All these months I have been telling you how microfinance kills the poor. But somehow I still find that many of the policy makers and planners are still sold to the flawed concept, and some genuinely believe that micro-credit actually helps the poorest of the poor. They (and this includes the Reserve Bank of India as well as the Finance Ministry) are reluctant to initiate any action that may pull down the shutter on something that I have always regarded as a crime.
What is however heartening to observe is that many concerned citizens across the globe have begun to see through the pernicious design, and have now started to question the very basis of the concept. An award-winning Danish documentary film maker, Tom Heinemann, has launched today his latest film "Caught in the micro-debt" (in Norwegian language). Premiered on the Norwegian State TV Channel NRK, the film is based on an investigation by Tom Heinemann who made 'several trips to Bangladesh, and talks with a number of international experts worldwide, shows that the Grameen Bank leads many poor women into a crippling debt spiral.'
You can watch the documentary at www.nrk.no/brennpunkt
The film also makes some serious allegations against Muhammad Yunus, founder of Grameen Bank, had transferred Tk 7 billion to Grameen Kalyan, which has nothing to do with micro-credit operations. More at: http://www.bdnews24.com/details.php?id=180277&cid=2
According to a media statement: "The women pay about 30 per cent interest on loans, as they already have to start paying back after a week. The documentary tells the poor to harsh collection methods from Grameen Bank, which has received the entire 400 million in aid from Norway."
This film shatters the claims that were made by the microfinance institutes worldwide. I only wonder how could distinguished economists, academicians and policy makers eulogise the MFIs without first ascertaining the truth behind the flawed claims. Why didn't academicians at least warn the world? How could the World Bank/IMF and even the donors sink millions of dollars in such dirty enterprises? Why was the truth kept hidden?
Well, not only microfinance, the sordid truth behind the hyper claims being made by the biotechnology industry (and backed by the mainline scientists) has been kept under wraps by a corrupt regulatory regime. Pharmaceutical as well as the food processing industry have also managed to keep the stark truth remain hidden from public glare.There is something terribly going wrong with the people/institutions who are supposed to regulate the system to protect us.
The Norwegian Development Agency Norad, according to the press statement, had supported the Grameen Bank from 1986 to 1997 with a total of 400 million. Focal Point (the NRK programme that has brought this film) has gone through the entire archive of Norad, which has the Grameen Bank to make. Here it emerged that employees of NORAD in the early 1990's was concerned that the poor were trapped in a debt spiral.
In a memo from Norad 20 December 1993 states the following:
"In fact, according to a survey done by David Gibbons and Helen Todd of the 40 women with 10 years of membership (of Grameen Bank), had almost all borrowed privately to pay installments."
And in another note from Norad 1 June 1994 states the following:
"One of the matters which the report points out is that the credit concept as it has evolved, created fertile ground for a practice in which new loans can be used to repay current loans. This may help to explain the impressive repayment statistics as Grameen Bank operates. "
This only goes on to show that even as far as 1993-94 it was known that microfinance was not working. The film then goes on to quote a small borrower, Hazera: "I have had loans from Grameen Bank for 15 years, and I paid my installments on time. At one point I got problems with your refund. The staff of Grameen Bank came and called me names. They threatened me with selling panels from the house. If I did not pay, they would throw me on the street. They said many nasty things to me. I was scared and sold everything I owned and paid installment. The house will collapse. There are holes in the roof. I have no one in the world."
This is nothing but Goonda Raj.
MFIs: Profiteering from poverty
Some days back, the New York Times had in a report Indian Microcredit Faces Collapse From Defaults (Nov 17, 2010) stated: "But microfinance in pursuit of profits has led some microcredit companies around the world to extend loans to poor villagers at exorbitant interest rates and without enough regard for their ability to repay. Some companies have more than doubled their revenues annually.
Now some Indian officials fear that microfinance could become India’s version of the United States’ subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to low-income households threatened to collapse the global banking system because of a reckless, grow-at-any-cost strategy."
The NYT had blamed the borrowers in one of India’s largest states for the collapse. Accordingly, they have stopped repaying their loans, egged on by politicians who accuse the industry of earning outsize profits on the backs of the poor. If this is true, I am very happy.
MFIs deserve to be kicked out, the sooner the better for the poor.
Dainik Jagran, the largest selling newspaper in India (it is in Hindi), has carried today (Nov 27, 2010) an interesting report that should serve as an eye-opener. It says that the Ministry of Finance had a couple of days back held a discussion on microcredit in which a document detailing the profits earned by the MFIs was placed before the members. The details are shocking, and show how the MFIs have been extracting their pound of flesh in the name of poverty eradication.
An analysis of 13 major non-banking MFIs shows that the profits these firms accumulated by charging exorbitant interest from the poor borrowers had swelled from Rs 677.3 crore in 2007-08 to Rs 3776.93 crore in 2009-10. In other words, their profits had multiplied by 5.5 times over a period of two years. Since the MFIs have failed to expand the borrower base, it is quite evident that the profit increase is based on the interest amount they have managed to garner.
So while the poor took the fatal route to escape the humiliation that comes with coercive recovery of outstanding loans, the MFIs have made it rich. Bandhan Microfinance has broken all records. Its profits swelled by 34 times in two years. Some of the other players -- SKS Microfinance, Ujjivan Microfinance, BSS Microfinance, Share Microfinance, Sampada Safurti, and Grameen Financial -- have also managed to collect huge profits. Further investigations are on.
MFIs Interest Profit (in crore rupees)
2007-08 2009-10
SKS Microfinance 170.1 958.92
Bandhan 6.56 222.11
BSS 7.03 155.38
Share Microfinance 113.08 475.27
Grameen FS 82.65 327.35
Samdana Safurti 127.45 724.09
Ujjivan 36.37 372.89
(Note: Rs 1 crore=Rs 10 million)
The above chart is self-explanatory. It tells us how lucrative is the microfinance business. If you are foreign educated, and have lost your job in the wake of US recession, it is time to head home and set up an MFI. You can make money from the laudable objective of helping the poor. Many of the stalwarts in the MFI business have done it like this.
And don't worry, you will have a huge support from an equally indifferent educated from the middle class who would call it a 'win-win' situation. Many iNGOs, who also thrive on lending for the poor, would back you up to the hilt. Mainline economists are always there to justify such financial crimes.
You make your profits by sucking the blood of the poor. The resulting social cost would be picked up by the poor.
Now some Indian officials fear that microfinance could become India’s version of the United States’ subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to low-income households threatened to collapse the global banking system because of a reckless, grow-at-any-cost strategy."
The NYT had blamed the borrowers in one of India’s largest states for the collapse. Accordingly, they have stopped repaying their loans, egged on by politicians who accuse the industry of earning outsize profits on the backs of the poor. If this is true, I am very happy.
MFIs deserve to be kicked out, the sooner the better for the poor.
Dainik Jagran, the largest selling newspaper in India (it is in Hindi), has carried today (Nov 27, 2010) an interesting report that should serve as an eye-opener. It says that the Ministry of Finance had a couple of days back held a discussion on microcredit in which a document detailing the profits earned by the MFIs was placed before the members. The details are shocking, and show how the MFIs have been extracting their pound of flesh in the name of poverty eradication.
An analysis of 13 major non-banking MFIs shows that the profits these firms accumulated by charging exorbitant interest from the poor borrowers had swelled from Rs 677.3 crore in 2007-08 to Rs 3776.93 crore in 2009-10. In other words, their profits had multiplied by 5.5 times over a period of two years. Since the MFIs have failed to expand the borrower base, it is quite evident that the profit increase is based on the interest amount they have managed to garner.
So while the poor took the fatal route to escape the humiliation that comes with coercive recovery of outstanding loans, the MFIs have made it rich. Bandhan Microfinance has broken all records. Its profits swelled by 34 times in two years. Some of the other players -- SKS Microfinance, Ujjivan Microfinance, BSS Microfinance, Share Microfinance, Sampada Safurti, and Grameen Financial -- have also managed to collect huge profits. Further investigations are on.
MFIs Interest Profit (in crore rupees)
2007-08 2009-10
SKS Microfinance 170.1 958.92
Bandhan 6.56 222.11
BSS 7.03 155.38
Share Microfinance 113.08 475.27
Grameen FS 82.65 327.35
Samdana Safurti 127.45 724.09
Ujjivan 36.37 372.89
(Note: Rs 1 crore=Rs 10 million)
The above chart is self-explanatory. It tells us how lucrative is the microfinance business. If you are foreign educated, and have lost your job in the wake of US recession, it is time to head home and set up an MFI. You can make money from the laudable objective of helping the poor. Many of the stalwarts in the MFI business have done it like this.
And don't worry, you will have a huge support from an equally indifferent educated from the middle class who would call it a 'win-win' situation. Many iNGOs, who also thrive on lending for the poor, would back you up to the hilt. Mainline economists are always there to justify such financial crimes.
You make your profits by sucking the blood of the poor. The resulting social cost would be picked up by the poor.
India Needs A Seed Liability Bill
For past several weeks, thousands of farmers in Madhya Pradesh, Uttar Pradesh, Chhatisgarh, Rajasthan, Bihar and Jharkhand have been left in the lurch. They had planted urd and til crops in a large acreage, and to their dismay no grain formation took place in the standing crop.
Unable to bear the economic loss, at least four farmers have reportedly committed suicide. Thousands of farmers have been pushed deeper into economic distress. They had also expressed their indignation by holding demonstration and protests at a number of small towns but haven’t got anything more than an official promise to provide them adequate compensation.
This is not the first time that the so called ‘improved seed’ has failed the farmers. Not only the seed supplied by the National Seeds Corporation, but even the seeds of multinational companies like Monsanto, Pioneer Hi-bred and Mahyco and others have routinely failed either to germinate or to form grains. And yet, there is no effort by the government to provide exemplary punishment to the seed companies and at the same time adequately compensate the farmers.
The controversial Seed Bill 2010 that has been placed in Parliament in the ongoing session fails to address the long standing demand of farmers. Originally drafted in 2004, the new Seed Bill that has been reintroduced after much deliberations and discussions still takes a soft line against the seed companies, and provides no succour to farmers. Ignoring most important suggestions made by the Standing Parliamentary Committee on Agriculture, and also by several civil society groups and farmer unions, it tows the line of the seed industry.
Seed Bill 2010 appears to have been drafted by the seed industry, for the seed industry. The proposed amendments once again favour private seed companies and corporations at the expense of farmers.
The $ 26 billion multinational giant Du Pont for instance has already made it clear that it is shifting its focus from agro-chemicals to sell better seed varieties. Monsanto has already created a strong foothold in the seed market, and other multinational seed giants like the Swiss-based Syngenta too have been extending its market. Over 500 private seed companies are presently setting shop in India.
As the seed industry grows, sale of spurious and sub-standard seeds has also grown. Sale of hybrid seeds particularly has become a lucrative business with a large number of fly-by-night operators who make a killing by selling seeds for a year and then disappearing the next year. In the absence of tighter controls, it is the farmers who bear the brunt and continue to suffer silently.
The Seed Bill 2010 proposes a maximum fine of Rs I lakh for not keep proper record of purity and germination of seed as per the laid-out standards. And in cases spurious seeds, the bill proposes a jail term extending to one year and a maximum fine of Rs 5 lakh. Crop losses suffered by farmers will be evaluated by a local expert committee which will work out the compensation to be paid to farmers.
This is simply unfair. When seed fails to germinate or develop grains, it is the farmers’ livelihood that is destroyed. Such is the extent of damage that many farmers prefer to commit suicide unable to bear the loss. It is therefore a question of life and death for a farmer. Considering that a good crop not only provides for food security but also economic security for the farmer’s family, the loss cannot be measured simply in terms of the seed price that the farmer had incurred. Compensation must include the livelihood loss, and should include a minimum liability amount.
What is therefore required is a Seed Liability Bill. Drawn on the lines of the Nuclear Liability Bill, the proposed Seed Liability bill must provide for a minimum economic liability that the seed companies must undertake in event of a crop failure. Agriculture Minister Sharad Pawar cannot be soft on the seed industry as seed is not merely a consumer product but the means of a livelihood for a farm family. One crop failure pushes the farmer deeper into the dreaded debt cycle.
Sometimes back, we had discussed the components of the proposed Seed Bill at a national consultation in New Delhi. The following suggestions do include some of the recommendations of the national consultation held in June this year:
a) the proposed seed bill should provide for mandatory price controls. Farmers must be able to purchase seed at an affordable price. At present, companies are charging prices at will and that too without any rationale. Tomato seed price for instance varies between Rs 475 to Rs 76,000 per kg, and Capsicum seed price between Rs 3,670 to Rs 65,200 a kg.
More recently, seed companies have taken the Andhra Pradesh government to the High Court challenging its decision to regulate prices and royalty. Therefore, the seed bill must include power to decide on price and price controls (including royalties).
b) Since the penalties/punishments have been mild, the government has failed to check the menace of fake, spurious and sub-standard seeds. Companies selling spurious and sub-standard seed should be black-listed. The penalty should include an imprisonment for a maximum period of ten years and a minimum fine of Rs 10 lakh. The penalty should also commensurate with the turnover of the seed company.
In addition, in cases of complete crop loss, the seed company should be directed to pay an amount equal to expected crop output, plus a 50 per cent assured return as livelihood security.
c) Provision for re-registration increases the monopoly of the seed company for at least 20 years. This is unacceptable for the simple reason that it brings in monopoly control over seed through the back door.
d) While seeds may be registered with the National Register of Seeds, it is imperative that State Governments must be given the authority to decide on which of these registered seeds can be licensed to be used in their State.
e) The Seed (Control) Order, 1983 had allowed the unbridled import under open-general license of planting material and seeds of flowers, vegetables and horticultural crops. This Order was exploited by unscrupulous seed trade and business to import plant materials without undergoing any rigorous quality checks. The seed imports have come with a heavy load of pests and diseases posing serious damages to crop cultivation and to the country’s food security. Many hitherto unknown pests have also entered the country.
f) All imports of seeds therefore must undergo mandatory seed testing procedures, including multi-location trials, to ensure its adaptability to the Indian conditions. No self-testing or certificates from foreign seed certification agencies should hold true for Indian conditions.
g) Seed imports should only be allowed after pest risk analysis, local adaptability have been assessed. There is a need for a liability clause to be introduced that makes seed exporter responsible for any pest outbreak and also for the clean-up operations. This assumes importance in the wake of the Bhopal gas tragedy where the chemical companies have simply evaded any liability for the toxic clean-up.
Unable to bear the economic loss, at least four farmers have reportedly committed suicide. Thousands of farmers have been pushed deeper into economic distress. They had also expressed their indignation by holding demonstration and protests at a number of small towns but haven’t got anything more than an official promise to provide them adequate compensation.
This is not the first time that the so called ‘improved seed’ has failed the farmers. Not only the seed supplied by the National Seeds Corporation, but even the seeds of multinational companies like Monsanto, Pioneer Hi-bred and Mahyco and others have routinely failed either to germinate or to form grains. And yet, there is no effort by the government to provide exemplary punishment to the seed companies and at the same time adequately compensate the farmers.
