Friday, October 3, 2008
Sunday, August 31, 2008
Monday, August 25, 2008
TheGreatIllusion_PaulKrugman_NyT_14Aug08
The Great Illusion
By PAUL KRUGMAN
Published: August 14, 2008
So far, the international economic consequences of the war in the Caucasus have been fairly minor, despite
If you’re wondering what I’m talking about, here’s what you need to know: our grandfathers lived in a world of largely self-sufficient, inward-looking national economies — but our great-great grandfathers lived, as we do, in a world of large-scale international trade and investment, a world destroyed by nationalism.
Writing in 1919, the great British economist John Maynard Keynes described the world economy as it was on the eve of World War I. “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth ... he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world.”
And Keynes’s Londoner “regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement ... The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion ... appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.”
But then came three decades of war, revolution, political instability, depression and more war. By the end of World War II, the world was fragmented economically as well as politically. And it took a couple of generations to put it back together.
So, can things fall apart again? Yes, they can.
Consider how things have played out in the current food crisis. For years we were told that self-sufficiency was an outmoded concept, and that it was safe to rely on world markets for food supplies. But when the prices of wheat, rice and corn soared, Keynes’s “projects and politics” of “restrictions and exclusion” made a comeback: many governments rushed to protect domestic consumers by banning or limiting exports, leaving food-importing countries in dire straits.
And now comes “militarism and imperialism.” By itself, as I said, the war in
Most obviously,
And if
Some analysts tell us not to worry: global economic integration itself protects us against war, they argue, because successful trading economies won’t risk their prosperity by engaging in military adventurism. But this, too, raises unpleasant historical memories.
Shortly before World War I another British author, Norman Angell, published a famous book titled “The Great Illusion,” in which he argued that war had become obsolete, that in the modern industrial era even military victors lose far more than they gain. He was right — but wars kept happening anyway.
So are the foundations of the second global economy any more solid than those of the first? In some ways, yes. For example, war among the nations of
Much of the world, however, including nations that play a key role in the global economy, doesn’t share those values. Most of us have proceeded on the belief that, at least as far as economics goes, this doesn’t matter — that we can count on world trade continuing to flow freely simply because it’s so profitable. But that’s not a safe assumption.
Angell was right to describe the belief that conquest pays as a great illusion. But the belief that economic rationality always prevents war is an equally great illusion. And today’s high degree of global economic interdependence, which can be sustained only if all major governments act sensibly, is more fragile than we imagine.
[End]
Wednesday, August 13, 2008
Tuesday, August 12, 2008
ReadingDifficulties_SoumyaBhattachrya_HT_12Aug08
Hindustan Times August 11, 2008
Soumya Bhattachrya
In a 1946 essay, ‘Books v Cigarettes’, George Orwell explored, with penetrating and amusing insight, the reading and book-buying habits of his fellow Englishmen. He took the assumption — as prevalent in the England of 1946 as the India of 2008 — that “the buying, or even the reading, of books is an expensive hobby and
beyond the reach of the average person”, and showed how much of a myth it was.
Taking the national average of smoking and drinking, Orwell demonstrated how “the [annual] cost of reading, even if you buy books instead of borrowing them and take in a fairly large number of periodicals, does not amount to more than the combined cost of smoking and drinking”.
I returned to Orwell’s essay after noticing over and over again just how few of us in public places have a book with us. How many people have you seen reading in an airport/on a plane/on the beach/having a solitary meal/on a park bench/at a salon/on a train or bus/in a doctor’s waiting room? Perhaps the only pleasure of travelling in an aeroplane nowadays — in what Jonathan Raban called its “sealed pod” — is to be able to read undistracted, free of the clutter and the white noise of our own lives. Phones can’t ring. Strangers don’t usually try and make conversation. Emails don’t ping in. Is there a better time?
Yet we don’t, really, do we?
The whole sub-genre of literary journalism alive in the West, that of ‘Summer Books’ or ‘Holiday Books’, doesn’t quite exist for us. What do we do on our holidays? Oh, we talk a lot on our mobile phones. (The roaming rates have been slashed again, let’s chatter some more.) But away from home and its attendant daily annoyances, we seldom commune with a dead master (or a living author).
We read, the 16th century English poet John Dryden told us, “for instruction and delight”. We read, as the Victorian novelist George Eliot said, because “art is the nearest thing to life”. What that means, the critic Louis Bayard explains, is that “to approach the mystery of our own condition, we have to grasp the mystery by which words make worlds”.
But we don’t seem to be doing enough reading or buying. An author’s sales figures in India (unless you happen to be Chetan Bhagat — not an aspiration anyone who fancies himself as a writer will share) are dismal. Sea of Poppies, Amitav Ghosh’s latest, intricately plotted, page turner of a maritime adventure, is expected to sell 30,000 copies across the country. (And while we’re at it, this, his publishers say, will be one of the biggest sellers of the year for them.) It is Ghosh’s big breakthrough book, his most accessible, almost crossover novel. The equivalent in England would perhaps be Ian McEwan and Atonement. That sold millions, and is still selling.
The old argument about English being the language of the metropolitan elite won’t wash here. There are in Delhi or Mumbai alone more than a million buyers of daily English newspapers. And there are 30,000 buyers across India for probably the most-hyped, most riveting English book of the year from an Indian writer. Also, even allowing for the thing about English being the preserve of the elite, is Bengali literature flying off the shelves? Is Hindi? Not when I last noticed.
So why are we so loathe to buy books? Too expensive, we say. How can young people afford them? Well, let’s use an Orwellian parameter to calculate things.
