Thursday, September 29, 2011

India-China Trade Talks: Fast Track towards Greater Milestones

The respective national interests always determine the foreign and trade relations between two countries. Moreover, in today’s world it is the economy that is often the crucial driver in ensuring smooth and cordial bilateral relations often leaving the otherwise differences into the backburner.
The recent India-China trade talks in Beijing, therefore, must be seen in that perspective.
At the talks between Indian side led Planning Commission Montek Singh Ahluwalia and Chinese side led by Chairman, National Development and Reform Commission, Zhang Ping both the countries have agreed to enhance co-operation in infrastructure development, particularly in the railway sector on the basis of mutual complementarities and benefit. The two sides also agreed to strengthen communication on macro-economic policies, share development experiences and enhance coordination in addressing the common economic challenges.

The two sides also agreed to strengthen cooperation on energy efficiency
and conservation as well as on environmental protection with an eye to promote sustainable development.

The strategic economic dialogue is the brainchild of the Chinese premier Wen Jiabao and Prime Minister Dr Manmohan Singh, and is largely seen as aimed towards addressing the basic issue that the India-China trade deficit over the last couple of years has grown bigger.

Obviously, this does not augur well for the emerging economies.
On the other hand, there is no denying both the countries are key members of emerging international bloc BRICS and as such have important role to play jointly as emerging economies in the region.

The trade deficit has already reached 14 billion US dollars this year, where as India's trade with China is expected to touch 70 billion US dollar this year.
The two sides now hope to scale up the trade ties to 100 billion US dollars by 2015, with Indian side especially looking for greater cooperation in IT, pharmaceuticals and engineering products.

There is gradual appreciation to these vital facts even among the Chinese leadership. The Chinese delegation leader Zhang was therefore right in his diagnosis that both India and China are faced with identical problems in pursuing developmental activities.
"Closer cooperation will not only benefit our two countries but also
help boost the confidence of developing countries as a whole,” quote unquote, he said.
This spirit was unequivocally appreciated by Indian delegation leader Montek Singh Ahluwalia and hence the maiden strategic economic dialogue has rightly sought to deepen bilateral investments, further open up markets and share developmental experiences.

Taking these initiatives further, yet another key development is the setting up of an India-China CEO Forum to enhance economic engagement and to make corporate sectors party to this cooperation.

True, over the past decades both the countries have got embroiled into skirmishes and diplomatic differences; but now both the sides are sincere about what they say, “enhance pragmatic cooperation” in economic sectors.
The economic policy makers on both sides agree that both the countries have their own limitations in handling the respective domestic macro-economic situations and therefore there ought to be the mid and long-term economic and social development plans.
This can be achieved only by mutual cooperation between two emerging economies.
In the recent times, both China and India have come together even in dealing with major global issues like climate change. Both have also tried to give a tremendous momentum to the BRICS conglomeration.

India on its part has been pursuing to build up a relationship of "cooperative partnership" with China.
It’s true, the history of 60 years relations between the two countries cannot be simply put on the backburner. But it goes without saying that at least on economic and trade front, both tend to benefit immensely by mutual cooperation.
For reasons best known to diplomatic historians, strategically both the countries have not been natural allies. But on the economic front they probably owe to each other and more importantly to their respective interests to cooperate. This ‘pragmatic’ roadmap would definitely put both the countries on a fast-track towards the higher plane of achievements.


Tuesday, September 27, 2011

Price Rise – Saga of a Daunting Experience

The price rise across the board has hit the common man hard.

These are the watershed times in Indian socio-economic life as in food production the country at one hand is recording bumper harvest hoping to touch 4.4 per cent agricultural growth, on the other hand the increase in prices across the board are leaving the common man in tears.
Just when the government seemed to have heaved a sigh of relief after battling the Anna Hazare-led corruption crusade, the fuel price hike with the fear of leaving cascading impact has hit the UPA government hard.

The growing unpopularity of the Congress-led dispensation in the centre is near complete with the unprecedented increase in prices of essential commodities – affecting all sectors.

Predictably, the government stands vulnerable to severe criticism for alleged mishandling of the fuel price issue and also the food stocks and prices of other essential commodities.
Price-rise on all fronts has crippled the life of middle class. In fact, before they could stomach the hike in petrol price, there is already hike in home loan EMI and the Railway Ministry is talking about train fare hike. (See accompanying box – ‘Eclipse of a Family Life’)

The cry of the middleclass is not without good reason. Food inflation has ruled high for much of 2011, averaging 10.26 per cent in January-August.
The inflation has touched 13-month high by mid September and even for those who believe in higher GDP calculations, there is something to worry about as whilst between January-December 2010 period, growth was around 16.5 per cent, in the last eight months of 2011, it has failed to breach 15 per cent.