The controversial Seed Bill 2010 that has been placed in Parliament in the ongoing session fails to address the long standing demand of farmers. Originally drafted in 2004, the new Seed Bill that has been reintroduced after much deliberations and discussions still takes a soft line against the seed companies, and provides no succour to farmers. Ignoring most important suggestions made by the Standing Parliamentary Committee on Agriculture, and also by several civil society groups and farmer unions, it tows the line of the seed industry.
Seed Bill 2010 appears to have been drafted by the seed industry, for the seed industry. The proposed amendments once again favour private seed companies and corporations at the expense of farmers.
The $ 26 billion multinational giant Du Pont for instance has already made it clear that it is shifting its focus from agro-chemicals to sell better seed varieties. Monsanto has already created a strong foothold in the seed market, and other multinational seed giants like the Swiss-based Syngenta too have been extending its market. Over 500 private seed companies are presently setting shop in India.
As the seed industry grows, sale of spurious and sub-standard seeds has also grown. Sale of hybrid seeds particularly has become a lucrative business with a large number of fly-by-night operators who make a killing by selling seeds for a year and then disappearing the next year. In the absence of tighter controls, it is the farmers who bear the brunt and continue to suffer silently.
The Seed Bill 2010 proposes a maximum fine of Rs I lakh for not keep proper record of purity and germination of seed as per the laid-out standards. And in cases spurious seeds, the bill proposes a jail term extending to one year and a maximum fine of Rs 5 lakh. Crop losses suffered by farmers will be evaluated by a local expert committee which will work out the compensation to be paid to farmers.
This is simply unfair. When seed fails to germinate or develop grains, it is the farmers’ livelihood that is destroyed. Such is the extent of damage that many farmers prefer to commit suicide unable to bear the loss. It is therefore a question of life and death for a farmer. Considering that a good crop not only provides for food security but also economic security for the farmer’s family, the loss cannot be measured simply in terms of the seed price that the farmer had incurred. Compensation must include the livelihood loss, and should include a minimum liability amount.
What is therefore required is a Seed Liability Bill. Drawn on the lines of the Nuclear Liability Bill, the proposed Seed Liability bill must provide for a minimum economic liability that the seed companies must undertake in event of a crop failure. Agriculture Minister Sharad Pawar cannot be soft on the seed industry as seed is not merely a consumer product but the means of a livelihood for a farm family. One crop failure pushes the farmer deeper into the dreaded debt cycle.
Sometimes back, we had discussed the components of the proposed Seed Bill at a national consultation in New Delhi. The following suggestions do include some of the recommendations of the national consultation held in June this year:
a) the proposed seed bill should provide for mandatory price controls. Farmers must be able to purchase seed at an affordable price. At present, companies are charging prices at will and that too without any rationale. Tomato seed price for instance varies between Rs 475 to Rs 76,000 per kg, and Capsicum seed price between Rs 3,670 to Rs 65,200 a kg.
More recently, seed companies have taken the Andhra Pradesh government to the High Court challenging its decision to regulate prices and royalty. Therefore, the seed bill must include power to decide on price and price controls (including royalties).
b) Since the penalties/punishments have been mild, the government has failed to check the menace of fake, spurious and sub-standard seeds. Companies selling spurious and sub-standard seed should be black-listed. The penalty should include an imprisonment for a maximum period of ten years and a minimum fine of Rs 10 lakh. The penalty should also commensurate with the turnover of the seed company.
In addition, in cases of complete crop loss, the seed company should be directed to pay an amount equal to expected crop output, plus a 50 per cent assured return as livelihood security.
c) Provision for re-registration increases the monopoly of the seed company for at least 20 years. This is unacceptable for the simple reason that it brings in monopoly control over seed through the back door.
d) While seeds may be registered with the National Register of Seeds, it is imperative that State Governments must be given the authority to decide on which of these registered seeds can be licensed to be used in their State.
e) The Seed (Control) Order, 1983 had allowed the unbridled import under open-general license of planting material and seeds of flowers, vegetables and horticultural crops. This Order was exploited by unscrupulous seed trade and business to import plant materials without undergoing any rigorous quality checks. The seed imports have come with a heavy load of pests and diseases posing serious damages to crop cultivation and to the country’s food security. Many hitherto unknown pests have also entered the country.
f) All imports of seeds therefore must undergo mandatory seed testing procedures, including multi-location trials, to ensure its adaptability to the Indian conditions. No self-testing or certificates from foreign seed certification agencies should hold true for Indian conditions.
g) Seed imports should only be allowed after pest risk analysis, local adaptability have been assessed. There is a need for a liability clause to be introduced that makes seed exporter responsible for any pest outbreak and also for the clean-up operations. This assumes importance in the wake of the Bhopal gas tragedy where the chemical companies have simply evaded any liability for the toxic clean-up.
The milk madness. US/EU pushing India to open up for its subsidised milk products
India is the biggest producer of milk in the world. Not satisfied, a High Powered Committee on Animal Husbandry and Dairying has in January 2010 submitted a report to the Planning Commission calling for redoubling of efforts to increase milk production. Well, all this seem to be fine. After all, with increasing population growth, India should be planning for future needs.
But then came President Obama. He brought along more than 200 CEOs and a total of 3,000 officials to pressurise India to provide a market for various American industries. Among the thrust areas the US was looking for dairying topped the agenda as far as the farm sector was concerned. India's Agriculture Minister Sharad Pawar did have a series of negotiations with the US Agriculture Secretary Tom Vilsack.
Sharad Pawar later told media that he has an 'open mind' but for now the Ministry of Agriculture had held back permission for importing US dairy products.
US milk products in any case come laced with harmful hormones, antibiotics and are also derived from milk that has been produced from cows fed with feeds carrying GM ingredients.
India is not a major player when it comes to international trade. The three big players, European Union last year accounted for 32 per cent of the dairy commodity export market by volume, with New Zealand on 22 per cent and the US third on 16 per cent. With markets shrinking, the US, Canada and Europe are now aggressively looking for new markets. And India happens to be a major one.
According to The Hindu (Nov 15, 2010): "In recent bilateral talks during U.S. President Barack Obama's visit to India, the Agriculture Ministry made it clear that India will subject US dairy products to the same protocol and veterinary certification as was applicable to other countries, and that India would have to be sensitive to religious sentiments.
Drawing a parallel with the Codex Alimentarius-recognised Islamic and Jewish dietary code, which is applicable to Halal and Kosher foods, the Indian side held that religious sentiments would not allow for the import of dairy products such as cheese that were manufactured from the milk of cattle fed on blood meal and tissues of ruminant origin or those which contain animal rennet and are unlabelled."
Let me illustrate. For production of cheese, India uses synthetic rennet, which is derived from non-animal sources. In America, animal rennet is used. Animal rennet comes from the membrane lining the stomach of a young calf containing an enzyme called rennin used for curdling milk to make cheese. India is demanding labelling of American cheese.
Now let us understand why the US is able to over-produce and dump the milk products in the developing countries. It is all because of monumental subsidies that are doled out to inefficient US producers (and that includes multinationals). Even though, India is the biggest producer of milk, its dairy industry does not receive any subsidies. On the contrary, the US dairy sector received US $ 4.9 billion between 1995 and 2009. Much of these subsidies are provided for the following programmes (Source: Environment Working Group):
1. Milk Income Loss Contract Payment $2,784,722,485
2. Market Loss Assistance - Dairy $994,714,404
3. Milk Income Loss Transitional Payment $555,990,950
4. Dairy Ecomonic Loss Assistance Program $267,385,319
5. Milk Marketing Fees $171,578,059
6. Dairy Disaster Assistance $21,547,587
7. Dairy Indemnity $3,671,552
Such huge subsidies bring down the international prices and insulate the domestic producers against the volatility of the markets. As if this is not enough, the US has reintroduced export subsidies for the dairy introduced in May 2009. This is what the US Agriculture Secretary had to say in defence: "Subsidies would support the dairy industry, which had “seen its international market shares erode, in part due to the reintroduction of direct export subsidies by the European Union earlier this year.” EU Agriculture Commissioner Mariann Fischer Boel called it ‘very unfair’ of the US to use Europe’s reinstatement of export subsidies “as an excuse to go ahead in this direction.”
US dairy subsidies are for a mere 91,000 metric tons of milk powder, butter and cheese that it has for export. Also its unfair to countries trading fairly, and potentially damaging to global economy's recovery, as someone pointed out. And it is not only US that plays the dirty game. In March 2009, EU had also reintroduced dairy subsidies. As per news report: "the EU also restarted buying excess butter and milk from farmers at intervention prices set respectively at €2,218 and €1,698 per tonne." With these subsidies, EU is also pressurising India to open up its market under bilateral trade agreement, the EU-India FTA.
Ironically, the US had won a dispute against Canada's dairy subsidies in 2003. But who cares if the US were to itself violate the WTO norms. Might is always right. And with economists in tow, and trade negotiators benefiting from the trade regime, the resulting social cost must be borne by the poor and developing countries.
But then came President Obama. He brought along more than 200 CEOs and a total of 3,000 officials to pressurise India to provide a market for various American industries. Among the thrust areas the US was looking for dairying topped the agenda as far as the farm sector was concerned. India's Agriculture Minister Sharad Pawar did have a series of negotiations with the US Agriculture Secretary Tom Vilsack.
Sharad Pawar later told media that he has an 'open mind' but for now the Ministry of Agriculture had held back permission for importing US dairy products.
US milk products in any case come laced with harmful hormones, antibiotics and are also derived from milk that has been produced from cows fed with feeds carrying GM ingredients.
India is not a major player when it comes to international trade. The three big players, European Union last year accounted for 32 per cent of the dairy commodity export market by volume, with New Zealand on 22 per cent and the US third on 16 per cent. With markets shrinking, the US, Canada and Europe are now aggressively looking for new markets. And India happens to be a major one.
According to The Hindu (Nov 15, 2010): "In recent bilateral talks during U.S. President Barack Obama's visit to India, the Agriculture Ministry made it clear that India will subject US dairy products to the same protocol and veterinary certification as was applicable to other countries, and that India would have to be sensitive to religious sentiments.
Drawing a parallel with the Codex Alimentarius-recognised Islamic and Jewish dietary code, which is applicable to Halal and Kosher foods, the Indian side held that religious sentiments would not allow for the import of dairy products such as cheese that were manufactured from the milk of cattle fed on blood meal and tissues of ruminant origin or those which contain animal rennet and are unlabelled."
Let me illustrate. For production of cheese, India uses synthetic rennet, which is derived from non-animal sources. In America, animal rennet is used. Animal rennet comes from the membrane lining the stomach of a young calf containing an enzyme called rennin used for curdling milk to make cheese. India is demanding labelling of American cheese.
Now let us understand why the US is able to over-produce and dump the milk products in the developing countries. It is all because of monumental subsidies that are doled out to inefficient US producers (and that includes multinationals). Even though, India is the biggest producer of milk, its dairy industry does not receive any subsidies. On the contrary, the US dairy sector received US $ 4.9 billion between 1995 and 2009. Much of these subsidies are provided for the following programmes (Source: Environment Working Group):
1. Milk Income Loss Contract Payment $2,784,722,485
2. Market Loss Assistance - Dairy $994,714,404
3. Milk Income Loss Transitional Payment $555,990,950
4. Dairy Ecomonic Loss Assistance Program $267,385,319
5. Milk Marketing Fees $171,578,059
6. Dairy Disaster Assistance $21,547,587
7. Dairy Indemnity $3,671,552
Such huge subsidies bring down the international prices and insulate the domestic producers against the volatility of the markets. As if this is not enough, the US has reintroduced export subsidies for the dairy introduced in May 2009. This is what the US Agriculture Secretary had to say in defence: "Subsidies would support the dairy industry, which had “seen its international market shares erode, in part due to the reintroduction of direct export subsidies by the European Union earlier this year.” EU Agriculture Commissioner Mariann Fischer Boel called it ‘very unfair’ of the US to use Europe’s reinstatement of export subsidies “as an excuse to go ahead in this direction.”
US dairy subsidies are for a mere 91,000 metric tons of milk powder, butter and cheese that it has for export. Also its unfair to countries trading fairly, and potentially damaging to global economy's recovery, as someone pointed out. And it is not only US that plays the dirty game. In March 2009, EU had also reintroduced dairy subsidies. As per news report: "the EU also restarted buying excess butter and milk from farmers at intervention prices set respectively at €2,218 and €1,698 per tonne." With these subsidies, EU is also pressurising India to open up its market under bilateral trade agreement, the EU-India FTA.
Ironically, the US had won a dispute against Canada's dairy subsidies in 2003. But who cares if the US were to itself violate the WTO norms. Might is always right. And with economists in tow, and trade negotiators benefiting from the trade regime, the resulting social cost must be borne by the poor and developing countries.
Free trade helps the rich, not the poor
In recent days, US President Obama is leading a campaign to complete the Doha Development Round at the earliest. His allies of course are very excited, and stand up behind him. They are the real beneficiaries, and so therefore have to aggressively push for free trade. Unfortunately, there is no such thing as free trade. It is a clever term coined to cover-up for an unjust and unethical trade paradigm that is economically unsound and benefits only the rich.
As I wrote in my earlier blog post, Obama is a prisoner of the corporate world. Only the mainline media refuses to acknowledge that, and for obvious reasons. As we all know, the mainline media is corporate controlled and so therefore no difficult questions have to be asked.
With economists on their side, the rich and industrialised countries are desperately trying to open up the developing countries.
This was evident when Obama led the tribe at G-20. As The Guardian says: Obama's free trade conversion is a depressingly short term manoeuvre Barack Obama backed a return to the Doha free trade talks at the G20 summit, but the deal on offer benefits only big business, the west and a handful of powerful interests in developing countries.
The Guardian (Nov 15, 2010) has a full page article today entitled: "Obama's free trade conversion is a depressingly short term manoeuvre." I am bringing the full article for you. It is time you understood how the democratically-elected leaders end up serving only the rich and the crooked. you will now see Prime Minister Manmohan Singh likely to open up for FDI in multi-brand retail. He is simply misleading the country by saying that FDI in retail will help the farmers. Actually, he is doing to oblige the US/UK, and is of course under pressure from Barack Obama as well as David Cameron.
"Obama's free trade conversion is a depressingly short term manoeuvre".
By Phillip Inman
In the dying hours of the G20 summit, US president Barack Obama backed a new round of free trade talks with a view to putting a bill before Congress next year.
What persuadid him? Was it a chat with David Cameron and Angela Merkel? The pair lobbied hard throughout the summit to revive the Doha round of talks on lowering protectionist barriers, started almost 10 years ago in the capital of Qatar.
Or was it a collective desire on the part of all the G20 leaders to deflect criticism over their almost total lack of agreement on important subjects like the prospect of a currency war?
Perhaps it was the forceful editorial in the Wall Street Journal a day before the summit urging Obama to smash trade barriers to drive growth and solve the problems of competitive currency devaluations and global imbalances between rich and poor.