It costs Rs 200 to watch a movie on a weekend evening at a multiplex. (And that’s without the popcorn and the soft drinks.) Now my edition of Cormac McCarthy’s The Road — for my money the finest novel of 2007 and a New York Times bestseller, which means that a lot of people, including those who make their reading choices based on what Oprah recommends in her book club, have bought it — costs Rs 195. A Penguin Modern Classic — the storehouse of the finest literature in the history of literature — usually costs Rs 250.
It costs Rs 900-1,200 for a meal for two at a restaurant in Mumbai. You could get the new Ghosh and the new book of stories by Jhumpa Lahiri (award-winning, finely calibrated, exquisite tales of belonging and loss) for Rs 1,049. It costs Rs 125-150 for a coffee and a sandwich at one of the coffee chains. A Penguin Popular Classic — the cheaper version of the Penguin Modern Classic — is available for Rs 95. Oh, and my Orwell Centenary Edition of Shooting an Elephant and Other Essays costs Rs 367. That’s less than what I would spend for a few drinks at a Mumbai bar. So it’s not the money. And it’s certainly not that we don’t have the time. (If I could lay my hands on a study that totted up the amount of time we spend sending text messages or watching puerile rubbish on TV or travelling, vacant-minded, and not reading…)
It’s just that we’d rather not buy books. Most of us choose not to.
How many times have you dined out/watched a movie/gone for a drink in, say, the past three months? And exactly how many books have you bought in that period? How many things have you actively sought out and read? (Text messages, credit card bills and restaurant menus don’t count.)
What is it in our culture — especially our aggressively consumerist, burgeoning middle-class and affluent, urban, elite culture — that makes us shy away from reading and buying? It suggests that we don’t have the patience for it, don’t quite appreciate what it can give us, don’t derive enough pleasure for it.
“We used to build civilisations,” Bill Bryson once wrote. “Now we build shopping malls.” And we love them. We can’t love shopping enough. But we don’t love shopping for books. It is an affront to the notion of being civilised.
[End[
Goodbye, Chetan Datar _ShantaGokhale_MumbaiMirror_Wed06Aug2008
Goodbye, Chetan Datar
Shanta Gokhale
Wednesday, August 06, 2008 Mumbai Mirror
Where do you begin to mourn Chetan Datar’s death and where do you end? At 44, he was at the very peak of his career. In August last year, he was invited to Kolkata to do a play based on a Tagore text. He did Giribala, an experiment in using live music with dance to deepen the effect of the spoken word.Two months later he was in Bangalore, directing Mahesh Elkunchwar’s Holi, in Kannada, for the annual Rangashankara festival. In March this year he was in Kolkata attending a seminar on translation. In May he was in Delhi, directing Dr Chandrashekhar Phansalkar’s Ram Naam Satya Hai for the National School of Drama Repertory. He returned from Delhi with colitis. And that, tragically, turned out to be the beginning of his end.With Chetan Datar’s death, theatre has lost a fine writer, adapter and translator. His very first play, Savlya, still dwells hauntingly in the minds of those who saw it. Writing it was a test of Chetan’s tenacity and trust in his guru, Satyadev Dubey. In its first avatar, the play was a one-act sequence of four monologues. Dubey pushed Chetan into recreating it as a full length play. Then pushed him again into reworking it as Gaanth, the Hindi version.Although Savlya made people sit up and take notice of this introverted, soft-spoken, intense, self-effacing but stubborn young writer, Chetan did not write another original play for the next 12 years. Perhaps Savlya had squeezed him dry. Perhaps he needed to escape realism which appeared in those days to be his instinctive form of dramatic expression. Eager to explore theatre beyond its confines, he turned to direction.In Chetan’s death, theatre has lost a politically conscious director. Angered and pained at the ostrich-like attitude of the middle class in denying the realities of life, he translated and directed a fine production of Are There Tigers in the Congo? With this play, the Marathi audience was compelled to confront the issue of homosexuality for the first time.Ram Naam Satya Hai and Holi, directed by Chetan, both touched on this issue. His own play, 1, Madhav Baug, was about a mother’s coming to terms with her son’s sexuality.He opened up other vital contemporary issues with plays like his own Radha Vaja Ranade and Premanand Gajvi’s Gandhi ani Ambedkar which he directed for the mainstream in order to reach a wider audience.In Chetan’s death, theatre has lost a director who never stopped experimenting. For years, he collaborated with Kathak and Bharat Natyam dancers Rajashree Shirke and Vaibhav Arekar to explore the possibility of using classical dance in theatre, not as a decorative device, but as part of the text itself. First he did mythological stories with contemporary interpretations. Mata Hidimba was the most powerful in this series.But his real aim was to see if dance could be similarly used in a modern play. He chose Mahesh Elkunchwar’s Pratibimb for this experiment and turned it into the utterly beguiling dance drama, Haravalele Pratibimb.In Chetan’s death, theatre has lost a dedicated teacher and organiser. Young people who flocked to his acting workshops are now bereft. Bereft too is Awishkar, which Chetan helped the indefatigable Arun Kakade to bring back to vibrant life in a municipal school hall in Mahim. The monthly mini-festivals he organised there demonstrated his faith in cross-fertilisation between the arts and the languages.When Gowri Ramnarayan wanted to perform Dark Horse, based on Arun Kolatkar’s poetry, in Mumbai, Chetan made it happen at Awishkar despite financial constraints. When Usha Ganguli wanted to perform her one-woman play Antaryatra in Mumbai, again Chetan made it happen, despite similar constraints.A rich future lay ahead for Chetan Datar, and through him for theatre. Saturday saw that future turn into ashes.
[End]
HarmonyAndTheDream_DavidBrooks_NyT_12Aug08
By DAVID BROOKS
August 11, 2008 New York Times
The world can be divided in many ways — rich and poor, democratic and authoritarian — but one of the most striking is the divide between the societies with an individualist mentality and the ones with a collectivist mentality.
