Anda di halaman 1dari 62

Apr May Jun Jul 2011

1. PILs
When public interest litigations (PILs) were first introduced into India s jurisprudence in the 1980s, they had a very clear role: to enhance access to justice on behalf of those who had been historically excluded from the justice-delivery system. Yet, over time, like many nobly intentioned innovations, they have been warped away from their original purpose; alongside those that are genuinely filed in the public interest, there are some that are filed with malice aforethought; and some that are filed frivolously, for the sheer exercise of power to bring something down or to halt some development. Anger has been building for a while at this misuse of what is a fragile part of our legal machinery. In 2006, the well-known lawyer Fali Nariman said that PILs are definitely being misused... The courts have realised that they need to control them. There must be a screening process. A PIL was meant for those who didn t have the wherewithal to approach the courts. Now there are corporate PILs. In June last year, Law Minister Veerappa Moily angrily declared that the government would seek compensation from those whose petitions caused public developmental work to be stopped before being dismissed. And on his first day in office, in May 2009, the current chief justice declared that he would cut down on frivolous PILs, and tighten procedures. The Supreme Court has now moved to act on that pledge. A two-judge bench heard a petition asking that a retired UPS officer be removed from any connection with the temple in Tirupati; it dismissed the PIL, saying that there was insufficient information as to what the petitioner was. Unless the petitioner was apparently and patently above board , they said, PILs would be rejected. This stand by the SC must be welcomed. Too often, as the judgment pointed out, behind the beautiful veil of public interest, an ugly private malice, a vested interest, or publicity-seeking is lurking. This not only adds to the enormous case backlog in the higher courts, but also, as Moily warned, risks grinding growth to a halt. The SC s decision to act as regulator is both necessary and timely.

2. Judiciary independence & activism

Delivering the M.C Setalvad lecture organised by the Bar Association of India, Chief Justice S.H. Kapadia urged circumspection and restraint on the judiciary, especially on matters of policy and governance. He spoke of judicial activism, which, even if it comes from a good place and is intended as a check on the arbitrariness of the executive, can shade into a dangerous overreach. He cautioned that judicial activism that runs free of Constitution and statute raises questions about the accountability of individuals who are after all, not chosen by democratic process, and are not answerable to the legislature or executive. He asked the judiciary to ponder whether the question presented to them had a legal or a political content, reminding them that the court s true role is to review the acts of the legislature and not to substitute its own policies or values . That is fitting advice, in this atmosphere of extreme hostility to the processes of parliamentary democracy. However, it must also be pointed out that in the Indian experience, far from circumventing the electoral process or thwarting the people s will, our courts have, in many, many cases, protected their interests and expanded their rights. The higher judiciary has tried to act as bulwark against corruption by strengthening investigative agencies, wrested greater openness from the government, filled the gaps where state agencies have failed and acted boldly on welfare issues, environmental protection, sexual freedom, etc. Recent examples are the way Supreme Court systematically sifted through the facts on the 2G spectrum scandal, or the way it held the government to account on the sloppy appointment process for the chief vigilance commissioner s office.

So in turn, we need to be careful of any action that inadvertently messes with the independence of the judiciary. Even the civil society members of the Lokpal Bill drafting committee have piped down somewhat, accepting that the higher judiciary could be kept out of the bill s ambit. The rationale for keeping them out is not to shield wrongdoing, but because it might encroach on their free functioning, which must be carried out without fear for penalties (or hope for reward). The separation of powers is hardwired into our constitution, the principle that no one branch of the state will be able to subordinate the other and all sides need to underscore their commitment to that bedrock principle.

3. Khap Panchayats
The Supreme Court couldn t be clearer in its condemnation of khap panchayats and caste-related injustice, as it held the police and administration directly responsible for letting these acts of vigilante violence continue unpunished. Khap panchayats are Jat social structures in Haryana, UP and Rajasthan that once served as forums for dispute resolution, and hold on to a vestigial authority, mainly used to wreak terrible punishment on those who fall in love with people of the same gotra. They patrol the borders of caste and clan, and they persuade or intimidate families into excommunicating their own, and directly or indirectly provoke honour killings. Despite not having a shred of legal authority, their sway in Haryana is undisputed, and the problem is compounded by a foot-dragging police and administration and a sympathetic political class. Because these structures undergird their electoral calculations, political leaders across Haryana, from Naveen Jindal to Om Prakash Chautala, have urged that khap panchayats be handled with care, that custom and ceremony be respected. The Haryana government suggested, with a straight face, that going after khap panchayats would be a rash step with dangerous consequences for law and order. However, there has finally been some progress towards dismantling these structures. Last year, for the first time, after the widespread public revulsion over the murders of Manoj and Babli in Haryana, these honour killings were answered with a strong conviction for the entire khap panchayat, and it was decided that the Indian Penal Code, Indian Evidence Act and Special Marriages Act would be amended to prise loose their grip. The honour killings bill is likely to be introduced in the next session of Parliament. And now, the SC has thrown its weight behind the move, saying that, apart from criminally prosecuting those responsible for violence, district collectors and superintendents of police who display a reluctance to act should be suspended and chargesheeted as well. As the SC pointed out, everyone has the right to love and marry whom they want, and families don t have to approve of these relationships, but they have to let them be. They can glower and sever connection, but they have no larger right on their lives. Khap panchayats, as voluntary civic associations, present no problem but when they lay down oppressive writs and promise social intimidation and bodily harm to those who smear the caste lines, they have no place in a modern nation.

4. Declaration of Assets Bureaucracy

The government has taken an essential step towards accountability and transparency by deciding to make public the assets of those in the higher echelons of bureaucracy. All serving IAS officers, other Group A Central service officers and their dependents will have to disclose their assets and income-tax returns. Defaulters will face serious consequen- ces, and therein hopefully lies a pointer to the gravity with which the government is seized of the matter. Those who refuse to submit their details will be denied vigilance clearance, will not be considered for promotion and empanelment for senior posts in the government and their names will be proclaimed online. Declaring one s assets is an elementary act of transparency between the public servants and the public. While there have been arguments, especially in the context of the higher judiciary declaring their assets, that this bit of personal information has no bearing whatsoever on how one conducts in public office, putting the documents out there is considered one way of deterring potential acts of corruption. That is why declaration of assets by election candidates has gained such traction though the format needs more regulation. Over a year ago judges of the Supreme Court too

made public details of their wealth first due to public pressure and then a judgment by the Delhi High Court. After the legislature and judiciary, now it is bureaucracy s turn. The Right to Information Act has indeed ensured a greater sense of transparency over the past few years, but here the public has to seek out much of the information which should have been open and accessible to them as a matter of course, without them having to take recourse even to the minimum act of filing and submitting application forms. This is not to discount the enormous impact that the RTI has had, but to point to new creative ways in which the government can subject itself to greater accountability. By simply putting up online details of procedures and policymaking, of services rendered and auctions made, etc, the government would be able to contain corruption, address the prevailing consternation about institutional opaqueness and make people feel they are indeed part of the system, not shut out of it. Sunlight really is the best disinfectant.

5. MPLAD Scheme: Bihar

Bihar Chief Minister Nitish Kumar, who scrapped the MLA Local Area Development Fund (MLALAD), has now asked the Centre to make alternative arrangements to implement projects for its parliamentary variant the MPLAD in the state. Kumar says the reasons are technical. The MLALAD has been replaced by the Chief Minister s Local Area Development Scheme, under which a body of engineers will be in charge of executing development works. Thereby the Rural Works Department earlier in charge of carrying out projects proposed under the MLALAD and MPLAD has been absolved of such duties. Kumar s proposal hardly suggests a game of political one-upmanship, of the 40 MPs in Bihar 32 are from the ruling NDA. Instead of turning this into a limiting controversy of an NDA-ruled state government resisting a Central scheme, this should be seen as an opportunity to open a much-needed dialogue on these contentious schemes. The local area development schemes were both introduced in 1993 to give legislators a stake in their constituencies and to enable them to directly and urgently respond to some of their needs. But from the beginning they invited concern whether an elected representative should be participating in such executive tasks. Also, the schemes have been wracked by allegations of corruption, irregularity and indiscretion. The criticism notwithstanding, the Centre recently decided to more than double the MPLAD corpus to Rs 5 crore per year for an MP in a clear indication that it is not keen on revoking it. However, Bihar has started a debate by doing away with the MLALAD and substituting it with a restructured development fund. And now that Kumar has brought the status of the MPLAD within the purview of this debate, Parliament and the Centre must respond in a forward-looking way.

6. Planning Commission
That the Planning Commission needs to update its ability to serve as a resource for government policy-making is something most people agree on. That will, certainly, require it to expand its own resources, allowing it to access and commission the best in outside research, as well as ramp up in-house ability. It is important, however, that we take into account the need to keep the reform going; the boost the commission receives should outlast individuals. It s this test that, unfortunately, the latest proposal from within the Planning Commission fails. It is proposed that discretionary funding of up to Rs 1 crore a year be allowed to the commission s members, allowing them to personally engage individuals, firms or institutions to assist them in research in areas that they feel are important to the planning process. This money is unlikely to be subject to gross misuse. And yet the proposal falls into the trap that has bedevilled too many of the Indian state s attempts to expand the scope of research: the inability to craft institutional structures that are effective beyond the tenure of a few particularly motivated or visionary individuals. The Planning Commission goes on, apparently, for ever, even as its members come and go. And while its members deserve the best resources possible as they work, there need to be structures that direct and target

what that work is, as well as ensuring its benefits are not lost even after the individual who has commissioned it leaves. Otherwise, we will get a Planning Commission that produces little beyond ephemeral reports written by outside consultants on matters of interest to one commission member, and not the body of area experts and constantly growing in-house expertise we require. India suffers from too many experts and too few places to put them. We need incubators of original thought, of careful analysis, urgently. But the really good think-tanks are never those places which rely constantly on individual discretion. Nor are they merely staging points to fund external research, or for a de-committed class of roving consultants. This proposal is a step in the wrong direction for the Planning Commission.

7. CBI out of RTI

The decision to exclude the Central Bureau of Investigation from the Right to Information Act s ambit has been widely questioned now, the Madras high court has asked for a clearer rationale for the decision, and opinion was visibly divided within the government and even among previous CBI chiefs. The CBI has been bundled with the National Investigative Agency and the National Intelligence Grid to justify this exemption. However, it s not primarily concerned with security and intelligence functions that are explicitly left out of the RTI Act, but with cases of corruption and crime. Though the agency has cloudily argued that it has investigated/ is investigating extremely sensitive and important cases having inter-state/ international ramifications , RTI requests would not have applied to ongoing investigations anyway. The CBI also cites a mosaic theory that seemingly innocuous bits of information can be pieced together to draw large conclusions, and argues that its file-notings are too free-spoken and revealing to be given away. However, other sensitive and elevated offices have submitted to these processes, to no visible harm. The problem is, these arguments stem from a reflexive suspicion of the citizen, which undercuts the very premise of RTI and maximum disclosure. RTI exemptions must be narrowly defined, and ideally they should be case-specific, rather than an entire category being swept out of the public domain. The harm should be demonstrably greater than the public interest in disclosure, and restrictions that serve to shield the official agency from embarrassment or exposure have no place in these exemptions. The one argument that make sense is that the CBI is too understaffed to keep up with a flood of RTI requests but that s a working glitch the government must, and can, fix, instead of using it to draw the curtains over the CBI s work. And the CBI is in a particularly bad place to make these appeals to keep its affairs private. Despite the 1997 Supreme Court judgment that explicitly reminded it of its autonomy, the agency has often been accused of being the government s obliging little helper, its investigations twist and turn depending on which way the political wind is blowing, rendering its word dangerously suspect.

8. Right to Privacy
The finance minister of the country, it transpires, felt worried enough about the possibility of his office having been bugged to write to the PM last year. And senior civil servants suspected that their phones had been tapped without authorisation. All this underlines the seriously alarming levels to which electronic surveillance has been taken in India . In this context, the possible introduction in the coming session of Parliament of a Right to Privacy Bill assumes great significance. Indeed, the entire political class must realise the grave danger unfettered, and not just unauthorised, phone tapping and surveillance poses and work towards enshrining the Right to Privacy as a fundamental right guaranteed by the Constitution.

The choice is clear: between lapsing into a de facto police state which wantonly spies on its citizens or having in place strict safeguards that govern the exigencies of sometimes having to monitor communications between certain individuals and groups. Reports suggest the proposed Bill is a step in the right direction, as it seeks to, among other things, protect citizens' personal communications, banking, legal, medical and other data and establish rules governing the gleaning and disposal of such data. Such protection is required from private snooping as well. One leading telecom operator revealed recently that it had tapped around 1.5 lakh telephones over a five-year period. Take, also, the host of e-surveillance projects or even the unique identity scheme, and the need to safeguard privacy, protect information leakages across silos and into the public domain becomes manifest. There is, of course, a wider debate about what information a state can seek and retain about its citizens. But the governing factors in breaching privacy should be the law and the greater common good - whether going after criminals/terrorists or detecting cases of economic fraud. Making the Right to Privacy a fundamental right would also be in tandem with the Supreme Court's practice of reading the Right to Privacy as part of the Right to Protection of Life and Personal Liberty (Article 21 of the Constitution).

9. CAG s mandate
As auditor to a nation whose institutions of oversight are weak and underdeveloped, the Comptroller and Auditor General of India is more than just the keeper of our national accounts. It is, in many ways, a conscience-keeper and a watchdog, which may not bite but can bark and warn ordinary citizens that something is amiss in the wider affairs of state. Like the Election Commission and the Supreme Court, the CAG has managed to protect its integrity and independence despite pressure from various arms of the state. If conducted freely and fairly, a robust audit can serve as a catalyst for corrective action. The CAG's report on Bofors in 1989 had major political consequences. Its explosive 2010 report on the allocation of 2G spectrum led to the filing of criminal charges against politicians, bureaucrats, and businessmen. Other reports may have had a less dramatic political impact but they have been equally useful. The CAG's observations may be politically embarrassing to the government but they clearly contribute to the public good. Democratic India must ensure that the government takes the work of this constitutionally sanctioned institution very seriously and removes the obstacles placed in the path of a more effective and efficient audit process. Aware of the limitations of its mandate, the CAG has asked the United Progressive Alliance government to make three broad amendments in the 1971 Audit Act, which governs the functioning of the audit authorities. The first amendment is intended to ensure that government departments reply to audit enquiries in 30 days rather than in the open-ended manner as now. Secondly, the CAG wants the statute to stipulate a clear timeframe for the tabling of completed audit reports on the floor of the relevant legislature. The Act, as it stands today, gives the Central and State governments wide latitude in this regard and it is hardly surprising that this freedom has been abused to delay making public the audit reports that contain embarrassing observations. The third set of proposed amendments is aimed at bringing the CAG's legal mandate up to speed with the changes that have taken place in the way public money is spent. Since the 1971 Act was passed, the 73rd and 74th amendments to the Constitution have been adopted, adding a layer of decentralised governance and hence expenditure management to the institutions of the state. Liberalisation has meant public money is increasingly utilised in joint ventures and public-private partnerships. Because of ambiguities in its mandate, the CAG feels unable adequately to audit this vast area of public economic activity. The government should deal with the call for a modernised Audit Act proactively.


Bureaucrats as regulators

Law Minister Veerappa Moily is spot on when he says government should stop appointing retired bureaucrats as regulators. Where he is wrong is in suggesting regulators be appointed from among serving bureaucrats instead. Far

from being an improvement over the existing state of affairs where regulators are, almost to a man (there is no woman as yet!), retired bureaucrats, his solution would only make matters worse. Retired bureaucrats at least have a semblance of independence; serving officials do not. They are far more likely to follow the diktat of the government of the day. This can be particularly damaging in sectors where the government is also a player, as in telecom, airlines, banking, insurance etc where government companies compete with private players and the field can and often is skewed. The argument that serving officials are likely to be more accountable does not wash. Regulators should be accountable, not to the government of the day but to society at large, and that can happen only when they are selected through a rigorous process that places a premium on merit and competence. One could argue that, ideally civil servants, too, owe their allegiance to the country and the Constitution, not to their mantri. But that is not how it works in real life. Perhaps it is difficult for civil servants to shed habits acquired over years of acquiescence, honourable exceptions only proving the rule. Moreover, like Caesar's wife, regulators must not only be above suspicion but also be seen to be above suspicion. The sine qua non for that is an appointment mechanism that ensures independence. Good regulation requires an in-depth understanding of the sector which few bureaucrats (understandably) possess. Contrast the position in India with the US where regulators are usually former market players who know the ins and outs of the game and their selection has to be confirmed by the Senate . This kills two birds with one stone. It ensures the best man is appointed and additionally, removes any fear of partisanship. This is what we should aspire to emulate.



India s regulators have taken two decisions that deserve to be applauded. In the first, the Securities and Exchange Board of India, or Sebi, cracked down on two companies of the Sahara group. The two housing-sector companies had raised Rs 4,800 crore through the markets; Sebi directed the companies to repay that money, and disbarred its directors, including group chairman Subrata Roy, from associating themselves with any public company that would raise money from the markets till the repayments were made. Then the Competition Commission of India fined the National Stock Exchange, or NSE, Rs 55.5 crore 5 per cent of its average turnover for three years for abusing its dominant market position, in particular to squeeze out rival exchange MCX. These are exemplary orders, in that they have both taken on powerful insiders. The Sahara group has considerable political clout; and yet, faced with toughness from Sebi, there has been little dissent; the ministry of corporate affairs, in fact, went so far as to issue a statement that it did not intend to intervene. The NSE, too, represents those with considerable clout, being an often-quoted example of the gains of liberalisation; and, even so, it has been shown that it is subject to regulatory control. The courts are now examining both disputes. Clearly, competent, independent, emboldened regulators are at work to monitor 21st century capitalism. Creating a restrictive framework of laws stifles innovation and growth. Nor can faith in the abilities of ex-ceptional individuals be the foundation of a long-term solution. India s growth requires it to construct and empower a stable framework of credible regulatory agencies. The modern economy works on trust; and it can, at its worst, lead to crony capitalism. There is no way to root out that problem unless you have strong institutions overseeing market transactions. And that applies to the political-economic domain, too. The Election Commission has shown what a power an independent, credible institution can become. The CAG, too, has demonstrated its autonomy recently. Such examples are, however, too few. The petrochemicals sector, always at risk from cronyism, is not yet properly regulated. An approach paper from the Planning Commission earlier this year that laid out proposed regulatory reform is a good way to start. India s economy and politics are already complex, and are growing more complex still. There are no quick fixes, no short cuts to ensuring their continued health; no police-state interventions will work. But the expansion of independent, depoliticized regulation will.