Obama's last minute support appeared to wrong-foot the new top-table countries China and Brazil, which up to that moment had spent most of their time berating Washington for the Fed's decision to switch on the printing presses and inject $600bn into the US economy.
If you would believe Cameron, Merkel and the Murdoch-owned WSJ, free trade is a panacea for all the world's ills. Not only does it give African and other poor nations access to European markets, they say, it also allows capital to flow to where it will be used most efficiently. So western countries will invest in poor countries where there are readily available pools of cheap labour and resources – not to exploit them, but to raise their living standards.
Cameron and Merkel often point to the example of South Korea – how it transformed itself over a mere 30 years into a rich nation, almost all through "free" trading with the rest of the world. That same could happen in Africa, south and central America, former soviet bloc countries and neglected parts of Asia, they say.
Obama's overnight switch of tactics was designed to leave countries that artificially depressed their currency (China) and those that imposed capital controls (Brazil) flapping to find a coherent argument against the logic of globalisation.
It is another depressingly short term tactic that lacks strategic sense, unless we consider the US president has allowed himself to be captured by the interests of big business and those countries, including our own, with an ever growing need for cheaper raw materials and virgin markets. Let's face it, this is what they mean by free trade.
Obama will, no doubt, have listened to those who say protectionism awaits those who block globalisation.
It's true that China heavily restricts access to its markets to protect important industries and employment. There are few opportunities for western, or even other Asian, businesses in the fast growing cities of China's prosperous south and east. A minority stake or partnership is as much as most can expect.
While markets are opening, hence Tesco's multi-billion pound investment in China, the pace is painfully slow.
David Cameron said without progress on lowering trade barriers, the situation would reverse, with terrible consequences for everyone. He promised Chinese premier Wen Jiabao he would force Brussels to consider lowering its trade barriers on Chinese goods as a start along the Doha road. Once Beijing sees the benefits of free trade, it will come to the Doha talks with a more open mind, or at least a weaker argument against lowering some of its own barriers.
Germany is all in favour now its powerhouse economy has successfully driven down wages to a point where it is a super-competitive exporter with much to gain from lower barriers on manufactured goods.
The British also see trade as a route out of the crisis, though more on the services side. (It is noteworthy that Cameron emphasised the export potential of the creative industries as much as manufacturing in his China and G20 speeches last week).
Even president Jacob Zuma of South Africa has converted to the cause. As Cameron's new best friend, they lobbied at Seoul for a free trade area for Africa as another boost to Doha.
Yet there is little reason to accept this kind of turbo-charged capitalism if you are poor or need to defend a welfare state that needs time to undergo reform.
In the latter category, the French are classic objectors. Like most western countries France has adopted "free trade" policies when they disproportionately benefit. It knows that while some of its manufacturing is world class, much of it is woefully inefficient compared to rivals in Asia.
When unemployment is high and looks like remaining that way, the benefits of building Chinese cars in Lyon for Chinese companies will not look so great compared to the havoc it could wreak, wiping out big names like Renault and Peugeot Citroën with unmatchable levels of investment.
The Anglo-German argument has little sympathy for western nations unable to afford welfare provision or maintain jobs in a globalised world. They must cut wages, as the Germans have, or cut welfare – the preferred British route.
The argument that the poor will gain is also flawed. War on Want, among other anti-poverty campaign groups, has consistently argued that free trade is a misnomer for rampant pillaging of third world assets.
There was a campaign to gather developing nations together to fight the west and the big mining companies, manufacturers and banks that wanted a bigger slice of their cake.
But today the world is fractured again. China and Brazil have little in common with their neighbours, which fear them as much as they do the west. In Africa, Zuma wants free trade because he thinks South Africa is like Germany and in pole position to dominate the region economically, which means politically too.
For Zuma, like Merkel, free trade is something their countries are poised to exploit, with bigger banks and more sophisticated manufacturers. South Africa also has a services industry that its neighbours lack. Faced with a choice of investment from China, Europe and the US, African nations could increasingly turn to a smiling Zuma, especially if a local free trade zone makes South African goods and services cheaper. Britain, with strong South African links, would benefit.
Academic assessments agree that the Doha deal on the table will mostly benefit the world's richest countries, along with certain export sectors in powerful developing countries.
The World Bank's analysis shows that 80% of gains from the Doha round will go to high-income economies, and that China, Thailand, India, Indonesia, South Africa, Argentina and Brazil will scoop up almost all the rest.
Sub-Saharan nations and Bangladesh figure on the list of losers.Maybe Obama's mid-term election loss was the turning point. It seems to have robbed him of any fight, and handed those countries that are emerging from the financial crisis with healthy balance sheets and the political structure to compete a chance to consolidate their power.
As I wrote in my earlier blog post, Obama is a prisoner of the corporate world. Only the mainline media refuses to acknowledge that, and for obvious reasons. As we all know, the mainline media is corporate controlled and so therefore no difficult questions have to be asked.
With economists on their side, the rich and industrialised countries are desperately trying to open up the developing countries.
This was evident when Obama led the tribe at G-20. As The Guardian says: Obama's free trade conversion is a depressingly short term manoeuvre Barack Obama backed a return to the Doha free trade talks at the G20 summit, but the deal on offer benefits only big business, the west and a handful of powerful interests in developing countries.
The Guardian (Nov 15, 2010) has a full page article today entitled: "Obama's free trade conversion is a depressingly short term manoeuvre." I am bringing the full article for you. It is time you understood how the democratically-elected leaders end up serving only the rich and the crooked. you will now see Prime Minister Manmohan Singh likely to open up for FDI in multi-brand retail. He is simply misleading the country by saying that FDI in retail will help the farmers. Actually, he is doing to oblige the US/UK, and is of course under pressure from Barack Obama as well as David Cameron.
"Obama's free trade conversion is a depressingly short term manoeuvre".
By Phillip Inman
In the dying hours of the G20 summit, US president Barack Obama backed a new round of free trade talks with a view to putting a bill before Congress next year.
What persuadid him? Was it a chat with David Cameron and Angela Merkel? The pair lobbied hard throughout the summit to revive the Doha round of talks on lowering protectionist barriers, started almost 10 years ago in the capital of Qatar.
Or was it a collective desire on the part of all the G20 leaders to deflect criticism over their almost total lack of agreement on important subjects like the prospect of a currency war?
Perhaps it was the forceful editorial in the Wall Street Journal a day before the summit urging Obama to smash trade barriers to drive growth and solve the problems of competitive currency devaluations and global imbalances between rich and poor.
Obama's last minute support appeared to wrong-foot the new top-table countries China and Brazil, which up to that moment had spent most of their time berating Washington for the Fed's decision to switch on the printing presses and inject $600bn into the US economy.
If you would believe Cameron, Merkel and the Murdoch-owned WSJ, free trade is a panacea for all the world's ills. Not only does it give African and other poor nations access to European markets, they say, it also allows capital to flow to where it will be used most efficiently. So western countries will invest in poor countries where there are readily available pools of cheap labour and resources – not to exploit them, but to raise their living standards.
Cameron and Merkel often point to the example of South Korea – how it transformed itself over a mere 30 years into a rich nation, almost all through "free" trading with the rest of the world. That same could happen in Africa, south and central America, former soviet bloc countries and neglected parts of Asia, they say.
Obama's overnight switch of tactics was designed to leave countries that artificially depressed their currency (China) and those that imposed capital controls (Brazil) flapping to find a coherent argument against the logic of globalisation.
It is another depressingly short term tactic that lacks strategic sense, unless we consider the US president has allowed himself to be captured by the interests of big business and those countries, including our own, with an ever growing need for cheaper raw materials and virgin markets. Let's face it, this is what they mean by free trade.
Obama will, no doubt, have listened to those who say protectionism awaits those who block globalisation.
It's true that China heavily restricts access to its markets to protect important industries and employment. There are few opportunities for western, or even other Asian, businesses in the fast growing cities of China's prosperous south and east. A minority stake or partnership is as much as most can expect.
While markets are opening, hence Tesco's multi-billion pound investment in China, the pace is painfully slow.
David Cameron said without progress on lowering trade barriers, the situation would reverse, with terrible consequences for everyone. He promised Chinese premier Wen Jiabao he would force Brussels to consider lowering its trade barriers on Chinese goods as a start along the Doha road. Once Beijing sees the benefits of free trade, it will come to the Doha talks with a more open mind, or at least a weaker argument against lowering some of its own barriers.
Germany is all in favour now its powerhouse economy has successfully driven down wages to a point where it is a super-competitive exporter with much to gain from lower barriers on manufactured goods.
The British also see trade as a route out of the crisis, though more on the services side. (It is noteworthy that Cameron emphasised the export potential of the creative industries as much as manufacturing in his China and G20 speeches last week).
Even president Jacob Zuma of South Africa has converted to the cause. As Cameron's new best friend, they lobbied at Seoul for a free trade area for Africa as another boost to Doha.
Yet there is little reason to accept this kind of turbo-charged capitalism if you are poor or need to defend a welfare state that needs time to undergo reform.
In the latter category, the French are classic objectors. Like most western countries France has adopted "free trade" policies when they disproportionately benefit. It knows that while some of its manufacturing is world class, much of it is woefully inefficient compared to rivals in Asia.
When unemployment is high and looks like remaining that way, the benefits of building Chinese cars in Lyon for Chinese companies will not look so great compared to the havoc it could wreak, wiping out big names like Renault and Peugeot Citroën with unmatchable levels of investment.
The Anglo-German argument has little sympathy for western nations unable to afford welfare provision or maintain jobs in a globalised world. They must cut wages, as the Germans have, or cut welfare – the preferred British route.
The argument that the poor will gain is also flawed. War on Want, among other anti-poverty campaign groups, has consistently argued that free trade is a misnomer for rampant pillaging of third world assets.
There was a campaign to gather developing nations together to fight the west and the big mining companies, manufacturers and banks that wanted a bigger slice of their cake.
But today the world is fractured again. China and Brazil have little in common with their neighbours, which fear them as much as they do the west. In Africa, Zuma wants free trade because he thinks South Africa is like Germany and in pole position to dominate the region economically, which means politically too.
For Zuma, like Merkel, free trade is something their countries are poised to exploit, with bigger banks and more sophisticated manufacturers. South Africa also has a services industry that its neighbours lack. Faced with a choice of investment from China, Europe and the US, African nations could increasingly turn to a smiling Zuma, especially if a local free trade zone makes South African goods and services cheaper. Britain, with strong South African links, would benefit.
Academic assessments agree that the Doha deal on the table will mostly benefit the world's richest countries, along with certain export sectors in powerful developing countries.
The World Bank's analysis shows that 80% of gains from the Doha round will go to high-income economies, and that China, Thailand, India, Indonesia, South Africa, Argentina and Brazil will scoop up almost all the rest.
Sub-Saharan nations and Bangladesh figure on the list of losers.Maybe Obama's mid-term election loss was the turning point. It seems to have robbed him of any fight, and handed those countries that are emerging from the financial crisis with healthy balance sheets and the political structure to compete a chance to consolidate their power.
G-20: Worried About Corporates, Not People
I have always failed to understand why the governments have been lowering the interest rate on bank savings. In England, as early as in 1996, banks provided barely one per cent interest on savings.
In India, interest on savings has been progressively reduced to 3.5 per cent. If given a choice, Prime Minister’s Economic Advisory Committee would like to also reduce it still further.
All these years the basic habit of household savings has come under a sharp attack. Forced by orthodox economists, and backed by the fast-moving consumer goods industry, governments have deliberately reduced the incentives to save saying that the more you spend the more you add to the national economy. Well, if you don’t believe me read what Alexei Kudrin, Finance Minister of Russia, had to say recently: “If you smoke a pack of cigarettes, that means you are giving more to help solve social problems such as boosting demographics, developing other social services and upholding birth rates…People should understand: Those who drink, those who smoke are doing more to help the state.”
The logic being that the more people spend, the more will be the economic growth. Unfortunately, this is not true. The less people save and more they consume, the more the economy becomes unsustainable in the long-run. It increases people’s inability to cope up with economic pressures, and thereby multiplies their vulnerability to any economic volatility. In turn it brings heavy expenditure burden on the governments, and the economy starts to hang precariously. Such flawed economic thinking sowed the seeds of the US housing bubble in 2008, when people were left with no savings to pay mortgages, triggering a global economic meltdown.
Such predatory lending policies, in the absence of adequate legal protection, is also ‘sucking the blood’ of the poor in the name of micro-finance. The same flawed and in many ways criminal lending practices are robbing the poor across the globe.
If you think the leaders of G-20 economies have learnt their lessons, the answer is no. They continue to pursue the same faulty policies, and want to shift the blame to a ‘foreign hand’. Whether it is micro-finance or global capital, it follows the same route. Instead of taming the galloping horse, the US is trying to do what the Wall Street wants. It is printing excess money to ward-off its short-term crisis, and blame China for its present crisis. We all know that the US and its allies pumped in huge bailout packages, which again went to service the banks and a privileged few, leaving the masses in shock and awe.
China’s trade surplus is what the US is now eyeing to reduce. And China is refusing to oblige. Rightly so.
Isn’t it therefore amusing to find America and its allies calling for balancing growth across countries so that some countries do not grow at a breathtaking speed, while others languish? Since when have the rich and industrialised countries begun to think of balanced growth across nations? Shouldn’t the same principle be also followed when it comes to international trade? Take the case of agriculture. Almost 35 per cent of the global trade in agriculture is in the hands of America and European Union. The US has time and again reiterated its desire to pierce open the developing country markets. WTO is designed to service the interest of agribusiness companies of the developed countries. In the process, 105 of the 149 Third World countries have already become food importing countries. Successful completion of Doha Development round will make the remaining nations also become food importers.
America does not see any wrong in the way it is using WTO to its sole advantage. And it is here that the Seoul Summit of G-20 nations that ended on Friday failed to stand up. Nor did the G-20 leaders call for a radical change in the structural problems that are behind the growing economic crisis. Much of the economic crisis that the world faces emanates from the US, which has over the years multiplied debt, and destroyed natural resources, to buttress growth. In other words, rich countries have aggressively pursued policies that widened economic disparities.
In America, studies show that 10 per cent of the population receives half of the total income every year. On top of it David Rockefeller and Ted Turner (along with multinational corporations) receive phenomenal agricultural subsides. The American decision to pump in an additional $ 600 billion in government bonds further distorts the term of trade. In India, rich corporate houses get a subsidy of Rs 5.16 lakh crore by way of tax exemptions, which is roughly half the total annual budget of the country. In almost all the major economies, 10 per cent of the population has control over 80 per cent of the resources.
The increase in income disparities, aided by fiscal policies that discourage household savings, fuels the stock markets. It is here that speculation takes over, and in the absence of tough regulations, capital flows dictate the economic policies. In the past few months, agricultural commodities prices are once again witnessing price spiral. With over 30 per cent jump in prices, one doesn’t know whether the world will soon witness a repeat of the food riots of 2007. In essence, G-20 leaders have lost control not only over where the excess liquidity flows, but also the global food system.
