlement Colonies: To resettle the squatter population, about 2.16 lakh households have been resettled in 45 resettlement colonies. Socio-economic conditions of these colonies are like slums. At present these colonies are suffering from various infrastructural inadequacies. The scheme for resettlement of JJ Cluster households was started in 1961 in Delhi. The commencement of the scheme was made with the allotment of two room tenements to 3560 JJ Cluster households. During 1975-77, a massive programme for settlement of about 1.97 lakh JJ Cluster households was undertaken by DDA with the development of 26 new JJ Resettlement Colonies. Since 1979-80 upto march, 2002 an amount of Rs. 451.67 crore (plan funds released) under plan and an amount of Rs. 470.18 crore under non-plan for maintenance has been released by Delhi Government.

. Regularised Unauthorised Colonies: Government of India regularized 567 unauthorised colonies in Delhi in the year 1977. To provide basic amenities in these colonies, a plan scheme was initiated in 1979-80. An investment of Rs. 469.96 crore (plan funds released) has been made in these colonies upto March, 2002. This amount does not include the cost of water supply, electrification and solid waste disposal system.

If one looks at the table 1, then one can find that percentage share of expenditure on urban development in total expenditure on social services has come down marginally from 26.15 percent in the year 2002-03 to 25.08 percent in the year 2004-05.

The Master Plan for Delhi 1961-81 further extended to 2001, was prepared by the Delhi Development Authority (DDA) and approved by the Government of India in order to ensure proper balance between the spatial allocations for the distribution of housing, employment, social infrastructure and transport, and adequate arrangement to accommodate all other physical infrastructure and public utility systems in Delhi. However, due to lack of adequately developed land at affordable prices to different categories of residents, various types of unplanned settlements have come up in Delhi. Land allocated for housing of the poor and working segments of the population have been siphoned for industrial usage, in opposition to the principles of the original Master Plan[1].

The recently constructed modified Master Plan is subject to various kinds of criticisms and has been termed by many as unsustainable. If the modified Master Plan is applied, then according to some, Delhi cannot provide habitation to the large chunk of population which are in-migrating without destroying the natural resources since there will be huge gap between supply and demand of not only land, but also power (electricity), water et al. One should also mention that the state of public transportation system is quite poor in Delhi, leading to burgeoning presence of privately owned vehicles by those who have enough purchasing power in their hands. But this phenomenon has led to the erection of flyovers in various parts of Delhi, in order to avoid traffic jams. This too is leading to increase in public expenses. Instead of the public expenses to be made on important services in the social sector, the money is spent for the wrong kind of investment. However, a democratic way to solve the problem by taking the views of experts is the key. With the rise in human population due to migration, untreated sewage generated in the Capital could well be one of the prime reasons for water-related diseases such as malaria, cholera and jaundice now becoming an accepted health hazard of urban living. One of the most important sources of water pollution in the country is untreated sewage. There are pressures from various NGOs that conservation of nature should one of the main thrust areas apart from conservation of old historical monuments.

In India, many states enacted Town and Country Planning laws during the decade of 1960 under which Master Plans were prepared for a very large number of cities and towns across India. The first Master Plan (1961-81) is indicative of the major themes of that era: 1. Demographic projection and decision on the level at which the population shall be contained; 2.. Allocation of population to various zones depending on existing density levels, infrastructure capacity and acceptable future density levels; 3. Land-use zoning to achieve the desired allocation of population and activities in various zones as projected; and 4. Large-scale acquisition of land with a view to ensuring planned development.

According to the 2001 census, in India around 285 million people or about 28 percent of the population live in the urban areas. In 1991, there were 300 Class I cities accommodating about 65.2 percent of the total urban population, while 1135 Class IV cities accommodated only 7.7 percent. It is alleged that urban growth nevertheless has been unplanned, exploitative and chaotic, resulting in rising unemployment and low productivity work-sharing in the informal sector, squatting in teeming slums, congestion, encroachment on public space, water and air pollution and deteriorating infrastructure and services. In this context another important aspect is that of the inequality of distribution of resources especially income which has led to the deterioration of the living standards of a section of urban poor. This is one of the causes of the origins of slums in cities. Delhi state is surrounded by the states of Uttar Pradesh and Haryana. Delhi is among the top three states in terms of per capita incomes. Yet one can find abject poverty in the dingy slums which offer habitation to a sizeable portion of its population. Elite people hardly pay any attention to the requirement of the children from poor families. Child from poor families are forced to study in MCD schools and are not allowed to study in elite private schools, since they come from poor income background.

Basic Demographic Data on Delhi

The population of Delhi has increased from 0.63 million in the year 1931 to about 13.8 million by the time of the 2001 Population Census. Delhi attracts people from all over India because of its central position in trade, commerce and lure of better employment opportunities. Delhi was considered as a single district for the Population Census of 1991. In 1996, Government of National Capital Territory (NCT) of Delhi created 9 districts and 27 sub-divisions. By the 2001 Census count, the North-West district of Delhi had the highest population (20.66% of the total). Declining sex ratio in Delhi from 915 to 868 between 1991 and 2001 shows the grave situation. Gender discrimination and sex-selective abortions does exist along with domestic violence against women. In 2001, literacy rate in Delhi was 81.82%, which is higher than the national figure. Structured information regarding the socio-economic background of the 1.6 million people who migrated to the city during the last decade (1991-2001) is not available as yet. However, a large majority of the migrants are poor rural migrants who were ‘pushed’ out of the villages for livelihood. Forced and distress migration due to lack of alternative sources of livelihood is significantly high in various rural districts. There are also those who are not so desperate but are ‘pulled’ by the lure of better opportunities of employment and living conditions that the city offers. This may include those who already have their nearest kiths and kins staying in Delhi. Getting ration cards is a big problem since there exists land mafia (middle-men/ pradhans) in various slums. Many of the original residents of Delhi like jats, gujjars etal have changed their habitats, and professions over the last one hundred years. Delhi is now termed as having cosmopolitan culture. At one hand, Delhi has posh localities in the southern districts and on the other hand, there exists the walled city, which is clumsy and congested.

