http://ashwanimahajan.blog.co.uk/en-EUMokoFeed10http://ashwanimahajan.blog.co.uk/http://data5.blog.de/design/preview/9d/f3afb2b776bf3e1908795ed5c2b158_160x200.jpghttp://ashwanimahajan.blog.co.uk/2009/11/14/bycotting-china-economically-7373502/tag:ashwanimahajan.blog.co.uk,2009-11-14:/2009/11/14/bycotting-china-economically-7373502/Sat, 14 Nov 2009 18:52:57 +0100 <p> For quite some time China has been transgressing Indian Territory. Country still has not forgotten 1962 Chinese aggression and illegal occupation of thousands of square kilometers of land by them. Yet again China by leaving traces of their intrusion into Arunachal Pradesh and later objecting to Prime Minister's visit to the state has once again shaken the self-esteem of the nation.<br> Before this they had given up the visa requirement for the people of Arunachal and now by giving visa to residents of Kashmir on a separate piece of paper, China has continuously been revealing its ulterior motives.<br> When our then Prime Minister Jawaharlal Nehru was propounding Panchsheel principle for peaceful co-existence, China was busy making plans to invade India and grab its land. Today when we are working with China to build closer economic ties, China once again is intruding into Indian Territory and asserts its authority.<br> Today when our country is fighting against the menace of poverty, hunger and unemployment, our goal can not be to indulge in war with anybody, especially when we believe in the principle of peaceful co-existence. Not that India alone is entangled in this fight against these economic evils; China too is suffering from similar problems. Raking up border disputes at this stage can best be termed as China's arrogance to embarrass India. India's endeavor has always been to avoid war. For more than two decades Pakistan has been instigating India by indulging in terrorist activities and giving shelter to terror. A large section in India wanted to teach a lesson to Pakistan for its deeds. But neither the present Government nor the previous NDA Government were in favour of decisive war. Except for a limited operation like Kargil, Pakistan was never contested, while the whole world knows that India is much ahead of Pakistan's strategic preparations.<br> Former Defense Minister George Fernadese, had warned the country that China is India's number one enemy. At that time the country had ignored his warnings. But the recent operations by China have once again reminded his warning. Meanwhile unfortunately our own military officers are perhaps unwittingly raising issues like strategic superiority of China. Our Naval chief told that Chinese are impregnable power, so now we have Air Force chief, who has repeated almost the same thing. We have won several wars with bravery and self confidence of our forces. Thus this kind of statement game by the forces chiefs needs to be stopped immediately.<br> We know that today China and India are the world's two major emerging forces. These two nations are advancing fast in technology, industry and all sectors of the economy including infrastructure. Unprecedented development of India and China and their emergence as economic giants have stunned the world, especially US and countries of Europe. But it is unfortunate that instead of consolidating its gains, China is unnecessarily indulging in non-existing border disputes and military aggression against India, and thus instigating India to retailate. So India has limited options.<br> India has to firmly safeguard its borders. Construction of air strips in Arunachal and Kashmir is a step in that direction. But perhaps these measures are not sufficient. The reason is that India still needs to strengthen its defense line against China, which may take some more time. But the country's security can not wait for that. Diplomatic efforts may also be important to convince China. But the possibilities of success of these efforts are extremely feeble.<br> Therefore we need a third option. That option is economic boycott. We know that China's emergence as a superpower has primarily been due to its growing industrial production and exports. Chinese products have made inroads into markets world over including India. Ever rising imports of Chinese products have caused havoc on the Indian economy. Our industry has been ruined, whereas businesses and industries in China are flourishing. With this money flowing from growing exports, China is set to enhance their strategic power, and has become a threat to India's security.<br> At the same time a large number of Chinese firms are being granted infrastructural and other projects in India. China's companies are growing at the cost India's security and economy.<br> So to counter evil designs of China who is hurting the country's dignity and self respect, we should boycott Chinese and bar Chinese companies from contracts for projects in India. Countrymen don't buy goods made in China and government and private establishments don't grant contracts to Chinese companies, then only China would be made to realise the strength of India. Country or countries having enmity with our nation, have to be given most unfavoured nation treatment in national interest and in interest of world peace. Government must show its will power to teach China a suitable lesson</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/11/14/bycotting-china-economically-7373502/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/11/14/bycotting-china-economically-7373502/#commentshttp://ashwanimahajan.blog.co.uk/2009/09/30/menace-of-fake-currency-7067411/tag:ashwanimahajan.blog.co.uk,2009-09-30:/2009/09/30/menace-of-fake-currency-7067411/Wed, 30 Sep 2009 09:22:39 +0200 <p> The nation was stunned when it was revealed by the government, a few days back that some security features of currency printing in the country have been leaked out, and the task of enquiry has been given to CBI in this regards. Peoples’ faith in the currency of any country is the basis of its acceptability. And faith depends upon its genuineness. Banks and other big establishments normally make use of a machine to test the genuineness of currency. This genuineness is tested on the basis of secret features of the currency. If these secret features themselves become known to makers of fake currency and are used in the printing of fake currency, its genuineness would be almost impossible to test.<br> Though fake currency has always been in circulation right from the beginning but the organized manner in which its circulation is being expanded using ultra modern technology, it becomes a matter of serious concern. Land of the different countries ranging from Pakistan (Muzzafarabad) to Dubai, Bangkok, Singapore and neighbouring countries like Nepal, Sri Lanka and Bangladesh is being used for this purpose. Pakistan secrete agency ISI coordinates the whole racket.<br> The extent of the problem becomes clear when we find the presence of fake currency in almost all states. In the last few years menace of fake currency is on rise. Though banks and RBI are seemingly alert about the problem, but they also try to under estimate the problem. In the last two years vast amount of fake currency was found in almost all states. According to a rough estimate made by the study group constituted by RBI recently the quantum of fake currency is around 1,69,000 crores of rupees. According to recent dater of RBI, total genuine currency in the country is around rupees 6,80,000 crore. There is no agency other than RBI in the country which can provide an authentic data about quantum of fake currency. But RBI also is not imposition to provide the exact figure.<br> According to a report of RBI in 2007, number of fake 100 rupee notes have came down by 60 percent but number of fake 500 and 1000 rupees notes increased by 75 and 300 percent. Magnitude of fake currency revealed by RBI is only which gets recorded in police records. According to the existing laws, banks after taking notice of fake currency have to forfeit the same and then handed over to police after stamping. FIR is registered and police in turn sends these notes to government’s security fress situated at Nasik, where the same is verified. But this happens very rarely. Normally private bank return the fake currency notes back after stamping them. Thus vast magnitude of take currency does not get registered in government records. According to National Crime Bureau in all 2204 cases were registered with regard to fake currency and rupees 10 crores of fake currency was forfeited in the process.<br> In the past Pakistani terrorist network used to be financed using fake currency at a large scale and the dubious business of fake currency was expanding very fast. But now it has gone much beyond the terrorist network and enemy countries are using the fake currency as an instrument to weaken Indian Economy.<br> Lack of Coordination<br> Though after handing over of the latest case of leakage of some secrete features of currency printing to CBI, there seems to be some movement on this issue in general there is a total lack of sensitivity and coordinated efforts against this menace. There are three departments, which are related to this issue, namely Central Bureau of Investigation (CBI), Directorate of Revenue Intelligence, Central Economic Intelligence Bureau and Directorate of Enforcement.<br> Though IB and other departments have reported the gravity of the situation and even Military Intelligence has also given revealing information about the extent of the problem and changing pattern of fake currency circulation, lack of coordination is continuing unabated.<br> Serious Economic Dangers<br> We should understand that menace of fake currency is not just a law and order problem or terrorist problem, this is a proxy war against the nation and if not checked firmly, this may destroy our economic structure. We understand that exclusive right of printing currency rests with Reserve Bank of India (RBI). In order to carry out the responsibility of welfare state, the government finances a major portion of its expenditure by borrowing from RBI. For this purpose RBI prints additional currency. Though in this process inflation is the obvious out come, this is essential for uplifting this standard of living of our masses. Thus printing of currency for financing welfare expenditure, printing of additional currency by RBI is acceptable.<br> But if enemy nations or terrorist outfits circulate fake currency in the market, not only purchasing power goes into wrong hands and results into high rate of inflation, value of rupee would also go down and there will be devaluation of currency. Peoples’ faith in the currency also gets eroded and they start purchasing metals and real estate and this may further cause hyper inflation.<br> We have to get rid of this menace of fake currency at any cost. Government should take up this issue on war footing and should constitute a central authority to deal with the problem by making a coordinated effort in this direction by engaging all related secrete agencies in this task. Our secrete agencies are capable of dealing with this problems. A strong political will power is the only requirement.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/09/30/menace-of-fake-currency-7067411/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/09/30/menace-of-fake-currency-7067411/#commentshttp://ashwanimahajan.blog.co.uk/2009/07/02/outsourcing-is-a-compulsion-6434499/tag:ashwanimahajan.blog.co.uk,2009-07-02:/2009/07/02/outsourcing-is-a-compulsion-6434499/Thu, 02 Jul 2009 04:19:36 +0200 <p> By Dr Ashwani Mahajan</p> <p>Though recession has taken the whole world into its grip but US and European countries are worst affected by the same. Many of US banks, other financial institutions and even their star corporates like General Motors are lying flat on the ground. Jobs of Americans are vanishing. According to a rough estimate between November 2008 and February 2009, in just four months about 3 million jobs were lost in USA. Similar position is there in Australia, Canada and countries of European Union (EU).</p> <p>People in these countries, though understand that this sudden impact on jobs is due to recession, but still they consider the ongoing outsourcing of jobs to foreign countries including India and large scale migration of Indians into their respective countries for their miseries.</p> <p>When a company gets a part of its work done from same outside agency, it is called outsourcing of services, i.e. sourcing from outside the company. When such outsourcing is done from within the country, then theoretically there is no impact on employment opportunities in the country. For example, it Railways outsource its reservation and other services from IRCTC or some other agency, then jobs in Railways get reduced but at the same time jobs are created elsewhere, within the country. Economic principle behind outsourcing is, that it helps the concerned company or undertaking to concentrate on its care competence. It not only helps in reducing cost but also improve efficiency in many ways.</p> <p>But if a company get its work outsourced from outside the country, this has a different type of impact. This kind of outsourcing causes a reduction in employment opportunities in the country. Today USA gets its professional/business related work outsourced to Business Processing Offices (BPOs), and call centres, legal service providers outsource their professional work to legal processing offices (LPOs), knowledge related work to knowledge processing offices (KPOs) and medical related jobs to medical transcription services providers and many other jobs are being outsourced from abroad.</p> <p>Thus the jobs which could have been accomplished by people of US, Europe, Australia, and Canada etc are being outsourced abroad. Outsourcing is being practiced by companies to reduce their costs. IT giants like IBM and Microsoft get their software made from India and even in their own countries' offices they employ mostly Indians. US government has been easing visa rules to smoothen the entry of Indians to facilitate their companies.</p> <p>In the last decade outsourcing business has been growing at a rate of more than 40 percent per annum. We understand that performance of a company is judged by the profits earned by the same. If a company incurs losses continuously even its existence may be endangered in the long run. Thus may it be lure for maximizing profits or struggle of its survival in the competition, American companies are driven to outsourcing from abroad.</p> <p>In the election campaign for US president the issue of outsourcing was at the core. During the campaign Barak Obama outrightly took a position against outsourcing and promised to stop outsourcing.</p> <p>After the elections Obama was facing a dual challenge of receding US economy and consequently vanishing job opportunities on the one hand and banning of outsourcing (for better job prospects for Americans) to fulfill its poll promise on another. Earlier Bush administration had already banned outsourcing by government departments. Barak Obama after taking over the reign of power ordered for making visa rules more stringent. Recently his administration made a legislation effecting withdrawal of tax benefits from companies indulging in outsourcing.</p> <p>US companies have waged an open war against the Obama administration's new legislation. Companies openly level charge Obama for working against their economic interest and economic interests of USA. Since companies cannot do away with outsourcing, withdrawal of tax concessions can cause heavy damage to their interests .Thus opposition of new legislation by US companies is obvious.</p> <p>So far US government willingly or unwillingly, knowingly or unknowingly has been facilitating outsourcing and migration of Indians . May it be recession or struggle for survival, people in US and other developed countries are rising against their own companies for indulgence in excessive outsourcing. In some countries we find racial attacks on Indians. Perhaps they think that they may be able to ensure jobs for themselves by sending back Indians or by banning outsourcing.</p> <p>Those who oppose outsourcing or are opposing migration of Indians in their respective countries must understand that outsourcing is not a grace given to Indians. Outsourcing is being practiced due to low wages and the capacity of India and Indians to provide services at low cost. For a job accomplished by an Indian youth working in Indian call centre for a meager sun of ten to twenty thousand rupees per month, an American company may have to pay 2 lakhs per month in USA. Cost efficiency is the business mantra today. High cost US economy perhaps is not competitive enough to face the challenge of low cost India economy. Compulsion to reduce cost perhaps compels US companies to make inroads to India. </p> <p>Costs in US and European countries are much higher in provision of medical, business or even civil services as compared to India. Cost reduction through outsourcing is a reality today, thanks to technological advancements. Obama and others who oppose outsourcing must realise the compulsion of US companies.</p> <p>Today an American spends about 30 times more as compared to an Indian on an average. Universe is fast becoming a global village. National boundaries are vanishing. Such a large gap between US citizens and Indian citizens cannot be sustained. American people must change their life styles of high consumption, wastage of resources and luxurious life style. They must reduce their costs to survive in this competitive world to get rid of the evil of outsourcing.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/07/02/outsourcing-is-a-compulsion-6434499/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/07/02/outsourcing-is-a-compulsion-6434499/#commentshttp://ashwanimahajan.blog.co.uk/2009/06/29/let-happiness-measure-the-development-6419173/tag:ashwanimahajan.blog.co.uk,2009-06-29:/2009/06/29/let-happiness-measure-the-development-6419173/Mon, 29 Jun 2009 12:15:40 +0200 <p> Normally increase in production and thereby increase in national income is considered to be a measure of development. If we look at our politicians, bureaucrats, policy makers, economists, all seems busy in talking about growth in production and thus Gross National Product (GNP). GNP therefore becomes the measure of development. In the last two decades, United Nations Development Program (UNDP) has started the exercise of publishing Human Development Report and tries to measure development in terms of human development. Whereas GNP in measured by multiply production of goods and services by respective prices, human development in measured in terms of averaging per capita income, level of education and health indicated by life expectancy. If we closely look at human development index, we find that nations, which have achieved high levels of incomes, they tend to achieve higher levels of education and health standards. These developed countries tend to rank higher even in terms of human development index.</p> <p>National Happiness Index<br> In 1974, then king of Bhutan figure Singe Wan chuck propounded this concept of national happiness index. He believed that increase in production alone could not be the basis of happiness of humans. Thus in the measurement of development, happiness should be an integral element. Since then Bhutan started giving utmost importance to the happiness of its citizens. In the last few years, countries are being ranked in terms of happiness of people by some agencies. In the regard 'Happy Planet Index' puts USA in150th position in the list of 178 nations Singapore in 131st, France 129th, Canada 111th, UK 108th and Germany in 81st position in terms of this index. India is at 62nd position in this ranking. Surprisingly Bhutan which in ranked 131st in terms of Human Development Index as published by UNDP(2008) is at 13th position in terms of happiness index. Bhutan is the only developing country, securing a place in the top 20 nations in happiness index. </p> <p>Why Rich Nations are deprived of Happiness<br> Whether it is physical development or human development, both perhaps are not much relevant for happiness. That is the reasons, why nations on top of the world in terms of Gross National Product or other indicators of development are lying very low on happiness index. While earning more and more we tend to forget that ideally ultimate aim of all efforts is human happiness. If we look at rich people we find world’s 85 percent of assets are concentrated in the hands of only 10 percent people. To maximise their profits these rich people and companies do not hesitate in snatching employment from the people. Cutthroat competition, envy, ill feeling etc. are common in the process of becoming rich. Inequalities also encourage crimes. Despite large police force, we find wide prevalence of murders, burglary, thefts etc in rich nation. There crimes are on rise in countries like India also. Feeling of depression is pushing people towards suicides.<br> How to Measure Happiness<br> At present, we include three factors in measuring happiness namely, life satisfaction, expected life span and environment. These three elements are put together in a formulae and an index is prepared accordingly. Nations are listed in descending order of happiness. Rich nations are devoid of happiness because attempts to raise production cause environmental degradation and lust of maximizing incomes, brings down life satisfaction.<br> In this context farmer king of Bhutan propounded the concept of national happiness, which was substitute for national product. Today Bhutan is the only country in the world which has maximization of nationals happiness as their declared goal and same goal is also the guiding principle for their government’s policies. According to kinley Dorji, information and communication secretary Bhutan, even industralised countries are now compelled to rethink about, whether to retain or not, the objective of maximizing gross national product. According to the new constitution as adopted by Bhutan, all government policies and programmes related to agriculture, transport, external trade etc. would be judged based on happiness caused by them and not on the basis of economic benefit they bring. In this process, both government and people have their respective role. On the one hand, Bhutan has adopted democracy and paved the way for constitutional monarch of democratically elected government and on the other hand, conducive atmosphere is provided to maximize happiness. Nine aspects have been identified in this regard, namely; environment, health education, culture, life standard, time use, community vitality and good governance. All these are analysed on the basis of 72 indicators designed for this purpose. All aspects are scientifically analysed. For instance, time utilisation aspect would include how much time one spends with his family and at work place. All these figures are then put into a formulae and happiness index is prepared. Gross National Happiness Commission of Bhutan makes reassessment of these indicators after every two years.<br> However, even Bhutan is finding it difficult to maintain its happiness due to cultural pollution. They fear that their happiness may get eroded, as pillars of happiness are in danger. However, at the same time a small Himalayan Kingdom is educating the rest of the world that they design their policies with a goal to maximise happiness, moving ahead of the objective of economic growth or even human development index. Perhaps this is the only way to make this planet prosperous and happy.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/06/29/let-happiness-measure-the-development-6419173/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/06/29/let-happiness-measure-the-development-6419173/#commentshttp://ashwanimahajan.blog.co.uk/2009/06/14/bimaru-states-turn-around-needs-a-big-push-6298691/tag:ashwanimahajan.blog.co.uk,2009-06-14:/2009/06/14/bimaru-states-turn-around-needs-a-big-push-6298691/Sun, 14 Jun 2009 03:53:10 +0200 <p>Today there are 28 States and 7 Union Territories in India. But all these states are not similar in terms of level of development. We can classify states on the basis of per capita income between developed and underdeveloped states. Punjab was at the top with highest per capita income in 1990-91, whereas Orissa was at bottom with lowest per capita income. By the year 2002-03, Maharashtra had reached the top and Bihar had taken the bottom position with lowest per capita income. By the year 2005-06, Haryana occupied the top slot. Out of Union Territories Chandigarh was at the top, Goa occupies the second position, and on third position is with Delhi.<br> Agony of Bimaru States<br> Punjab, Maharashtra, Haryana, Gujarat, Tamil Nadu, Kerala, Himachal Pradesh are undoubtedly developed states and Bihar, Madhya Pradesh, Assam, Rajasthan, Uttar Pradesh etc. are backward states. Economic analysts try to name these backward states as BIMARU by joining first letter of names of these backward states. They are called backward, as not only their per capita income in low, rate of economic growth in also very low there. We find that between 1990-91 and 2002-2003 Bihar state domestic product instead of rising, declined at the rate of about one percent per annum. We find that during this period rate of growth of gross domestic product (All India) was 5.4 percent per annum, rate of growth of State Domestic Product (SDP) was only 0.4 percent for Madhya Pradesh, 2.1 percent for Uttar Pradesh, 2.6 percent for Assam and 3.5 percent for Rajasthan.<br> At aggregate level, the rate of growth of backward states was only 1.7 percent per annum. Thus it was legitimate to call these states – BIMARU states. But situations have changed since 2002-03. Data indicate towards a much better position for these states. Rate of growth of Rajasthan's SDP has been about 12 percent per annum between 2002-03 and 2006-07. This rate has been 11 per cent for Orissa, 10 percent for Madhya Pradesh and 6.5 percent for Uttar Pradesh during the same period. Bihar has also started showing signs of improvement since 2005. Bihar has demonstrated a high rate of growth of 11 percent per annum. It may not be a pure coincidence that after new government took the reign of Bihar, that the rate of growth of Bihar economy not only turned positive it became one of the fastest growing state of the country and achieved a rate of growth of 11 percent per annum during 2006-07 and 2007-08. But this is also a fact that per capita income of Bihar is still the lowest in the country. On the other hand per capita income of Uttar Pradesh, Orissa, Rajasthan, Assam, Madhya Pradesh and newly constituted state of Jharkhand is lower by 25 to 40 percent as compared to national average per capita income. This is cause of major concern. Reduction in regional inequalities is imperative not only from the point of view of improving living standards in backward states but also for faster economic development of the country at large. The importance of contribution of our vast man power specially youth in the development of the country is well established. If anyone or more states remain backward, it affects the development in education, health and other public utilities. In such states infrastructure development is also adversely affected. We find that in such states educational development index also goes down. According to the government's statistics Bihar is educationally most backward state and in the list of all state and union territories it is at lowest rank of 35.Ranks of Jharkhand, Uttar Pradesh, Madhya Pradesh and Orissa are 34th, 31st, 29th and 28th respectively. Development of Rajasthan is getting revealed in its educational development and it has reached at 19th position. Though West Bengal is considered to be developed but it comes at 32nd position, even lower than Madhya Pradesh.<br> Once a state misses the train of development, it is caught into the web of backwardness. Whereas forward states get all kinds of investment proposals, backward states lag behind in investment. They get less support even from financial institution as compared to forward states. Living standards in these states are very low with no signs of improvement. Forward states enjoy maximum utilisation of national resources. According to Planning Commission per capita consumption of electricity in backward states is less than half as compared to forward states. These backwards states lag behind forward states even in terms expansion of roads, telecom, agriculture extension services, irrigation etc. They lag behind in terms of all types of indicators of human development. Life expectancy is low, literacy level is low and birth rate and death rate both are very high.