Within the country there has been a debate for sometime on allowing foreign universities to operate in India. The main argument against allowing foreign universities is that they may come here for making money by exploiting the huge demand for higher education. Let us examine this aspect.
It should be clear that a foreign university operating in India will have to keep the fees substantially lower than that in the foreign country concerned. Otherwise the student will simply go to the parent varsity, as it also opens opportunities of working/settling overseas and gives overseas exposure and experience, which is much sought after by Indians.
Furthermore, keeping in mind the paying capacity of the middle class, the tuition fees have to be accessible. Currently the highest fee in private universities is of the order of Rs 2 lakh or about $4,000 per year. Overall, it is very unlikely that in the short-to-medium term, a foreign university can charge substantially more than this in India for undergraduate education.
If we assume a fee of about $5,000 per year (approximately half the fees in many mid-level universities in the US), the university will have a revenue of $5 million with 1,000 UG students, and $50 million when it reaches a UG student population of 10,000, i.e., an intake approximately equal to that of the five main IITs.
Though this amount may be significant for the smaller universities, for a well known university, this is a very small sum — such universities often have a budget of more than $1 billion (MIT’s budget is over $2 billion, Georgia Tech’s is around $1.2 billion — both medium-sized universities). Clearly, this type of money is not going to be a significant attraction for the big-name universities to come to India. And remember this is the total fee revenue, not profit, and that it is generated only when the operations become very large.
So, if we restrict ourselves to the top universities of the world, we can safely resolve the main concern of profiteering. And if we require that they must have a research-led operation in India, then not only does the risk further reduces as such institutes require much more investment, it also helps increase the production of PhDs — which will help academics and R&D in the country even further.
If profit is not going to be an incentive for a top university, then why should such a university come to India? How can India attract them to come? Perhaps the main attraction will be to be present in emerging India, which can be a major player in the global knowledge society. If a university aspires to be a global brand in future, having a presence in India will be an asset.
Second reason is similar to why R&D organisations are opening centres in India — to tap the benefits of the R&D talent, the young population, and the cost benefits. The Indian operations can also be leveraged for executing R&D projects in the parent by outsourcing part of the project to their Indian operations. As research is an important focus for top universities in the world, this provides a strong reason for operating in India.
Third, the India operations, due to their lower costs, can become the centre for providing education opportunities to students from across the world that cannot be serviced by the parent due to high cost.
Fourth, by having multi-year student exchange between the parent and Indian campus, the cost of education in the parent can be reduced — a goal that many universities want to pursue.
These reasons are not as tangible as profits, but something that major universities can appreciate. And it will be for us to convince these universities that it is these types of “soft” reasons for which they should come to India.
It is also worth noting that for creating a high quality university in India, a top foreign university has a number of advantages over its Indian counterpart for attracting and retaining faculty. First, it can use its stature and presence in the west to actively recruit there, where there is a large pool of Indian talent available.
With the branding of the original university, and a commitment to create something similar, the attraction can be tremendous. And by providing opportunities of spending sabbaticals in parent, it can create a unique proposition to attract faculty in India that others cannot match. It can also use its existing faculty to set up systems as well as start the programmes in India, alleviating the start-up difficulties.
To ensure that a foreign university operating in India serves our objectives, we have to ensure two things — the university should be one of the top universities of the world, and it must have a strong research programme. To put this in practice, one possibility is to invite the top universities to open campuses here.
The only constraint that should be imposed on them is that some percentage of their students should be PhD students (at least one-fourth). If this constraint is agreed to, then the government should go out of its way to facilitate their operations by providing cheap land, and giving complete freedom to operate.
(The author is director, IIT Delhi and professor IIT Delhi. Views are personal.)
http://economictimes.indiatimes.com/Opinion/Whos-afraid-of-foreign-universities/articleshow/5174767.cms
Saturday, October 31, 2009
City growth: When Big is not Beautiful - Kala Seetharam Sridhar
India has 35 cities with million-plus population, with Mumbai leading the pack with a population of about 17 million. The question arises — can individual cities grow forever and whether there is an optimum city size? This is an important question as development plans of cities frequently follow the direction of development rather than guiding them.
Is the current size of cities justifiable in terms of greater efficiencies in the production of goods, services and amenities offered to their residents? General equilibrium models of city growth refer to the drawbacks of increasing city size — high cost of living, crime, pollution and congestion costs.
For example, in Bangalore, the one-way commute time to work increased from about 24 minutes in 1991 to 40 minutes in 2001. Thus, city population can grow, but the city may or may not grow economically. This happens as a city will experience congestion and decline in its economic output if its population grows beyond a certain limit. One manifestation of excessive city growth is the suburbanisation and urban sprawl we see in India’s cities.
With decentralisation of population and jobs from the dense core of cities to less densely developed suburbs, monocentric cities have evolved into polycentric cities. While such decentralisation is caused by rising incomes, rising land costs at the city centre and problems with the central city (high taxes, poor public services, high crime rates), recent research also attributes urban sprawl to strong land use controls in India’s cities.
A research shows that the maximum floor area ratio (FAR) — which refers to the ratio of built area to plot area — permissible in India’s cities is not even five whereas cities across the world have FARs ranging from well above 10. A higher FAR implies vertical city growth. Vertical city growth is more efficient if the infrastructure necessary to support it is in place — it would be poor public economics not to use fully-serviced plots of land with water and sewer networks, roads in the centre of the city. Low FARs lead to inefficient cities.
Efficiency of cities is partly determined by the mobility and access needs of the population as it has a direct relationship with the city’s economic activity such as commute to school, jobs and shopping trips. While Indian cities’ decentralisation has been caused by rising incomes and the use of the automobile, one direct outcome of the urban sprawl has been that Indian cities have become automobile-oriented with little space for pedestrians and cyclists. For instance, Indians bought 1.5 million cars in 2007, more than double than that in 2003.
Delhi, Mumbai, Kolkata and Bangalore have 5% of India’s population but 14% of its registered vehicles. Pedestrians and cyclists account for a substantial part of urban population. In Delhi, pedestrians and cyclists account for around 55% of the population. Pedestrian accessibility in Indian cities is poor – there are no sidewalks, and where they exist, they are taken over by parked vehicles, uncollected garbage, or encroachment by local businesses.
Rightly, a recent research points out that policymaking related to urban transport has focused predominantly on road infrastructure development such as the construction of flyovers. However, given the fact that pedestrians and cyclists are the most vulnerable road users, budgets for the provision of infrastructure for them have been minuscule. This is not consistent with their number. A 3.5 metre lane has a carrying capacity of 1,800 cars per hour while it can carry 5,400 bicycles per hour. Providing segregated infrastructure for pedestrians and cyclists would not cost much, but would greatly improve the efficiency of cities by facilitating the mobility of masses.
The above does not imply that we do not need highways or expressways of international standards. We need them for long distances and for facilitating movement of public transport that is affordable, convenient and safe to use. Highways are efficient if they are used for high occupancy vehicles such as public transport as compared to cars.
What the above implies is that decentralisation and sprawl have occurred in India’s cities, with economic growth, rising incomes, rising land costs, and land use regulation playing a role. With rising incomes, the sprawl has also brought about increased usage of cars with poor access for pedestrians and cyclists. We have to consciously decide what kind of cities we want. Only innovative city planning and better infrastructure to support them, better space and planning for pedestrians, cyclists and public transport will ensure that we have efficient and equitable cities whose costs do not outweigh their benefits.
(The author is senior research fellow, Public Affairs Centre. Views are personal)
http://economictimes.indiatimes.com/Opinion/City-growth-When-big-is-not-beautiful/articleshow/5174679.cms
Is the current size of cities justifiable in terms of greater efficiencies in the production of goods, services and amenities offered to their residents? General equilibrium models of city growth refer to the drawbacks of increasing city size — high cost of living, crime, pollution and congestion costs.
For example, in Bangalore, the one-way commute time to work increased from about 24 minutes in 1991 to 40 minutes in 2001. Thus, city population can grow, but the city may or may not grow economically. This happens as a city will experience congestion and decline in its economic output if its population grows beyond a certain limit. One manifestation of excessive city growth is the suburbanisation and urban sprawl we see in India’s cities.
With decentralisation of population and jobs from the dense core of cities to less densely developed suburbs, monocentric cities have evolved into polycentric cities. While such decentralisation is caused by rising incomes, rising land costs at the city centre and problems with the central city (high taxes, poor public services, high crime rates), recent research also attributes urban sprawl to strong land use controls in India’s cities.
A research shows that the maximum floor area ratio (FAR) — which refers to the ratio of built area to plot area — permissible in India’s cities is not even five whereas cities across the world have FARs ranging from well above 10. A higher FAR implies vertical city growth. Vertical city growth is more efficient if the infrastructure necessary to support it is in place — it would be poor public economics not to use fully-serviced plots of land with water and sewer networks, roads in the centre of the city. Low FARs lead to inefficient cities.
Efficiency of cities is partly determined by the mobility and access needs of the population as it has a direct relationship with the city’s economic activity such as commute to school, jobs and shopping trips. While Indian cities’ decentralisation has been caused by rising incomes and the use of the automobile, one direct outcome of the urban sprawl has been that Indian cities have become automobile-oriented with little space for pedestrians and cyclists. For instance, Indians bought 1.5 million cars in 2007, more than double than that in 2003.
Delhi, Mumbai, Kolkata and Bangalore have 5% of India’s population but 14% of its registered vehicles. Pedestrians and cyclists account for a substantial part of urban population. In Delhi, pedestrians and cyclists account for around 55% of the population. Pedestrian accessibility in Indian cities is poor – there are no sidewalks, and where they exist, they are taken over by parked vehicles, uncollected garbage, or encroachment by local businesses.
Rightly, a recent research points out that policymaking related to urban transport has focused predominantly on road infrastructure development such as the construction of flyovers. However, given the fact that pedestrians and cyclists are the most vulnerable road users, budgets for the provision of infrastructure for them have been minuscule. This is not consistent with their number. A 3.5 metre lane has a carrying capacity of 1,800 cars per hour while it can carry 5,400 bicycles per hour. Providing segregated infrastructure for pedestrians and cyclists would not cost much, but would greatly improve the efficiency of cities by facilitating the mobility of masses.
The above does not imply that we do not need highways or expressways of international standards. We need them for long distances and for facilitating movement of public transport that is affordable, convenient and safe to use. Highways are efficient if they are used for high occupancy vehicles such as public transport as compared to cars.
What the above implies is that decentralisation and sprawl have occurred in India’s cities, with economic growth, rising incomes, rising land costs, and land use regulation playing a role. With rising incomes, the sprawl has also brought about increased usage of cars with poor access for pedestrians and cyclists. We have to consciously decide what kind of cities we want. Only innovative city planning and better infrastructure to support them, better space and planning for pedestrians, cyclists and public transport will ensure that we have efficient and equitable cities whose costs do not outweigh their benefits.
(The author is senior research fellow, Public Affairs Centre. Views are personal)
http://economictimes.indiatimes.com/Opinion/City-growth-When-big-is-not-beautiful/articleshow/5174679.cms
Friday, October 30, 2009
Caveats of Falling Mobile Charges - V Sridhar & G Venkatesh
The mobile usage charges typically depend on the volume of call minutes and the termination location. It reflects the marginal cost of carrying the call from the source to the destination. In general, calls terminated within caller’s networks (referred to as on-net calls) are often charged less than those terminated in other operator’s networks (i.e., off-net calls).
One reason for this is the termination charge (20 paise/min currently) to be paid to the receiver’s network for off-net calls. In a larger network with more subscribers, a typical user is more likely to find the potential recipient also to be in the same network (also referred to as the network effect). Hence it is expected that users would prefer to subscribe to a larger operator’s network to gain advantage of on-net call plans.
To counter this, new entrants with a smaller subscriber base need to offer very competitive tariff plans to attract subscribers, which is precisely what is happening today in the Indian mobile market. However, the average usage charges, especially for off-net calls cannot come down significantly due to the positive termination charges. Hence the new entrants suffer from both lower network effect and positive termination charges. However, there are strong reasons for new entrants to charge lower usage charges since the offered traffic on their network is much lower than the capacity of the networks. Since network capacity is perishable, the new entrant is better off charging a very low price and invite users to join the network and create traffic.
One of the successful methods the new entrants have used to attract new/ churned subscribers is the per-second billing as opposed to fixed time duration pulses. When more and more subscribers hook on to the network of the entrants, the network traffic also grows and the difference between capacity and offered traffic decreases. It is at this stage that the network faces congestion and the operator is forced to increase the usage charges to maintain the quality of service. However by now the new operator would have hopefully built a large enough subscriber base to sustain itself. Hence the critical mass of subscribers that the new entrant needs for sustainability is when the network effect starts dominating the price effect. The entrants who could not accumulate the critical mass are up for grabs by the larger incumbent operators.
In general, the subscriber is involved in a two-stage selection process: first on the subscription plan and second on the usage volume plan. Since these two stages are temporally separated, users can adjust their calling behaviour after subscribing to the plan. Per-second billing provides the subscriber greater flexibility in controlling the volume of usage. After the user subscribes to the plan, there are carrier-level shocks such as network signal quality and user service experience, based on which the customer selects the volume of calls to be made in accordance with her expected utilities.
Thus it is important for the operator to provide complete information about the tariff plan to the subscriber at the time of subscription so that the net welfare including that of the operator is maximised. Without this clarity, subscribers are likely to bicker about operators deliberately dropping calls or increasing the call rates after a specific duration. The regulator would do well to get the operators to publish in detail all the conditions of tariff plans for the benefit of the consumers.
Will the incumbents follow the price war and embrace the per second tariff model? With mobile number portability due to commence in December and the fact that more than 80% of the subscribers are pre-paid without much loyal attachment to the operators, the smaller incumbents have no option but to follow to reduce the churn. The per-second billing is expected to reduce the average call holding time, thus decreasing the average revenue per user, with subsequent decline in profit margins.