This is a divide that goes deeper than economics into the way people perceive the world. If you show an American an image of a fish tank, the American will usually describe the biggest fish in the tank and what it is doing. If you ask a Chinese person to describe a fish tank, the Chinese will usually describe the context in which the fish swim.
These sorts of experiments have been done over and over again, and the results reveal the same underlying pattern. Americans usually see individuals; Chinese and other Asians see contexts.
When the psychologist Richard Nisbett showed Americans individual pictures of a chicken, a cow and hay and asked the subjects to pick out the two that go together, the Americans would usually pick out the chicken and the cow. They’re both animals. Most Asian people, on the other hand, would pick out the cow and the hay, since cows depend on hay. Americans are more likely to see categories. Asians are more likely to see relationships.
You can create a global continuum with the most individualistic societies — like the United States or Britain — on one end, and the most collectivist societies — like China or Japan — on the other.
The individualistic countries tend to put rights and privacy first. People in these societies tend to overvalue their own skills and overestimate their own importance to any group effort. People in collective societies tend to value harmony and duty. They tend to underestimate their own skills and are more self-effacing when describing their contributions to group efforts.
Researchers argue about why certain cultures have become more individualistic than others. Some say that Western cultures draw their values from ancient Greece, with its emphasis on individual heroism, while other cultures draw on more on tribal philosophies. Recently, some scientists have theorized that it all goes back to microbes. Collectivist societies tend to pop up in parts of the world, especially around the equator, with plenty of disease-causing microbes. In such an environment, you’d want to shun outsiders, who might bring strange diseases, and enforce a certain conformity over eating rituals and social behavior.
Either way, individualistic societies have tended to do better economically. We in the West have a narrative that involves the development of individual reason and conscience during the Renaissance and the Enlightenment, and then the subsequent flourishing of capitalism. According to this narrative, societies get more individualistic as they develop.
But what happens if collectivist societies snap out of their economic stagnation? What happens if collectivist societies, especially those in Asia, rise economically and come to rival the West? A new sort of global conversation develops.
The opening ceremony in Beijing was a statement in that conversation. It was part of China’s assertion that development doesn’t come only through Western, liberal means, but also through Eastern and collective ones.
The ceremony drew from China’s long history, but surely the most striking features were the images of thousands of Chinese moving as one — drumming as one, dancing as one, sprinting on precise formations without ever stumbling or colliding. We’ve seen displays of mass conformity before, but this was collectivism of the present — a high-tech vision of the harmonious society performed in the context of China’s miraculous growth.
If Asia’s success reopens the debate between individualism and collectivism (which seemed closed after the cold war), then it’s unlikely that the forces of individualism will sweep the field or even gain an edge.
For one thing, there are relatively few individualistic societies on earth. For another, the essence of a lot of the latest scientific research is that the Western idea of individual choice is an illusion and the Chinese are right to put first emphasis on social contexts.
Scientists have delighted to show that so-called rational choice is shaped by a whole range of subconscious influences, like emotional contagions and priming effects (people who think of a professor before taking a test do better than people who think of a criminal). Meanwhile, human brains turn out to be extremely permeable (they naturally mimic the neural firings of people around them). Relationships are the key to happiness. People who live in the densest social networks tend to flourish, while people who live with few social bonds are much more prone to depression and suicide.
The rise of China isn’t only an economic event. It’s a cultural one. The ideal of a harmonious collective may turn out to be as attractive as the ideal of the American Dream.
It’s certainly a useful ideology for aspiring autocrats.
PutinMakesHisMove(Georgia)_RobertKagan_WshPost_11Aug08
Putin Makes His Move
By Robert Kagan
Monday, August 11, 2008
The details of who did what to precipitate Russia's war against Georgia are not very important. Do you recall the precise details of the Sudeten Crisis that led to Nazi Germany's invasion of Czechoslovakia? Of course not, because that morally ambiguous dispute is rightly remembered as a minor part of a much bigger drama.
The events of the past week will be remembered that way, too. This war did not begin because of a miscalculation by Georgian President Mikheil Saakashvili. It is a war that Moscow has been attempting to provoke for some time. The man who once called the collapse of the Soviet Union "the greatest geopolitical catastrophe of the [20th] century" has reestablished a virtual czarist rule in Russia and is trying to restore the country to its once-dominant role in Eurasia and the world. Armed with wealth from oil and gas; holding a near-monopoly over the energy supply to Europe; with a million soldiers, thousands of nuclear warheads and the world's third-largest military budget, Vladimir Putin believes that now is the time to make his move.
Georgia's unhappy fate is that it borders a new geopolitical fault line that runs along the western and southwestern frontiers of Russia. From the Baltics in the north through Central Europe and the Balkans to the Caucasus and Central Asia, a geopolitical power struggle has emerged between a resurgent and revanchist Russia on one side and the European Union and the United States on the other.
Putin's aggression against Georgia should not be traced only to its NATO aspirations or his pique at Kosovo's independence. It is primarily a response to the "color revolutions" in Ukraine and Georgia in 2003 and 2004, when pro-Western governments replaced pro-Russian ones. What the West celebrated as a flowering of democracy the autocratic Putin saw as geopolitical and ideological encirclement
Ever since, Putin has been determined to stop and, if possible, reverse the pro-Western trend on his borders. He seeks not only to prevent Georgia and Ukraine from joining NATO but also to bring them under Russian control. Beyond that, he seeks to carve out a zone of influence within NATO, with a lesser security status for countries along Russia's strategic flanks. That is the primary motive behind Moscow's opposition to U.S. missile defense programs in Poland and the Czech Republic.
His war against Georgia is part of this grand strategy. Putin cares no more about a few thousand South Ossetians than he does
about Kosovo's Serbs. Claims of pan-Slavic sympathy are pretexts designed to fan Russian great-power nationalism at home and to expand Russia's power abroad.