<br> We get a sigh of relief when we note signs of development in these backward states and it seems that they are coming out of web of under development. Now it becomes the bounded duty of growth central and state government to completely eradicate the menace of illiteracy, lack of health facilities, poverty and unemployment and infrastructural bottlenecks, all arising due to under development and place these states on right track for the betterment of the common man.<br> Today according to United Nations Development Programme (UNDP) India stands at 132nd position in terms of human development. But if we make a comparison of human development index (HDI) of forward states, we find that they are comparable with HDI of nations with 60th to 100th ranks. But agony of the situation is that due to backwardness of some states, the nation is pushed to 132nd position in the world in terms of HDI. Thus even to push the nation up in International ranking, it is imperative to accelerate the economic, human and infrastructure development of backward states. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/06/14/bimaru-states-turn-around-needs-a-big-push-6298691/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/06/14/bimaru-states-turn-around-needs-a-big-push-6298691/#commentshttp://ashwanimahajan.blog.co.uk/2009/05/17/aftermath-of-satyam-fraud-6130376/tag:ashwanimahajan.blog.co.uk,2009-05-17:/2009/05/17/aftermath-of-satyam-fraud-6130376/Sun, 17 May 2009 17:45:51 +0200 <p>Aftermath of Satyam Fraud<br> On April 13,2009 Tech Mahindra forwarded its claim on Satyam computers by bidding for 31 percent stake in the company at a price of rupees 58 per share. This ended all speculations about the future of Satyam computers. Indian share market, already plagued with the virus of global economic recession got shattered when CEO of Satyam computers conceded that he manipulated company’s account to the tune of Rs. 7000 crores in the past few years; such that cash and bank deposits reflected in the accounts, actually did not exist. This was not limited to share markets alone; in fact, the whole nation lost faith on corporate governance by this episode.<br> Earlier common belief was that private sector companies could take care of themselves on their own. Corporate governance is capable of handling any eventuality. Representatives of public sector financial institutions and independent directors have always been on the board of directors of these private sector companies. In addition to this, various regulatory bodies such as Company Law Board, Securities and Exchange Board of India (SEBI) also keep vigil on the activities of the companies. For all these reasons, corporate governance was claimed to be complete in it self and it was argued that there is no need for any intervention in the management of these companies on the part of the government. In addition to the well-placed institutional mechanism as enumerated above, these companies get their accounts audited from auditors of international standards. Thus in this process accounts of these companies are also thoroughly inspected.<br> However, this well placed faith in corporate governance was shattered by the exposes of Satyam. We understand that any kind of report could be obtained from auditors by luring them, including giving exorbitant fees (in this case auditors were given a fees of rupees 4.3 crores, whereas normal fees was rupees 2 crores). This fraudulent behavior of auditors is not limited to Satyam only. In fact, there are examples of hundreds of such frauds in India and all over the world helped by auditors. Frauds committed by Arther Anderson, which lost its existence by manipulating accounts of Enron, grant of AAA rating to the companies under deep financial crisis and ultimately filing for bankruptcy by Price Waterhouse Cooper, (which incidentally is also auditor of Satyam), are already in public knowledge. Further ‘dependence' of ‘independent' directors on company's management is also well known. Failure of SEBI and Company Law Board is also well known.<br> Under these circumstances, the government reconstituted the Board of Directors of Satyam computers, by including personalities from IT sector, corporate sector and the legal luminaries. Offers were invited from willing parties to take over the management of Satyam in a transparent manner. In the process a leading construction and engineering company Larsen and Toubro and leading IT and software company Tech Mahindra, which is a joint venture of British Telecom (BT), a UK based company and Mahindra and Mahindra, participated in the bidding. Tech Mahindra emerged as the successful bidder by offering the highest bid of Rs. 58 per share.<br> Future of Satyam and Tech Mahindra<br> Tech Mahindra which at present is sixth largest IT and software company would become fourth largest company in the field after taking over Satyam. After the takeover biggest challenge before Tech Mahindra would be to maintain client base of Satyam, apart from dealing with the obstacles to the growth of IT sector due to the recessionary trends. Tech Mahindra will also have to deal with cases of fraud against Satyam abroad. After a new offer of Tech Mahindra, which was much higher than earlier offer of Rs. 45.90 of Larsen and Toubro, share markets responded quickly by showing a general uptrend. Market seems to be confident about the future of Satyam after its take over by a leading software company. Even Larsen & Toubro is not willing to off load the 12 percent stake in the company, which it had purchased in anticipation of its success in bidding, as L&T is confident that share prices will go up after the take over.<br> Lessons for Future<br> Maturity of Indian legal and political system is very well demonstrated by the fact that in just 3-4 months of the fraud, not only that Board of Directors was reconstituted but also even the process of handing over the same to the new company was almost completed in most transparent manner. In the process due consideration was also given to the fact that the new incumbent meets the requirement of possessing essential experience and capabilities to run the fraud stricken company.<br> Though the problem is seemingly solved for the time being but this is also correct that regulatory agencies like SEBI, independent directors, Company Law Board, auditing firms etc. have all proved to be incapable of handing such situations. Finding solution to the problem arising out of Satyam fraud does not in anyway provide any guarantee against repetition of such frauds. Incapability of the regulatory agencies has been sufficiently proved in earlier cases such as Harshad Mehta fraud, Ketan Parikh fraud etc. This does not mean that officers of these regulatory agencies are incapable. It seems that the present structure of these regulatory agencies is devoid of sufficient provisions to avoid such frauds. Thus, there is an urgent need to make suitable changes in the constitution and powers of these agencies.<br> The government also has to ensure the safety of the investment of the public sector institutions and the public in big companies of private sector. We understand that Comptroller and Auditor General of India (CAG) audits public sector companies' accounts. This is also a fact that in the past there has never been a fraud to this magnitude. We can make suitable changes in the law, bring private sector companies having business more than Rs. 1000 crores under the scanner of CAG, and thus put a stop to these frauds.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/05/17/aftermath-of-satyam-fraud-6130376/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/05/17/aftermath-of-satyam-fraud-6130376/#commentshttp://ashwanimahajan.blog.co.uk/2009/05/07/control-fiis-to-stablise-rupee-6072721/tag:ashwanimahajan.blog.co.uk,2009-05-06:/2009/05/07/control-fiis-to-stablise-rupee-6072721/Thu, 07 May 2009 00:59:21 +0200 <p>In the middle of 2002, a US dollar was equivalent to 49 rupees. Comes May 2007 and dollars comes down to around 40 rupees. In the last five years rupee is constantly getting appreciated. In the past initially due to the devaluation and later due to so called forces of the market were making the rupee weak. We must keep in mind that though the rupee has appreciated vis-a-vis all other international currencies, but it has appreciated more with respect to US dollar.</p> <p>In the past our balance of payment has always been in deficit, due to which there has always been a shortage of foreign currency. This meant more demand and less supply of dollars, which was making the rupee weak. We had to shed more and more rupees for every dollar. In the last few years our balance of payment has turned into surplus. Unprecedented increase in IT exports, remittances from Non Resident Indians and capital inflow (FDI and FII) have been the main reasons for balance of payment turning into surplus. As a result of all this our foreign exchange reserves started overflowing and reached near 300 billion dollars. Appreciation in rupee vis-a-vis dollars was an obvious outcome of fast rising foreign exchange reserves and thereby increased supply of dollars.</p> <p>For the last few months the process of decline in value of Indian rupee has again started. Rupee has depreciated to around rupees 50 per UD dollar (exchange rate even reached rupees 52 per US dollar some time back), after reaching rupees 39 per dollar in May 2007. In the past decline in value of Indian rupee has been basically due to adverse balance of payment on current account. But in the present circumstances it is not due to this reason. In fact the last few month have seen an unprecedented outflow of foreign exchange by foreign institutional investors. This has happened due to the unprecedented shortage of liquidity in their own countries as a result of recessionary situation globally and in developed countries particularly.</p> <p>Theoretically depreciation of rupee may bring about an increase in value of exports and decrease in value of imports and thereby could potentially solve the problem of balance of payment. But theory also puts a condition on this remedy. There condition is known as Marshall-Lerner condition. According to this condition depreciation of home currency could solve the problem of deficit in balance in payment provided price elasticities of demand of imports and exports are sufficiently high, such that their sum total exceeds one.</p> <p>Under the situation value of Indian exports may rise if price elasticity of Indian exports to the rest of the world is high (more than unit). If history is any guide we find that devaluation of rupee has never brought about any significant increase in exports. Our experience has been such that depreciation of rupee has never given any relief in the balance of payment situation. Rupee was first devalued in 1966, but our balance of payment situation continued to remain grim. In the decade of 1990s, rupee was made to depreciate again, but our trade imbalance, instead of declining continued to increase. This happened because the condition as set forth by Marshall and Lerner about elasticities of demand of exports and imports could not be fulfilled. In 1990-91. Our trade deficit was US $9438 crore, which increased to US $63171 by the year 2006-07. In fact unprecedented rise in exports of software and call centre services helpful in keeping our balance of payment deficit law. But this is also a fact that depreciation of rupee could neither reduce value of imports nor increase the value of exports significantly. In fact software sector came to the rescue of the nation. If exporters are happy due to depreciation of rupee it is only for the reason that they expect greater profit as same amount of dollars would bring more rupees to their kitty.</p> <p>But our national policy should not be guided by interests of any particular section. If we look at our imports we find that price elasticity of demand of imports is very low, as our imports constitute mainly of petroleum products, raw diamonds, essential imports of machinery and defence goods. Demand for such goods is not very elastic. Thus we can not expect any fall in their demand as rupee depreciates. Therefore as a result of depreciation of rupee our oil import bill in rupee terms would get inflated. This would affect our domestic cost of petroleum products and thus would escalate our cost of production as well as cost of living. This may also cause deterioration in our competitive strength internationally.</p> <p>Under the circumstances there is a need to ensure stability of rupee by stalling further depreciation of rupee and ultimately strengthen the rupee. It is surprising that though the US economy is receding, the value of its currency is appreciating. In fact major cause of depreciation of rupee is large scale outflow of foreign exchange by the foreign institutional investors. In the last few years FIIs have been responsible for large scale upheavals in the exchange rates. But the Government has not been able to control these FIIs in absence of regulatory mechanism. Many governments (including China) all over the world have been trying to keep in the value of their currencies intact. India also needs to adopt suitable measures to regulate FI. We can impose a minimum lock in period for investments made by these FIIs. Further by imposing tax on repatriation of profits may also be helpful in discouraging out flow of foreign exchange by these investors. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/05/07/control-fiis-to-stablise-rupee-6072721/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/05/07/control-fiis-to-stablise-rupee-6072721/#commentshttp://ashwanimahajan.blog.co.uk/2009/04/30/make-the-rupee-stronger-6036063/tag:ashwanimahajan.blog.co.uk,2009-04-30:/2009/04/30/make-the-rupee-stronger-6036063/Thu, 30 Apr 2009 16:36:52 +0200 <p> Ashwani Mahajan<br> The last five years have seen the rupee constantly appreciate in value. In the past, initially due to devaluation and later due to the so-called market forces, the rupee was weak. Our balance of payment used to be in deficit due to which there was always a shortage of foreign currency. This meant more demand and less supply of dollars, which made the rupee weak. We had to shed more and more rupees for every dollar. But in the last few years our balance of payment has seen a dramatic turnaround. Unprecedented increase in IT exports, remittances from Non-Resident Indians and capital inflow — from FDI and FII — have been the main reasons for this. As a result our foreign exchange reserves started overflowing and reached nearly 300 billion dollars, and the appreciation of the rupee vis-à-vis the greenback was an obvious outcome.</p> <p>However, in the last few months the value of the rupee has started declining again. In fact, it has depreciated to around Rs 50 per dollar from Rs 40 in May 2007. This is because of the unprecedented outflow of foreign exchange brought on by the decision of Foreign Institutional Investors to pull out. This in turn has happened due to the shortage of liquidity in their own countries as a result of the global economic downturn.</p> <p>Theoretically, depreciation in the value of the rupee may bring about an increase in the value of exports and decrease in value of imports, and thereby, could potentially solve the problem of balance of payment. The value of Indian exports may rise if the price elasticity of Indian exports to the rest of the world is high. However, if history is any guide we find that devaluation of the rupee has never brought about any significant increase in our exports. On the contrary, it has never given us any relief in the balance of payment situation.</p> <p>Therefore, under the circumstances there is a need to ensure the stability of the rupee. Since the major cause of depreciation is the large-scale outflow of foreign exchange by the Foreign Institutional Investors, it is this that needs to be tackled. But the Government has not been able to do anything in the absence of a regulatory mechanism. Many foreign Governments — including that of China — have been trying to keep the value of their currencies intact. India also needs to adopt suitable measures to regulate FIIs. We can impose a minimum lock-in period for investments made by these investing institutions. Further, imposing tax on repatriation of profits may also be helpful in discouraging the outflow of foreign exchange. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/04/30/make-the-rupee-stronger-6036063/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/04/30/make-the-rupee-stronger-6036063/#commentshttp://ashwanimahajan.blog.co.uk/2009/04/05/economic-agenda-of-upcoming-elections-5894766/tag:ashwanimahajan.blog.co.uk,2009-04-05:/2009/04/05/economic-agenda-of-upcoming-elections-5894766/Sun, 05 Apr 2009 17:12:42 +0200 <p>People of India are going to elect their next government in April and May this year. There is no single political party or political combinations that have not been tested by the people of India. Even small regional parties have also participated in the government both at the centre and state level. For the last more than six months, present UPA government has been patting its own back counting its ‘achievements’. Previous NDA government had also boasted by way of its ‘India Shining’ campaign. Government is claiming that the GDP had been growing at a rate more than 9 percent per annum in the first four years of its regime and despite world wide recession, growth rate would still be little above 7 percent in the current fiscal. Government claims all round progress in the country. But the ground realities are saying a different story.</p> <p>Rising poverty<br> When present UPA government took over the reign of power from NDA, 27 crore people were living below poverty line. Indian Statistical Institute, Kolkata, while analyzing the data collected by National Sample Survey Organization (NSSO) concluded that by the year 2009, 32.5 crore people would be living below poverty line. This implies that during UPA regime 5.5 crore more people had been pushed below poverty line. This conclusion gets strengthened by the fact that 50 percent population in rural India and 38 in urban India in suffering from malnutrition as reported by the World Bank. Sometime back Arjun Sen Gupta Committee also reported that 77 percent people in the country live with less than 20 rupees a day. </p> <p>Rising Prices<br> Government claims that inflation rate has come down to near 3 percent. But the fact is that prices of food grains, edible oils, pulses, fruits and vegetates are sky rocketing and these essential commodities have gone out of reach of the common man. Actually prices of cars, electronic products and petroleum products have declined due to recession. But government is taking undue credit by counting the same as its achievement.</p> <p>Rising unemployment<br> About one crore people have lost their employment in the last one year due to recession. If we add this figure to the count of unemployed before recession, we find that almost 6 crore people are unemployed today. Five years back this figure was 4 crores. </p> <p>Rising Hunger<br> Poverty and hunger is on rise. According to UN’s World Food Programme, 22 crore people in India are suffering from hunger. Of 119 nations, our place is 94th in terms of hunger. According to the World Food Programme 56 percent females suffer from Animea and 59 percent children are underweight. UN says that the progress made in this direction has actually reversed and declining growth rate of food production, rising unemployment, declining purchasing power with poor have all made the problem of poverty and hunger even more acute. NSSO data collected on the sample of more than 1,24,000 households also support the findings of UN.</p> <p>Rising Health Expenses making people poor<br> Poor are suffering not only due to rising food prices, but also from rising health expenses. According to World Health Organization, due to rising prices of medicines and other health related expenses, 16 percent more families were pushed below poverty line. WHO further says that 12 percent families had to sell their household assets to meet ever rising health expenses.<br> Farmers’ Suicides<br> More than 2 lakh farmers so far have committed suicide. In the last only five years more than 1.5 lakh farmers committed suicide. It is now an open secret that farmers are falling into debt trap as they are not getting remunerative prices for their produce. Ultimately problems of farmers culminate to a point that there is no option left for him except suicide. If ‘Anna-data’ farmer is suffering, how nation can prosper?</p> <p>Countrymen were told that the country can develop only with deep integration with rest of the world. Reign of economic administration was virtually handed over to international agencies like Mackinsey, Arthur Anderson, Moodys, Price Waterhouse, Lehman Brothers and the like. Today Arthur Anderson and Lehman Brothers have lost their existence, whereas large banks and financial institutions are lying flat on ground. It is unfortunate that following suggestions and instructions of these bodies, foreign capital was allowed a free entry and control of the economy was virtually seized by the foreign agencies and Trans-National Corporations. This policy of globalization has not be carried out by any single political party but has actually been implemented by different political parties during their respective regimes. More unfortunate is the fact that political leaders are not ready to own any responsibility for the present ills. Rather they are still beating the drum of so called economic reforms.</p> <p>Whistle for polls for next Lok Sabha is already blown. Farmers are facing bad times, even as per governments own admission more than 33 percent small scale and cottage enterprises have closed down, unemployment and poverty are at their Worst. But the government which came to power in the name of ‘Aam Admi’ in trying to boast on examples of well being of ‘Khas Admi’ and various other populist measures and thus trying to cover their wrong doings. While people one going to elect next government, political parties, are trying to woo voters and showing concerns about inflation, unemployment, hunger and farmers suicides but without committing on any strategy to take on these problems effectively. No political party is ready to give up present day policy of globalization and so called economic reforms. Political parties instead of wooing voters by catchy slogans should come clear on these issues and their proposed strategies to deal with the same.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/04/05/economic-agenda-of-upcoming-elections-5894766/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/04/05/economic-agenda-of-upcoming-elections-5894766/#commentshttp://ashwanimahajan.blog.co.uk/2009/01/29/satyam-fraud-emerging-issues-5467623/tag:ashwanimahajan.blog.co.uk,2009-01-29:/2009/01/29/satyam-fraud-emerging-issues-5467623/Thu, 29 Jan 2009 09:37:40 +0100 <p>SATYAM FRAUD: EMERGING ISSUES</p> <p>Dr. Ashwani Mahajan</p> <p>Satyam Computers has been one of the major contributor to IT revolution is India. Till now a company which had been fourth largest Software Company of India came to ground on January 7, 2008 with its chairman Ramalinga Raju conceding that he has systematically fudged the accounts of the company. Cash and bank balance as reflected in the accounts, actually does not exist. According to a rough estimate total fraud is to the tune of around 8000 crores.</p> <p>Keeping in view the interest of the investors, employees and the IT sector at large, government recently reconstituted the board of Satyam Computers, with a view to control the damage. It has even decided to give away a package to revitalize the company starving of funds to even pay the salary of its 51000 employees.</p> <p>When this fraud was brought to light by Satyam’s chairman himself, the price of the share tumbled by about 80 per cent in a day. In the international market, price of its ADR depreciated by 90 per cent and its trading was forbidden forthwith. Government has even ordered an enquiry into the affairs of 8 group companies of Satyam. SEBI, Company Law Board and Institute of Chartered Accountants of India have also initiated their enquiries on their own.. But this is a fact that shareholders net worth has been eroded by thousands of crores and 51000 of workers are at the verge of losing their livelihood, exchequer and the economy would he at a great loss.</p> <p>ROLE OF AUDITORS </p> <p>But real question is much different and pertinent. Satyam fraud may be first of its kind in India, but not the first such fraud of the world, where fraud was given effect by forging the books of accounts. Enron an American company did exactly the same. In that case auditors were named as one of the main culprits. CEO of the company is serving 24 years of imprisonment, but at the same time auditing company Arthur Anderson has lost its existence world over after the incident. In the present scam auditing company is Price Waterhouse Cooper. Experts believe that the company could not have done a fraud of this magnitude without the connivance of the auditors. Price Waterhouse Cooper is also escaping to speak on the issue.</p> <p>Fact is that when Satyam was fudging its accounts in, the auditing company was certifying these accounts to be correct. Auditor is obliged to minutely inspect each and every transaction of a firm and certify the same to be correct and as per rules. These certified account statements are then sent to the shareholders. Thus we can say that fraud has not been committed by Ramalinga Raju alone, auditing company must also have been fully involved in the same. It is worth noting that Price Waterhouse Cooper, auditing firm of Global Trust Bank (USA) also, is facing legal proceeding in the case of not only certifying fudged accounts of the bank but also giving it a good rating.</p> <p>ROLE OF SEBI</p> <p>Constituted under the Act of Parliament, Security Exchange Board of India (SEBI) is a regulatory body of Indian share and bond markets. It is expected from SEBI that no company or broker is allowed to act against the interests of the shareholder. In fact existence of a regulator gives a confidence amongst the stakeholders in that sector. Existence of SEBI naturally gives a confidence to the investors in the share markets. But this regulating agency has failed at various occasions. Thousands of companies vanished eating away lakhs of crores of rupees of investors and SEBI could not do any thing. Sometimes tiny cases of insider trading by companies are investigated by SEBI, fraud of lakhs of crores of rupees gets easily escaped from its scanners. Recently a company made Initial Public Offer (IPO) and lakhs of crores of application money which should have gone to an independent agency went into the accounts of the company and SEBI could not even issue a clarification in this regard.</p> <p> All or any information regarding all transactions of a company, issue of capital, sale-purchase of shares in either available with SEBI or it could be asked for by it. Then why SEBI could not get a clue about such a big fraud. We should not conclude that fault lies with the officers of SEBI. Perhaps constitution of SEBI as provided by the Act of the Parliament itself forbids SEBI to proactively act against defaulting parties.</p> <p> Learning lesson from the present case and to avoid repetition of such incidents, there is a need to make government’s audit compulsory for all big private sector companies on lines of public sector companies. We know that strict auditing of public sector companies by Comptroller and Auditor General of India (CAG) has been reason why there has never been any big scam in public sector companies.<br> Secondly there is a need to examine the constitution and functioning of SEBI and make suitable changes wherever needed to enable SEBI to meaningfully discharge its duty as a regulator in the stock market.</p> <p> All multinational and Indian auditing companies which are found to be indulged in fraud in any part of the world, should be placed under the scanner and their acts be investigated in India . This world be a proactive step in the interest of the nation at large.