When will the price war end? It is expected to continue until at least a couple of new entrants accumulate subscribers to reach the critical mass. With the current mobile density touching 40 per 100, there is still some room for a few new entrants to reach the critical mass in certain service areas. This will increase the number of active operators in the service area to 9-10. What will happen to the remaining 4-5 operators who have been given licence in 2007 is anybody’s guess.
(Dr Sridhar is Research Fellow & Dr Venkatesh, CTO/CSO, Sasken Communication Technologies. Views are personal.)
QWERTY - History of the Modern Keyboard
Do you know what QWERTY is? Unsure - then just glance down at your computer key-board. The first six letters at the top left of your keyboard spell it out – QWERTY. Well, did you know that this arrangement of letters, along with the other 20 on the traditional keyboard were arranged that way to make the job of typing more difficult? Let's find out why?
The first commercially successful typewriter was developed by Christopher Latham Sholes in 1873. Originally, the keys were arranged alphabetically. However, a problem soon arose. People became so adept at using the keyboard that the keys would stick or jam when struck in quick succession. In order to overcome this problem Sholes decided to make the job of typing as slow as he possibly could. His solution? He placed the most frequently used keys as far apart from each other as he could. His keyboard became known as the QWERTY keyboard.
So, that is the reason why your keyboard is formatted the way it is. Ironic, really – considering that every other aspect of your computer is streamlined for maximum efficiency and yet you have to labor over a 127 year old system designed specifically for inefficiency. And inefficient it certainly is. For one thing, QWERTY was not designed for touch typing, which came much later. For keys that are not in the middle or home row it is necessary to reach across diagonally. This is difficult and leads to a high error rate.
Yet, there is a better system. Unfortunately, too few people are aware of it. It is called the DVORAK keyboard system. It was designed by August Dvorak in the 1930’s. Dvorak’s keyboard put nine of the most used letters in the middle row of the keyboard. This allows the typist to write over 3,000 words without the fingers reaching. In comparison, only about 50 words can be typed on a keyboard without reaching on QWERTY’s middle or home row. Another advantage of the DVORAK keyboard is that the workload is much reduced. This is achieved by redistributing the workload amongst the fingers. As a result the fingers of a typist on a DVORAK keyboard moves about one mile per day whereas the same typist on a conventional QWERTY keyboard will move his fingers between 12 and 20 miles per day.
So, does the DVORAK system really improve performance. In order to prove that it does August Dvorak retrained 14 Navy typists during World War Two. The result? After just one month their work productivity rate improved by an amazing 74 percent. Accuracy improved by 68 percent. So, you would think that people would be jumping over each other to switch over from QWERTY to DVORAK. Surprisingly, this has not proved to be the case. DVORAK keyboards are readily available on most computers and typewriters, yet – by and large – they remain unutilised..
An even better keyboard than the DVORAK version is the MALT keyboard devised by Lillian Malt. The Malt keyboard does away with staggered rows, gives greater use of the thumb and makes it easier to reach the backspace and other normally out of the way keys. Unlike the DVORAK keyboard, however, the MALT version will require special hardware I order to be installed onto your computer. Modern designs are also available on both the DVORAK and the MALT keyboards that are specially contoured to alleviate the physical problems associated with the traditional typewriter style keyboard. DVORAK have also put out one handed keyboards which give a free hand for other tasks while typing.
Tuesday, October 27, 2009
Innovate India's way to Modernity - Rama Bijapurkar
The recent changes in the world, whether in technology or ideology, underline the fact that emerging markets are a great leveller for businesses. They challenge even the most indomitable global champions with a new set of consumer circumstances that they have never encountered before. Emerging market consumers of today have a wider and better set of competitive choices, many of which were non-existent when the developed markets’ leg of the race was being run. And the consumption discourse today is totally different too, now that we are far more conscious of dwindling natural resources and ecological threats.
In fact, the newer markets of the world often create a “champion’s disadvantage”, because most champion companies are prisoners of their past success formulae. They are far too deeply vested in every way in the religion and the ritual that they have built so far and the risk of change is real. The same applies to western academia, who has built knowledge based on the experiences of global businesses. Their predicaments are understandable. But it is puzzling why Indian business executives and thinkers, who do not carry any such baggage, don’t think differently and originally.
Perhaps, we need to reflect on whether there is an incumbent advantage or disadvantage for reigning champions of the developed world. If they have an incumbent disadvantage, then the new kid on the block (Indian business) is not a challenger risking a bloody nose but a leading-edge innovator. It’s what C K Prahalad calls the “next practice”; and an investment banker entrepreneur we know calls “God has pressed the reset button”.
Many developed market businessmen and academics ask exactly the wrong question when they look at markets such as India. How long will it be before it gets to an acceptable level of ‘modernity’, how can it be dragged there faster? “Modernity” is implicitly defined by some notional benchmark of “like somewhere else”— often, the holy grail of modernity is seen to be the way things are in the US. Thus, in the early years of Indian retail, we debated when India’s car penetration would get to a reasonable level to enable “modern” retail to “take off”. The interesting thing is that the cell phone is to India what the automobile is to America (Shiv Vishwanath in Times of India).
The automobile became the central nervous system of America, thanks to a very aggressive car manufacturer lobby, and low prices of gasoline in the days when this central nervous system was being built. The retailing environment was built around this, and then evolved further from this base. It is obvious that the retail environment in which India, or indeed any emerging market operates from is quite different.
At a recent academic marketing conference in the US, the central question being debated was “what is stopping Indian retail from modernising [unsaid: into something that we recognise as familiar], when will kiranas die”. Strange, because the purpose of marketing is to satisfy customers’ needs and wants rather than to pummel them into accepting some arbitrary notion of modernity that marketers have!
However, we haven’t seen a whole host of new and innovative retail formats in India so far. In fact, there seems to be a weary wait for FDI rules to change so that the western retailers can come and modernise this market. Australia is proof that local retailers can and do own a market. Many malls in Dubai have a distinctive local flavour, leaving no doubt about which part of the world they are in; and there exist some very interesting formats like small single storied “local” destination modern malls. How come Indian malls seem determined to strip all cultural character away from them, in the cause of being “modern” retail?
Indian consumers have grown up in an era of high tech and high touch — think Jet airways, or your local video shop or bank branch head. They remember you via the computer but recognises you in person. American consumers had to trade in high tech for high touch, and have a far more transactional consumer culture. It is not altogether obvious that the present Indian model should be evolved into a higher being as it is in the US. It isn’t about decreasing costs, because customer attrition and new customer acquisition costs are huge.
In Asia, in many a 5-star hotel, you thoughtfully get a small hair grip along with a shower cap so that the job can be better done, and multi plug points are built in because people from different countries have different plugs. In California, in a very high end hotel, we found the plug adaptor stocked in the mini bar in the room priced at ten dollars! Is that modern best practice?
Yet another example: developed world marketers are now most concerned about green products and sustainable consumption. India has an opportunity to get there ahead of others by not starting down the bad road at all, because most of India is yet to seriously begin its consumption journey. The accompanying picture is from Bangalore, of a “fast food format” idli served in an ingenious container made of leaves, allowing sambar to be put on top of the idli and scooped out with a spoon.
It is the “global best practice” marketer who overplays and overuses plastic packaging, when in fact we have always been very frugal with our packaging due to cost considerations. If we have the courage to say that “made in India” packaged goods will be low plastic in their packaging, and if we can instead bring about a storage and reuse container revolution, then we can leap into the future on this count without going through the painful “modern” steps in between.
Why do airports and other high end public places insist on proclaiming their “modernity” by making women cleaners wear “pant shirt”? It makes them socially and physically uncomfortable and unhappy. Why don’t we have the confidence to believe that the salwar kameez is as modern?
The suggestion being made here is that marketers and retailers in India should believe confidently that they are as well positioned, if not better, than anyone else in the world, to create the modern Indian consumer formula; and rather than import ideas from elsewhere, should aggressively move ahead and build smart solutions to consumers needs and wants of today and for the future. The world might follow... or not!
http://economictimes.indiatimes.com/Opinion/Innovate-Indias-way-to-modernity/articleshow/5161809.cms
In fact, the newer markets of the world often create a “champion’s disadvantage”, because most champion companies are prisoners of their past success formulae. They are far too deeply vested in every way in the religion and the ritual that they have built so far and the risk of change is real. The same applies to western academia, who has built knowledge based on the experiences of global businesses. Their predicaments are understandable. But it is puzzling why Indian business executives and thinkers, who do not carry any such baggage, don’t think differently and originally.
Perhaps, we need to reflect on whether there is an incumbent advantage or disadvantage for reigning champions of the developed world. If they have an incumbent disadvantage, then the new kid on the block (Indian business) is not a challenger risking a bloody nose but a leading-edge innovator. It’s what C K Prahalad calls the “next practice”; and an investment banker entrepreneur we know calls “God has pressed the reset button”.
Many developed market businessmen and academics ask exactly the wrong question when they look at markets such as India. How long will it be before it gets to an acceptable level of ‘modernity’, how can it be dragged there faster? “Modernity” is implicitly defined by some notional benchmark of “like somewhere else”— often, the holy grail of modernity is seen to be the way things are in the US. Thus, in the early years of Indian retail, we debated when India’s car penetration would get to a reasonable level to enable “modern” retail to “take off”. The interesting thing is that the cell phone is to India what the automobile is to America (Shiv Vishwanath in Times of India).
The automobile became the central nervous system of America, thanks to a very aggressive car manufacturer lobby, and low prices of gasoline in the days when this central nervous system was being built. The retailing environment was built around this, and then evolved further from this base. It is obvious that the retail environment in which India, or indeed any emerging market operates from is quite different.
At a recent academic marketing conference in the US, the central question being debated was “what is stopping Indian retail from modernising [unsaid: into something that we recognise as familiar], when will kiranas die”. Strange, because the purpose of marketing is to satisfy customers’ needs and wants rather than to pummel them into accepting some arbitrary notion of modernity that marketers have!
However, we haven’t seen a whole host of new and innovative retail formats in India so far. In fact, there seems to be a weary wait for FDI rules to change so that the western retailers can come and modernise this market. Australia is proof that local retailers can and do own a market. Many malls in Dubai have a distinctive local flavour, leaving no doubt about which part of the world they are in; and there exist some very interesting formats like small single storied “local” destination modern malls. How come Indian malls seem determined to strip all cultural character away from them, in the cause of being “modern” retail?
Indian consumers have grown up in an era of high tech and high touch — think Jet airways, or your local video shop or bank branch head. They remember you via the computer but recognises you in person. American consumers had to trade in high tech for high touch, and have a far more transactional consumer culture. It is not altogether obvious that the present Indian model should be evolved into a higher being as it is in the US. It isn’t about decreasing costs, because customer attrition and new customer acquisition costs are huge.
In Asia, in many a 5-star hotel, you thoughtfully get a small hair grip along with a shower cap so that the job can be better done, and multi plug points are built in because people from different countries have different plugs. In California, in a very high end hotel, we found the plug adaptor stocked in the mini bar in the room priced at ten dollars! Is that modern best practice?
Yet another example: developed world marketers are now most concerned about green products and sustainable consumption. India has an opportunity to get there ahead of others by not starting down the bad road at all, because most of India is yet to seriously begin its consumption journey. The accompanying picture is from Bangalore, of a “fast food format” idli served in an ingenious container made of leaves, allowing sambar to be put on top of the idli and scooped out with a spoon.
It is the “global best practice” marketer who overplays and overuses plastic packaging, when in fact we have always been very frugal with our packaging due to cost considerations. If we have the courage to say that “made in India” packaged goods will be low plastic in their packaging, and if we can instead bring about a storage and reuse container revolution, then we can leap into the future on this count without going through the painful “modern” steps in between.
Why do airports and other high end public places insist on proclaiming their “modernity” by making women cleaners wear “pant shirt”? It makes them socially and physically uncomfortable and unhappy. Why don’t we have the confidence to believe that the salwar kameez is as modern?
The suggestion being made here is that marketers and retailers in India should believe confidently that they are as well positioned, if not better, than anyone else in the world, to create the modern Indian consumer formula; and rather than import ideas from elsewhere, should aggressively move ahead and build smart solutions to consumers needs and wants of today and for the future. The world might follow... or not!
http://economictimes.indiatimes.com/Opinion/Innovate-Indias-way-to-modernity/articleshow/5161809.cms
Wanted: A Blue Revolution - Ravi Uppal
India and sections of her people have benefited from the ‘Green Revolution’ and the ‘White Revolution’. It is time now to bring about the same convergence of policy and action to execute a quantum jump in the generation of energy. For want of a better hue from the palette, I will term it the ‘Blue Revolution’. The need for energy today is as stark as the need for food grain and milk once was. Energy is an imperative for economic growth and well-being. The per capita consumption of electricity — the cleanest form of energy — is recognised as a barometer of a country’s development and prosperity.
Unfortunately, even six decades after Independence, India fares poorly in the energy race. Our per capita consumption of about 700 kwhrs gives us the unenviable distinction of being in the league of 40 LDCs. The figures are revealing: global per capita consumption is about 2,600 kwhrs; developed nations enjoy a level between 10,000 and 20,000 kwhrs. China, whose total power generation capacity until mid-’70s was comparable with India’s, now boasts the world’s second largest power generation capacity — 700,000 MW. Its per capita consumption is currently around 2,000 kwhrs — three times as much as India’s, and set to surpass global averages by 2011.
Every region and state of India is starved for power — only the degree varies. Today, the lack of power is identified as the single biggest roadblock to India’s economic growth. No segment of the economy — be it industry, agriculture or service can do without power. Often government agencies claim that India’s peak time power shortage is about 12%. This is unarguably one of the most misleading pieces of disinformation going around as it is premised only on load shedding data. It does not take into account potential or unrealised demand from consumers who just do not have access to the grid. Interestingly, power is one industry in which demand follows supply.