Rapid urbanisation and growth due to industrialisation could not benefit all the sections of the society in Delhi, equally. A large section of the population stays in slums or jhuggi-jhompris, which offer miserable living conditions without basic amenities. However, these inequalities are not captured in the average figures that are calculated for the state as a whole. The Planning Commission estimates the proportion and number of poor separately for rural and urban India at the national and State levels. In the year 1999-2000, the percentage of population living below the poverty line in Delhi was estimated at 8.23%. The corresponding figure for India was 26.10%. The per capita income of Delhi at constant (1993-94) prices is estimated at Rs. 24,450 in 2000-01 while for India it was estimated to be Rs. 10,254. Housing along with sanitation are big problems before the urban poor of Delhi. There are slums which are not at all suitable for living.

Urban Settlements in Delhi and Conditions of People staying in Slums

The Population Census of 2001 had for the first time attempted to estimate the magnitude of slum population in cities and large towns (50,000+) of India. For the 14 ‘large towns’ in the NCT of Delhi, inclusive of 11 Municipal towns, the figure came to around 18.45 % of the population in these sites. If one adds the ‘smaller, i.e., class C, D and E towns, which are in the outskirts of the metropolitan city, the percentage would be far higher. However there is no Census figure on this, although smaller sample surveys in these suggest that over 50% of the population in these areas live in slum-like structures. Considering that there are a lot of unauthorised housing clusters that house hundreds of thousands of the poor living in the city but are not officially designated as slums’, the Census figures quoted above are likely to be huge underestimates.

In the national capital of India, Delhi, peri-urban agriculture is quite a source of livelihood in the Yamuna belt. However, due to high level of polluted and toxic material available in the soil, such crops are advised not to be eaten. People who reside in slums (Seelampur, Delhi)[2] are engaged in a varieties of informal sector work, which is not only hazardous to them but also to the environment. However, things cannot be changed if residents of slums are not made skilled and trained for moving them to other jobs. Although lot of NGOs, CBOs, have their educational centres in the slums (some of which are unauthorised), the efforts made by them has brought little change since such arrangements are made on an adhoc basis, and there is lack of co-ordination among the NGOs, CBOs, donors and the government agencies. The roles the various stakeholders have to play is not clear. Moreover there are issues, which are ideological and political, that needs to be solved democratically, transparently and peacefully. Eviction of slum residents (residing in unauthorised slums) by the MCD without alternative arrangements have caused social problems in the past, and things must carefully be done in the future by consulting with all the stakeholders of the society. Some of the slums have become dens for criminals, where drug peddling take place. It is alleged that the police administration itself requires major reforms in all the major cities in India in order to make it citizen-friendly.

People residing in slums suffer from various infrastructural problems such as shortage of water supply, improper sanitation facilities, shortage of electricity, proper housing etc. The variation in water supply is significantly noticed between the deprived and the privileged areas of Delhi. New Delhi Municipal Corporation (NDMC) and Delhi Cantonment areas are receiving a surplus water supply of recommended norm of 70 gallons per person per day, while areas of Municipal Corporation of Delhi (MCD) suffer from shortage of water. The overall situation of sanitation in Delhi is poor. In posh localities of Delhi, there is sufficient quantity of water supply, better sewer system and efficient sewage/ garbage collection system, while slum settlements and poor localities of MCD suffer due to lack of such services. Garbage is generally collected from the private households, streets and lane cleaning, construction sites, dalaos in localities and industries. The existing infrastructure is becoming inadequate. The total volume of garbage generated is more than 4000 metric tonnes per day. Only about 400 trucks are available to dispose off the garbage[3]. Most of the garbage bins are located near slums which is a threat to the health and hygiene of the slum residents. The drainage system is inadequate. The poor people residing in the slums on the bank of the Yamuna River face serious health hazards due to such poor drainage infrastructure. A study named Slums within Slums[4] reveals that real sufferers due to locational distribution of medical institutions are the inhabitants of slums. Due to the high cost of treatment and nonavailability of public medical services, the poors (income as well as non-income) are suffering from hookworms, malaria etc. NDMC is providing preventive, promotive and curative services to all the residents of NDMC area. NDMC runs a 150 bedded Charak Palika Hospital, 50 bedded Palika Maternity hospital 23 dispensaries within an area of 42.76 sq. kms. Sewage pollution is basically an urban issue, notes the CPCB's latest report. It is estimated that of the 3,267 million litres per day (MLD) of sewage generated, treatment capacity exists only for 2,330 MLD, in Delhi. However, actual treatment is possible only for 1,478 MLD of sewage in terms of biochemical oxygen demand (the amount of dissolved oxygen consumed by micro-biological action). There are around 30 STPs at 17 locations in Delhi and the total combined treatment capacity of all the STPs is 2,330 MLD. The actual treatment of sewage during the period November-December 2003 was 1,478 MLD.

Health Facilities

According to the Census 1991, percentage of households who have access to safe drinking water in Delhi turned was 95.78 percent, whereas at the all-India level this figure is 62.30 percent. Yet water-borne diseases are rampant in Delhi slums, especially during the monsoon season. In order to see the health condition in Delhi we should look into certain vital statistics such as birth rate, death rate and infant mortality rate. According to Civil Registration Records, birth and death rate (per ‘000 population) have been declining since 1991. Birth rate which was 28.48 per 1000 in 1991 for Delhi declined to 22.15 in 1999. The death rate also declined from 6.35 per 1000 in 1991 to 6.06 per 1000 in 1999. Infant mortality rate declined from 32.37 per thousand live births in 1991 to 23.18 in 1999. The total birth rate, total death rate, natural growth rate and infant mortality rate in Delhi (India) are 18.6 (23.8) per 1000, 4.6 (7.6) per 1000, 13.9 (16.3) per thousand and 35.0 (58.0) per 1000, respectively, according to the Sample Registration System 2006.

Per capita expenditure on health is much higher in Delhi as compared to the national level. The per capita expenditure on health in Delhi stood at Rs.436.40 which is more than double the per capita expenditure on health at the all-India level (Rs.179.65) in 2001-2002. This may be one of the reasons behind lower infant mortality rate and death rate which is found in Delhi. Government efforts in bettering the health conditions of the people and providing quality health services can be judged from the allocation of funds for the health sector. Share of expenditure on health in the total plan expenditure was 7.40% during the Sixth Five Year Plan which increased to 7.87% during the Seventh Five Year Plan, dipped to 6.56% during the Eighth Five Year Plan and again rose back to the level of 7.09% during the Ninth Five Year Plan. Under the Ninth Plan, the share of expenditure on health in the total plan expenditure was more than 6% for all the annual plans of the years 1997-98, 1998-99, 1999-2000, 2000-01 and 2001-02.