Ian Fleming gave James Bond the licence to kill. G-20 fails to withdraw the licence to speculate. Global capital therefore continues to be on a killing spree.
In India, interest on savings has been progressively reduced to 3.5 per cent. If given a choice, Prime Minister’s Economic Advisory Committee would like to also reduce it still further.
All these years the basic habit of household savings has come under a sharp attack. Forced by orthodox economists, and backed by the fast-moving consumer goods industry, governments have deliberately reduced the incentives to save saying that the more you spend the more you add to the national economy. Well, if you don’t believe me read what Alexei Kudrin, Finance Minister of Russia, had to say recently: “If you smoke a pack of cigarettes, that means you are giving more to help solve social problems such as boosting demographics, developing other social services and upholding birth rates…People should understand: Those who drink, those who smoke are doing more to help the state.”
The logic being that the more people spend, the more will be the economic growth. Unfortunately, this is not true. The less people save and more they consume, the more the economy becomes unsustainable in the long-run. It increases people’s inability to cope up with economic pressures, and thereby multiplies their vulnerability to any economic volatility. In turn it brings heavy expenditure burden on the governments, and the economy starts to hang precariously. Such flawed economic thinking sowed the seeds of the US housing bubble in 2008, when people were left with no savings to pay mortgages, triggering a global economic meltdown.
Such predatory lending policies, in the absence of adequate legal protection, is also ‘sucking the blood’ of the poor in the name of micro-finance. The same flawed and in many ways criminal lending practices are robbing the poor across the globe.
If you think the leaders of G-20 economies have learnt their lessons, the answer is no. They continue to pursue the same faulty policies, and want to shift the blame to a ‘foreign hand’. Whether it is micro-finance or global capital, it follows the same route. Instead of taming the galloping horse, the US is trying to do what the Wall Street wants. It is printing excess money to ward-off its short-term crisis, and blame China for its present crisis. We all know that the US and its allies pumped in huge bailout packages, which again went to service the banks and a privileged few, leaving the masses in shock and awe.
China’s trade surplus is what the US is now eyeing to reduce. And China is refusing to oblige. Rightly so.
Isn’t it therefore amusing to find America and its allies calling for balancing growth across countries so that some countries do not grow at a breathtaking speed, while others languish? Since when have the rich and industrialised countries begun to think of balanced growth across nations? Shouldn’t the same principle be also followed when it comes to international trade? Take the case of agriculture. Almost 35 per cent of the global trade in agriculture is in the hands of America and European Union. The US has time and again reiterated its desire to pierce open the developing country markets. WTO is designed to service the interest of agribusiness companies of the developed countries. In the process, 105 of the 149 Third World countries have already become food importing countries. Successful completion of Doha Development round will make the remaining nations also become food importers.
America does not see any wrong in the way it is using WTO to its sole advantage. And it is here that the Seoul Summit of G-20 nations that ended on Friday failed to stand up. Nor did the G-20 leaders call for a radical change in the structural problems that are behind the growing economic crisis. Much of the economic crisis that the world faces emanates from the US, which has over the years multiplied debt, and destroyed natural resources, to buttress growth. In other words, rich countries have aggressively pursued policies that widened economic disparities.
In America, studies show that 10 per cent of the population receives half of the total income every year. On top of it David Rockefeller and Ted Turner (along with multinational corporations) receive phenomenal agricultural subsides. The American decision to pump in an additional $ 600 billion in government bonds further distorts the term of trade. In India, rich corporate houses get a subsidy of Rs 5.16 lakh crore by way of tax exemptions, which is roughly half the total annual budget of the country. In almost all the major economies, 10 per cent of the population has control over 80 per cent of the resources.
The increase in income disparities, aided by fiscal policies that discourage household savings, fuels the stock markets. It is here that speculation takes over, and in the absence of tough regulations, capital flows dictate the economic policies. In the past few months, agricultural commodities prices are once again witnessing price spiral. With over 30 per cent jump in prices, one doesn’t know whether the world will soon witness a repeat of the food riots of 2007. In essence, G-20 leaders have lost control not only over where the excess liquidity flows, but also the global food system.
Ian Fleming gave James Bond the licence to kill. G-20 fails to withdraw the licence to speculate. Global capital therefore continues to be on a killing spree.
The myths that kept the MFIs afloat
Microfinance is under attack. Even the normally reticent pink newspapers have now begun to bring out the inherent flaws in the microfinance model. While Finance Minister Pranab Mukherjee and the Reserve Bank of India governor Mr D Subbarao refuse to take notice, public outcry against the criminal micro-credit system that has actually grown with state support, is building up.
It hasn't been that easy. When I first began exposing the fraudulent credit system in the name of the poor, I faced a barrage of criticism by the MFI employees who accused me of not appreciating the difficulties under which they were operating. Short of calling me names, they kept on expressing their 'disgust' at what I wrote, and how much little I knew about the 'wonderful' and 'humanitarian' role they were playing. Someone even went to extent of comparing the MFIs with Mother Teresa !
Nevertheless, as I went along, people began to take notice. A week after my first blog post on MFIs some months back, two young employees working in a microfinance unit contacted me, and thanked me for the "courage" demonstrated in taking the 'bull by the horn'. A day later a journalist called, and she came over to understand my perspective. I wasn't surprised when she told me that somehow she carried an impression that microfinance was a tiny loan at a tiny rate of interest.
Gradually the issue began receiving attention. More and more articles began appearing in newspapers, including vernacular language dailies. Media dug out reports submitted by district collectors in Andhra Pradesh, which showed the killing ways of MFIs. All this helped built up public pressure. Later, some Lok Sabha MPs reached me, and expressed their 'disbelief' over the unbridled exploitation of the poorest. Meanwhile, reports of suicides from Andhra Pradesh began to trickle in. The local TV channels and the print media highlighted the tragedy.
It then became a political issue. Andhra Pradesh government decided to bring in an ordinance to reign in the MFIs. Former Chief Minister Chandrababu Naidu gave a call for non-repayment of the dues.
SKS Microfinance was forced to 'reduce' interest rate to 24 per cent. This kind of window dressing has to be condemned. What a reader wrote to me yesterday is so telling: “I’ve made a tonne of money… more than I ever thought I would make in my lifetime and my kid’s lifetime combined,” says Vikram Akula in a recent interview to Business Standard.
'Yes no one would crib if he became overnight a multi-billionaire tycoon. Except that he made this money by squeezing the blood of the poor and pressurizing them to take their lives while all the time cultivating an image of the "saviour of the poor,"
I am convinced that microfinance is actually a scam. It is inherently a flawed model in the name of reaching small credit to the poor. In reality, the MFIs are no different than the villains of the story -- money lenders. You have just read above what Vikram Akula told a newspaper. I don't have to say more. But don't think that only MFIs in India are bad. MFIs everywhere in the world are bad. In fact, if you have to see their ugliest face, just follow the MFIs in Latin America.
If we really need to pull the poor out of poverty, the MFIs must go. I know it is not going to be easy. I am aware of the hawks sitting in World Bank, UNDP, Ford Foundation and among numerous donors (both private and public) who are not going to let go so easily. Only public pressure can bring down the shutters on MFIs. So don't think your job is over. It has just begun.
I want you to read an excellent article in today's Economic Times (Nov 11, 2010) 'Five myths about microfinance' by T T Ram Mohan. I have never met him, but I must acknowledge that if there is one economic writer that I respect, it is T T Ram Mohan. I love his incisive writings, and admire his analytical ability.
Five myths about microfinance
By T T Ram Mohan
Economic times, Nov 11, 2010
http://bit.ly/dveD5q
The microfinance bubble has burst. The AP government ordinance, the AP opposition's campaign asking borrowers not to repay and the sheer public hostility towards MFIs . all these have put the brakes on MFI activities for now. We need to rethink the role of MFIs in the rural economy . In order to do so, we must first grasp some of the myths on which the MFI sector has rested th US far.
MFIs are crucial to financial inclusion: The big impetus to financial inclusion came way back in 1969 following the nationalisation of banks. Secondly, financial inclusion is not just about giving small-ticket loans. It is also about taking deposits and providing basic banking services.
MFIs are hardly the pioneers in microfinance. The early initiative came from the self-help group (SHG) movement started by the government of India in 1992 under the auspices of Nabarad and with the involvement of banks. This is the biggest outreach programme of its kind in the world. It covers 86 million poor households and has extended credit of Rs23, 000 crore. MFIs cover 30 million customers and have lent over Rs 30,000 crore.
Under the SHG scheme, credit is linked to savings (unlike MFI credit). There is focus on capacity-building among borrowers. The rate of interest is 8-10% with monthly repayment. The suggestion that MFIs are crucial to financial inclusion is only part of an attempt to give respectability to what is increasingly a profit-driven activity.
MFIs have reached out to those ignored by banks: The contention is that MFIs complement the efforts of banks by reaching out to those ignored by banks. This too is not true. AP has an average credit/deposit ratio of over 105% and a ratio of over 80% in half the districts. (The national average is 63%). AP does not lack credit. MFIs would have been made a real contribution had they fanned out to states where the redit/deposit ratios are low. Instead, they have focused on AP.
They have done so because AP houses nearly a quarter of the SHGs. MFIs chose the easy route of tapping into established SHGs for making loans. This was viable in the early stages but, over time, it has led to the problem of multiple lending and excessive debt burdens.
It is no different from private banks in India marketing consumer loans or US banks marketing subprime loans. œ MFIs are an important mechanism for alleviating rural poverty: Credit is only one of several instruments needed for fighting poverty.
Secondly, credit can help alleviate poverty if it goes into income-generation schemes. MFI credit, for the most part, is for consumption. Thirdly, returns to agriculture are so low that it is inconceivable that it can service interest rates of 24% and above that MFIs charge. Since agriculture is the key to rural poverty, it is ridiculous to suggest that MFI credit can help alleviate poverty.
MFIs have substituted moneylenders who used to charge even higher interest rates: The comparison with moneylenders is flawed. Moneylenders donft go out and market their loans as MFIs do. Besides, moneylenders make loans strictly against collateral and this is a built-in check on lending.
Secondly, MFI interest rates in AP are said to be have been in the range of 24-60%. At the upper end, the rates are no different from those of moneylenders. Yes, MFIs did substitute moneylenders in a way because many moneylenders found it expedient to set up MFIs themselves . they could then have easy access to bank funds!
High operational costs means that smallticket loans cannot cost less than 24%: If this is true, how is lending to SHGs viable? The high lending rates of many MFIs translate into fat salaries for executives and abnormal returns. (Some have return on assets of 5%; a bank is lucky if it makes 1%).
Public sector banks (PSBs) have long had branches in the rural areas. Small loans will be one element in their portfolio which will include low-cost deposits and other products. With branch costs fully written off, it is hard to see why microfinance provided by PSBs needs to be priced at 24%. If indeed the operational costs turn out to be steep in some areas, then the bank correspondent and other models need to be developed.
PSBs have not put their best foot forward in respect of microfinance because they lack the incentives to do so. Most are listed now and have had to focus on earnings growth, which is easily provided by corporate and retail credit. The regulatory cap on interest on small loans was a dampener. (The cap is now gone). Lending to MFIs qualified as priority sector credit, so PSBs could not be troubled to build their own portfolios.
Many people think the recent problems with MFIs were the result of some excesses. With a little tweaking here and there, MFIs can be in the forefront of financial inclusion. They are wrong. The entire MFI model needs revisiting. At least PSBs are much better placed to pursue financial inclusion on their own. The AP ordinance and its fallout ensure that the go-go days for MFIs are over. And that is all to the good.
It hasn't been that easy. When I first began exposing the fraudulent credit system in the name of the poor, I faced a barrage of criticism by the MFI employees who accused me of not appreciating the difficulties under which they were operating. Short of calling me names, they kept on expressing their 'disgust' at what I wrote, and how much little I knew about the 'wonderful' and 'humanitarian' role they were playing. Someone even went to extent of comparing the MFIs with Mother Teresa !
Nevertheless, as I went along, people began to take notice. A week after my first blog post on MFIs some months back, two young employees working in a microfinance unit contacted me, and thanked me for the "courage" demonstrated in taking the 'bull by the horn'. A day later a journalist called, and she came over to understand my perspective. I wasn't surprised when she told me that somehow she carried an impression that microfinance was a tiny loan at a tiny rate of interest.
Gradually the issue began receiving attention. More and more articles began appearing in newspapers, including vernacular language dailies. Media dug out reports submitted by district collectors in Andhra Pradesh, which showed the killing ways of MFIs. All this helped built up public pressure. Later, some Lok Sabha MPs reached me, and expressed their 'disbelief' over the unbridled exploitation of the poorest. Meanwhile, reports of suicides from Andhra Pradesh began to trickle in. The local TV channels and the print media highlighted the tragedy.
It then became a political issue. Andhra Pradesh government decided to bring in an ordinance to reign in the MFIs. Former Chief Minister Chandrababu Naidu gave a call for non-repayment of the dues.
SKS Microfinance was forced to 'reduce' interest rate to 24 per cent. This kind of window dressing has to be condemned. What a reader wrote to me yesterday is so telling: “I’ve made a tonne of money… more than I ever thought I would make in my lifetime and my kid’s lifetime combined,” says Vikram Akula in a recent interview to Business Standard.
'Yes no one would crib if he became overnight a multi-billionaire tycoon. Except that he made this money by squeezing the blood of the poor and pressurizing them to take their lives while all the time cultivating an image of the "saviour of the poor,"
I am convinced that microfinance is actually a scam. It is inherently a flawed model in the name of reaching small credit to the poor. In reality, the MFIs are no different than the villains of the story -- money lenders. You have just read above what Vikram Akula told a newspaper. I don't have to say more. But don't think that only MFIs in India are bad. MFIs everywhere in the world are bad. In fact, if you have to see their ugliest face, just follow the MFIs in Latin America.
If we really need to pull the poor out of poverty, the MFIs must go. I know it is not going to be easy. I am aware of the hawks sitting in World Bank, UNDP, Ford Foundation and among numerous donors (both private and public) who are not going to let go so easily. Only public pressure can bring down the shutters on MFIs. So don't think your job is over. It has just begun.
I want you to read an excellent article in today's Economic Times (Nov 11, 2010) 'Five myths about microfinance' by T T Ram Mohan. I have never met him, but I must acknowledge that if there is one economic writer that I respect, it is T T Ram Mohan. I love his incisive writings, and admire his analytical ability.
Five myths about microfinance
By T T Ram Mohan
Economic times, Nov 11, 2010
http://bit.ly/dveD5q
The microfinance bubble has burst. The AP government ordinance, the AP opposition's campaign asking borrowers not to repay and the sheer public hostility towards MFIs . all these have put the brakes on MFI activities for now. We need to rethink the role of MFIs in the rural economy . In order to do so, we must first grasp some of the myths on which the MFI sector has rested th US far.
MFIs are crucial to financial inclusion: The big impetus to financial inclusion came way back in 1969 following the nationalisation of banks. Secondly, financial inclusion is not just about giving small-ticket loans. It is also about taking deposits and providing basic banking services.