In Plan after Plan, the government encouraged new industrial units to be set up in rural India — away from mega cities. But at the end of the day, little is achieved due to the absence of basic infrastructure inputs like power. Where do we go from here, and how fast can we move? Do we follow our neighbour China’s model or do we create one of our own? We must recognise that power is a form of energy derived from various natural sources: fossil or renewable.
Do we have a large enough bounty of resources or the wherewithal to boost our per capita levels to those of developed countries? Simple arithmetic tells us that if India were to match US energy consumption levels, our power generation capacity would need to grow to 3.6 million MW from the present level of a mere 175,000 MW. That is a tall order.
When India determines its model of ‘power sector’ development, we can be discerning and choose with the wisdom of hindsight. We can select contemporary technologies and adopt enlightened energy usage practices and thus set per capita targets which are affordable and sustainable.
India can certainly aspire to be among the leading economic powers and assure a good standard of living for its citizens if it could achieve an average per capita power consumption of around 3,000 units by 2027. If one assumes that the adverse impact of growing population will be neutralised by improving utilisation of the existing and new capacity, India could target a total generation capacity of about 700,000 MW by 2027. In other words, this would mean an average annual addition of 25,000–27,000 MW of new capacity for the next 18–20 years.
Is this too high a target, given our past record? Not quite. The enactment of Electricity Act 2003 has opened the power generation and distribution sector to private players and recent years have seen a great deal of interest from the private sector. Some of the private companies are set to become among country’s largest utilities. The next few years may see an addition of 15,000 to 18,000 MW every year, and the rate could easily be ramped up to 25,000 to 30,000 MW by the end of 12th Plan.
Power sector reforms including free access to transmission networks, energy trading markets, development of fuel sites, land & water acquisition will be critical to achieve the new capacity growth targets. In this context, when we are setting our ambition levels, it would be pertinent to ask what really limits our growth. The most critical of the limiting factors are the two Fs — financing and fuel.
India has multiple resources but none in sufficient quantity to enable us to rely on it totally. That means we need to harness each and every possible resource available. It is estimated that India’s exploitable resource potential from hydro and wind is 150,000 MW and 50,000 MW respectively out of which the total capacity set up until the end of 2008 is about 45,000 MW. So even if we exploit 80% of the total capacity during the next 20 years, India would need to add 450,000 MW of thermal and nuclear capacity to achieve an aggregate capacity of 700,000 MW.
India does have large deposits of coal and an increasing amount of natural gas and both needs to be exploited for the speedy growth of the power sector. India’s present coal-based generation is about 120,000 MW, which needs about 350 million tonnes of coal from its own mines. This capacity will need to go up at least three times, i.e., up to 1.2 billion tonnes to realise our target of about 400,000 MW from coal alone. The remaining 50,000 MW capacity will be contributed by natural gas, biomass and nuclear. It should be recognised that coal will remain the mainstay of our energy sources. This is the most dependable resource because it is locally available and its output can be controlled. Although external pressures will mount in view of environmental concerns, India will have to manage such pressures by adopting the most environment-friendly technologies to convince the global community about India’s unequivocal commitment to ecology.
As regards growth of India’s nuclear power, it remains uncertain due to external pressures and dependence on external resources for supply of fuel. This segment, which is environment- friendly, still deserves to be probed into with all seriousness. India also needs to cut short the total gestation period for execution of nuclear plants which as per the current standards take anywhere between 7-8 years to go critical.
A significant level of development has taken place in the wind-based power projects. India has started off well within this domain but needs to do a lot more by adapting practices of countries like Germany and Spain which draw over 25% of their generation capacity from wind alone. India’s coastline is over 6,500 km long and offshore sites have a lot more potential to offer than the sites onshore. Solar is another emerging resource which is quite effective at the micro level usage, particularly in the residential segment both in urban and rural locations. The utility level production of solar based electricity is still in a very early stage and its role in India’s future energy management should be seen as a positive upside.
Energy saved is energy generated. While we focus on augmenting our generation capacity, we must at the same time induct a sense of responsibility in usage. Reckless consumption is myopic and would have a catastrophic long-term cost to society. We should align our consumption norms with our long-term energy plans. Use of energy saving devices has to be mandatory and tariff structure has to be designed in a way that it discourages and prohibits wasteful consumption. We must constantly remind ourselves that regardless of ownership or access, every natural resource is a national asset. Generation and subsequent transmission and distribution have to be executed in a manner that these processes do not themselves consume most of the energy. Thermal power plants should be located close to the coal mines and colossal amount of energy required to move coal to the user point should be avoided. Energy conservation if implemented can certainly contribute equivalent to about 150,000 MW of power.
The ‘Blue Revolution’ and an attitude of responsible usage are two domains India needs to focus on. While we draw lessons from our own experience as well as the track record of others around us, we need to conceive our vision with an enlightened sense of self-interest, and implement it with tenacity and an uncompromised sense of urgency.
(The author is managing director, L&T Power)
http://economictimes.indiatimes.com/view-point/Wanted-A-Blue-Revolution/articleshow/5161858.cms
Unfortunately, even six decades after Independence, India fares poorly in the energy race. Our per capita consumption of about 700 kwhrs gives us the unenviable distinction of being in the league of 40 LDCs. The figures are revealing: global per capita consumption is about 2,600 kwhrs; developed nations enjoy a level between 10,000 and 20,000 kwhrs. China, whose total power generation capacity until mid-’70s was comparable with India’s, now boasts the world’s second largest power generation capacity — 700,000 MW. Its per capita consumption is currently around 2,000 kwhrs — three times as much as India’s, and set to surpass global averages by 2011.
Every region and state of India is starved for power — only the degree varies. Today, the lack of power is identified as the single biggest roadblock to India’s economic growth. No segment of the economy — be it industry, agriculture or service can do without power. Often government agencies claim that India’s peak time power shortage is about 12%. This is unarguably one of the most misleading pieces of disinformation going around as it is premised only on load shedding data. It does not take into account potential or unrealised demand from consumers who just do not have access to the grid. Interestingly, power is one industry in which demand follows supply.
In Plan after Plan, the government encouraged new industrial units to be set up in rural India — away from mega cities. But at the end of the day, little is achieved due to the absence of basic infrastructure inputs like power. Where do we go from here, and how fast can we move? Do we follow our neighbour China’s model or do we create one of our own? We must recognise that power is a form of energy derived from various natural sources: fossil or renewable.
Do we have a large enough bounty of resources or the wherewithal to boost our per capita levels to those of developed countries? Simple arithmetic tells us that if India were to match US energy consumption levels, our power generation capacity would need to grow to 3.6 million MW from the present level of a mere 175,000 MW. That is a tall order.
When India determines its model of ‘power sector’ development, we can be discerning and choose with the wisdom of hindsight. We can select contemporary technologies and adopt enlightened energy usage practices and thus set per capita targets which are affordable and sustainable.
India can certainly aspire to be among the leading economic powers and assure a good standard of living for its citizens if it could achieve an average per capita power consumption of around 3,000 units by 2027. If one assumes that the adverse impact of growing population will be neutralised by improving utilisation of the existing and new capacity, India could target a total generation capacity of about 700,000 MW by 2027. In other words, this would mean an average annual addition of 25,000–27,000 MW of new capacity for the next 18–20 years.
Is this too high a target, given our past record? Not quite. The enactment of Electricity Act 2003 has opened the power generation and distribution sector to private players and recent years have seen a great deal of interest from the private sector. Some of the private companies are set to become among country’s largest utilities. The next few years may see an addition of 15,000 to 18,000 MW every year, and the rate could easily be ramped up to 25,000 to 30,000 MW by the end of 12th Plan.
Power sector reforms including free access to transmission networks, energy trading markets, development of fuel sites, land & water acquisition will be critical to achieve the new capacity growth targets. In this context, when we are setting our ambition levels, it would be pertinent to ask what really limits our growth. The most critical of the limiting factors are the two Fs — financing and fuel.
India has multiple resources but none in sufficient quantity to enable us to rely on it totally. That means we need to harness each and every possible resource available. It is estimated that India’s exploitable resource potential from hydro and wind is 150,000 MW and 50,000 MW respectively out of which the total capacity set up until the end of 2008 is about 45,000 MW. So even if we exploit 80% of the total capacity during the next 20 years, India would need to add 450,000 MW of thermal and nuclear capacity to achieve an aggregate capacity of 700,000 MW.
India does have large deposits of coal and an increasing amount of natural gas and both needs to be exploited for the speedy growth of the power sector. India’s present coal-based generation is about 120,000 MW, which needs about 350 million tonnes of coal from its own mines. This capacity will need to go up at least three times, i.e., up to 1.2 billion tonnes to realise our target of about 400,000 MW from coal alone. The remaining 50,000 MW capacity will be contributed by natural gas, biomass and nuclear. It should be recognised that coal will remain the mainstay of our energy sources. This is the most dependable resource because it is locally available and its output can be controlled. Although external pressures will mount in view of environmental concerns, India will have to manage such pressures by adopting the most environment-friendly technologies to convince the global community about India’s unequivocal commitment to ecology.
As regards growth of India’s nuclear power, it remains uncertain due to external pressures and dependence on external resources for supply of fuel. This segment, which is environment- friendly, still deserves to be probed into with all seriousness. India also needs to cut short the total gestation period for execution of nuclear plants which as per the current standards take anywhere between 7-8 years to go critical.
A significant level of development has taken place in the wind-based power projects. India has started off well within this domain but needs to do a lot more by adapting practices of countries like Germany and Spain which draw over 25% of their generation capacity from wind alone. India’s coastline is over 6,500 km long and offshore sites have a lot more potential to offer than the sites onshore. Solar is another emerging resource which is quite effective at the micro level usage, particularly in the residential segment both in urban and rural locations. The utility level production of solar based electricity is still in a very early stage and its role in India’s future energy management should be seen as a positive upside.
Energy saved is energy generated. While we focus on augmenting our generation capacity, we must at the same time induct a sense of responsibility in usage. Reckless consumption is myopic and would have a catastrophic long-term cost to society. We should align our consumption norms with our long-term energy plans. Use of energy saving devices has to be mandatory and tariff structure has to be designed in a way that it discourages and prohibits wasteful consumption. We must constantly remind ourselves that regardless of ownership or access, every natural resource is a national asset. Generation and subsequent transmission and distribution have to be executed in a manner that these processes do not themselves consume most of the energy. Thermal power plants should be located close to the coal mines and colossal amount of energy required to move coal to the user point should be avoided. Energy conservation if implemented can certainly contribute equivalent to about 150,000 MW of power.
The ‘Blue Revolution’ and an attitude of responsible usage are two domains India needs to focus on. While we draw lessons from our own experience as well as the track record of others around us, we need to conceive our vision with an enlightened sense of self-interest, and implement it with tenacity and an uncompromised sense of urgency.
(The author is managing director, L&T Power)
http://economictimes.indiatimes.com/view-point/Wanted-A-Blue-Revolution/articleshow/5161858.cms
To Grow Without Inflation - Ashima Goyal
Government intervention prevented the sharp oil-driven peak in global food prices from reaching us, but now we are in our usual lagged catch-up as inflation falls elsewhere. The lag needs to be reduced now, says Ashima Goyal.
INDIAN green shoots are becoming more robust. But even if we reach 7% growth this year, it will be below a conservative potential growth estimate of 8%. Yet food price inflation is high, creating a dilemma for policy. Growth has still to be encouraged until it reaches capacity and a robust new investment cycle is established. But food is a large part of the average consumption basket and high prices impact the common man.
Month-to-month food price inflation showed some reduction, but rose again in August as the rains failed. Post the festival season and with the late revival of rains, the current spike could moderate. So should policy wait out the current inflation In 1998-99 not tightening monetary policy when inflation peaked with food prices worked as inflation fell later.
But food prices do affect wages, costs and inflation down the line, as inflationary expectations enter prices being set today. There has been some rise in manufacturing prices also in the past few months. Therefore there is a need to anchor inflation expectations. But how best to do this?
Should liquidity be reduced Or some of the quantitative easing measures reversed The liquidity adjustment facility is absorbing large amounts of liquidity, which is not yet percolating into the real sector where it is required. It follows that excess liquidity is not the problem. Credit growth remains low at around 13%. Asset bubbles normally rise only if credit growth is excessive. And the instrument of procyclical prudential requirements is available to moderate them. If credit is going too much in any one direction concentration margins can be charged.
In China, credit is growing at 34%, financing not just government investment, but also private housing. Each house needs to be equipped, and given the large population, it generates a lot of demand. So Chinese growth may be sustainable, and they may avoid asset bubbles. We have a similar large population. Low interest rates and easy liquidity facilitate the supply side response we require to grow and to control inflation.
Communication from the Reserve Bank of India may help control inflationary expectations, if markets and the public are clearly educated on the difference between cost shocks and excess demand driven inflation. In addition, giving an expected inflation rate, announcing an acceptable range of inflation, may help underling the lower levels of inflation we have got used to. Although the RBI communication has improved, it has had poor success in forecasting inflation. The definition and measurement of Indian inflation is unsatisfactory as yet. Therefore, communication to be credible some action is required to back it.
One signal of serious inflation watch is increasing the repo rate or rate at which the RBI lends to banks by 0.25 basis points. Since there is little borrowing from the RBI at present, it will have minimal effect on credit availability and price, but will signal a concern about inflation . The yield curve is steep currently, partly because of fears of inflation. A mild rise in the repo rate may actually help calm such fears and improve the transmission allowing lower short rates to successfully reduce long rates and loan rates. As banks expect rate rises it would be profitable to shift from holding government securities to making loans.
EXIT , whenever it occurs, must be very gradual, since banks pass on rate rises faster. So the tug on the string should be mild. The RBIs mild rate rises from 2004 did not reduce growth, but the steep rise in 2008 did. A stitch in time saves nine. If inflation moderates a mild rate rise can be reversed, and the structure of Indian interest rates can stay at the lower levels the crisis has enabled. If a further rise is required it can continue to be mild if it starts now.