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/01/29/satyam-fraud-emerging-issues-5467623/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/01/29/satyam-fraud-emerging-issues-5467623/#commentshttp://ashwanimahajan.blog.co.uk/2009/01/16/challenge-of-controlling-inflation-5388244/tag:ashwanimahajan.blog.co.uk,2009-01-16:/2009/01/16/challenge-of-controlling-inflation-5388244/Fri, 16 Jan 2009 12:30:28 +0100 <p> Challenge of Controlling Inflation<br> Dr Ashwani Mahajan Thursday January, 15 2009<br> Source: Daily Excelsior<br> Rate of inflation dipped to 6.38 percent in the week ending December 20, 2008. This is important that in the month of August 2008 it had climbed to near 13 percent. Recession is ruling the world today. May it be steel or cement, cars or scooters, wheat or rice or even petrol and diesel, prices of almost all commodities are falling world over. This sharp decline in the prices is not due to any Government policy; rather it is due to fast declining purchasing power with the people in this era of recession.</p> <p>Rise in rate of inflation in the past one year was the result of host of reasons. Prices of crude oil, steel, cement, edible oils, food grains etc. were on rise due to large scale speculative activities by financial institutions world over. Grow financial indiscipline of US banks and investment banks, declines in price of crude oil and lot of other reasons including rise of emerging economies led to the wide spread recession in US and other economies integrated with it. Incomes and employment in these economies started declining. Fall in prices of commodities was obvious outcome of this recession.</p> <p>Secondly in India steel, cement and even paper manufacturing companies started taking undue advantage of spike in prices of these products world over. They started making cartels and gave effect to even further increase in prices of these commodities. These companies who even refused to listen to the advice of the Government are now forced to reduce prices in tune with international prices.</p> <p>Thirdly prices of food grains have been rising for the last few years. This has been mainly due to near stagnant production and falling per capita availability of food grains and government's apathy in procurement of food grains. This was accompanied by low level of production of pulses and edible oils in the country, forcing international dependency in this sphere. In light of all this prices of food products have been constantly rising in the past few years. About twenty years ago agriculture used to get nearly 27 percent of total Government expenditure. This used to facilitate the provision of infrastructure for agriculture apart from subsiding agricultural inputs. Government used to make heavy purchases of agricultural commodities to help farmers fetch remunerative prices for their produce.Today the naked reality is that Government has taken its hands off from all agriculture related activities and hardly 6 percent of Central Government expenditure is allocated to agriculture. The obvious outcome of all this is that farmers not only have to purchase seeds, fertilizers, pesticides and agricultural equipments at high prices, they are also not able get remunerative prices for their produce.Farmer is also seen testing his luck by producing cash crops in certain pockets but that too have brought misfortune to farmers. At some places farmers are even forced to commit suicide.</p> <p>Non agricultural activities are being encouraged on fertile agriculture land. If we look at the figures of per capita food grain availability, it has actually declined to only 186 kilogram during 2004-07, from 190 kilogram during 1976-80. This year record procurement of rice helped keeping the prices of these products low. But this policy of large scale procurement does not seem to continue as the same does not auger well with the declared policy of the Government.</p> <p>Fourthly large influx of foreign exchange by foreign institutional (FIIs) and Foreign Direct Investment (FDI) on the one hand and increase in Government expenditure on the other resulted in heavy increase in money supply breaking all records.</p> <p>Price rise was obvious outcome of rise in money supply. But in last few months FIIs have been withdrawing from stock markets and are pulling out foreign exchange from India (though this trend has reversed a little bit in the past few weeks), and signaling a decline in money supply. Although RBI has been making all out efforts in the form of lowering of Cash Reserve Ratio (CRR) but no significant change is there in terms of demand for loan from banking system. All this indicate decline in money supply, causing slowing down of inflation.</p> <p>Fall in rate of inflation recorded in recent weeks is due to immediate causes. In any way it is not due to any concrete efforts on the part of the Government. Except for sizable procurement of wheat and rice by the Government, there have not been any serious efforts on the part of the Government to stem inflation. We should not be pleased by decline in the rate of inflation recently, as it does not seem to continue in the long run. If in the coming days prices again start rising at the global level or FIIs return, inflation may again start raising its ugly head. If we need to curb inflation, we will have to control monopoly tendencies and have to keep vigil on further monetary expansion. We should also bring an end to indifference towards agriculture and make positive efforts for agricultural development. Rise in production of food grain, pulses and edible oils are key to their price stability. If in future there happens to be any spurt in price of crude oil, Government should not allow the domestic prices of petrol and diesel rise by sacrificing its taxes. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2009/01/16/challenge-of-controlling-inflation-5388244/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2009/01/16/challenge-of-controlling-inflation-5388244/#commentshttp://ashwanimahajan.blog.co.uk/2008/10/25/have-patience-india-is-different-from-us-4930383/tag:ashwanimahajan.blog.co.uk,2008-10-25:/2008/10/25/have-patience-india-is-different-from-us-4930383/Sat, 25 Oct 2008 17:15:51 +0200 <p>Many American companies especially banks and other finance companies have either failed or are at the verge of failure. Now the impact of this financial crisis is spreading to European and Asian countries also. Governments of US and European countries have already announced bail packages to save their sinking economies. This crisis of US has alarmed central banks all around the world. Even Reserve Bank of India has announced various measures including drastic reduction in CRR. Share Markets all around the world are under turmoil.</p> <p>In these circumstances Indian share market is also under severe stress. Panic selling in the share markets is pushing them to the bottom. But we must understand that there is a marked difference between Indian economy and economies of US and Europe. If we take a minute look at this crisis, we find that it started with sub-prime crisis in US. It happened like this that US banks gave loans at a large scale, without giving due consideration to the repaying capacity of the borrowers. It is well known with regard to credit card based US economy that American people spend more than their incomes. Inability of the American people to repay their loans led to large scale acquisition of their houses by the banks. Sale of these acquired houses by banks resulted in steep fall in the property prices. US banks increased heavy losses due to their inability to recover their loans. Another cause of heavy loss by these banks was due to their excessive involvement in forward trading. According to a rough estimate, hedge funds had put in 13 trillion US dollars in forward trading of crude oil. Initially price of crude oil jumped to around 150 US dollars per barrel but ultimately tumbled to near 80 US dollars per barrel, thanks to sharp reduction in demand for crude oil from US and European countries and increase in production by OPEC countries. This factor has also contributed to the crisis of US and European financial institutions. Lehman Brothers, who used to ‘educate’ the world about how to make investments have applied for bankruptcy and condition of many other financial institution is no better.</p> <p>Condition of India in this context is much different and much better. Loan are given by Indian banks on solid basis. Though its correct that some times Indian banks also indulge in unsafe lending. Such kind of loans, repayment of which is irregular are defined as Non Performing Assets (NPAs). These NPAs normally don’t exceed more than 5 to 7 percent of total loans by these banks. These NPAs are also not completely bad debts. Indian banks never lend like US banks. Sometimes Indians banks face the criticism that they undertake too much of paper work. But Indian banks don’t lend without a solid collateral. Apart from this Indian banks have to keep a major portion of their deposits with Reserve Bank of India in the form of cash reserves or have to invested in government securities as per the directions of RBI. Thus these banks have very little to spare for even lending. Being under the control of the government, these banks make minimum involvement in forward trading. It is natural that due to government control the public sectors banks are not able to earn heavy profits but at the same time there is no threat to their stability.</p> <p>In the last do decades some private banks have also come up in India. These banks do lend more than their capacity and even take risk involving themselves in forward trading. Some of these banks have definitely burned their hands in this American crisis and have lost a few thousand crores of rupees in the process. Rumors are on regarding probable failure of these banks. But we must keep in mind that these banks also function under the rules framed by RBI. According to these rules they have to invest heavily in government securities and keep a sizeable portion of their assets with RBI in the form of cash reserves. Even home loans given by these banks are also on solid footings. Thus in the present circumstances there is no dangers to these banks also. Thus we can say that there is no danger of failure of any Indian bank.</p> <p>Indian industry is also growing at fast pace, thanks to strong domestic demand. Despite all these problems Indian economy is all set to grow between 7 to 8 percent in the current financial year. Any turmoil in the share markets is not due to any problem within Indian economy. It is all because of large scale outflow of funds by Foreign Institutional Investors (FIIs). These FIIs are indulging in panic selling in share markets. In the process they are purchasing dollars from RBI and transferring these dollars to their home countries. This is leading to sudden shortage of liquidity in Indian markets. Due to sudden increase in the demand for dollars value of rupee is also going down. But this problem is only for short term.</p> <p>For the last two decades our policy makers had been teaching the benefits of ‘integrating’ with the rest of the world. It was being told that the whole universe is like a village and therefore we should increase our economic relations with the rest of the world. But these people only are now proudly saying that Indian economy is ‘insulated’ from the rest of the world and therefore world recession is not going to affect our economy in any major way. Recent events have sufficiently proved that there should not be any blind integration with the rest of the world. We should have economic relations with the rest of the world only to the extent that our interests are not harmed in the process. Everything what glitters is not gold has been amply proved by the sudden collapse of US financial system. Those who try to sell the dreams of making India, US or Europe should now realize that the need of the hour is to build new India keeping in view the Indian capacities, resources, opportunities and problems.</p> <p>The time is not good for investors in the share markets. But there is no need to panic as well. Investors will have to keep patience. It would be better if they wait till settling of the dust of international turmoil. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/10/25/have-patience-india-is-different-from-us-4930383/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/10/25/have-patience-india-is-different-from-us-4930383/#commentshttp://ashwanimahajan.blog.co.uk/2008/10/03/villain-of-farmers-suicides-4816899/tag:ashwanimahajan.blog.co.uk,2008-10-03:/2008/10/03/villain-of-farmers-suicides-4816899/Fri, 03 Oct 2008 17:57:20 +0200 <p> Villain of Farmers’ Suicides</p> <p> Dr. Ashwani Mahajan</p> <p>Menace of farmers’ suicides has turned into a calamity in the last two decades. For obvious reasons government tries to underestimate the number. But according to a rough estimate more than one lakh farmers have committed suicide so far. News of farmers’ suicides comes from all over the country but situation in Vidarbha has taken the form of an epidemic and on an average 3 farmers commit suicide per day. According to government records between January 2001 and November 2005, 3715 farmers had committed suicide. So far government has constituted 7 committees and panels to study about the problems and recommend remedial measures. Apart from the committees and panels constituted by the government, 46 universities and other institutes have also submitted their reports about the causes and remedies of the menace. </p> <p>Counts of Vidarbha suicides </p> <p>It is understandable that the government tries to save itself from bad name by underestimating crimes like theft, burglary, murders etc. They do the same for underestimating farmers’ suicides too. Although between 2001 and 2006, suicide toll was 15980 in 6 districts of Vidarbha but the government recognised only 1290 suicides as farmers’ suicides. Government is authorised to recognise or otherwise, a suicide as farmers suicide. This act of government underestimating the farmers’ suicides deprives the affected families from the relief amount distributed by the government machinery. </p> <p>Studies made under pressure </p> <p>It seems from the events that but for court intervention government had no interest in instituting enquiries or studies to look into the issue of farmers’ suicides. At first, Bombay High Court pulled the government of Maharashtra and as a result it asked Tata Institute of Social studies to submit a report on the issue. Institute did submit the report but nothing was heard from the government after that. Later Indira Gandhi Institute of Development Studies was entrusted with the similar job but perhaps its report again was left to eat dust on the shelves. In October 2005, Prime Minister asked Chairman of National Farmers Commission Dr. M.S. Swaminathan to visit Vidarbha and submit a report .But this exercise also met the fate of earlier reports. In March 2006, Planning Committee constituted a team under the chairmanship of Adarsh Mishra which submitted its report with no action taken again. </p> <p>In view of this hush-bush exercise, Bombay High Court directed Government of Maharashtra to undertake a comprehensive survey. Survey was undertaken covering 8560 villages and 20 lakh farmer families. The report revealed that 2 million farmers are under strain and another 4 million are under deep distress.</p> <p>After these revelations Prime Minister visited Vidarbha during June-July 2006 and released Rupees 3750 crores of relief amount but the farmers’ suicides continued unabated. Government of Maharashtra constituted yet another committee to put salt on the wounds. Government sources claim that waiving off of farmers’ loan by the government, as announced in the Union Budget 2008-09, would help check the problem. But experts opine that this is not going to serve the purpose as farmers committing suicides are mostly those who have borrowed from unorganised sources. </p> <p>Farmer’s indebtedness </p> <p>It is obvious that one commits suicide under deep distress. This distress stems from crop failure and inability to repay the loan already taken and also the inability to get their family members treated in wake of serious illness. This point is clear from the reports of various committees and panels constituted for this purpose. According to 59th Round of National Sample Survey Organisations (NSSO) data, major cause of farmers’ indebtedness is loan taken for farm related expenditure (60%) and loan taken for the treatment of their family members (20%). Aftermath of extensive Survey due to court’s intervention when S.K. Goel , Commissioner of Amravati , revealed that 20 lakh farmers are under stain and 40 lakh under deep distress, he was very obviously transferred. </p> <p>Root cause of the problem </p> <p>This is amply clear that a farmer commits suicide due to his inability to repay his loans. Crop failure accentuates this problem. But the question is why Vidarbha farmers were not committing suicide earlier. If we go deep into this we find that Vidarbha land is most suitable for cotton farming. Earlier farmers used to earn heavily from cotton farming. Data shows that one quintal of cotton was equivalent to 12 grams of gold 20 years back. A Farmer used to grow food grains just for self consumption and by selling cotton; he used to add to his riches. Cotton used to be called white gold. Today he gets merely rupees 1750 per quintal of cotton and in the last 10 years, prices of fertilizers, pesticides and other agricultural inputs have multiplied by 4 to 6 times. </p> <p>Why cotton prices didn’t increase along with the cost of production? Reason is simple, international price of cotton has declined from $ 1.10 in 1994 to nearly 50 cents now. Government of India reduced import duty on cotton to just 10% under pressure from WTO. How come cotton has become so cheap in international market? Whereas cost of cotton growing is around US$ 1.70 per kilogram in America and a farmer gets subsidy from the government to the extent of US$1.5 to 2.0 per kilogram. Due to this heavy subsidy U.S. farmers are able to export cotton at a much lower price; this is the root cause of Vidarbha farmers’ devastation. </p> <p>This problem is not limited to Vidarbha only. Farmers from all over the country especially Andhra Pradesh, Punjab, Uttar Pradesh are also committing suicides. Constantly rising input cost and non-remunerative prices compel them to end their lives. Again farmers’ devastation is not limited to India, farmers of most of the developing countries are getting ruined due to heavy subsidies being given by U.S. and some other developed countries. This is one of the basic reasons why Agreement on Agriculture (AOA) could not be finalised in WTO. Some cotton growing African countries are opposing any new WTO agreements tooth and nail. </p> <p>Government has to understand that foreign trade can not to be more important than farmers’ lives. In fact security of the farmer can only ensure prosperity. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/10/03/villain-of-farmers-suicides-4816899/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/10/03/villain-of-farmers-suicides-4816899/#commentshttp://ashwanimahajan.blog.co.uk/2008/09/05/govt-pay-hike-will-increase-inflation-4686241/tag:ashwanimahajan.blog.co.uk,2008-09-05:/2008/09/05/govt-pay-hike-will-increase-inflation-4686241/Fri, 05 Sep 2008 15:02:57 +0200 <p> Ashwani Mahajan Friday September, 5 2008<br> Source: The Pioneer<br> The Union Government has approved the recommendations of the Sixth Pay Commission, which is sure to make Central Government employees extremely happy. The First Pay Commission was constituted in 1956 as an administrative provision for deciding Government pay scales. Since then the Pay Commission has been constituted after a gap of every 10 years. It not only recommends the pay scales of Central Government employees, armymen etc, but also forms the basis of pay scales for State Government employees and employees of educational, health and other institutions working with the assistance of the Centre and the States.</p> <p>This time around the Government has increased the pay scale of armymen. In fact, it has gone a step further and improved upon the recommendations of the Pay Commission, thus making the defence services more attractive. On the other hand, the improvement in the pay scales of teachers, doctors, researchers, etc, was necessitated to retain them in Government service and keep them away from the lure of the private sector. </p> <p>Though it is being said that adopting the recommendations will benefit 50 lakh Union Government employees, there will be an additional burden of Rs 18,000 crores on the Government. But if we take into account the effect of the Pay Commission's recommendations on the State Governments, the burden on the public exchequer will be far greater.</p> <p>In the last few years increase in money supply has broken all records. As of March 31, 2005, currency held with the public was Rs 3,55,663 crores. This increased to Rs 6,02,706 crores by May 31, 2008. This amounts to an increase of 70 per cent in just three years and two months. Keeping in view the large-scale impact of the Sixth Pay Commission recommendations on the exchequer and thus on money supply, inflation is likely to worsen.</p> <p>The poor financial condition of the States is no secret. Apart from a few States, most are on the verge of bankruptcy. A few States have not been able to implement even the Fifth Pay Commission's recommendations. </p> <p>At a time when the Government is finding it difficult to control rising inflation, the Sixth Pay Commission will undoubtedly multiply the problems of the common man. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/09/05/govt-pay-hike-will-increase-inflation-4686241/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/09/05/govt-pay-hike-will-increase-inflation-4686241/#commentshttp://ashwanimahajan.blog.co.uk/2008/08/26/a-tale-of-failed-talks-4640588/tag:ashwanimahajan.blog.co.uk,2008-08-26:/2008/08/26/a-tale-of-failed-talks-4640588/Tue, 26 Aug 2008 19:04:28 +0200 <p>A Tale of Failed Talks</p> <p>Dr. Ashwani Mahajan<br> On the night of July, 29, 2008, a news flashed that World Trade Organization’s Mini Ministerial talks have failed. These talks started on July, 21, 2008. It was told that Indian delegation demanded for reduction in heavy subsidies, especially trade distorting subsidy being given by developed countries to their agriculture. These nations were not ready to reduce their subsidy, nor were they ready to accept special security measures (SSMs) for security of farmers, as per the demands of developing countries.<br> WTO came into existence on Jan, 1, 1995. Prior to WTO, world trade was guided through General Agreement on Trade and Tariff (GATT). On the outset GATT was constituted in order to give boost to international trade, which was disrupted due to Second World War. Eight rounds of talks were made under GATT. In the first seven rounds, general talks and negotiations were made to boost world trade by reducing tariff and scaling down of non-tariff barriers.<br> During the course of eighth rounds of WTO negotiations, four new issues were added namely agriculture, services, investment, and intellectual property. This was now decided that countries would be bound by the decisions taken under the GATT. A dispute settlement mechanism was set in place. All this was included in the Final Agreement and thus came into existence the World Trade Organization. Since then six Ministerial Conferences have so far been organized in WTO. In each Ministerial Conference, discussion is made for future course of action based on the consensus reached earlier. First Ministerial Conference took place in Singapore and second in Geneva in the years 1996 and 1998 respectively. In both these meetings things went on ‘smoothly’ and wishes of developed world were fulfilled to a large extent. In the meanwhile developing countries were forced to reduce their tariff and remove quantitative restrictions on their imports. Nations who were not following the dictates of WTO, faced penal actions.<br> It was during this time when India also reduced its tariffs and removed quantitative restrictions. Prior to WTO, there were more than ten thousand items on the import of which, quantitative restrictions were in place. Government could block import of any or all these items. But by the year 2000 all these quantitative restrictions were done away with and at present the situations is that we cannot restrict import of any commodity. Many more issues including ‘agriculture’ were added in the negotiations. Prior to WTO, agriculture was not a part of trade negotiations. Inclusion of agriculture in trade negotiations affected agriculture adversely in majority of the developing countries and this led to people’s outburst against WTO. This anger was demonstrated during third Ministerial Conference at Seattle, USA. Seattle Conference was called off due to large scale demonstrations of farmers and NGOs from all over the world. Perturbed by these demonstrations, next Ministerial Conference was organized at Doha in the State of Qatar, where it was impossible to hold any demonstration. But mounting people’s pressure in developing countries, forced their representatives to put up their case strongly and Doha ministerial is known for its ‘declaration on public health’ and notable emergence of issue of agricultural subsidies by developed countries at the forum of WTO. Fifth Ministerial Conference was organized at Cancun, Mexico and people’s anger was once again demonstrated there. Sixth Ministerial Conference was organized at Hong Kong and it was decided that issues would be sorted out in the next six months, and ‘Agreement on Agriculture’ would be finalized shortly. But since then no consensus could be reached so far, thanks to strong positions and adamant behavior of USA and European countries. Failure of Mini Ministerial at Geneva has once again demonstrated the contradictions in this multilateral trade body, that is, WTO.<br> Indian delegations courage to stand firmly despite pressure from developed world is commendable. Even before this meeting started on July, 21, 2008, pressure was being put on India to concede before the wishes of USA, EU and other developed countries giving huge subsidies to their farmers. They want that India and other developing countries allow free import of agricultural commodities. Problem of developing countries including India is that if this demand is conceded, farmer’s security and thus food security would be endangered. The question is of livelihood of millions of our farmers. Developed countries are not ready to concede to the special security measures (SSMs) as wanted by developing countries. Pressure on India could be easily understood that US President Bush called our Prime Minister not once but thrice, asking for the success of trade talks.</p> <p>This is pointing to the one point agenda of the government in the trade negotiations i.e. to obtain SSMs and discard other important issues in agriculture, Non – agriculture market access (NAMA), services and TRIPS. Importance of the SSM for safeguarding the livelihood needs of Indian farmers can not be denied. However, it is not the only provision which is going to safeguard the interests of India in the multilateral trade negotiations. India needs a series of provisions to safeguard its interest in agriculture, NAMA, services and TRIPS</p> <p>All this demonstrates that whole of government’s attention was centered on the issue of special security measures and all other issues including non-agriculture market access (NAMA), services and other issues in agriculture were not in their priority. They were either conceded before developed countries or there was lack of commitment on these issues. Government reduced its demands on special products and our earlier demand of at least 20 products to be treated as special products, was not pressed when WTO’s Director General Pascal Lamy suggested for 12 products. In case of NAMA, developed countries formula was largely accepted, which may endanger our industry. Reports were coming in that government has agreed to open up many services for foreigners. There was also no discussion even on amendment of TRIPS Agreement as demanded by India, which is of prime importance for our public health.