MFIs are hardly the pioneers in microfinance. The early initiative came from the self-help group (SHG) movement started by the government of India in 1992 under the auspices of Nabarad and with the involvement of banks. This is the biggest outreach programme of its kind in the world. It covers 86 million poor households and has extended credit of Rs23, 000 crore. MFIs cover 30 million customers and have lent over Rs 30,000 crore.
Under the SHG scheme, credit is linked to savings (unlike MFI credit). There is focus on capacity-building among borrowers. The rate of interest is 8-10% with monthly repayment. The suggestion that MFIs are crucial to financial inclusion is only part of an attempt to give respectability to what is increasingly a profit-driven activity.
MFIs have reached out to those ignored by banks: The contention is that MFIs complement the efforts of banks by reaching out to those ignored by banks. This too is not true. AP has an average credit/deposit ratio of over 105% and a ratio of over 80% in half the districts. (The national average is 63%). AP does not lack credit. MFIs would have been made a real contribution had they fanned out to states where the redit/deposit ratios are low. Instead, they have focused on AP.
They have done so because AP houses nearly a quarter of the SHGs. MFIs chose the easy route of tapping into established SHGs for making loans. This was viable in the early stages but, over time, it has led to the problem of multiple lending and excessive debt burdens.
It is no different from private banks in India marketing consumer loans or US banks marketing subprime loans. œ MFIs are an important mechanism for alleviating rural poverty: Credit is only one of several instruments needed for fighting poverty.
Secondly, credit can help alleviate poverty if it goes into income-generation schemes. MFI credit, for the most part, is for consumption. Thirdly, returns to agriculture are so low that it is inconceivable that it can service interest rates of 24% and above that MFIs charge. Since agriculture is the key to rural poverty, it is ridiculous to suggest that MFI credit can help alleviate poverty.
MFIs have substituted moneylenders who used to charge even higher interest rates: The comparison with moneylenders is flawed. Moneylenders donft go out and market their loans as MFIs do. Besides, moneylenders make loans strictly against collateral and this is a built-in check on lending.
Secondly, MFI interest rates in AP are said to be have been in the range of 24-60%. At the upper end, the rates are no different from those of moneylenders. Yes, MFIs did substitute moneylenders in a way because many moneylenders found it expedient to set up MFIs themselves . they could then have easy access to bank funds!
High operational costs means that smallticket loans cannot cost less than 24%: If this is true, how is lending to SHGs viable? The high lending rates of many MFIs translate into fat salaries for executives and abnormal returns. (Some have return on assets of 5%; a bank is lucky if it makes 1%).
Public sector banks (PSBs) have long had branches in the rural areas. Small loans will be one element in their portfolio which will include low-cost deposits and other products. With branch costs fully written off, it is hard to see why microfinance provided by PSBs needs to be priced at 24%. If indeed the operational costs turn out to be steep in some areas, then the bank correspondent and other models need to be developed.
PSBs have not put their best foot forward in respect of microfinance because they lack the incentives to do so. Most are listed now and have had to focus on earnings growth, which is easily provided by corporate and retail credit. The regulatory cap on interest on small loans was a dampener. (The cap is now gone). Lending to MFIs qualified as priority sector credit, so PSBs could not be troubled to build their own portfolios.
Many people think the recent problems with MFIs were the result of some excesses. With a little tweaking here and there, MFIs can be in the forefront of financial inclusion. They are wrong. The entire MFI model needs revisiting. At least PSBs are much better placed to pursue financial inclusion on their own. The AP ordinance and its fallout ensure that the go-go days for MFIs are over. And that is all to the good.
'Microfinance borrowers are forced to commit suicide'
The Allahabad High Court has yesterday termed an interest rate of 10 per cent that is being charged from defaulting farmers in Uttar Pradesh as 'cruelty' and has described it as similar to the case of 'a dying person being physically beaten.' This news comes in the wake of the leading money lender SKS Microfinance cutting down its interest rate from 24.55 to 24 per cent. This is the second time in a month when the SKS has reduced its lending rate after much hue and cry.
I wonder how come 10 per cent interest being charged from a farmer becomes 'cruelty' whereas 24 per cent rate being charged from his wife in the name of micro finance goes under the category of 'humanitarian' support?
It is therefore quite obvious that micro finance is designed to exploit the poor, and draw every ounce of blood from the hapless poor. And yet, Vijay Mahajan, the CEO of another big money lending firm Basix, has the audacity to say: "There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff."
Why only the erring staff? Why not you, Mr Vijay Mahajan?
And this also reminds me of what the apathatic government officials invariably say whenever news reports of starvation deaths come out. Every time I remember they would contest the news reports by saying that these deaths are not due to starvation but some chronic diseases. Vijay Mahajan is no different.
Business Standard (Nov 10, 2010) quotes K Venkatanarayana of Kakatiya University, who has been studying MFI sector in Andhra Pradesh. He says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner," he explains.
Wasn't I right? The MFIs are designed to kill. And yet, the killers are roaming free. Why is Andhra Pradesh government not filing FIRs against them? Just look at the four case studies that are pasted below. Why should these widows not get justice? Why shouldn't the MFIs responsible for the deaths of their near and dear be held for murder?
Meanwhile, here is the Business Standard report:
AP suicides raise questions on MFI model
Warangal November 10, 2010
Ban multiple lending, bring about greater transparency, slash interest rates. Only that can salvage the sector, say activists
As the high-rises of Hyderabad fade away, verdant greenery and a cool breeze take over. Early morning, we are travelling through beautiful terrain on our way to Warangal. Once there, however, nature is no solace.
A deafening calm greets us at Venkatadripet near Ghanpur station. In the past couple of months, several residents of this hamlet have faced the alleged coercive methods of micro finance institutions (MFIs) for defaulting on repayments. Their only recourse: taking their own lives.
With the death toll climbing, the government had to finally step in. But heart-wrenching stories of the victims’ families still hang heavy in the air. Warangal district is the worst hit, with 17 suicides reported from the area. Andhra Pradesh reportedly has 57 cases of harassment, including suicides.
R Subrahmanyam, principal secretary, rural development, Andhra Pradesh, minces no words. He says MFIs are raking in hyper-profits at the cost of the rural poor. “MFIs are also resorting to multiple lending without conducting due diligence.”
K Venkatanarayana of Kakatiya University, who has been studying MFI sector in the state closely, says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner,” he explains.
MFIs charge an interest rate of 26-32 per cent. “This is exorbitant,” says Venkatanarayana. “MFIs have deviated from their path of serving the poor. They are just pushing the poor into a debt trap by multiple lending and lending beyond the capacity of borrowers. There are many MFIs operating in the same area and function on joint legal liability. The model is based on pure profit.”
However, MFIs counter accusations of usury, claiming the interest on a loan includes the cost of finding customers in remote places, appraising them and selecting the creditworthy, disbursing money and collecting repayments for over 50 weeks, administration and raising funds.
“Banks don’t go to the doorstep to offer loans. We ensure that a borrower does not lose a single day’s earnings,” says P Kishore Kumar, managing director, Trident Microfinance, adding that the interest includes insurance cover. There are around 100 MFIs operating in AP, of which only 18 are registered, he adds.
Venkatanarayana blames commercial banks for the mess created by MFIs. “Banks do not want to invest in the rural poor. Reaching out to the poor means investing in infrastructure, manpower and other activities, which they are unwilling to do.”
Kishore Kumar says moneylenders are now calling themselves MFIs. “That’s the reason we have started taking corrective measures. The Microfinance Institutions Network (MFIN), the industry body, was formed with this very purpose.”
To address the issues, the Andhra Pradesh government issued an ordinance on October 15 to protect borrowers from exploitation by MFIs. But has the damage been already done?
MFIN, while agreeing that there might be some aberrations, argues that the ordinance will affect the financial inclusion plans of the government. “There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff. If required, the MFI will be expelled from MFIN,” says Vijay Mahajan, founder of Basix and CEO of MFIN.
Ban multiple lending, bring about greater transparency, slash interest rates and monitor the end-use of loans. These are some of the steps that can be introduced to salvage the MFI sector and make it successful, say activists. But should these not have been done before the MFIs started operating? The Warangal deaths are ample answer to that question.
CASE 1: Ranjitha
Everyone knew K Ramesh. His wife, Ranjitha, borrowed Rs 10,000 from Spandana, an MFI, to buy a buffalo. The family paid 15 weekly instalments of Rs 225 each. But she could not keep up with the repayments. She was part of a group of villagers, who had taken loans. The first time she defaulted, other members of the group pooled in and paid her instalment. But soon after, they insisted that Ramesh clear the dues. Spandan’s agents also started hounding them. Ranjitha doused herself with kerosene and set it alight. The following day, Ramesh hanged himself. Ranjitha was hospitalised with burns, but survived. “If you borrow in a group, you have to repay in a group. That was the diktat,” she says.
CASE 2: KAUSAR
Twenty-two-year-old Kausar, a resident of Warangal, is buckling. She has a two-year-old son and a Rs 10,000-loan to be repaid. She paid 25 instalments on time. But then her child met with an accident and the money was spent on treatment. She again borrowed Rs 12,000 from Swayamkrushi and took another Rs 12,000 through a friend. With medical expenses mounting, she found herself unable to make her repayments. Members of the group threatened to sit in front of her house. This prompted Akbar, her husband, to take the extreme step: suicide. The insurance cover would take care of Kausar’s loans, but she still has to repay the loan taken on her behalf by her friend.
CASE 3: ALIYA
“MFIs don’t crosscheck if a loan was used for the intended purpose,” says Suresh, a friend of Baskaa Aliya in Kadapikonda near Kazipet. Aliya committed suicide after failing to repay money owed to MFIs. His wife, Hyma, had borrowed Rs 40,000 from Sharemoolah and Spandana. Suresh pays Rs 625 a week for the Rs 26,000 loan that his wife had taken. Agents highlight the long-winded procedures that banks follow to sanction loans. This deters the poor from approaching them. They also believe getting a loan from banks is too difficult a job for the likes of Aliya and is the main reason the Andhra government's Paavala Vaddi (loans at 25-paise interest) scheme is not utilised.
CASE 4: RAMA
Multiple borrowing ruined Rama’s life. Her teenage daughter, E Mownika, set herself ablaze after lenders repossessed her sewing machine. She succumbed to her injuries. Her father also suffered burns in an effort to save her. Rama, a resident of Karimabad, had taken loans from five MFIs. The family is yet to return Rs 1,00,000, including Rs 50,000 to Pragati. They used to pay Rs 5,300 every month, but defaulted three months ago. “The agents would tell us to sell household items to repay,” she alleges. Rama had taken loans to expand her business. Her husband runs a paan shop. After falling into a debt trap, she ended up taking fresh loans to repay earlier loans.
http://mediatoday.co.in/stories_discription.php?id=23732
I wonder how come 10 per cent interest being charged from a farmer becomes 'cruelty' whereas 24 per cent rate being charged from his wife in the name of micro finance goes under the category of 'humanitarian' support?
It is therefore quite obvious that micro finance is designed to exploit the poor, and draw every ounce of blood from the hapless poor. And yet, Vijay Mahajan, the CEO of another big money lending firm Basix, has the audacity to say: "There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff."
Why only the erring staff? Why not you, Mr Vijay Mahajan?
And this also reminds me of what the apathatic government officials invariably say whenever news reports of starvation deaths come out. Every time I remember they would contest the news reports by saying that these deaths are not due to starvation but some chronic diseases. Vijay Mahajan is no different.
Business Standard (Nov 10, 2010) quotes K Venkatanarayana of Kakatiya University, who has been studying MFI sector in Andhra Pradesh. He says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner," he explains.
Wasn't I right? The MFIs are designed to kill. And yet, the killers are roaming free. Why is Andhra Pradesh government not filing FIRs against them? Just look at the four case studies that are pasted below. Why should these widows not get justice? Why shouldn't the MFIs responsible for the deaths of their near and dear be held for murder?
Meanwhile, here is the Business Standard report:
AP suicides raise questions on MFI model
Warangal November 10, 2010
Ban multiple lending, bring about greater transparency, slash interest rates. Only that can salvage the sector, say activists
As the high-rises of Hyderabad fade away, verdant greenery and a cool breeze take over. Early morning, we are travelling through beautiful terrain on our way to Warangal. Once there, however, nature is no solace.
A deafening calm greets us at Venkatadripet near Ghanpur station. In the past couple of months, several residents of this hamlet have faced the alleged coercive methods of micro finance institutions (MFIs) for defaulting on repayments. Their only recourse: taking their own lives.
With the death toll climbing, the government had to finally step in. But heart-wrenching stories of the victims’ families still hang heavy in the air. Warangal district is the worst hit, with 17 suicides reported from the area. Andhra Pradesh reportedly has 57 cases of harassment, including suicides.
R Subrahmanyam, principal secretary, rural development, Andhra Pradesh, minces no words. He says MFIs are raking in hyper-profits at the cost of the rural poor. “MFIs are also resorting to multiple lending without conducting due diligence.”
K Venkatanarayana of Kakatiya University, who has been studying MFI sector in the state closely, says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner,” he explains.
MFIs charge an interest rate of 26-32 per cent. “This is exorbitant,” says Venkatanarayana. “MFIs have deviated from their path of serving the poor. They are just pushing the poor into a debt trap by multiple lending and lending beyond the capacity of borrowers. There are many MFIs operating in the same area and function on joint legal liability. The model is based on pure profit.”
However, MFIs counter accusations of usury, claiming the interest on a loan includes the cost of finding customers in remote places, appraising them and selecting the creditworthy, disbursing money and collecting repayments for over 50 weeks, administration and raising funds.
“Banks don’t go to the doorstep to offer loans. We ensure that a borrower does not lose a single day’s earnings,” says P Kishore Kumar, managing director, Trident Microfinance, adding that the interest includes insurance cover. There are around 100 MFIs operating in AP, of which only 18 are registered, he adds.
Venkatanarayana blames commercial banks for the mess created by MFIs. “Banks do not want to invest in the rural poor. Reaching out to the poor means investing in infrastructure, manpower and other activities, which they are unwilling to do.”
Kishore Kumar says moneylenders are now calling themselves MFIs. “That’s the reason we have started taking corrective measures. The Microfinance Institutions Network (MFIN), the industry body, was formed with this very purpose.”
To address the issues, the Andhra Pradesh government issued an ordinance on October 15 to protect borrowers from exploitation by MFIs. But has the damage been already done?
MFIN, while agreeing that there might be some aberrations, argues that the ordinance will affect the financial inclusion plans of the government. “There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff. If required, the MFI will be expelled from MFIN,” says Vijay Mahajan, founder of Basix and CEO of MFIN.
Ban multiple lending, bring about greater transparency, slash interest rates and monitor the end-use of loans. These are some of the steps that can be introduced to salvage the MFI sector and make it successful, say activists. But should these not have been done before the MFIs started operating? The Warangal deaths are ample answer to that question.