Liquidity is high internationally, yet leverage is lower after the collapse of many investment banks. But there is little progress on financial reform. If inflows surge as they did in 2007 more restraints may be required on the types of inflows susceptible to wider interest differentials. Indias intermediate stage of capital account convertibility gives it some degrees of freedom in managing, despite an unsatisfactory international financial architecture . Equity inflows do help Indian companies investment plans.
Another instrument to moderate inflation is more short-term appreciation of the nominal exchange rate. Inflows are strong because of better Indian prospects. The Reserve Bank has not intervened so far. If it continues to refrain from intervening in the forex market, the rupee will appreciate further. Appreciation above equilibrium values may allow Indias interest rate to be higher than in the US while discouraging inflows through different types of carry trade, since depreciation would be expected in future. With excess capacity, inflation is low in most countries in the world. We should be able to import these low international prices. If we do not abort inflation now, there will be real appreciation anyway from higher domestic inflation.
The exchange rate cannot substitute for depressed world trade conditions, which will continue for sometime, so it makes sense to encourage some substitution towards domestic demand. The majority of Indian exports continuing to do well are niche exports that are not so price sensitive. But, over the long run, a competitive real exchange rate is required since India has a current account deficit in the balance of payments.
A fiscal policy alternative to exchange rate policy is tariff cuts on food price items. This together with the absence of elections in the next year may prevent further procurement prices increases. Low world inflation did help bring down Indian inflation rates in the nineties. Government intervention prevented the sharp oildriven peak in global food prices from reaching us, but now we are in our usual lagged catch-up as inflation falls elsewhere . The lag needs to be reduced now.
(The author is professor, Indira Gandhi Institute of Development Research, Mumbai)
http://lite.epaper.timesofindia.com/getpage.aspx?pageid=8&pagesize=&edid=&edlabel=ETD&mydateHid=24-10-2009&pubname=&edname=&publabel=ET
Saturday, October 17, 2009
The Copenhagen Panic - Bjorn Lomborg
A sense of panic is setting in among many campaigners for drastic cuts in global carbon emissions. It is becoming obvious the highly trumpeted meeting set for Copenhagen this December will not deliver a binding international treaty that will make a significant difference to global warming.After lofty rhetoric and big promises, politicians are starting to play the blame game. Developing countries blame rich countries for the lack of progress. Many blame the US, which will not have cap-and-trade legislation in place before Copenhagen.
The UN Secretary General says ,“it may be difficult for President Obama to come with strong authority” to reach agreement in Copenhagen. Others blame developing countries, particularly Brazil, China and India, for a reluctance to sign up to binding carbon cuts. Wherever you turn, somebody is being blamed for Copenhagen’s apparent looming failure.
Yet, it has been clear for a considerable time that there is a more fundamental problem: immediate promises of carbon cuts do not work. Seventeen years ago, industrialised nations promised with great fanfare in Rio de Janeiro to cut emissions to 1990 levels by 2000. Emissions overshot the target by 12%. In Kyoto, leaders committed to a cut of 5.2% below 1990 levels by 2010. The failure to meet that target will likely be even more spectacular, with emissions overshooting by about 25%.
The plan was to convene world leaders in Copenhagen and renew vows to cut carbon while committing to even more ambitious targets. But it is obvious that even a last-minute scramble to salvage some form of agreement will fare no better in actually helping the planet. With such a poor track record, there is a need for soul-searching and openness to other approaches.
A realistic “Plan B” does not mean plotting a second meeting after Copenhagen, as some have suggested. It means re-thinking our strategy. This year, the Copenhagen Consensus Center commissioned research from top climate economists examining feasible ways to respond to global warming.
Their research looked at how much we could help the planet by setting different levels of carbon taxes, planting more trees, cutting methane, reducing black soot emissions, adapting to global warming, or focusing on a technological solution to climate change. The Center convened an expert panel of five of the world’s leading economists, including three Nobel Prize winners, to consider all of the new research and identify the best — and worst — options.
The panel found that expensive, global carbon taxes would be the worst option. This finding was based on a groundbreaking research paper that showed that even a highly efficient global CO2 tax aimed at fulfilling the ambitious goal of keeping temperature increases below 2oC would reduce annual world GDP by a staggering 12.9%, or $40 trillion, in 2100.
The total cost would be 50 times that of the avoided climate damage. And if politicians choose less-efficient, less-coordinated cap-and-trade policies, the costs could escalate a further 10 to 100 times. Instead, the panel recommended focusing investment on research into climate engineering as a short-term response, and on non-carbon-based energy as a longer-term response.
Some proposed climate-engineering technologies — in particular, marine cloud-whitening technology — could be cheap, fast, and effective. Remarkably, the research suggests that a total of about $9 billion spent implementing marine cloud-whitening technology might be able to offset this entire century’s global warming. Even if one approaches this technology with concerns — as many of us do — we should aim to identify its limitations and risks sooner rather than later.
It appears that climate engineering could buy us some time, and it is time that we need if we are to make a sustainable and smooth shift away from reliance on fossil fuels. Research shows that non-fossil fuel energy sources will get us less than halfway toward a path of stable carbon emissions by 2050, and only a tiny fraction of the way towards stabilisation by 2100.
If politicians change course and agree this December to invest more in R&D, we would have a much greater chance of getting this technology to the level where it needs to be. And, as it would be cheaper and easier than carbon cuts, there would be a much greater chance of reaching a genuine, broad-based — and thus successful — international agreement.
Carbon pricing could be used to fund R&D, and to send a price signal to promote the deployment of effective, affordable technology alternatives. Investing about $100 billion annually would mean that we could resolve the climate-change problem by the end of this century.
While the blame game will not solve global warming, the mounting panic could lead to a positive outcome if we reconsider our approach. If we want real action, we need to pick solutions that will cost less and do more. That would be a result for which every politician would be happy to accept responsibility.
(The author is director of the Copenhagen Consensus Center and Adjunct Professor at Copenhagen Business School.) (C): Project Syndicate, 2009
http://economictimes.indiatimes.com/articleshow/5133162.cms
Wednesday, October 14, 2009
Impact of Mobile Phones on Farmers - Gaurav Tripathi
While substantial anecdotal evidence on the impact of mobile phones on farmers has been reported in the media, rigorous demonstration of its potential has only recently been attempted. Among the most celebrated of such studies is the Jensen (2007) paper that estimated the welfare impact of introduction of mobile phones among the fishing community in some of the districts in Kerala.
The study concluded that the economic impact of mobile is likely to be strongest when the absence or inadequacy of existing telecommunications facilities acts as a barrier or bottleneck to private economic activities, but also when enough, other infrastructure exists to permit the effective use of telecommunications.
An ICRIER study on the impact of mobile phones on farmers across several Indian districts highlights the key role played by mobiles in lowering transaction costs and raising the income-levels of farmers, by efficiently addressing their immediate agricultural-information requirements.
Information asymmetries are a well documented source for inefficient functioning of markets; farmers can bridge or alleviate the information gap at three major stages of the agricultural cultivation cycle by the use of mobile phones.
One, while deciding the crop and choosing the best seed variety based on soil-type of their land; two, deciding the month/season of sowing and addressing plant protection issues during the growth of crop; and three, deciding where and at what price to sell the farm output.
Mobile phones enable farmers to access this information from a host of information providers such as scientists from seed and pesticide companies, cooperative committee office-bearers, input dealers, government agriculture extension officers, market-commission agents/traders, veterinary doctors, and so on.
If such information is available when the farmers need it, not only does it reduce transaction costs, it also improves the returns farmers can get for their produce. In the discussions with farmers, they emphasised that timing of precise information is central to minimising wastage and therefore increasing efficiency.
The recent launch of mobile-based agricultural information services in India, such as IFFCO Kisan Sanchar Ltd and Reuters Market Light programme provided a reasonable method to test the above hypotheses. UP, Rajasthan and Maharashtra, with sizeable subscriber-base, were surveyed during July and November 2008. In general, farmers were confident of the utility of the mobile phone in reducing costs and enhancing earnings. The biggest influence was reported from Maharashtra followed by Rajasthan and UP.
Maharashtra farmers took greater advantage of the mobile phone for their farming needs vis-a-vis farmers in UP and Rajasthan. It should be highlighted that in our sample the Maharashtra farmers were better placed in terms of both social and infrastructure indicators. They reported higher literacy levels, economic well-being, and had better access to agricultural infrastructure facilities like irrigation and road transport, than the other two states.
The study highlights the vital importance of complementary skills and other infrastructure to realise the full potential of better access to telecommunications. There is no benefit in access to better information if it cannot be leveraged. For example, there is no use of farmers knowing the prices that their produce could be sold for in different markets if the roads are too poor for them to be able to transport the goods to those other markets.
At a time when the government agricultural extension services are unable to adequately fulfil their responsibility of providing information on scientific modern technology for farming to all the farmers due to resource constraints and the operative inefficiencies, mobile phones along with the mobile-enabled services present us with a ray of hope for uplifting our agricultural extension system.
Mobile phone has the potential to effectively supplement the efforts of existing extension services and synergise the whole process. The fast growth of mobile penetration and the rapid expansion in mobile communication network by the telecom players provide a fertile ground for looking at this medium seriously.
We found during our survey that mobile phone has huge potential to enable the small farmer to diversify from self-sustenance farming to higher income generating ventures like horticulture crops, animal husbandry and fish farming in paddy fields. This is particularly useful when returns to farmers are decreasing due to decline in agricultural yields and shortage of fertilisers for the past few years, putting pressure on them.
Mobile phones have the potential to play a key role in efficient logistics management and reduce costs for both farmers and the government. In the grim situation faced by farmers in several districts of India today due to scarcity of rainfall, the mobile platform offers a glimmer of hope; the government will be well advised to support the development of the complementary infrastructure to enable farmers to maximise the benefits that go with better access to information.
http://economictimes.indiatimes.com/articleshow/5113887.cms
The study concluded that the economic impact of mobile is likely to be strongest when the absence or inadequacy of existing telecommunications facilities acts as a barrier or bottleneck to private economic activities, but also when enough, other infrastructure exists to permit the effective use of telecommunications.
An ICRIER study on the impact of mobile phones on farmers across several Indian districts highlights the key role played by mobiles in lowering transaction costs and raising the income-levels of farmers, by efficiently addressing their immediate agricultural-information requirements.
Information asymmetries are a well documented source for inefficient functioning of markets; farmers can bridge or alleviate the information gap at three major stages of the agricultural cultivation cycle by the use of mobile phones.
One, while deciding the crop and choosing the best seed variety based on soil-type of their land; two, deciding the month/season of sowing and addressing plant protection issues during the growth of crop; and three, deciding where and at what price to sell the farm output.
Mobile phones enable farmers to access this information from a host of information providers such as scientists from seed and pesticide companies, cooperative committee office-bearers, input dealers, government agriculture extension officers, market-commission agents/traders, veterinary doctors, and so on.
If such information is available when the farmers need it, not only does it reduce transaction costs, it also improves the returns farmers can get for their produce. In the discussions with farmers, they emphasised that timing of precise information is central to minimising wastage and therefore increasing efficiency.
The recent launch of mobile-based agricultural information services in India, such as IFFCO Kisan Sanchar Ltd and Reuters Market Light programme provided a reasonable method to test the above hypotheses. UP, Rajasthan and Maharashtra, with sizeable subscriber-base, were surveyed during July and November 2008. In general, farmers were confident of the utility of the mobile phone in reducing costs and enhancing earnings. The biggest influence was reported from Maharashtra followed by Rajasthan and UP.
Maharashtra farmers took greater advantage of the mobile phone for their farming needs vis-a-vis farmers in UP and Rajasthan. It should be highlighted that in our sample the Maharashtra farmers were better placed in terms of both social and infrastructure indicators. They reported higher literacy levels, economic well-being, and had better access to agricultural infrastructure facilities like irrigation and road transport, than the other two states.
The study highlights the vital importance of complementary skills and other infrastructure to realise the full potential of better access to telecommunications. There is no benefit in access to better information if it cannot be leveraged. For example, there is no use of farmers knowing the prices that their produce could be sold for in different markets if the roads are too poor for them to be able to transport the goods to those other markets.
At a time when the government agricultural extension services are unable to adequately fulfil their responsibility of providing information on scientific modern technology for farming to all the farmers due to resource constraints and the operative inefficiencies, mobile phones along with the mobile-enabled services present us with a ray of hope for uplifting our agricultural extension system.
Mobile phone has the potential to effectively supplement the efforts of existing extension services and synergise the whole process. The fast growth of mobile penetration and the rapid expansion in mobile communication network by the telecom players provide a fertile ground for looking at this medium seriously.
We found during our survey that mobile phone has huge potential to enable the small farmer to diversify from self-sustenance farming to higher income generating ventures like horticulture crops, animal husbandry and fish farming in paddy fields. This is particularly useful when returns to farmers are decreasing due to decline in agricultural yields and shortage of fertilisers for the past few years, putting pressure on them.
Mobile phones have the potential to play a key role in efficient logistics management and reduce costs for both farmers and the government. In the grim situation faced by farmers in several districts of India today due to scarcity of rainfall, the mobile platform offers a glimmer of hope; the government will be well advised to support the development of the complementary infrastructure to enable farmers to maximise the benefits that go with better access to information.
(The author is researcher, ICRIER. Views are personal.)
http://economictimes.indiatimes.com/articleshow/5113887.cms
Borlaug and the Bankers - Joseph E Stiglitz
The recent death of Norman Borlaug provides an opportune moment to reflect on basic values and on our economic system. Borlaug received the Nobel Peace Prize for his work in bringing about the “green revolution,” which saved hundreds of millions from hunger and changed the global economic landscape.
