A big question mark hangs over the future of globalisation

What has happened to Prime Minister Manmohan Singh? No, I am not talking about the political confabulations that he is holding to save his colleague Home Minister P Chidambaram from falling into disgrace.  In case you missed it, what I am referring to is his speech at the 66th session of the UN General Assembly in New York. "Till a few years ago the world had taken for granted the benefits of globalisation and global interdependence,” the Prime Minister said. “Today we are being called upon to cope with the negative dimensions of those very phenomena.” [Grim globalisation sermon by Singh, The Telegraph, Sept 24. http://bit.ly/oTuKjt].

It seems wisdom has finally dawned upon the elderly economist. After being in power for over seven years, and having initiated the process of economic liberalisation in Indiain 1991, Manmohan Singh probably is now being arm-twisted to sign on the dotted line. Only he would know how tough and harsh it must be for him to blurt it out at the UN General Assembly. Enough is enough, he seems to be conveying.

This reminds me of another historical statement that India's first Prime Minister Jawaharlal Nehru had made from the ramparts of the Red Fort in New Delhi on Aug 15, 1955. He had said: "It is very humiliating for any country to import food. So everything else can wait, but not agriculture." I have often said in my presentations that only Nehru would have known how much humiliation he had to undergo to receive food aid. Similarly, I think only Manmohan Singh can tell us, if at all he ever picks up the courage to confide with the nation, how humiliating it has been for him to not only sing songs in favour of globalisation but to also bring in policies that would eventually go against the national interest.

The Telegraph report further states: In a clear indictment of free market policies and deregulation which have brought the world to its present financial meltdown, Singh said: “Economic, social and political events in different parts of the world have coalesced together and their adverse impact is now being felt across countries and continents.” The economist Prime Minister warned that “the world economy is in trouble”. As one of the leaders who is party to the Group of Twenty (G-20) efforts to revive the global economy after the meltdown three years ago, he lamented that “the shoots of recovery which were visible after the economic and financial crisis of 2008 have yet to blossom”.Making a grim prediction for the future, the Prime Minister, in fact, said: “In many respects the crisis has deepened even further.”

This is what happens when you read too much from the textbooks. The proponents of economic liberalisation had simply followed the book rules and had gone on defending whenever signs of failure would appear. These rules were designed in the west, and Indian economists (most of whom are on a kind of sabbatical from the western universities) had the onerous task to ensure that Indiadoes not deviate from the path of privatisation and neoliberalism. Using the mainline media to their advantage, I must say these economists had done a remarkable job in creating the illusion of economic growth. We have been simply seduced by the power of GDP, and somehow made to believe that we can all realise our dreams to be stinkingly rich before we die.

I think the Prime Minister's exasperation stems from the diktats he has been lately receiving from the G-20 and the World Trade organisation (WTO). Take a look at the recent review of India's trade policy by the WTO (which in reality was more of a USreview of India's trade policies). WTO hit where it would hit the Prime Minister most. Already under fire from the political opposition, media and the public at large for his inability to control inflation, WTO actually directed India not to restrict food exports at any cost. India must export, and when it needs to meet its domestic needs it can import. Such a directive, if India decides to follow, will only add to Manmohan Singh's woes. [WTO slams India's trade policy on farm items, Economic Times, Sept 15, 2011, http://bit.ly/pNqIKh]

Another crucial policy that he is being directed to adopt, and in fact he is being repeatedly asked to explain as to why he has not been able to implement is the approval for FDI in big retail. As per the G-20, Indiawas supposed to have cleared all the obstacles in allowing unhindered approval for FDI in retail by November last year. As the coordinator on behalf of G-20, IMF was to monitor the implementation for FDI in retail across the G-20 countries. It is not that Manmohan Singh didn't try. He had in fact created a fast track approval process as a result of which all discerning views were put on hold. But then politically it has not been possible for him to appease the G-20. 

