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.

Tenth Five Year Plan (2002-2007), Volume II, Sectoral Policies and Programmes, Planning Commission, Government of India

Pottier, Johan (1999): Anthropology of Food: The Social Dynamics of Food Security, Polity Press.

Foster, P (1992): The World Food Problem: Tackling the Causes of Undernutrition in the Third World, Boulder, Colo., USA: Lynne Rienner Publishers. Sen, AK (1981): Poverty and Famines: An Essay on Entitlement and Deprivation, Oxford: Clarendon Press.

Watts, M and H Bohle (1993): Hunger, Famine and the Space of Vulnerability, Geojournal 30(2): 117-126.

Chambers, R (1989): Vulnerability, Coping and Policy, IDS Bulletin 20 (2): 1-7.

Vyas, VS (2000): ‘Ensuring Food Security’, Notes, in Economic and Political Weekly, December 9, pp. 4407)

Bentley, M and G Pelto (1991): The Household Production of Nutrition. Social Science and Medicine, 33 (10): 1101-1102.

Maxwell, Daniel G (1995): Measuring Food Insecurity: The Frequency and Severity of “Coping Strategies”, FCND Discussion Paper No. 8, International Food Policy Research Institute, December.

Qudrat-i-Elahi, Khandakar (2006): “Entitlement Failures: A Critique of Sen’s Famine Philosophy”, by, Journal of Development Studies, Vol-42, No. 4, Page: 541- 558, May, 2006

Swaminathan, Madhura (2001): Weakening Welfare: The Public Distribution of Food in India, Leftword Publication.

George, PS (1984): ‘Some Aspects of Public Distribution of Foodgrains in India’ in Economic and Political Weekly, September 29.

Dev, S. Mahendra and MH Suryanarayana (1991): ‘Is PDS Urban Biased and Pro-Rich’, in Economic and Political Weekly, October 12, pp. 2365-6

Ahluwalia, Deepak (1996): ‘Food Security: PDS vs. EGS’, Economic and Political Weekly, July 6th, pp. 1759

Swaminathan, Madhura (1996): ‘Structural Adjustment, Food Security and System of Public Distribution of Food’, Economic and Political Weekly, June 29.

Swaminathan, Madhura (2002): ‘Excluding the Needy: The Public Provisioning of Food in India’ in Social Scientist, Vol.30, Nos. 3-4, March-April 2002.

Cornia, GA and F Stewart (1993): ‘Two Errors of Targeting’, Journal of International Development, 5,5

Rao, CHH (2003): ‘Declining Per Capita Demand for Foodgrains in India: Why and What Does This Imply?’ in S Mahendra Dev, KP Kannan and Nira Ramachandran (ed.) Towards A Food Secure India: Issues and Policies, Institute for Human Development, Centre for Economic and Social Studies.
Radhakrishna, R and and Ravi, C (1992): ‘Effect of Growth, Relative Price and Preferences of Food and Nutrition’, The Indian Economic Review, Vol. 27, pp. 303-323.

Swaminathan, Madhura (2003): ‘The Dangers of Narrow Targeting: An Assessment of the Targeted Public Distribution System’, in S Mahendra Dev, KP Kannan and Nira Ramachandran (ed.) Towards a Food Secure India: Issues and Policies, Institute for Human Development, Centre for Economic and Social Studies.

Sharma, PK (1994): Government Intervention in the Foodgrains Economy: Case of Rice and Wheat: An Econometric Analysis, Ph.D. thesis submitted to CSRD, JNU George, PS (1984): ‘Some Aspects of Public Distribution of Foodgrains in India’ in Economic and Political Weekly, September 29, pp. A-108

Dev, S. Mahendra and MH Suryanarayana (1991): ‘Is PDS Urban Biased and Pro-Rich’, in Economic and Political Weekly, October 12, pp. 2365-6

Ahluwalia, Deepak (1996): ‘Food Security: PDS vs. EGS’, Economic and Political Weekly, July 6th, pp. 1759
Parekh, Kirit (1993): ‘Who Gets How Much From PDS: How Effectively Does It Reach The Poor?’ in Sarvekshana, January-March

Tyagi, DS (1990): Managing India’s Food Economy: Problems and Alternatives, Sage Publications, New Delhi.

Rao, VKRV (1985): Food, Nutrition and Poverty in India, New Delhi, Vikas Publications.

Radhakrishna and Ravi (1990): Food Demand Projections for India, Centre for Economic and Social Studies, Hyderabad, May.

George, PS (1983): Government Interventions in Foodgrain Markets, CMA, Indian Institute of Management, Ahmedabad.

Indrakant (1995): Food Security and Public Distribution System in Andhra Pradesh, Paper presented at Workshop on Food Security and Public Distribution System in India, Planning Commission of India, New Delhi, 28-29 April.

Sharma, RK (1995): Government Intervention in Food Security at Micro-level: A Case Study of Uttar Pradesh and Bihar, Workshop on Food Security and Public Distribution System in India, Planning Commission of India, New Delhi, 28-29 April.

Dev, Mahendra (1995): Food Security: A Tale of Two States, Maharastra and West Bengal, Paper presented at a Workshop on Food Security and Public Distribution System in India, Planning Commission, New Delhi, 28-29 April.
Bapna, SL (1990): ‘Food Security through the PDS: The Indian Experience’, in DS Tyagi and VS Vyas (ed.) Increasing Access to Food: The Asian Experience, Sage, New Delhi.

Tyagi, DS (1990): Managing India’s Food Economy: Problems and Alternatives, Sage Publications, New Delhi.
Ahluwalia, Deepak (1991): Public Distribution of Food in India: Issues and Evidence, August (mimeo).
Howes, Stephen and Shikha Jha (1992): Urban Bias in Indian Public Distribution System, Economic and Political Weekly, May 9.

Kundu, Amitabh (1993): In the Name of the Urban Poor: Access to Basic Amenities, Sage Publications, New Delhi/ Newbury Park/ London.

Taimni, Brij K (2001): Food Security in 21st Century, Konark Publications Pvt. Ltd.

Anderson and Garcia (1990). ‘Data on Food Consumption by High-risk Family Members: Its Utility forIdentifying Target Households for Food and Nutrition Programmes’, in Intrahousehold Resource Allocation ed. by Beatrice Lorge Rogers and Nina P Schlossman, United Nations University.

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.