Before Borlaug, the world faced the threat of a Malthusian nightmare: growing populations in the developing world and insufficient food supplies. Consider the trauma a country like India might have suffered if its population of a half-billion had remained barely fed as it doubled. Before the green revolution, Nobel Prize-winning economist Gunnar Myrdal predicted a bleak future for an Asia mired in poverty. Instead, Asia has become an economic powerhouse.
Likewise, Africa’s welcome new determination to fight the war on hunger should serve as a living testament to Borlaug. The fact that the green revolution never came to the world’s poorest continent, where agricultural productivity is just one-third the level in Asia, suggests that there is ample room for improvement.
The green revolution may, of course, prove to be only a temporary respite. Soaring food prices before the global financial crisis provided a warning, as does the slowing rate of growth of agricultural productivity. India’s agriculture sector, for example, has fallen behind the rest of its dynamic economy, living on borrowed time, as levels of ground water, on which much of the country depends, fall precipitously.
But Borlaug’s death at 95 also is a reminder of how skewed our system of values has become. When Borlaug received news of the award, at four in the morning, he was already toiling in the Mexican fields, in his never-ending quest to improve agricultural productivity. He did it not for some huge financial compensation, but out of conviction and a passion for his work.
What a contrast between Borlaug and the Wall Street financial wizards that brought the world to the brink of ruin. They argued that they had to be richly compensated in order to be motivated. Without any other compass, the incentive structures they adopted did motivate them — not to introduce new products to improve ordinary people’ lives or to help them manage the risks they faced, but to put the global economy at risk by engaging in short-sighted and greedy behaviour. Their innovations focused on circumventing accounting and financial regulations designed to ensure transparency, efficiency, and stability, and to prevent the exploitation of the less informed.
There is also a deeper point in this contrast: our societies tolerate inequalities because they are viewed to be socially useful; it is the price we pay for having incentives that motivate people to act in ways that promote societal well-being. Neoclassical economic theory, which has dominated in the west for a century, holds that each individual’s compensation reflects his marginal social contribution — what he adds to society. By doing well, it is argued, people do good.
But Borlaug and our bankers refute that theory. If neoclassical theory were correct, Borlaug would have been among the wealthiest men in the world, while our bankers would have been lining up at soup kitchens.
Of course, there is a grain of truth in neoclassical theory; if there weren’t, it probably wouldn’t have survived as long as it has (though bad ideas often survive in economics remarkably well). Nevertheless, the simplistic economics of the eighteenth and nineteenth centuries, when neoclassical theories arose, are wholly unsuited to twenty-first-century economies. In large corporations, it is often difficult to ascertain the contribution of any individual. Such corporations are rife with “agency” problems: while decision-makers (CEOs) are supposed to act on behalf of their shareholders, they have enormous discretion to advance their own interests — and they often do.
Bank officers may have walked away with hundreds of millions of dollars, but everyone else in our society — shareholders, bondholders, taxpayers, homeowners, workers — suffered. Their investors are too often pension funds, which also face an agency problem, because their executives make decisions on behalf of others. In such a world, private and social interests often diverge, as we have seen so dramatically in this crisis.
Does anyone really believe that America’s bank officers suddenly became so much more productive, relative to everyone else in society, that they deserve the huge compensation increases they have received in recent years? Does anyone really believe that America’s CEOs are that much more productive than those in other countries, where compensation is more modest?
Worse, in America stock options became a preferred form of compensation — often worth more than an executive’s base pay. Stock options reward executives generously even when shares rise because of a price bubble — and even when comparable firms’ shares are performing better. Not surprisingly, stock options create strong incentives for short-sighted and excessively risky behaviour, as well as for “creative accounting,” which executives throughout the economy perfected with off-balance-sheet shenanigans.
The skewed incentives distorted our economy and our society. We confused means with ends. Our bloated financial sector grew to the point that in the US it accounted for more than 40% of corporate profits.
But the worst effects were on our human capital, our most precious resource. Absurdly generous compensation in the financial sector induced some of our best minds to go into banking. Who knows how many Borlaugs there might have been among those enticed by the riches of Wall Street and the City of London? If we lost even one, our world was made immeasurably poorer.
(The author, University Professor at Columbia University and winner of the 2001 Nobel Prize, served as chairman of the Commission on the Measurement of Economic Performance and Social Progress. )
http://economictimes.indiatimes.com/view-point/Borlaugs-death-provides-moment-to-reflect-on-eco-system/articleshow/5113745.cms
Before Borlaug, the world faced the threat of a Malthusian nightmare: growing populations in the developing world and insufficient food supplies. Consider the trauma a country like India might have suffered if its population of a half-billion had remained barely fed as it doubled. Before the green revolution, Nobel Prize-winning economist Gunnar Myrdal predicted a bleak future for an Asia mired in poverty. Instead, Asia has become an economic powerhouse.
Likewise, Africa’s welcome new determination to fight the war on hunger should serve as a living testament to Borlaug. The fact that the green revolution never came to the world’s poorest continent, where agricultural productivity is just one-third the level in Asia, suggests that there is ample room for improvement.
The green revolution may, of course, prove to be only a temporary respite. Soaring food prices before the global financial crisis provided a warning, as does the slowing rate of growth of agricultural productivity. India’s agriculture sector, for example, has fallen behind the rest of its dynamic economy, living on borrowed time, as levels of ground water, on which much of the country depends, fall precipitously.
But Borlaug’s death at 95 also is a reminder of how skewed our system of values has become. When Borlaug received news of the award, at four in the morning, he was already toiling in the Mexican fields, in his never-ending quest to improve agricultural productivity. He did it not for some huge financial compensation, but out of conviction and a passion for his work.
What a contrast between Borlaug and the Wall Street financial wizards that brought the world to the brink of ruin. They argued that they had to be richly compensated in order to be motivated. Without any other compass, the incentive structures they adopted did motivate them — not to introduce new products to improve ordinary people’ lives or to help them manage the risks they faced, but to put the global economy at risk by engaging in short-sighted and greedy behaviour. Their innovations focused on circumventing accounting and financial regulations designed to ensure transparency, efficiency, and stability, and to prevent the exploitation of the less informed.
There is also a deeper point in this contrast: our societies tolerate inequalities because they are viewed to be socially useful; it is the price we pay for having incentives that motivate people to act in ways that promote societal well-being. Neoclassical economic theory, which has dominated in the west for a century, holds that each individual’s compensation reflects his marginal social contribution — what he adds to society. By doing well, it is argued, people do good.
But Borlaug and our bankers refute that theory. If neoclassical theory were correct, Borlaug would have been among the wealthiest men in the world, while our bankers would have been lining up at soup kitchens.
Of course, there is a grain of truth in neoclassical theory; if there weren’t, it probably wouldn’t have survived as long as it has (though bad ideas often survive in economics remarkably well). Nevertheless, the simplistic economics of the eighteenth and nineteenth centuries, when neoclassical theories arose, are wholly unsuited to twenty-first-century economies. In large corporations, it is often difficult to ascertain the contribution of any individual. Such corporations are rife with “agency” problems: while decision-makers (CEOs) are supposed to act on behalf of their shareholders, they have enormous discretion to advance their own interests — and they often do.
Bank officers may have walked away with hundreds of millions of dollars, but everyone else in our society — shareholders, bondholders, taxpayers, homeowners, workers — suffered. Their investors are too often pension funds, which also face an agency problem, because their executives make decisions on behalf of others. In such a world, private and social interests often diverge, as we have seen so dramatically in this crisis.
Does anyone really believe that America’s bank officers suddenly became so much more productive, relative to everyone else in society, that they deserve the huge compensation increases they have received in recent years? Does anyone really believe that America’s CEOs are that much more productive than those in other countries, where compensation is more modest?
Worse, in America stock options became a preferred form of compensation — often worth more than an executive’s base pay. Stock options reward executives generously even when shares rise because of a price bubble — and even when comparable firms’ shares are performing better. Not surprisingly, stock options create strong incentives for short-sighted and excessively risky behaviour, as well as for “creative accounting,” which executives throughout the economy perfected with off-balance-sheet shenanigans.
The skewed incentives distorted our economy and our society. We confused means with ends. Our bloated financial sector grew to the point that in the US it accounted for more than 40% of corporate profits.
But the worst effects were on our human capital, our most precious resource. Absurdly generous compensation in the financial sector induced some of our best minds to go into banking. Who knows how many Borlaugs there might have been among those enticed by the riches of Wall Street and the City of London? If we lost even one, our world was made immeasurably poorer.
(The author, University Professor at Columbia University and winner of the 2001 Nobel Prize, served as chairman of the Commission on the Measurement of Economic Performance and Social Progress. )
Monday, October 12, 2009
Caught in between GRAIN GLUT & SCANT - ASHOK GULATI & TEJINDER NARANG
THE DROUGHT OF 2009 HAS BEEN one of the worst since 1987. Parts of India, especially northern Karnataka and Andhra, have also faced the fury of floods simultaneously. This increased intensity of droughts and floods makes one feel that the impact of climate change is coming on us faster than we thought. If this recurs in future, increased volatility in agriculture production would be a natural consequence . This warrants a re-thinking of our policies to cope up with this volatility, especially of grain that are vital for food security.
Of late, there are frequent reports of shortfall of 6 million hectares in kharif paddy sowing due to deficient monsoon. Some ministers are echoing deficit of 12-15 million tonnes (mt) of rice in public pronouncements to justify the possible rise in rice prices in the coming days. Exaggerated phobia of possible paucity by relying on a single parameter can cause excessive speculation in domestic and international trading community and that can push prices sky high, converting the fear into reality.
For policymakers, it is critical to also look into carry-in stocks and consumption factor before they push the panic button . The analysis below shows that there is an over-reaction to potential drop in production. India has no cause to worry.
A dispassionate analysis of the rainfall deficiency at regional and district level indicates that the paddy crop is very good in the Punjab and Haryana belt, where deficiency of rain has been the maximum. This is due to reliance on groundwater irrigation. It is in the eastern belt (eastern UP, Bihar, Orissa, West Bengal and Assam), which relies on rains despite floating on groundwater, where there is likely to be a shortfall of paddy production. The yields of rainfed rice is generally less than 2 tonnes per hectares. Also, there is possibility of catching up in the rabi season at least in some places of the eastern and southern belts due to late rains.
Taking into account all this, it wont be a surprise if India still manages to produce about 90 mt of rice this year, a shortfall of about 9 mt over last year. But India has carry-over stock of rice of 15 mt as of October 1, 2009 with FCI and other state agenciesthat is more than sufficient to take care of a consumption of about 92-93 mt, even if production drops to below 90 mt. On top of this, there is accumulated wheat stock of 30 mt as of October 1, 2009, against a buffer stock norm of only 11 mt of wheat. Total grain stocks with FCI are 45 mt as of October 1, 2009 against a buffer stock norm of 16 mt. So there is no need for pressing any panic button whatsoever.
The worst will be if the Cabinet decides to import x quantity of rice or wheat. This can set the global markets into tizzy. If at all India needs to import in this year of unusual rains, it should quietly lower the import tariffs on agricultural products by private traders across a wide spectrum, abolish the stocking limits on importers, and bring back key grain (wheat and rice) on future markets to study the behaviour of private trade. Let the private trade decide when and how much of which agricultural product they want to import. This will keep the domestic prices under check without creating any panic.
Also, there is another important policy lesson that India needs to learn from this years experience. It needs to urgently tap groundwater resources through shallow tubewells in the eastern region so that pressure on the Punjab-Haryana belt for common rice can be reduced. The NASA satellites have lately shown that northwest India has been experiencing a fall in its groundwater to the extent of 15 inches each year during 2002-08 . This year it could be even more. This strategy of taking the green revolution eastwards was talked and started after the drought of 1987, but fizzled out in 1990s as we crossed over the hump. It will have to be now put on high priority. And to make it successful, power supplies in the region will have to be improved, procurement mechanism in the region to be made proactive in giving an effective price support. Whenever the eastern region produces a good harvest, their market prices of grain (like wheat this year) drop below the minimum support price as there is no effective procurement mechanism in the eastern belt that is comparable to what exists in Punjab and Haryana.
While this gets underway, the government has to work towards doubling the stocking capacity for grain in the country. It is also pathetic that in Punjab and Haryana grain are lying in the open with half a tarpaulin on it, with rodents having a good time. It leads to large wastages (almost of 10%). Total covered capacity to store in the country is less than 27 mt. Modern bulk handling facilities, preferably under the private sector, coupled with warehouse receipt system, need to be encouraged with capital subsidy schemes (as in cold storages ). Similar encouragement needs to be given for rural godowns that can be operated through panchayats or farmers grain companies. A grain saved is much more cost effective way to manage the fluctuations in grain economy than producing more grain that we cannot properly store.
(Gulati is director, Asia, International Food Policy Research Institute & Narang is a commodity specialist)
http://lite.epaper.timesofindia.com/getpage.aspx?pageid=13&pagesize=&edid=&edlabel=ETD&mydateHid=08-10-2009&pubname=&edname=&publabel=ET
Also, there is another important policy lesson that India needs to learn from this years experience. It needs to urgently tap groundwater resources through shallow tubewells in the eastern region so that pressure on the Punjab-Haryana belt for common rice can be reduced. The NASA satellites have lately shown that northwest India has been experiencing a fall in its groundwater to the extent of 15 inches each year during 2002-08 . This year it could be even more. This strategy of taking the green revolution eastwards was talked and started after the drought of 1987, but fizzled out in 1990s as we crossed over the hump. It will have to be now put on high priority. And to make it successful, power supplies in the region will have to be improved, procurement mechanism in the region to be made proactive in giving an effective price support. Whenever the eastern region produces a good harvest, their market prices of grain (like wheat this year) drop below the minimum support price as there is no effective procurement mechanism in the eastern belt that is comparable to what exists in Punjab and Haryana.