CASE 1: Ranjitha
Everyone knew K Ramesh. His wife, Ranjitha, borrowed Rs 10,000 from Spandana, an MFI, to buy a buffalo. The family paid 15 weekly instalments of Rs 225 each. But she could not keep up with the repayments. She was part of a group of villagers, who had taken loans. The first time she defaulted, other members of the group pooled in and paid her instalment. But soon after, they insisted that Ramesh clear the dues. Spandan’s agents also started hounding them. Ranjitha doused herself with kerosene and set it alight. The following day, Ramesh hanged himself. Ranjitha was hospitalised with burns, but survived. “If you borrow in a group, you have to repay in a group. That was the diktat,” she says.
CASE 2: KAUSAR
Twenty-two-year-old Kausar, a resident of Warangal, is buckling. She has a two-year-old son and a Rs 10,000-loan to be repaid. She paid 25 instalments on time. But then her child met with an accident and the money was spent on treatment. She again borrowed Rs 12,000 from Swayamkrushi and took another Rs 12,000 through a friend. With medical expenses mounting, she found herself unable to make her repayments. Members of the group threatened to sit in front of her house. This prompted Akbar, her husband, to take the extreme step: suicide. The insurance cover would take care of Kausar’s loans, but she still has to repay the loan taken on her behalf by her friend.
CASE 3: ALIYA
“MFIs don’t crosscheck if a loan was used for the intended purpose,” says Suresh, a friend of Baskaa Aliya in Kadapikonda near Kazipet. Aliya committed suicide after failing to repay money owed to MFIs. His wife, Hyma, had borrowed Rs 40,000 from Sharemoolah and Spandana. Suresh pays Rs 625 a week for the Rs 26,000 loan that his wife had taken. Agents highlight the long-winded procedures that banks follow to sanction loans. This deters the poor from approaching them. They also believe getting a loan from banks is too difficult a job for the likes of Aliya and is the main reason the Andhra government's Paavala Vaddi (loans at 25-paise interest) scheme is not utilised.
CASE 4: RAMA
Multiple borrowing ruined Rama’s life. Her teenage daughter, E Mownika, set herself ablaze after lenders repossessed her sewing machine. She succumbed to her injuries. Her father also suffered burns in an effort to save her. Rama, a resident of Karimabad, had taken loans from five MFIs. The family is yet to return Rs 1,00,000, including Rs 50,000 to Pragati. They used to pay Rs 5,300 every month, but defaulted three months ago. “The agents would tell us to sell household items to repay,” she alleges. Rama had taken loans to expand her business. Her husband runs a paan shop. After falling into a debt trap, she ended up taking fresh loans to repay earlier loans.
http://mediatoday.co.in/stories_discription.php?id=23732
Obama's visit: Fate of Millions of Farmers Hangs in Balance
From: Economic Times, Nov 9, 2010
http://bit.ly/bBHGLX
He came, he spoke, and he got 54,000 jobs. This was on Day One of his India visit. By the time he flies out of New Delhi on November 9, US President Barack Obama would have charmed his way through to force open Indian agriculture to American corporations . And therein hangs the fate of millions of small and marginal farmers.
Top on the agenda is the push to make Prime Minister Manmohan Singh allow the entry of multi-brand food retail. “Agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas,” says a discussion paper drafted by the Department of Industrial Policy and Promotion sometimes ago. Nothing could be further away from truth, but then the G-20 has made it obligatory for member countries to open up for big retail.
Nowhere in the world has big retail helped farmers. In the US, despite the growth of big retail like Wal-Mart and Carrefour, farmers number has dwindled and come down to such a low level that America has stopped counting its farmers since the 2000 census. Meanwhile, hunger has broken a 14-year record, and poverty is on an upswing. In Europe, notwithstanding the presence of Tesco, one farmer quits agriculture every minute. For India too, multi-brand retail will be the beginning of the end for Indian farmers. No assessment has ever been made of the extent of job losses in the farm sector as a result.
If big retail in food is capable of raising farm incomes I see no reason why the US should be providing monumental subsidies to the tune of $307 billion for five years, beginning 2008. The same holds true for Europe where farmers survive because the Common Agricultural Policy (CAP) bails them out with direct income support. In both Europe and America, nearly 80% farm subsidies go to the big corporations. Neither the World Trade Organisations (WTO) nor has the US Fed ever tried to rationalise these wasteful farm subsidies.
It is primarily because of such huge farm subsidies that global food prices slumps thereby pricing out the Indian farmers. An UNCTAD-India study had conclusively shown that if the Green Box subsidies were to be withdrawn, the US agriculture would collapse. The US is therefore trying to pierce open the developing country agriculture essentially to sustain its own economy.
President Obama has made this abundantly clear when he repeatedly talks of seeking more market access from India. Unfortunately, Manmohan Singh has never sought reciprocity. I wonder how many more human lives are required to be sacrificed before the most powerful person on earth takes notice, and revive global farming by encouraging low external-input sustainable agriculture.
http://bit.ly/bBHGLX
He came, he spoke, and he got 54,000 jobs. This was on Day One of his India visit. By the time he flies out of New Delhi on November 9, US President Barack Obama would have charmed his way through to force open Indian agriculture to American corporations . And therein hangs the fate of millions of small and marginal farmers.
Top on the agenda is the push to make Prime Minister Manmohan Singh allow the entry of multi-brand food retail. “Agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas,” says a discussion paper drafted by the Department of Industrial Policy and Promotion sometimes ago. Nothing could be further away from truth, but then the G-20 has made it obligatory for member countries to open up for big retail.
Nowhere in the world has big retail helped farmers. In the US, despite the growth of big retail like Wal-Mart and Carrefour, farmers number has dwindled and come down to such a low level that America has stopped counting its farmers since the 2000 census. Meanwhile, hunger has broken a 14-year record, and poverty is on an upswing. In Europe, notwithstanding the presence of Tesco, one farmer quits agriculture every minute. For India too, multi-brand retail will be the beginning of the end for Indian farmers. No assessment has ever been made of the extent of job losses in the farm sector as a result.
If big retail in food is capable of raising farm incomes I see no reason why the US should be providing monumental subsidies to the tune of $307 billion for five years, beginning 2008. The same holds true for Europe where farmers survive because the Common Agricultural Policy (CAP) bails them out with direct income support. In both Europe and America, nearly 80% farm subsidies go to the big corporations. Neither the World Trade Organisations (WTO) nor has the US Fed ever tried to rationalise these wasteful farm subsidies.
It is primarily because of such huge farm subsidies that global food prices slumps thereby pricing out the Indian farmers. An UNCTAD-India study had conclusively shown that if the Green Box subsidies were to be withdrawn, the US agriculture would collapse. The US is therefore trying to pierce open the developing country agriculture essentially to sustain its own economy.
President Obama has made this abundantly clear when he repeatedly talks of seeking more market access from India. Unfortunately, Manmohan Singh has never sought reciprocity. I wonder how many more human lives are required to be sacrificed before the most powerful person on earth takes notice, and revive global farming by encouraging low external-input sustainable agriculture.
When will America open its markets, Mr Obama?
I have a great respect for US President Barack Obama. I admire his intellect, and of course his ability to mesmerise the audience with his brilliant expositions. I know he stands tall, and exudes confidence and hope.
There is no denying that in today's world where political leaders are merely rubber stamps for business and industry, Obama does have the ability to chart out a new pathway. But the more I see him hardselling the unwanted merchandise from the US corporations, the more I feel sad. As much as he may want us to believe in the ideals of Mahatma Gandhi and Martin Luther King, the fact remains that he himself is no where even remotely closer to following what the 'global hero' (as he calls Gandhi) had preached.
Obama is in reality a prisoner of the corporate world. Knowingly or unknowingly, he is trapped in a vicious cycle of economic growth that is plundering the natural resources and making this planet inhospitable.
The sooner the US President sheds the black corporate robe that keeps him chained to promote unsustainable economic growth, the better it would be for a world that is looking up to him as perhaps the lone saviour who has the ability to stem the rot. I only hope that like his predecessors he too does not disappoint. Only history will tell.
When he told a group of students in Mumbai yesterday: "Well, if our country is open to everybody, countries that trade with the US have to change their practices," I think he was merely echoing what the business leaders accompanying him had briefed him. This is where the President has been wrongly informed. This is where he is behaving more like a salesman for the corporates whose arm-twisting antics in WTO and numerous bilaterals being signed world over have still not opened up the kind of market they always dream.
Let me take this opportunity to draw attention to two contentious areas of free trade: agriculture and pharmaceuticals. It is here that US is trying every trick of the trade to stop imports. It is here that the US is refusing to open up its markets, and its policies are actually killing farmers in Africa, Latin America and Asia.
1. Former US President Bill Clinton had recently apologised for flooding Haiti since early 1990s with cheaper American rice, which had destroyed Haiti's ability to feed itself. If Mr Obama is presented with the stark facts of how unjust has the WTO been so far, I am sure he would like to apologise for what the US has done to harm developing country agriculture and food security. This is what Bill Clinton had said: “It may have been good for some of my farmers in Arkansas, but it has not worked. It was a mistake.
Clinton—now a UN special envoy to Haiti—told the US Senate Foreign Relations Committee March 10, 2010. “I had to live everyday with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did; nobody else." [read the fill report at http://devinder-sharma.blogspot.com/2010/05/bill-clinton-apologises-for-flooding.html
2. In 2001, nearly 25,000 US cotton growers received roughly $3.9 billion in subsidy payments, for producing a cotton crop that was worth only US$ 3 billion at world market prices (One Arkansas cotton grower received US$ 6 million, equal to the combined annual earnings of 25,000 cotton farmers in Mali). It's also more than the gross domestic product of several African countries and three times the amount the US spends on aid to half a billion Africans living in poverty. In 2002, direct financial assistance by a number of exporting countries, including China, European Union and the US, to the tune of 73 per cent of the world cotton production, destroyed millions of livelihoods in West African countries (Benin, Burkina Faso, Mali, and Chad). India and Pakistan too have been forced to lower import duties, allowing a surge of cotton imports thereby pushing farmers out. [read my article The Great Trade Robbery, available at: http://www.countercurrents.org/en-sharma020903.htm]
And what did the US do, Mr President? Instead of doing away with cotton subsidies, it actually bribed Brazil, which had won a case against the US in the WTO dispute panel. It offered to subsidise instead Brazil's rich cotton growers to the tune of $ 147.3 million a year. This is a small fee to ensure that Brazil keeps its mouth shut, which also means that the US can continue to distort the global cotton market by the huge subsidies it provides to its rich and pampered cotton growers. [read my analysis: http://devinder-sharma.blogspot.com/2010/04/us-bribes-brazil-with-147-million-in.html]
3. Although 80 per cent of US monumental agricultural subsidies go to the agribusiness industry, the US continues to increase its farm support. This makes the international prices slump as a result of which US farm produce becomes 'competitive.' A recent UNCTAD-India study had categorically brought out that if the US were to do away with its Green Box subsidies, its farm output would dip by over 40 per cent. This will bring in cheaper food exports from developing countries. Mr President, it is the massive subsidies you dole out for your agribusiness companies that the US market becomes inaccessible. On top of it, US has thrown in non-trade barriers to keep the agricultural imports out.
4. You want India to provide more market access. What you probably are not aware is that India has already gone in for an autonomous liberalisation and has opened up its market. This happened in March 2008 when George Bush wanted India to open up, before the US could reciprocate. The import tariffs for the most important farm commodities have already been brought down to zero. Wheat import tariff is zero, rice is at zero (whenever US asks us to do), maize is at zero, pulses is at zero, edible oils is practically zero (or 7.5 per cent as the case may be for some categories), what further reduction do you expect now?
India opened up, but the US did not reciprocate. The US in fact approved the US Farm Bill 2008 that makes a provision for an additional farm subsidy of $ 307 billion for the next five year. Come on, Mr President show us that you mean business, and that you follow ethics and justice in trade. When will you start reducing agricultural subsidies so as to provide market access for developing country agricultural products?
5. You want us to accept GM foods. You also want India to open up for the agricultural commodities. What you are probably not aware is that it is because of the industrially produced food that US today supports the sickest population on earth. US has more people living with Alzheimer, dementia, cancer, allergies, autism, APHD, and diabetes than any other country in the world. As far as GM foods are concerned, please tell which laws in the US makes it mandatory for the companies to do safety tests. The bio tech companies do their own tests, evaluate their results, declare the crops safe, and all that the regulators do is to stamp the approval.
Why do you want India to import such unhealthy foods, just because it benefits US corporations?
6. A sick nation needs affordable medicines. No one knows it much better than you. But as Health GAP (Global Access Project) states: "The US as well as European countries are also challenging India to grant monopoly protection to the data that drug companies use to obtain regulatory approval for a medicine. This measure, called "data exclusivity," would undermine cost cutting generic competition by delaying the entry of generics to market. Data exclusivity is not required by the World Trade Organization?but pharmaceutical companies have pushed aggressively for it. India's refusal to create a regime of data exclusivity was another feature of its Special 301 Report listing.
As a result, India's ability to make low cost, generic versions of newer medicines is under threat, and U.S.-funded AIDS treatment programs will be forced to waste money procuring more costly medicines. Isn't it time that you provide more market access for generic drugs from India, which alone produces 80 per cent of world's requirements of cheaper drugs?
Mr President, providing more market access for agriculture and pharmaceuticals by the US too is a 'win-win' situation. Try that, and I can assure you much of your problems in health and unsustainable farming would be taken care of. Michelle Obama has already shown the way by turning White House lawns organic, and also by launching a nationwide campaign to reduce diabetes among children. You will helping her, as well as billions across the world by providing more market access for agriculture and pharmaceuticals.
There is no denying that in today's world where political leaders are merely rubber stamps for business and industry, Obama does have the ability to chart out a new pathway. But the more I see him hardselling the unwanted merchandise from the US corporations, the more I feel sad. As much as he may want us to believe in the ideals of Mahatma Gandhi and Martin Luther King, the fact remains that he himself is no where even remotely closer to following what the 'global hero' (as he calls Gandhi) had preached.
Obama is in reality a prisoner of the corporate world. Knowingly or unknowingly, he is trapped in a vicious cycle of economic growth that is plundering the natural resources and making this planet inhospitable.
The sooner the US President sheds the black corporate robe that keeps him chained to promote unsustainable economic growth, the better it would be for a world that is looking up to him as perhaps the lone saviour who has the ability to stem the rot. I only hope that like his predecessors he too does not disappoint. Only history will tell.
When he told a group of students in Mumbai yesterday: "Well, if our country is open to everybody, countries that trade with the US have to change their practices," I think he was merely echoing what the business leaders accompanying him had briefed him. This is where the President has been wrongly informed. This is where he is behaving more like a salesman for the corporates whose arm-twisting antics in WTO and numerous bilaterals being signed world over have still not opened up the kind of market they always dream.
Let me take this opportunity to draw attention to two contentious areas of free trade: agriculture and pharmaceuticals. It is here that US is trying every trick of the trade to stop imports. It is here that the US is refusing to open up its markets, and its policies are actually killing farmers in Africa, Latin America and Asia.