On 15 September, state-owned oil companies raised petrol prices by Rs 3.14 per litre. The government has sought to shift the responsibility to the oil companies. Subsequently, the official reaction from the Finance Minister Pranab Mukherjee has been that “inflation is a reality of our time” and quickly the Reserve Bank of India raised key interest rates by 25 basis points, the 12th time since March 2010.
These have come on the backdrop that only four months back, there was diesel price hike and according to estimates since 2004, when economist Dr Manmohan Singh was anointed as the Prime Minister, the prices of petrol products has gone up 40 times.
Former Finance Minister and BJP leader Yashwant Sinha says faulty government policies have helped the profiteers, hoarders and the corrupt to “loot” the common man of an additional Rs 6 lakh crore in the past three years. “We totally reject the theory that growth is required at any cost. Is the growth aimed to dispossess the poor?” he asks.
Food Prices:
The entire irony of the situations could be well understood as with hardly the heat and dust on fuel price hike settled, yet another government measure announced on 20 September could leave an adverse impact on the prices of onion.
However, the government was apparently pushed to a corner after it faced strong protests from onion growers – apparently also egged by the Maharashtra politicians.
The government decided to lift the ban on onion exports with the pledge to review the same every fortnight. The government had imposed a ban on onion exports on 9 September to check its spiraling prices which touched Rs 25 a kg in retail in the national capital.
Analysts agree that in recent months vegetable prices have shot up nearly 22-25 per cent – even at wholesale level and as a result their impact to the housewife gets magnified in inefficient distribution system where the same material passes through a whole range of intermediaries even as the authorities apparently prefer to look the other side.

The union Agriculture Minister Sharad Pawar has time and again resorted to the hunting game – looking for scapegoats to blame on spiraling prices. His excuses have been: global factors, increase in purchasing capacity of the village population and that the “high minimum support price to farmers”.
“The market is yet to reconcile to higher MSP for growers,” he reportedly told the Prime Minister in a meeting on price rise.
But the rhetoric do not help the aam admi, the ruling combine’s supposed core constituency. The government inaction is only pinching the middle class and more especially the poor along the base of the economic pyramid hard.
Take few examples. Rice that is the basic diet of the Indians sells about 3-4 per cent higher, wheat at 6 per cent higher compared to same time last year. Dal prices too hover around high range though it has come down a bit gracefully after having touched the sky with most pulses selling between Rs. 80 and Rs. 100 a kilo last year.
Similarly, prices of sugar, atta, milk and other items have also increased.

The price of milk has seen quantum leap from 2008 from average Rs 22 a litre to Rs 30 to Rs 35 forcing some consumers to admit openly that as a consequence they have shifted to “prefer black tea”.
In many households, such changes and sacrifices have become the order of the day.
In some cities, figures from the ministry of consumer affairs say, the milk price has even gone up to Rs 38.

In many middleclass houses, confectionaries and biscuits have vanished from the kitchen shelves and people have given up buying magazines and buying gifts and sweet for children and friends during festivals.

The large scale pessimism is endorsed by business chamber ASSOCHAM, which says, “Year on year in 2008-09 food articles rose by 10.85 per cent and in 2009-10 it was 17.4 per cent”.
Worse, retailers say, in some quarters the rise in prices of essential commodities has been week by week.

Even in many other areas, the common people are feeling the pinch. According to homemakers, even the prices of baby food and chosen health drinks have risen 2-3 times.

In Delhi, the common man’s agony continues in the form of higher prices for DTC city bus travel as well as whopping 20 per cent hike in electricity charges.