Copyright Amendment Bill 2010

The Copyright (Amendment) Bill 2010, approved by the Union Cabinet on December 24, 2009, and introduced in the Rajya Sabha on April 19, 2010, sparked great controversy for a number of reasons. First, in an unusual departure from the British legal tradition, inspired by French and German law, the Bill proposes guaranteed royalties for lyricists/composers for the commercial exploitation of their songs. Anticipating that these new rights will force producers to share 50 per cent of royalties with lyricists and composers, these proposals were simultaneously welcomed by the former and condemned by the film industry. Second, the Bill introduces the parallel importation of books in accordance with Article 6 of the Trade Related Intellectual Property Rights (TRIPS) Agreement a provision intended to provide readers in developing countries with books at cheaper prices but which, ironically, in India has been heralded by publishers as the death of books or at least the death of Indian publishing. Section 2(m) of the Copyright Act, 1957 defines the expression infringing copy as a reproduction of a literary work. The Bill proposes to add the following proviso: provided that a copy of a work published in any country outside India with the permission of the author of the work and imported from that country into India shall not be deemed to be an infringing copy. The impact of this proviso is as follows. Currently, an Indian publisher has to enter into a license agreement with the owner of the Indian copyright in a foreign work (usually the foreign publisher) which authorises him to publish the work in India. If the proviso is added to section 2(m), the Indian publisher can buy the book abroad and freely import it and re-sell it in India without obtaining a license from the owner of the Indian copyright in the work a practice called parallel importation. It is important to note that the book still has to be legally purchased from the foreign publisher and re-sold in India and cannot just be illegally copied or imported into India. Allowing parallel importation only liberalises the distribution of books after the first sale of the work and does not affect the copyright holder's exclusive right to make the first sale of the work. Parallel importation takes into the international context the first sale doctrine in copyright law which provides that, after the first sale of the work, the copyright is exhausted and the copyright owner cannot prevent re-sale of the work. Indian publishers oppose allowing parallel importation of books on the grounds that foreign publishers will stop licensing cheap Indian editions of their work to Indian publishers leading to rise in book prices in India. Further, if licensing ends, Indian publishers will have no incentive to invest in the marketing and promotion of books. In its report on the Copyright Amendment Bill 2010, the Department-Related Parliamentary Standing Committee on Human Resource Development disagreed and found that the present practice of publishing books under a territorial license results in very high prices of books and the low priced books are confined to old editions. However, notably, no empirical evidence was discussed by the Parliamentary Standing Committee in its Report before arriving at this conclusion. If it is true that the cheap Indian editions are limited to outdated works, then clearly the Parliamentary Standing Committee was correct in recommending the introduction of parallel imports and Indian publishers are only decrying the loss of their comfortable license raj and the introduction of competition through parallel imports. Copyright law While the foregoing controversies have attracted a lot of press, little attention has been paid to the fact that the Bill also seeks to modernise copyright law in view of the challenges raised by the new digital environment and the internet which has been described by the World Intellectual Property Organisation (WIPO) as the world's biggest copy machine. While the older technologies of photocopying and taping were expensive, time-consuming and produced copies of lower quality than the original, the internet enables one to make instantaneous copies of the same quality. Earlier, copies had to be individually faxed or couriered to each recipient. Today, an unlimited number of copies can be distributed instantaneously around the world with the click of a mouse. Copyright law, therefore, has to rise to the challenge of how to protect the rights of authors of works published on the internet.

According to the Bill, the answer lies in the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT) which address the challenge posed to the protection of copyright arising from dissemination of works over the internet. Curiously, even though India is not a signatory to either of these treaties which entered into force in 2002 and also refused WIPO's call to sign the treaties in July 2008, the Bill seeks to conform Indian law to these Internet Treaties. The first legal principle enshrined in the WCT and the WPPT is that existing rights will continue to apply in the digital environment. In other words, copyright holders will continue to be protected by copyright when their works are published on the internet. This principle is implicit in section 14 of the existing Copyright Act while not expressly stated. The second legal principle of the WCT and WPPT is the anti-circumvention provisions which are intended to ensure that copyright holders can effectively use technology to protect their rights and to license their works online by, for example, using encryption technology, access control devices and copy control devices to protect their copyrighted works from cyber criminals hacking into passwords and illegally reproducing their works. The second prong of the anti-circumvention provisions in the WCT/WPPT requires countries to prohibit the deliberate alteration or deletion of electronic rights management information, that is, information which accompanies any protected material and which identifies the work, its creators, performer or owner and the terms and conditions for its use. The Bill seeks to introduce both of these two prongs of the anti-circumvention provisions into the Copyright Act through the new sections 64A and 65B. The new section 65A(1) provides that any person who circumvents an effective technological measure applied for the purpose of protecting any of the rights conferred by the Act with the intention of infringing such rights shall be punishable with imprisonment which may extend to two years and shall also be liable to fine. Interestingly, the Bill does not follow the approach of the Digital Millennium Copyright Act (DMCA) which incorporated the anti-circumvention provisions of the WCT into U.S. law in 1998 as it does not distinguish between technological measures which prevent unauthorised access to a copyrighted work and measures that prevent unauthorised copying of a copyrighted work. The DMCA only prohibits the circumvention of the access control measures and not the copy control measures because copying of a work may be fair use under appropriate circumstances. Moreover, the DMCA creates a civil right of action, in addition to criminal remedies, and any person injured by the circumvention of the technological measures intended to protect his rights can seek monetary damages against the offender in U.S. Federal Court. The Bill, however, fails to give copyright holders a right of action and provides only for criminal remedies. Encryption techniques The main objective of the proposed section 65A is to enable authors of copyrighted works to use encryption techniques in order to protect their copyrighted works against unauthorised dissemination on the internet. However, Indian law, in any case, severely restricts the use of encryption technology by providing that DoT approval is required for use of encryption levels higher than the outdated 40-key bit length. Today, 128-256-key bit length is required to protect communications from interception. In sum, the Copyright Amendment Bill 2010 bravely takes socially progressive steps intended to ensure that lyricists and composers get a fair share of royalties and that Indians will have access to recent editions of foreign works at reasonable prices. However, in order to modernise Indian copyright law, the Bill has to go beyond only copying the provisions of the WCT and WPPT and should incorporate the provisions necessary to ensure that authors have the access to encryption and other technological means to protect their works published on the internet from hacking and can enforce those rights in the courts.


Role of SGI

The solicitor general, Gopal Subramanium, has resigned because he was sidestepped, and another lawyer was chosen to represent the telecom minister, Kapil Sibal, in a public interest litigation petition. Subramanium claims his decision was prompted by the desire to preserve the dignity of his office. The solicitor general is the second highest law officer in the country, after the attorney general. The English, Scottish, US and Canadian models all place different emphases on the law officers functions, but the core remains legal advice and representation to the government. And certainly, on that count, there is a clear disconnect between the government and its law officers whether it was the 2G cases, the CVC confusion, the black money or Salwa Judum judgments, the government has struggled and failed to make a convincing case for its actions. These cases have consequences not just of a political nature for the Central government. Many of these cases could also have an impact on the essential separation of powers laid out in our Constitution and on the manner in which internal security is handled. Therefore, the anarchy that the law ministry is presiding over requires the urgent attention of the prime minister. Recall the moral dilemma over the CVC s appointment. There was a striking lack of clarity on the principles involved, the documents presented were incomplete and failed to mention details of a case pending in the Kerala high court in short, it exposed the perfunctoriness of the way the government intended to fill an statutory post. The error was inflated in court by the shoddy defence of its actions. Later, the government tangled with the Supreme Court on the choice of public prosecutor in the 2G cases. In the black money case, the government capitulated to the court s early assessment that it was not capable of handling the investigation and repatriation of the money, and that a special investigative team appointed by the court was necessary. In another demonstration of this laxity, only one of its law officers was present to appear for the government during most of the recent summer holidays, who presented over 150 opinions to the government in roughly two weeks. These examples only serve to expose the larger abdication of his brief by the Union law minster. Never before have law officers in this country been drawn into so much controversy, or the government looked so adrift in the court.


SIT on Black Money

Since the time of Dadabhai Naoroji, Indians have always been captivated by the idea that our national wealth is slowly being drained abroad. That is why the Supreme Court's decision to set up a Special Investigation Team to ensure the return of money stashed abroad will be widely welcomed. What happens to the ill-gotten gains stashed at home, however, is anybody's guess. Black money is generated by the desire to evade taxes and hide assets disproportionate to known sources of income but populist political discourse on the subject has paid scant attention to this dynamic. Understandably, the focus is on the more emotional but hard to quantify problem of illegal bank deposits abroad. Upset by the slow progress made by the government's High Level Committee on the return of black money, the Supreme Court has now justly decided that its work must be supervised. To the extent political considerations are undermining the fight against black money, the SIT could act as a welcome antidote. But the court may also wish to frame the problem more comprehensively. Black money, after all, refers to the sum total of unaccounted income, and not just the funds spirited away to Switzerland, Lichtenstein, or some other foreign safe haven. The SIT must identify the legal and diplomatic tools the government can use to pierce this veil of secrecy. But unless it comes to grips with the overall pathology of black money, the political economy of India is likely to remain vulnerable to corruption. In proceeding against unaccounted money, the judiciary which scores high in public esteem must push for urgent and far-reaching reforms in the way the Indian property market functions. Corruption in government contracts and licensing may generate large individual chunks of black money but for sheer overall volume, the top culprit is property. Every day, property transactions up and down the country add to the national stock of unaccounted money. Simply put, buyers and sellers collude in under-reporting the true value of the transaction. Usually, more than half the true sale price is paid in cash, depriving the state of capital gains tax and stamp duty. The cash received is often recycled back into

the property market, where the returns are extremely high. What this means is that the focus of public activism, political outrage, and judicial concern on black money ought to be as much inward as it is westward. Seizing the moment, the SIT can and must devise a way to bring our wealth back from abroad. But if it can also push for simple reforms in the property market to clean up transactions, it could make a huge contribution towards ending the problem of black money.

1. IMF & Capital Flows
The International Monetary Fund, or IMF, has historically been hawkish on capital controls. Countries that use them, the IMF worries, wind up artificially undervaluing their currencies. In the Indian case, too, most economists have long argued against harsh capital controls; but, often, a concern for exporters and attempts to use the value of the rupee as a variable in managing trade policy have factored into decision-making. For a long time, these economists had the IMF on their side. But the IMF has performed something of an about-turn. Unprecedentedly loose monetary policy in the West post-crisis has caused an enormous amount of money to slosh around the international financial system; much of that has headed off in search of higher returns in emerging economies. In response, many of them, such as Brazil, have imposed controls, like special tariffs on monetary inflows. The IMF, challenged by this new environment, has now released a new policy framework, which reverses its decades-old advice. The new framework acknowledges that, under some circumstances, capital controls might be the right thing to introduce: particularly if the influx of money is obviously caused by temporary or cyclical factors. The Indian monetary authority has been quick to pick up on this. Speaking at the 60th anniversary of the central bank of Sri Lanka, the governor of India s Reserve Bank, D. Subbarao, said that it is now broadly accepted that there could be circumstances in which capital controls can be a legitimate component of the policy response to surges in capital flows . There is much sense to a more nuanced approach to capital controls. But the larger argument which has been made, particularly in the Indian context, remains valid, regardless of the IMF s apparent U-turn. India needs to ensure that the investment coming in is long-term, and not driven by short-term needs; but those are frequently hard to tease apart, and the methods used to do so may backfire. The IMF s prescription that temporary and cyclical factors could require capital controls means that macro-prudential policy, not trade policy, should dictate capital controls. Fortunately, the RBI also seems to be aware of this. Subbarao said that what is needed is keeping exchange rates aligned to economic fundamentals, and an agreement that currency interventions should be resorted to not as an instrument of trade policy but only to manage disruptions to macroeconomic stability . Not all the IMF s prescriptions are immediately relevant for us.

2. Unemployment
There is unanimous agreement that India needs some serious alchemy, to make sure that its swelling workforce is up to the job. The preliminary census findings revealed that we have no time to waste there is a sea of impatient young people moving towards the employment market, and India needs to make sure that it responds now, to make sure its much talked-up demographic dividend doesn t double back on it. The late C.K. Prahalad and the CII, in their India@75 vision, suggested that by 2022, India would need a 500 million-strong trained workforce to fulfil its promise. Unemployment is not as challenging a problem as unemployability despite the large numbers of those seeking jobs, most of them do not have the skills required to fill the jobs available. Supply and demand are still spinning in different orbits, and jobs that require even the most basic specialisation remain unfilled. Only 2 per cent of the country s workforce has had any skills training (compared to 96 per cent in South Korea, 75 per cent in Germany, 80 per cent in

Japan and 68 per cent in the United Kingdom). We have industrial training institutes and skilling centres, but they remain cramped spaces, serving only a fraction of the new entrants to the job market. However, it is heartening that both government and private sector are pouring efforts into priming our workforce. The prime minister had set up a three-tier structure, helmed by the National Council for Skill Development, a coordination board at the Planning Commission level and a National Skill Development Corporation, to catalyse the private sector, with corpus funds provided by the government. Corporate India has also sensed immense opportunity in the skilling business and gone full-tilt, with or without government showing the way. Ultimately, industry-led training is the only way to get our workforce up to speed, to make sure that the training fills some tangible needs. For instance, in areas like construction, information technology, hospitality, or the auto industry, companies need to identify their needs and train staff to fit them. The nature of these needs shifts, and in order to have a self-directed, agile workforce capable of meeting the market s requirements, private-sector intervention is essential. Now, as new companies emerge, trying to match needs and ready job seekers for jobs, more power to them.

RBI Governor D. Subbarao has, for the first time, explicitly and openly spoken against the government setting up its own Debt Management Office (DMO). The world over when central banks have modernised and moved their focus to monetary policy, they have got rid of conflicting objectives and additional responsibilities. And the government has proposed to set up its own DMO which would minimise the cost of its borrowing, go about it professionally, and do so without forcing banks to buy government securities in the statutory liquidity ratio environment. In his budget speech of 2011-12 the finance minister announced that it would be accomplished this year. Yet it seems the RBI would like to retain this job, regardless of whether this is the best allocation of responsibilities for the country or not. This is especially disturbing in the present context. In the most recent credit policy, Subbarao had indicated that the RBI would conduct monetary policy with a focus on controlling inflation. The difficulty with the RBI s present framework is that there are conflicting objectives. So, should interest rates be raised with a view to having an impact of monetary policy on inflation when the government has large borrowings and an increase would raise interest expenditure of the government? The moment the RBI says that it opposes setting up an independent DMO, it says more about the RBI s priorities than raising the repo rate by 50 basis points does. It indicates that inflation control is not its top priority. In this scenario, it will be difficult for the RBI to change the public perception, as it tried to do with the credit policy announcement and the hawkish tone of the governor s speech. He suggested there should be a monetary policy committee structure and the RBI should have autonomy. In other countries, when this is so, it is part of giving the central bank a clear single mandate, often inflation-targeting, and then making it accountable for that mandate. Without accepting accountability, the RBI cannot realistically expect to be given autonomy. A public institution should be responsible to the people of India. A clear framework in which this system of accountability will work can pave the way for greater autonomy. However, today, the RBI has, barely a few days after its hawkish credit policy, quickly backed away from accepting responsibility for inflation and is back to fighting turf wars on the DMO. It is a pity, and it will unfortunately take credibility away from the RBI s credit policy announcements. A monetary policy committee cannot compensate for lack of credibility.

4. DMO (2)
It appears that the Debt Management Office being set up by the government may not only manage the debt of the Central and state governments but also be allowed to manage debt of both public and some private sector companies. This feature would be a welcome addition to the functions of the DMO. Among the concerns about the DMO proposed to be set up are the availability of human capital and skills required for the job. At present, the RBI s job is simple in the sense that it is the regulator of banks and can use moral suasion to make banks (especially public sector banks) buy government bonds. Further, since debt management for the government is not its only responsibility and keeping the

cost of debt low by timing the maturity and composition of the debt accurately is not something that it is held primarily accountable for, it is able to get by without requiring too much professional expertise. However, for a professional DMO, whose job is to ensure that the long-term debt costs for the government remain low, the capacity and skills of the team will need to be of extremely high quality. This will become even more important as India moves away from financial repression, embodied today in the high statutory liquidity ratio requirement of banks. The task of managing the government s debt, which is so big that there needs to be a full calendar of transparent and predictable auctions ahead, is different from that of smaller companies, whether public or private. In the latter case, the volume of the debt is likely to be big, but not as big as that of the government. DMOs, as in the UK, watch the pulse of the financial market and work closely with them to ensure the government s debt programme does not disrupt bond markets. The benefit from the DMO managing PSU and private debt in addition to government debt is thus two-fold. First, it helps PSUs use the DMO s professional expertise. Second, it increases the interaction between the DMO and financial markets, helping the DMO to function better. Taking a cue from DMOs in the UK and Sweden, the Indian DMO should plan to recruit openly to get the best expertise available in the market for the job. A mix of smart public servants with finance professionals may be required for genuinely carrying out a good job of managing the Indian government s huge debt.