These may be just two of the irritants. But the writing of the wall is clear to any sensible person, provided he is not a mainline economist. The 2008 economic meltdown was in reality an economic collapse. If the governments across the globe had not joined hands to pump in US $ 20 trillion to save the economy, the neoliberal economic model would have collapsed by now. This year too it is once again showing its ugly head. There is panic all around. The crisis of PIGS countries is now heating the Eurozone. The US is already faced with its worst economic crisis, partly being sustained by printing more currency notes. Everyone know it can't go on for long. 

Nevertheless, Manmohan Singh must now be familiar with the imminent collapse of the global economy. As the head of the State he must be trying to emerge clean so that he can say: Look, I warned you.."   

The Poverty of Estimates

Everyone seems upset. Ironically, more upset with the definition of the poverty line and the criteria that has now become the butt of a national joke, are the economists and of course some members of the high-profile National Advisory Council. They have been doing the rounds of the TV channels expressing dismay at the threshold of what Planning Commission constitutes as the poverty line.

I was amused watching them express their concerns. In many ways it is like shedding crocodile tears. Amused because these were the same people who were either responsible for drafting the poverty line or were in a way the silent spectators. They had never challenged the 'below the poverty line' (BPL) criteria. Perhaps by remaining quiet or turning a blind eye to the gross injustice being perpetuated by the planners on country's vast army of poor and downtrodden, these economists stood to gain. I see no other reason why the entire community of economists had silently been using the same fraudulent BPL norms that they now find fault with (believe it or not, some of the most distinguished names are associated with the formulation of the poverty line).

This is what constitutes conspiracy of silence.  

I have no hesitation in saying that the entire controversy following the questioning of the BPL norms by the Supreme Court has actually brought the economist class into disgrace. For nearly 50 years, they had not only prepared but also backed a bogus poverty estimate. They went on using the same useless poverty estimates into all their economic analysis. I wonder with such a faulty foundation what kind of analysis these economists must have produced. How reliable is their analysis, perhaps we will get to know provided the Supreme Court now gets into questioning the merits of the econometric analysis (that uses the poverty data) has been churned out in volumes over the years.

I have also keenly followed many of the quick news analysis that many economists and others have written. This was expected. The best way to overcome your guilt is to paint a picture that show how pained you are now to know that Planning Commission's poverty line for urban areas is Rs 31/day and Rs 25/day for the rural areas. If you are earning more than this, you are above the poverty line. In reality, this estimate is nothing but a revised estimate based on the current prices. Otherwise, Tendulkar committee had earlier drawn a line of Rs 19 per day for the urban areas and Rs 14 for the rural areas. The parameters that go into defining this BPL criteria remain the same. (Spend Rs 32 a day? Govt says you can't be poor Times of India Sept 21, 2011 http://bit.ly/qMWYRc).

In an interesting piece Playing with numbers, and lives (Indian Express, Sept 23, 2011) Rajya Sabha MP Brinda Karat writes: "The National Advisory Council, headed by Sonia Gandhi, had in its draft also included a clause that 'identification will be based on the criteria notified by the Central government'. One wonders whether the veteran activists who were part of the drafting committee in NAC were unaware of the poverty line which at the stage of their drafting was even lower than the Rs 26 line they are so articulately criticising today." She is referring to the public outcry being made by Aruna Roy, Jean Derez and N C Saxena.

I have always considered India's poverty line to be actually a starvation line. For over a decade now, I have been questioning the wisdom of fixing a stringent poverty line in which you can't even feed a dog. How can a human being survive in that amount? But believe me, none of the economists or NAC members (I am not sure of there is an exception) ever stood up to pose the same questions. They were very happy following the poverty prescription laid out. They obviously stood the gain by not questioning the poverty norms.