Delhi has witnessed a rise in the number of medical institutions providing health services. Total number of dispensaries rose from 511 in 1982 to 214 in 1996. Total numbers of hospitals rose from 63 in 1982 to 86 in 1996. We can also find that the number of nursing homes operating in Delhi rose from 85 in 1982 to 136 in 1996.

Provision of Health Services – The Administrative Structure.

Health and Family Welfare Department, Government of NCT of Delhi has the prime responsibility for providing health care facilities to the people of Delhi by providing services and implementing various state and national programmes under medical and public health sector for prevention and eradication of various diseases; dovetailing Indian System of Medicine and Homeopathy (ISM&H) in the main system and by opening new hospitals and dispensaries/health centres in deficient areas to remove geographical imbalance and to ensure that facilities are provided at a reasonable distance for everybody.

Among the above health centres and dispensaries, mobile dispensaries are specially designed for those people who reside in the slums and unauthorized colonies. As it is already mentioned above, Delhi attracts a whole lot of rural people for livelihood. Consequently, Delhi has a huge migrated population. Prevailing high disparity between rich and poor has forced this migrant population to settle in the small groups in unauthorised colonies called J.J. clusters. Poverty, sub human conditions, poor quality of life and lack of medical facilities has resulted in higher incidence of diseases and thus high mortality, morbidity and birth rate pattern can be seen in this group of population. Today, about 35% of Delhi population is living in these J.J. clusters and unauthorised colonies. Civic bodies are not able to do provide required civic amenities as they are all settled in the area labelled as unauthorised by civic authorities themselves. Directorate of Health Services of Delhi strengthened the mobile health scheme to provide primary health care to the residents of these slum clusters at their door steps. Due to lack of enough funds, the scheme started with only 20 mobile dispensaries. Later Delhi government invited NGO sector to participate in the scheme and as a result of some NGO’s joining in scheme, a fleet of 68 mobile dispensaries started providing health care to the JJ clusters. The usage of Right to Information Act can become handy in this regard. The state of MCD runned hospitals is pathetic. There exists inefficiencies in service delivery, shortage of good quality doctors, nurses, midwives and inadequacy of basic infrastructure. Patients are ill-treated in the hospitals, and there is no counter-guaranty, that the money spent by the patient/ his/ her family, will lead to correct treatment. Even safety of the patients is at stake. According to some privatization is the solution. But there is no guaranty that after privatisation, things will improve unless there is a regulatory framework for accountability.

Despite the Government of Delhi relying on the NGOs, and residential welfare associations (RWAs) under the Bhagidari scheme, little benefit has reached the urban poor. One should not entirely rely on NGOs, since they too can be inefficient in terms of service delivery and can also siphon off funds. It can happen that the funds allocated to the NGOs are under-utilised. NGOs may not be at par with the ground-level realities and may have untrained and less qualified staff. Although it is said that in the case of bureaucracy, much of development happens on the paper than off the paper. But the same thing can happen with the NGOs. There should be a mechanism of accountability and good governance for all the three actors: the government sector, the NGOs and the people (/public). How far services offered by the NGOs can be termed as public good, is a moot question. One must be aware that when NGOs work instead of government, that too becomes a part of outsourcing. Apart from professionalism, there is thus the need for transparency along with monitoring and evaluation. The organisational structure of NGOs also needs to encourage talent, allow implementation of good management and accounting practices, conducive work ambience and move towards providing incentives to better employees. The opinion of hot-shots and famous NGO workers should be respected but new talents should be allowed to speak up. There is thus the need for efficiency mapping and capacity building (including knowledge management and sharing) of staff from NGOs, CBOs and government sector. Discrimination on the basis of race, caste, gender, physical appearance, linguistic background etc. should not be practiced and human rights should be obeyed within and without the organisation.

[1] Gita Dewan Verma (2002): ‘Slumming India—A Chronicle of Slums and Their Saviours’. Penguin Books, India.
[2] The author has visited this place personally.
[3] Voluntary Health Association of India (1993). ‘Delhi—A Tale of Two Cities’. 40, Qutab Institutional Area, New Delhi.
[4] Sabir Ali (1991). ‘ Slums Within Slums’. Vikas Publications, New Delhi.

[1] Cf. Sabir Ali (2003), Environmental Situation of Slums in India; especially Chapter 3 on the ‘Magnitude of Slum Problem in Delhi’. Uppal Publishing House, New Delhi. Also see Economic Survey of Delhi 2001-02. Government of the NCT of Delhi. The term Rs. used in the article means INR.
Sabir Ali (2003), Environmental Situation of Slums in India; especially Chapter 3 on the ‘Magnitude of Slum Problem in Delhi’. Uppal Publishing House, New Delhi. Also see Economic Survey of Delhi 2001-02. Government of the NCT of Delhi. The term Rs. used in the article means INR.

Gita Dewan Verma (2002): ‘Slumming India—A Chronicle of Slums and Their Saviours’. Penguin Books, India

Delhi Finance Accounts

Voluntary Health Association of India (1993). ‘ Delhi—A Tale of Two Cities’. 40, Qutab Institutional Area, New Delhi.

Census of India 2001

Saturday, October 25, 2008

Obituary: Yasser Arafat (1929-2004)

The death of Yasser Arafat on November 11, 2004 was a severe blow to the struggles of Palestinian people and people all over the world against imperialism and the Empire. While the US media describes him as “… a leader who has failed his own people” (The Economist November 13, 2004; quoted by the author), but to the struggling masses of Palestine, he was a hero who brought them their freedom and land. The life and times of Arafat have been both interesting and dangerous, which is difficult to capture in a few words. But a sincere attempt will be made in the following passages to cover his life, which was full of struggles, from personal to political, and all for the cause of a free Palestine. Mohammed Abdel-Raouf Arafat As Qudwa al-Hussaeini was born on 24 August 1929 in Cairo, Egypt. His father was a textile merchant, and his mother was from an old Palestinian family in Jerusalem. She died when Yasir, as he used to be called, was five years old. He was sent to live with his maternal uncle in Jerusalem, the capital of Palestine, then under the British rule, which the Palestinians were opposing. Not much is known about his childhood except one bitter incident when British soldiers broke into his uncle's house after midnight, beating members of the family and smashing furniture.