5. IIP
The government s decision to move to a new index of industrial production (IIP) is welcome. Macroeconomic policymaking requires information about the behaviour of the economy. This requires good data. This is particularly true for monetary policy which is often expected to be used to finetune the economy. When there are signs of the economy growing too fast, or overheating, monetary policy is expected to address the issue. Good data is also essential for businesses making plans whichinvolve estimates of growth of demand and production in the economy. The current index is based on the industrial production basket of the Indian economy in 1993-94. It includes goods no longer in production such as typewriters, black and white televisions, loud speakers and VCRs. It excludes items like mobile phones and laptops. The weights given to items in the basket of goods produced, based on the 1993-94 GDP production data, are outdated. The coverage of the current index is also inadequate. These problems have made the series highly volatile. Month-to-month variations are sometimes impossibly large. A recent example has been a 100 per cent increase in the production of capital goods, which is almost impossible to achieve by many of the factories which were already seen to be operating at full capacity. The reason was found to be insulated rubber tubes whose production was reported to have jumped sharply. Such behaviour posed a dilemma for policy-makers. Should they have responded to sharp increases or declines in industrial output? Or, should they have ignored them as merely data problems? The new index seeks to correct these problems. It will have a more recent base year and will use the 2004-05 production basket for assigning weights. It will also improve both geographical and product coverage. The move to a new series, with the CSO also promising to provide historical data based on the new index, will be useful to properly analyse trends and cyclical behaviour in the economy. Hopefully, the new series will show less volatility, which will be one sign of the health of the index and improved data collection methods. The new index is timely as the economy, especially investment, is seen to be slowing down. The current 1993-94 index appeared to be most outdated for production in the capital goods industry, which is a proxy for investment activity in the economy.

6. IIP (ET)
The revamped, updated index of industrial production ( IIP )), with 2004-05 as base year, reveals a more upbeat growth trend than hitherto estimated by the old 1993-94-base series. The latest figures show that for April 2011, the index as per the new series has risen by 6.3% over the same period last year. Going by the old series, with its dated sectoral weightages (reflecting the industrial scenario then) and limited number of goods, growth in April would have amounted

to a poor 4.4%. The revised figure points to the vital need to regularly update the industrial index, preferably every five years. This will better reveal ground realities, in what is a fast-growing economy undergoing rapid structural change. Also, for April-March 2010-11, the new series shows a strong 8.2% industrial growth over the previous fiscal. Further, disaggregated figures for April show continuing sluggishness in the mining sector, which has 14.2% weightage in the industrial economy, with growth a lacklustre 2.2%. Policy dithering in mining is clearly reducing growth. As for manufacturing (weightage 75.5%) growth for the month added up to 6.9%, while electricity output (weight 10.3%) grew 6.4%. Overall, industrial growth seems less than buoyant. It calls for proactive policy to rev up production. Use-based data for April (new series) do show continuing strong performance in the capital goods segment, an indicator of investment demand, with growth for the month (over previous April) estimated at 14.5%. For last fiscal as a whole, capital goods growth was a solid 15%. Additionally, the new figures suggest broad-based growth in capital goods, with the earlier emphasis mostly on power-related segments like boilers, turbines and heat exchangers now including textile, plastic and earth-moving machinery. Note that as per the old industrial index, capital goods output would have added up to a lowly 2.5% for April, with growth for last fiscal not even touching double digits. However, under the new series the growth in consumer goods output (with almost 30% weightage) remains modest at 2.9%. High inflation seems to be hitting the consumption of both durable and non-durable goods.

7. GST
The deadline for implementation of the goods and services tax is being pushed even further. The GST has been delayed because of slow progress in arriving at a consensus. But the fact that India has a federal structure should be its strength and not its weakness. Discussions in the empowered committee have continued for many years without yielding a consensus. Today there are few champions of the tax reform. The Central government must fill this gap by taking leadership. At the same time, it is important for the opposition to play a constructive role. The idea of the GST was mooted during the NDA government. The BJP should show some seriousness, especially since it has cited no principled opposition to it. In the current environment, when reforms have come to almost a halt, the GST would be a big step forward. Once the GST is implemented, record-keeping, filing of tax forms and the corruption associated with the multiplicity of levies will be eliminated. The biggest benefit will be that of building India as a common market, where goods and services move freely across state boundaries. Finally, the GST will make possible the full elimination of customs duties. These features will raise productivity, reduce distortions and increase the rate of GDP growth. Most OECD countries have done away with the large number of small and distortionary taxes that we still continue to impose. The first milestone that the finance ministry needs to target is a well-functioning Central GST , which combines the CENVAT and the Central Service Tax into a single IT system on the lines of the Tax Information Network (TIN) which has worked so well for income tax. While it is foreseen that difficulties may arise with many state administrations trying to fight for turf in GST collection, the Central government must take the lead and push for an efficient administration. Each business should have to deal with a single administration and a single IT front end for the GST, rather than many tax administrations and many forms. The Centre must draw a roadmap for this. Further, the UPA must push states ruled by the Congress and its allies to back the GST. This will take the sting out of the opposition s resistance and avert the danger of having the GST delayed by years. Finally, with the current focus on black money, it would help to publicise the fact that the GST is an important element in the fight against tax evasion. It creates incentives to be part of the tax chain and get refunds.

8. Oil price rise (ET)

The Centre has belatedly raised retail prices marginally of diesel, cooking gas and kerosene, after a whole year of inaction even as crude prices kept rising. This, and the cuts in duties on crude and products, helps the oil companies, but

fall short of much needed systemic reform. There is no move yet again to decontrol prices of diesel, the most used fuel, never mind the inprinciple okay some time ago for oil companies to revise retail prices on their own. It is sensible that oil marketers now willy-nilly get to revise petrol prices. However, after the latest revision for diesel, the price differential vis-avis petrol has further risen, which distorts demand, for example, favouring cars that run on diesel. And despite the long-overdue increase in the prices of the trio of petroproducts, the estimated under-recoveries in oil, the difference between the cost price and realised price of petrogoods, would nevertheless reportedly add up to Rs 1,20,000 crore this fiscal alone. The massive imbalance underscores the need for purposeful reform in oil, with real scope for competitive, market-determined prices rather than sporadic, politicised price revisions that leave an inefficient, opaque oil marketing structure intact. In tandem, the customs duty on crude has been reduced from 5% to nil, and that on petrol and diesel brought down to 2.5% from 7.5%. It would have made more sense to unify the rates for crude and refined products at 1.5-2%. The state governments do need to bring down and rationalise local levies on oil products. After all, in a regime of ad valorem duties on petro-products, runaway prices do tend to disproportionately rev up indirect levies. Additionally, excise on diesel has been almost halved. But the special excise on petrol remains anomalously in place. Abroad, the relative price differential is minimal. The cooking gas (LPG) price per cylinder goes up by Rs 50, to about Rs 395, and subsidised kerosene (SKO) by Rs 2/litre. But LPG prices are already double ours in the immediate neighbourhood, and SKO is heavily used as adulterant. The express need is for comprehensive subsidy overhaul for both the household fuels.

9. SEBI-KYC norms (ET)

Securities and Exchange Board of India (Sebi) chairman U K Sinha plans to have a single know-yourcustomer (KYC) clearance for all capital market functions. This is welcome. A single identity proof will make investing hassle-free for investors, due diligence easier for the regulator and boost capital market transactions. It will enable all the market intermediaries to have access to a common data base, which is not the case now. KYC norms are meant to ensure that stock markets, banks or insurance companies as not used as channels to route funds that are not kosher. However, it is unfair to make an investor produce certificates each time she opens an account with a stockbroker or walks into a new fund company. A single identity proof will eliminate such duplication of effort and also save back-office costs for intermediaries. It would be akin to the government's unique identity number for citizens. Earlier, Sebi had made it compulsory for investors - with transactions of over Rs 1 lakh - to secure a Market Participation Identification Number, but it was scrapped in 2007. A single identity proof is an extension of MAPIN. This calls for evolving uniform KYC norms for all entities regulated by Sebi. Sebi's move to incentivise mutual fund distributors is also sound. This would boost sales that dipped after the regulator scrapped entry loads on mutual funds. Distribution of financial products is a distinct activity. Incentives to market these products, without making them too expensive for investors, are in order. Today, the new pension scheme (NPS), that offers superior returns, is tottering due to a faulty marketing model. The thin asset management fee prevents fund managers from marketing the scheme using their funds. There is also no incentive for the points of presence - banks that open NPS accounts for subscribers - and others, to enrol subscribers.

The government should offer to pay the NPS agents' commission as it does for the public provident fund (PPF) scheme. It can rope in the same agents who sell small savings for the NPS. This would be a more effective way to market the scheme than offering subsidy to NPS subscribers.


Merger of CBDT & CBEC

Law minister M Veerappa Moily's suggestion to merge the Central Board of Direct Taxes ( CBDT )) and Central Board of Excise and Customs (CBEC), the two wings responsible for tax collections by the central government, is sound. It will vastly improve the flow of information on taxpayers and enable a coordinated approach in tackling tax evasion. A merger is logical as the tax base direct and indirect tax collectors target is the same: companies pay central excise duty on manufactured goods; states charge value added tax (VAT) on the purchase of these goods and corporate tax is paid on the profits generated from the sale of these goods. A unified goods and services tax (GST) will further strengthen these linkages and also lead to a widening of the tax base. Robust IT infrastructure will ensure that audit trails of transactions are available without breaks. As taxpayers start filing invoice level returns, a common GST portal can analyse data for evasion and fraud. GST will enhance compliance in Direct Taxes as well. Taxpayer services would get a leg-up as a merger would mean extending the facility of a large tax payer unit to all taxpayers. A unified model is at work in the UK, following the merger of Inland Revenue with HM Customs and Revenue department. The single authority, that collects and administers direct and indirect taxes, makes creative use of information technology to track VAT defaulters. This example can be followed even ahead of implementing GST. The two boards were separated in 1964, keeping in view the differences in the nature of direct and indirect taxes and the administration of a plethora of tax rates. Tax reforms resulted in pruning of the tax slabs and moderation in tax rates. There is no rationale to continue with the current dispensation that suffers from the ills of a fragmented approach to policy-making. However, unification alone is not the answer to tackling evasion. Real estate transactions, a widely used medium to hide unaccounted money, should be brought under GST. A clean and transparent tax system, simple tax laws and moderate tax rates will curb evasion.


Inflation & RBI

The RBI has raised policy rates by an additional quarter of a percentage point, bringing the rate at which banks can borrow from the central bank to 7.5%. This is still significantly below the 9% effective before the financial crisis and below the rate of inflation, keeping real interest rates still in the negative territory. It is difficult for the central bank to ease off on restoring policy rates to where they were before the crisis when inflation continues unabated, and when a largish current account deficit indicates that the economy's appetite for goods and services is running ahead of domestic supply. So, the RBI is likely to raise policy rates even further in the coming quarters. Where would this leave growth? The simple reality is that neither growth nor even inflation is determined solely by domestic monetary policy . The government has to step in and take the corrective action that only it can take. It has to act at three levels: at the level of the G20, to initiate action on reining in global commodity prices as they ride a wave of gushing liquidity flowing out of developed economies; at the level of fiscal consolidation, to prevent government expenditure adding to excess demand in the system; and in terms of policy and governance to restore investor confidence and kick-start investment, particularly to remove the supply bottlenecks that feed inflation.

Fiscal consolidation and policy reassurance would converge in a long-awaited decision to deregulate diesel prices. It would help anchor inflation expectations as also free up for others the huge chunks of bank lending that oil companies corner at present, to make up for under-recoveries. If the government swiftly moves to shed dither and policy paralysis, the mood would change, definitely for the better. It could easily allow foreign direct investment in multi-brand retail, write off a fifth of the debt of all states that scrap restrictions on farmers' freedom to market their produce and permit workers to voluntarily shift their retirement savings from the moribund Employees' Provident Fund to the forward-looking New Pension System. The fields would bloom, and so would the markets. That would revive confidence.



The government is reportedly toying with amending the Fiscal Responsibility and Budget Management (FRBM) Act to reflect the current (changed) realities. While there is no doubt the original targets will have to reworked, if only because we are nowhere near achieving them and the end-date is over, there is no point laying down fresh targets if we do not intend to abide by them. Or are content to violate them at the slightest pretext! Neither UPA-I nor UPA-II has shown any abiding faith in fiscal discipline. The FRBM Act, 2003 (notified in July 2004) envisaged an annual 0.3 percentage point reduction in the fiscal deficit and a 0.5 percentage point reduction in the revenue deficit to bring the former down to 3% of GDP and the latter to nil by 2008-09. In reality, the fiscal deficit doubled to 6% of GDP during 2008-09, driven largely by the desire to distribute largesse on the eve of the 2009 general elections, and remains close to 5%. Meanwhile, the revenue deficit is nowhere near being eliminated. The government likes to pass off its disrespect for FRBM targets as fiscal stimulus necessitated by the financial crisis. But in truth, it was an electoral gambit that fortuitously doubled up as a timely stimulus. Remember, the government eased the tap on spending well before the crisis. Agreed, fiscal rules cannot be cast in stone. All governments require a free hand to deal with times of crises. However, such deviations must truly be exceptions to the rule. Adherence to targets must also be genuine, not contrived through ruses like off-Budget treatment of expenditure. This calls for much more than mere passing of legislation. It calls for commitment to the cause of fiscal discipline by the government and a willingness on the part of the Opposition to play a more constructive role than it has hitherto. The FRBM Act requires the government to justify its failure to achieve the specified targets. In practice, since the finance minister is seldom hauled over the coals by the Opposition for his failure to do so, the entire exercise is reduced to a farce. Unless that changes and the polity as a whole respects fiscal discipline, any amendment of the law will only be a waste of time.


Mongolia s Economy

India's economic gurus, now in hibernation somewhere deep inside Raisina Hill , should wake up and look at the world's latest poster-child of reform - Mongolia . Growth there is 10% and is expected to cross 20% by 2013. Mining is big business, but citizens of this democratic country have not started to fret about any adverse impact on the environment. Markets are up more than 25% this year, even after cooling off substantially. Overseas capital is rushing in. But the most remarkable thing that the Mongolian government is doing, is pursuing its own version of inclusive growth. In order to let citizens share in the boom, it has given away - yes, for free - 538 shares in state-owned mining giant Erdenes-Tavan Tolgoi to each Mongolian. Currently at price zero, there's surely a significant upside for people when the stock lists, in an IPO scheduled for later this year. Under Chengiz Khan, the Mongols fanned out to occupy much of Central Asia, Europe and China. China is back again in the crosshairs of the Mongols, but this time

as the main buyer of much of its mineral wealth, and the source of manufactured imports. At around $2,000, Mongolia's per capita income is relatively low. The government wants people to spend without worrying too much, so it recently gave $55 to each person to do what they want. It also sweetened the handout with a monthly stipend of $15 for everyone. India, which lacks for many things but not trained economists, has worked itself into a lather debating how to reform our creaking subsidy and food delivery system, and how to make cash transfers work. It's time to export some economists to Ulan Bator, and import some Mongol commonsense. The economists are welcome, of course, to suggest substituting members of the National Advisory Council for themselves.


FDI in retail

The government's move to free up foreign direct investment (FDI) in multi-brand retail, signalled by the support of an inter-ministerial group headed by chief economic advisor Kaushik Basu , is welcome. This committee was asked for ways in which inflation could be moderated, and the freeing up of overseas investment in retail was one of its suggestions. Today, it's estimated that about 40% of all farm products rot by the time they reach the final point of sale. Apart from the enormous waste that this generates, it creates upward pressure on food prices, hitting consumers hard, with no benefit to farmers. The lack of organised storage and transport chains is the main culprit behind these losses. Allowing FDI will not only bring financial capital into the market, it will also bring in new technologies for storage and transport. India today allows 51% FDI in single brand retail and 100% for wholesale. It's expected that FDI in multi-brand retail will also be capped at 51%. Actually, the government should remove these overseas investment caps because they have no function apart from generating rents for local businessmen, and restricting the inflow of much-needed overseas capital. In the last year, India's FDI inflows have fallen off a cliff, partly because of the environment of scandal surrounding the government but also because our rules make it tough for foreign investors to do business here. For about a decade, the issue of retail FDI has been a political hot potato, opposed by the BJP as well as the Left parties, which argue from opposite ends of the political spectrum that overseas funds will kill small shopkeepers. Today, both parties are politically irrelevant at the Centre, leaving the government free to open up retail. But experience, rather than political dogma, shows that the local Indian shopkeeper can more than hold his own against organised retail. Even with big domestic players like Bharti, the Birlas, Tata and the Future group in the market, the share of organised retail in India is a tiny 4% of the total, opposed to 20% in China, 30% in Indonesia and 55% in Malaysia. Opening up retail is a good idea, removing FDI caps will be an even better one.



When many Budget promises remain on paper, the good news is the government has delivered on two of them: guidelines for infrastructure debt funds to attract overseas investment last week and now, the liberalised regime for overseas investment in the stock market. Foreign retail investors (as distinct from non-resident Indians) will now be allowed to invest up to a cumulative total of $10 billion a year in the stock market through mutual funds instead of having to come through foreign institutional investors. With this, the equity market, though not individual stocks, is now effectively open to investors, globally - although the notification talks of investment by qualified foreign investors, in practice, anyone who can satisfy KYC (know your customer) norms can invest in the market. Portfolio investment is an important channel through which countries attract overseas capital and to the extent it becomes easier for foreigners to invest in Indian stocks, the move should lead to more inflows to the stock market. Agreed, our stock market has been among the worst performers in the calendar year to date (-14.8% in dollar terms).

Nonetheless, the market prognosis for any economy that is expected to grow at 8-9% in the medium to long-term cannot but be positive; so any move that eases investment restrictions is welcome. Two caveats are in order, however. More foreign fund inflows could make the stock market even more dependent on foreign sentiment and increase volatility. The remedy is to bring more long-term domestic savings to the stock market. We need more action on this front. The other area of concern is the continuing lack of official resolve to enhance inflows of the more desirable kind of foreign investment, of the direct kind. The government should bite the bullet on liberalising foreign direct investment (FDI) in sectors like insurance and retail trade. While boosting portfolio flows and moving to liberalise FDI are not mutually exclusive choices, inaction on the latter front means enhancing the volatility of overall inflows even while forgoing the systemic gains FDI brings in.