I have been asked as to what I think should be the way to determine real poverty. You can read what I had to say when the NAC came up with what I consider is yet another faulty path to removing hunger (Path to hell they say is paved with good intentions. http://bit.ly/iB2HDj). I also draw your attention to another article How to keep poverty low http://bit.ly/o60BsA. In my opinion, what India needs is not one poverty line. We need two lines: Poverty Line (what Arjun Sengupta committee worked out at 77 per cent population unable to spend more than Rs 20 a day), and an Antyodaya Line comprising 37.2 per cent of the population (which incidentally is the present poverty line).

Why onions continues to bring tears in your eyes.

Within 11 days of imposing a ban on the export of onions, the powerful traders lobby forced the government to lift the ban. Succumbing to pressure from the onion traders, who normally cry hoarse in the name of farmers, the speed at which the onion trade made the government to bend backwards is a pointer to the monumental failure to curb food inflation.

For over 4 years now, ever since food inflation has hit the roof, I haven’t seen so much of political activity as I have observed in the last few days. Triggered by protest by Nasikonion traders, who had refused to partake in daily auction to demonstrate their anger against the sudden imposition of exports ban, the NCP chief Madhukar Pichad had first written to Prime Minister Manmohan Singh and the Commerce Minister Anand Sharma. Maharashtra Chief Minister Prithviraj Chavan had deputed his Agriculture Minister Radhakrishna Vikhe-patil and some of his colleagues to meet Finance Minister Pranab Mukherjee and other concerned ministers.

According to news reports, Prithviraj Chavan had himself lobbyed with Pranab Mukherjee and Anand Sharma seeking an immediate withdrawal of the ban on onion exports. Union Agriculture Minister Sharad Pawar too had thrown his weight behind the agitating traders and had met Food Minister K V Thomas to impress upon him the need to allow onion exports. He had forcefully argued in favour of onion exports at the meeting of the empowered Group of Minister (eGoM) on Tuesday. Knowing the strength Sharad Pawar wields in UPA II, it was expected that the government will give in.

After the much-awaited eGoM that met under the chairmanship of Pranab Mukherjee on Tuesday, Food Minister K V Thomas announced the lifting of the ban subject to a minimum export price (MEP) of $475/tonne. While no quantitative restrictions were announced, the high MEP is expected to act as a damper on onion exports. Seeing the steady rise in open market onion prices for a month or so, the MEP had been steeply raised by $ 200/tonne within a span of a month. In mid-August, the MEP stood at $ 275/tonne.

The high MEP certainly has not dampened the spirit of the exporters who have merrily resumed the daily auction operations in Nasik mandis.

There are reasons to understand the panic the Food Ministry must be under when it decided to impose a ban on onion exports. Knowing well the stupendous rise in the prices of onions in the retail market just a few months back, when for no justifiable reasons the consumer prices had swung to a high of Rs 80/kg, the Food Ministry was certainly being over-cautious. Heavy rains in the last week of August had further slowed down transportation of bulbs from Maharashtra, thereby adding to the woes of the consumers In mid-August, Food Ministry first tried to restrict exports by raising the MEP by $45 to bring it $275/tonne, but it failed to control the retail prices. And when open market prices increased to Rs 25/kg, the panic button was pressed.

For the past three years, September has been the worrying month. Last year, heavy exports undertaken in September were blamed for the subsequent shortfall in onion availability in December when a sudden jerk in prices had brought tears in the eyes of the consumers. When onion prices had jumped from Rs 35/kg to Rs 60/kg in retail last year, Commerce Minister Anand Sharma had said that the price rise was because of hoarding as the country had enough stocks. This year too, when onion prices had begun to show its head, Anand Sharma is on record saying that the price rise is because of hoarding. I remember when the government went into a tizzy last year, the Nafed chief had expressed surprise at the price rise. He told the media that there was roughly 20 per cent more supply, and despite the rain damage to the standing crop in September, the price rise defies any logic.

  

The legitimate question that follows is then why is the government unable to crackdown on hoarders. More so at a time when onion production was estimated to be at record 145.62 lakh tonnes last year. This year, the crop is still better and estimates point to an overall production of 151.36 lakh tonnes.