1. Former US President Bill Clinton had recently apologised for flooding Haiti since early 1990s with cheaper American rice, which had destroyed Haiti's ability to feed itself. If Mr Obama is presented with the stark facts of how unjust has the WTO been so far, I am sure he would like to apologise for what the US has done to harm developing country agriculture and food security. This is what Bill Clinton had said: “It may have been good for some of my farmers in Arkansas, but it has not worked. It was a mistake.
Clinton—now a UN special envoy to Haiti—told the US Senate Foreign Relations Committee March 10, 2010. “I had to live everyday with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did; nobody else." [read the fill report at http://devinder-sharma.blogspot.com/2010/05/bill-clinton-apologises-for-flooding.html
2. In 2001, nearly 25,000 US cotton growers received roughly $3.9 billion in subsidy payments, for producing a cotton crop that was worth only US$ 3 billion at world market prices (One Arkansas cotton grower received US$ 6 million, equal to the combined annual earnings of 25,000 cotton farmers in Mali). It's also more than the gross domestic product of several African countries and three times the amount the US spends on aid to half a billion Africans living in poverty. In 2002, direct financial assistance by a number of exporting countries, including China, European Union and the US, to the tune of 73 per cent of the world cotton production, destroyed millions of livelihoods in West African countries (Benin, Burkina Faso, Mali, and Chad). India and Pakistan too have been forced to lower import duties, allowing a surge of cotton imports thereby pushing farmers out. [read my article The Great Trade Robbery, available at: http://www.countercurrents.org/en-sharma020903.htm]
And what did the US do, Mr President? Instead of doing away with cotton subsidies, it actually bribed Brazil, which had won a case against the US in the WTO dispute panel. It offered to subsidise instead Brazil's rich cotton growers to the tune of $ 147.3 million a year. This is a small fee to ensure that Brazil keeps its mouth shut, which also means that the US can continue to distort the global cotton market by the huge subsidies it provides to its rich and pampered cotton growers. [read my analysis: http://devinder-sharma.blogspot.com/2010/04/us-bribes-brazil-with-147-million-in.html]
3. Although 80 per cent of US monumental agricultural subsidies go to the agribusiness industry, the US continues to increase its farm support. This makes the international prices slump as a result of which US farm produce becomes 'competitive.' A recent UNCTAD-India study had categorically brought out that if the US were to do away with its Green Box subsidies, its farm output would dip by over 40 per cent. This will bring in cheaper food exports from developing countries. Mr President, it is the massive subsidies you dole out for your agribusiness companies that the US market becomes inaccessible. On top of it, US has thrown in non-trade barriers to keep the agricultural imports out.
4. You want India to provide more market access. What you probably are not aware is that India has already gone in for an autonomous liberalisation and has opened up its market. This happened in March 2008 when George Bush wanted India to open up, before the US could reciprocate. The import tariffs for the most important farm commodities have already been brought down to zero. Wheat import tariff is zero, rice is at zero (whenever US asks us to do), maize is at zero, pulses is at zero, edible oils is practically zero (or 7.5 per cent as the case may be for some categories), what further reduction do you expect now?
India opened up, but the US did not reciprocate. The US in fact approved the US Farm Bill 2008 that makes a provision for an additional farm subsidy of $ 307 billion for the next five year. Come on, Mr President show us that you mean business, and that you follow ethics and justice in trade. When will you start reducing agricultural subsidies so as to provide market access for developing country agricultural products?
5. You want us to accept GM foods. You also want India to open up for the agricultural commodities. What you are probably not aware is that it is because of the industrially produced food that US today supports the sickest population on earth. US has more people living with Alzheimer, dementia, cancer, allergies, autism, APHD, and diabetes than any other country in the world. As far as GM foods are concerned, please tell which laws in the US makes it mandatory for the companies to do safety tests. The bio tech companies do their own tests, evaluate their results, declare the crops safe, and all that the regulators do is to stamp the approval.
Why do you want India to import such unhealthy foods, just because it benefits US corporations?
6. A sick nation needs affordable medicines. No one knows it much better than you. But as Health GAP (Global Access Project) states: "The US as well as European countries are also challenging India to grant monopoly protection to the data that drug companies use to obtain regulatory approval for a medicine. This measure, called "data exclusivity," would undermine cost cutting generic competition by delaying the entry of generics to market. Data exclusivity is not required by the World Trade Organization?but pharmaceutical companies have pushed aggressively for it. India's refusal to create a regime of data exclusivity was another feature of its Special 301 Report listing.
As a result, India's ability to make low cost, generic versions of newer medicines is under threat, and U.S.-funded AIDS treatment programs will be forced to waste money procuring more costly medicines. Isn't it time that you provide more market access for generic drugs from India, which alone produces 80 per cent of world's requirements of cheaper drugs?
Mr President, providing more market access for agriculture and pharmaceuticals by the US too is a 'win-win' situation. Try that, and I can assure you much of your problems in health and unsustainable farming would be taken care of. Michelle Obama has already shown the way by turning White House lawns organic, and also by launching a nationwide campaign to reduce diabetes among children. You will helping her, as well as billions across the world by providing more market access for agriculture and pharmaceuticals.
Obama's India visit: Where India fails
One thing that I admire about American President's is that they know what they want. In the last 10 years or so whenever I have read about an American President visiting China, India, Vietnam, Indonesia and other countries, I have always noticed that before the US President leaves the American shores, he would announce that he is going to return with so many jobs.
President Obama is no exception. And within hours of reaching India, he managed to bag 53,000 jobs for America. By the time he flies out of New Delhi on Nov 9, I am sure he would have added another 50,000 or so.
When was the last time you heard the Indian Prime Minister say so. Except for the use of usual cliches like ' it is a goodwill visit' and 'the visit will strengthen the ties,' I don't know what our successive Prime Ministers have achieved all these years from such state visits. Except for a few business deals, I think successive Indian Prime Ministers have actually failed the nation. Prime Minister Manmohan Singh is no exception.
Compare this with China. During the term of President Clinton, he made a statement that the US will not trade with China because of its bad human rights record. Within a day or so the big US corporations made life tough for Bill Clinton, but more significant was the courage and political statesmanship shown by the then Chinese President. I remember watching the BBC World TV Beijing correspondent asking the question to the Chinese President. His reply was: "Trading with America, we never trade with America for the last 4000 years. So how does it matter."
The US has never again brought up the human rights issue.
Remember Manmohan Singh's visit to G-20 Summit in Toronto after the Bhopal gas tragedy court verdict. He didn't even have the courage to talk about justice for Bhopal victims when he met President Obama in Toronto. What can you expect from such spineless leadership.
President Obama knows what he wants. He wants India to provide more market access for the American manufacturing and agricultural products. And he wants India to provide jobs in America. He has come to sell American hardware, and with India Inc. in tow, he knows he will get what he wants.
The tragedy is that India does not even know what it needs to get from America. If you have been following the endless debates and discussions on the TV, it is obvious that we are a confused nation. Most of the experts on the show are not talking business, but giving us a feel of how much they know about strategic relations. This is because they are completely cut-off from the realities of the ongoing economic developments that are shaping the upheavals in the global economy.
I was therefore very surprised when I heard a Mumbai student (when interviewed by a TV journalist today) as to what he intends to ask President Obama when he meets the generation next on Sunday morning. He replied that he is going to ask about the unjust TRIPs and TRIMs agreements which are heavily loaded against the developing countries, and which would lead to the rich becoming richer and the poor being driven to the wall.
I bet the correspondent didn't know anything about TRIPs or TRIMs !
No wonder, while the US has come with a laundry list, India has no such shopping list. Except for the controversial issue of outsourcing (which is nothing compared to market access that India should be seeking in the US), there is nothing that seems to be on the radar screen. If you have no shopping list, you have no reason to complain later.
US knows where it has to walk the extra mile for its own strategic business interests. India does not even know how to take advantage of the huge market that it can offer to the American corporations. We are on a position of strength. Even if America has the sophisticated technology (not much of it is actually required in India), it desperately requires customers to buy it. Otherwise it is only a matter of time before the American company pulls down the shutters in the absence of buyers.
Remember George Bush when he came to India in 2006. Media had played up the story of the US willing to allow imports of Indian mangoes. In return, the US had wanted access for selling its Harley-Davidson motorcycles. What is little known is that while India lowered the emission norms to allow the sub-standard motorcycle into India, the US has still not softened the sanitary and phytosanitary standards that blocks the entry of mangoes.
India is a Mango Republic.
President Obama is no exception. And within hours of reaching India, he managed to bag 53,000 jobs for America. By the time he flies out of New Delhi on Nov 9, I am sure he would have added another 50,000 or so.
When was the last time you heard the Indian Prime Minister say so. Except for the use of usual cliches like ' it is a goodwill visit' and 'the visit will strengthen the ties,' I don't know what our successive Prime Ministers have achieved all these years from such state visits. Except for a few business deals, I think successive Indian Prime Ministers have actually failed the nation. Prime Minister Manmohan Singh is no exception.
Compare this with China. During the term of President Clinton, he made a statement that the US will not trade with China because of its bad human rights record. Within a day or so the big US corporations made life tough for Bill Clinton, but more significant was the courage and political statesmanship shown by the then Chinese President. I remember watching the BBC World TV Beijing correspondent asking the question to the Chinese President. His reply was: "Trading with America, we never trade with America for the last 4000 years. So how does it matter."
The US has never again brought up the human rights issue.
Remember Manmohan Singh's visit to G-20 Summit in Toronto after the Bhopal gas tragedy court verdict. He didn't even have the courage to talk about justice for Bhopal victims when he met President Obama in Toronto. What can you expect from such spineless leadership.
President Obama knows what he wants. He wants India to provide more market access for the American manufacturing and agricultural products. And he wants India to provide jobs in America. He has come to sell American hardware, and with India Inc. in tow, he knows he will get what he wants.
The tragedy is that India does not even know what it needs to get from America. If you have been following the endless debates and discussions on the TV, it is obvious that we are a confused nation. Most of the experts on the show are not talking business, but giving us a feel of how much they know about strategic relations. This is because they are completely cut-off from the realities of the ongoing economic developments that are shaping the upheavals in the global economy.
I was therefore very surprised when I heard a Mumbai student (when interviewed by a TV journalist today) as to what he intends to ask President Obama when he meets the generation next on Sunday morning. He replied that he is going to ask about the unjust TRIPs and TRIMs agreements which are heavily loaded against the developing countries, and which would lead to the rich becoming richer and the poor being driven to the wall.
I bet the correspondent didn't know anything about TRIPs or TRIMs !
No wonder, while the US has come with a laundry list, India has no such shopping list. Except for the controversial issue of outsourcing (which is nothing compared to market access that India should be seeking in the US), there is nothing that seems to be on the radar screen. If you have no shopping list, you have no reason to complain later.
US knows where it has to walk the extra mile for its own strategic business interests. India does not even know how to take advantage of the huge market that it can offer to the American corporations. We are on a position of strength. Even if America has the sophisticated technology (not much of it is actually required in India), it desperately requires customers to buy it. Otherwise it is only a matter of time before the American company pulls down the shutters in the absence of buyers.
Remember George Bush when he came to India in 2006. Media had played up the story of the US willing to allow imports of Indian mangoes. In return, the US had wanted access for selling its Harley-Davidson motorcycles. What is little known is that while India lowered the emission norms to allow the sub-standard motorcycle into India, the US has still not softened the sanitary and phytosanitary standards that blocks the entry of mangoes.
India is a Mango Republic.
Obama’s Visit: US Merchants eyeing Indian agriculture
At a time when America is faced with an economic downtrend, US President Barack Obama comes calling in a few days hoping that India will bail him out of the seemingly unending economic crisis. With a huge business team – more than 200 top business chiefs -- accompanying him, US is expecting to increase it exports to India by at least 400 per cent.
Food and Agriculture is one of the major thrust areas where President Obama is likely to make a strong pitch.
In 2006, the last time the US President visited India, George Bush had formally launched the Rs 1000-crore Indo-US Knowledge Initiative in Agricultural Research and Education, when he made a quick visit to Hyderabad. For years later, in 2010, the Indo-US Knowledge Initiative (KIA) appears to be almost in a cold storage, but after having successfully promoted unwanted US technologies on several farm universities.
This followed from the previous visit of prime minister Manmohan Singh to Washington in 2005. Addressing a joint session of the US Congress during his visit, prime minister had said: “The Green Revolution lifted countless millions above poverty.... I am very happy to say that U.S. President George Bush and I have decided to launch second generation of India-US collaboration in agriculture."
Following the agreement, a team of Indian agricultural scientists visited US in December 2005 to work out the modalities of the programme. It was followed by a return visit by US agricultural scientists, and the entire exercise has been kept confidential and prepared in a hush-hush manner.
It was feared that the Indo-US agricultural treaty would bring Indian agriculture under the direct control of US Corporate houses. The dominance of the American agri-business became clear when it became known that the US supermarket giant Wal-Mart, food giant Cargill and the seed multination Monsanto were on the board of the Indo-US Initiative. All these companies are now well entrenched, ready for the next phase.
President Obama is likely to re-energise the dead Indo-US Knowledge Initiative in Agriculture. Since the agreement is facing un-surmountable hurdles because of the inability of the Indian Council for Agricultural Research (ICAR) to pay for staff travels and technologies being imported, it is likely that the US would push through more collaboration in agricultural scientific research through the US-India Strategic Dialogue.
While collaboration in farm research will pave the way for the entry of US agribusiness multinationals, especially technology companies like Monsanto and Du Pont, the thrust of the US talks is going to be on opening up of the food retail and insurance sector. A few weeks back, President Obama had expressed hope that India would allow FDI in big retail. The G-20 Summit in Toronto some months back had also in its final communiqué decided to lift all hurdles to allow big retail to operate.
As a welcome gesture, Prime Minister Manmohan Singh is likely to announce the formal approval for FDI in big retail. It was primarily to justify the need for FDI in retail that the Department of Industrial Policy and Promotion (DIPP) had come out with a highly flawed discussion paper to indicate government’s rethinking on the controversial subject. “The agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas,” the discussion paper said. A number of economists and researchers joined the chorus singing praise for the role the supermarkets can play.
Despite the destruction of farming globally by the supermarkets, the Ministry for Commerce and Industry is gung-ho about allowing foreign direct investment in multi-brand retailing, which means allowing the big players like Wal-Mart and Tesco to swamp the Indian market. Agriculture Minister Sharad Pawar has time and again spelt out the need to allow FDI in big retail. Ministry for Commerce had even set up a small committee to prepare the ground for its entry.
If the supermarkets were so efficient and provided dynamism, I would like to know why the US is providing a massive subsidy for agriculture. After all, the world biggest retail giant Wal-mart is based in America and it should have helped American farmers to become economically viable. But it did not happen. American farmers have instead been bailed out by the government, providing a subsidy of Rs 12.50 lakh-crore between 1995 and 2009, and this includes direct income support.