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/08/26/a-tale-of-failed-talks-4640588/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/08/26/a-tale-of-failed-talks-4640588/#commentshttp://ashwanimahajan.blog.co.uk/2008/08/14/india-must-resist-wto-4586915/tag:ashwanimahajan.blog.co.uk,2008-08-14:/2008/08/14/india-must-resist-wto-4586915/Thu, 14 Aug 2008 10:53:17 +0200 <p> Second Opinion: Ashwani Mahajan</p> <p>On the night of July 29 a blink-and-miss variety ticker was seen flashing across most English language news channels, reporting that the World Trade Organization's Mini Ministerial talks had failed. It is said that the Indian delegation to the talks had demanded for a significant reduction in subsidies, especially trade distorting subsidies, being given by developed countries to their agricultural sector. The talks failed because these nations were not ready to give in to the demands of India and its supporters. Neither were they prepared to accept special security measures (SSMs) for the security of farmers in developing countries.</p> <p>The WTO came into existence on January 1, 1995. Prior to that world trade was guided through the General Agreement on Trade and Tariff (GATT). GATT was constituted in order to give international trade a boost, which was disrupted during the second World War. Eight rounds of talks were held under GATT. </p> <p>During the course of the eighth round four issues suvh as agriculture, services, investment, and intellectual property were taken up. It was now decided that countries would be bound by the decisions taken under GATT. A dispute settlement mechanism was also put in place. All this was included in a document called the Final Agreement and thus the World Trade Organization was born. Since then six Ministerial Conferences have been organised by the WTO. The initial meetings went off 'smoothly' and the wishes of the developed countries were fulfilled. But the developing countries were forced to reduce trade tariffs and remove quantitative restrictions on imports. </p> <p>In this context the Indian delegation's courage to stand firm despite being pressurised by the developed world is commendable. Even before the talks started on July 21, pressure was being put on India to concede to the wishes of the US, the EU and other developed nations. They wanted India and other developing countries to allow free import of agricultural commodities. But if that happens the livelihood of millions of our farmers will be at risk, which in turn will hamper our food security. Thus, India should remain steadfast and not cave in to the WTO's demands, which is using trade as a potent weapon to colonise developing countries for neo-imperialists such as the US and the EU.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/08/14/india-must-resist-wto-4586915/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/08/14/india-must-resist-wto-4586915/#commentshttp://ashwanimahajan.blog.co.uk/2008/08/03/can-monetary-measures-control-inflation-4535515/tag:ashwanimahajan.blog.co.uk,2008-08-03:/2008/08/03/can-monetary-measures-control-inflation-4535515/Sun, 03 Aug 2008 07:15:55 +0200 <p>Perturbed by accelerating rate of inflation, government has been advocating various measures to combat the same. Recently the government has advised the RBI to take appropriate measures to curb inflation. Following government’s advice RBI has even increased Repo rate, Cash Reserve Ratio (CRR) etc., but has so far refrained from changing bank rate for the time being.</p> <p>In the week ending June 24, 2008, rate of inflation has climbed to 11.63 percent, breaking 13 years record. Though government blames petrol-diesel price hike to the present spurt in inflation, but contradictory statements coming from the government circles, have also been the major cause of confusion about the causes of inflation. This confusion is creating distrust about effectiveness of the measures being adopted by the government to combat inflation.</p> <p>At first government was citing economic growth as major reason for high rate of inflation, but later it changed its stand and started accusing price rise internationally for the same. Recently government even blamed steel and cement companies conspiring by forming ‘cartels’ and pushing the prices upward. At other instance government even blamed hoarding by traders causing price hike of food items. And now government has added a new chapter by asking RBI to adopt appropriate monetary measures to check fast rising inflation. </p> <p>According to economic principles excess demand, costs escalation and structural factors cause inflation. For the past few months combination of all these factors have played their role in accelerating inflation. Major reason for present inflation is unprecedented increasing in the supply of money in recent years. It is important to note that currency held with the public which was 3, 55,666 crores on May 31st 2005 increased to 6,02,706 crores by 2008. This implies an increase of 2, 47,043 crores in just 3 years and 2 months. According to monetary economists money supply in the economy increases by approximately twice that of increase in the currency held with the public and reserve money. According to RBI, reserve money increased by 28.5 percent in the year 2007-08.</p> <p>RBI has only limited powers<br> This unprecedented increase in money supply is basically caused by large scale purchase of foreign exchange by RBI, populist government policies, heavy deficit financing by the government and rampant corruption at government level. In order to gain cheap publicity government is successively making populist schemes, ultimately leading to large scale deficit financing and thereby increasing money supply.</p> <p>Now the major question is, whether RBI would be able to stop inflation. To find answer to this question, we need to understand the limitations of RBI. According to Constitution of India, RBI cannot compel government to limit or reduce deficit financing. RBI is obliged to purchase foreign exchange brought to it by international investors and other investors. RBI even has no right to restrain government to adopt populist schemes. All this is leading to unprecedented increase in quantity of currency held by the public. It is true that currency is issued by RBI but it has no right to stop or reduce the issue of currency for all such purposes.</p> <p>RBI has jurisdiction only with regard to variation in Cash Reserve Ratio (CCR), Repo Rate, Bank Rate, sale and purchase of government securities in open market operations or Statutory Liquidity Ratio (SLR). All these measures can affect changes, only in the limited way, the capacity to create credit by commercial banks. But these measures have drawbacks as well as they affect economic growth adversely. In this context the decision of the RBI, not to increase bank rate is a step in right direction. Though it is obligatory for RBI to purchase foreign exchange brought before it, but it was possible to pay rising oil bills from large and overflowing foreign exchange reserves accumulated so far. This act could have stopped devaluation of rupee and petrol price hike to some extent.</p> <p>Need to attack basic causes of inflation<br> Government needs to directly attack basic causes of inflation. No doubt government has no control on fast rising international crude prices, but its impact on consumers can be reduced by providing relief in taxes. To curb price hike in food products, we need to end policy of neglecting agriculture. Investment in agriculture needs to be encouraged. Farmers should be provided remunerative price for their produce and agricultural costs be reduced. Buffer shocks should be maintained by procuring as products from the farmers and the practice of periodical sale from buffer shock should be re-established to curb unwanted upheavals in prices of food products. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/08/03/can-monetary-measures-control-inflation-4535515/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/08/03/can-monetary-measures-control-inflation-4535515/#commentshttp://ashwanimahajan.blog.co.uk/2008/06/22/penal-discussion-on-icrier-report-4346766/tag:ashwanimahajan.blog.co.uk,2008-06-22:/2008/06/22/penal-discussion-on-icrier-report-4346766/Sun, 22 Jun 2008 11:31:14 +0200 <p>Retail sector should be regulated, opine panelists at BIMTECH Seminar </p> <p>Jun 16, 2008<br> The retail market has to be regulated to avoid extinction of the unorganized retail segment, to avoid loss of employment to many small retailers.<br> This was the upshot of the panel discussion on 'Impact of organized retailing on the unorganized sector' which was organized on June 13th by Birla Institute of Management Technology (BIMTECH) in New Delhi. The panelists who were drawn from different political spectrums, organized and unorganized retail sector, the consumer activist organizations, political think-tanks, have endorsed the view that there should be a de-politicization of the entire issue to arrive at a pragmatic policy frame-work on retailing.<br> Kick-starting the discussion, Dr. Ashwani Mahajan expressed the concern about the ICRIER report, keeping the domestic retail and organized retail at par. Sooner or later, foreign retail chains would have an upper hand in the Indian retail scene. He also expressed the view that the body of evidences collated across the world clearly indicates that the price differential in the organized retailing was short lived. Once the monopolistic competition was caught up, there would be ramping up of prices as that had happened in the USA.<br> Echoing the same sentiments, Mr. Praveen Khandelwal, General Secretary, Confederation of the Indian Traders Association, said that "the ICRIER report had also indicated that 1.7% of the traders would have to close shop on account of the entry of the organized retail chains. In the Indian context, this would work out to 2 lacs shops per year. "This is a matter of great concern and none of the successive governments have given any thoughts to enhance the efficiency of the traditional distributive trade and neither is there any institutional credit available to the small traders," he added. He mentioned about the predatory pricing that would be resorted to by the organized retail sector by offering attractive discounts. The end result of this would be an unequal playing field which could push the 'self organized' retailers out of business.<br> Mr. Tapan Sen, Gen. Sec, CITU, mentioned about the social cost that would be incurred by displacing the traditional retail trade. There should be adequate measures for rehabilitating them and also for regulating the functioning of retail chains in India so that they are not being given an unfettered freedom. He made it clear that his party is not against the opening up of the retail sector but is extra cautious about the social backlash that such policy decisions can create if it is not properly orchestrated and the decisions are not taken in the most democratic manner.<br> Mr. Sumit Sinha, CEO, Aditya Birla Retail, said that there are a lot of misconceptions about the organized retail trade in India. It would leave enough space for traditional retailing and kirana shops, since the focus of the organized retail sector would be to sell multi-products like furniture, electronic gadgets, textiles, etc. through one window. He also referred to the price advantage, lower transaction costs, scaling down of wastages and better remuneration to the farmers, by the induction of organized retailing. He mentioned that Walmart in US co-existed with a large number of mom and pop stores, which is indicative of the co existence of both in a harmonious manner.<br> Reflecting the same sentiments, Dr Shriram Khanna, a consumer activist and professor in the Delhi School of Economics said there is a very high degree of politicization of the retail trade. He wanted a fair and transparent on these issues of national importance. The consumer, he said, is for organized retail since he gets the price advantage, quality material, redressal of consumer grievances and elimination of deceptive prices.<br> The others who spoke at the discussion were, Mr. Sunil Jain, Consulting editor, Business Standard, Mr. Pratap Somvanshi, Resident editor, Amar Ujala, N. Soundararajan, co-author, ICRIER report and Dr Jagadish Shettigar, Professor, BIMTECH. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/06/22/penal-discussion-on-icrier-report-4346766/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/06/22/penal-discussion-on-icrier-report-4346766/#commentshttp://ashwanimahajan.blog.co.uk/2008/06/10/gallping-growth-under-deepening-poverty-4297478/tag:ashwanimahajan.blog.co.uk,2008-06-10:/2008/06/10/gallping-growth-under-deepening-poverty-4297478/Tue, 10 Jun 2008 14:51:29 +0200 <p>DR. ASHWANI MAHAJAN</p> <p>Food insecurity has already reached a dangerous level. Prime Minister has said the world is moving fast towards shortage of food. The Finance Minister has blamed USA for trying to makeup the shortage of petroleum products by using food products. Ethanol is being extracted from soya and land under cultivation of food grains is being constantly diverted towards bio fuels. As a result of all this, the world is facing a severe food crisis. Countering this US President blamed that it is the rising food consumption of Indians, thanks to their rising incomes which is the root cause of shortage of food grains world over. Though there is no logic in the argument of US President but it is a reality that India is fast moving towards food insecurity. </p> <p>Government on wrong track<br> Food security is an internal matter of any nation. A nation cannot be dependent on foreign countries for food grains and other food products. As a nation ensures its external security, it has to ensure its food security as well. Condition of our agriculture was never excellent, but in the last two decades is has gone from bad to worse. Agriculture, especially food grain production was considered to be unnecessary. Our policy makers started suggesting the farmer that he should produce flowers and other cash crops like cotton, soybeans etc. for expo and domestic market to earn more incomes. Regarding shortage of food grains resulting from such a policy, the argument of the government was that we can easily makeup this shortage by way of imports. </p> <p>On the one hand government was discouraging farmers to produce food grains; it was taking its hands off agricultural development. Government expenditure on agriculture was reduced from 27 percent in 1987 to only 6 percent now. In the process subsidies of various kinds were withdrawn or reduced drastically. In the last year itself food subsidy was reduced by rupees 3,000 crores. Government also kept on washing its hands off from its basic duty of making procurement from the farmers at minimum support price. Even minimum support price so declared was too less to cover even the cost incurred by the farmers. Under these circumstances, totally devoid of government support farmers had to face the market forces. In search of good profits they diverted towards cash crops. Area under food grain cultivation started declining. Thanks to increasing productivity total production showed a marginal increase but per capita food grain availability declined during this period. </p> <p>Then started exploitation game by multinational corporations. Exploited by MNCs, the farmer went into severe debt. Farmers' suicides now have become a routine affair. Farmers insecurity got converted into food insecurity for the nation. Prices of Wheat, Rice, Pluses, Edible oils, Vegetables etc. all sky rocketed. Worst sufferer was the poor. </p> <p>Farmer security versus price control<br> Government says that price control is top in its priority. But perhaps farmers security is not in their priority list. In the last 6 to 7 years lakhs of farmers have committed suicide and this tendency is increasing instead of declining. Farmers are being deprived of their arable land for making Special Economic Zone (SEZ). Basic facilities like Road, Electricity, Health & Education are lacking. Government is not only trying to shy away from procurement, it is also constantly reducing its presence in agricultural research. </p> <p>Rising prices in the election year is giving sleepless nights to the government. To avoid further increase in inflation, the government has now turned to more and more procurement of food grain. Advertisements by the government shows that government is patting its back on this issue. If we go in the history, the same people used to call procurement by the government totally unnecessary and try to reduce allocation of funds for procurement. So far the government has procured 210 lakh tones of wheat by now. </p> <p>Last year government agencies could procure only 92 lakh tones of wheat. An year before that 2006 they purchased 148 lakh tones of wheat. In both these years they were well behind the targets. Due to low procurement government had to resort to heavy imports of wheat. Government though was not ready to pay adequately to the farmer, paid heavy price for imported wheat. Their love for imports is demonstrated by the fact that they allocated rupees 6000 crores for import of 50 lakh tones of wheat in 2007, whereas they were not ready to increase procurement price for the Indian farmer even marginally. Whereas price of rupees 1300 to 1600 per quintal was paid for imported poor quality wheat, farmers were being paid only rupees 850 per quintal. At this time private companies appeared on the scene and offered up to rupees 1050 per quintal of wheat. Naturally farmers preferred private companies to government procurement agencies. Imports were eminent. Shri Sharad Pawar, Minister of Food and Agriculture, revealed government's mind. When asked about repercussions of this heavy purchase by private players on price front, he said "If the farmer is getting a better price [from private buyers, as Agriculture Minister I am the happiest person. However, as a Food Minister, if I face any problem, I will import."</p> <p>Key to food security is farmer's security<br> Description above clearly shows that since the government decided to offer reasonable price to the farmer, it could procure 210 lakh tones of wheat. And now the government says that nation is comfortable on food front. Moral of the story is that if we want to have food security we need to secure the farmer. A small effort in the form of increased procurement price could change the situation drastically. The government should change its attitude. If we look at the international experience we note that even the developed countries have not only continued subsidizing their agriculture, they rather have increased their subsidies. Recent Farm Bill of USA aimed at enhancing agriculture subsidies to over 300 billion dollars clearly demonstrates their intentions. Indian government does not subsidise the farmers in any big way. In fact whatever little subsidy is there, it is constantly declining. Government agencies like FCI, NAFED, MARKFED etc. try to shy away from their responsibility of procurement due to non allocation of sufficient funds from government budget.<br> This year we may be able to manage the affairs with the help of wheat procurement to some extent. But in the long run government has to change its attitude towards agriculture. Government must take up the responsibility of over all development of rural areas, development of infrastructure in the form of Road, Electricity, Irrigation etc., protecting the farmer from market upheavals, providing crop insurance and remunerative price for their products may be some steps to start with. Government must understand that farmer and only farmer can save the nation's pride by providing food security to the nation. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/06/10/gallping-growth-under-deepening-poverty-4297478/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/06/10/gallping-growth-under-deepening-poverty-4297478/#commentshttp://ashwanimahajan.blog.co.uk/2008/05/16/food-insecurity-the-indian-express-story-4180027/tag:ashwanimahajan.blog.co.uk,2008-05-16:/2008/05/16/food-insecurity-the-indian-express-story-4180027/Fri, 16 May 2008 04:51:15 +0200 <p>Suman K Jha<br> Posted online: Thursday, May 15, 2008 at 2355 hrs IST<br> Towards food insecurity<br> In the column ‘Economy Watch’, Ashwani Mahajan says that “India is fast moving towards food insecurity.” He writes, “India which had emerged as an exporter of foodgrains has become a net importer. This is also true that developing countries are making large-scale imports of food grains ... Two weeks back Prime Minister Dr Manmohan Singh forewarned the international community that the world is moving fast towards shortage of foodgrains. This would not only lead to a high rate of inflation, but in fact even the development efforts of the third world would get adversely affected. Prior to the PM’s statement, Finance Minister P. Chidambaram had complained about reduction of area under wheat cultivation by the US in an attempt to enhance its bio-fuel production. And now it’s the turn of US president George Bush. According to his statement a week ago, the consumption in fast growing India and China is a major cause of the rapid increase in food prices. Before him, US Secretary of the State Condoleezza Rice had also made a similar statement blaming the rising prosperity of India’s huge middle class for spiralling food prices.<br> He concludes by saying, “When we are neglecting our agriculture ourselves, we don’t have the moral right to blame the US for the rising prices of foodgrains as it is producing bio-fuel from agriculture.” </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/05/16/food-insecurity-the-indian-express-story-4180027/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/05/16/food-insecurity-the-indian-express-story-4180027/#commentshttp://ashwanimahajan.blog.co.uk/2008/05/11/india-fast-moving-towards-food-insecurit-4160506/tag:ashwanimahajan.blog.co.uk,2008-05-11:/2008/05/11/india-fast-moving-towards-food-insecurit-4160506/Sun, 11 May 2008 18:16:00 +0200 <p>Two weeks back Prime Minister forewarned the international community that world is moving fast towards shortage of food grains. This would not only lead to high rate of inflation, even development efforts of the third world would get adversely affected. Prior to Prime Minister’s statement Finance Minister P. Chidambaram had complained about reduction of area under wheat cultivation by US in an attempt to enhance its bio fuel production. And now it’s the turn of US president George Bush. According to his statement a week ago, consumption in fast growing India and China is a major cause of the rapid increase in food prices. Before him Secretary of The State Condoleezza Rice had also made similar statement blaming rising prosperity of India’s huge middle class for spiraling food prices.<br> There is no point in George Bush’s argument considering the fact that according to UN since 2006 ,USA's consumption of food grains increased by huge 12 percent against only 2.5 percent annually in India.Irrespective of this debate there are not two views in this matter that the country is suffering from the shortage of food grains. This not only raises cost of living, a large number of people are also at the verge of starvation. In the last two years, the price of wheat flour has more than doubled from Rs8 to Rs18\kg. Same is the case with rice and other food grains like pulses, vegetables etc. When the country started facing shortage of food grains, the government decided to import food grains from abroad. After that, the international prices of food grains started sky rocketing and India had to import the food grains at exorbitant prices, much higher than what was being given to our farmers.<br> India which had emerged an exporter of food grains for a long time has become a net importer. This is also true that developing countries are making large scale imports of food grains .Situation for India becomes even more alarming if we compare availability of food grains with increasing population. In the last five years India’s population has increased by 8%, whereas food grains production could increase by hardly 5%.In the last one decade production of oil seeds has definitely gone down. Despite the fact that oil is very essential part of our consumption, government did not make any plan to increase production of oil seeds. This ignorance of oil seeds’ production has become a major cause of our increased dependence on oil & oil seeds imports. There is not doubt about the fact that in the whole world the prices of traditional food grains like wheat, corn and rice have been rising. According to UN in the last six months the prices of the food grains have increased by 50%. The major factor behind increasing prices of food grains is historic decline in the production of food grains world over. Food and Agriculture Organisation(FAO) has also cautioned that world production of wheat would be only 142 million tones by the year 2008, which is 10% less than the last year’s production. Situation of rising prices has been made even more worst by constantly rising international price of crude oil. The price of crude oil has been moving around $120 US per barrel for the last few days. Constantly rising prices of crude oil is prompting various countries to shift their crop pattern such that the land previously been used for food grains production is now being used for bio fuel. Apart from this food products are also being used for extracting ethanol. In the year 2006-07, US utilized 20% of its corn production for extracting ethanol. It is believed that by the year 2016, US would be utilizing 32% of its corn production for producing ethanol. In the light of rising prices of crude oil US has set target for itself for producing 25 billion gallons of bio fuel in the next 10 years. Europe has set a target of 5.75% of its diesel needs to be fulfilled from plants by the year 2010.The China is extracting ethanol not only from corn but even from wheat and rice. Experts believe that this tendency will increase further. Even UN believes that US and European Union are both responsible for this sudden international food crisis, as these nations have reduced their production of food grains in order to produce more bio fuel. These countries have started shifting their land in favour of bio fuel plants. </p> <p>Demand is gaining ground that subsidy being given for production of bio fuel is stopped forthwith. UN’s World Food Program also believes that in the next two three year prices of food grains & edible oils would continue to increase further. According to their estimates by the year 2008-09 prices of food grains may increase further by 35%. Today 70% of developing countries are dependent on imported food grains. By the year 2030 situation would be even worse. According to a study by the World Food Program by the year 2030, developing nations would be able to fulfill hardly 86% of their food grains needs. As a result of this their dependence on imports would increase further. At present developing nations are importing 103 million tones of food grains. This dependence would increase more than twice to 265 million tones in the next 20 years. US, European Union, Canada, Australia and Argentina would be the largest food grains exporters, it believes. </p> <p>All this clearly depicts that not only there is a shortage of food grains in India; even the possibilities of food grains imports to make up this deficiency are also very meager. There is hardly any single year when India could produce food grains for its need for the last so many years. For the last so many years we have been importing wheat. In the year 2007 we made a import of 5 million tones of wheat. Normally government keeps buffer stocks of 40 million tone of food grains. But due to advent of corporates in the procurement of food grains, its buffer stock has constantly been depleting and government had to depend upon import of food grains to supplement supplies. Now even rice is being imported, apart from wheat. </p> <p>Looking at the international deficiency of food, it is even more essential now that India once again strive for food self sufficiency. But situation has worsened in the last two decades due to neglect of agriculture. Not only that government is spending much less on agriculture than before, rising agriculture input costs, lack of infrastructure like electricity, roads irrigation etc and un-remunerative prices of agricultural products are all contributing toward ill health of agriculture. Even rising number of farmer suicides and insufficient food grains production are the result of the same. </p> <p>When we are neglecting our agriculture ourselves, we don’t have moral right to blame US for the rising prices of food grains as it is producing bio fuel from agriculture. We have to fulfill our food needs domestically and not by importing food grains at high prices from US and other countries. In addition to this we also have to arrange for effective distribution and ware housing facilities, Situation is alarming. If we don’t rise to the occasion, worst food crisis is not very far off. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/05/11/india-fast-moving-towards-food-insecurit-4160506/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/05/11/india-fast-moving-towards-food-insecurit-4160506/#commentshttp://ashwanimahajan.blog.co.uk/2008/04/28/dream-of-ten-paisa-mobile-call-4104986/tag:ashwanimahajan.blog.co.uk,2008-04-28:/2008/04/28/dream-of-ten-paisa-mobile-call-4104986/Mon, 28 Apr 2008 12:50:48 +0200 <p>Dr. Ashwani Mahajan</p> <p>Recently Telecom Regulatory Authority of India (TRAI) claimed that the day is not far when you would be able to make a mobile call for ten paisa only. Reason told was increasing competition among telecom companies on the one hand and declining per unit cost on the other. According to telecom companies per connection revenue has also been declining very fast.</p> <p>Its known to all that there are two kinds of mobile technologies used in India – one is CDMA and the other is GSM. Two technologies are different, so the companies using these two technologies have also been different. Mobile phone entered this country with GSM technology. Leading company using GSM technology is Sunil Bharati’s Airtel. Along with this another company which entered is this field was Essar, later known as Hutch and now Vodafone. This company maintains second position in GSM. Apart from these two, BSNL (Public sector), Aditya Birla’s Idea, BPL, Spice etc are some other companies providing mobile services on GSM technology. Its known to all that when mobile phone came in, tariff lends were very high at rupees 32 for outgoing and rupees 16 to incoming. Customer base kept on increasing fray more companies kept on entering in and call rate kept on falling. But till the time CDMA based companies didn’t enter into the as, customers had to pay very high call rates, thanks to monopoly of GSM companies. Thanks to the entry of Reliance at the first instance and Tata later, level of competition increased many fold and the result was drastic fall in call rates. At present nothing could the said about comparative call rates of different companies, as these companies offer different kinds of plans, which are not easily comparable. To raise their customer base, companies offer zero to ten paisa call within their own network. For roaming customers they offer low cost roaming plans, for youths they offer night talk plan, different plans for short messages (SMS), different types of packs for STD calls and many more plans to woo more customers. Despite all this, still GSM tariffs are still higher as compared to CDMA tariffs. </p> <p>Never the less, thanks to increasing competition, mobile call rates declined and customers enjoyed more and better choices. Today a customer who wishes to own a phone, can get the same in minutes. Prior to advent of mobile companies, it used to take 8 to 15 years to get a phone connection. Today an ordinary workman can and is also affording a mobile phone. Today a mobile in the hand of a Plumber, Carpenter, Electrician, Autorikshaw driver is a common feature. At the time of independence there were two phones per ten thousand of population. At present by the end of 2007 there are about, about 3 phone connections per 10 persons. Data shores that by the end of 2007, available there were 28 crore 57 lakh telephone connections, out of which mobile phones were 24 crore 56 lakh.</p> <p>As landline phones are connected through wires, mobile phones are wireless. Medium to send signals in mobile phones is ‘Spectrum’. This spectrum is available with Ministry of Defence. This ‘Spectrum’ is freed from defence activities and is made available to the mobile companies by way of a license. Overall ‘Spectrum’ in the country is limited. Even Prime Minister says, that spectrum is a limited resource, which must be used judiciously. In fact quantum of spectrum allocated to a company would decide the maximum number of connections/customers of the company. That is the size of the company is decided by the size of the spectrum held by the company.</p> <p>There was a time when telecom sector was completely controlled as it was completely under public sector. Expected expansion of telecom services could not take place because of complete control. Lifting of controls on the one hand and technological development on the other, played a great role in the development of telecom services in the country. Recently a big controversy arose due to sale of spectrum by the government. To expand their services, 46 companies were in queue for allocation of spectrum. This queue was determined in accordance with the date of original license of these companies. In the meanwhile companies who have been using CDMA technology, now applied for GSM licence. Their argument was, that they already have mobile licence (though it was for CDMA technology). Department of Telecom, Government of India, accepting Their argument accorded the status of GSM licence to Reliance Communications and also offered spectrum as desired by the company for rupees 1651 crores. It may be noted that Reliance communications was ready with a Bank draft of rupees 1651 crores. Thus among 46 companies, who had made 575 applications, Reliance Communication jumped the queue and was allocated spectrum. Another company who got benefited was Tata. According to experts, government last rupees 6000 crores in the process. Had the government adopted auction route, it would have got rupees 6000 crores more. Recently US government’s auction of spectrum yielding more than 16 billion US $ have proved them right. Alongside started legal battles and also a war of words between Telecom Regulatory authority of India (TRAI) and Department of telecommunication, (DOT) Government of India.</p> <p>It is clearly evident from the chronology of events that in this battle among mobile companies, the government has tried to give undue benefit to one set of companies. Other companies, especially smaller ones are the losers. But this game of losses and gains are not limited to companies only. Experience in the past clearly reveals that due to campetition among companies the biggest gainer in the consumer, whose call rate have declined from rupees 32 for outgoing and rupees 16 for incoming to 50 paisa to one rupee for outgoing and zero paisa for incoming. Government has a special responsibility to encourage equitable competition among companies to benefit the consumers. The way in which the government has allocated spectrum to one set of companies, by a sudden change in policy, is against this spirit. If the government refrain from lobbyism and adopt fair policy, dream of 10 paisa mobile call can actually be realized.<br> --------------------------------------------------------------------------------------------------------</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/04/28/dream-of-ten-paisa-mobile-call-4104986/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/04/28/dream-of-ten-paisa-mobile-call-4104986/#commentshttp://ashwanimahajan.blog.co.uk/2008/04/05/world-needs-india-3997490/tag:ashwanimahajan.blog.co.uk,2008-04-05:/2008/04/05/world-needs-india-3997490/Sat, 05 Apr 2008 03:30:53 +0200 <p>WORLD NEEDS INDIA<br> It is a fact that today India is second fastest growing country of the world. But but our policy makers are still reeling under the psyche that India can develop only with the help of foreign investment or foreign help. We must not forget that we are a country which provides scientists to US for its scientific excellence, a country which is fast becoming a hub for medical tourism, a country which is a recognised nuclear power, a country with the largest youth population of the world, a country whose people have proved their intellegence, hard work and entrepreneurship par excellence wherever they have gone. This all indicate very clearly that nobody can stop India in becoming a super power. What we need is the confidence in ourselves.<br> After the disintegration of USSR, it was thought it is the rule of USA all over. But position is detoriating fast for US. Increasing budgetary deficit of US government, thanks to its extraordinary involvement in Iraq and other countries, erosion in its economic position due to detoriating competitive strength is leading to constantly depriciating dollar vis-a-vis other currencies. It is the time when India is showing a high rate of growth in its GDP. Exports especially of services are rising in leaps and bounds, our scientific community has established its supremacy in the so called developed countries. But those at the helm of the affairs in the government are still reeling under the psyche of white men’s supremacy. They are still desperate about FDI, FII and MNC’s. For them the development is possible only if we are able to maximise FDI and hand over the management of our economy to MNC’s.<br> It is true that in the beginning of 1990s, the country was reeling under foreign debt, foreign exchange reserves were at their lowest, such that the country was not able to afford even one week’s imports. That was the position which was a natural outcome of our overdependence upon foreign assistance and a development model based upon foreign technology. But our policy makers could not learn from their past mistakes of following an alien model of development. They once again decided to follow another alien model, that is American capitalist model of development. They thought for this purpose Foreign Direct Investment and entry of multinational corporations can only take us out from this position. Norms for foreign investment were relaxed. Foreign promoters of the multinational corporations were allowed to regain their holdings in the companies which had earlier been Indianised, more and more sectors were opened up for Foreign Direct Investment, foreign institutional investors were allowed to rule Indian stock and commodity markets. In other words we can say that the Stalin model of development was replaced by capitalist model in the changed scenario. In the process under the influence of USA, in the past 15 years governments of different regimes have followed similar kind of policies. Similar influence had been at work forcing India to sign unequal multilateral treaties with regard to International Trade.<br> Though government has failed the people by putting India into an unfavourable position, Indian people have marched ahead to demonstrate their strength, intelligence and entrepreneurship and has put India on the world map as a powerful country, striving hard to become a super power in a short span of time. In the analysis to follow an attempt has been made to underline this march of the nation to become a super power.<br> India One Of The Fastest Growing Nations<br> According to a report published by World Bank India is now one of the fastest growing countries in the world and in the years to follow it will not only continue to sustain its growth, it may surpass even the developed countries of today. In the last three years India’s nominal GDP has been rising at 16% per annum in dollar terms (as Rupee has strengthened against Dollar). If this rate can be sustained then India will equal to US GDP of $11 trillion by 2050. One may not be mistaken that this spurt in the growth rate has been caused by FDI or FII from developed countries like US, UK, Japan etc. This has been made possible by the hard work and intelligence of Indians themselves. Had US been behind this booming Indian economy they would have done it for themselves first. Let us have a look at the comparative rates of growth of different economies to make the picture clear.<br> Declining Human Resources In Developed World<br> In the prosperity of a country human resources play the most vital role. The whole of the West is facing an acute shortage of this human resources both in terms of number as well as quality. Future is still very bleak for them. Take Germany, still Europe’s largest economy and its benchmark. By 2030, German demographers project their country will have 7 million fewer people of working age than now. There are now four workers supporting each retiree. Within a generation there could be just two.<br> Some other countries are facing an even steeper demographic slide. By 2050, the United Nations projects, Italy will shrink from 57.5 million people to just 45 million, Hungary from 10 million to 7.5 million, Poland from 39 million to 33 million, while Russia will shrivel from 145 million to barely 100 million.<br> This scarcity is behind large scale immigrations to European countries from the third world especially from Asia. Europe’s rate of population growth is falling while the inhabitants are ageing. Data from the EU’s statistical office shows that between 1975 and 1995 the EU population grew by just over 6%. From 1995 to 2025 however, this growth is expected to almost half to roughly 3.7%.<br> The working-age population was 225 million in 1995, and is expected to remain fairly constant at around 223 million in 2025. They are facing an acute problem of sustainability of retired population. Immigration is being regarded as the ‘magic bullet’ to solve Europe’s labour market and welfare state problems. A 2002 United Nations report on ‘replacement migration’ suggested that immigration could help solve their population problems.<br> Rising Migration - The National Statistical Office estimates the UK population to rise by around 5 million people over the next 25 years, with immigrants accounting for around two thirds of this growth. Net migration in the UK over the next 25 years is projected to be around 135,000 a year.<br> This trend of migration is found in almost whole of the Europe, US, Canada and Australia. Bulk of the migration comes from India. Though this involves a lot of brain-drain from India, where many of our educated youths trained in different spheres of life migrate in search of riches of these countries, this also brings many indirect benefits to our economy by way of International linkages. Bulk of our trade deficit is filled by way of remittances from Non Resident Indians. Not only this, what we call FDI also comes to a great extent, from people of Indian origin.<br> With the emerging trends in population of the present day developed countries, whether they like it or not Indians are likely to support these countries by way of migration to these countries. Even today Indian community plays an important role in the politics of US, UK, Canada etc. This phenomenon will get strengthen further in future.<br> Sometimes we do find a reverse trend. Many of the people from different parts of the world are looking forward to work in India for different reasons including good business environment, low cost of living, low cost of health services etc. In other words who would not like to work in an emerging power center, that is India.<br> India A Technological Super Power<br> On January 10, 2007 India stunned the world by launching four satellites on a single rocket, including one that will be brought back to earth to set the stage for the country to send an astronaut into space. It not only carried two small Indian satellites but also two foreign satellites, one each for Indonesia and Argentina.<br> India is fast turning to become one of the few countries to possess a capacity to hit a target of 5000 kilometers. India has already successfully test fired Agni II ballastic missile, with a range of 2000 km in April 1999. Marching towards becoming an IT superpower Indian IT industry recorded 34.5% growth in exports from $12.8 billion in 2003-04 to $17.2 billion in 2004-05 and to $22.5 billion during 2005-06.<br> India Emerging As A Hub For Medical Tourism<br> On the one hand Indians are getting settled abroad, high cost of health care is attracting foreigners from almost all parts of the world including so called developed countries to India for solution of their health related problems. As health care costs skyrocket, patients in the developed world are looking overseas for medical treatment. India is capitalizing on its low costs and highly trained doctors to appeal to these “medical tourists.” Even with airfare, the cost of going to India for surgery can be markedly cheaper, and the quality of services is often better than that found in the United States and UK. Many countries have developed links for speedy treatments in India for their nationals on account of the fact that in these countries one has to wait for extended periods of time to undergo operations. In India, medical treatment is not only fast but also costs a fraction of what it costs in USA or Europe. Even tele-consultancy is available for expert opinion and transmission facilities. An annual medical checkup in India costs US $150, whereas in Germany it costs US $1,400.<br> Is It Because Of Globalisation?<br> If we are the fastest growing nations in the world it is not because of globalisation. If we have a look at the composition of GDP and its growth, it is clearly indicated that globalisation has practically no role in GDP growth. Rather globalisation has played a negative role in the growth of agriculture, as it has been completely neglected under the influence of foreign investment. Government has reduced its expenditure on agriculture.<br> Budgetary allocation for agriculture has been reduced from 27 percent in the pre globalisation era to only 6 percent now. Contribution of agriculture has come down from more than 25 percent to less than 20 percent. Sector which has grown fastest, that is service sector, is mainly due to growth in IT, BPO sector etc. This at best can be attributed to technological factors and Indian genius. If India has emerged as a hub for medical tourism it is because of the excellent human resource in the field of medicine, surgery and other related fields. India has pushed the established centers far behind and made its position on the top on the basis of excellent service at competetive prices.<br> No country whatsoever has ever willingly provided us with any technology with regard to space, nuclear sciences or others. It is our scientists who have made it possible. To conclude we can say nobody can stop India now to become a global superpower. What we require is a self confidence, consistent efforts to educate our people at all levels, build infrastructure and a true nationalist character. Our policy makers should also understand that world needs us more than we need them.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/04/05/world-needs-india-3997490/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/04/05/world-needs-india-3997490/#commentshttp://ashwanimahajan.blog.co.uk/2008/04/01/loan-waiver-is-no-solution-3980480/tag:ashwanimahajan.blog.co.uk,2008-04-01:/2008/04/01/loan-waiver-is-no-solution-3980480/Tue, 01 Apr 2008 12:57:11 +0200 <p>When government announces that GDP is growing at a rate of around 9 percent and that India has emerged as one of the fastest growing economies of the world, it gives a feeling of pride. Infact in the last fiscal year April 2007 to March 2008, our GDP growth rate though less, but was still around 8.8 percent.<br> Government is patting its back for the so-called growth experience. What does GDP mean to an average person living in this country? If we have a look at the composition of GDP, it includes agricultural products including food grains, industrial products and services. On the one hand more of GDP should mean more of wheat and rice, more of cars and two wheelers and other industrial goods. But it also means more of transport services, electricity, tele-communication etc. If we try to look into the factors leading to increase in GDP, we find that agriculture does not contribute to this growth experience, industry is growing almost equal to the rate of growth of GDP and growth of services surpass all limits and as such the contribution of services sector to GDP jumps from 45.80 percent in 1997-98 to 55 percent recently, whereas gain of services is the loss of primary sector, contribution of which dips from 26.50 percent to 19 percent during the same period.<br> Latest NSSO data shows that still 58 percent of the population depends on agriculture and rest 42 percent is engaged in non-agricultural activities. Another important thing to note is that hardly 7 percent of total work force is engaged in organised sector, both public and private. If we try to compare the share of primary sector (including agriculture, fishing, mining and animal husbandry) in GDP with the proportion of population engaged in the same, story of unequal and non-inclusive growth experience becomes evident. Vast majority of population is reeling under poverty, while a few enjoy all sorts of luxuries.<br> Experience of 60 years after independence has been a mixed one. In these 60 years we have build up a wide production base, large scale infrastructure, and self sufficiency in food grain, far reaching achievements in the scientific and strategic fields and so on. But we are facing a serious challenge of unemployment, poverty and hunger of our masses.<br> Unprecedented Agricultural Crisis<br> Continuous neglect of agriculture by the government, declining capital formation both by public and private, consistently rising cost of production and unequal competition with imports has made agricultural the most vulnerable sector of Indian Economy, translating into unprecedented crisis of agricultural sector. Farming is becoming most unprofitable venture, deepening of farmer’s debt, translating into large-scale farmers' suicides. So far lakhs of farmers have already committed suicide and many others are loosing their titles over land. The process of pauperisation of agriculturists is being accentuated by entry of multinational agri-business firms, whose interests are being promoted by the state.<br> Indian economy is going through a critical phase today with worst situation of agriculture than ever before, rising unemployment both in absolute terms and as percentage of working population, sky rocketing prices especially of food products etc. on the one hand and rising aspirations of the people at large and youth in particulars.<br> But response of our policy makers has been very dismal. They perhaps have left the economy to the whims and wishes of markets, especially international markets, which in turn are controlled by transnational corporations. When our finance Minister rose to present his budget proposals for the finical year 2008-2009, this influence was once again looked very apparent and solutions suggested in response to the present problems have not only insufficient they also lacked depth.<br> Loan Waiver for Farmers is no solution<br> The fact that agriculture is a very bad shape has been clearly conceded in Economic Survey 2007-08 and in the Union Budget 2008-09. More significantly the government has also conceded that agriculture has been grossly neglected during the period of economic reforms. In the last four years when GDP was growing at an average rate of 8.8 percent, agriculture was lagging much behind with growth rate of less than 2 percent. Ever increasing suicides by farmers, persistently rising cost of production, declining area under food crops are all indications of the crisis in India’s agriculture.</p> <p>There is no reason to believe that our Oxford educated Finance Minister does not know about the root cause of agriculture crises in India. But the only package he chose was loan waiver for farmers. It was told that 4 crore farmers would be benefited from 60 thousand crores of loan waiver. But he conveniently ignored the fact that farmer indebtedness is not the cause, but actually the effect of agriculture crises. The crises of agriculture is caused primarily due to lack of infrastructure such as electricity, irrigation, roads, market etc., high court of production due to rising prices of fertilizers, pesticides, electricity, seeds etc. and above all non-remunerative prices for their produce. Farmers’ indebtedness thus is only an indicator of deep agricultural crises. To solve the problem of agricultural crisis we need to attack the root cause of the problem. </p> <p>It is important to note that loan waiver as announced by the Finance Minister can give relief to only those farmers, who have borrowed from Regional Rural Banks, Co-operative Banks and Commercial Banks. But 70 percent farmers, those who have borrowed from moneylenders, traders etc., could not get any relief from this loan waiver scheme of ballot box budget. More important is a fact that there is no significant impact of government’s claims about agricultural policy at ground level. Rampant corruption in National Rural Employment Guarantee Scheme, persistently increasing cost of production and non remunerative prices of agriculture produce are all making agricultural crisis more and more deeper. </p> <p>Just saying that slow growth of agricultural is disappointing and conceding that agriculture has been neglected during the reform period, will not serve any purpose. Some concrete measures are called for including a policy shift, giving due respect to the agricultural sector in national economic policy. If the policy makers do not rise to the occasion, not only sectoral inequalities would get more widened, disturbing our social fabric, even our food security would also be endangered.</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/04/01/loan-waiver-is-no-solution-3980480/#comments">Comments</a> </small> </p>http://ashwanimahajan.blog.co.uk/2008/04/01/loan-waiver-is-no-solution-3980480/#commentshttp://ashwanimahajan.blog.co.uk/2008/03/13/ever-greening-of-patents-and-public-heal-3872035/tag:ashwanimahajan.blog.co.uk,2008-03-13:/2008/03/13/ever-greening-of-patents-and-public-heal-3872035/Thu, 13 Mar 2008 16:42:20 +0100 <p>Ever-greening of Patents and Public Health: Emerging Issues<br> Dr. Ashwani Mahajan, Reader, Department of Economics, PGDAV College, University of Delhi<br> Patents and intellectual property rights are no new terms. First patent law in India came into being in 1852. This patent law was obviously aimed at giving preference to foreign pharmaceutical companies. After independence Indian Patent Act 1970 was enacted after deliberating on the issue for 15 years. This law was aimed at providing medicines at affordable prices to the masses, apart from giving encouragement to research and development and domestic competition while protecting interests of the patent holders. Provision was made only for the process patent and to ensure the availability of medicines at affordable prices to the public, provisions were made for compulsory licensing. Royalty to the patent holders was limited to 5 percent for use of patent by others and for patent to be effective, domestic production was the essential condition.<br> Then came TRIPS agreement under WTO. The government gave the commitment to amend Indian Patent Act in tune with TRIP’s agreement, which necessitated the inclusion of provisions in the Patent Act, which were undoubtedly not in the national interest in general and public health in particular. Indian Patent Act was amended which led to inclusion of Product Patent, limiting the scope for compulsory licensing, lengthening the period of patent to 20 years and patent protection, even in case there is no domestic production of that product and patent protection was provided even on the import.