While this gets underway, the government has to work towards doubling the stocking capacity for grain in the country. It is also pathetic that in Punjab and Haryana grain are lying in the open with half a tarpaulin on it, with rodents having a good time. It leads to large wastages (almost of 10%). Total covered capacity to store in the country is less than 27 mt. Modern bulk handling facilities, preferably under the private sector, coupled with warehouse receipt system, need to be encouraged with capital subsidy schemes (as in cold storages ). Similar encouragement needs to be given for rural godowns that can be operated through panchayats or farmers grain companies. A grain saved is much more cost effective way to manage the fluctuations in grain economy than producing more grain that we cannot properly store.
(Gulati is director, Asia, International Food Policy Research Institute & Narang is a commodity specialist)
Sunday, October 11, 2009
What's holding back telecom growth? - Rekha Jain
Mobile services in India, much as in the rest of the world, have driven economic growth, made business more efficient and effective, led to emergence of large enterprises that generate tax revenues for the government, employment, and wealth for their shareholders.
However, India was a late starter in licensing out mobile services. While licences had been awarded in 1994, it was not until 1999 that several policy and regulatory issues were sorted out and mobile services took off. During this time, China had reached a teledensity several times higher than ours. Despite the claim of Indian policymakers regarding the “success” in the sector, it is a story that needs to be compared with other countries. A large number of Asian countries in the region have teledensities above 70%, compared to our nearly 30%, and have licensed out 3G, through auctions several years ago.
Everyone recognises that future of telecom is wireless. And competitiveness of countries, especially the service sector will be determined by developments in their telecom sector. Countries such as the US, UK and Malaysia, among others, explicitly recognise this and are publicly funding R&D in wireless technologies, deployment of broadband and roll out in rural areas. In India, while there is an overt recognition of this fact at the policy level, there is little effort in planning how we as a nation wish to achieve growth in the sector. While it can be argued that India needs to focus on physical infrastructure of roads, ports, power, etc, rather than on telecom, it is imperative that the focus is simultaneous, because without the latter, the benefits of the former can not be leveraged to the fullest extent.
The most critical resource for wireless services is spectrum. India needs to address the lack of strategic planning for spectrum urgently. That there is no national initiative to review the strategic aspects is a matter of great concern. What is worse is that even the operational aspects of managing spectrum are poorly handled. For example, for a variety of reasons, the government has not been able to auction 3G spectrum to date, despite nearly two years since the first announcement regarding its intention to make such spectrum available. 3G allocations had already occurred in both developed and developing countries (e.g., Philippines, Sri Lanka), so it was something that could have been undertaken easily by the government as so many precedents existed. At the strategic level, there is a need to develop a national spectrum policy that comprehensively examines and identifies the following:
Institutional mechanisms for managing spectrum:
However, India was a late starter in licensing out mobile services. While licences had been awarded in 1994, it was not until 1999 that several policy and regulatory issues were sorted out and mobile services took off. During this time, China had reached a teledensity several times higher than ours. Despite the claim of Indian policymakers regarding the “success” in the sector, it is a story that needs to be compared with other countries. A large number of Asian countries in the region have teledensities above 70%, compared to our nearly 30%, and have licensed out 3G, through auctions several years ago.
Everyone recognises that future of telecom is wireless. And competitiveness of countries, especially the service sector will be determined by developments in their telecom sector. Countries such as the US, UK and Malaysia, among others, explicitly recognise this and are publicly funding R&D in wireless technologies, deployment of broadband and roll out in rural areas. In India, while there is an overt recognition of this fact at the policy level, there is little effort in planning how we as a nation wish to achieve growth in the sector. While it can be argued that India needs to focus on physical infrastructure of roads, ports, power, etc, rather than on telecom, it is imperative that the focus is simultaneous, because without the latter, the benefits of the former can not be leveraged to the fullest extent.
The most critical resource for wireless services is spectrum. India needs to address the lack of strategic planning for spectrum urgently. That there is no national initiative to review the strategic aspects is a matter of great concern. What is worse is that even the operational aspects of managing spectrum are poorly handled. For example, for a variety of reasons, the government has not been able to auction 3G spectrum to date, despite nearly two years since the first announcement regarding its intention to make such spectrum available. 3G allocations had already occurred in both developed and developing countries (e.g., Philippines, Sri Lanka), so it was something that could have been undertaken easily by the government as so many precedents existed. At the strategic level, there is a need to develop a national spectrum policy that comprehensively examines and identifies the following:
Institutional mechanisms for managing spectrum:
For example, while spectrum management is a technical issue, it has long-term economic and commercial value. Therefore, it is not necessary that DoT is the only body that should be involved in strategising for future use. This requires considering a review of the organisational structure of wireless planning and coordination wing of DoT. For developing a strategic blueprint, besides DoT, we need to have institutional mechanisms to involve industry, broadcasting sector professionals, public safety agencies that use spectrum, maritime and aviation bodies, commerce ministry, defence agencies, technology institutes, public policy experts etc. Once there is a blueprint, DoT could manage the operational aspects of allocation and monitoring.
Approach to manage spectrum:
Approach to manage spectrum:
While it is true that rapid technological developments in this field make it very difficult to predict long-term uses and make appropriate allocations, it also points to the need for adoption of a flexible management approach. The new approaches to managing spectrum adopted by several leading countries indicate moving away from a “command and control” method to permit more market-based, flexible uses in terms of services that may be offered, sharing of spectrum, trading etc.
Review and audit of exiting spectrum usage:
Review and audit of exiting spectrum usage:
Several developing and developed countries have moved from analog services that are extremely inefficient with regard to spectrum usage to digital usage (for example in broadcasting). This has made large amounts of spectrum available (“digital dividend”) that may be used to provide a host of wireless services. This band has extremely good propagation characteristics and is commercially valuable as the experience in the US has shown. In India, we have a golden opportunity to adopt this approach, as our TV penetration is only 55%. The new TV sets can be mandated to be digital, so that new users benefit from the digital switchover. The digital TV sets in the replacement market will ensure that complete switchover can be managed over time. Thus, proper planning for the switchover needs to be done as was also shown in the US case.
There is a need to have a dialogue and debate at the national level regarding the issues identified above, that should involve senior decision-makers at the highest level. We are already running behind in a rapidly changing world, and if we do not take action now, we would have denied our citizens and industry early growth paths and a competitive edge.
(The author is executive chair, IIMA Idea Telecom Centre of Excellence, IIM, Ahmedabad)
http://economictimes.indiatimes.com/articleshow/5108002.cms
There is a need to have a dialogue and debate at the national level regarding the issues identified above, that should involve senior decision-makers at the highest level. We are already running behind in a rapidly changing world, and if we do not take action now, we would have denied our citizens and industry early growth paths and a competitive edge.
(The author is executive chair, IIMA Idea Telecom Centre of Excellence, IIM, Ahmedabad)
http://economictimes.indiatimes.com/articleshow/5108002.cms
Friday, October 9, 2009
Horse Trading and Climate Change: Noreena Hertz
WHEN the panda smiles, the world applauds. Or so it seemed after Chinese President Hu Jintao’s recent speech at the United Nations. Judging by the way much of the media reported his words, it seemed as if China had actually made an important announcement on cutting greenhouse-gas emissions. It hadn’t. All President Hu really said was that China would now “endeavour” to curb its carbon emissions by a “notable” margin. But how does one measure “endeavour” or “notable”? As someone with close links to the Chinese administration told me when pressed: “What was said was actually pretty meaningless.”
Indeed, there were no specific targets and, as any China watcher knows, the “greening” of the government is old news. Official Chinese policy in recent years has been to make GDP growth greener. But not at the expense of growth itself — and China plans to grow pretty fast.
At least the panda smiled. Poor Barack Obama didn’t even have that to offer. He offered no pledge to cut emissions in the United States, and, with vote-sapping battles already underway over health-care reform, one wonders how much time and energy Obama will have for environmental imperatives.
If all the world got out of this UN General Assembly meeting of government leaders was insubstantial rhetoric, the worse news is that it got more of the same at the G-20 meeting in Pittsburgh. As one finance minister told me rather wistfully, when I asked him what had actually been delivered on climate change: “Words,” he said, “just words.”
Given that there are little more than two months until the Copenhagen summit on climate change, which is supposed to frame the successor agreement to the Kyoto Protocol, this is depressing. Perhaps the only people not suddenly depressed are those immersed in the negotiations. With more than a thousand points still to be agreed, all the policymakers I’ve spoken to recently say that they cannot see how a meaningful deal can be reached by December in Copenhagen.
In reality, everyone is gearing up behind the scenes for a “Copenhagen 2,” and what those involved in the negotiations are calling “an even greater slog.” Even if some sort of communiqué is cobbled together in December, it is hard to believe that it will contain sufficient detail or reflect the proper level of commitment to have the impact so desperately needed.
“Copenhagen 1” was always bound to fail, partly because — and this may sound strange at first — it is all about climate change. Although cuts in CO2 emissions and agreement on funding and finance are necessary goals, the geopolitical reality is that climate change cannot be decoupled from trade or discussions on exchange rates, the IMF, reform of the UN, and so on. There is a quid pro quo that no one explicitly talks about but which must be addressed: trade-offs between these negotiations, not just within them. Meaningful action on climate change will not be seen until it is agreed within this broader framework.
This means taking the issue out of its current compartment and being realistic enough to understand that Brazil’s position on cutting down rainforests, for example, will be affected by whether or not it is given a seat on the UN Security Council. It means being sophisticated enough to understand that as long as China feels under pressure to stop propping up the renmimbi, it is unlikely to deliver commitments on emissions cuts.
Widening the scope of the next round of negotiations so that much more can be used as bargaining chips would make the job of the negotiators considerably harder. But it would also give them considerably more to work with. In fact, there is no other way to prevent the process from remaining a zero-sum game.
Worryingly, “Copenhagen 2” will not only have to navigate this complicated terrain, but it must do so in less than five years. The climate bomb is ticking, and there is a palpable sense of urgency among policymakers. For, as the UN’s Intergovernmental Panel on Climate Change has explicitly warned, if emissions do not fall before 2015, and only fall from then onwards (and the overall trend is that they have been rising), we will reach the point of no return.
At that point, the Armageddon scenarios of droughts, rising sea levels, floods, energy and resource wars, and mass migration will become a reality. Just think of the images of recent storms and floods in the Philippines and Vietnam that displaced and killed thousands, and multiply those horrors manifold. That is what we are up against.
Climate change negotiations are arguably the most important of our lifetime, because their outcome will determine the fate of our planet. It is essential that they take place within structures and frameworks that encourage agreement by putting other major multilateral issues up for discussion. The world’s governments must be able to trade horses if pandas and presidents are to do more than smile.
(The author is Professor of Globalisation, Sustainability and Finance, Duisenberg School of Finance, Amsterdam and Fellow, Judge Business School, University of Cambridge.)
http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETD/2009/10/06&PageLabel=12&EntityId=Ar01201&ViewMode=HTML&GZ=T
Indeed, there were no specific targets and, as any China watcher knows, the “greening” of the government is old news. Official Chinese policy in recent years has been to make GDP growth greener. But not at the expense of growth itself — and China plans to grow pretty fast.
At least the panda smiled. Poor Barack Obama didn’t even have that to offer. He offered no pledge to cut emissions in the United States, and, with vote-sapping battles already underway over health-care reform, one wonders how much time and energy Obama will have for environmental imperatives.
If all the world got out of this UN General Assembly meeting of government leaders was insubstantial rhetoric, the worse news is that it got more of the same at the G-20 meeting in Pittsburgh. As one finance minister told me rather wistfully, when I asked him what had actually been delivered on climate change: “Words,” he said, “just words.”
Given that there are little more than two months until the Copenhagen summit on climate change, which is supposed to frame the successor agreement to the Kyoto Protocol, this is depressing. Perhaps the only people not suddenly depressed are those immersed in the negotiations. With more than a thousand points still to be agreed, all the policymakers I’ve spoken to recently say that they cannot see how a meaningful deal can be reached by December in Copenhagen.
In reality, everyone is gearing up behind the scenes for a “Copenhagen 2,” and what those involved in the negotiations are calling “an even greater slog.” Even if some sort of communiqué is cobbled together in December, it is hard to believe that it will contain sufficient detail or reflect the proper level of commitment to have the impact so desperately needed.
“Copenhagen 1” was always bound to fail, partly because — and this may sound strange at first — it is all about climate change. Although cuts in CO2 emissions and agreement on funding and finance are necessary goals, the geopolitical reality is that climate change cannot be decoupled from trade or discussions on exchange rates, the IMF, reform of the UN, and so on. There is a quid pro quo that no one explicitly talks about but which must be addressed: trade-offs between these negotiations, not just within them. Meaningful action on climate change will not be seen until it is agreed within this broader framework.
This means taking the issue out of its current compartment and being realistic enough to understand that Brazil’s position on cutting down rainforests, for example, will be affected by whether or not it is given a seat on the UN Security Council. It means being sophisticated enough to understand that as long as China feels under pressure to stop propping up the renmimbi, it is unlikely to deliver commitments on emissions cuts.
Widening the scope of the next round of negotiations so that much more can be used as bargaining chips would make the job of the negotiators considerably harder. But it would also give them considerably more to work with. In fact, there is no other way to prevent the process from remaining a zero-sum game.
Worryingly, “Copenhagen 2” will not only have to navigate this complicated terrain, but it must do so in less than five years. The climate bomb is ticking, and there is a palpable sense of urgency among policymakers. For, as the UN’s Intergovernmental Panel on Climate Change has explicitly warned, if emissions do not fall before 2015, and only fall from then onwards (and the overall trend is that they have been rising), we will reach the point of no return.
At that point, the Armageddon scenarios of droughts, rising sea levels, floods, energy and resource wars, and mass migration will become a reality. Just think of the images of recent storms and floods in the Philippines and Vietnam that displaced and killed thousands, and multiply those horrors manifold. That is what we are up against.
Climate change negotiations are arguably the most important of our lifetime, because their outcome will determine the fate of our planet. It is essential that they take place within structures and frameworks that encourage agreement by putting other major multilateral issues up for discussion. The world’s governments must be able to trade horses if pandas and presidents are to do more than smile.