Regulation: Global banking

Bank regulators everywhere are pressing ahead with an overhaul of bank regulations. Some bankers and policy-makers have opposed the proposed changes. They argue that we might end up with regulatory overkill. It is clear that getting the balance right will be a long and arduous process. One can only hope that, by the time the reforms come through, it is not too late. Some of what is to come is clear enough, while others are still in the realm of discussion. Banks will have to deal with higher capital requirements. Basel 3 has proposed core equity, that is, equity, reserves and surplus, for banks of 7%. This is only the minimum across the system. Over and above this, around 30 of the world's biggest banks, deemed 'systemically important', face additional core capital requirements of up to 2.5%. Higher capital is the one thing on which we have some certainty and yet this does not reassure everybody. There are some who believe that core equity should be even higher - say, 15-20%. In the recent financial crisis, it is estimated that US banks lost nearly 7% of their assets. If we accept that banks need a minimum of 8% tier I capital in order to run their business, that adds up to a tier I capital requirement of 15%. Banks argue that holding more equity will increase their cost of capital and will result in higher costs for their borrowers. That, in turn, will translate into lower economic growth. They are wrong. Higher equity will lower the perceived risk of banks and hence cause the cost of capital to fall. So, it is not bad for borrowers. It may be bad for bankers because it will cause return on equity to decline and this will mean lower bonuses for bankers. Is it bad for investors? Not really. The return on bank equity, under the present conditions, is fictional. Investors earn high returns on equity for a few years. Thereafter, when a bank fails or if a banking crisis strikes, the return is wiped out. It is better for investors to live with lower returns that are stable. Higher capital apart, there are some radical proposals on the table. The US is planning some form of the Volcker Rule which would restrict banks' involvement in proprietary trading. This is intended to effect a clear separation between retail banking and investment-banking type activities. Some have questioned whether the integration of retail and investment banking is indeed the cause of instability in banking. They point out that pure commercial banks, such as Northern Rock in the UK, were not exempt from failure. The Vickers Commission in the UK has proposed a compromise. Banks can have retail and investment banking activities. But retail activities, namely, deposits and small loans, will be 'ring-fenced' from both wholesale and investment banking through higher capital requirements, say, 10%. Other banking activities can have lower capital. The idea is that, when a bank fails, the retail bank is insulated by a large enough capital cushion.


IMF & Capital flows

Through the nineties, the IMF preached the virtues of free capital flows. It has learnt since, from the East Asian crisis as well as the recent sub-prime crisis. In 2010, the IMF made something of a volte face. It discarded its long-standing hostility to capital controls. It took the position that countries would be justified in responding to temporary surges in capital flows. The IMF is still learning. In recent months, it has come out with another staff paper and a policy framework that shows that its position is still evolving. The paper goes further than the one last year and argues that countries may be justified in responding to surges in flows that are of a permanent nature as well. The policy framework presents recommendations that arise from the paper. The IMF outlines a threestep approach to dealing with capital flows. The first step is to get macroeconomic policies right. Where the exchange rate is undervalued, it should be allowed to appreciate through increased inflows . Where forex reserves are not adequate, countries can respond to inflows by building up reserves and limiting the impact on liquidity through sterilisation. Fiscal policy should be tightened and monetary policy eased where there is scope for doing these. In other words, in dealing with capital flows, countries should first exhaust these macroeconomic options . Only then should other options be considered. The next line of defence is what the IMF calls prudential measures. These measures are of a long-term nature and may not be deployed only in response to a surge in capital flows. They could be measures aimed at increasing the capacity of an economy to absorb foreign inflows (e.g., strengthening the bond market). Or they could be measures that increase the resilience of financial institutions (e.g., higher capital adequacy norms or loan-to-value norms). They may not have an immediate impact on capital flows but they help limit the damage to the financial sector that can be done by volatile flows. Suppose the currency is undervalued , forex reserves are inadequate and monetary policy can be eased. In the face of a surge in capital flows, would prudential measures suffice? The answer is not obvious. You can do what you like to protect the financial sector but there is no getting away from the fact that the financial sector is exposed to the real sector. If there is rapid appreciation in currency, it could undermine the competitiveness of firms in the real sector and that is bound to impact on the financial sector. Moreover, the whole problem with capital flows is their fickleness. Capital that flows in easily can flow out just as easily. There is huge volatility in the exchange rate and this can undermine stability in the economy, including financial sector stability. If a large portion of flows bypasses the regulated financial sector, prudential measures may not suffice. Some resort to capital controls may become unavoidable. That would explain why many countries, such as Brazil and Peru in recent times, have thought it necessary to use controls to deal with capital flows. The IMF finds that 9 out of 30 countries it surveyed met the macroeconomic conditions it specifies for the use of capital control measures. Unfortunately, the jury is out on the effectiveness in the long-run of such controls. The IMF makes a distinction between capital control measures that distinguish based on residency and those do not. It indicates a preference for the latter. Then again, countries may have to choose between price-based bases (such as taxes on inflows) and administrative measures (such as outright bans on certain types of inflows). However, even well-designed capital controls may not work. Capital has a way of bypassing barriers. Moreover, there could be costs to the economy of erecting barriers. The IMF policy framework suggests that capital controls should be temporary and should be scaled back at the earliest opportunity . But this assumes that surges in capital flows are of a relatively short duration. It does not tell us how countries are to cope with sustained surges in capital.



The microfinance sector in India is battling for life ever since the political backlash suffered by it in October 2010 in Andhra Pradesh. The industry has survived by downsizing. However, as loans from commercial banks get repaid in the coming months and with no replenishments of funds in the offing, the downsizing is likely to accelerate. The net worth of the microfinance institutions (MFIs), built up painstakingly, is likely to erode soon, making them technically ineligible to borrow. The MFI clients at the bottom of the pyramid will be forced to go back to local moneylenders whose current

lending rate starts at 60% per annum. This is a time for introspection for all the stakeholders of the sector, including bankers. The loss of confidence in the MFIs in AP has ensured that the funding tap has been literally closed for this industry, which services 18 million unique low-income families, employs over 150,000 people - 50% of them undergraduates from low-income families -provides at-least one additional financial service apart from credit and has built credit history among the unbanked by inculcating financial discipline. Till recently, the sector has been financed largely by commercial banks in a winwin scenario - banks meeting their priority sector lending requirements while MFIs building sustainable businesses with community connect. The microfinance sector cannot survive without sensitive and responsible handling by bankers who have specialised knowledge of the sector and the underlying risks. Banks need to consider following key factors for a positive engagement with the sector which, even today, holds out the promise of financial inclusion for 60% of the unbanked Indian population: Catch the vision:Without vision, the microfinance industry can perish. MFIs should not be treated as the last-minute dumping ground of loans to claim the benefits of priority sector lending targets by banks. They need to be treated as what they are: priority. It is important to know that 75.6% of India's 1.2 billion people live below an internationally accepted benchmark of poverty, at $2 dollars, per day. This segment of the population has the potential to be the core customer base in the future for the banks even as the top 20% of the market is moving towards saturation. Credit appraisals: They cannot be outsourced. Rating reports are useful but are no substitute for own homework and market intelligence. Avoid herd mentality: Back MFIs lead by people, who are there for the long-haul. Herd mentality will not work. Bankers need to be bold to take independent view and stand apart, if required, with a select few co-lenders and investors, and go for the old fashioned long-term, steady growth approach. Build incentives: The incentives must be for deeper penetration in underserved areas, e.g., loan funds for remote rural districts should cost less to MFIs. This will help off-set their high operating costs to serve these areas while adhering to interest rate caps. The strict "no's" for a banker lending to the microfinance sector are the following: Sound growth alert: Fast growth can be a road leading to disaster and hence a red alert for any MFI projecting over 50% year-on-year gro wth, going forward. Growth is fine but where is this growth coming from is the key question. Geographical heat maps need to be created and studied. KYC norms: MFIs using agents for distribution of loans and collection practices must be a strict 'no'.


MFI Bill

The draft Micro Finance Institutions (Development and Regulation) Bill, meant to provide a legal framework to an otherwise unregulated sector in the Indian financial system, is an attempt to over-regulate and micro-manage the microfinance sector. The draft can at best be termed a mimic of legislation on usurious practices and moneylenders that is in place in several states of the country. Buzzwords such as systemically important replace exploitation , expropriation provides the modern setting to justify pervasive regulation. The draft bill adds a retrograde touch to the stalled process of financial sector reforms. The bill, if made law, will reduce competition in this industry as it hopes to regulate net margins. It will limit new entry into the industry. From the point of view of the customer, such regulation can push customers back to moneylenders who will now be outside these regulatory requirements. The present draft represents the microfinance industry as extended arms of banks, allowing for bank-like regulatory architecture for microfinance firms. This could potentially stall any progress in the microfinance industry. Capital adequacy requirements work for banks and not for non-deposit-taking financial institutions. In allowing a regulator to

set capital adequacy based on risk weights for assets and deployment of funds , the draft bill fails to recognise that not all microfinance companies are deposit-taking, and even if so, the extent of deposit-taking, by virtue of the business model itself, is limited to and well below the maturity mismatch possible in its balance sheet. Prudential norms for banks lending to microfinance companies are already in place. Financial regulation is required to contain systemic risk and protect consumers. Systemically important microfinance institutions cannot be defined in terms of the number of clients they cover, but whether the failure of the institution could bring down the financial system altogether and, consequently, impact the underlying real economy. This is not an issue the microfinance industry poses today. The real issue is that of customer protection. An issue of consumer protection does not require micro-management of the business enterprise, but an effective arrangement to ensure that contracting parties are doing so knowing fully the consequences of non-adherence. The government may do well by looking into consumer protection more carefully than stifling microfinancial innovation.


Economy forecast (Jul 2011)

Economic data from across the globe strongly suggest that the world economy has been slowing down recently. Factory output has declined perceptibly. In the advanced economies, the financial markets have been sliding and there is a distinct loss of confidence among investors. Consumer spending in the developed world has not picked up to the extent expected. Crude oil prices have been rising on supply uncertainties and the trend is likely to continue. High petroleum prices result in a transfer of wealth from cash-strapped consumers to producers who generally sit on their windfall earnings and do not contribute to global economic recovery. The twin natural disasters in Japan not only caused its GDP to fall sharply but seriously disrupted supply chains across the world, halting assembly lines in many countries. In the emerging economies such as India, inflation has been high and, as the authorities hike interest rates, the growth in output has slowed from its heady pace. On the other hand, recovery in the advanced economies has been anaemic, ominously so at a time when there is a serious talk of their governments withdrawing the stimulus packages. Taken together, global economic growth is seen to be at its weakest since recovery began two years ago. Yet while these are genuine concerns, there are good reasons to be optimistic. Previous fears of a double dip recession in the developed world did not materialise, and this time too, despite some hiccups, the world economy should recover in the latter part of the year. As the IMF's latest World Economic Outlook points out, the global economy has continued to grow at 4.3 per cent, the rate indicated in its earlier forecast for 2011-12. Although downside risks have increased significantly notably from the greater than anticipated weakness in the U.S. economy and the European debt crisis they have been compensated substantially by certain off-setting factors. If Japan's twin natural disasters were an unpleasant surprise, the strong performance of France and Germany has been hugely positive. As Japan's reconstruction gets under way, the rebound of its economy is forecast to offset any weaker growth in the U.S. Much will depend upon how the European debt crisis is resolved. The way the developed countries confront their major fiscal challenges will determine the course of recovery. Sadly, one of the fundamental tasks repairing the financial sector has so far not been fully addressed.

International issues
1. Syria crisis
Almost one month has passed since Syrians first took to the streets. Daraa has become the epicentre of unrest and in the latest wave of anti-government protests at least 40 died on Friday. President Bashar al-Assad has responded with cosmetic changes: increase in labour wages and the inclusion of Kurds as Syrian subjects. Alongside, he has authorised the use of force to quell unrest.

Syria is a complex mosaic of tribes; further denomination sees the country divided on sectarian lines Shi a, Sunni, Druze, Maronites and Kurds. Much of the anger on the streets is directed towards the Alawi minority clan that claims hegemony over Syria. It is their monopoly through the Baath Party that has denied Syrians access to coveted positions in politics, military and business. This is the Syria that Bashar al-Assad inherited from his father Hafez not much has changed in the five-decade-long Assad rule. It was hoped that Western-educated Bashar would usher in reform; in fact, a small period of openness was seen during his first year. However, the path to reform, the Damascus Spring, was aborted and the draconian Emergency Law was used to jail political activists. It is this law that ordinary Syrians are chanting against. Similarities with Tunisia and Egypt do exist in Syria. There is rampant unemployment amongst the youth; political participation is close to zero. But Syria is also different: the state and the army are almost indistinguishable. It was the older Assad that instituted members of the Alawi clan into the army, it is they who would lose out should the Assad dynasty be toppled. In the last real challenge to the government, in Hama, the older Assad authorised the killing of around 20,000 people in 1982 with the army at the forefront.

2. Yemen
Three months of protests, bloodshed and stalled peace deals in Yemen could soon come to a close as President Saleh readies to pen the agreement that will transfer power from his hands to the opposition. The terms of his exit ensure that actions committed during his 32-year, iron-fisted rule remain immune from prosecution. The challenge now falls upon the opposition the Joint Meeting Parties to ready for elections in 60 days. It is difficult to picture a Yemen without Saleh, but the groundwork to his departure has been worked upon since November 2005. It is then that the Joint Meeting Parties, a mosaic of political groups and factions composed of socialists, Nasserists, Zaydi intellectuals and Islamists formally entered the political arena. Now, during this transitory phase, it is they who will lead. But the political landscape they will preside over is volatile and wrought with tribal allegiances that could trump parliamentary politics. Saleh s policy has often been one of divide-and-rule, through which he has alienated both Yemen s north and its south. And, besides the growing presence of the al-Qaeda in the Arabian Peninsula (AQAP) franchise, Yemen faces an existentialist dilemma: the southern secessionist movement and the northern Houthi civil war. The JMP s first task will be to bring these warring factions to the table. They have in the past displayed willingness to talk to factions within the JMP. In his last speech, Saleh raised the prospect of a worsened Yemen upon his departure as the AQAP threat looms. Naturally AQAP s presence is worrying and resources that have been used to fight the insurgencies will need to be better appropriated. Under Saleh s rule, the east of the country, AQAP s sanctuary was virtually unpatrolled. This needs to change for Yemen s, and the world s, security.

3. US exit from Afghanistan

There were no surprises in US President Barack Obama s speech on Wednesday defining the scale and scope of American troop withdrawals from Afghanistan starting next month. In the new form of American political communication, the broad outline of the president s speech was shared with media outlets before it was formally delivered. That Obama was going to reject advice from the military and civilian leadership of the Pentagon for a small and slow withdrawal was known. What we have now are the specific numbers and a timeline from him for a significant and speedy reduction of the US military footprint in Afghanistan. Ten thousand troops will be out of Afghanistan this year and another 20,000 or so by September next year, thereby reversing the surge of 30,000 troops ordered by Obama in December 2009. He now promises to end the US combat role in Afghanistan by 2014. After that the security of Afghanistan will be the responsibility of its armed forces.

It is never easy for a president of the US, especially a Democrat like Obama, to be seen as walking away from a war. Obama s task had become somewhat easier thanks to the rapid evolution of the popular American perceptions of the war in Afghanistan. American weariness with the war, the longest in US history, has been palpable and set the stage for the president s decisions. While there have been many suggesting that Obama stay the course in Afghanistan until the country is stabilised, others have insisted that the US cannot prevail in Afghanistan and must look for the exits now. This division, which has enveloped both the Democrats and the Republicans, allowed Obama to occupy the middle ground and unveil what he called a responsible approach to ending the war in Afghanistan. The bold raid and the killing of Osama bin Laden deep inside Pakistan last month allowed Obama to claim that he is leaving Afghanistan from a position of strength and after achieving US goals there. As India ponders the consequences of Obama s decision, it can learn one immediate lesson. Unlike Obama, who set aside the recommendations of the military establishment and has taken political responsibility in ordering the surge as well as the exit, the UPA government has shown little political will to lead on defence issues. As the US retreats from Afghanistan over the next three and a half years and the new turbulence on our north-western frontiers begins to test India s strategic resolve, the UPA government can no longer duck major defence and national security decisions.

4. Doha Round (Jagdish Bhagwati)

The Doha Round, the first multilateral trade negotiation conducted under the auspices of the World Trade Organization, is at a critical stage. Now in their 10th year, with much negotiated, the talks need a final political nudge, lest Doha - and hence the WTO - disappear from the world's radar screen. Indeed, the danger is already real: when I was in Geneva a year ago and staying at the upscale Mandarin Oriental, I asked the concierge how far away the WTO was. He looked at me and asked: "Is the World Trade Organization a travel agency?" The threat of irrelevance is understood by leading statesmen, who have committed themselves to putting their shoulders to the wheel. British Prime Minister David Cameron , German Chancellor Angela Merkel and Indonesian President Susilo Bambang Yudhoyono have unequivocally endorsed the recommendation of the High-level Expert Group on Trade, which Peter Sutherland and I co-chair, that we ought to abandon the Doha Round if it is not concluded by the end of this year. Our idea was that, just as the prospect of an imminent hanging concentrates the mind, the deadline and prospective death of the Doha Round would galvanise the world's statesmen behind completing the last-mile of the marathon. (The analogy is all the more appropriate, given that WTO Director-General Pascal Lamy, who has brilliantly kept the process going, is a marathon runner). But even as these efforts are gathering momentum, Financial Times, which used to be a staunch supporter of multilateral free trade, dropped a cluster bomb on Doha, even congratulating itself that, in 2008 (when a ministerial meeting failed to reach closure), it "argued that leaders should admit the negotiations were dead." But if sceptics forget Mark Twain's famous response to a mistaken obituary -" The reports of my death are greatly exaggerated" - were the negotiators who have continued to work since then akin to Gogol's "dead souls?" FT recommends working out a Plan B here and now, which would sabotage the political efforts to conclude the Doha Round. Despite rhetorical bromides about requiring "ministers to unlearn ingrained habits and focus on substance, not rhetoric," and about "business associations engaging with the granular detail of what companies want" , this proposed Plan B would strengthen the bilateral and regional trade initiatives that have diverted energy and attention from Doha and the WTO. The irony here is that the proliferation of such preferential trade agreements (PTAs) is usually justified by pointing to the lack of progress in concluding the Doha talks. Never have cause and effect been so dramatically reversed in arguments over trade policy. It has become increasingly obvious that such PTAs are what I call "termites in the trading system" . Indeed, evidence is mounting that they foster harmful trade diversion by increasing discrimination against non-members through differential use of anti-dumping actions. Thus, recent work by economists Tom Prusa and Robert Teh has produced convincing evidence that antidumping filings decrease by 33-55 % within a PTA, whereas such filings increase against non-members by 10-30 %.