After four years in Jerusalem, his father brought him back to Cairo, where an older sister took care of him and his siblings. In Cairo, before he attained seventeen Arafat got involved in the Palestinian struggle against the British. At nineteen years of age, during the war between the Jews and the Arab states, Arafat left his studies at the University of Faud I (later Cairo University) to fight against the Jews in the Gaza area. The defeat of the Arabs and the establishment of the state of Israel left him in hopelessness. In the year 1953, as a student he wrote “Don’t Forget Palestine” in blood and presented the petition to General Neguib, Egypt’s military leader. Disenchanted with the Arab world’s inability to do anything about Israel’s 1948 conquests, he and his friends founded Al-Fatah (fatah meaning conquest) in 1958. Al-Fatah was an underground network of secret cells, which in 1959 began to publish a magazine advocating armed struggle against Zionist Israel.

In 1964, the Palestine Liberation Organisation (PLO) was established, under the sponsorship of the Arab League, bringing together a number of groups all working to free Palestine. When the Arab League was defeated by Israel in the 6 days war in 1967, Fatah emerged from the underground as the most powerful and best organised of the groups and took over the PLO in 1969. After Arafat became the chairman, PLO no longer remained as a stooge of the imperialist power backed by the Arab states, wanting to keep the Palestinians quiet, but an independent nationalist organisation, based in Jordan.

Arafat took great pains to develop the PLO into a state within the state of Jordan with its own military forces. But in 1971, Jordan expelled PLO. Arafat sought to build a similar organisation in Lebanon, but was driven out by an Israeli military invasion in 1982. He kept the organization alive, however, by moving its headquarters to Tunisia. From there, he supported the 1987 Intifada, the first widespread uprising of Palestinians against Israeli rule. In the meanwhile, Arafat survived many assassination attempts by the Israeli intelligence agencies and recovered from a serious stroke.

In 1988, there came a change of policy on the part of Arafat. At a special United Nations session held in Geneva, Switzerland, Arafat declared that the PLO renounced terrorism and supported "the right of all parties concerned in the Middle East conflict to live in peace and security, including the state of Palestine, Israel and other neighbours". The prospects for a peace agreement with Israel then brightened. After a setback when the PLO supported Iraq in the Persian Gulf War of 1991, the peace process began leading to the Oslo Accords of 1993. Yasser Arafat shared the Nobel Peace Prize 1994 with Shimon Peres and Yitzhak Rabin "for their efforts to create peace in the Middle East". As per the Oslo Accords, elections took place in early 1996, and Arafat was elected President of the Palestine Authority. But the peace process suffered due to the emergence of right wing leadership in power in Israel. The Israelis postponed their promises, missed deadlines for withdrawal and ceaselessly built ever-expanding settlements on the land that was destined to be Palestine. Furthermore, the rise of religious fundamentalism associated with US intervention in the middle-East after the Gulf war, gave little scope for Arafat to carry forward the peace process. The Camp David talks between Ehud Barak and Arafat in 2000 failed due to these obvious reasons. In 2003, Sharon and the Bush administration chose to end negotiations with Arafat, excluding him from talks because of the Palestinian leader's perceived failure to crack down on militant Islamic groups like Hezbollah and Islamic Jihad. By the year 2004, there had been many crackdowns on Arafat’s regime both from inside by the religious fundamentalists, and also from outside by Israel and the US, particularly. India always stood for the causes of Palestinian people, except during the period when the National Democratic Alliance (NDA) was in power. The staying away from extending the hands of friendship policy was relentlessly pursued by the erstwhile Bhartiya Janta Party (BJP) government in order to constantly appease and get applauds from the two military powers namely the US and Israel. A recent stance by the BJP not to send any of its representatives to join the official Indian delegation to Palestinian Embassy in order to condole the death of Arafat somehow corroborates BJP’s policy perspective towards its West Asian friend as well as the minorities (The Hindu, November 13, 2004). However, the Left which was always sympathetic to the Palestinians’ struggle came out clearly with the statement that “..he (Arafat) has stood up against all odds through more than four decades of struggle against the Zionist Israeli government and its armed forces backed by the US imperialists... (and) … was a source of inspiration for the worldwide struggle against imperialism” [Press Release by CPI(M), http://cpim.org/statement/2004/11112004_arafat_left.htm, November 11, 2004; quoted by the author]. One must know that when former Prime Minister Indira Gandhi invited PLO leader Yasser Arafat to New Delhi in order to establish formal diplomatic relations, she was called Gamal Nasser’s niece, King Faisal’s daughter and Yasser Arafat’s sister in the Arab world. (taken from the article 'Indira Gandhi—An Outstanding International Leader' by M Saleem Kidwai, http://www.mainstreamweekly.net/article389.html). The death of Yasser Arafat will leave a vacuum difficult to be filled up. His passion, love and commitment for a free Palestine will be remembered in the days to come.

[Note: The views expressed are personal and are not meant to hurt anybody].

*The above image has been taken from

Friday, October 24, 2008

Performance of the Indian Economy during 2007

1. Introduction
The present article on the performance of Indian economy is based upon various reports, produced by various government agencies, international and national donor agencies and think-tanks, and reports which flashed out in the media, during various points in 2007. In most of the reports, it has been pointed out that Indian economy's performance has remained comparable to China. But it has also been increasingly felt that the slowdown of the US economy can adversely affect other economies, particularly the economies from South-East Asia, and may be—India. India has recently faced problems like rise in food prices and hike in the price of crude oil at the international level. Moreover, Indian economy is constantly struggling with its under-performing agricultural sector. According to the Annual Report of the Reserve Bank of India 2006-07, since the mid-1990s, the growth of the agricultural sector has been low as well as volatile; the agricultural growth decelerated from an annual average of 4.7 per cent per annum during the 1980s to 3.1 per cent during the 1990s and further to 2.2 per cent during the Tenth Plan period. Despite this, policy-makers are hopeful that Indian economy will grow at 9 % during 2007-08. There have been various steps taken up by the Government of India in order to curb inflation and promote growth, but during the 11th Five Year Plan, the main goal has been to achieve 'inclusive' growth. There have been papers and articles, written in various newspapers and journals, regarding the current state of the Indian economy, and the worth of India pursuing the goal of 'equitable' growth. For a comprehensive idea about the state of Indian economy, kindly have a look at the table 1, provided above. The present article provides a cursory look at the performance of the Indian economy during the year 2007.