Unfortunately, such tactics always seem to work. While Russian bombers attack Georgian ports and bases, Europeans and Americans, including very senior officials in the Bush administration, blame the West for pushing Russia too hard on too many issues.
It is true that many Russians were humiliated by the way the Cold War ended, and Putin has persuaded many to blame Boris Yeltsin and Russian democrats for this surrender to the West. The mood is reminiscent of Germany after World War I, when Germans complained about the "shameful Versailles diktat" imposed on a prostrate Germany by the victorious powers and about the corrupt politicians who stabbed the nation in the back.
Now, as then, these feelings are understandable. Now, as then, however, they are being manipulated to justify autocracy at home and to convince Western powers that accommodation -- or to use the once-respectable term, appeasement -- is the best policy.
But the reality is that on most of these issues it is Russia, not the West or little Georgia, that is doing the pushing. It was Russia that raised a challenge in Kosovo, a place where Moscow had no discernible interests beyond the expressed pan-Slavic solidarity. It was Russia that decided to turn a minor deployment of a few defensive interceptors in Poland, which could not possibly be used against Russia's vast missile arsenal, into a major geopolitical confrontation. And it is Russia that has precipitated a war against Georgia by encouraging South Ossetian rebels to raise the pressure on Tbilisi and make demands that no Georgian leader could accept. If Saakashvili had not fallen into Putin's trap this time, something else would have eventually sparked the conflict.
Diplomats in Europe and Washington believe Saakashvili made a mistake by sending troops to South Ossetia last week. Perhaps. But his truly monumental mistake was to be president of a small, mostly democratic and adamantly pro-Western nation on the border of Putin's Russia.
Historians will come to view Aug. 8, 2008, as a turning point no less significant than Nov. 9, 1989, when the Berlin Wall fell. Russia's attack on sovereign Georgian territory marked the official return of history, indeed to an almost 19th-century style of great-power competition, complete with virulent nationalisms, battles for resources, struggles over spheres of influence and territory, and even -- though it shocks our 21st-century sensibilities -- the use of military power to obtain geopolitical objectives. Yes, we will continue to have globalization, economic interdependence, the European Union and other efforts to build a more perfect international order. But these will compete with and at times be overwhelmed by the harsh realities of international life that have endured since time immemorial. The next president had better be ready.
Robert Kagan, a senior associate at the Carnegie Endowment for International Peace, writes a monthly column for The Post. His most recent book is "The Return of History and the End of Dreams." He served in the State Department in the Reagan administration.
Sunday, August 10, 2008
DebWaiver2Farmer Articles
http://vidarbhacrisis.blogspot.com/2008_07_01_archive.html
[End]
Business Daily from THE HINDU group of publicationsWednesday, Jul 16, 2008
Who benefits from the waiver?
Sharad Joshi
The last act in the drama surrounding the Agricultural Debt Waiver and Debt Relief Scheme (ADWDR) announced by the Finance Minister on the February 29 is unfolding in rural India. All the leading banks were instructed to put on their notice-boards the lists of farmers who actually benefited from the scheme.
The banks faced a Herculean task and certainly tried their best to acquit themselves creditably.
The details of the scheme in close print cover some two dozen pages. On June 18 the Ministry of Finance issued clarifications on some 32 points. To prepare detailed lists of the beneficiaries of the scheme mentioning the financial extent of the benefit derived by them 12 days after the issue of clarifications was no simple task. In addition to preparing the lists of beneficiaries, the lending banks were required to issue individual certificates to each farmer loanee.
Guidelines
The small and the marginal farmers were to be given certificates mentioning the amounts borrowed by them since March 31, 1997 till March 31, 2007 and which had remained unpaid till December 31, 2007. The calculation was further complicated by the fact that the loans that were rescheduled under the packages announced by the government in the years 2004 and 2006, and which had remained unpaid, were also required to be mentioned.
On June 18 the Government made a further amendment and ordered that all loans, even those taken before 1997, were to come under the purview of the scheme if they were covered under the rescheduling packages announced in 2004 and 2006. The certificates for the small and marginal farmers had to give the total amounts of crop loans, short-term loans and long-term loans that had become overdue and, hence, eligible for debt relief.
‘Other farmers’
As regards ‘other farmers’, that is those holding more than five acres of land, the certificate was even more complex. It had to mention all loans taken between 1997 and 2007, which had become overdue. The loans rescheduled under the 2004 and 2006 packages taken before 1997 had to be taken into account.
Three-fourths of the amount overdue was to be paid by the loanee farmer in three instalments on September 30, 2008, March 31, 2009 and June 30, 2009. These farmers had to sign affidavits committing themselves to this schedule of payment. The certificates in their favour do mention the amount overdue as also 25 per cent thereof, which becomes eligible for debt relief.
The lists were put on the notice-boards of the lending banks, much to the disappointment of most farmers — small and large — who did not find their names therein. The farmers, however, did not fail to notice that the biggest beneficiaries were large farmers who had managed to avail themselves of big loans, taking advantage of their positions on the boards of directors of the lending banks. In Satara district of Maharashtra a single individual who happens to be the chairman of a co-operative bank has benefited to the extent of Rs 35 lakh from the scheme.
Overdues are new loans
I organised interaction sessions in two villages of Satara district — Chinchani Vandan and Patkhal. The feedback from the farmers brought out some astonishing facts. The ADWDR scheme covers crop loans, investment loans for increasing production in agriculture as also investment loans in activities auxiliary to agriculture, such as dairy, poultry, piggery, and so on.
As regards the crop loans that are taken by the farmers for meeting costs of input such as tillage, seeds, fertilisers, manures, pesticides, power and labour, and which are supposed to be returned within 18 months, the whole scheme has become ridiculously pointless because of the widely rampant practice of conversion of old loans into new loans every year, year after year. This system works on the following lines.