More importantly, PTAs are used by hegemonic powers to foist on weaker trading partners demands unrelated to trade but desired by domestic lobbies, at times in a markedly asymmetric way. Thus, Peru saw its labour legislation virtually rewritten by United States Congressmen indebted to American unions before the US-Peru PTA was concluded. Similarly, Claude Barfield has documented how Colombia has been intimidated into making it acrime (with prison terms of up to five years) to engage in acts that "undermine the right to organise and bargain collectively" . Colombia must also pass a law dictating prison terms for anyone who "offers a collective pact to non-union workers that is superior to terms for union workers" . Will the US administration start filing criminal charges against the governor of Wisconsin and the many other Republican leaders who are doing precisely what the Colombian government is being bullied into not doing? Such overreach is typical of what goes on in hegemon-led PTAs, unlike at the WTO, where stronger countries like India and Brazil cannot be so intimidated. The danger is that overreach will lead civil society and voters in democratic developing countries to react against selfserving displays of hegemonic might by jettisoning free trade itself, on the assumption that such openness is little more than neocolonialism.

5. Venezuela
Venezuela is a study in irony. Unlike its Latin American sister states, this spectacularly beautiful country has had a democratic order since 1958. As speculation mounted about the health of President Hugo Chavez, officially recuperating in Cuba after surgery, it was time to look back at the last 12 years, defined and determined by the man who is now a presence in absence. A saviour to Chavistas, detractors of this self-styled Pirate of the Caribbean would say Venezuelan democracy s end began in Chavez s 1998 victory a landslide that led to a socialist dictatorship that incrementally curtailed freedoms, nationalised the economy, shackled the private media. A darling of the international Left, Chavez quickly made himself a political foe of the US. But to understand the Chavistan phenomenon, one must look at the Venezuelan distributive gap, wherein the barrios had remained poor while the middle-class had seen both sides of the oil boom wealth from the 1970s price hike, poverty from the 1980s price crash. Chavez s Bolivarian revolution came as a redistributive blessing, with standards of living, health and education improving in the barrios. Yet, Chavez has been neither here nor there, a Castro-lite who was persistently challenged, and last year the opposition made big gains to rob him of his two-thirds majority, but whose ruling by decree has done more damage than merely polarise politics. Venezuelan irony lies also in the nationalising of oil production: aimed at reversing the Oil Curse , it became the oil curse itself. Killing the industry s ability to manage itself efficiently and make profits, diverting money to socialengineering projects, did help the poor. But as that money dried up and food shortages and high inflation hit, Chavez looked increasingly vulnerable and desperate. That s the vacuum uncompromising populism and one-man rule sooner or later lead to.

6. China s journey
What started off as a humble group of over 50 idealistic Chinese has now grown into an 80-million-strong political party, ruling over the world's most populous country. The first National Congress of the Communist Party of China (CPC) was held in Shanghai in July 1921. Thirteen delegates, including Mao Zedong, representing over 50 Party members nationwide, attended the meeting, which marked the founding of the CPC. After nine decades, China has become the world's second largest economy under the CPC's leadership. With foreign exchange reserves totalling $3 trillion, China has become the largest creditor of the United States. China also boasts the world's largest banking, petroleum and telecommunications companies by market value.

The CPC has brought this country, with a civilisation of over 5,000 years, back to the centre of the international arena. Nevertheless, the country is facing challenges. For instance, while the per capita GDP is still around the world's 100th, corruption is still rampant in some areas. Where will the CPC lead China to and what are the implications of China's development to the world? Organizational construction In September 1927, Mao Zedong decreed that every company in the revolutionary army should have a party branch, with a commissar to give political instruction to the company. This military rearrangement gave the CPC absolute control over its military forces and is considered to have had a profound impact on the Chinese revolution. Today, such party branches are not only established in the party's strongholds, like the army, governments, universities and State-owned enterprises, but also private enterprises and foreign-owned enterprises. An increasing number of foreign-owned enterprises in China's economically prosperous coastal cities are also forming their own party branches. For instance, Suzhou, a city in east China's Jiangsu Province, is home to more than 6,000 foreign-owned enterprises, over 1,000 of which have established their own party branches. The party constitution stipulates that primary Party organisations may be formed in enterprises, rural areas, government organs, schools, research institutes, communities, social organisations, companies of the People's Liberation Army and other basic units where there are at least three full Party members. By the end of 2010, the CPC had had over 3.892 million grassroots Party organisations, through which the CPC fulfils effective leadership to the country. Prof. Zheng Yongnian, director of East Asia Institute of the National University of Singapore, said that the successful ruling of the CPC lies in its strong mobilisation mechanism. For instance, China's success in holding Beijing Olympic Games and the Shanghai World Expo, as well as the efficient reconstruction in earthquake-affected areas could be attributed to the Party's strong mobilisation mechanism and its solid organisational system, said Zheng. Before the 90th anniversary of the CPC's founding, about one million copies of a new book on the history of the Communist Party of China (1949-1978) have been sold since being published on January 11. This year, a book, translated as Why and How the CPC works in China, compiled by Xie Chuntao, professor with the Party School of the CPC Central Committee, is fast becoming a bestseller. It tries to answer why the CPC can maintain vitality 90 years after its founding and more than 60 years after it came to power. A chapter explains why the Communist Parties in the former Soviet Union and East European countries lost their ruling status, while China has not and will not. Unlike other political powers, the CPC has never sought external expansion during its development and rise, preferring to focus on improving the country's domestic situation. To that end, one of the CPC's greatest successes has been its alleviation of poverty. The CPC has eliminated hunger for many people in China, ensuring the Party's long-term support from the Chinese people. China had 26.88 million people living below the country's poverty line in 2010, compared with 250 million living in absolute poverty in 1978. It is a great success, considering that 925 million people in the world still suffer from hunger. However, the Party now faces the challenge of ensuring that the country's citizens live relatively comfortable lives and achieve common prosperity.

Foreign big names in politics, business and academia are no stranger to podiums at cadre schools of the CPC, but as the country grows interdependent with the outside world, their previously occasional lectures have become a compulsory course in the curriculum. CPC cadres are also going abroad for studies. The year 2011 not only marks the 90th anniversary of the CPC's founding, but the 10th anniversary for China's entry into the World Trade Organisation (WTO). China's foreign trade soared after the WTO entry, providing momentum for its economic development. Presently, China is the world's largest exporter and second largest importer. Globalisation is an irreversible trend. China felt the pinch of the global financial crisis as well in year 2008. To address its impact and maintain the steady and relatively fast growth of the economy, China quickly adjusted its macroeconomic policies, putting in place a package plan to boost domestic demand and stimulate economic growth. As a result, China's economy in 2009 and 2010 maintained steady and relatively fast growth and contributed to the economic recovery of the region and the world. China is now facing challenges as well, such as transforming the economic development mode, bridging the yawning income gap, maintaining social stability and harmony. That will be new contributions to the world, if the challenges are overcome, said Zheng. On development Development is the absolute principle, late Chinese leader Deng Xiaoping said during his famous inspection tour of south China in 1992. The motto has been working and will still work. It is expected that under the leadership of CPC, China in future will seek more balanced development, or say scientific development in domestic issues, while continuing to seek peaceful development in international affairs. The country's planned economy worked for some time, but its flaws created obstacles for China's development. The mixed functions of government and enterprises, egalitarianism in distribution, and other problems resulted in low industrial efficiency, low agricultural output and stagnant living standards. China officially abolished grain coupons in 1993, a milestone in its shift from being a planned economy to being a market economy. The CPC explicitly stated that it would create a socialist market economy at its 14th National Congress in October 1992. Observers believe this reflected the CPC's flexibility and innovation at the time. In dogmatic views of communism, market economies are considered to be specific to capitalism. Even discussing market economics was taboo at one time. However, Deng, in his 1992 tour, said planned economies are not equivalent to socialism, because there is also planning under capitalism. Market economies are not equivalent to capitalism, because there are markets under socialism as well. Planning and marketing are both economic means. Deng, who is widely regarded as the chief architect of China's period of reform and opening-up, greatly boosted efforts for the reformation of China's economic system with his remarks. However, the creation of a market economy under China's existing socialist structure was an arduous task. A main feature of the country's socialist market economy is the joint impact of the government and the market itself. In socialist market economies, the government uses macro-level control mechanisms to restrain the spontaneity and blindness of the market. This feature allowed China to withstand the 1997 Asian financial crisis and the 2008 global financial crisis, Ding Yuanzhu, deputy director of the Department of Policy-Making Consultation of the Chinese Academy of Governance, said.

The creation of a socialist market economy had an incredible effect on the country's development. China's GDP ballooned from 2.4 trillion yuan in 1992 to 39.8 trillion yuan in 2010. China's international status and the living standard of its people improved accordingly. However, some economic experts have said that market-oriented reforms in some key areas have yet to be completed. They say that the CPC needs greater wisdom and a broader vision in order to allow the country to continue to develop in the face of complicated international situations. The root cause of some of the problems that China now faces is the inadequacy of market-based reforms, which has left systemic problems unsolved. It is important to improve the way these reforms are designed, including market system reforms, Ding said. Experts believe that the CPC has the ability to draw on collective wisdom in the face of challenges, adapt to changes and implement its decisions with efficiency. Despite the challenges facing it, the CPC will advance its reforms by using a practical, flexible and open-minded style of governance.

7. South Sudan challenges

On Saturday, the mood in Juba was euphoric. The city, the world s newest capital, was crammed with citizens of the hours-old Republic of South Sudan, dancing on the streets, waving the young country s flag. Outside the mausoleum of John Garang, the leader of the region s military resistance for decades till his death in 2005, delegates from all over the world assembled to see the first government sworn in including Indian Vice President Hamid Ansari. South Sudan s new president, Salva Kiir, was sworn in, as always wearing a broad-brimmed black cowboy hat; close at hand was Sudan s president, Omar al-Bashir, wanted for war crimes in The Hague, but present, swinging his trademark cane, to show that Khartoum had finally consented to the South s independence. The challenges ahead are awe-inspiring. South Sudan has been wracked by rebellion for decades; the new country of eight million has seen little development, and the civil war claimed over two-and-a-half million deaths. By one development indicator after another maternal mortality, school enrolment this is one of the least developed places on earth. Its unity is hard-won, and might vanish once the common adversary, the Arabic-speaking North, is removed. South Sudan, close to the cradle of humanity s evolution, is one of the most diverse places on earth: 200 ethnic groups and dozens of languages. What South Sudan has going for it is its resources. Specifically, oil. Oil-rich Abyei province continues to be disputed, but the rest of the country has productive wells, currently exploited by Canadian, Malaysian, French, Swedish and, of course, Chinese companies. The only way out for the oil, however, is pipelines through its northern neighbour, and Khartoum skims off half the profit. That will continue to be an irritant. Nevertheless, the oil revenue will need to be put to use carefully and quickly to work on the now peaceful country s development.

Foreign Relations
1. Tagore s gifts relations with Pak & B desh
Ties between India and Pakistan have never been easy, but have always been given a certain sort of attention. Hindustani poetry has been quoted back and forth, even perhaps especially during political interactions; singers move across the border, celebrated here and there; the nostalgia and affection that Punjabis on each side of the border have for the towns and villages of the other side informs and pushes efforts to bring the two nations closer. Oddly, with our other large neighbour, with whom even more Indians share a common, tightly held heritage, and with whom relations have improved rather than stagnated, little of this cultural sheen animates our interaction. There could be many reasons for this, but it is definitely true that Delhi s policy establishment s look westward rather than eastward is

driven not just by cold realist calculation, but partly by culture. It is necessary, perhaps, to inject into India-Bangladesh ties, too, a reminder of shared civilisational heritage. The productive meeting this week of India s and Bangladesh s culture secretaries, which resulted in a confirmation that Rabindranath Tagore s 150th birth anniversary would be commemorated this May in a series of joint programmes, is thus welcome. Tagore, the writer of the two countries anthems, an outspoken internationalist who is beloved in both nations, is the best starting point for reviving cultural exchanges. But this cannot be left to languish in boring sarkari cultural-ghetto hell. The schedule that has been released, for example, focuses on opening ceremonies in New Delhi and Dhaka; West Bengal could justifiably complain that it is being ignored. Even so, the energising of India s ties with Bangladesh is overdue. Bangladesh has a government that has demonstrated its willingness to engage India in various policy areas; politically, the rhetoric coming out of Dhaka is favourable, too. A friendly, close Bangladesh is vital for stability in India s northeast, and could provide an enormous boost to trade. But New Delhi has been unforgivably lazy in responding to Bangladeshi efforts. Perhaps a little cultural oil will help get the machinery of bilateral relations moving; and perhaps it will remind us, too, how important it is, how rewarding it would be, to get those relations on track.

2. India-China
China deserves credit for addressing two important issues that India had raised in recent months the question of stapled visas to Indian citizens living and working in Jammu and Kashmir and the mounting bilateral trade deficit in favour of Beijing. The signals from Wednesday s meeting between Prime Minister Manmohan Singh and Chinese President Hu Jintao on the margins of the BRICS summit at Sanya, Hainan are that Beijing is eager to find a way out. This welcome problem-solving culture in Sino-Indian relations has also been highlighted by the agreement in principle between the two leaders to establish a new forum to manage the long and contested border along the Great Himalayas. The message from Hainan is that the Chinese leadership is committed to arresting the recent political slide in bilateral ties with India. A series of Beijing s recent actions challenging India s territorial sovereignty culminated last year in Beijing s denial of a regular stamped visa to the commander-in-chief of India s northern armies, Lt Gen B.S. Jaswal. India decided to draw the line, suspend some high-level military exchanges and demand an immediate end to the Chinese practice of issuing stapled visas. During Prime Minister Wen Jiabao s visit to Delhi last December, the Indian leadership told him that Beijing s position on J&K was hostile and offensive. Beijing appears to have relented a little by agreeing to issue normal stamped visas to a broad-based Indian military delegation led by a major general from the Northern Command. This artful compromise does not mean China s tilt towards Islamabad in the Indo-Pak dispute over J&K has been fully reversed. What it does mean is that Beijing is ready to acknowledge India s concerns and deal with them. As Delhi persists in the effort to change Beijing s unacceptable policy on J&K, it must also make the best of the newly agreed Working Mechanism for Consultation and Coordination on border management. This forum should help resolve the many issues that crop up in the day-to-day management of the Sino-Indian border as well as facilitate more expansive trans-frontier cooperation. President Hu also appears to have addressed India s concerns on the growing trade deficit in favour of China $20 billion in 2010. India s exports are said to be rising faster than its imports from China in 2011 and Beijing is apparently willing to let Indian IT and pharma companies into its market. The good news from Sanya is that India s current approach to China, firm yet calm and rooted in realism, has a better chance of success than the earlier wild policy swings between romanticism and unreasonable suspicion.

3. India-Pak-Afghanistan (ET)
With admissions of being involved in talks with the Taliban coming from both the Afghanistan and United States governments, and with the latter now having announced a phased withdrawal of its troops, two important questions

arise. Will Pakistan continue to face international pressure to abandon its policy of using terror groups for strategic objectives? And what shape or form will the Taliban take if it is represented in the future regime in Kabul? New Delhi is one of the major stakeholders on both counts, and it must try to ensure that its interests and investments in Afghanistan are not sidelined during the process of political resolution. That would require India to continue with its assistance projects, even as it deepens ties with the Afghan army , and strengthens relations with Pashtun political groups. It is a tragedy that ethnic and tribal divisions have prevented the formation of a larger Afghan national legacy, and power in that country is likely to remain a matter of juggling those deep divisions. But one aspect New Delhi must underline is that Pakistan's policy of conflating Pashtun interests with those of the Taliban has been part of the problem. And India must do what it can by way of helping governance and development in Pashtun areas, even as strong ties with the Northern Alliance are maintained. That said, New Delhi should also try to engage Pakistan on the notion that Afghanistan doesn't necessarily have to be a terrain of mutual hostility. A stable Afghanistan, though it may sound utopian at present, can be the gateway to Central Asia for both countries. The core problem continues to be the sanctuary the Taliban find in Pakistan's border and tribal areas. As long as such havens remain, it will be impossible to achieve enduring peace and stability in Afghanistan and the wider region. On that count, despite the US' public stand, New Delhi should remember that US and Indian interests in Afghanistan converge only up to a point. So, while arguing for continuing international aid and presence in Afghanistan, India must also chart its own course. And one key component of that would be convincing Pashtun groups that India isn't inimical to their interests.