(The author is Professor of Globalisation, Sustainability and Finance, Duisenberg School of Finance, Amsterdam and Fellow, Judge Business School, University of Cambridge.)
http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETD/2009/10/06&PageLabel=12&EntityId=Ar01201&ViewMode=HTML&GZ=T
Managing Rural Development Regionally: Surinder Singla (Former Finance Minister, Punjab)
India and China are acting as engines of growth in a world hit by slowdown. The Asian giants’ pace might have slackened, but they are still notching a decent 6-7 % growth. Some experts even feel that the two countries may pull the developed world out of the quagmire of recession. The two nations have charted different growth paths. Focus on exports of goods has helped China emerge as the manufacturing hub of the world. India’s growth, on the other hand, is driven by domestic demand. Which makes it all the more imperative that the government intensify its inclusive growth efforts to make rural India a more prosperous and, for that very reason, a greater driver of domestic demand and overall economic growth.
While a large part of the public spending by governments in developed economies has gone to shore up a broken banking system, in India and China, fiscal policies have targeted the real economy. This is all to the good. However, in India’s case, much more needs to be done.
The growing gap among states in terms of per capita income, poverty, availability of infrastructure and socio-economic development is a big blot on and challenge for the India growth story. The seven low-income states of Bihar, Chhatisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh are home to more than half of India’s population.
Between 1999 and 2008, the fast-growing states like Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) far outpaced Bihar (5.1%), Uttar Pradesh (4.4%) and Madhya Pradesh (3.5%). Poverty rates in rural Orissa (43%) and rural Bihar (40%) are among the worst in the world. Illiteracy, socio-economic backwardness and, inadequate and inefficient finance and marketing services for farm produce are hindering increase in productivity. Poor governance at state level has been a major factor.
Tackling this will need intervention by the central government. What kind is the real question? One good example can be found in how China has tackled economic backwardness in its interior regions. In recent months, following the global economic meltdown, Chinese state planners have shifted their focus to boosting industrial and infrastructure growth inwards from the coastal region where they allowed unrestricted capitalism in the past 30 years. As a result, eight of the 10 fastest growing regions of China in the second quarter of 2009 have been inland. According to The Economist, state directed improvements in transport infrastructure, especially railway networks, should encourage companies to move westwards from the coastal districts where they are concentrated at present.
In India, too, investment must be designed to link rural areas to urban centres and to create physical and market infrastructure in rural areas.
Finance minister Pranab Mukherjee has done the right thing in his budget by stepping up the allocation for rural development. But what all rightthinking Indians need to debate is whether it is sufficient to keep raising budget allocations without due thought to how the money is spent.
The late Rajiv Gandhi had said that just 15 paise out of every rupee the Centre sends to states reached the common man. Corruption and misuse of funds at state level have only worsened. State governments have money to spend on everything except the welfare of the poor and downtrodden. Just to give an example, the Bahujan Samaj Party government in Uttar Pradesh allocated a huge sum of Rs 553 crore of the total state budget for construction of parks and statues of chief minister Mayawati but a pittance of Rs 6.15 crore was given for development of Bundelkhand and Poorvanchal. Nearly 200 farmers have reportedly committed suicide in the Bundelkhand region alone during Mayawati’s tenure. Such mishaps could have been avoided if the UP government had utilised money given by the central government.
It’s here that the Centre can innovate. It can set up a public sector authority which is independent of the state government. This authority will not tread into the state government’s territory but will rather supplement and complement the developmental efforts of the state government. Such an authority will be specially effective in unwieldy states like UP and MP, or stragglers like Bihar, Orissa, Jharkhand and Chhatisgarh.
Finance minister Pranab Mukherjee can make history by grabbing the opportunity to bring Bharat and especially the agriculture sector, which still employs majority of our countrymen, on a par with India. This will need massive diversion of funds to countryside.
We have tried routing or funds through the state government, and direct transfers from the Centre to district administrations. Perhaps we should try setting up regional development authorities and transferring money to them, to find a balance between neglect of a poor region by the capital of a large state and the lack of region-wide coherence and coordination at the district level.
http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETD/2009/10/06&PageLabel=13&EntityId=Ar01300&ViewMode=HTML&GZ=T
While a large part of the public spending by governments in developed economies has gone to shore up a broken banking system, in India and China, fiscal policies have targeted the real economy. This is all to the good. However, in India’s case, much more needs to be done.
The growing gap among states in terms of per capita income, poverty, availability of infrastructure and socio-economic development is a big blot on and challenge for the India growth story. The seven low-income states of Bihar, Chhatisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh are home to more than half of India’s population.
Between 1999 and 2008, the fast-growing states like Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) far outpaced Bihar (5.1%), Uttar Pradesh (4.4%) and Madhya Pradesh (3.5%). Poverty rates in rural Orissa (43%) and rural Bihar (40%) are among the worst in the world. Illiteracy, socio-economic backwardness and, inadequate and inefficient finance and marketing services for farm produce are hindering increase in productivity. Poor governance at state level has been a major factor.
Tackling this will need intervention by the central government. What kind is the real question? One good example can be found in how China has tackled economic backwardness in its interior regions. In recent months, following the global economic meltdown, Chinese state planners have shifted their focus to boosting industrial and infrastructure growth inwards from the coastal region where they allowed unrestricted capitalism in the past 30 years. As a result, eight of the 10 fastest growing regions of China in the second quarter of 2009 have been inland. According to The Economist, state directed improvements in transport infrastructure, especially railway networks, should encourage companies to move westwards from the coastal districts where they are concentrated at present.
In India, too, investment must be designed to link rural areas to urban centres and to create physical and market infrastructure in rural areas.
Finance minister Pranab Mukherjee has done the right thing in his budget by stepping up the allocation for rural development. But what all rightthinking Indians need to debate is whether it is sufficient to keep raising budget allocations without due thought to how the money is spent.
The late Rajiv Gandhi had said that just 15 paise out of every rupee the Centre sends to states reached the common man. Corruption and misuse of funds at state level have only worsened. State governments have money to spend on everything except the welfare of the poor and downtrodden. Just to give an example, the Bahujan Samaj Party government in Uttar Pradesh allocated a huge sum of Rs 553 crore of the total state budget for construction of parks and statues of chief minister Mayawati but a pittance of Rs 6.15 crore was given for development of Bundelkhand and Poorvanchal. Nearly 200 farmers have reportedly committed suicide in the Bundelkhand region alone during Mayawati’s tenure. Such mishaps could have been avoided if the UP government had utilised money given by the central government.
It’s here that the Centre can innovate. It can set up a public sector authority which is independent of the state government. This authority will not tread into the state government’s territory but will rather supplement and complement the developmental efforts of the state government. Such an authority will be specially effective in unwieldy states like UP and MP, or stragglers like Bihar, Orissa, Jharkhand and Chhatisgarh.
Finance minister Pranab Mukherjee can make history by grabbing the opportunity to bring Bharat and especially the agriculture sector, which still employs majority of our countrymen, on a par with India. This will need massive diversion of funds to countryside.
We have tried routing or funds through the state government, and direct transfers from the Centre to district administrations. Perhaps we should try setting up regional development authorities and transferring money to them, to find a balance between neglect of a poor region by the capital of a large state and the lack of region-wide coherence and coordination at the district level.
http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETD/2009/10/06&PageLabel=13&EntityId=Ar01300&ViewMode=HTML&GZ=T
Sunday, October 4, 2009
Celebrating an Economic Turnaround - Story of Chinese Ecnonomy
China observed the 60th anniversary of the founding of the People's Republic on 1 October. The celebrations, which have been under preparation for more than a year, rival those of the Beijing Olympics.
The expense may seem lavish at a time when the rest of the world is just recovering from a financial crisis, but the fact is that China has a great deal to celebrate. Despite major challenges, China has evolved into the world's third most powerful economy. It is now the world's premier source for manufacturing and it is increasingly making its influence felt in shaping international affairs. Equally important, there is no longer any question of China turning back.
In 1949, Mao Zedong stood before First Plenary Session of the Chinese People's Political Consultative Conference and declared victory, announcing that: "The Chinese people have now stood up."
This gave many Chinese people a sense of national pride following two decades of civil war and a succession of corrupt and ineffective regimes. An even more critical factor was the fact that in 1949, China was largely agricultural, mired in poverty and lacked roads, bridges, railways, electric power and a communications infrastructure.
Mao's first task was to move China's population (approximately 544 million) to a modern industrial-based economy. Despite a number of political and economic catastrophes, the plan ultimately worked, albeit at a cost. By 1979, China's industrial output, which had been only 12.6% of GDP in 1949, had increased 13 times to 46.8% of GDP. The size of China's rail network had more than doubled and the proportion of irrigated land had risen from 20% in 1952 to 50% in 1978.
Despite these advances, China still suffered from serious inaccuracies in its price structure, inflexible central planning, power shortages and inadequate transportation and communications networks. The next three decades changed that situation dramatically. China went from being the 19th largest economy in 1979 to the third largest today.
Thirty years ago foreign currency reserves were practically non-existent. Today it stands at almost $2 trillion. How China reached this point is critical to understanding how China thinks today and where it plans to go in the future.
When Deng Xiaoping launched his Open Door policy to modernise China in 1979, the country was still suffering from serious imbalances, including shortages of technicians and other highly trained personnel, insufficient foreign exchange for procurement of advanced technology and inadequate legal and administrative provisions for both foreign and domestic investment, among other problems.
Its economic policies had until then favoured state collectivism over private entrepreneurship. The ideology that had unified the leadership during the revolution had become a hindrance to modernisation. To modernise China a change was needed.
The turning point came during the third plenary session of the 11th CPC Central Committee meeting in Beijing in December 1978. A collective leadership of the CPC Central Committee with Deng Xiaoping at its core emerged from the meeting and a critical decision was made to turn away from chaotic class struggle and to focus instead on reconstructing China's economy. From that point on, economic pragmatism would trump ideology.
Deng publicly explained China's new direction by observing: "It doesn't matter if a cat is black or white, as long as it catches the mouse."
The transition to a somewhat decentralised and entrepreneurial economy began in 1979 with the creation of four Special Economic Zones in Shenzhen, Zhuhai, Shantou and Xiamen. These would eventually provide sceptics with tangible proof of the effectiveness of a market economy. Deng called the idea "Crossing the river by feeling the stones."
A number of innovative approaches came from provincial leaders — often in contradiction with the rules laid down by the central government. Deng's contribution was to open the door to make experimentation possible. Reforms that succeeded spread quickly.
Deng followed up with agricultural reform in January 1982, which authorised farmers to sell surplus crops in the open market, resulting in a surge in agricultural production. A companion reform in 1984 authorised town and village enterprises to do the same. Price reform was carried out by establishing a dual track system with state subsidies reduced over an extended period of time.
The second stage of Deng's reform began in December 1986, with the phasing out of state-owned industry, a policy that popularly referred to as "Breaking the iron rice bowl". It was a difficult process. According to Chinese statistics, China's state-owned enterprises eliminated 15 million jobs by 1998, and then laid off another 30 million workers between 1998 and 2005. Sixty percent of China's workforce was forced to find alternative employment.
By the time that the 10-year transition had ended, China's industrial base had been fundamentally changed. Some form of state ownership still exists in sectors such as financial services, energy, commodities and infrastructure. While the transition meant enormous pain for workers losing their jobs, it dramatically increased revenues, created a surge in productivity and unleashed China's entrepreneurial spirit.
The Tiananmen crackdown on June 4, 1989 frightened and alienated the international community. It raised questions about China's ultimate intentions. Growth dropped under 5% in 1989 and 1990, but Deng soon made it clear that he had no intention of deviating from the transition to a market economy.
In early 1992, he travelled to southern China and declared: "To get rich is glorious." The statement signalled that more than ever China was open for business. Foreign investment began pouring in again.
China's next major step was to join the World Trade Organisation in 2001. This forced China's newly privatised economy to meet international standards.
Instead of holding China back, the WTO accession made Chinese companies more attractive to international markets and far more competitive, while foreign companies could better access the Chinese market. China's growth has soared since then, helping it further become a world power that will play a major role in defining the 21st century.
Add all these major historical events together and what do you get? China's National Bureau of Statistics notes that the Chinese economy in 2008 is nearly 67 times larger than it was in 1979. According to the 2009 IMD World Competitiveness Yearbook, per capita GDP has gone from $578.11 in 1995 to $3,295.92 in 2008. Surely China has its many challenges ahead. But there is indeed a good reason to pause and celebrate these remarkable economic achievements.
(Nie is professor of Operations and Service Management and Lu, Research Associate at IMD, Lausanne, Switzerland.)
http://economictimes.indiatimes.com/Comments-Analysis/Celebrating-an-economic-turnaround/articleshow/5082410.cms
The expense may seem lavish at a time when the rest of the world is just recovering from a financial crisis, but the fact is that China has a great deal to celebrate. Despite major challenges, China has evolved into the world's third most powerful economy. It is now the world's premier source for manufacturing and it is increasingly making its influence felt in shaping international affairs. Equally important, there is no longer any question of China turning back.
In 1949, Mao Zedong stood before First Plenary Session of the Chinese People's Political Consultative Conference and declared victory, announcing that: "The Chinese people have now stood up."
This gave many Chinese people a sense of national pride following two decades of civil war and a succession of corrupt and ineffective regimes. An even more critical factor was the fact that in 1949, China was largely agricultural, mired in poverty and lacked roads, bridges, railways, electric power and a communications infrastructure.
Mao's first task was to move China's population (approximately 544 million) to a modern industrial-based economy. Despite a number of political and economic catastrophes, the plan ultimately worked, albeit at a cost. By 1979, China's industrial output, which had been only 12.6% of GDP in 1949, had increased 13 times to 46.8% of GDP. The size of China's rail network had more than doubled and the proportion of irrigated land had risen from 20% in 1952 to 50% in 1978.