At the opening of the crop season, a farmer who has not been able to repay his previous loans finds himself ineligible to get a fresh loan for the coming year. The Chairman/Secretary, very condescendingly, offers him a way out. If the loanee farmer can manage to pay the chairman/secretary about 4-5 per cent of the outstanding loan, he agrees to juggle the books of accounts to show that the old overdue loan has been settled and a fresh loan is paid to the farmer. Under this system, crop loans never become overdue. Consequently, the provision in the scheme for the write-off of overdue crop loans is entirely redundant.
In the two villages where I interacted with the farmers, I came across only one case of overdue crop loan. The case of this farmer is very peculiar. He and his brothers live together and cultivate the land together. However, on paper they are all small farmers because the ancestral land has been subdivided between them in successive generations. It so happened that in the last two years, for some reason, he was not able to convert his old crop loan into a fresh one. As a result, he will benefit from the loan waiver scheme. The small as also the large farmers, thus, gain nothing from the waiver of the overdue crop loans.
Investment loans
As regards the investment loans the position is more bizarre. The certificates issued to the farmers mention the amounts of loans taken between 1997 and 2007 and then mention the amounts overdue without mentioning the amounts repaid by the loanee farmer time to time.
The certificates do not mention the rates at which the interest was calculated nor is there any way of knowing for sure if the lender bank has charged simple interest or compound interest. There is, thus, no way of knowing if the lending banks have observed or flouted the instructions of the Supreme Court against charging of compound interest.
As if this is not enough, there is an even curiouser stipulation. The ‘other farmers’, that is those holding more than five acres of land, in order to be eligible for the debt relief, are required to repay the first instalment of 25 per cent of the overdue amount on or before September 30, 2008.
Now, the farmers in Maharashtra are unlikely to get any new income this year before that date. They would, hence, not be able to respect the schedule of repayment and would, automatically, be disqualified not only from the debt relief but even from getting fresh loans. The only way they can save themselves is by taking recourse to borrowing from the private money-lender. The ADWDR scheme thus contains within itself the seeds of a new generation of farm indebtedness.
The UPA Government, in order to avoid owning up its responsibility for the farmers’ indebtedness and mass suicides, announced a highly legalistic scheme. Indications are that the scheme will itself prove a massive liability for it in the ensuing general elections.
(The author is Founder, Shetkari Sanghatana and Member of Parliament, Rajya Sabha. E-mail: sharad.mah@nic.in)
[End]
Business Daily from THE HINDU group of publications
Monday, Jun 16, 2008
S. D. Naik
The substantial expansion of farm waiver package by the UPA Government from Rs 60,314 crore announced in the Budget to Rs 71,680 crore reflects its growing loss of nerve with approaching elections. This announcement has come closely on the heels of bringing political pressure on the State Bank of India to withdraw its internal circular to branches to temporarily suspend new loans to tractors and power tilling equipment segment following mounting non-performing assets (NPAs ) in the segment.
The loan waiver scheme has now been enlarged to include plantations and horticulture, allied agricultural activities such as dairy and poultry farming, as well as investment credit for purchase of tractors and bullocks, deepening of wells etc. Moreover, as recommended by Mr Rahul Gandhi, the scheme will now include bigger farmers with more than five acres of land in dryland areas.
The Government has decided to create a Farmers’ Debt Relief Fund, with an initial corpus of Rs 10,000 crore. The Finance Minister has also stated that Rs 40,000 crore (instead of Rs 25,000 crore) will be provided this year towards the debt waiver scheme. The future installments will be in subsequent Budgets until 2011-12.
ILL-CONCEIVED
Clearly, the massive loan waiver scheme is ill-conceived from several angles. For one, it will impose a huge additional fiscal burden at a time when global crude prices have gone through the roof and the Centre will have to provide for hefty increases in salaries of its employees under the Sixth Pay Commission award.
Moreover, with the National Rural Employment Guarantee Scheme (NREGS) having now been extended to al the 600 districts of the country, the Centre will have to provide more funds for the scheme. Second, it is grossly iniquitous in that it leaves out nearly two-thirds of the farmers who have borrowed from private moneylenders.
Moreover, it will make the farmers who repaid their loans in time, feel betrayed and affect the carefully nurtured credit culture. Already, many banks are finding their farm sector NPAs rising because of non-repayment of loans.
Third, it is a one-time benefit to only a small section of farmers who borrowed from institutional sources and is no substitute for the substantially higher investments needed in agriculture and rural infrastructure on a sustained basis.
Even after the announcement of the expanded package, an overwhelming majority of affected farmers feel left out and new demands and suggestions have been coming from different States every day. In fact, the State government has now announced its own package to include some of the left-out farmers. Thus, as the Magasasay award winning journalist, Mr P. Sainath has aptly put it: “The UPA Government’s waiver is no solution to even the immediate crisis, let alone long-term agrarian problems.”
PRAGMATIC ALTERNATIVE
A pragmatic alternative for the Government would have been to implement some of the recommendations made by the Radhakrishna Committee on Rural Indebtedness. The Committee had suggested several remedial measures to tackle the serious problem of rural indebtedness. However, loan waiver did not find a place in its report.
After noting that more than half of the farm households do not borrow from institutional sources and that they pay usurious rates of interest on borrowings from moneylenders, the Committee wanted the banks to grant a one-time term loan to such farmers to free them from the clutches of moneylenders. It had also mooted a Moneylenders’ Redemption Fund with an initial corpus of Rs 100 crore to operationalise the scheme.
Some of the other pragmatic suggestions of the Committee included the rescheduling of loans, making available fresh loans and waiving of interest liability of borrowers for the extended period of up to two years (both for short and long-term loans).