Now, let us look at how politics is defining the rise in onion prices. Before even the prices had stabilised to Rs 50-60 per kg last year, Anand Sharma had met some of his fellow cabinet colleagues and impressed upon them the need to support the opening up of multi-brand retail. Finance Minister Pranab Mukherjee, Home Minister P Chidambaram and Defence Minister A K Anthony had taken part in these discussions. Why the urgency? Anand Sharma had replied: “Policy formation is a dynamic process, and we are very progressive and forward-looking.”

In fact, he also met the media the same day (Dec 23) to inform them about the dynamics of multi-brand retail. According to a news report: “While Mr Sharma rejected the argument that there was a link between the soaring onion prices and the opening up of multi-brand retail to foreign direct investment, the demand for liberalising the sector has been intensifying, especially in the wake of wide gap between the wholesale prices and retail prices.” It was therefore quite apparent that the onion price hike in Dec 2010-jan 2011 was a manipulation to justify the approval for FDI in multi-brand retail.

Indiais under pressure from G-20 leadership to remove all barriers in opening up to multi-brad retail. British Prime Minister David Cameron, US President Barack Obama and the French President Nicolas Sarkozy had during their visits to New Delhi had reportedly impressed upon Prime Minister Manmohan Singh on the urgency to open up for multi-brand retail. No wonder, the government has been trying its best to project the need for big retail. With the political environment is not still conducive, there is no reason to disbelieve that there is a deliberate effort to establish that multi-brand retail remains the only option to bring down the retail prices. 

September-October is generally a lean period for onions. Its arrival in the mandis slackens during these months, and to meet the market demand traders maintain enough stocks from April onwards. With the arrival of the new crop in the second half of October, prices generally ease. Knowing the seasonality of the production cycle, the Food Ministry should have waited for a little more time before the sudden knee-jerk action of banning exports. Such ad hoc decisions when it comes to commodity exports results in a loss of confidence among importers as a result of which the trade suffers. More often than not, exports only help traders whereas onion farmers continue to be paid a fraction.

This brings me back to the original question why the government has been unable to control food inflation. Well, looking at the way the onion traders have forced the government to retract its ban order, the fact remains that I haven’t seen so much of political activity at any time on the issue of price rise. The reason is obvious. No political party wants to ruffle the traders with any stringent action. Traders hold the key to the political purse, and a crackdown against hoarding and speculation would mean chopping off the financial cord. We must therefore learn to live with food inflation. 

Farmers in Andhra Pradesh are left with no option but to go on a 'crop holiday'

There is something terribly going wrong with agriculture. While nearly 40,000 farmers in Punjab, Haryana, Himachal Pradesh and Jammu & Kashmir have defaulted on repayment to the State Bank of India alone to the tune of Rs 600-crore, hundreds of farmers in the rice bowl of Andhra Pradesh, comprising the fertile and irrigated East Godawari and West Godwari districts, have refused to cultivate paddy this year, declaring a ‘crop holiday’.

What may appear to be two completely disconnected events happening in two different geographical regions of the country is in reality a wake up call. Whether it is the northeast or the more productive northwest regions; whether it is Punjab, Andhra Pradesh, Tamil Nadu or Odisha; agriculture continues to be in the throes of what appears to be a perpetual crisis for survival. What is not realised is that it is actually a crisis of sustainability and economic viability.

It all began from the fertile konaseema region of East Godawari district in Andhra Pradesh where a small farmer Suryabhagwan owning six-acres of land voluntarily announced that he would prefer to work as a ‘coolie’ than to undertake paddy cultivation. Already under heavy debt and knowing that another season of paddy cultivation will only add to his indebtedness, his call for a ‘crop holiday’ soon reverberated. Within a few weeks, the idea of a ‘crop holiday’ in the ongoing kharif season spread like wildfire and more than 1 lakh hectares in the two irrigated districts today lies barren.