2. Annual Policy Statement of the Reserve Bank of India
The Reserve Bank of India (RBI) while unveiling the Annual Policy Statement, during April, 2007, for the fiscal year 2007-08 has lowered the growth forecast for 2007-08 to 8.5 per cent and promised to keep the inflation close to 5 per cent. While announcing a feel-good policy, the RBI has taken a number of initiatives toward capital account convertibility and encouraging hedging of price risk on global commodity exchanges. The RBI Governor YV Reddy has put in place measures to develop the corporate bond market, futures contract, establishment of credit information companies and a number of steps to help distressed farmers and to promote micro-finance. The RBI Annual Policy Statement has proposed to expand the range of hedging tools available to the market participant, and also facilitate dynamic hedging by the residents. The RBI wants to include corporate bonds in the repo market after stabilising trading platforms for this purpose and a robust settlement systems. The RBI has kept the bank rate unchanged at 6 per cent, short-term repo rate at 7.75 per cent, and cash reserve ratio at 6.5 per cent. The RBI has said that the role of the monetary policy will be to reinforce emphasis on price stability and well-anchored inflation expectations, while ensuring a monetary and interest rate environment that supports export and investment demand for boosting growth. It has also re-emphasised credit quality and orderly conditions in financial markets for securing macroeconomic and financial stability, while ensuring greater credit penetration and financial inclusion. India's CEOs (chief executive office) and CMDs (chief managing directors), according to a survey study by Associated Chambers of Commerce and Industry of India (ASSOCHAM), especially from the real estates, automobiles, housing finance, banking and financial services, were worried about the yet to be released Annual Monetary Policy of the Reserve Bank of India (RBI).

3. Health of the Indian Economy
According to the Reserve Bank of India's document 'Macroeconomic and Monetary Developments: Mid-Term Review 2007-08', which was released on 30 October, 2007, Indian economy continued to maintain strong growth momentum during the first quarter of 2007-08 due to the sustained performances of the manufacturing and services sectors. However, India saw consumer price inflation and deceleration of the infrastructure sector. Consumer price inflation (CPI) remained strong during the second quarter of 2007-08 and continued to be above the wholesale price index (WPI) inflation, thereby reflecting the impact of higher food prices. The wholesale price index (WPI) came down from 4.4% by June 2007 to 3.1% by October 13, 2007. The report says that the real gross domestic product (GDP) growth stood at 9.3% during the first quarter of 2007-08 as compared with 9.6% at the same period in 2006-07. During April-August 2007, the index of industrial production (IIP) rose by 9.8% as compared with 11% recorded during the corresponding period of the previous year. Manufacturing sector saw a growth rate of 10.3% in April-August 2007. The services sector faced a growth rate of 10.6% in April-June 2007. The Mid-term Review consists of two parts: Part I Mid-term Review of the Annual Statement on Monetary Policy for the year 2007-08; and Part II Mid-term Review of the Annual Statement on Developmental and Regulatory Policies for the Year 2007-08. The Report has retained the GDP growth forecast at 8.5 percent during 2007-08, assuming no further rise in international crude prices and barring domestic and external shocks. The real GDP growth during the first quarter of 2007-08 is placed by the Report at 9.3 percent as against 9.6 percent in the corresponding quarter a year ago. According to the Report, merchandise exports rose by 18.2 percent in US dollar terms during April-August 2007 as compared with 27.1 percent in the corresponding period of the previous year, while import growth was higher at 31.0 percent as compared with 20.6 percent in the previous year. India's foreign exchange reserves increased by US$ 62.0 billion during 2007-08 and stood at US$ 261.1 billion on October 19, 2007. The rupee appreciated by 10.3 percent against the US dollar, by 2.4 percent against the euro, by 5.4 percent against the pound sterling and 7.1 percent against the Japanese yen during the current financial year upto October 26, 2007. The appreciation of rupee vis-a-vis the dollar has also adversely affected the business process outsourcing (BPO) industry in India, according to some economists. The Ministry of Finance, Government of India during September, 2007, asked all Central Ministries and Departments to effect a 5 % cut in their non-Plan expenditure sanctioned in Budget 2007. The revenue collections have shown remarkable buoyancy during the initial months of the financial year, with direct taxes growing by over 40 %. The Government of India had pegged non-Plan expenditure during 2007-08, 6.5% higher at INR 4,35,421 crore. All Central Ministries and Departments have been asked to curtail the allocation by 5 % as the Government of India has to find resources for priority schemes. The mandated Fiscal Responsibility & Budget Management (FRBM) Act targets also need to be met, under which revenue deficit needs to be wiped out by the year 2008-09. The fiscal deficit has to be brought to 3.3 % of gross domestic product (GDP), and it has to be brought down to below 3% in 2008. The instructions emphasize that not more than one-third of the Budget estimates be spent in the last quarter of the financial year and the expenditure in March 2008 should not exceed 15 % of the estimates. Payment of interest, debts, salaries, pension and defence capital as also Finance Commission grants have been exempted from the 5% cut in the non-Plan expenditure, which is at the same level as slapped in 2006-07. These instructions mandate the government offices to reduce expenses to the "minimum essential" in areas like building maintenance, office equipment, transport, communication, furniture, furnishings, stationery and hospitality, regulate advertisements and publicity campaigns.