The financial burden of this was to be equally shared between the Central and State governments. More important, the Committee had suggested that those who repaid their dues promptly must be rewarded.
Thus, rescheduling of loans could have been for a much longer period of three-five years, interest waivers, making available fresh loans on government guarantee, and finding some way to provide the much-needed relief to those indebted to moneylenders on the lines suggested by the Radhakrishna Committee, would have been a much better alternative.
WAY FORWARD
While the damage caused by the ill-conceived loan waiver scheme cannot be undone now, the government should immediately initiate both short and long-term measures to rejuvenate agriculture. And, as the Expert Group on Agricultural Indebtedness has suggested, rejuvenation of the farm sector lies in addressing basic structural, institutional and technological factors as also the restructuring of public support systems.
First and foremost, there is an urgent need to reverse the long-term declining trend in public investment in agriculture since 1980-81. There has been a sharp decline in the share of public sector gross capital formation (GCF) to 17.23 per cent in 1999-2000 from 43.2 per cent in 1980-81. Contrary to expectations, private investment failed to compensate for the drastic decline in public sector investment in the sector.
To overcome the resource constraint, funds allocated under ‘Bharat Nirman’ and National Rural Employment Guarantee Scheme could be used to boost the asset base of the farm sector.
Serious efforts are needed to ensure that not only the institutional credit to the sector increases significantly, but that it reaches more number of farmers, particularly the small and marginal farmers. Though farm credit has shown a robust growth over the past few years, the number of farmers covered has not increased proportionately.
In this context, the suggestion of the Expert Group to make Micro-Finance Institutions (MFIs) an integral part of mainstream banking deserves consideration.
The banks should be asked to provide resource support to MFIs on the condition that they moderate their interest rates and abide by ethical banking practices. This will immensely benefit the vast majority of small and marginal farmers who have no access to banking institutions at present.
The other areas requiring urgent attention are the strengthening of Research and Extension Services and risk mitigation measures such as crop insurance, weather insurance, price risk mitigation and expanding the livelihood opportunities for the rural population outside the farm sector.
Far-reaching changes are also needed in the land use pattern, water management, reclamation of waste-land and selection of crops to suit the environmental needs. Organic farming also needs a closer look to make agriculture sustainable.
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Business Daily from THE HINDU group of publicationsFriday, May 30, 2008
Arvind P. Datar
In Budget 2008-09, the Finance Minister, Mr P. Chidambaram, announced the write-off of Rs 60,000 crore of loans given to small and marginal farmers holding up to two hectares. For other farmers, 25 per cent of the outstanding amount was to be written off. Other ministers and politicians were quick in claiming similar relief. The Agriculture Minister, Mr Sharad Pawar, called for a waiver of loans given to fishermen and also for increasing the minimum exemption area from two to five hectares.
The Finance Minister has accepted some of these demands and the subsidy will now cost the exchequer Rs 71,680 crore. Farmers cultivating up to five acres of land are also eligible and the scheme has been extended to poultry, dairy and bee-keeping.
The domino effect has been felt at the State level as well. The Tamil Nadu State Budget for 2008-09 provides for a complete waiver of loans given to handloom weavers. Housing loans up to Rs 25,000 availed by economically weaker sections from co-operative banks have also been written off.
With elections for several State assemblies looming ahead, it is only a matter of time before this Santa Claus syndrome spreads to different States, and each Chief Minister tries to outdo the other by writing off or waiving loans given to different sections of society.
Counter-productive
The loan waiver scheme will be counter-productive and, ironically, affect the small and marginal farmer the most. A recent article in the Economic and Political Weekly (March 15-21), discusses the disastrous consequences of the debt relief scheme announced by Devi Lal in 1990-91.
The share of moneylender’s loans to farmers had actually increased from 17.5 per cent in 1992 to 26.8 per cent in 2002! All attempts to control exorbitant rates of interest charged by money-lenders and various schemes of debt relief have miserably failed. Indeed, it is impossible to control or regulate the money-lender and his usurious rates of interest. The present loan waiver will only tighten the stranglehold of rural Shylocks.
Muhammad Yunus, Nobel laureate and founder of the Grameen Bank in Bangladesh, perhaps knows more about lending money to the poor than all our Finance Ministers combined. In his book Banker to the Poor, Yunus specially points out that Grameen Bank never, never writes off a loan.
Even after a cyclone or flood, so common in Bangladesh, the Grameen Bank would reschedule the loan and give a longer grace period for repayment. But it never wrote off the loan. Yunus states: “The repayment of loan boosts the self-reliance, pride and confidence of an impoverished person in his own ability. To forgive a loan does just the opposite and can undo years of difficult work in trying to get that borrower to believe in his or her own ability. When Governments forgive loans extended by nationalised banks, it creates an almost untenable situation for micro-credit programmes to recover their money”.
Rewarding law-breakers
After 60 years of pro-farmer policies, the agricultural sector is still in a sorry state. Every budget has numerous schemes for rural employment or some other relief. But large amounts allocated for roads, irrigation and other projects are consistently siphoned off. Rajiv Gandhi famously admitted that only 19 paise of each rupee reached the poor. The confession implies that 81 per cent is knocked off by politicians, bureaucrats and contractors.
Farmers enjoy a huge fertiliser subsidy, free power and minimum price for their agricultural output. But these benefits clearly do not reach the rural poor and have failed to make the small farmer financially independent. It is clear that subsidies, handouts and freebies are not the solution to the problems facing the small and marginal farmer. The loan waiver scheme will not only seriously damage the banking sector but, even more importantly, do irreparable harm to our national character. Such schemes breed contempt for the law and any kind of contractual obligation.