<br> Thanks to Indian Patent Act 1970, India emerged as an important production centre for medicines. Medicines are available in India at the cheapest prices. Our pharmaceutical industry in comparison with the rest of the world served not only our own country; rather it emerged as one of the important exporters of medicines all over the world, especially to the developing countries. While Indian Patent Act was being amended by the government under the pressure from WTO appeals were coming from not only within India but even from other countries including WHO to safeguard public health. Under severe criticism from different quarters the government was forced to introduce amendments in Indian Patent Act (Amendment) Bill 2005. Under these amendments provisions were introduced so as to allow the existing domestic production of medicines to continue despite the Patent. Another provision was made to discourage continuation of Patent Right beyond the period of patent by preventing the grant of frivolous patents and ever-greening.<br> “Ever greening” is when patent owners attempt to extend the patent monopoly by seeking a new patent that “updates” the first one before its expiration. This is usually done by claiming things such as an “inventive” method for administering the pharmaceutical compound covered by the base patent. For pharmaceutical products, this means an extended monopoly that excludes generic drugs from the market.<br> Ever greening, in one common form, occurs when the brand-name manufacturer literally “stockpiles” patent protection by obtaining separate 20-year patents on multiple attributes of a single product. These patents can cover everything from aspects of the manufacturing process to tablet colour, or even a chemical produced by the body when the drug is ingested and metabolised by the patient.<br> According to European Generic Medicines Association ,in the 1980s the list of a drug’s properties eligible for patenting was relatively limited. They included:<br> Primary uses<br> Processes and intermediates<br> Bulk forms<br> Simple formulations<br> Composition of matter<br> During the 1990s the catalogue (1) grew to 18, nearly four times the amount of a decade earlier, to include patents on such additional aspects as:<br> Expansive numbers of uses<br> Methods of treatment<br> Mechanism of action<br> Packaging<br> Delivery profiles<br> Dosing regimen<br> Dosing range<br> Dosing route<br> Combinations<br> Screening Methods<br> Chemistry Methods<br> Biological Target<br> Field of use </p> <p>EXPERIENCE OF EVER GREENING IN OTHER COUNTRIES<br> When ever-greening through patent strategies, the originator manufacturer simply keeps adding patents to the product (whether legitimate or not), essentially forcing the generic manufacturer to choose between waiting for all the patents to expire and applying for marketing authorisation anyway, running the risks of litigation and the associated costs and delays.<br> Drug patent evergreening is the single most important strategy that multinational pharmaceutical companies have been using since 1983 in the US (and since 1993 in Canada) to retain profits from "blockbuster" (high sales volume) drugs for as long as possible.<br> When the original patent over the active compound of a brand-name drug is due to expire, these drug companies often claim large numbers of complex and often highly speculative patents. Laws in the US and Canada require manufacturers to notify the original brand-name patent holders of their intention to market copies at the expiry of the original patent. The original patent holders can then threaten these potential generic competitors with breaching their now "evergreened" patents and seek a court order preventing their marketing approval.<br> The ultimate consequence could be elderly and poor patients paying several times the present price for drugs.<br> The problem is a severe one in the US. In 2002, an extensive inquiry by the US Federal Trade Commission found that as many as 75 per cent of new drug applications by generic drug manufacturers were the subject of legal actions under patent laws by the original brand-name patent owner. These were driving up US drug costs by keeping the cheaper generic versions off the market.<br> In Canada, a similarly extensive investigation by the Competition Bureau revealed similar problems with drug patent evergreening. It found that the hundreds of legal actions involving evergreening claims were having a disastrous effect on drug prices.<br> The evergreening article in the Australia-US FTA (article 17.10.4) is far worse than the US or Canadian versions. For the first time it links the operations of our Therapeutic Drug Administration (the drug safety and efficacy body) with supervising patent law.<br> It requires that TGA drug marketing approval be "prevented" indefinitely (not for the 30-month and 24-month periods as in the US and Canada) whenever any type of patent (including a speculative evergreening patent) is merely "claimed".<br> The Generic Medicines Industry Association of Australia, in its submission to the Senate inquiry on the FTA, stated that this evergreening provision could lead to "long delays or generic equivalents not reaching the market".<br> If the big companies succeeded in delaying generic drug market entry for as little as 24 months, the federal cost for just the first few highest expenditure PBS drugs could be $1.5 billion between 2006 and 2009. Public hospital drug expenditures could increase by 12 per cent over the same period.<br> ATTEMPTS TO RESTRICT EVER GREENING IN INDIA<br> As per the amendments readied by the commerce and industry ministry and passed by the Parliament, scope of patentability was restricted by expounding mandated terms namely inventive step and new invention. A patentable pharmaceutical substance will now be any new entity involving one or more inventive steps (as redefined). In this regard an issue was raised in the Parliament about the pharmaceutical substance, that whether it will be a New Chemical Entity (NCE) or a New Medical Entity (NME). The matter was then decided to be referred to a Technical Expert Committee to go into the question of whether it would be TRIPS compatible to limit the patent to New Chemical Entity of New Medical Entity involving one or more inventive steps. Apart from this another issue was raised that whether it would be TRIPS compatible to exclude micro-organisms from patenting Hence, an Expert Committee was constituted to examine these issues. This Expert Committee headed by Dr. R.A. Mashelkar submitted its report on the issue of TRIPS compatibility of NCE or NME and recommended as follows:<br> “It would not be TRIPS compliant to limit granting of patents for pharmaceutical substance to New Chemical Entities only. However, every effort must be made to provide drugs at affordable prices to the people of India. Further, every effort should be made to prevent the grant of frivolous patents and ‘ever-greening. Detailed Guidelines should be formulated and rigorously used by the Indian Patent Office for examining the patent applications in the pharmaceutical sector so that the remotest possibility of granting frivolous patents is eliminated.<br> NOVARATIS LOST EVERGREENING TEST CASE<br> Pharmaceutical giant Novartis first file a suit against Indian companies producing generic version of cancer drug imatinib, which was marketed as Glivec (or Gleevec in the US) after second amendment of Indian patent Act 1970, claiming generic producers of the drug violates it’s (Novartis’s) patent rights. The company was granted interim relief and wad granted one of first exclusive marketing rights.<br> As a developing country, India was not required to full comply with TRIPS rules, which include pharmaceutical product patents, until 2005. in the interim, however, it introduced a temporary system of ‘exclusive marketing rights’ for new products that would then be considered for patents with the advent of full TRIPS compliance. When Novartis was granted one of the first such exclusive marketing rights. For Glivec in November 2003, the price increased from $230 to $2,740.<br> After India reformed its patent laws to make them compliant with WTO rules in 2005, Novartis was refused a patent for Glivec on the basis that the beta crystalline from did not provide a significant enough “enhancement of efficacy” of the original imatinib molecule. Novartis responded with a writ to the High Court appealing against the ruling. It argued that Section 3(d) of the Indian Patent Act was “unconstitutional as it is vague, arbitrary and violative of Article 14 of the constitution (right to equality)”, and alleged that it contravened India’s obligations under the TRIPS Agreement.<br> Defending the patent-worthiness of Glivec, Novartis research chief Paul Herrling said “medical progress occurs through incremental innovation. If Indian patent law does not recognise these important advances, patients will be denied new and better medicines”.<br> India attempts to differentiate genuine innovation from evergreening by using the “enhancement of efficacy” concept. The High Court suggested only that efficacy can be defined as the ability of a drug to produce a desired therapeutic effect.<br> Novartis maintains that Glivec boosts bioavailability (i.e. the degree to which the drug is absorbed by the patient) by 30 percent over the original form of imatinib, which should constitute an enhancement of efficacy. The Chennai Patent Ofice disagreed in rejecting the application.</p> <p>THE ISSUE<br> So far we have talked about the technicalities and what Expert Committee had recommended. It is not merely a question of what definition of pharmaceutical substance is adopted. It is a question of whether our people would be able to afford medicines and can enjoy the right to live as provided by our constitution. Though apparently Mashelkar report seems to be concerned with provision of medicines at affordable prices, prevention of ever-greening of patents and grant of frivolous patents, but its recommendations in fact go against what it says. Theoretically, the logic for patent protection is straightforward. Discovery of new medicines involves heavy cost, those who invent (companies) need an incentive to make this investment. Grant of patent provides this incentive and protection.<br> But, practically issue is not so straightforward. Those who have invented medicine were given protection for a long period. Now innovative drugs are no longer coming in a big way. They (companies) have very little to add in terms of new medicines. Now their strategy is to get minor tweaks to existing drugs patented and thereby get an ever-extended monopoly wherever possible. In trade circles this phenomenon is called ever greening. In real terms recommendations by Mashelkar Committee actually allow these companies to get this ever extended monopoly by way of ever-greening of patents. This phenomenon is also known as Swiss Patents.<br> MASHELKAR COMMITTEE’ ARGUEMENTS<br> 1. Given the terms of reference of the committee to find out whether it would be TRIPS compatible to limit the grant of patent for a pharmaceutical substance to a New Chemical Entity or to a New Medical Entity by involving one or more inventive steps. Analysing the TRIPS agreement and also the practice in different countries, Mashelkar Committee comes to the conclusion that it would not be TRIPS compatible to limit the grant of patent for a pharmaceutical substance to a New Chemical Entity or New Medical Entity.<br> 2. It would also not be in the national interest to limit grant of patent for a pharmaceutical substance to a New Chemical Entity or to a New Medical Entity. For this the argument put forward by the committee is that Restricting patentability just to NCEs or NMEs could have both legal and scientific ramifications. There is a perception that even the current provisions in the Patents Act could be held to be TRIPS non-compliant. Drug discovery research is still finding its feet in India. Though many companies are investing, it will at least be a decade before a critical mass is in place and results start accruing. Thus, restricting patentability to just NCEs would mean that most of the pharmaceutical product patents would be owned by MNCs.<br> 3. The report suggests not to confuse ever greening of patents with incremental innovations.<br> HOLES IN THE REPORT<br> 1.It would be interesting to note that Mashelkar’s report came in December 2006 ,when Novaratis’s case was pending in the court. Faced with severe charges of plagiarism ,when Mashelkar was preparing to withdraw his report ,Novaratis issued a press statement stating” A report from the Mashelkar committee, commissioned by Indian Government and comprised of Indian experts, supports many of the concerns about Indian patent law expressed by Novaratis, mentioning that the laws are not complying with international agreements like TRIPS."<br> 2. Mashelkar Committee while recommending on the issue, chose to ignore the arguments put forward by eminent jurists and experts, different stake holders and groups. It would not be out of context to mention that while ignoring the arguments, contrary to its recommendations, it borrowed (without acknowledgement) from UK based research funded by Interpat, an association of major multinational pharmaceutical companies. The question is if this committee of five renowned experts was to base its recommendations on secondary sources and that too on research funded by the beneficiaries of the recommendations, why it took a long duration of one and a half years to finalise its report.<br> 3. While amending its patent law the Parliament included some unique provisions to prevent ever-greening of patents. It stipulated that if the patent holder wanted a patent for an improvement on an already existing drug it must show the improvement actually made the drug more effective. Though, this stipulation is very logical but it does not concur with the interest of the multinational corporations. The TRIPS agreement explicitly gives us the flexibility to set higher patent standards. The Mashelkar Committees report ignores these flexibilities and declares the present provisions in the Patent Act incompatible with TRIPS.<br> 4. The report though suggests not to confuse ever-greening of patents with incremental innovation, it fails to really distinguish these two.<br> Dangers Ahead<br> 1. The recommendations of the committee if accepted would go a long way to translate existing patents into an infinite monopoly and artificially high prices for essential medicines for infinite period because only one manufacturer is allowed to supply the market.<br> 2. Hard earned protections placed in the existing law as a result of continuous efforts by experts and activists may also become doubtful and multi national corporations may use these recommendations as a weapon to build up argument against the protections available in the existing law.<br> Mashelkar retracts<br> After having thoroughly been exposed, Dr. Mashelkar the chairman of the committee has sought to withdraw the report on the grounds of 'technical inaccuracy and plagiarism' and has requested for three months time to reexamine and resubmit the report. But it is a fact that the committee has not only recommended in tune with the dictates of MNCs, but has also misstated India right to define the scope of patentability and thereby threatened the access to medicines by the masses. The committee therefore loses the moral right to continue and re examine and resubmit its report<br> References:<br> Eric Larson, A presentation entitled “Evolution of IPR and Pharmaceutical Discovery and Development”, at the conference: “Intellectual Property Rights: How Far Should They Be Extended?”, organised by The National Academies, Committee on Intellectual Property Rights in the Knowledge-based Economy (22 October 2001).<br> Eric Larson’s comments during panel discussions in the verbatim report of the conference proceedings, pp 119-127.<br> Evergreening of Pharmuceutical Market Protection ,www.egagenerics.com<br> Report of Technical Expert Group on Patent Law Issues , Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion, February 2006<br> Indian Patent (Amendment) Act,2005,Government of India</p> <p>Appendix 1<br> Extracts of the Report of Technical Expert Group on Patent Law Issues<br> (a) New Chemical Entity</p> <p>Terms of Reference: Whether it would be TRIPS compatible to limit the grant of patent for pharmaceutical substance to new chemical entity or to new medical entity involving one or more inventive steps:</p> <p>5.2 The term "new chemical entity" appears for the first time in International Intellectual Property agreements in the TRIPS Agreement of 1994, under Article 39.3:</p> <p>"Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, (emphasis added) the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public or unless steps are taken to ensure that the data are protected against unfair commercial use."</p> <p>5.3 According to the United States (US) Food and Drug Administration (FDA), a new molecular entity (NME) or new chemical entity (NCE) means a drug that contains no active moiety that has been approved by FDA in any other application submitted under section 505(b) of the Federal Food, Drug, and Cosmetic Act.</p> <p>5.4 The term "new medical entity" has neither been used nor defined in the TRIPS Agreement.</p> <p>5.5 Article 27 of the TRIPS Agreement elaborates the scope of patentable subject matter as follows:</p> <p>“1. Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.</p> <p>2. Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.</p> <p>3. Members may also exclude from patentability: </p> <p>(a) diagnostic, therapeutic and surgical methods for the treatment of humans or animals;<br> (b) plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO Agreement.”</p> <p>5.6 Granting patents only to NCEs or NMEs and thereby excluding other categories of pharmaceutical inventions is likely to contravene the mandate under Article 27 to grant patents to all 'inventions'. Neither Articles 7 and 8 of the TRIPS Agreement nor the Doha Declaration on TRIPS Agreement and Public Health can be used to derogate from this specific mandate under Article 27.</p> <p>5.7 Article 1 of the TRIPS Agreement requires compliance to the provisions of the Agreement, while TRIPS plus provisions are optional. This would mean that limiting grant of patents to pharmaceutical substances to new chemical entities only, and excluding new forms of crystals, polymorphs, etc., if they satisfy the criteria of patentability, is not consistent with TRIPS Agreement.</p> <p>5.8 Section 2 (1) (j) of the Indian Patents Act defines “invention” as a new product or process involving an inventive step and capable of industrial application. The term “pharmaceutical substance” has also been defined in Section 2 (1) (ia) as any new entity involving one or more inventive steps. The term “inventive step” has been defined in Section 2 (1) (ja) as a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art. Thus, a chemical to be patentable must be new, non-obvious and have utility. However, Section 3 excludes certain inventions from being patented. This, inter alia, includes the exclusions under Section 3 (d) as under:</p> <p>“The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.</p> <p>Explanation: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy.”</p> <p>Thus, the new form of a known substance would not be patentable unless it differs significantly in properties with regard to efficacy.<br> National Interest perspective</p> <p>5.9 If the aim of limiting patents to new chemical entities is to prevent a phenomenon loosely referred to as 'ever-greening', this can be done by a proper application of patentability criteria as present in the current patent regime. </p> <p>5.10 It is important to distinguish 'ever-greening' from what is commonly referred to as 'incremental innovation'. While 'ever-greening' refers to an extension of a patent monopoly, achieved by executing trivial and insignificant changes to an already existing patented product, 'incremental innovations' are sequential developments that build on the original patented product and may be of tremendous value in a country like India. Therefore, such incremental developments ought to be encouraged by the Indian patent regime.</p> <p>5.11 Restricting patentability just to NCEs or NMEs could have both legal and scientific ramifications. There is a perception that even the current provisions in the Patents Act could be held to be TRIPS non-compliant. Drug discovery research is still finding its feet in India. Though many companies are investing, it will at least be a decade before a critical mass is in place and results start accruing. Thus, restricting patentability to just NCEs would mean that most of the pharmaceutical product patents would be owned by MNCs.<br> 5.12 In case of patenting of drugs, the protection to various forms of same substance (salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixture, etc.) is often seen as ‘ever-greening’ (extending incremental protection to a subsisting patent) and hence such protection is objected to.</p> <p>5.13 In most countries, patenting of an invention for different forms of the same substance is subjected to the test of novelty, non-obviousness (unexpected effect) and utility before it is granted patent protection. Such a protection in the form of incremental inventions in respect of known and new molecules or a process potentially provides an added advantage to an inventor or a firm to retain its market share or capture a space in the established market. However, patenting an invention does not imply that a person can practice the invention; he would have to exercise due diligence and ensure that the rights of others are not infringed. </p> <p>5.14 Many drug industry stakeholders feel that the use of the expression “new chemical entity” under the Patents Act would lead to many interpretations. While some Indian drug industry representatives feel that limiting grant of patents to new chemical entities will not be conducive to competitive growth, some others feel that patent protection should only be given based on the strict compliance of the patentability criteria. Many Indian industry representatives are not in favour of widening the scope of patentability.</p> <p>5.15 The group examined the current level and type of R&D innovations that the Indian drugs and Pharma industry was undertaking. Annexure IV and V provide some representative samples of international patents filed by the Indian industry. It is clearly seen that most of them are based on incremental inventions.</p> <p>5.16 In the light of the above discussion, it would not be TRIPS compliant to limit granting of patents for pharmaceutical substance to New Chemical Entities only. However, every effort must be made to provide drugs at affordable prices to the people of India. Further, every effort should be made to prevent the grant of frivolous patents and ‘ever-greening’. Detailed Guidelines should be formulated and rigorously used by the Indian Patent Office for examining the patent applications in the pharmaceutical sector so that the remotest possibility of granting frivolous patents is eliminated.<br> Appendix 2<br> Extracts from Patent (Amendment) Act,2005<br> 3. In section 3 of the principal Act, for clause (d), the following shall be substitued, namely:—<br> "(d) the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.<br> Explanation.—For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to effica</p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/03/13/ever-greening-of-patents-and-public-heal-3872035/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/03/13/ever-greening-of-patents-and-public-heal-3872035/#commentshttp://ashwanimahajan.blog.co.uk/2008/03/03/ssi-s-in-the-web-of-laws-3808541/tag:ashwanimahajan.blog.co.uk,2008-03-03:/2008/03/03/ssi-s-in-the-web-of-laws-3808541/Mon, 03 Mar 2008 02:35:32 +0100 <p>Background<br> While introducing and pursuing new economic policy it was promised that the administrative procedures will be simplified, inspector raj will be done away with and to give a reprieve to the small scale sector from cumbersome procedures, a new unified simple small enterprise act would be enacted. In fact liberalization policy boasted all along in the name of new economic policy, means among other things liberalization from unwarranted government intervention, unhealthy administrative procedures and end of inspector raj.<br> After more than 15 years of the beginning of the new economic policy, this is the right time to look into this aspect of policy. We understand that Inspector Raj has been a stumbling block not only in the development but also for survival of the Small Scale Units. Given the number of inspectors and other conditions with which these small entrepreneurs deal with, there is hardly any time and scope for them to think for the welfare and future of the unit. Much of entrepreneurs time is wasted in fulfilling the obligations prescribed under never ending rules and regulations.<br> Despite talks about reforms there has hardly been any reform with regard to procedures in the recent past. There has been no simplification after new economic policy came into force, except occasional and frequent changes in the formats and returns. There are about 40 Acts which an entrepreneur has to comply with. While complying with these Acts and other rules and procedures an entrepreneur has to fill up more than 300 forms per year and a number of inspectors visit their units, all making it almost impossible to think about the improvement or development of the production unit.<br> Despite talks about reforms very little has been done with regard to burden of procedures in the recent past. There has been very little simplification after new economic policy came into force, except occasional and frequent changes in the formats and returns. Rather in some cases new rules are being added to make scenario worst.<br> Different Acts/Rules/Schemes, must have had some objective at the time of their enactment, but it is generally seen that as it penetrates to the lower level or the implementation level, the entire objective and the spirit behind the policy seems to had been forgotten and lost. The officers concerned are more interested and busy in finding who has not updated the records, who has not filed the return in time and try to grill from all possible angles, rather than to what extent their department has performed in achieving objectives like pollution department in clearing the atmosphere, the employment exchange in achieving the employment objectives etc. Law is stiffened to such an extent that the follower always fails and offers then take pride in having more violators than the followers.<br> There have been only a few studies about the plethora of regulations and procedures inhabiting the growth of small scale industries. There has been an occasional reference about the same in different commissions and committees concerning small scale sector. It is worth looking at the report of the Study Group on Development of Small Scale Enterprises headed by Dr. S.P.Gupta, Study made by Administrative Staff College of India on laws, rules, regulations and procedures relating to Small Scale Industries in India, report of the Second Labour Commission.<br> All these studies and reports indicate that Small Scale Industries in India are reeling under the plethora of rules, regulations and procedures etc. which come in a big way in the development of Small Scale Industry in the country. It has been recommended that this burden of procedures be reduced for the betterment of SSI sector.<br> Burden of Policy Framework on SSI Units<br> Small Scale Sector is a vibrant part of Indian Economy with significant contribution towards production, employment and exports. It not only contributes, it’s performance is better than big industries in the field of production, employment and exports.<br> Small industries not only provide large scale employment with much less capital, they play a significant role in the industrialisation in the rural and backward areas. Thus they are helpful in equal distribution of national income and wealth by way of reducing regional imbalances. Small industries also work as ancillary to big and medium industries and thus help in their growth. In a country like India where labour is abundant but capital is scarce, this sector has special and multi-dimensional importance due to its ability to provide large scale employment to the unemployed labour force.<br> There are two types of trends emerging simultaneously. One, the number of SSI units both registered and unregistered is growing. The number of SSI units in the country (including registered and unregistered) is estimated to have grown from 10.52 million in 2001-02 to 11.86 million in 2004-05; the employment estimate has correspondingly gone up from 24.91 million persons in 2001-02 to 28.28 millions in 2004-05.