Andhra Pradesh is a paddy growing area. While production has been steadily on an upswing over the years, adequate market infrastructure for procurement has not been created. The result is that despite a very high production capacity there is little space for storage. When Chandrababu Naidu was the chief minister, I remember one of his statements asking farmers not to produce more rice in kharif season as he has no place to stock the surplus grain. I am therefore not surprised to learn that from the previous rabi season (2010-2011) alone, an estimated 50 lakh tonnes lying with farmers, is still to be purchased.

Much of the unsold stocks of paddy are stored with farmers in the two districts of East Godawari and West Godawari. Suryabhagwan therefore is absolutely right in deciding not to grow another crop of rice in kharif and be saddled with the additional harvest. This brings me to another popular thinking, being promoted by economists, policy makers and the private trade, that the government needs to withdraw from procurement and allow the private players to procure the grains. If the Andhra Pradesh government was to withdraw from paddy procurement, and knowing how private trade exploits the gullible farmers, I wouldn’t be surprised to find more and more seasons of ‘crop holidays’.

Like in Andhra Pradesh, the Ministry of Food and Agriculture announces procurement price for 25 crops every year but effectively procures only wheat and rice. Unlike Punjab and Haryana where the State agencies procure over 90 per cent of the grains flowing into the mandis, the Food Corporation of India has in other States outsourced its procurement operations. Such an arrangement has allowed farmers to be exploited by the private trade, and more often than not forces them into distress sale. Minimum Support Price (MSP) thereby loses its significance and farming becomes unviable. It is primarily because the farmer is unable to get a remunerative price for his produce that more than 40 per cent of the farmers, as per a NSSO survey, want to quit agriculture if given a choice.

Even in the frontline agricultural states of Punjab and Haryana, where massive quantities of chemical fertilisers, pesticides and ground water are used, farming has become economically unviable. Despite abundant irrigation and subsidised loan to farmers, if nearly 40,000 farmers have defaulted on repayment to just one bank -- State Bank of India – to the tune of Rs 570 crore (HP and J&K have defaulted by Rs 30 crore only), it clearly is an indication that agriculture in the Green Revolution belt has lost its sheen. Farmers in Punjaband Haryana have certainly not opted for a ‘crop holiday’ but by defaulting the banks they too have made a powerful statement. What is still worse is that such an acute economic crisis is happening in a state that has always been considered to be the harbinger of rural prosperity. 

Interestingly, the subsidised loan was being provided at an effective rate of 4 per cent despite the rate of interest for agriculture being 7 per cent. The State bank is now holding 400 compromise camps for farmers where a final settlement can be made. I am told the situation in other states is no different. The non-performing assets of the banks from agriculture are piling up. This is happening at a time when a recent NABARD study shows that banks are in reality charging 14 per cent interest (against the subsidised 7 per cent) by clubbing their extraneous expenses also as amount to be recovered from farmers.     

The warning is loud and clear. The terrible agrarian crisis sweeping the country is the outcome of a continuous neglect and apathy. Over the years, agriculture has been deliberately pushed the downhill path. While the economic and scientific prescription to bail out the farming community invariably hinges on to providing improved and sophisticated technology, it is the declining incomes that is hitting the farm sector. The tragedy is that instead of providing more incomes into the hands of farmers, what is being offered is more credit which further adds on to farm indebtedness. No wonder, two-third of MNREGA workers are actually land owners. Clearly an indication that small farmers are unable to survive solely on agriculture.

Setting up yet another high-level committee is not the answer. What is needed is to provide farmers with an assured monthly take-home package. At a time when the monthly wages of government employees after the 6^thpay commission have gone up by 150 per cent, monthly income of legislators and parliamentarians has risen by 200 to 400 per cent, education and health expenses have gone through the roof, and even the BPL families are getting the benefit of health insurance and PDS, it is only the farming community that has remained at the receiving end. What the farmers need desperately is a Farmers Income Guarantee Act that determines the monthly income package a farm family must receive. #  

Agriculture in ruins

I haven’t forgotten that night. Sitting with a group of farmers in a village in Ludhianadistrict in Punjab, at the height of the Green Revolution, a farmer showed me a bag of fertiliser that he brought from the market.