Over the last several years, we have consistently rewarded law-breakers and punished law-abiding citizens. Income-tax evaders are not prosecuted but given the benefit of voluntary disclosure and samadhan schemes. Builders who flagrantly violate building laws are given the benefit of “regularisation”.
Farmers who repaid their loans despite all odds cannot but feel a sense of outrage; indeed, farmers who repaid their loans and honoured their contractual obligations look like idiots while the defaulters can literally laugh their way to the bank.
Risk of fraud
The loan waiver scheme will now increase the demand of different sections of society for getting waivers and write-offs. It can also breed serious fraud. Loans can be taken in the name of existent or non-existent farmers or labourers by the local political mafia and periodically written off.
The success of Germany, Japan and Singapore has not been accidental. It is, in each case, a result of visionary leadership and the dedication and discipline of the people. It requires men of stature to make a country economically strong and have the necessary self-discipline and integrity not to allow anyone to plunder the country’s resources.
On the other hand, it requires no intelligence to write off loans or distribute other gifts to the public. From the distribution of free sarees and dhotis, we have graduated to colour TVs and gas stoves. What prevents political parties from promising one motor-cycle for every family belonging to the weaker sections?
The distribution of largesse at the cost of the tax-payer is very simple and can be accomplished by any politician; good governance requires politicians to rise to the level of statesmen.
The Santa Claus syndrome will have a crippling effect in the years ahead. With coalition politics taking centre-stage, long-term national interests are being increasingly sacrificed for short-term political gains. The loan waiver scheme was perhaps the worst way of helping the small and marginal farmer.
(The author is a Senior Advocate of the Madras High Court.)
[End]
Business Daily from THE HINDU group of publications
Thursday, Jun 05, 2008
Achieving Sisyphean proportions
SHARAD JOSHI
The more the Finance Minister grapples with the problem of farmers’ loan waivers, the more he appears to get bogged down in its complexities. How did this massive burden of farmers’ indebtedness arise at all? For decades, those in authority have been placing the blame on such diverse factors as uneconomic size of holdings, vagaries of climate, pest damage, inordinately high rates of interest, low level of literacy, diversion of loans to non-agricultural purpose s, low yields, addictions to alcohol/drugs and even sheer laziness of the farmer community.
These anti-farmer calumnies have, for decades, persisted in the textbooks on agriculture. It was in 1986-89 that things changed. The statistical data submitted by the Ministry of Commerce to the World Trade Organisation (WTO) on the subsidies given to farmers made it quite clear that the farmer was not to be blamed for his penury and colossal burden of debt that was crushing him.
All economists and political parties had to concede that the farmers’ indebtedness was largely a result of successive governments’ deliberate measures to keep domestic agricultural prices depressed by using one or the other of their vast armoury of instruments of market intervention.
Agriculture, as a whole, had become a losing proposition, irrespective of the size of individual holdings or geo-climatic zones or the State in which the land was located.
Rising indebtedness
The indebtedness continued even after private money-lending was proscribed and replaced by an elaborate structure of co-operative credit.
The attempts to promote formal credit institutions such as commercial banks and the co-operative credit institutions further impoverished the rural economy inasmuch as rural savings were sucked into the urban sector. Farm indebtedness was unrelated to the merits or demerits of any particular credit institution. No matter what the source of credit, indebtedness continued to rise.
Even the colonial government was sensitive to the misery of farmers, as seen in the alacrity with which it responded to the Deccan riots; the governments of Independent India, however, have not cared to respond to the demands of the farmers’ organisations for debt relief/loan waivers, voiced at least since 1984. The matter was brought to a crunch by the spate of farmers’ suicides that numbered over 1,50,000 since 1985.
An analysis of the suicides showed they were spread fairly equally across all castes and age-groups.
There was a preponderance of landholders among those who took their lives. Clearly, the landless labourer, who could count on his fixed income, howsoever uncertain, was generally better off than the landholding farmer, who faced the vagaries of nature as well as the tyranny of the political state.
The highest incidence of suicide was among the cotton-growing farmers in Andhra Pradesh, Karnataka and Vidarbha. That was conclusive evidence that the phenomenon of indebtedness and suicides was directly related to the extent of negative subsidy imposed on various crops. Cotton suffered from the highest negative subsidy since pre-Independence days.
Cotton growers had become further vulnerable because of the extent of the use of pesticides the crop needs as also the rising incidence of spurious pesticides/seeds and adulteration. Those in authority continued to put the blame on the various factors mentioned above. They could not have signed a confession that the suicides were a direct result of the anti-farmer economic policies they had followed since Independence.
Faulty basis
The farmers had made a clear case that their loans were both illegal and immoral and that the quantum of loan was insignificant compared to the loss caused to the farm community from the negative subsidies imposed by the government.
Even before February 29, when the Finance Minister announced the Loan Waiver and Debt Relief scheme (LWDR), the country at large expected that, in the last Budget before the general election, there would be some attempt to assuage the farmers’ anger.
The Finance Minister ought to have prepared a scheme of debt relief which should have recognised that the uneconomic character of the agricultural vocation is a national phenomenon not related to the size of the holdings or to the character of the institution from which the loan was obtained. It made no sense to make a distinction between the loanees on the basis of the size of holdings or between the various lenders on the basis of their structural character. This is the truth that the UPA government could not afford to accept as it established the culpability of all the governments since 1947.
The Finance Minister tried in the initial version of the LWDR to stick to the belief that indebtedness is caused by the uneconomic size of holding, the vagaries of nature and the tyranny of private moneylenders. The loan waiver scheme announced in the last Budget was clearly based on this theory.
The scheme caused widespread dissatisfaction, impossible to ignore. The Finance Minister has since announced an extension of the scheme that increases its cost from Rs 60,000 crore to Rs 71,680 crore.