Diagnosis and Excuses:

The higher prices can not be swept under the table especially for food and other consumable items. There are several reasons.
Even globally, the spiraling food prices are being driven by financial players taking over commodities markets. Unlike the past, a report from World Development Movement, claims financial speculators now account for more than 60 per cent of some agricultural futures and options markets, compared to just 12 per cent 15 years ago.
"Financial speculators have flooded food commodity markets, creating sudden price spikes. For people in developing countries, price rises are disastrous," says the report's author, Murray Worthy. Even in India, parliamentary committees and several political parties have from time to time spoken against forward trading though a section of economists have always opposed the theory.
There are other factors too as echoed by Sharad Pawar that in recent years there has been significant inflow of government (read easy) money into rural India through the Mahatma Gandhi NREGA, the UPA’s populist scheme.
A report, from Kotak Institutional Equities points out that the income in rural India has risen by 138 per cent over the five-year period ending 2009.
“The first thing Indians do with higher income is to switch to better and increased food intake and also confectionary items like chips and biscuits. Moreover, India has a lot of vegetarians which means only increased consumption of pulses, vegetables and milk,” says an Ahmedabad-based commodity watcher.
He also says things can only get worse once the government comes out with yet another vote-catcher scheme, the so called Food Security Bill. The proposed act is expected to ensure subsidized grains to 90 per cent of the rural and 50 per cent of the urban population. The government would then confront a startling problem on the food subsidy bill.


Tuesday, September 13, 2011

Will Railways go the Air India way?

The populist measures of netas like Mr Lalu Prasad
and his illustrious successor Ms Mamata Banerjee for refusing to
increase railway fares for last 8 years have contributed immensely to
the financial woes of the Railways. After the parliamentary
consultative committee and railwaymen’s federation, the finance
ministry has reportedly now directed the Railways to reconcile to
augmentation of resources by increasing fares.
“There is apprehension that sustained financial crisis in railways
owing to huge subsidies doled out to passengers could lead to bigger
crisis. We can be the next Air India,” said a senior official
referring to the national carrier crisis wherein even salaries of the
employees were affected.
It is this precarious situation which made All India Railwaymen
Federation general secretary Mr Shiva Gopal Mishra recently write to
the new railway minister Mr Dinesh Trivedi, “to increase passenger
fare or ask the government of India to at least compensate the amount
the Indian Railways spends on passenger subsidy”.
“….non-rationalizing of fare will be quite unfair with the Indian
Railways,” Mr Mishra’s missive said.

Even last year a whopping amount of Rs 20,000 has been drained out on
the subsidy for passengers and is only likely to increase this year.
The rail fares were increased marginally by the then minister Mr
Nitish Kumar in 2002 and under Mr Lalu Parasad during UPA-I, the
populism only led to slashing down of fares at least thrice.
In 2002-03, during Vajpayee era, fares were last hiked minimum for
second-class mail and express trains went up from Rs 15 to Rs 16.
Not to forget, Mr Lalu Prasad’s petline used to be that there’s no
need for fare hike as railways were making profit --- which ultimately
has been proved only as “jugglery’ of figures by none other than the
CAG and also Ms Mamata Banerjee.
Slamming Lalu’s alleged jugglery of figures, the CAG lamented that the
balance sheet prepared by railways “had not followed the generally
accepted principles” of commercial accounting in presenting fixed
assets, investments, and contingent liabilities.
“…. the revenue for the year (Lalu’s stint) remained overstated and
current liabilities stand understated," the CAG had said.

However, under Ms Banerjee, who was always obsessed about Bengal
polls, also refused to take a more practical step and never gave a nod
for raising the fares – at times even against the wishes of the Prime
Minister Dr Manmohan Singh and the Finance Minister Mr Pranab
Even her Man Friday, Mr Dinesh Trivedi, the present imcumbent,
initially remained non committal for increasing fares.
Even on July 14, 2011 at his first media conference after taking over
the railway ministry, Mr Trivedi virtually had ruled out fare hike
saying, “increasing fare in the name of augmenting resources is the
easiest option” and cited rather other options.
However, the railway board is now reportedly pushing for mid-term
passengers fare hike by about 8 per cent to tide oer the crisis.
The All India Railwaymen Federation, to start with, has mooted the
proposal to link the fare hike to fuel process suggesting that
“reduction in fuel prices” could lead to reduction in fuel surcharge
for passengers also.