<br> Two, a large number of SSI units are getting closed down for one or the other reasons. According to the Third Census, in November 2002, covering units registered permanently up to March 31, 2001, a total of 22.62,401 units were surveyed. Of these 13,74,974 were found to be working and the remaining 8,87,427 units (39 per cent) closed, according to the 2004-05 Annual Report of the Ministry of Small Scale Industries.<br> The size of the total SSI sector, as per the 2002 Survey, is estimated to be over one crore units, with as much as 47.22 per cent of the units located in Uttar Pradesh, Andhra Pradesh, Madhya Pradesh and Tamil Nadu.<br> According to the various committees constituted by the government to study the problems of Small Scale Sector, the factors hampering the healthy growth of this sector range from inadequate access to timely credit, technological obsolescence and infrastructure bottlenecks, to marketing constraints and cumbersome rules and regulations.<br> A super structure of rules and regulations have been created by the combination of Central and State governments and Provincial authorities. These rules and regulations can be complied with, but with a high cost in terms of human efforts. A SSI units typically has to go through the process of obtaining a number of statuory clearances, even much before the start of actual production. The moment a project is conceived, this compliance with rules and regulations start inhibiting the very start of the project. First of all a certificate of registration from the relevant authorities has to be obtained. This certificate of registration is the pre-requisite to seek allotment of an industrial shed, sanction of requisite power connection and clearance from municipal authorities. Thus the authority empowered under the law to grant such registration is in a position to wield tremendous influence over the fortunes of the enterprise. This registration may even be cancelled. And units require re-registration at the end of every five years.<br> Further, the entrepreneur must obtain sales tax, excise and pollution control clearances before commencing manufacture of the product. Sales tax registration, central excise registration and consent letter from pollution control authorities require a whole range of formalities of filling up the forms, inspections etc.<br> Thus, we understand that regulatory system has inbuilt provisions for entrepreneural overload with its emphasis on prior registration and periodic renewals. Record keeping is another aspect. Labour laws for instance require the entrepreneurs to maintain registration of workmen on his rolls, of wages paid, deduction effected, overtimes paid, fines extracted, advances paid, engagement of sub-contractors etc. The law on sales tax typically requires the registered units to maintain eleven registers, eight books of accounts and files of ten different types of the documents taken together with registers and records under other statutes. The SSI units obligations under law in this regard could easily running to about hundred types of documents and other records. A list of the various Acts faced by SSI units, different forms which an entrepreneur has to fill up and the registers they have to maintain is attempted at and is given in the appendix.<br> The entrepreneur managing a small scale unit has basically two options, one, expend all his energies in ensuring compliance with the multitude of state regulations applicable to industrial establishments. In this case he will have a very little time left to pay attention for improving quality, business promotion, technical innovation etc. Two, he enters into some sort of secret arrangements with the regulatory establishments to save him from troubles and wastage of energy. But such an arrangement carries a price tag. This enhances cost of production and thus reduces competitive strength of the Small Scale Units. Thus it is very clear that this so called regulatory framework undermine the financial viability of these units. This regulatory framework does not make any distinction between large and small units (except very small units). Presently, units employing ten or more workers (where manufacturing is carried out with the aid of electric power) are brought within the ambit of Factories Act. In certain aspects of regulations such as in case of Environmental Protection even size in terms of number of workers employed is not a relevant criterion.<br> The Factories Act is a classic example of how rules and regulations governing Small Scale Manufacturing Sector work against the smooth functioning of Small Scale Units. It is also a classic example of the Inspector Raj. There are too many parameters of functioning of the unit that the entrepreneur has to monitor and ensure compliance. They are not only too stringent to be complied with, they are loosely specified too. </p> <p>The Menace of Inspector Raj<br> The Factories Act, E.S.I. Act, Provident Fund Act, Central Excise Act, State Sales Tax Act, Income Tax Act etc. are only a few of the various Acts faced by the Small Scale Units. There are number of other legislations faced by SSI units. A list of such Acts is given in the Appendix 1. Of course various Inspector numbering more than 50 visit a unit to inspect whether the provisions, rules and regulations as specified by the Act are complied with or not. Adding to the agony of SSI units sometimes Inspectors visit a unit not for any inspection, but for collection of data for various types of census records.<br> The Factories Act 1948 followed by the Contract Labour Act 1948, Minimum Wages Act 1948, Payment of Bonus Act 1965, Employment Exchange (Compulsory Notification of Vacancies Act 1959, Air (Prevention & Control of Pollution) Act 1981 empower the maximum number of inspectors.<br> Some of these inspectors are vested with wide ranging powers, including order of imprisonment (which ranges anywhere between 6 months and 7 years), sealing the unit, and stopping the operations of a unit. Other powers comprise imposing a penalty, disconnecting water and electricity supply, filing a case in the court of law, and denying renewal or canceling the operating license.<br> A list of inspectors is tabulated below on the basis of these powers. The following inspectors have all the three powers of - imprisonment, sealing and stopping operations of a unit - vested with them :-<br>  Asst P.F Commissioner/ P.F Enforcement Inspector<br>  ESI Inspector<br>  Asst/ Jt/ Dy Director (Industrial Health & Safety<br>  Officials of the State Pollution Control Board<br>  Director of Intelligence & Revenue<br>  Dy/ Chief Electrical Inspector<br>  Assistant Controller of Weights & Measures<br>  Range Inspector<br> The first 4 categories of inspectors in the above-mentioned list visit a unit most regularly, as has been pointed out by our survey. Hence, it is evident that, those inspectors with maximum powers also visit most regularly.<br> The enormous powers vested with these inspectors coupled with the frequency of their visits, perpetuates Inspector Raj and breeds corruption.</p> <p>Experts’ View Point<br> Number of Experts, Committees, Commissions and Study Groups has tried to look into the various aspects of this menace of plethora of rules and regulations and other aspects of policy framework inhibiting the growth of Small Scale Sector. All of them without exception have suggested for amending rules, simplification of procedures and exempting Small Scale Sector from various Acts. They have also suggested to minimise the number of forms to be submitted by the Small Scale Sector under various rules. Dutta Committe on Inspector Raj, Sub-Committees of SSI Board, Bhatt Committee on Legislature for Small Industries etc. had gone into this aspect.<br> Later on Study Group on Development of Small Scale Enterprises headed by Dr. S.P.Gupta, Second National Commission on Labour and Study Group of Administrative Staff College of India went into the problems faced by Small Scale Sector due to the burden of policy and legal framework. An attempt has been made in this chapter to realise recommendations made by the above three.<br> Study Group on Development of Small Scale Enterprises<br> The report of Planning Commission’s Study Group on Development of Small Scale Enterprises headed by S.P.Gupta suggests that the vision for the 21st century for SSEs cannot be realised with plethora of laws and rules and regulations governing this sector and there is need for a single Unified Act governing promotion and development of small scale enterprises in the country.<br> The report further suggests that there should be a separate Small Enterprises Development Act for SSEs similar to the Industrial Development and Regulation (IDR) Act. This comprehensive Act may cover all aspects relating to regulation and growth of SSEs.<br> The report further observes that the small Business Administration (SBA) of United States has a comprehensive single law governing SMEs. On the same lines, there should be a separate comprehensive law for SSI units, which has been long pending demand of SSI units.<br> Study group recommends that the SSE units should be free from Laws/procedures which cause undue harassment. As far as possible, inspection should be replaced by self certification and procedures should be transparent and hassle-free. Broadly, the existing laws could be classified in three categories <img src="/img/smilies/icon_sad.gif" alt=":(" class="middle" border="0">a) Laws governing set- ting up of industries; (b) Laws governing working of the industry; and (c) Laws relating to Labour and their Welfare.<br> The study group observes that the laws relating to labour and welfare have been found more deterrent and troublesome because the small entrepreneurs are not able to comply with the requirement of maintaining a large number of registers, forms returns, etc. Further, the labour strength of small enterprises may vary as per availability of orders, which increases difficulties of small enterprises to comply with the labour laws. In view of the above difficulties experienced by the SSI entrepreneurs, especially tiny units, it is felt necessary to recommend exemption from all laws/regulations to tiny units. This would leave more time for entrepreneurs to pay attention to their work and make efforts for increasing productivity and profitability.<br> The Study Group on Development of Small Scale Enterprises suggested that :<br> 1. Tiny units should be exempted from all laws/regulations excepting those which relate to safety of human beings and the environment.<br> 2. It was noted that the system of Inspection on fiscal matters such as Income Tax, Excise Duty, Sales Tax etc., have been greatly simplified in recent years. There is need for similar simplifications in other fields as well.<br> 3, Inspections carried out for SSE’s could be prescribed under three conditions: (i) on receipt of complaints, (ii) selection of unit for sample check (10% of total units), and (iii) for audit purposes. The Study Group feels that self-certification and voluntary declarations would help the SSE’s.<br> 4. System of self-certification be introduced, which will obviated the need for regular inspections. Electronic transmission of data should be encouraged to make the system more transparent and hassle free.<br> 5. The regualtory laws/ procedures for SSI units should be further simplified. Number of visits by Inspectors should be programmed that all inspections could be held on only one day within a quarter as far as possible, so that the entrepreneurs are not harassed frequently. The day of inspections should be communicated in advance.<br> 6. For new units, single window clearances should be arranged irrespective of whether they relate to clearances from Central Authorities or State Authorities or Local Authorities.<br> 7. The regulatory laws/ procedures for SSE’s should be clubbed together wherever possible.<br> 8. The jurisdiction of various Sections/ Clauses and Departments should be clubbed so that minimum possible inspectors are required to visit the SSE units.<br> Apart from this rules can be simplified in the following manner.<br> Second National Commission on Labour<br> The report of the Second National Commission on Labour, Government of India appreciates Labour Laws (Exemption from furnishing returns and Maintaining Registers by Certain Establishments) Act, 1988 in their observation. By this enactment employers in small and very small establishments were exempted from furnishing return and maintaining registers under certain labour laws. Small establishment has been defined to mean an establishment in which not less than ten and not more than nineteen persons are employed or were employed on any day of the preceding twelve months; ‘very small establishment’ has been defined to mean an establishment in which not more than nine persons are employed or were employed on any day of the preceding twelve months. The laws in respect of which this law provides for exemption from filling returns and maintaining registers as prescribed are the following :-<br> Payment of Wages Act, 1936<br> Weekly holiday Act, 1942<br> Minimum Wages Act, 1948<br> Factories Act, 1951<br> Working Journalists and other Newspaper Employees (Conditions of Service)<br> and<br> Miscellaneous Provisions Act 1955<br> Contract labour (Regulation and Abolition) Act, 1970<br> Sales Promotion Employees (condition of Service) Act 1976<br> and Equal Remuneration Act 1976<br> The above mentioned Act of 1988 does not intend to all Labour Laws but only to those listed above. Second National Commission on labour, Govt. of India noted that there is no reason why the simplification of returns to be sent and registers to be maintained cannot be extended to all aspects, including social security. Commission notes “After all, it must be recognised that the returns are being asked for, essentially for statistical purposes and in some cases for information on compliance with safety regulations. But considering the delays, the gaps and unevenness of data, these returns in the aggregate do not serve much purpose. It may be desirable to rely on periodic sample surveys which will furnish the data necessary for policy formulation. We would urge that this matter be pursued vigorously. Some States have already simplified the forms that are to be submitted, and are experimenting with one simple form. There is no reason why this should not be prescribed and given effect to”.<br> Study Group of Administrative College of India<br> The SSI Law Project Commissioned by the Union Ministry of Small Scale and Agro and Rural Industries, has been undertaken to reduce the harassment faced by SSI’s due to plethora of laws, rules and regulations and the burden of inspections under various laws.<br> The Administrative College of India made a study of laws, rules, regulations and procedures relating to small scale industries in India, has recommended that none other than environment laws should be made applicable to SSI units employing less than 50 persons (including part-time, contractual and casual) or with less than Rs. 25 lakh in plant and machinery at historical value.<br> The study has identified the following laws as redundant for the SSI sector:<br> The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959 (Act 31 of 1959).<br> The Employees Liability Act, 1936 (Act 24 of 1938).<br> The Weekly Holidays Act, 1942 (Act 18 of 1942)<br> The Collection of Statistics Act, 1953 (Act 32 of 1953).<br> The Labour Laws (Exemption from Furnishing Returns and Maintenance of Registers by Certain Establishments) Act, 1988 (Act 32 of 1953).<br> The Study Group further recommended that laws and procedures should be simplified. In this context it was recommended to substitute 52 forms with one common annual return. It also recommended for substitution of all inspections with only one inspection once in five years or when the whistle is blown regarding non-compliance of statutory provisions by any particular unit and replacement of all the registers with one muster roll register and a binder of wage slips.<br> Thus, from the above analysis it is clear that burden of regulatory framework comes in the way of the development of SSI’s and there is no alternative to minimisation of this burden.<br> Occasional Reprieve from Burden of Legal Framework<br> According to Andhra Pradesh government claim, Andhra Pradesh is among the first few states in the country to initiate reforms relating to simplifying and minimising instructions. According to Andhra Pradesh government annual schedule is prepared for inspection of specific industrial areas and the industries are timely informed about the same.<br> All inspections, except for statutory inspections, regarding the violation of rules and regulations by any unit were to be permitted only on the basis of written, signed and verified complaints.<br> Surprise inspections are to be conducted only by Gazetted Officer with permission in writing from the regional authority or Head of the Department. Accredited agencies carry out statutory inspections on payment of fees in technical areas. Government formulated a regulated and systematized trial unit. Common annual return has been issued in consultation with the SSI associations to cover the returns filed under various laws of Factories and Employment Department.<br> Government of Andhra Pradesh further claims that a system of Common General Register has been started to meet the requirements of storing information. Further permanent licenses are being given provided some formalities which are completed. These formalities include proof of ownership/tenancy rights of the premises where the unit is located, municipal corporation clearances, clearance from pollution authorities, power releasing certificate, copy of partnership deed or memorandum of articles of associations in case of private limited companies etc. All small scale and tiny industries operating without power or operating with power up to 30 HP and employing up to 30 persons are exempted from obtaining prior approvals/clearances from government agencies. The industries with no power or having power up to 5 HP are exempted from obtaining all clearances. All proposed industries with installed power up to 75 HP are exempted from obtaining prior approvals for site/factory plan from the Factories Department. The clearance from the Pollution Control Board has been made automatic except for the enlisted 65 highly polluting industries. District Industries Centre will give NOC (acknowledgement) which will be considered as clearance. Government dispensed obtaining approvals from Medical & Health Department for setting up of industries. Self-certification by the industry to comply with labour laws is sufficient under provisions of certain Labour Laws to all types of industries except for major hazardous industries.<br> Labour Laws (Exemptions from furnishing returns and Maintaining Registers by Certain Establishments) Act, 1988<br> By this enactment employers in small and very small establishments were exempted from furnishing return and maintaining registers under certain labour laws. Small establishment has been defined to mean an establishment in which not less than ten and not more than nineteen persons are employed or were employed on any day of the preceding twelve months; ‘very small establishment’ has been defined to mean an establishment in which not more than nine persons are employed or were employed on any day of the preceding twelve months. The laws in respect of which this law provides for exemption from filling returns and maintaining registers as prescribed are the following :-<br> Payment of Wages Act, 1936<br> Weekly holiday Act, 1942<br> Minimum Wages Act, 1948<br> Factories Act, 1951<br> Working Journalists and other Newspaper Employees (Conditions of Service)<br> Miscellaneous Provisions Act 1955<br> Contract labour (Regulation and Abolition) Act, 1970<br> Sales Promotion Employees (condition of Service) Act 1976<br> and Equal Remuneration Act 1976<br> The above mentioned Act of 1988 does not extend to all Labour Laws but only to those listed above.<br> Example of Andhra Pradesh with regard to simplification of legal provisions and procedures show that we can give some reprieve to the Small Scale Sector, provided their is a will to do so. Andhra Pradesh and such other examples should be replicated in other places. But this does not fully solve the problem of Small Scale Sector with regard to burden of legal procedures. Fundamental changes are required even if they involve legislative changes.<br> Conclusions and Policy Suggestions<br> Inspector Raj has been a stumbling block not only in the development but also for survival of the Small Scale Units. Given the number of inspectors and other obligations the small entrepreneurs have to deal with, there is hardly any time and scope for small entrepreneurs to think for the development and future of the unit, as much of the time is wasted in fulfilling the obligations prescribed under never ending rules and regulations.<br> Despite talks about reforms very little effort has been made with regard to procedures in the recent past. There has been no simplification after new economic policy came into force, except occassional and frequent changes in the formats and returns.<br> Different Acts/Rules/Schemes, must have had some objective at the time of their enactment, but it is generally seen that as it penetrates to the lower level or the implementation level, the entire objective and the spirit behind the policy seems to had been forgotten and lost. The Officers concerned are more interested and busy in finding who has not updated the records, who has not filed the return in time and try to grill from all possible angles, rather than to what extent their department has preferred in achieving objectives like pollution department in clearing the atmosphere, the employment exchange in achieving the employment objectives etc. Law is stiffened to such an extent that the follower always fail than they take pride in having more violations than the followers.<br> Coming to the policy suggestions, we may catagorise the Small Scale Enterprises into three parts, one tiny industrial units, two Small Scale Industrial Units and three Service and Business Enterprises. This is essential due to the fact that it would not be advisable to have uniform law for all types of Small Scale Enterprises. A note of caution here that for the reasons best known to the government, a new concept of Small and Medium Enterprises (SME) has been coined. Apparently due to this concept Medium Scale Enterprises are being clubbed with Small Scale Enterprises. In view of the fact that there is a need to have separate policy descriptions for different sizes of Small Scale Enterprises, Medium Enterprises should not be clubbed with Small Scale Enterprises in any case.<br> Coming to the suggestions regarding reducing the burden of regulatory for Small Scale Enterprises, we can classify the existing laws governing the Small Scale Sector as follows:<br> 1. Laws governing setting up of industries.<br> 2. Laws governing working of the industries.<br> 3. Laws relating to labour and their welfare.<br> 1. Laws governing setting up of industries<br> Given the fact that before starting up of the industry an entrepreneur has to run from pillar to post for obtaining sanctions to start an industrial unit may it be tiny or small scale. Clearances from Central Authorities, State Authorities and Local Authorities are required to be obtained, which involve heavy cost in terms of energy, time and money for the entrepreneur. In some States attempts have been made to adopt Single Window Clearances for different types of authorities. There is no reason why this cannot be done. Online registration of Small Scale Industrial Units and Single Window Clearances from various authorities as given above should be arranged.<br> 2. Laws governing working of the industries<br> As discussed earlier various inspectors from departments tend to visit a Small Scale Unit, causing a lot of trouble for the entrepreneurs. In this regard a Unified Act incorporating aspects of different Acts pertaining to Small Scale Sectors should be legislated.<br> Towards a Unified Act for SSI’s<br> A well designed simple, transparent, impetial and understandable by all unified Act will definitely solve the problem.<br> Second National Commission on Labour rightly points out that returns which are being asked for stastical purposes, information on compliance with safety regulations etc. should be done away with because the delays, the gaps and unevenness of data provided by these returns make them redundant and they serve no purpose.<br> The regulatory regime of SSI is quite burdensome in comparison with their capability to cop with it. Although the SSI unit should not be exempted from the necessary social and safety legislature, it is common complaint that the SSI units are subjected to repeated and random inspections at the will and pleasure of local inspectors of various departments. It is a fact that the individual entrepreneurs are not strong enough to stand up to these inspectors whose intentions are often questionable.<br> There is a need for a simple practical law for small scale industries comprising of various Acts and rules like Central Excise Act, Factories Act, Provident Fund Act and rules, E.S.I. Act and rules, Income Tax Act. All the above aspects can be covered under a single Act, governing promotion and development of Small Scale Enterprises in the country.<br> Inspection<br> Dr. S.P.Gupta’s Study Group noted that the system of inspection on fiscal matters such as Income Tax, Excise Duty, Sales Tax etc., had been greatly simplified in recent years. A further suggested that there is a need for similar simplifications in other fields as well. Regarding inspections it rightly suggested that (a) system of self certification be introduced which will obviate the need for regular inspections, (b) electronic transmission of data.<br> Apart from this, given the computerisation and development in information technology a system of online returns for various Tax Authorities can further ease out the burden of inspections by various bodies.<br> The Study Group recommendation about clubbing the jurisdiction of various section/clauses and departments should be adopted at the earliest to minimise the inspections of Small Scale Enterprises. Further arrangements should be made. This is in line with clubbing of regulatory laws/ procedures for Small Scale Enterprises.There are no problem in making arrangement of single day inspection by inspectors from all the departments so that the hassles of repeated inspections are minimised. The day of inspections should be communicated in advance.<br> Regarding pollution laws except for highly polluting industries clearance from Pollution Control Board be made automatic and acknowledgment by District Industry Centre be considered as a clearance as is the case in Andhra Pradesh.<br> 3. Laws relating to labour and their welfare<br> It is found that laws relating to labour and their welfare are more deterrent and troublesome because the small entrepreneurs are not able to comply with the requirement of maintaining a large number of registers, forms, returns etc. Labour strength of small enterprise varies according to the availability of orders, which increases difficulties of small enterprises to comply with labour laws. As per the recommendation of Study Group headed by Dr. S.P.Gupta tiny units may be exempted from labour and their welfare laws. This would definitely increase productivity and profitability of tiny units.<br> Factory rules<br> 1. Factory Act rules should be made applicable only if the no. of persons employed are 50 and more with power and 100 and more without power.<br> 2. A single return should be allowed to be filed in one year.<br> 3. The Factory Act should be very clear in respect of installation of motors; machines etc. and the units should be allowed to go ahead with production if they satisfy the above norms. If there is any breach penal action could be taken against the offenders. This way any unit can commence production without delay.<br> Provident Fund Act and Rules: - The present system of collecting fixed amounts every month from both the employers and employees are good, but when there is an emergency for the workers they are not able to draw any money from their savings. Special provisions may be made for them for drawls from their savings in emergencies otherwise they are forced to borrow money from money lenders at very high interest rates.