Despite these advances, China still suffered from serious inaccuracies in its price structure, inflexible central planning, power shortages and inadequate transportation and communications networks. The next three decades changed that situation dramatically. China went from being the 19th largest economy in 1979 to the third largest today.
Thirty years ago foreign currency reserves were practically non-existent. Today it stands at almost $2 trillion. How China reached this point is critical to understanding how China thinks today and where it plans to go in the future.
When Deng Xiaoping launched his Open Door policy to modernise China in 1979, the country was still suffering from serious imbalances, including shortages of technicians and other highly trained personnel, insufficient foreign exchange for procurement of advanced technology and inadequate legal and administrative provisions for both foreign and domestic investment, among other problems.
Its economic policies had until then favoured state collectivism over private entrepreneurship. The ideology that had unified the leadership during the revolution had become a hindrance to modernisation. To modernise China a change was needed.
The turning point came during the third plenary session of the 11th CPC Central Committee meeting in Beijing in December 1978. A collective leadership of the CPC Central Committee with Deng Xiaoping at its core emerged from the meeting and a critical decision was made to turn away from chaotic class struggle and to focus instead on reconstructing China's economy. From that point on, economic pragmatism would trump ideology.
Deng publicly explained China's new direction by observing: "It doesn't matter if a cat is black or white, as long as it catches the mouse."
The transition to a somewhat decentralised and entrepreneurial economy began in 1979 with the creation of four Special Economic Zones in Shenzhen, Zhuhai, Shantou and Xiamen. These would eventually provide sceptics with tangible proof of the effectiveness of a market economy. Deng called the idea "Crossing the river by feeling the stones."
A number of innovative approaches came from provincial leaders — often in contradiction with the rules laid down by the central government. Deng's contribution was to open the door to make experimentation possible. Reforms that succeeded spread quickly.
Deng followed up with agricultural reform in January 1982, which authorised farmers to sell surplus crops in the open market, resulting in a surge in agricultural production. A companion reform in 1984 authorised town and village enterprises to do the same. Price reform was carried out by establishing a dual track system with state subsidies reduced over an extended period of time.
The second stage of Deng's reform began in December 1986, with the phasing out of state-owned industry, a policy that popularly referred to as "Breaking the iron rice bowl". It was a difficult process. According to Chinese statistics, China's state-owned enterprises eliminated 15 million jobs by 1998, and then laid off another 30 million workers between 1998 and 2005. Sixty percent of China's workforce was forced to find alternative employment.
By the time that the 10-year transition had ended, China's industrial base had been fundamentally changed. Some form of state ownership still exists in sectors such as financial services, energy, commodities and infrastructure. While the transition meant enormous pain for workers losing their jobs, it dramatically increased revenues, created a surge in productivity and unleashed China's entrepreneurial spirit.
The Tiananmen crackdown on June 4, 1989 frightened and alienated the international community. It raised questions about China's ultimate intentions. Growth dropped under 5% in 1989 and 1990, but Deng soon made it clear that he had no intention of deviating from the transition to a market economy.
In early 1992, he travelled to southern China and declared: "To get rich is glorious." The statement signalled that more than ever China was open for business. Foreign investment began pouring in again.
China's next major step was to join the World Trade Organisation in 2001. This forced China's newly privatised economy to meet international standards.
Instead of holding China back, the WTO accession made Chinese companies more attractive to international markets and far more competitive, while foreign companies could better access the Chinese market. China's growth has soared since then, helping it further become a world power that will play a major role in defining the 21st century.
Add all these major historical events together and what do you get? China's National Bureau of Statistics notes that the Chinese economy in 2008 is nearly 67 times larger than it was in 1979. According to the 2009 IMD World Competitiveness Yearbook, per capita GDP has gone from $578.11 in 1995 to $3,295.92 in 2008. Surely China has its many challenges ahead. But there is indeed a good reason to pause and celebrate these remarkable economic achievements.
(Nie is professor of Operations and Service Management and Lu, Research Associate at IMD, Lausanne, Switzerland.)
http://economictimes.indiatimes.com/Comments-Analysis/Celebrating-an-economic-turnaround/articleshow/5082410.cms
'Opportunities do not wait for strategies and strategists' - Azim Premji
I am not an entrepreneur by choice. In 1966, at the age of 21, I was practically overnight thrust into the role of the CEO of a company about $4 million in sales then, and not in the best of shape. I was trying to take charge of a role for which I had no training, no experience, no preparation and no demonstrated strength. We used to make vegetable oil. The journey from there on over the last four decades has not been easy. I learnt more from difficulties and failures than from successes.
The first lesson is that to be successful you have to be challenged by something, and then have the resolve to deal with it. This is the surest way forward. I learnt that challenges, determination and passion is what propel a person. I also learnt that often you have to go out seeking challenges because challenges may not come seeking you.
Rarely have I come across a successful entrepreneur, who became an entrepreneur only to make money. In practically all the cases, people became entrepreneurs because there is a challenge that excites them: A challenge to change the world, a challenge to invent, a challenge to create, etc—some deeply captivating challenge that appeals to them personally, but rarely is the desire to make money the prime driver.
The second learning is if you want something very much, you can actually make it happen, irrespective of the odds. As a living example, despite my age and the ageing grey cells, I did complete my Electrical Engineering degree
at Stanford, 33 years later in 1999. Let us also know that there is no substitute to action. That to me is the starting and the ending point of being an entrepreneur. The most important thing is to deal with the here and now. And I learnt that, that can happen only through personal action. It has stayed with me forever.
The fourth learning, and it may seem very elementary, is that hard work and passion pays. With the passing years, I am even more convinced that, all the thinking, the best of strategy and greatest of intelligence, can achieve little in the absence of hard work and passion. Also, one has to go against the grain of common wisdom. I have learnt to respect wisdom more than strategy and intelligence. However, I have also learnt that to build something, to create something different one has to inevitably go against the grain of common wisdom. However daunting it may seem, there are times when one has to trust one’s instincts and act, ignoring all the wisdom around. Opportunities don’t wait for any one, certainly not for strategies or strategists.
Opportunities are here today and gone tomorrow. Also, while we may have our role in creating opportunities, the big opportunities are driven by changes in the world that we live in. We have to seize these opportunities. The sixth and most important learning is a deep unflinching commitment to values. I started off with this notion that I would not compromise on Integrity. The fact is that I did not face a conducive environment to practice Integrity, in those days. My notion was that values come first and business success follows.
I can candidly admit that my belief was deeply tested through many years of painful learning process that I went through. This ‘unflinching’ commitment that I talk about is not something that happens just because of overnight resolve. At least it did not happen with me.
We have seen the most severe economic meltdown the world has ever seen, unmatched both in its geographic spread as well as severity. I believe that however long it is, the core characteristic of the entrepreneur will prevail. And the core characteristic of the entrepreneur is hope.
http://economictimes.indiatimes.com/articleshow/5079318.cms
Friday, October 2, 2009
A Competition Policy for Growth : Pradeep S Mehta
The Planning Commission will soon be conducting a mid-term review of the 11th five year plan (2007-2012). It will also take a look at the issue of a national competition policy, one of its recommendations in its policy document "Inclusive Growth" that was adopted by the National Development Council in December 2007.
The new government should revisit the same to ensure that inclusive growth is promoted and poverty reduced. Promoting competition is not only important as a principle for providing a just environment for all businesses, the fair race that it initiates among rival firms, including small producers, drives sustained growth.
It also keeps prices low by curbing collusive as well as monopoly pricing, as firms compete for consumers by minimising costs through efficient production.
India adopted the new competition law in 2002. Implemented after much delay, it replaced the vastly ineffective Monopolies and Restrictive Trade Practices Act of 1969. The older law was more of a licensing law. To curb anti-competitive practices, it had a mechanical approach: firms came under the scanner only if they acquired market dominance. And, it was the magnitude of market shares that was important, not how such market shares had been secured.
It is important to realise that a competition law by itself cannot ensure that the competitive spirit and culture permeates deep into the economy. It should be complemented by a national competition policy (NCP) to push structural and legislative reforms to promote competition in markets where it is restricted.
The competition law only focuses on the conduct of firms and ensures that such conduct is consistent with the spirit of fair play. However, distortions could arise due to either another law or policy. There are many such incongruities.
For instance, the mineral policy restrict quantitative extraction of minerals as well as sale of the minerals by the licensee. Unless there are valid social or environmental reasons, such policy conditions may go against the spirit of competition.
Use of trade policy instruments such as anti-dumping — without examining their deleterious effects on downstream industries — on the basis of complaints from domestic lobbies is another such recurring phenomenon. Some sector specific regulators would also implement laws that may vitiate the competitive spirit.
The NCP attempts to ensure congruity between all or most national and state laws with the principles of competition. That helps further the objectives of a competition law — to foster competition in all sectors of the economy and thereby induce efficiency, innovation and growth.
For a successful NCP, extensive advocacy and consultation are needed. This requires the cooperation and coordination of institutions such as the competition commission, civil society organisations, sector regulators and the government. The primary motivating factor behind the NCP is political will and priority accorded to growth as a political objective.
Ensuring competitive neutrality is another crucial aspect of the NCP — government businesses should not enjoy any undue advantage over private businesses. The requirement that government officials fly only Air India goes against this principle. Competitive neutrality is necessary to ensure competition within and across public and private enterprises.
The Planning Commission had established a working group on the NCP in 2007 to examine its various facets. This working group has already raised concerns over some policies, statutes and regulations at the levels of the central and state government that limit competition and has recommended review of such policies through the tool of competition impact assessment.
The Australian approach towards competition policy can be useful in the Indian context. There too, the competition policy followed the
competition law. But, the competition policy was preceded by an extensive review of all legislation from the competition perspective, and all laws and measures that had provisions (over 2,000 in number) violating the spirit of competition were repealed or amended.
The envisaged NCP approach would ensure equitable application of competition rules to all economic agents in the economy. It works on the principle that social welfare is best served by promoting competition.
Once adopted, the central government in coordination with the state governments should ensure that NCP is implemented uniformly across the country, particularly in respect of structural reform of public monopolies, review of anti-competitive legislation and regulation and the elimination of undue advantages enjoyed by government businesses where they compete with the private sector.
The NCP is an important step forward in establishing a consistent national economic framework to promote and maintain competition in all sectors of the economy. This, however, is clearly only an initial step in initiating wide ranging reforms to generate a culture and spirit of competition in the economy.
(The writer is secretary general, CUTS International)
http://economictimes.indiatimes.com/Opinion/A-competition-policy-for-growth/articleshow/5066465.cms
The new government should revisit the same to ensure that inclusive growth is promoted and poverty reduced. Promoting competition is not only important as a principle for providing a just environment for all businesses, the fair race that it initiates among rival firms, including small producers, drives sustained growth.
It also keeps prices low by curbing collusive as well as monopoly pricing, as firms compete for consumers by minimising costs through efficient production.
India adopted the new competition law in 2002. Implemented after much delay, it replaced the vastly ineffective Monopolies and Restrictive Trade Practices Act of 1969. The older law was more of a licensing law. To curb anti-competitive practices, it had a mechanical approach: firms came under the scanner only if they acquired market dominance. And, it was the magnitude of market shares that was important, not how such market shares had been secured.
It is important to realise that a competition law by itself cannot ensure that the competitive spirit and culture permeates deep into the economy. It should be complemented by a national competition policy (NCP) to push structural and legislative reforms to promote competition in markets where it is restricted.
The competition law only focuses on the conduct of firms and ensures that such conduct is consistent with the spirit of fair play. However, distortions could arise due to either another law or policy. There are many such incongruities.
For instance, the mineral policy restrict quantitative extraction of minerals as well as sale of the minerals by the licensee. Unless there are valid social or environmental reasons, such policy conditions may go against the spirit of competition.
Use of trade policy instruments such as anti-dumping — without examining their deleterious effects on downstream industries — on the basis of complaints from domestic lobbies is another such recurring phenomenon. Some sector specific regulators would also implement laws that may vitiate the competitive spirit.
The NCP attempts to ensure congruity between all or most national and state laws with the principles of competition. That helps further the objectives of a competition law — to foster competition in all sectors of the economy and thereby induce efficiency, innovation and growth.
For a successful NCP, extensive advocacy and consultation are needed. This requires the cooperation and coordination of institutions such as the competition commission, civil society organisations, sector regulators and the government. The primary motivating factor behind the NCP is political will and priority accorded to growth as a political objective.
Ensuring competitive neutrality is another crucial aspect of the NCP — government businesses should not enjoy any undue advantage over private businesses. The requirement that government officials fly only Air India goes against this principle. Competitive neutrality is necessary to ensure competition within and across public and private enterprises.
The Planning Commission had established a working group on the NCP in 2007 to examine its various facets. This working group has already raised concerns over some policies, statutes and regulations at the levels of the central and state government that limit competition and has recommended review of such policies through the tool of competition impact assessment.
The Australian approach towards competition policy can be useful in the Indian context. There too, the competition policy followed the
competition law. But, the competition policy was preceded by an extensive review of all legislation from the competition perspective, and all laws and measures that had provisions (over 2,000 in number) violating the spirit of competition were repealed or amended.
The envisaged NCP approach would ensure equitable application of competition rules to all economic agents in the economy. It works on the principle that social welfare is best served by promoting competition.
Once adopted, the central government in coordination with the state governments should ensure that NCP is implemented uniformly across the country, particularly in respect of structural reform of public monopolies, review of anti-competitive legislation and regulation and the elimination of undue advantages enjoyed by government businesses where they compete with the private sector.
The NCP is an important step forward in establishing a consistent national economic framework to promote and maintain competition in all sectors of the economy. This, however, is clearly only an initial step in initiating wide ranging reforms to generate a culture and spirit of competition in the economy.
(The writer is secretary general, CUTS International)
http://economictimes.indiatimes.com/Opinion/A-competition-policy-for-growth/articleshow/5066465.cms
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