4. India-Pak-Afghanistan
The implementation of a new trade and transit agreement between Afghanistan and Pakistan, despite its limitations, should be welcome in India. The APTTA, replacing the old trade and transit agreement from 1965, was signed by the two sides in October 2010.The differences on how to implement it were finally resolved this month it came into force last Sunday. The agreement does not allow India to despatch goods to Afghanistan at the Wagah border in Punjab. But it lets Afghanistan export a little more freely to India. Afghan trucks can now travel all the way to Wagah. Pakistan gets similar rights through Afghanistan to deliver goods in Central Asia. Delhi has been keen on acquiring full overland transit rights through Wagah to access the Central Asian markets. By letting goods flow on its territory to and from India, Pakistan stands to benefit as a commercial bridge between India on the one hand and Afghanistan and Central Asia. This enlightened self-interest, however, has been trumped by the political opposition from the Pakistan Army. Overland transit has been projected as some kind of a favour for India and a threat to Pakistan. Sections of Pakistan s security establishment have insisted that there can be no transit for India until the dispute over Jammu & Kashmir is resolved. Beyond that extreme view, it is quite clear that India will get transit rights at Wagah only when bilateral relations improve significantly. For the moment, then, India will have to be satisfied with the half-measure that the APTTA is. From a practical perspective, India must make the best of what it has got. The ability to import at Wagah will allow India to deepen trade relations with Afghanistan. India is a major market for Afghan agricultural produce. Delhi must now step up its assitance to improve agricultural productivity in Afghanistan and consider duty free access to food products from Afghanistan. As Kabul begins to tap into its vast mineral wealth, Indian corporations can now bid for the mining projects in Afghanistan and export natural resources and/or refined products from there to India. Market Access

While India is considerable distance away from the ideal of a liberal three-way trade and transit arrangement with Pakistan and Afghanistan, Delhi must look ahead and welcome the plans announced by Kabul and Islamabad for greater economic integration between themselves, which could contribute to economic growth and stability of the troubled Pashtun lands across the Durand Line. In the joint statement issued last Saturday in Islamabad, Afghan President Hamid Karzai and his Pakistan counterpart Asif Ali Zardari emphasised the importance of building special economic and industrial zones on and across their Pashtun borderlands. They also called upon their friends and partners and on the international community as a whole to assist and support development and economic opportunities by providing immediate preferential market access to Afghanistan and Pakistan. On its part, India should be ready where possible to participate in the building of these zones, at least on the Afghan side. India must also announce, unilaterally, liberal market access to the goods produced in these zones. Such an approach has a merit of its own in nudging the Pashtuns away from fighting to productive economic activity. It could also, hopefully, help reduce Pakistan s misperceptions about India s role in Afghanistan. Rail Networks At their meeting Karzai and Zardari agreed to promote trans-border infrastructure across the Durand Line. The two leaders reported progress on building the expressway between Peshawar in northwestern Pakistan and Jalalabad in eastern Afghanistan. They also unveiled plans to extend the highway all the way to Herat in western Afghanistan. Kabul and Islamabad are also discussing plans to build a railway from Peshwar to Jalalabad. In the late 19th and early 20th century, Kabul prohibited rail links with its neighbours. Afghanistan s anti-railway policy was part of the strategy of a weak state to preserve its independence and autonomy from the colonial powers. As a result at the turn of the 21st century, Afghanistan had barely 25 km of railway line on its territory. Today as the land-locked Afghanistan seeks connectivity to transform itself, many of its neighbours Iran to the west, Turkmenistan and Uzbekistan in the north and Pakistan from the East are looking at extending their rail networks into the country. While Pakistan may block India s physical access to Afghanistan, it is in Delhi s long-term interest to promote trans-border connectivity in the lands beyond the Indus. Some day in the not too distant future, India should be able to connect its own transport infrastructure to that emerging in the Af-Pak region.

5. India-SCO (1)
As External Affairs Minister S.M. Krishna joins the special summit of the Shanghai Cooperation Organisation which is celebrating the tenth anniversary of its founding on Wednesday in Astana in Kazakhstan there is much hyperbole about the geopolitical transformation of Eurasia. For the orphans of the Cold War, the SCO led by China and Russia and including four Central Asian states Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan represents either their darkest fears or fondest hopes. For some in Europe and North America, the SCO is anti-West and anti-NATO and is readying to establish hegemony on the Asian landmass. For some outside the West, the SCO which has India, Pakistan, Iran and Mongolia as observers is the dream alliance that Asia failed to organise during the Cold War but could be turned into a reality now. For traditional geopolitical theorists, rising China has the potential to unite the heartland of Eurasia, end the centuriesold regional dominance by the Western maritime powers and make itself the pre-eminent nation in the world.

Much of this hype is rooted in the growing worldwide perception of an inevitable American decline and a relentless rise of China. The SCO summit also takes place amidst the US plans to downsize its military presence in Afghanistan starting next month and end its combat role there by 2014. The SCO summit is expected to consider Kabul s application to be admitted as an observer. Until now, Afghanistan has been attending the SCO deliberations as a guest. At the Astana summit, the SCO is also expected to open the door for full membership of India and Pakistan. Some SCO enthusiasts suggest that Delhi will soon have to make a geopolitical choice between the continental SinoRussian entente that beckons it from the north and the Asian maritime coalition led by the United States tempting it from the south. Amid the US retreat, the continentalists argue, India might be isolated in Afghanistan, Central Asia and beyond, if it does not line up behind China and Russia. This is similar to the advice that Pakistan has reportedly offered Afghanistan dump Washington, align with Beijing; forget NATO and look to SCO. But Beijing has reportedly cautioned Pakistani leaders against geopolitcal delusion and focus on mending fences with the US as well as its immediate neighbours, including India and Afghanistan. As it rises in the international system, India is under no pressure to make immediate judgments on the shifting balance of power between a rising China and a troubled United States, let alone choose between the crouching tiger and the crippled eagle . Like everyone else, India would hedge rather than tightly align with one or the other great power groupings. In any event, the coherence of the SCO and its anti-Western orientation are somewhat exaggerated. China and Russia, which form the dual core of the SCO, are not always on the same page in defining the strategic priorities of the organisation. Moscow cannot but be wary of the rising Chinese influence in Central Asian space that was once part of the Soviet Union. China and Russia might be interested in leveraging the SCO to improve their bargaining power with the United States, but the Central Asian Republics (CARs) have no problem seeing through this. Some of the CARs have been pretty good at extracting concessions from America in return for hosting US military bases and facilities. The Obama administration itself has taken a positive view of the SCO and on a recent visit to China, US assistant secretary of state for South and Central Asia, Robert Blake, has called for a comprehensive dialogue between Washington and the SCO. The US has indeed worked with Russia in developing the Northern Distribution Network, a road network in Eurasia, as an alternative to its current reliance on Pakistan for supplying international troops in Afghanistan. Washington has also urged China to take on a larger responsibility for stabilising Afghanistan. From a pragmatic perspective, the SCO is a useful vehicle for India in the pursuit of three important national security objectives. The first is about managing the post-American scenario in Afghanistan. While the US has the luxury of withdrawing from Afghanistan, Russia, the CARs, China and India remain vulnerable if negative forces fill the vacuum in Afghanistan. All neighbours of Afghanistan, barring Turkmenistan, are part of the SCO in one form or another. The SCO, then, could provide the regional framework that everyone now wants for the stabilisation of Afghanistan.

The second is about fighting what China calls the three evils separatism, religious extremism and terrorism. While China and India have long faced similar threats, Beijing has seemed reluctant to engage Delhi on these issues for fear of offending Islamabad s sensitivities. As the situation in Pakistan continues to deteriorate, India must explore the prospects of deeper regional security cooperation with China within the SCO framework. The third is the SCO s utility in promoting economic integration between Central Asia and India. The SCO s focus in its first decade has been primarily on counter-terrorism. At Astana, it could widen the agenda to include economic integration. Until now Delhi could not entice Pakistan to become the bridge between India on the one hand and Afghanistan and Central Asia on the other. Could the SCO do the trick? If the size of the Indian market provides the necessary economic pull, the SCO could provide the necessary political push in encouraging Pakistan to open its territory for Central Asian connectivity with India. An early agreement to build the TAPI (Turkmenistan, Afghanistan, Pakistan, India) natural gas pipeline, with the full participation of Russian and Chinese companies, could be the precursor for such an integration. The SCO may or may not achieve the many ambitious regional objectives it is setting for itself. But Krishna has every reason to arrive in Astana to push for a stronger partnership with the SCO.

6. India-SCO (2)
An entente comes with a dual import. It s good for some, bad for others. At least, that s been the received wisdom of alliances in the last century. Once Russia reasserted itself after its post-Cold War slump, and a rising China showed its ambitions, an Asian bloc was on the cards. With the perceived decline of the US, the six-member Shanghai Cooperation Organisation (SCO), in its 11th year now, was being viewed by sceptics as an anti-Western formation. Now, what could India have to do with a group that, its enthusiasts believe, may soon ask New Delhi to choose between itself and the US maritime coalition in the Indian Ocean? India is an observer at the SCO, hoping to be a member soon. But the SCO despite its strong criticism of the US missile shield in the just-concluded summit in Astana, Kazakhstan doesn t voice any specific anti-Western agenda, nor is there any pressure on India to choose. As a rising power, Delhi has no hurry but plenty of room for hedging. On the other hand, the SCO could change the India-Central Asia dynamic and improve Delhi s ties with Beijing. Its current three major concerns are all relevant for Delhi. First, the stability of Afghanistan, a special invitee in Astana. India, China, Russia and the Central Asian republics know the consequences of disruptive forces taking over after an eventual US withdrawal. Second, terrorism and internal conflict, wherein Delhi and Beijing have common interests. Third, connectivity. External Affairs Minister S.M. Krishna emphasised the need for reducing the transportation time for goods to and from Central Asia and cumbersome customs procedures. What s involved here is India s economic integration with Central Asia. Currently, India uses Chinese ports and land routes, losing a good two months, or a similarly tedious option in Iran. Given its economic depth and market-size, India should urge the SCO to encourage Pakistan to open its routes to India. Notwithstanding the unpredictability of the future, India has a lot to gain from a stronger, closer partnership with the SCO.

7. Pak-China post Osama

Pakistani Prime Minister Yousaf Raza Gilani s forthcoming trip to China is not just another visit from Islamabad to Beijing. It foregrounds the shift in the post-bin laden discourse engineered by Beijing to help Pakistan withstand the blows against its reputation and conduct. At a time when the international community is scrutinising Pakistan and raising unpleasant questions after Osama bin Laden s safe house was discovered in the genteel environs of Abbottabad, the one country that has come out overtly in Islamabad s (and Rawalpindi s) defence is China. China has declared not only its sympathy for Pakistan but also its displeasure with the US raid that killed bin Laden and purportedly violated Pakistan s sovereignty. Pakistan, Beijing specified, has sacrificed and suffered a lot in its efforts against terror. Therefore, when Gilani begins his four-day China visit on May 17, behind the conspicuous economic agreements and cooperation on civilian nuclear energy, the strategic implications of the trip are evident. For, this is not just another turn in the Sino-Pak relationship, but the solidification of a new strategic alliance, pushing it beyond a longstanding allweather friendship. It may be far-fetched and premature to suggest that Pakistan is in strategic defiance of the US, that it is betting on China long-term in the belief that US power in the region is on the wane. Nonetheless, the leaked contents of a meeting in Kabul in late April are revealing: during a visit to Afghanistan, Gilani offered Afghan President Hamid Karzai the choice between the US and the West on one hand and itself and China on the other. Gilani s choice is believed to reflect the views of his army chief, General Ashfaq Parvez Kayani. Even before the circumstances of bin Laden s death raised questions about Pakistan s commitment to regional security, Kayani made little secret that he has prioritised groundwork to increase Pakistan s dominance in Afghanistan s affairs, as the US prepares to lighten its military footprint in that country. None of this should surprise. What does surprise is the drift in the Indian government on national security. The new great game pivoted over Afghanistan has serious security implications for India. It demands from New Delhi a more focused response in addressing defence capabilities and in building international partnerships to bring stability, prosperity and equilibrium to the Af-Pak region. Hopefully, Prime Minister Manmohan Singh s visit to Afghanistan will galvanise more creative diplomacy.

8. India-Africa
India has signalled a robust engagement with Africa through Prime Minister Manmohan Singh s visit to the resource-rich continent that looks to mature into the global economy s newest growth pole in the near future. At the second AfricaIndia Summit in Addis Ababa, the prime minister stressed the givens of India s Africa policy, founded on the stated objective of capacity-building helping Africans help themselves through supporting infrastructure development, regional integration and HRD. He announced a $5 billion line of credit for development projects over the next three years and a further $700 million for building educational facilities and a business council of CEOs. The PM s speech also evoked the comprehensiveness of the Addis Ababa Declaration and the Africa-India Framework for Enhanced Cooperation adopted at the summit, committing India and Africa to economic, political and cultural cooperation. Acknowledging this broad canvas, Dr Singh laid out in bold terms India s choice of strategy in Africa a concrete definition of ends and means necessary from both the Indian and African perspectives. African leaders themselves know only too well how the advent of globalisation shifted the economic balance of power in favour of countries like China and India, and how that has been fortunate for African states by increasing their own bargaining power with Western nations and financial institutions, thanks to the new opportunities from Beijing and New Delhi. Delhi itself is only too aware of how far ahead Beijing has stridden in Africa. However, the summit also emphasised that India is not in competition with anybody. Its involvement in Africa is on its own terms, at its own pace, for the mutual benefit of both sides. Given India s salient advantages, such as its democratic experience and efficient private sector (the latter s investments interface the continent and Delhi unlike China s state-owned enterprises), and

also its resource limitations, India has rightly chosen to chalk out its unique path in Africa, avoiding both the crusading zeal of the West and the cynical non-interventionism of China. But what Delhi needs next is a system of political accounting at home for its Africa policy, particularly a review system of the aid given to ensure it is not misused. Moreover, aid is rarely called so any more, and India and Africa are growing trading partners. Properly accounted for, this engagement with Africa can be the model for India s strategy in the developing world. As such, India s Africa policy has to be recast in a broader international perspective.

9. India-Myanmar
China inaugurates gas pipelines. India inaugurates rice silos. Now, that may be too reductive a study in contrast, but it should be on the mind of External Affairs Minister S.M. Krishna as he engages with the new, nominally civilian government in Myanmar. Of course, there s nothing ignoble about the rice silos being built in the wake of Cyclone Nargis, they are every bit humanitarian and part of economic diplomacy. Nevertheless, there are larger aspects to India s economic and strategic diplomacy in Myanmar that need to be foregrounded and pursued urgently issues which have seen India shaky at the worst, slow and indecisive at best. Notwithstanding international criticism, India had rightly engaged with the junta that ruled till recently, given the rapid strides China was making in this key common neighbour. But unlike China, which would prefer a weak state in Myanmar, India s relationship is layered, envisioning a strong and united nation central to its Look East policy. India s interests constitute security, energy (natural gas resources and hydel projects), infrastructure and connectivity, communications and information technology. Myanmar, with its own insurgency problems, is crucial to the security of India s Northeast. It also bears the potential to transform the economic fortunes of the seven landlocked states. While the Kaladan multi-modal transportation project has reached construction stage, an MoU will be signed on linking Manipur to Tiddim. A trans-Asian road system through Myanmar and the maritime gateway for India s Northeast via the Sitwe port need speedier work. There will be several other MoUs signed, such as the one on an industrial park. However, what is being closely watched is the NHPC s delivery on the revival of two hydel power projects, wherein delays on the Indian side were criticised by the Indian ambassador to Myanmar. India-Myanmar bilateral trade has more than doubled since 2006, reaching $1.5 billion last year. But even as India fell a good distance behind China in a country with nearly 20 trillion cubic feet of recoverable natural gas reserves, little changed in the way Delhi did business. Myanmar s new president has already visited Beijing, while scepticism has grown about India s ability to deliver. Certainly, there are questions about how genuinely democratic the new political order is. Nonetheless, India needs to deepen and thicken its involvement, looking beyond stale rhetoric and standard MoUs to devise institutional mechanisms to implement projects in its neighbourhood. Its ties to Myanmar are historic, and not a simple counterpoint to China for influence and access. What the bilateral relationship needs now is solid and speedy work on the ground, not continuing listlessness.


Enrolling CMs into Diplomacy

Bihar Chief Minister Nitish Kumar has returned from a goodwill trip to China, brimming with ideas for creative partnership. Bihar, as the birthplace of Buddhism, is perhaps best-positioned to articulate the old civilisational connect between India and China, and Kumar certainly laid great emphasis on Buddhism as a binding agent. This visit fits in with India s sharpened efforts to engage its neighbours, and it demonstrates the value of drafting chief ministers into the diplomatic agenda, especially when they have shared stakes as in many of our border states. In some cases, the state s politics dictates the tenor of diplomacy, the most obvious example being Tamil Nadu. However, in far too many instances, the state isn t represented in the bilateral exchange, even though its concerns have everything to do with the content. Many northeastern states are directly impacted by the questions of infrastructure, water-sharing, access to ports or migration discussed between India and its immediate neighbours like China, Myanmar

and Bangladesh. And yet, CMs of these states rarely take the lead in initiating and furthering these conversations, and Delhi has rarely made place for them at the table. States that share a border with a neighbouring country are likely to be attached to it in strong and instinctively understood ways, in terms of language and culture, and are also directly affected by the bilateral exchange. For instance, West Bengal CM Mamata Banerjee has a strong personal rapport with Sheikh Hasina. Surely, it stands to sense that Bengal s leadership should serve as the bridge with Bangladesh, or that Nitish Kumar should have a direct line to Nepal? Punjab, of course, has a more intuitive understanding of its place in reconciling India s and Pakistan s interests, and Amarinder Singh, especially, had done much to energise trans-border engagement. These states are threshold zones, places where either/or logic between nations gives way to an awareness of the reciprocal bonds that tie us to our neighbours. So it makes sense, from every angle, to give CMs a greater role in deepening those ties.