3.1 The Case for Manufacturing Sector Growth
The Confederation of Indian Industry (CII) released the July 2007 issue of 'State of the Economy' analysis for the last quarter-Q4 (Jan-March) results on 16 July, 2007. According to the CII 'State of the Economy', the impressive performance of the corporate sector is consistent, and has been led by the services sector. The July 2007 CII 'State of the Economy' has surveyed and analyzed results of some 3,283 firms comprising 1,971 firms from manufacturing, and 1,312 firms from services. According to the CII Survey, the impressive performance of the corporate sector continued in the last quarter of the financial year 2006-07, showing consistency with the GDP growth rate of 9.1 per cent achieved in that quarter (Q4). On almost all the parameters, the corporate sector has been doing better during Q4 in comparison to the same quarter in the previous financial year. The analysis shows that the net sales has recorded a growth rate of 19.35 per cent in the fourth quarter (Q4) as compared to the growth rate of 17.86 per cent achieved during the same quarter in the financial year 2005-06. The profit after tax (PAT) has registered a significant increase in the growth from 13.68 per cent in Q4 of 2005-06 to 19.12 percent in Q4 of 2006-07, owing to a lower rate of growth in input-cost and operating expenditures. The analysis finds that it is mainly the performance of the services sector that has resulted in the overall increase in the profits growth of the corporate sector. The services sector has recorded a significant decline in the growth of operating expenditure from 16.33 per cent to 10.41 per cent while showing an increase in the growth rate in net sales from 16.48 per cent to 24.74 per cent. 'The State of the Economy' Report has highlighted a distressing trend in the area of Agriculture - decrease in oilseeds production. In fact, oilseeds production, has registered a negative growth rate of 14.79 per cent. This is likely to lead to increase in the import of edible oil due to its reduced domestic production and rising demand. The demand is rising owing to the rising income levels and growing popularity of fast foods among the rich and upper middle class. It is interesting to note that the recently released index of industrial production shows declining growth rate for manufacturing to 11.9 per cent in May 2007 from 15.1 per cent in April 2007, which is in line with the warning given in this issue of the 'State of the Economy' about the lagged effect of the increase in interest rate. The dip stick survey done by CII on behalf of National Manufacturing Competitive Council (NMCC) to assess the impact of the rise in interest rates has reported negative impact on business due to the increase in the cost of financing. The Confederation of Indian Industry (CII) survey for April 2007- June 2007 over April 2006 - June 2006, which tracks the performance of the various sectors of the industry was released in September, 2007. The survey study showed that most sectors recorded a growth of over 10%. Out of a total of 101 sectors reporting production, 23 sectors recorded an excellent growth rate of more than 20 percent, 27 sectors recorded a high growth rate of 10-20 percent, 36 sectors registered moderate growth rate of 0-10 percent, while 14 sectors reported negative growth. The percentage of sectors in each category remained almost constant over the period April 2006 to March 2007, which reaffirmed that Indian manufacturing is on track. Almost 50% of the manufacturing sectors have shown above moderate growth despite various pressures in terms of the appreciating rupee and hardening of interest rates. According to the CII-ASCON survey, Cold Rolled Steel Strips, Pig Iron, Textile Machinery, Industrial Gases, Electric Fans, Microwave Ovens, to name few, are in the excellent growth category. One of the new entrants to the excellent growth category is Electric Two Wheelers in the auto sector showing growth of over 100%. Energy meters, Abrasives, Industrial valves, Machine Tools, Water equipment, Air conditioners, and Vanaspati were all in the high growth category. According to the CII-ASCON survey, out of the 27 sectors reporting sales, 6 sectors registered excellent growth, 11 sectors registered high growth, 4 sectors reported moderate growth, and 4 sector recorded negative growth.

3.2 A Room for Business Confidence
Business confidence in India slipped in the first quarter of the financial year by 8.8 per cent from the last quarter of the previous fiscal, according to the quarterly Business Expectations Survey for July 2007, which was conducted by the New Delhi-based economic think tank National Council of Applied Economic Research (NCAER). The survey study by the NCAER saw the Business Confidence Index falling across sectors for the second consecutive quarter. In April, 2007 the index had dropped by 3.8 per cent over its January, 2007 level. The NCAER report said the fall was more due to seasonal factors than the impact of the tight monetary policy. The fall, at 15.6 per cent, was the sharpest in the capital goods sector. Services saw a decline of 18.7 points, the intermediate goods sector 10.3 points, the consumer durable goods sector 6 points and the non-durables sector 4 points. Big and small firms showed less buoyancy than mid-sized firms. However, firms with more than INR 100 crore (INR 1 billion) turnover showed improved performance over the previous round. According to the newly released report titled 'Asian Development Outlook 2007 Update (ADO Update)' by the Asian Development Bank, which is based in Manila, Philippines, developing economies from Asia will register solid economic growth in 2007, driven by fast growth in the People's Republic of China (PRC) and India. The PRC and India, which together account for 55.3% of the total gross domestic product (GDP) in developing Asia, recorded their fastest growth in 13 years during the first half of 2007 and 18 years in fiscal year 2006, respectively.

4. EXIM Policy of the Government of India
The Annual Foreign Trade Policy for 2007-08 is considered to have pleased exporters in India because it promises refund of service tax on export goods. However the move can cost the exchequer an estimated INR 550 crore annually. The Third Annual Review of the Foreign Trade Policy 2004-09 saw the introduction of two export promotion schemes incentivising hi-tech exports as well as agro processing. It is expected that the refund of service tax on export goods, will encourage exporters meet the ambitious export target of US$ 160 billion during the fiscal 2007-08 (compared to US$ 125 billion in 2006-07). The policy prescription is vital since the US economy is seeing slowdown, the EU is facing static demand and the rupee is hardening vis-a-vis the dollar. The new foreign trade policy has tried to give impetus to exports of high-tech and agri-products by introducing new incentives and by expanding existing ones like the Vishesh Krishi and Gram Udyog Yojana. Other measures which were included are: extension of the export promotion capital goods (EPCG) scheme to spares and parts, flexibility in meeting export obligations under the EPCG scheme, expansion of the focus product and focus market schemes, extension of the DEPB scheme for a year, and a change in the categorisation of status holders. A new scheme is being worked out to replace DEPB, presently. India's exports have more than doubled in the last three years, and India's share in world trade has increased from 0.7% to 1.0% during the period. The inclusion of new countries (mostly from the CIS region) in the focus market scheme is expected to help India reduce its dependence on traditional markets like the United States (US) and the European Union (EU). In addition, new items like mica and its variety, barley, oats, soyabean, cigar/cheroots, bovine fat and copra have been included under the Focus Product Scheme, which gives a duty-free credit equivalent to 1.25 per cent of the freight-on-board (FOB) value of exports.