<br> E.S.I. Act: - Presently ESI contributions are made both by employers and employees with the laudable aim of giving medical facilities to the workers. The treatment given in most of the hospital is far from satisfactory. Most of the workers are forced to take medical aid outside even after paying sizeable amount every month. This could be discussed directly with the workers and made optional. Similarly employees earning more than Rs. 3000 per month may be exempted from the above payment or it could be made optional for them.<br> Corporation/Municipality/Panchayat Act: - There is enormous delay in the issue of installation licences. Therefore units may be allowed to remit the licence fees along with the applications. A time limit of 30 days may be fixed for the issue of licences after which it should be deemed that licence has been issued. Wherever possible system of online submission of applications for new units be introduced.<br> Electricity Act: - Now there is a long delay in giving connections. Therefore it should be made mandatory for the electricity board to give connection within a time frame of 30 to 60 days. This will go a long way in helping units in the initial stages.<br> Presently electricity boards supply power to units based on the installed horse power. Here the breakup of the load, motors with H.P. are to be indicated and no variations are permitted. In the case of larger units they are permitted to vary the motors etc. so long as they do not exceed the total H.P. permitted. This facility should be extended to small scale industry and tiny units also. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/03/03/ssi-s-in-the-web-of-laws-3808541/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/03/03/ssi-s-in-the-web-of-laws-3808541/#commentshttp://ashwanimahajan.blog.co.uk/2008/01/21/communal_economic_planning_an_attempt_to~3609631/tag:ashwanimahajan.blog.co.uk,2008-01-21:/2008/01/21/communal_economic_planning_an_attempt_to~3609631/Mon, 21 Jan 2008 14:58:02 +0100 <p> It is a fact that today India is the second fastest growing country of the world. We are a country which provides scientists to US for its scientific excellence, a country which is fast becoming a hub for medical tourism, a country which is a recognised nuclear power, a country with the largest youth population of the world, a country whose people have proved their intelligence, hard work and entrepreneurship par excellence wherever they have gone. All this indicates very clearly that nobody can stop India from becoming a super power. </p> <p>But perhaps the present UPA regime is not finding this growth suitable to its communal designs. In the recent meeting of the National Development Council, the UPA government has come out openly with these designs. Prime Minister Dr Manmohan Singh on an earlier occasion openly announced that Muslims have the first right over the national resources. Twenty thousand national level scholarships for Muslim students, funding of Muslim run enterprises and development of Muslim artisan clusters are some of the schemes which the government has already initiated. And now the Government has decided to earmark 15 per cent of the country’s development budget for the religious minorities, including Muslims. </p> <p>The Government’s arguments behind its actions are based on controversial findings of Sachar Committee (the Prime Minister’s High-Level Committee on the Social, Economic and Educational Status of Muslims), the National Sample Survey, Ministry of Human Resource Development and a sub-group on education in the Working Group on the Empowerment of Minorities for the Eleventh Plan. The Government’s argument is that Indian Muslims suffer grave deprivation in social opportunity, because of lack of access to education, healthcare and other public services, and to employment. For the most part they are even more disadvantaged than dalits. Forty-three per cent of them live below the official poverty line. Muslim men’s work participation rate (48 per cent) is lower than dalit males’ (53 per cent). For Muslim women, it is just 9.6 per cent, less than half the dalit women’s 23 per cent. Muslims are less likely to use the public distribution system for food (22 per cent) than dalits (32 per cent) or vaccinate their children (40 per cent) than dalits (47 per cent). The literacy rate among Muslims is 59 per cent, below the national average (65 per cent). Half of rural Muslim children are illiterate, as are a third of urban children. One-eigth of Muslim children aged between 6 and 13 do not attend schools. About 65 per cent of Muslim children in the 6-10 age group are enrolled, but only about half as many in the next age-bracket (11-14) are enrolled. </p> <p>Factors behind Muslim backwardness<br> Nobody would deny that Muslims are backward educationally, socially and even economically. They have lower literacy rate. But there is no bar for Muslim children to enter government schools or other educational institutions. They get more than equal opportunities to study. But Muslims do not prefer to send their children to normal schools rather send them to madrasas, under the influence from mullahs and moulavis. No amount of government aid can solve this problem. The solution has to come from within this community. </p> <p>Nobody has so far heard that any Muslim was ever denied a ration card or Muslim children were refused to be vaccinated by government doctors. If their blind faith or superstitions come in way to their health, no government funding can help the same. Because of their failure to get good education, thanks to their mullas and moulavis, ill health due to their ill beliefs, they remain socially and economically backward. This gets reflected in their low representation in government services, both administration and defence. Using this Muslim deprivation theory to put taxpayers’ hard earned money in wrong channels to carry forward its communal agenda is deplorable. </p> <p>Modus operandi of 15 per cent earmarking<br> The implication of government’s decision to earmark 15 per cent plan allocation for the benefit of minorities is not going to be achieved across the board. In the tenth five year plan, the combined expenditure of the Union and the States was around 12 per cent on agriculture and rural development, 26.5 per cent on energy, 15 per cent on transport and around 23 per cent on social services including education, medical and public health, family welfare housing, urban development, etc. Its not likely that government can demonstrate 15 per cent earmarking for agriculture, rural development, energy, transport, etc. Thus the whole burden of 15 per cent earmarking would be borne by social services. The government has already shown its intention clearly by announcing recently one scheme of stipend for minority students amounting to Rs 1,530 crore. Further subsidised medical and public health facilities and housing for Muslims are in the offing. If the whole burden of plan allocation was to be borne by social services then more than half of the plan for these services would go to minorities. </p> <p>Defocusing and stalling of growth<br> After a long time, Indian economy has started moving on fast track with varies sectors contributing to the development of the economy. According to a report published by World Bank, India is now one of the fastest growing countries in the world and in the years to follow it will not only continue to sustain its growth, it may surpass even the developed countries of today. In the last three years India’s nominal GDP has been rising at 16 per cent per annum in dollar terms (as rupee has strengthened against dollar). If this rate can be sustained then India will equal to US GDP of $11 trillion by 2050. This march towards development should be taken with a pinch of salt. Since agriculture has not been able to grow along with other sectors of the economy, poverty and unemployment are on rise, extra efforts are needed to take care of these problems. Instead of tackling these problems, attempts of the government to communalise economic planning would not only de-channelise and defocus the growth and stall the march of the country to became a developed nation but also create bitterness among the various communities in the nation and push the country to the communal fire. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/01/21/communal_economic_planning_an_attempt_to~3609631/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/01/21/communal_economic_planning_an_attempt_to~3609631/#commentshttp://ashwanimahajan.blog.co.uk/2008/01/05/marketising_climatic_change~3531644/tag:ashwanimahajan.blog.co.uk,2008-01-05:/2008/01/05/marketising_climatic_change~3531644/Sat, 05 Jan 2008 13:03:12 +0100 <p>Increasing pollution levels and global warming is turning out to be a reality and the humanity is reeling under the same. Lengthy summers, poor and untimely rains, destructive floods etc. are all causing havocs. In urban areas they have increased at such a high levels that breathing fresh air has become a luxury and business of oxygen parlors giving fresh oxygen to breath has gained a pace.<br> Increasing pollution levels are causing global warming due to the Green House Effect (GHE). The outer atmosphere of the earth has several gases, which are critical for life on earth as they keep some of the sun’s warmth from reflecting back into space and without them the world, would be a cold and barren place to live. The "Green House Effect" refers to the temperature regulating effect that such atmospheric gases have on the earth. The temperature regulating gases are called green house gases, which form a blanket around the earth, keeping some heat from the sun within the earth's atmospheric orbit and this keeping the planet warm and habitable. Six types of gases have been identified as ‘Green House Gases’,<br> 1. Carbon dioxide (CO2).<br> 2. Methane (CH4).<br> 3. Nitrous oxide (N2O).<br> 4. Hydro fluorocarbons (HFC's).<br> 5. Per fluorocarbons (PFC's).<br> 6. Sulphur hexafluoride (SF6).<br> Increased level of pollution had caused the emissions of these gases in increased and augmented quantities due to which the global temperature is increasing artificially. Some climatic change is now inevitable because of emissions of such gases over the years. The climate generally does not respond immediately to such external changes but after 150 years of industrialisation, global warming has gained momentum and it is bound to affect the earth's atmosphere in future.<br> Though green house gases makeup only one percent of the atmosphere, but they act like a blanket around the earth. Human activities are making the blanket 'thick', the natural levels of these gases are being supplemented by emissions of carbon dioxide from the burning of coal, oil and natural gas; by additional methane and nitrous oxide produced by farming activities and changes in land use; and by several long lived industrial gases that do not occur naturally.<br> The average temperature on the surface on the earth has risen by 0.60 Celsius since the late 1800's and his expected by another 20 Celsius. Average sea level has also increased by 10 to 20 centimeters and his expected to rise further by another 40 centimeters by 2100, causing contamination of underground sources of water across the world. Pollution and global warming is endangering the living species. Higher temperatures are expected to expand the range of diseases like malaria, Influenza etc.<br> Who are the Culprits?<br> According to Human Development Report 2007-08, High-income OECD countries’ total emissions of CO2 were 10,055.4 million metric tonnes in 1990 and 12,137.5 in 2004. United States alone caused 4818.3 in 1990 and 6045.8 in the year 2004. As on date US accounts for only 4.6 per cent of world population and is causing 22 per cent of world pollution, where as India which is 17.4 per cent of the world population, causes hardly 4 per cent of CO2 emissions<br> UN Initiative, Kyoto Protocol and Bali Convention<br> UN took the initiative and made efforts towards coping with rising global temperatures and hazardous effects of global warming, in the form of Inter-Governmental Panel on climate Change (IPCC) which gave its assessment report in 1990. The UNFCCC took effect in 1994 and after a series of meetings and discussions an International Treaty was adopted at the Kyoto Summit in 1997, on International agreement linked to the existing treaty, but standing on its own. The text of the Kyoto Protocol was adopted unanimously in 1997; it entered into force on 16 February 2005.<br> Article 3 of Protocol binds the member countries to reduce their combined emissions to 5% below 1990 levels by 2012. The overall target of 5% varies from nation to nation and ranges between -8% to 10%. The overall 5% target is to be met through cuts of 8% in the European Union and most Central European economies, 6% by Hungary Japan Poland and Canada and 7% in the United States, 0% by New Zealand, Russia and Ukraine i.e. these counties have to maintain their present level of emissions, while countries like Norway may increase its emissions by 1%, Australia by 8%, and Iceland by 10%. All the countries, which have a fixed commitment in the Protocol, are classified as Annexure I countries. The current targets of all annex I countries are setup on the basis of level of industrializations, current carbon emissions, geographic spread of the member countries, the economic progress done till now, the atmospheric contents and such several other factors.<br> Many developing nations like China, India, Brazil are not included in Annex I for the first commitment period as during negotiation stage, these countries resisted to the pressure of development countries for fixed commitments in their own national economic interests.<br> US Versus the Rest<br> It is significant to note that U.S. had pulled itself out of the Kyoto Protocol in 2001, saying implementing it would gravely damage the US economy. US is asking for an alternative way of emissions reduction commitments based on absolute emissions levels, instead of reduction of percentage terms. This should mean pressure on India, China, Brazil and also many other developing countries to reduce their emissions levels. Such an arrangement would put developing countries like India and China at disadvantage due to the fact that these countries will be forced to overhaul their production processes and embrace a process that has to be either developed anew or be imported from the ones who already have the technology. This is likely to affect their efforts aimed at reducing poverty and reduction in inequalities.<br> On the other hand developing countries including India are of the view that per capita approach be adapted instead. They argue that where as US accounts for 22 per cent of global carbon emissions with a population less than one third that of India and India accounts for hardly 4 per cent of global carbon emissions. In per capita terms this comes to 20.6 per metric tons for US and 1.2 metric tonnes for India, which means on per capita basis US accounts for 17 times more emissions than India in per capita terms. Therefore from the point of view of equity instead of aggregate approach, per capita approach be adapted instead of aggregate or percentage approach.<br> Instruments of Kyoto Protocol<br> Though targets have been set for the member countries to reduce their emissions levels, and these targets have also been stated as binding targets, flexibility has also been provided in the protocol itself. To understand this flexibility, one needs to know about the terms like sinking, clean development mechanism, emissions trading etc.<br> Sinking:<br> Member countries can partially compensate for their emissions by increasing “sinks” - by planting trees and soil conservation, which remove carbon dioxide from the atmosphere. That may be accomplished either on their own territories or in other countries. Or they may pay for foreign projects that result in greenhouse-gas cuts. This way the countries making such efforts are also to gain credits for activities which boost the environment’s capacity to absorb carbon.<br> Emissions trading:<br> We understand that according to Kyoto Protocol annex I countries are committed to reduce the emissions level. But the flexibility provided under the protocol allows countries to buy and sell their agreed allowances of greenhouse gas emissions. Highly polluting countries can buy unused “credits” from those which are allowed to emit more than they actually do. At micro level companies that need to increase their emissions must by credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Potential buyers of carbon credits are the entities which emit Co2 to the atmosphere and maybe required by the law to balance their emissions through mechanism of emissions reduction. On the other hand potential sellers of the carbon credits are two kinds of entities,<br> Entities that manage forest or agricultural land might sell carbon credits based on the accumulation of carbon in their forest trees or agricultural soils.<br> Business entities that reduce their carbon emissions may be able to sell their reductions to other emitters.<br> Marketisation of Environment<br> From the above analysis on emissions trading, sinking etc. it is evident that that an attempt has been made under Kyoto protocol to find solutions towards environmental degradation using market tools. It may be noted it that emissions trading is already being used in US and EU, as a tool to check environmental degradation. As a consequence of Kyoto protocol emissions trading has got a boost. The carbon trading at London financial marketplace is expected to have grown into a market valued at $60 billion in 2007. The voluntary offset market, by comparison, is projected to grow to about $4bn by 2010.<br> There are active trading programs in several pollutants. In the largest trading scheme namely European Union Emissions Trading Scheme, which started on 1st January 2005, 362 million tonnes of CO2 were traded on the market for a sum of $7.2 billion, and a large number of futures and options. Carbon emissions trading have been steadily increasing in recent years.<br> Can Emissions Trading Solve the Problem?<br> Those who favor the idea of emissions trading argue that emissions trading would lead to the reduction in emissions by those who can do so. This mechanism also involves lowest cost of emissions reduction to the society. But there is significant opposition to this mechanism. The critiques opine that emissions trading does little to solve pollution problems overall, as groups that do not pollute sell their conservation to the highest bidder. Overall reductions would need to come from a sufficient and challenging reduction of allowances available in the system. Likely this would occur over time through central regulation. Emissions Trading Scheme came under fire recently when some governments issued more carbon allowances than emissions during Phase I of the scheme. They have also been criticized for the widespread practice of grand fathering, where polluters are given carbon credits by governments, instead of being made to pay for them.<br> Critiques further argue that carbon trading places disproportionate emphasis on individual lifestyles and carbon footprints, distracting attention from the wider, systemic changes and collective political action that needs to be taken to tackle climate change. Thus according to them solution to the problem of environmental degradation is not emissions trading but a tax on polluters but it seems tax on polluters is not found to be feasible politically.<br> Apart from this there are significant scientific questions about efficacy of sinking and emissions trading program. We understand that part of the reason of global warming is excessive land clearing. Therefore restoring vegetation is thought to be the solution to the problem. But the note of caution here is that in the name of emissions trading old growth forests (which have slow carbon absorption rates) are being cleared and replaced with fast-growing vegetation, to the detriment of the local communities<br> Kyoto Protocol, Bali Convention and Looming Dangers for India<br> Though optimism Is being shown at the outcome of Bali convention on climatic change, as developed countries have been supposedly pushed to the wall and have been forced to accepts deep cuts in emissions (though without really quantifying the same). But the stand of US and it’s allies has thrown a challenge for developing countries specially India and China. Totally rejecting Kyoto protocol and refusing to accept reduction in emissions as per Kyoto protocol, US has demanded cuts in emissions by India and China. Given the fact that during the period from 1990 to 2004 CO2 emissions of India has approximately doubled, thanks to its efforts to improve standard of living and reduction in poverty. If US succeed in forcing India to reduce its emissions levels, our efforts towards growth would get jeopardised. And if instead we are forced to buy emissions credits, a significant portion of our fruits of growth would get transferred to the rest of the world. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/01/05/marketising_climatic_change~3531644/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/01/05/marketising_climatic_change~3531644/#commentshttp://ashwanimahajan.blog.co.uk/2008/01/04/misplaces_worries~3526869/tag:ashwanimahajan.blog.co.uk,2008-01-04:/2008/01/04/misplaces_worries~3526869/Fri, 04 Jan 2008 11:12:42 +0100 <p>THE ECONOMIC TIMES<br> Misplaced worries<br> 4 Jan, 2008, 0000 hrs IST,<br> Apropos of the article by Swaminathan S Anklesaria Aiyar, Overvalued Re? Exports are booming!(ET, Jan 2) the fears being expressed about loss of exports and employment are exaggerated. Exporters had always argued that devaluation of the rupee is the only way to increase exports. </p> <p>Accepting such arguments, rupee was devalued in 1966 and later in 1991. But despite the devaluation, the rate of growth of our exports has always been less than the rate of growth of our imports. Under such circumstances appreciation of the rupee rather than its depreciation is the way to reduce our trade deficit. </p> <p>Fast rising IT exports and profitability of software industry indicate that this sector is competitive enough. Whenever industries having significant export capacities become more competitive and profitable, currency of the country gets strengthened. Since the strong rupee is due to the strengthening of our export industries, it is not expected to adversely impact our exports. </p> <p>Dr Ashwani Mahajan, </p> <p>New Delhi January 3 </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2008/01/04/misplaces_worries~3526869/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2008/01/04/misplaces_worries~3526869/#commentshttp://ashwanimahajan.blog.co.uk/2007/11/03/paricipatory_notes_the_real_villain~3238461/tag:ashwanimahajan.blog.co.uk,2007-11-03:/2007/11/03/paricipatory_notes_the_real_villain~3238461/Sat, 03 Nov 2007 10:54:56 +0100 <p>DR. ASHWANI MAHAJAN</p> <p>Foreign exchange reserves continue to soar. By October 29, 2007 they stood at US $ 261 billion and sensex had crossed the magic figure of 20,000. Now it’s open secret that upheavels in the stock market are caused by non-other than foreign institutional investors (FIIs). A journey from 13765.46 in May 2007 to 20238 on October 30, 2007 cannot be explained by any logic except the jungle raj for FIIs.<br> The Government has constantly been pursuing the policy of attracting foreign investments irrespective of its form, including FIIs. In the process when foreign investors found that it is easy to channelise their funds through FIIs thereby escaping from the conditions getting them registered with the regulators including SEBI, RBI etc. This was being done by way of offshore derivative instruments (ODI), also called participatory notes (PNs) – the financial instruments used by foreign investors to play and invest in the Indian stock markets.<br> The Modus Operandi<br> As a part of policy of FDI, India allowed investments by Foreign Institutional Investors (FIIs) directly into stock markets, provided these FIIs register with SEBI and be subjected to its rules and regulations. To escape these rules FIIs used to issue participatory notes (PNs) to foreign investors (individuals of corporates) who want exposure to Indian equities but do not want to register with SEBI. Further, FIIs are not allowed to issue PNs to Indian nationals, Persons of Indian Origin or Overseas Corporate Bodies (a majority of which are controlled by NRIs). Thus it is a contract between a foreign institution and a foreigner for investing into the Indian stock market.<br> Linkages with Terrorism<br> While speaking to 43rd Munich conference on security in February 2007 Mr. M.. K. Narayanan hinted at links of terrorist with the stock market when he said "Isolated instances to terrorist outfits manipulating the stock markets to raise funds for their operations have been reported"; This raised many eyebrows. In fact Mr. Narayanan clearly hinted at Dawood & other terrorist groups who found an easy way to route their dirty money into Indian stock market by way of participatory notes, as FIIs are not bound to reveal the names of PN holders. This routing of terrorist money is further encouraged by lax regulatory framework in India. This should be seen in light of Indo-Mauritius DTAA, which ensures that even short term capital gain are tax free both in India & Mauritius, a benefit denied to resident Indians.<br> SEBI Proposes FM Disposes<br> There are various theories of origin of money flowing into India via participatory notes. Some express suspicion that politicians’ money move out through hawala route and then its Indian stock markets through PN route and in the process in advantage taken of the tax breaks provided by the Indo-Mauritius DTAA. While others link the same with terror money. Sensing the gravity of the situation SEBI decided to do away with the system of participatory notes according to the note issued by SEBI "FIIs [foreign institutional investors] to issue/renew ODIs with immediate effect", "are required to wind up their current position (issued PNs) over 18 months, during which period SEBI will review the position form time to time".<br> Moment these proposals were made by SEBI, the impact was immediately reflected by the stock market the following day, when the Sensex index fell a massive 1,700 points, or 9%. Then comes Mr. Finance Minister, who issues a clarification next day after SEBI's announcement about the measures to curb PNs and says "What was announced by SEBI yesterday is a part of the series of steps that it have been taking to moderate the capital inflows into India", and he further adds "Investors through participatory notes are certainly welcome to invest in India; but for the present, it is important to moderates these capital flows. And therefore, SEBI has proposed a number of measures that will moderate these capital flows."<br> Large scale holding of Indian companies' equity by foreigners<br> On October 19, 2007, holdings of equities of Indian corporate by FIIs etc. stood at 193 billion US $, which comes to 22% of the total capitalisation of all Indian corporates. This is in sharp contrast with holdings by Indian public, which is only 10%. It's not that, they want to stop at 22%.The reality is that they can not go beyond it, given the sectoral cap and other conditions on holding by FIIs. In 105 Companies FIIs holding has reached 100%, in 53 Companies it has reached 49% and in 17 Companies it has reached sectoral cap of 100% and in one Company 74%.<br> What the government is waiting for?<br> When Finance Minister says that doors are still open for foreign investors, even through the dirty route of PNs, it seems that government does not have any objection to hand over the command of Indian economy to those foreigners who don't want even their names to be revealed. It seems the government is taking the economy towards is situation of no return. Time is still there to stop Dawood and party to take over the economy. </p> <p> <small> <a href="http://ashwanimahajan.blog.co.uk/2007/11/03/paricipatory_notes_the_real_villain~3238461/#comments">Comments</a> </small> </p>economyhttp://ashwanimahajan.blog.co.uk/2007/11/03/paricipatory_notes_the_real_villain~3238461/#comments