“Why are you showing me this bag”, I asked. “Wait”, he said, and began to open the bag. It was only when he crushed the granules with his hands that I realised why he wanted me to see the fertiliser bag. The fertiliser was spurious. The jute bag, neatly packed and branded, contained mud granules.

Several years later I was travelling in the villages of Warangaldistrict in Andhra Pradesh to understand the reasons behind the spate of farm suicides that had first rocked the nation. This was in 1997 when 37 farmers committed suicide in this district alone. While everyone blamed the weather gods for inflicting a terrible blow to farmers, I found spurious pesticides to be the reason for the failure of the cotton crop.

More than 80 per cent of the pesticides sold in Warangaldistrict were later found to be adulterated and fake.   

Two and a half decades later, agriculture is in ruins. The story of demise in agriculture across the country is the same. Dying crop fields, and crying farmers. With degraded soils, depleting groundwater, and chemical pesticides playing havoc with the environment, agriculture is in terrible distress. With farming becoming a losing proposition, and with the entire equation going wrong, agriculture is witnessing a mass exodus.

While academicians, economists and policy makers are ascribing several complex reasons for the decline of agriculture, the dark underbelly has somehow remained unexposed. What has actually eaten into the vitals of agriculture over the years is rampant corruption. It is like the vultures swarming around a dead animal carcase. Believe it or not, the despicable farm scenario is no less gory.

Fake and sub-standard inputs – seeds, fertiliser, pesticides and machinery is only one part of the story. With quality control in complete shambles, and with testing laboratories known to have a fixed price tag for approving samples, farmers are always on the receiving end. No wonder, the post of plant protection officers as well as quality control is one of the most sought after in the State Departments of Agriculture.  

Massive public outlays under the National Horticulture Mission, Rashtriya Krishi Vikas Yojna, and the National Food Security Mission are in fact being used as grants. When I see the misuse of these outlays, often going into the pockets of senior farm officials, I have always wondered why the Comptroller and Auditor General (CAG) has refrained from focusing on the flagrant misuse of resources in the name of food security.

Agricultural officials and input suppliers have always maintained a cosy relationship. Even where upright officials have blacklisted erring firms, it isn’t difficult to pull down the shutters and then float a new company. Over the years, I have seen the business growing for those who were once know to be selling sub-standard products. 

Fly-by-night operators adorn the seed industry, and despite seed laws spelling out stringent punishment for marketing fake seeds, the market is full of spurious seeds. Bihar Chief Minister Nitish Kumar had recently said that a big seed company had supplied inferior maize hybrid seed, and had refused to account for the losses. Ultimately, Bihar government had to pay for the Rs 60-crore loss.

Post harvest, the travails of a farmer take a different turn. In areas where procurement centres and mandis exist (mainly in the Green Revolution belt of Punjab, Haryana, western UP and some parts of Madhya Pradesh), invariably farmers are at the mercy of the arhtiyas and the mandi agents. In rest of the country, the farmer is exploited, fleeced and ends up selling his produce in distress. It will not be wrong to say that it is a nightmare for a farmer to get a fair price for his produce and that too after putting in so much of hard labour.

Banks, money lenders and micro-credit agencies have been perpetual suckers. Several studies have pointed to the mismanagement (and corruption) in distribution of bank credit to be the primary reason for the agrarian crisis. Usurping interest charged by micro-finance institutions, often exceeding 24 per cent and that too to be repaid at weekly intervals, as well as the dependence on private money lenders has been the bane of farming.

If you think scientific research, agricultural development and policy framing is devoid of corruption you are grossly mistaken. Much of what hits the farmer is the result of wrong policies framed deliberately. But then, it is topic for another day.  

Source: Deccan Herald, Bangalore, Sept 7, 2011

http://www.deccanherald.com/content/189016/agriculture-ruins.html