5. Indian Economy and the Rest of the World
In a study titled 'Benchmarking Developing Asia's manufacturing sector', which has been sponsored by the Asian Development Bank, Jesus Felipe and Gemma Estrada have tried to look at the growth of the manufacturing sector in various Asian countries. The study is quantitative in nature to arrive at certain policy related conclusions. The paper by Jesus Felipe and Gemma Estrada show that during the last three decades, most economies in developing Asia have undergone massive structural change, particularly in terms of changes in both output and employment sectoral shares. The rise in developing Asia's share in world manufacturing value-added, during the last three decades has been significant. The joint share of the People's Republic of China (PRC), the newly industrialized economies (NIEs), and ASEAN-422 has more than doubled since the 1980s, representing in 2000–2004 close to 14% of the world total. This rise has been due to a much faster growth of the manufactured value-added in this region—8–10% per annum since the 1970s—compared to the rest of the world. The share of the PRC (the highest among all developing economies) is just over 5% of the world's manufacturing value-added, significantly less than the shares of Japan or the United States (which is more than 20% each), while the share of India has barely risen. Growth in manufacturing value-added has been substantially higher than that of gross domestic product (GDP) in many economies in developing Asia, including India; the NIEs (except Hong Kong, China, which registered a contraction); ASEAN-4 (except the Philippines, which also registered a fall); as well as the economies under Other Southeast Asia-3 and Other South Asia. Several of the ex-Soviet republics (including Armenia, Azerbaijan, Kyrgyz Republic, Tajikistan) registered contraction in manufacturing value-added after the breakup of the Soviet Union. India's manufacturing output share has remained stable at about 15–16% since the 1970s, while the share of manufacturing employment has been at around 11% during the periods under consideration. In terms of labor productivity, there is still a large gap between most developing Asian economies and the OECD average. The product mix of new employment has been toward relatively lowproductivity industries. The increase in employment has taken place in low-productivity techniques. During the 1970s, food and beverages; textiles; and apparel, leather, and footwear accounted for about 39% of total manufacturing, while electrical and nonelectrical machinery and transport equipment accounted for about 17%. By the period 2000–2003, the former three accounted for a substantially lower 22%, while the latter three accounted for about 34%. This shows a very clear change in the structure of manufacturing production. The most salient conclusions that can be drawn from this paper, are as follows:

(a) The share of developing Asia in world manufacturing output has risen significantly since the 1970s. However, the rise is concentrated in a number of economies, mostly the NIEs, the People's Republic of China (PRC), Indonesia, Malaysia, and Thailand.

(b) The NIEs have started experiencing a de-industrialization process, particularly in the case of Hong Kong, China (in terms of both output and employment shares). This is the result of maturation of this economy and the transfer of production facilities to the PRC.

(c) There has been an important upgrading as the share of more technologically advanced manufactures has increased.
(d) The productivity levels of most developing Asian countries is below than that in the OECD countries, with the exception of NIEs.