NSG (Kakodkar)

The recently reported decision of the Nuclear Suppliers' Group (NSG) on additional restrictions for transfer of ENR (enrichment and reprocessing) technologies with adherence to the Nuclear Non-Proliferation Treaty (NPT) being a condition for transfer has caused huge unease in India. It negates the positive and forward-looking orientation with respect to ENR issues that was built into bilateral and multilateral agreements developed as a part of development of our international civil nuclear cooperation. The NSG waiver for India now seems to have been circumscribed. While this does not affect the commerce related to nuclear reactors and their fuel supplies and our rights to reprocess and recycle used fuel, it appears to shut doors on commerce related to enrichment and reprocessing technologies. The United States, Russia, and France have issued statements reiterating their adherence to understandings with India. One would only hope that this does not amount to doublespeak and the NSG waiver in respect of the NPT condition that was granted to India earlier remains undiluted in respect of ENR transfers as well. The statements of these countries are far from being explicit in this respect. India is a responsible country with advanced nuclear technologies. Indian capability is comprehensive and covers the entire nuclear fuel cycle, including enrichment and reprocessing. Understandings embedded in our international civil nuclear cooperation arrangements are premised on sustained access to international commerce for facilities that we place under International Atomic Energy Agency (IAEA) safeguards. At some stage, we would set up reprocessing plants to reprocess used fuel arising from reactors under IAEA safeguards. Similarly, we could set up enrichment plants for enriching imported uranium under IAEA safeguards to feed our growing programme. Such plants, if they have to be under IAEA safeguards, must have the benefits of international commerce and not denied that access. That we have our own technological capability in respect of these technologies cannot be an argument to allow others to reverse the positive and forward-looking sentiment built into our understandings. Reprocessing and recycle (particularly in fast reactors) of used fuel from nuclear reactors enables extraction of several tenfolds larger carbon-dioxide-free energy from a given amount of uranium. Reprocessing is thus the key to nuclear energy, addressing the twin challenge of sustainable global energy supply as well as mitigating the threat of climate change. Claims made about the capability of available uranium to meet global energy needs, in once-through mode, for a long enough time are true only in the context of the current rate of consumption, which is primarily in rich countries with more or less stabilised energy supply needs. They are not true in the context of the rapidly growing energy needs of countries in the developing world. A closed fuel cycle involving reprocessing is thus a key necessity. Concerns on ENR technologies arise because they handle large quantities of weapon usable material in loose form. To meet the needs of the energy-hungry world and make the energy benefits more widely accessible, such technologies should be in responsible hands and technological solutions worked out to minimise the proliferation concerns. Simply depending on inspection and policing regimes and placing additional restrictions on ENR technologies, though necessary, could in fact jeopardise the larger contribution of nuclear energy to sustainable development and bring the climate change-related

threat closer. We need to realise that restricting access to fuller carbon-free nuclear energy potential could present far greater risks to humankind eventually. During the Bush regime, restrictions were sought to be placed on transfer of ENR technologies to countries that do not have them already. This would have limited the spread of these sensitive technologies, with India remaining eligible for their transfers, as we already have our own technology in this area. The latest NSG decision has changed the logic completely: it essentially targets India as we are the only country outside the NPT eligible for nuclear transfers. For us, a closed fuel cycle involving reprocessing of uranium and thorium has been an integral part of our policy from the beginning of our nuclear energy programme. While our interest in thorium arises primarily due to the huge energy potential that thorium provides for us, it is now becoming increasingly clear that the thorium fuel cycle also offers several advantages with respect to proliferation resistance. Since thorium by itself does not have a fissile component, it needs initial fissile inputs. Enriched uranium with thorium makes for an efficient fuel that could produce as much energy from mined uranium and leads to used fuel that can be recycled with a much-reduced proliferation risk. Uranium enrichment has thus a special significance in the context of the thorium-based proliferation-resistant fuel cycle as well. Given the present comprehensive capability and the rapid pace towards reaching the full objectives of the three-stage programme, Indian developmental efforts could well be a part of the solution the world is so desperately seeking. While we have a well-defined programme ahead of us for setting up reactors as well as fuel cycle facilities to support a growing power programme, progressively these technologies would evolve towards large-scale thorium utilisation. This programme being somewhat unique would anyway have to be evolved by us on our own. However, the inherent proliferation-resistant features of thorium that are of wider interest should have led to greater interest in collaboration with India. That somehow does not seem to be the case, at least for the present. There is also a question of supply of other hardware and equipment not specifically concerning ENR technologies to enrichment and reprocessing plants that India might set up under IAEA safeguards. Clearly, there could be a number of alternative approaches to configuring such plants. Denial of a specific hardware or equipment cannot be allowed to jeopardise a mutually satisfactory resolution between the IAEA and India to ensure the safeguardability of such plants. We live in an interdependent world where the terms of engagement depend upon how strong and capable you are. We have an ongoing mission to expand the share of nuclear energy in our energy mix to meet our rapidly growing energy needs and to reduce carbon intensity in our energy production. With the framework for international civil nuclear cooperation and the key provisions that are already in place, we can accelerate that process keeping our strategic interests intact. We however need to exercise caution and due diligence at every specific step as we negotiate the establishment of nuclear power plants with France, Russia, the U.S., and possibly others and as we do so, also press for adherence to the letter and spirit of our understandings. There is also the question of NSG membership in the air. It would be strange if India were to become a member of a group that denies us cooperation on the basis of the NPT.


India-South Sudan

Fifty-six years after Pandit Nehru wrote Sudan on his handkerchief to reserve a place for a representative of the then still-not-independent Sudan at the 1955 Bandung Conference of Afro-Asian nations, India hopes to partner an offshoot of that country as it comes into existence tonight. At midnight 1.30 am India time on Saturday the world s youngest nation, the Republic of South Sudan, will be born, the result of the split of the largest country in Africa into northern and southern halves.

A new country is coming into existence... It is appropriate for India to participate in celebrations, Vice-President Hamid Ansari told reporters on board the special aircraft flying to Juba, the capital of the new country, to represent India on the historic occasion. So far, the only high point of India s relationship with what will be the new Republic of South Sudan has been a day spent by President Fakhruddin Ali Ahmed in Juba to address the Regional Peoples Assembly in December 1975. When north Sudan suppressed a mutiny by the Equatoria Corps of the southerners in August 1955, India did not take sides. During the 1983-2005 civil war that nearly destroyed south Sudan, India only retained informal contacts with the southern rebels spearheaded by the Sudan People s Liberation Movement even when Khartoum (Sudan) turned to China for help against the rebels. However, sensing the inevitability of the creation of South Sudan, New Delhi has enhanced its contacts with Juba in recent years. India s Minister of State for External Affairs attended the signing of the Comprehensive Peace Agreement in Nairobi on January 9, 2005 the deal that paved the way for the January 2011 referendum in which over 98 per cent of south Sudanese supported breaking away from Khartoum. Today, as Sudan became the first country to recognise the Republic of South Sudan, dancers decked in South Sudan flags and leopard-print trousers marched through the streets of Juba, counting down the hours until the birth of their new nation. Impoverished, underdeveloped South Sudan, a huge, fractured territory that straddles Arab and sub-Saharan Africa, contains around 75 per cent of unified Sudan s known oil reserves, and some of the biggest oilfields in Africa outside of Nigeria and Angola. As India s energy needs grow, South Sudan is likely to emerge as one of the crucial sources of oil. Obviously, the hydrocarbons sector is a priority as we look for energy sources across the world, Hamid Ansari said in reply to a question on India s priority sectors of engagement with South Sudan. ONGC s foreign investment arm holds a 25 per cent stake in the Greater Nile Petroleum Operating Company (GNOPC), which has its largest investment in Sudan. By way of deepening its engagement with South Sudan, India announced a $ 10-million grant during a donors conference in 2005, and offered a $100-million concessional loan for projects in both the north and the south. In October 2007, it opened a consulate office in Juba. From 2006-07, India has offered a number of scholarships to South Sudanese. About 100 officials from the government of South Sudan have availed of these scholarships over the last two years. India s Foreign Service Institute trained 15 officials from the South Sudan government in 2008. India also hosted a parliamentary delegation from South Sudan in October 2006. In 2008, India hosted the commerce minister of South Sudan as part of the India-Africa partnership project. In April 2011, Priscilia Joseph Kuch, a minister in the office of the President of South Sudan, paid the first official visit to India on behalf of the South Sudan government. India reciprocated by sending E Ahamed, Minister of State for External Affairs, to South Sudan in June to discuss a roadmap for cooperation in the areas of agriculture, health and petroleum. As the new government settles down and starts work, we will identify specific areas and projects for cooperation, Ansari said, underlining India s willingness to partner in capacity-building in South Sudan in the days to come. On his way to Juba, the Vice-President stopped at Kampala for a bilateral meeting with Ugandan President Yoweri Kaguta Museveni.

Women & Child

1. RTE
The Right to Free and Compulsory Education Act was passed in August 2009 a momentous decision, if decades too late. Since last April, when it started functioning, the state has been required, by law, to provide a neighbourhood school that meets a minimum standard within three years. The act mandates a whole range of measures to upgrade the number and quality of schools, like specified teacher-student ratios, making sure teachers attain a nationally designated level of qualification within five years, and local school-management committees to oversee the implementation. However, a year on, RTE remains riddled with problems. Only 11 states have created a commission for child protection, the grievance redress mechanism that makes the act meaningful. Many key features of the act have been adopted in varying degrees these include the the non-detention policy, which 27 states have embraced, 28 states have banned corporal punishment, and 26 have scrapped the board examination. These changes are relatively easy to enact. But other provisions have been harder to push through. Education being a concurrent subject, there needs to be a more sensible apportioning of responsibility between the Centre and states. So far, the question of schooling has been largely handled by states, which are trying to adjust to the sudden largesse and rules foisted by the Centre. The three core issues of elementary education are access, retention and quality, with access being the least of the problems by now. Now, with this expansive national legislation and the promise of 65 per cent funding from the Centre, states do not have the same initiative. What s more, they have entirely different experiences of school education, and the management structures prescribed by the RTE run counter to their existing arrangements. A state like Kerala, for instance, is ahead of the RTE, and finds many of its provisions besides the point. In states like Maharashtra, many community-run schools, missionary schools, etc, have objected to the monitoring by local bodies, asking why the panchayat should be involved in decisions when it did not help create the school, and have sought amendments. As it irons out the last wrinkles in RTE, the Centre must avoid the homogenising impulse, and adopt a light touch, rather than micro-managing elementary education.

2. Cash transfers & Healthcare

The march of capitalism, with its reduced emphasis on public spending, while improving many national economies has also widened the gap between the rich and the poor. For millions of Indians, hunger is routine, malnutrition rife, employment insecure, health care expensive and livelihoods are under threat, arguing for an urgent need for social security. Over 80 per cent of the world's population lives in conditions without any guarantees to manage life's risks. The United Nations and other international agencies have argued that only 2 per cent of the world's Gross Domestic Product (GDP) is required to provide basic social security to the world's poor. They contend that such programmes provide growth with equity and are in the national interest of many countries. Successful social protection programmes, many of them in South America, have demonstrated the use of innovative social security schemes and have countered capitalism's attempts to roll back social expenditures, cut deficits and finance fiscal stimulus packages for the economy. Argentina's universal child allowance programme and Brazil and Mexico's conditional cash transfer schemes are credited with reducing poverty and improving the health of populations. South Africa's Child Support Grants and Thailand's universal health care are also notable successes. Most of these schemes run on less than 0.5 per cent of national GDPs. Redistributive transfers are not only desirable but are also hallmarks of civilised nations. They have multiplier effects and create more secure societies. Nevertheless, the philosophy, structures, economics and impact of these innovations are debated. Do they add to existing nutrition, health, education and employment services? Or do they replace existing public services and provisions? Are conditional cash transfer programmes a panacea to reduce poverty and improve health? Two schemes related to health are discussed here to highlight the complexity of the issues involved.

JSY a success: The Janani Suraksha Yojana (JSY) scheme is a conditional cash transfer (CCT) scheme to incentivise the use of health services. It is an intervention for safe motherhood and aims at reducing maternal and neo-natal mortality among poor women by encouraging institutional deliveries. It integrates financial assistance with delivery and postdelivery care for the mother and baby. The scheme also provides for the identification of pregnant women, antenatal care, assistance with transport and certification, postnatal care, and support and counselling services. Recent additions to these services include the cost of all medication and treatments, blood transfusions, consumables and diet. In some States, the scheme is complemented by the provision of public funds to private service providers in rural areas. The programme has caught the attention of public health experts around the world for its scope, coverage and budget. The success of the scheme is currently being measured by the number of institutional deliveries, beneficiaries and financial assistance provided. Independent evaluations of the programme have confirmed its beneficial impact on antenatal care, health facility births and neonatal deaths. However, the assessment also noted wide inter-State and inter-district variations in the programme. It also documented the fact that the poorest and the least educated women had the lowest odds for enrolment. While the JSY is a path-breaking initiative, its impact, when measured by maternal and child health outcomes, is dependent on the availability and accessibility of good health care services. Although the National Rural Health Mission (NRHM) has revitalised a neglected public health care delivery system, increased health finance, improved infrastructure, increased health personnel, established standards, trained health care staff, improved and streamlined health care delivery structures, many challenges still remain. The NRHM's functioning in its project mode and its competition with the State health services with their old ideas, platforms, ethos and morale complicate issues. These conflicts are not apparent in the evaluation of the NRHM with its focus on process indicators. For example, it records the monies spent on infrastructure, documents the increase in personnel, describes new priorities and records the recent benchmarks. However, there is a need to also evaluate indicators of efficient functioning. It needs to correlate its inputs and processes with health outputs in order to assess their effectiveness and to fine-tune its procedures. For example, data on the number of normal and complicated deliveries, maternal and neonatal outcomes should be correlated with the type of hospital infrastructure, personnel and health care provided. There is anecdotal evidence to suggest that 24 x7 health facilities with adequate medical staffing on their rolls continue to provide sub-standard care in violation of the established norms. The failure to document health outcomes of mothers and babies allows poor health care standards in many institutions to be masked by process indicators (e.g. institutional deliveries) employed for assessments. Unless good health care is provided at health institutions, CCTs for institutional deliveries will fall short of their goal of reducing infant and maternal mortality and improving standards of health. Incentives for sterilisation: India's population policy with its narrow focus on surgical sterilisation, aided by incentives and coercion, resulted in disastrous consequences during the Emergency (1975-77). The vehement rejection, not just of the programme but of the government in power, made such measures taboo in the nation's public and political discourse. And yet, sterilisation continues to be the sole population stabilisation strategy. While governments are conscious of avoiding coercive practices, incentives for tubal ligation and vasectomy continue to be provided. Vasectomy, despite its greater monetary value (compared to tubectomy), is not commonly accepted by Indian men. Its unpopularity is rooted in the cultural concepts of manhood and virility. Consequently, women continue to bear the responsibility for family size. However, the incentives for sterilisation have not reduced the fertility rate in many parts of India. The correlation between family size, illiteracy and poverty, leads the naive and uninformed to conclude that the large number of children in each family is the cause of poverty, malnutrition and ill health. Little do they realise that for the uneducated and poor, larger the number of children, better their insurance and social security, particularly in their old age. The complete absence of social security forces the poor to rely on their children to provide the safety net. Class and

caste issues interact and preclude universal explanations and call for a sensitive analysis of the context. Simplistic demographic transition models, which linked population growth to development without understanding non-European history, politics and contexts, have legitimised the argument that population control reduces poverty. The fact that poverty without social security results in increasing populations is rarely considered. Consequently, maps of high risk populations incorrectly identify the already marginalised groups (e.g. the poor, women, Muslims, Dalits, adivasis, etc.) for further stigmatisation. And yet, politicians, administrators and governments continue to emphasise contraception and sterilisation as the sole focus of population policies. Our current demographic approaches disregard questions of context, class, caste, religion and gender and classify people, us and them, based on narrow frameworks and value judgments. Without the provision of basic social security for the poor, the country's population will continue to increase. CCTs as tools to bring about social change, based on a simplistic understanding of issues, are doomed to failure. Nuanced approach: CCTs are not a panacea for poverty, ill health or for stabilising populations. As related to health, they will deliver only within the context of an effective health care system. Without a good public health delivery system, the aim of CCTs to bring people to hospital, to obtain effective health interventions, will be defeated. The use of CCTs as a proxy for the delivery of good health care is fallacious. They may change health-seeking behaviour, but it requires a good health care system to reduce maternal and child mortality rates. Similarly, CCTs for population stabilisation, by rewarding contraception and sterilisation, without a basic social security net for the poor will not be utilised and will be ineffective. CCTs are complex interventions and part solutions within a range of services provided for people. They cannot be an alternative to good health and social security services. Social determinants of health like clean water, sanitation, nutrition, housing, education, employment and social security play a major role in population health and growth. The use of CCTs should not result in the government abdicating its responsibility of providing public services to the poor. They should also not be viewed as another business opportunity for free market players. While recent efforts at improving health care delivery, food security and employment guarantee have made an impact, they have a long way to go before significantly influencing maternal and child mortality, family sizes and population numbers. CCTs are not complete solutions and call for a nuanced understanding of the strategy, context and issues.

3. Skilled women
Over five years to 2009-10, unemployment has fallen but the work participation rate, which measures the share of workers in the total population, is also down. The fall in the participation rate is significant for women: from nearly 30% to a little more than 23%. In absolute terms, this means that nearly 35 million women - more than the entire population of Canada - dropped out of the workforce in five years. Two things explain this decline. First, many women are choosing to educate themselves for longer periods instead of being forced to work at the first opportunity. Second, many families newly-risen from penury into the lower middle classes, can afford not to send their women to work. Both show welcome trends, but in order to be able to afford these choices, incomes have to rise significantly across the country. Do the numbers support this? Fortunately they do. Between January 2008 and December 2010, agricultural wages jumped 106% in Andhra Pradesh, 84% in Punjab, 74% in Tamil Nadu and 63% in Maharashtra. In relatively backward Orissa, wages rose 63%, by more than 62% in Uttar Pradesh and by 59% in Bihar. As family incomes rise, families withdraw their women from the workforce. Instead of getting defensive about jobless growth, the government can take heart that growth is lifting people, especially women, out of drudgery and giving them a chance to educate themselves for better things. Now instead of basking in this warm feeling, policymakers need to think of ways to employ the huge numbers of educated women who will join the workforce soon. Typically, jobs like teaching in schools or nursing were exclusive preserves of women. Increasing the number of schools and hospitals will do no harm. Services, like IT, aviation and

organised retail also employ women in large numbers, as do manufacturing units that rely on miniaturisation , and therefore, precision work. Instead of jobless growth, what India is witnessing today is an interregnum when vast numbers of women go from being rural or low-skilled workers to joining the skilled workforce. The government must make sure that by the time the women are ready, so are the jobs.