(The piece was used in The Statesman)

Wednesday, September 7, 2011

New Land Bill is a "political response", says 'political animal' Jairam

He is better known as a pro-active minister, who reportedly tried to defy even the Prime Minister.
But when it comes to the new Land Bill, Jairam Ramesh in his avataar as the Rural Development minister makes it crystal clear that the bill has a specific political purpose.
Ending weeks of suspence, the Land Acquisition,
Rehabilitation and Resettlement Bill, 2011 was introduced in the Lok
Sabha today seeking to replace a century old law even as within hours of its introduction, the Rural Development Minister Mr Jairam Ramesh called
it a "political response to a political problem".
With the introduction of the Bill, the Congress-led UPA government
under constant attack for neglecting its 'aam admi' political
constituency over price rise and corruption issues inched closer to replacing a the land acquisition law of 1894 by a new one that would hopefully placate the Congress party's rural vote base.
Stating that the "entire credit' for bringing about the draft
legislation in record time of 55 days after threadbare consultations
should go to Mr Rahul Gandhi, Mr Ramesh said, "I am a political animal ...... and the new bill is a political response and solution to a political problem".
"I am not living in a fool's paradise and divorced from reality," he
told a press conference in reply to a question emphasising on the
specific political purpose of the bill
vis-a-vis Congress general secretary Mr Rahul Gandhi's stated agenda
eyeing the next year's assembly elections in Uttar Pradesh.
Mr Ramesh had come to the Rural Development ministry from erstwhile position of MoS Independent charge for Environment reportedly at the instance of Rahul Gandhi, because the Gandhi scion was not satisfied with
Ramesh's predecessor, Vilasrao Deshmukh, an old-hat in Marathi brand of politics in his own right.
However, asked on how much does he think the Bill would help Congress
to storm back to power in the country's most populous state, Ramesh
merely said, " all depends on Congress party in UP, I mean right
from the pradesh Congress level to the district unit level".
He said Rahul Gandhi stood by the ministry all along for a
comprehensive bill and gave his invaluable inputs in various aspects
including ensuirng
the protection of the inherent rights of the tribals.
"It was Mr Gandhi who insisted to protect the interest of those whose
livelihood would be affected by the land acquisition as much as he
gave the guiding principle to ensure that the Bill has retrospective effect," Mr Ramesh said.
The minister said suggestions from various political parties including
Trinamul chief Ms Mamata Banerjee was enlisted for creating a
for Land Bank for the states and from Agriculture Minister Mr Sharad
Pawar for creating "equivalent agriculturable land out of wastelands
whenever multi crop irrigated land
is acquired".
He denied that there was any "heated debate" in the cabinet on 5
September on the Bill especially by three former Maharashtra chief
Mr Pawar, Mr Vilasrao Deshmukh and Mr Sushil Shinde.
"There was broad agreement on the bill and even today while I
introduced it in Lok Sabha; leaders from various political leaders
told me they welcome
its introduction though they may have certain differences". .
Mr Ramesh explained that the Bill has been criticised essentially from
two points. "One by the likes of Medha Patkar who say we have not gone
and the other who say it is against economic development and industrialisation".
But the government has only tried to strike a right balance, he said
adding this point was underlined by none other than the Prime Minister
Dr Manmohan Singh and
the Finance Minister Mr Pranab Mukherjee. He clarified that the
compensation as proposed at 4 times the market price for rural areas
as against the 6 times
proposed by Sonia Gandhi-led NAC was also "only to strike the balance".
"This is not one-sided draft. It's pro-land owner, pro-livelihood
dependents and pro-ecoonomic development," he said.
The minister explained that the Bill does not put any ban on the
'private purchase' of the land but there is a rider that for any such
purchase for landscape of over 100
acres in rural areas and 50 acres in urban areas, the rehabilitation
and resettlement package as enshrined in the new bill will be binding.
He also explained that as the land acquisition is on concurrent list
and the 'land' being a state subject, the states will be at liberty to
make their own
land acquisition law. "This is the minimum rehabilitation and
resettlement package, any state can give an higher compensation, there
is no upper limit bar," he said.
The Bill will go to the standing committee on rural development headed
by BJP member Ms Sumitra Mahajan, he said and is expected to passed in
December during the winter
session of parliament.
The compulsory land acquisition for the public pupose has assumed a
contentious spectre as the country is eyeying higher scale of
industrialization where in the land-owners and those dependent for
livelihood felt ignored in the entire neo-development paradigm.
The legislation, spearheaded by ruling Congress chief Ms Sonia Gandhi
and her son Rahul, is seen as crucial for the Congress chances of
repeating a Nandigram like political volte face in UP.
The new legislation is being awaited eagerly even by the industries
and real estate players as several land acquisition across the country
for mega projects is marred in disputes
amid fear of the courts stripping the industries of their holdings.
To a question, the minister said, the Bill if becomes a new law will
be applicable to Bhatta Parasul acquisition in UP also as the award
for compensation is not yet notified there.
Mr Ramesh also listed out as many as 18 differences between the
existing Land Acquisition policy of the BSP-led UP government and the
new central bill.