According to an Annual Report by the United Nations Conference on Trade and Development (UNCTAD), which has been released recently, the economic outlook for developing countries is positive for the first time since the early 1970s, driven in large part by the growth in China and India. Developing countries–including many of the world's poorest nations–will see ongoing benefits from strong demand for primary commodities, and this positive trend in terms of trade since 2003 has allowed such countries globally to bolster investment in their economies. The Report noted that per capita gross domestic product has increased nearly 30 per cent between 2003 and 2007, compared to 10 per cent for the Group of Seven (G-7) highly industrialized countries. Overall, the world economy will mark growth for a fifth consecutive year, with a 3.4 per cent expansion this year. UNCTAD has warned that a major recession in the United States could lead to diminished exports for China and India. The Report also cautioned that North-South bilateral and regional free trade or preferential trade agreements could prevent poorer nations from developing their industrial sectors and reduce their control over foreign direct investment. UNCTAD has pointed to the positive feature of protection to infant and nascent industries by the first world nations, which hone their abilities to meet the challenges of international competition. The Report has called for intensified regional cooperation in exchange rate arrangements as a means to reduce the vulnerability of developing countries. The absence of appropriate global exchange rate arrangements could lead to exchange rate instability, especially in developing nations by impeding their overall competitiveness, according to the report. Regional collaboration could also benefit developing countries in terms of long-term development as it can help countries build up their economic capabilities to allow them to compete globally. Such cooperation should include joint policy action–focusing on macroeconomic, financial, infrastructure and industrial policies–to boost growth and structural change potential. Economic growth in emerging East Asia was stronger during the first half of the 2007, buoyed by strong consumption growth and external demand, and the rapid 11.5% growth in gross domestic product faced by the People's Republic of China (PRC). The combined gross domestic product (GDP) in the nine largest economies of the ASEAN (i.e. People's Republic of China, Hong Kong China, Indonesia, Republic of Korea, Malaysia, Philippines, Singapore, Taipei China, and Thailand) grew by more than 8.1% in the first quarter of 2007 (Q1), marginally lower than 8.2% in 2006. The growth in GDP was supported by strong consumption growth and external demand. In the first half of March 2007, GDP growth was 5.6% in four middle-income countries of the Association of Southeast Asian Nations (ASEAN-4), above 2006 levels. However, the four newly industrialized economies (NIEs)--Hong Kong, China; Republic of Korea (Korea); Singapore; and Taipei, China—moderated in Q1, with GDP growth slowing to 4.5%, from 5.4% in the year 2006. In the PRC, strong investment and solid consumption continued to support high growth rates. Domestic demand in the ASEAN-4 economies remained strong due to high level of private consumption, as public sector salary hikes and higher overseas remittances propped up household income. According to the Asia Economic Monitor, July, 2007, continued strong growth in the People's Republic of China and only slightly moderating expansions in the newly industrialized economies (NIEs), and most of ASEAN would lead emerging East Asia to robust 8.1% GDP growth in 2007 and 7.9% in 2008. However, surging capital inflows—which reached a record US$ 269 billion in 2006—brought with them increasing pressures for currency appreciation and fast-rising prices of assets. Inflation continued to fall in most ASEAN economies, but started to rise in the PRC, Korea and Singapore. Throughout the region, current account surpluses were sustained during the first half of 2007, while capital inflows remained strong. Financial markets gained across the region in the first half of the 2007 despite some volatility, with several policy makers increasingly anxious about the risk of a possible equity market bubble. Monetary policy responses varied across emerging East Asia—with the PRC; Korea; and Taipei, China tightening policy, Malaysia keeping policy rates unchanged, while policy rates in Indonesia, Philippines, and Thailand were lowered. Against a background of favourable economic conditions, financial sectors in the region have generally remained resilent, although signs of stress related to sharply higher asset prices and higher volatility in several markets are emerging. The potential risks to the economic outlook include greater than expected inflation; increased financial market volatility; a sharper US economic slowdown; a disorderly adjustment of global payments imbalances; and noneconomic events, such as geopolitical disruptions, or further outbreaks of diseases like avian flu.
According to the July, 2007 Update of the International Monetary Fund's (IMF) World Economic Outlook (WEO), the international economy has continued to expand at a brisk pace during the first half of 2007. As per the IMF estimates, emerging market countries have led the way, with the People Republic of China (PRC) growing by 11.5 percent in the first half of 2007, and India and Russia also growing very strongly. Although growth in the United States slowed in the first quarter, recent indicators show that the U.S. economy has gained strength during the second quarter. In the euro area and Japan, growth has remained above the trend with some positive signs that domestic demand is taking a more central role in the expansions. There are projections that international economic growth would be 5.2 percent in the year 2007. Among the advanced economies, growth in the United States is now expected at 2 percent in 2007 (0.2 percentage points lower than projected in the April 2007 World Economic Outlook). The risk of an oil price spike remains a concern. With sustained strong growth, supply constraints are tightening and inflation risks have edged up since the April 2007 WEO, while increasing the likelihood that central banks will need to tighten monetary policy further. Credit risks have risen, where the weakening of credit discipline identified in the IMF's April 2007 Global Financial Stability despite strong global growth, although some emerging market and developing countries have faced rising price pressures especially from energy and food prices. A slowdown in the US economy could represent a significant downside risk to the global economy. In the past, East Asia became vulnerable to slowing growth in the US economy given its relatively high export reliance on the US market. This fact is important to know since the United States (US) is facing slowdown in 2007. During the last slump in 2001–2002, the US imports fell by a cumulative 4.2% and this fall was translated into falling exports, cuts in industrial production, and declining growth rates in East Asia. Traditionally, East Asia has been viewed as a region that relies heavily on exports for growth. Thus, the East Asian economy has been considered vulnerable to external demand shocks. East Asia saw an average growth rate of
7.6% per year over the past 5 years, contributing nearly one-fourth of global growth in the same period. Yet despite its increasing share in world output, East Asia's economic size remains small relative to the US's 30.6% of world GDP, Japan's 14.0%, and European Union's (henceforth, G3 economies) 24.9%. East Asia's weight in global demand is also less than its weight in income, as it has continued to run large current account surpluses. According to the IMF's World Economic Outlook (WEO) released in October 2007, the forecast for global real GDP growth on a purchasing power parity basis has been retained at 5.2 percent for 2007 as in the July 2007 update, down from 5.4 percent in 2006, but forcast for 2008 has been revised down to 4.8 percent in October from 5.2 percent in the July 2007 update. In the US, real GDP growth had risen to 3.8 percent in the second quarter of 2007 as compared with 2.4 percent in 2006. The IMF's October 2007 WEO expects the US economy to grow at 1.9 percent in 2007 and 2008 as against 2.9 percent in 2006. According to the Global Financial Stability Report (April 2007), favourable global economic prospects, particularly strong momentum in the euro area and in emerging markets led by China and India, continued to serve as a strong foundation for global financial stability. However, underlying financial risks and conditions have shifted since the September 2006 Global Financial Stability Report (GFSR). The sub-prime segment of the US housing market is showing signs of credit quality deterioration, as per the Report. The economic impact of the housing market slowdown has been limited and some market indicators have begun to stabilize, suggesting that the financial effects may also be contained. There was a sudden fall in credit market confidence in late July 2007 brought on by the spread of risks from exposure to the US sub-prime mortgages with credit crunch spreading into corporate bond markets and equity markets. The US Federal Reserve has been the most aggressive in terms of easing monetary policy, with a higher than expected rate cut. The Report said that the shift to private sector debt flows especially bank-based flows into emerging Europe and portfolio flows into other regions, including sub-Saharan Africa, shows that foreign investors are taking more risk and an abrupt reversal cannot be ruled out. Institutions may well be acting in accordance with their own incentives but collectively their behaviour may cause a build up of investment positions in certain markets, possibly resulting in a disorderly correction when conditions change, the Report added. Flows and stocks of cross border claims have increased both in absolute size and relative to the volume of domestic economic activity, according to the Report. The diversity of assets, source countries and investors types now involved in cross-border asset accumulation suggested more stable flows. For some countries, the sharp rise in capital inflows has contributed to rapid credit growth and asset price inflation, at times complicating the conduct of policies. Report has resulted in rising difficulties in the U.S. subprime market and leveraged loan market. Financial market risks have also increased as credit quality has deteriorated in some sectors, and market volatility too has risen.

6. Conclusion
The Prime Minister's Economic Advisory Council, chaired by C. Rangarajan, during July, 2007 expected that the Indian economy will grow at 9% in 2007-08, with inflation contained at 4%, despite slowing credit expansion and pressures of a climbing rupee. The Indian economy is expected to be on an unprecedented strong trajectory of economic growth. With a 36.3% investment rate driving growth and net foreign capital flows expected to remain strong at US$ 58 billion, there is need for selective controls on the flow of debt funds into the country, namely external commercial borrowings (ECBs). Controls on FDI (foreign direct investment) or equity would be most unwise, according to C Rangarajan. The Economic Advisory Council estimates that net FDI will almost double from US$ 8.4 billion last fiscal to US$ 15 billion, and portfolio flows will grow by 76% from US$ 7.1 billion to US$ 12.5 billion. Although much has been promised as per the predictions made by the Government of India and others, yet the forthcoming Economic Survey 2007-08 may solve all our apprehensions regarding the real economic growth faced by India. The declaration of the National Policy for Farmers, 2007 and the successful implementation of the National Rural Employment Guaranty Act, 2005, may be fruitful for agricultural development, poverty eradication, rural development, and for inclusive growth.