The supermarkets have therefore failed the American farmers.
India is therefore importing a failed economic model, which otherwise would help the economic recovery of America.
Entry of the big US food retail signals the complete corporate takeover of Indian agriculture. At a time when the government is busy laying out the infrastructure for the 2nd Green Revolution, which means strengthening agribusiness, a plethora of Indian laws on water, seeds, pesticides, fertilisers, land use policy, contract farming, biodiversity, intellectual property, biotechnology and genetic engineering have either been suitably amended (or are in the process) to facilitate the entry of multinational companies. One of the major thrust areas where Manmohan Singh is expected to assure President Obama of his un-stinted support is the introduction of the controversial genetically engineered crops.
India has already prepared a bill – National Biotechnology Regulatory Authority bill -- awaiting introduction in parliament that allows for a single-window clearance for genetically-modified crops, something that even the US does not allow within its own borders.
In the last few weeks, multinational companies like Monsanto, Wal-Mart and also the US Grain Council has been making a fervent pitch to life the barriers that have come in the way of US exports to India. It is not without reason that the Ministry of Commerce has been seeking fast conclusion of the Doha round of the World Trade Organisation. In the last few weeks, the US has forced Russia to cut down its agricultural subsidies by 50 per cent as a pre-requisite for its entry as a member of the WTO. It is also asking India, Brazil and China to further reduce the industrial tariffs.
India is expected to assure President Obama that it will not press for the reduction of the massive US farm subsidies, especially in cotton, but will provide more market access to US farm goods. All non-trade barriers are being gradually removed, and the US will find it easy to rebuild its sagging economy on the strength of the Indian market.
Indian agriculture provides a sustained market for the US companies. What is good for the commercial interest of the US companies is not necessarily going to be productive for Indian farmers. But then, Manmohan Singh has time and again talked of shifting 70 per cent of the rural population into the urban centres. Bringing agriculture under the yoke of the US business and industry will hasten this population transfer.
Food and Agriculture is one of the major thrust areas where President Obama is likely to make a strong pitch.
In 2006, the last time the US President visited India, George Bush had formally launched the Rs 1000-crore Indo-US Knowledge Initiative in Agricultural Research and Education, when he made a quick visit to Hyderabad. For years later, in 2010, the Indo-US Knowledge Initiative (KIA) appears to be almost in a cold storage, but after having successfully promoted unwanted US technologies on several farm universities.
This followed from the previous visit of prime minister Manmohan Singh to Washington in 2005. Addressing a joint session of the US Congress during his visit, prime minister had said: “The Green Revolution lifted countless millions above poverty.... I am very happy to say that U.S. President George Bush and I have decided to launch second generation of India-US collaboration in agriculture."
Following the agreement, a team of Indian agricultural scientists visited US in December 2005 to work out the modalities of the programme. It was followed by a return visit by US agricultural scientists, and the entire exercise has been kept confidential and prepared in a hush-hush manner.
It was feared that the Indo-US agricultural treaty would bring Indian agriculture under the direct control of US Corporate houses. The dominance of the American agri-business became clear when it became known that the US supermarket giant Wal-Mart, food giant Cargill and the seed multination Monsanto were on the board of the Indo-US Initiative. All these companies are now well entrenched, ready for the next phase.
President Obama is likely to re-energise the dead Indo-US Knowledge Initiative in Agriculture. Since the agreement is facing un-surmountable hurdles because of the inability of the Indian Council for Agricultural Research (ICAR) to pay for staff travels and technologies being imported, it is likely that the US would push through more collaboration in agricultural scientific research through the US-India Strategic Dialogue.
While collaboration in farm research will pave the way for the entry of US agribusiness multinationals, especially technology companies like Monsanto and Du Pont, the thrust of the US talks is going to be on opening up of the food retail and insurance sector. A few weeks back, President Obama had expressed hope that India would allow FDI in big retail. The G-20 Summit in Toronto some months back had also in its final communiqué decided to lift all hurdles to allow big retail to operate.
As a welcome gesture, Prime Minister Manmohan Singh is likely to announce the formal approval for FDI in big retail. It was primarily to justify the need for FDI in retail that the Department of Industrial Policy and Promotion (DIPP) had come out with a highly flawed discussion paper to indicate government’s rethinking on the controversial subject. “The agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas,” the discussion paper said. A number of economists and researchers joined the chorus singing praise for the role the supermarkets can play.
Despite the destruction of farming globally by the supermarkets, the Ministry for Commerce and Industry is gung-ho about allowing foreign direct investment in multi-brand retailing, which means allowing the big players like Wal-Mart and Tesco to swamp the Indian market. Agriculture Minister Sharad Pawar has time and again spelt out the need to allow FDI in big retail. Ministry for Commerce had even set up a small committee to prepare the ground for its entry.
If the supermarkets were so efficient and provided dynamism, I would like to know why the US is providing a massive subsidy for agriculture. After all, the world biggest retail giant Wal-mart is based in America and it should have helped American farmers to become economically viable. But it did not happen. American farmers have instead been bailed out by the government, providing a subsidy of Rs 12.50 lakh-crore between 1995 and 2009, and this includes direct income support.
The supermarkets have therefore failed the American farmers.
India is therefore importing a failed economic model, which otherwise would help the economic recovery of America.
Entry of the big US food retail signals the complete corporate takeover of Indian agriculture. At a time when the government is busy laying out the infrastructure for the 2nd Green Revolution, which means strengthening agribusiness, a plethora of Indian laws on water, seeds, pesticides, fertilisers, land use policy, contract farming, biodiversity, intellectual property, biotechnology and genetic engineering have either been suitably amended (or are in the process) to facilitate the entry of multinational companies. One of the major thrust areas where Manmohan Singh is expected to assure President Obama of his un-stinted support is the introduction of the controversial genetically engineered crops.
India has already prepared a bill – National Biotechnology Regulatory Authority bill -- awaiting introduction in parliament that allows for a single-window clearance for genetically-modified crops, something that even the US does not allow within its own borders.
In the last few weeks, multinational companies like Monsanto, Wal-Mart and also the US Grain Council has been making a fervent pitch to life the barriers that have come in the way of US exports to India. It is not without reason that the Ministry of Commerce has been seeking fast conclusion of the Doha round of the World Trade Organisation. In the last few weeks, the US has forced Russia to cut down its agricultural subsidies by 50 per cent as a pre-requisite for its entry as a member of the WTO. It is also asking India, Brazil and China to further reduce the industrial tariffs.
India is expected to assure President Obama that it will not press for the reduction of the massive US farm subsidies, especially in cotton, but will provide more market access to US farm goods. All non-trade barriers are being gradually removed, and the US will find it easy to rebuild its sagging economy on the strength of the Indian market.
Indian agriculture provides a sustained market for the US companies. What is good for the commercial interest of the US companies is not necessarily going to be productive for Indian farmers. But then, Manmohan Singh has time and again talked of shifting 70 per cent of the rural population into the urban centres. Bringing agriculture under the yoke of the US business and industry will hasten this population transfer.
Small borrowers must stop repaying the loans from MFIs. This is the only way to curb the social evil
Yesterday, when the Reserve Bank of India (RBI) announced the credit policy review in Mumbai, I was discussing the implications on a national TV. Within minutes of the announcement of the upward revision in repo and reverse repo rates -- sixth time this year -- I found that the media focus had shifted to the tightening of the home loans. It was then that I asked a question as to why the RBI had refrained from tightening the screws on the micro-finance segment.
For some strange coincidence, the UPA President Sonia Gandhi who was addressing the All India Congress Committee (Rajdeep Sardesai of CNN-IBN later in show extended the acronymn AICC to 'All India Crooks Corner') at the same time, also skipped talking about rampant corruption within the party. Is it merely a coincidence or a pointer to the evil that the Congress party as well as the RBI is finding it too hot to handle?
I thought my poser on the TV show had gone unnoticed. But I was pleasantly surprised when I found George Mathew of the Indian Express (Nov 3, 20101) asking the same question to the RBI governor D Subbarao. He asked: Microfinance companies are charging very high interest rates. Why is the RBI not doing anything to bring them down?
Subbarao replied: "The RBI regulates only one segment of the MFI sector, which is the non-banking finance companies involved in the microfinance sector. There’s no such separate categorisation of NBFC-MFIs. There are 37 NBFCs which are MFIs and regulated by us and none of them are deposit taking. Only about 13 out of 37 NBFCs are systematically important with business of over Rs 100 crore. The segment of the MFI sector that comes under RBI regulation is small but in terms of total lending, it might be significantly higher. Now there are questions about regulating interest rates and our stance is to move away from regulating interest rates. We can’t now turn towards this and start regulating interest rates. In any case, this is a question that Malegam committee will go through and we will take a view after the report is available."
While this may be partly true, I think the RBI (like the Congress party) is trying to turn a blind eye to the gory ongoings in the MFI sector. How can the RBI governor first express helplessness, and then say that 'in any case, this is a question that Malegam committee will go through and we will take a view after the report is available." Does it mean that Malegam committee will give additional regulatory powers to RBI? The answer is No. The RBI is simply trying to avoid taking a harsh decision lest it reflects on the lending rates of the nationalised banks (which provides refinance to MFIs and others).
Only a few days back, the Sunday Indian Express (Oct 24, 2010) had in a full-page article entitled Andhra's Small-Debt Trap (Read the full report at: http://www.expressindia.com/latest-news/Andhras-smalldebt-trap/701577/) written by Sreenivas Janayala clearly brought out the malaise that afflicts the micro-finance sector. It quoted R Subramaniam, Principal Secretary, Rural Development, Andhra Pradesh, as saying: “But it is the fine print in the clauses and loan agreement that really create the debt trap. When borrowers fail to pay one EMI, the additional interest is calculated at double or triple the interest rate. The interest continues to remain the same until the principal amount is paid off. More often than not, the final interest rate works to nearly 50 per cent.”
Now please tell me, isn't this shameful? Does it make the MFIs any different from the moneylenders that they depict as the villain of the story?
On Oct 16, the Andhra Pradesh government, for the first time in the history of India, promulgated an ordinance, restraining the MFIs from using coercive tactics to recover loans and weekly interest, and keep lending rates in check. This is only one part of the criminal activity that MFIs indulge in. In my understanding, as numerous reports/studies have shown, the main problem is the high interest rate that is being charged from the small borrowers. The AP government as well as the RBI is silent on this. The conspiracy of silence is taking a human toll.
The answer lies in what I had first suggested some days ago on this blog. I had asked small borrowers (including the SHGs) to stop paying back the loans. I am glad the former chief minister Chandrababu Naidu, who is on a three day visit to Ranga Reddy district, also asked "women who have taken loans not to repay till interest rates are reduced."
In a democracy, people must raise their voice. They must express their anger in a peaceful way so that the powers that be sit back and take notice. MFIs charge such exorbitant interests because the nation does not care nor is it aware. The MFIs will come under pressure only of we exert that pressure. As Rajan Alexander has in a letter to Ground Reality wrote: "And how do know they are vulnerable? Because Vijay Mahajan, the father of MFIs in India tells us so:
“We are facing collapse. Unless something changes on the ground, the industry as we know it is basically gone.”
Mahajan, we have news for you. The day when the likes of you are gone, that will be the turning point for the fight against poverty!"
For some strange coincidence, the UPA President Sonia Gandhi who was addressing the All India Congress Committee (Rajdeep Sardesai of CNN-IBN later in show extended the acronymn AICC to 'All India Crooks Corner') at the same time, also skipped talking about rampant corruption within the party. Is it merely a coincidence or a pointer to the evil that the Congress party as well as the RBI is finding it too hot to handle?
I thought my poser on the TV show had gone unnoticed. But I was pleasantly surprised when I found George Mathew of the Indian Express (Nov 3, 20101) asking the same question to the RBI governor D Subbarao. He asked: Microfinance companies are charging very high interest rates. Why is the RBI not doing anything to bring them down?
Subbarao replied: "The RBI regulates only one segment of the MFI sector, which is the non-banking finance companies involved in the microfinance sector. There’s no such separate categorisation of NBFC-MFIs. There are 37 NBFCs which are MFIs and regulated by us and none of them are deposit taking. Only about 13 out of 37 NBFCs are systematically important with business of over Rs 100 crore. The segment of the MFI sector that comes under RBI regulation is small but in terms of total lending, it might be significantly higher. Now there are questions about regulating interest rates and our stance is to move away from regulating interest rates. We can’t now turn towards this and start regulating interest rates. In any case, this is a question that Malegam committee will go through and we will take a view after the report is available."
While this may be partly true, I think the RBI (like the Congress party) is trying to turn a blind eye to the gory ongoings in the MFI sector. How can the RBI governor first express helplessness, and then say that 'in any case, this is a question that Malegam committee will go through and we will take a view after the report is available." Does it mean that Malegam committee will give additional regulatory powers to RBI? The answer is No. The RBI is simply trying to avoid taking a harsh decision lest it reflects on the lending rates of the nationalised banks (which provides refinance to MFIs and others).
Only a few days back, the Sunday Indian Express (Oct 24, 2010) had in a full-page article entitled Andhra's Small-Debt Trap (Read the full report at: http://www.expressindia.com/latest-news/Andhras-smalldebt-trap/701577/) written by Sreenivas Janayala clearly brought out the malaise that afflicts the micro-finance sector. It quoted R Subramaniam, Principal Secretary, Rural Development, Andhra Pradesh, as saying: “But it is the fine print in the clauses and loan agreement that really create the debt trap. When borrowers fail to pay one EMI, the additional interest is calculated at double or triple the interest rate. The interest continues to remain the same until the principal amount is paid off. More often than not, the final interest rate works to nearly 50 per cent.”
Now please tell me, isn't this shameful? Does it make the MFIs any different from the moneylenders that they depict as the villain of the story?
On Oct 16, the Andhra Pradesh government, for the first time in the history of India, promulgated an ordinance, restraining the MFIs from using coercive tactics to recover loans and weekly interest, and keep lending rates in check. This is only one part of the criminal activity that MFIs indulge in. In my understanding, as numerous reports/studies have shown, the main problem is the high interest rate that is being charged from the small borrowers. The AP government as well as the RBI is silent on this. The conspiracy of silence is taking a human toll.
The answer lies in what I had first suggested some days ago on this blog. I had asked small borrowers (including the SHGs) to stop paying back the loans. I am glad the former chief minister Chandrababu Naidu, who is on a three day visit to Ranga Reddy district, also asked "women who have taken loans not to repay till interest rates are reduced."
In a democracy, people must raise their voice. They must express their anger in a peaceful way so that the powers that be sit back and take notice. MFIs charge such exorbitant interests because the nation does not care nor is it aware. The MFIs will come under pressure only of we exert that pressure. As Rajan Alexander has in a letter to Ground Reality wrote: "And how do know they are vulnerable? Because Vijay Mahajan, the father of MFIs in India tells us so:
“We are facing collapse. Unless something changes on the ground, the industry as we know it is basically gone.”
Mahajan, we have news for you. The day when the likes of you are gone, that will be the turning point for the fight against poverty!"
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