Under the extended version, all farmers — small, marginal and big — in 237 identified unirrigated and drought-prone districts in various States will get a minimum one-time debt relief of 25 per cent of the outstanding loan amount, or Rs 20,000, whichever is higher.
The extended version is, of course, an improvement over the initial one, in that the dichotomy between the small, marginal and other landholders has narrowed to some extent. The farmers with holdings larger than five acres will now be entitled to some benefit if they are located in the districts identified as drought-prone.
Still not logical
That, however, does not make the scheme any more logical or consistent. The indebtedness is not due to any natural climatic factors. It is more the result of the State’s keeping agricultural prices depressed.
The list of the identified districts is going to raise more questions than it resolves. Since in most southern States the monsoons start in the first week of June, there will be uncertainty as to which farmers are entitled to get fresh crop loans and which farmers are not.
The non-seasonal rains that the Northern region has been experiencing of late suggest that the onset of the monsoons in the North will be considerably delayed. As a result, farmers in the southern region may become vulnerable to uncertainty about eligibility to get fresh crop loans.
Fixing the district as a unit for judging the eligibility of a farmer for the loan waiver is irrational. In crop insurance schemes, it is acknowledged that even a block is a highly unsatisfactory unit for settlement of claims.
The availability of rainwater varies widely within a district. There are regions within a district that benefit from major or minor irrigation schemes while others do not. Treating all the farmers in a given district as a homogeneous category would be an absurdity.
Further, the list includes some districts that are well-endowed with water resources while it excludes certain others have long been recognised as drought-prone. The ‘district approach’ will only result in many inter-district disputes, which may be difficult to resolve.
The UPA government and the Finance Minister P. Chidambaram, in an effort to clear the ruling parties of the charge of chronic animosity towards farmers, seem to be making things so complicated that it is impossible to come up with workable remedies that will make a real difference.
The Finance Minister is apparently unable to shake off the burden of farmers’ indebtedness, which is weighing him down even more each day.
(The author is Founder, Shetkari Sanghatana and Member of Parliament, Rajya Sabha. E-mail: sharad.mah@nic.in)
[End]
Business Daily from THE HINDU group of publications
Thursday, Mar 13, 2008
Mechanics of farm loan waiver
Sanjiv Agarwal
In 2007-08, gross domestic product (GDP) is estimated to grow at 8.7 per cent and agriculture (which accounts for 17.5 per cent of GDP) a mere 2.6 per cent. While growth of agricultural credit is all set to exceed the 2007-08 target, credit in 2008-09 is pegged at Rs 2,80,000 crore.
Budget 2008 has announced a Rs 60,000-crore debt wavier scheme for farmers. The scheme envisages complete waiver of all loans of marginal and small farmers that were due as on December 31, 2007, and remained unpaid until February 29, 2008.
For other farmers, a one-time settlement (OTS) scheme has been announced wherein outstanding loans which were due as on December 31, 2007, but remained unpaid till February 29, 2008, can be settled at a rebate of 25 per cent against the balance payment of 75 per cent.
Whither the resources?
Not only this, once such loans are settled or waived, the same farmers would still be eligible for fresh loans from banks.
This will result in about three crore small or marginal farmers getting relieved and another about one crore farmers getting settlement. All this is expected to be over by June 30, 2008. The scheme will have a direct bearing on the bottom-line of scheduled commercial banks, regional rural banks and cooperative credit institutions.
So far as the Government in concerned, the Rs 60,000 crore burden has not been provided for in the Budget, meaning that it will have to be funded by future tax collections. From where the resources will come is still not clear. Such a huge amount can neither be left to be recouped under the head, ‘contingencies’ nor left without being provided for. If that be the case, it would mean that either the respective banks or the taxpayers will have to take the hit
In public sector banks (PSBs), non-performing assets (NPAs) as regards the agricultural sector stand frozen now (cut off is February 29, 2008), as banks will have to write off their advance/lending portfolio to that extent. The actual figure could be even more than Rs 60,000 crore.
What banks will gain is the cleaning up of the messy agricultural loan portfolio. Now such loans will be out of the books and banks, in turn, will be provided with liquidity. In what form the liquidity will be is not yet clear. Will it be a simple reimbursement, a form of subsidy or some other financial package will be known in April. Ideally, this should be made known immediately as only then banks can decide whether to book such waivers and OTS in 2007-08 or 2008-09 (before June 30).
Type of liquidity
If the banks get liquidity in the form of bonds, it could be considered as fresh tier II capital. What would effectively happen is that on the liabilities side of the balance-sheet the capital would be shown, and assets (NPAs) will get replaced by investments in the form of bonds on the asset side. For banks, these amounts were already NPAs and had either been or would eventually be written off in the books by charge to profit and loss (P&L) account. In any case, liquidity was never a case as these were dead loans with virtually nil chances of recovery. It is expected that banks will be compensated as and when loans fall due.
Depending on how the scheme is framed by the Government, banks will account for the same.
In case the banks have already provided for such loans as bad/doubtful/sub-standard assets, they will gain to the extent the provision is reversed as a result of recovery/waiver under the scheme.
If no such provision exists, the banks will only get rid of such NPAs and their books will be cleaned up. If the Government reimburses this NPA amount, the banks will merely set off these advances against the funds so received from the Government. But if the Government decides to provide liquidity by issuance of bonds, the banks’ assets will get substituted, that is, NPAs will go out of the balance sheet and bonds would be shown as investment. Any interest earned on such bonds could then be accounted as income by banks.
Despite the huge waiver, the small farmer could continue to reel in debt as formal credit is only a fraction of the total credit. Overall, therefore, it is felt that banks may not have much to lose. But once they start afresh, they will start creating NPAs again as such borrowers are eligible for fresh loans.
(The author, a chartered accountant, is an independent director in a public sector bank.)
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