1. MSP in Naxal areas
As part of the Central government s development offensive in Naxal-affected areas, the Planning Commission has proposed a minimum support price (MSP) for minor forest produce bamboo and non-timber products like mahua and tamarind that are a source of income for tribal communities. Such a move is expected to put more money in the hands of the tribals, give them some amount of financial independence that would translate into freedom from both the oppressive, exploitative middle men who buy their products for a pittance and the Naxals who find in them and their deprivation a constituency and a cause. If implemented properly, it can deepen the tribals rights to livelihood, and stem the flow of funds from the middle-men to the Naxals and undermine the authority of both in our forests. There is no faulting the intention of the proposal, which, however, requires both clarity and structure in its implementation. The institution of MSP has to be followed up with the constitution of an organisation to administer the prices. While the government charts that out, it has to factor in several issues that are essential to the economic development of tribal communities: the Panchayat Extension to Scheduled Areas (PESA) Act that grants tribals complete rights over minor forest produce is often disregarded by several states and needs to be strengthened, and gram sabhas that are meant to protect community resources should be given suitable powers and resources to make them operational bodies in the local level and not vulnerable organisations that can be easily manipulated. While the fixing of MSP could give a thrust to a programme for regenerating and harvesting forest produce, there should be a move to slowly dehyphenate our big-ticket tribal welfare programmes from anti-Naxal initiatives. The former, by themselves, are needed and for their own sake.

As one of the largest job programmes in history, NREGA often gets a bad rap from those who think it does not contribute to growth that it amounts to giving people fish, rather than teaching them to fish, to use the Chinese expression. Now, there s an interesting proposal in the works, floated by the Prime Minister s National Council on Skill Development, to impart greater sustainability to NREGA employment by investing in skill-formation. However, to make sure that the original intent of the scheme is not diluted, it s going to be rolled out in a calibrated way and meant for those who have already completed the required number of days of unskilled manual labour. Also, it will focus largely on artisan skills, because NREGA was felt to have unwittingly contributed to a de-skilling as many craftspeople abandoned their work to shovel soil and build ditches, because it was a reliable source of income. Meanwhile, as far as the skill development mission goes, hitching its wagon to NREGA is a great idea, giving it a countrywide horizontal reach to scale up. Apart from the major crafts clusters, like weavers in Varanasi or Chanderi, brass workers in Moradabad, etc, we don t know the dimensions of our artisan community. NREGA has phenomenal scale and covers all the districts across India, and will help provide a real database so that the skill development programme can have greater range and depth. This will add greater heft to the programme, which aims to massively expand the skilled pool of workers in health, information technology, tourism and hospitality, with private sector cooperation. So this plan would not only raise the NREGA profile and make it a productivity-enhancing scheme rather than simply welfare, it

would also make a huge difference to the skilling project, so crucial if India is to make use of its demographic advantage. At a less abstract level, it could stop the free fall of Indian craftsmanship, the slump in self-belief among our artisans who now feel that digging a well gives them greater returns and security.

3. PDS
Indian government uses public funds to alleviate, prevent and end poverty; but, unarguably, does so inefficiently. A new report from the World Bank for the Planning Commission on India s social protection programmes outlines the scope of the failure and provides a few answers. Those programmes can be divided into three kinds, the report argues: those that prevent a slide into poverty, like social security and insurance schemes; those few that promote a rise out of poverty, like mid-day meals and conditional transfers like Nitish Kumar s bicycle giveaways; and those that protect those who are nevertheless poor from the worst effects of poverty. It is the last section which eats up most of India s spending on the social sector, and is also the most inefficient, driven by the catastrophic, chronic failure of the public distribution system for food. Reform of the PDS is inevitable; but the report lists possible approaches. One is incremental , in which we tinker with those parts of the PDS that work least while retaining the overall model. Radical, fundamental reform would require a cash-transfer option when the state fails to provide grain. In between, there is an intermediate approach in which some deep-seated innovations are introduced to the existing system, such as smart cards. The report surveys these options conscientiously, but it winds up, of course, acknowledging that fundamental reform is the only sensible option for a programme that constitutes a large chunk of social-sector spending but benefits barely 40 per cent of those it is supposed to. Ruling that out for nothing but an idealistic rights-based attempt is likely to leave many poor households with a stronger legal right but better a realworld situation . In a well-observed section, however, it lays out the roadblocks to such reform. The 450,000 employees of the Food Corporation of India and the 400,000 ration-shop owners, for one. The problem, too, of areas where food insecurity is chronic, where neither the state nor the private sector can reach but also, the legal implications of existing Supreme Court decisions. The possibility of food security legislation with insufficient flexibility being passed is also listed as a constraint. Reform is necessary and inevitable; but a clear-eyed consideration of how to overcome these obstacles is necessary. And the first requirement is the political will to realise that food security doesn t rule out reform; it requires it.

4. BPL-Caste
There is an old joke about a drunk man searching under a lamppost for his keys. Did you drop them here? No, but this is the only place where there s enough light to look. That s what the recent plan to identify the BPL population and include caste and religion information sounds like. Obviously, there are large overlaps in these categories but the point is not to create a composite picture of deprivation but to target poverty as efficiently as possible. Just as we need accurate data on numbers of the poor for more useful welfare schemes, we should also avoid imposing a fixity on their caste identity by putting this information in the official census. Though colonial administrators attempted to map caste, the post-Independence establishment recoiled at a record of caste identity in the national census. However, after the Mandal Commission inaugurated a phase of competitive politics around caste, for electoral mobilisation and policy benefits, there seemed to be a new rationale in knowing the real numbers. Given how much rides on caste classification, in terms of education, employment and welfare, even political office, some argue that there is a need to assess the dimensions of each claim. However, this argument fails to recognise that officially assigning caste categories can harden these identities. First, it is a more mutable category than most altered by marriage, migration and mobility. It shifts by geographical context, and people respond differently depending on the framework whether they are being socially slotted or making a bid for affirmative action. Unlike religion or ethnicity, caste is a trickier kind of group identity.

This is not to wish away its effects: caste enfolds many kinds of discrimination, apart from cumulative economic disadvantage. We still need positive discrimination to undo that historic damage. However, the state should guard against force-fitting categories like poverty and caste in the census because at the individual level, a poor person should be able to deny caste and still be entitled to welfare. The focus should be on sharper targeting of the BPL individual, not on widening the lens.

5. BPL (2)
Everyone knows poverty is rampant in India, but nobody knows exactly how many of us are poor. That's because we've tried to count the poor many times with different assumptions, and come up with widely different numbers. In 2004-05, the Planning Commission reckoned that only 27% of Indians were poor. This was debunked by a committee headed by Suresh Tendulkar in 2009, which pegged the number of poor at 37% of the population. Around the same time, another committee headed by the late Arjun Sengupta estimated that a staggering 78% of Indians were poor and a panel headed by N C Saxena pegged the number at 50% of the population. Last year, however, another study used a wide-ranging definition of poverty to conclude that 55% of Indians were below the poverty line. This profusion of numbers makes it hard to administer and deliver the vast amounts of money that India spends on poverty-reducing programmes: Rs 40,000 crore on the NREGS, a similar amount on a scheme for rural jobs, about Rs 10,000 crore in housing schemes for the poor and Rs 60,000 crore in food subsidies. So, the government's decision to conduct a census to identify the poor as well as their religion and caste is welcome. It's also a good idea to measure poverty by asking whether the poor can afford education and healthcare for the family. To do that, the poverty census will have to focus on some measure of spending power - the norm used by many multilateral agencies is $1.25 a day, in PPP dollars. Counting for the census is just over and a lot of data from that will give a template against which the poverty data can be cross-referenced. Of course, the government will face pressure from many state governments to scuttle or minimise the scope of the poverty census, but that's because many states run profitable rackets to siphon off anti-poverty finances. These pressures should be resisted. Finally, once the government has identified the poor, it should knock everybody else out of the list of beneficiaries. The Saxena panel found that 17% of India's richest people continue to have access to BPL facilities while more than 50% of the poor do not. That has to end.

6. Agriculture (ET)
A special feature in this newspaper on Tuesday points to the terrible mess that Indian farming is headed for, and the ostrich-like attitude that policymakers have adopted towards this. The 1960s green revolution, which boosted the yields of our major food crops - rice and wheat - was based on technology that needs lots of water and chemical fertilisers. The pricing, procurement and distribution mechanism was built around this. But erratic rainfall and inadequate canal and tank irrigation in many parts of India meant that farmers gravitated towards diesel pumps to pull groundwater to irrigate crops. In the 1960s, canals and tanks supplied more than 60% of irrigation water, tubewells about 0.6%. By 2002-03, canal water was only a third of all irrigation water, tubewells made up nearly 40%. So, groundwater reserves have plummeted, mostly in states like Punjab, Rajasthan, Haryana, Gujarat, Tamil Nadu and UP which are large grain producers. The green revolution introduced crops that were shorter and grew faster than local varieties, but that meant less fodder for livestock. Much of the soil subject to intensive cultivation has become poisoned by the use of chemical fertilisers and can't sustain lifeform like earthworms, which are necessary to replenish soil quality. If continued, this pattern of farming will clearly push India off an environmental cliff.

The government has to put in place policies that force a change in the way India farms today. The use of groundwater has to be discouraged. The quickest way to do that would be to hike the price of diesel, now kept artificially low. Tank irrigation has to be encouraged, possibly with generous subsidies that could be funded by money saved from fuel sops. Research and development of genetically modified crops, which need negligible amounts of fertilisers and pesticides, has to be speeded up. Technologies already tested and proved globally should be implemented at home. Finally, fertile east India has to be brought into the farming mainstream by strengthening private transport and storage networks, and dismantling the inefficient state-controlled farm produce marketing committees that prey on farmers.

7. MSP
The Centre's decision to raise the minimum support price (MSP) sharply for oilseeds and moderately for rice and pulses is right in the customary sense. The signal against increasing the acreage for rice this kharif, given the huge stocks with the government, is sound. Last year, the MSP merely rolled in the bonus offered in 2009-10 against an 8% hike this year. The signalling is right in oilseeds too, with a 17% hike in the MSP to boost output and curtail imports, though its utility is in doubt with farmers already receiving higher prices from the market. The hike in support prices of pulses is moderate compared to the last year when production touched an all-time high. The MSP is meant to cover costs and forestall distress sale. The promise of MSP though does not make sense unless the government is able to keep prices at or above that level. But the government's capacity to procure produce is limited outside northwest India, which is why wheat prices have crashed below its MSP and even the price of maize, prompting poultry feed manufacturers to use wheat instead of maize. The government should revamp the entire food management system to allow and encourage private trade to play a larger role in the procurement, storage and distribution of grain. However, price changes signaling a shift in the cropping pattern alone are not enough. With increasing income levels and the rising demand for superior foods, we need to rapidly raise yields and output levels in every crop. Farm productivity can be enhanced through modern crop husbandry, investment in water management and new hybrid and bio-engineered seeds. We need to build more rural roads to enable farmers' easier access to markets and raise output and income. Instituting organised retail, preferably with foreign investment to augment expertise and competition, will help farmers break the stranglehold of middlemen. Contract procurement will benefit farmers if they organise into larger bodies that can negotiate with organised retail. A producer company like Amul has shown results in the dairy sector. That experience deserves replication in other sectors as well.

8. Land acquisition: fertile or barren?

Eco-fundamentalists have long campaigned for restricting industry and urbanisation to barren or rocky areas, leaving fertile areas reserved for agriculture. The judiciary must steer clear of this Luddite approach. Great cities the world over are located on fertile land along rivers, not in barren wastes, deserts or rocky mountain-tops. The Nile valley is the most crowded in the world, but the solution is not to move Cairo into the desert. Productivity in cities is far higher than in agriculture , sometimes hundreds of times higher. So, when cities and industries replace farms, no matter how fertile, the resultant productivity supports far more people and far higher incomes than farming can. There remains the issue of appropriate compensation, but that must not be confused with forcing industries and towns to go to barren or rocky wasteland. Forget green warnings that food production will be endangered by urbanising farmland: all the proposed SEZs put together will total barely one million acres, just 0.25% of India's 400 million cultivated acres.

The Supreme Court has expressed concern about land acquisition by the UP state government just to re-sell to real estate developers. Arguably this is not a public purpose, and deprives farmers of a good market price. However, inter alia, the court has suggested that barren rather than fertile land should be used to prevent future Singurs. This is flawed logic. If indeed there is a public purpose in land acquisition, it should be acquired at the most appropriate spot for the purpose. This will usually be in decent agricultural areas: the deserts of Rajasthan or mountains of Nagaland are not the best locations for new towns. In rare cases, there may indeed be rocky or barren land that will suffice for the public purpose. But the guiding principle should be to locate cities and industries where they will be most productive, and to compensate farmers accordingly. Compensation will obviously be far higher in fertile than in rocky or barren land. The world over, land acquisition has occurred widely in fertile areas for public purposes, with the higher compensation this entails. India should be no different.

1. Sporting Chance - CWG
Sport s triumphs are dependent on the moment: the power, precision and speed of one glorious instant. The greatness of an international sporting event is often tabulated by the frequency of that feat on display the number of records broken, the number of medals collected. But there is something else that defines its indelibleness: its legacy, an ex post facto exuberance that goes beyond a fortnight or so to encompass the community in a grand athletic outreach. The Commonwealth Games in Delhi last year transformed the city s infrastructure, had the people discovering and delighting in sports other than cricket and gave the country over a hundred medals. Now finally the government is, taking a cue from the best of international practices, opening the gates of the CWG venues for the city s people. For a small fee, the public can use the tracks of the Jawaharlal Nehru Stadium and the pools of the S.P. Mukherjee Swimming Complex. There will be summer camps for children and concessional rates for girls. People below the poverty line will not have to make any payment to use the facilities that will be offered on a first-come-first-served basis. The baton passes on from sporting echelons to the commoner. With this inclusionary gesture, the government is not just drawing in citizens as rightful stakeholders of the CWG heritage, but is also making up for its own gaffe. For, one of the most befuddling moments after CWG came when the government declined to bid for Asian Games 2019. It was a glaring refusal to acknowledge the CWG legacy and the sporting ethos it had infused the city with. Hopefully, the government is waking up from denial mode. It was, we should do well to remember, Manchester CWG 2002 that led in so many ways to London 2012. That s how sport s achievements gather pace across time; that is why a country should take ownership of the many inheritances of the Games.

2. Doping
Since the 2002 Commonwealth Games, India has faced major embarrassment in international sports because of doping by leading sportspersons. If the malady used to be deep in weightlifting, it has now spread alarmingly across Indian athletics. The news that eight athletes, including three members of the 2010 Commonwealth Games and Asian Games gold-medal winning 4x400 relay quartet, Mandeep Kaur, Ashwini Akkunji and Sin Jose, have tested positive is a matter of shame. Predictably, all have pleaded innocence, triggering a blame game. The suspicion points to coaches and administrators. In a quick response to the public outrage, the Sports Ministry has sacked the coach of the relay team from Ukraine, Yuriy Ogorodonik. Indian coaches who were assisting him have also been placed under suspension. Measures aimed at cleansing the system have been initiated, with Mukul Mudgal, former Chief Justice of the Punjab and

Haryana High Court and an expert in sports law, being appointed to enquire into the modus operandi of doping in Indian athletics. Where the lure of money, privilege, and fame becomes irresistible, many athletes turn to doping as a short cut to success. Several coaches and doctors aid the racket. Sports administrators, if they are not directly complicit, often turn a Nelson's eye to the goings-on in the camps so long as success is ensured to enlarge their own influence. The logic of sending teams for training to Ukraine and other countries, with the same set of coaches who have been assisting them in India, is difficult to understand. This policy needs to be reviewed. The current scourge appears to be a calculated fraud by coaches, doctors, misguided athletes, and unscrupulous officials. Union Sports Minister Ajay Maken must be commended for making a tough stand against doping and stepping in boldly to make it clear that there will be zero tolerance of such practices. He surely knows that the malaise is deep-seated and that dismissing the foreign coach, who denies any wrongdoing, touches only the fringe. A thorough probe and stiff penalties for those abusing the WADA (World Anti-Doping Agency) code will help curb this menace. The public mood favours withdrawing the rewards and awards from the offending athletes. Since 2006, Indian athletes have remained prominently on the international dopetesting radar without actually getting caught. Now, with the National Anti-Doping Agency (NADA) playing a leading role in catching the culprits, there is new hope that the dope cheats will be weeded out. Mr. Maken's insistence that punishment should be meted out to coaches and officials, apart from the athletes, reflects the mood of the sports fraternity.

1. The Chilling Picture Census
The broad indices of the 2011 census have been released: India is teeming with more people than ever before, there are more literate men and women than ever before. But the child sex ratio, which indicates the number of girls below the age of six per 1,000 boys, has declined horrifically: 914, the lowest since Independence. The chilling statistic reveals a failure on the familial, societal and institutional levels. The child sex ratio has been falling since 1961, but over the past 10 years ever since the previous census showed that the figure drastically dropped from 945 in 1991 to 927 in 2001 there have been renewed efforts to give more teeth to the law against sex determination and sex selection and to spread awareness. They have clearly not delivered. The child sex ratio has fallen across the country except in a handful of states and Union territories: Himachal Pradesh, Gujarat, Tamil Nadu, Mizoram, the Andaman and Nicobar Islands, Punjab and Haryana. The last two have shown marginal improvement, but have the worst sex ratios in the country. It only goes to prove that we have failed in conveying the message that female infanticide/ foeticide is murder by another name. Diagnostic centres are mushrooming in towns and villages illegally offering sexdetermination and pregnancy-termination services, unfettered and untroubled by the stringent provisions in the law. There has to be a greater political will in reversing this trend. Legislation has not really helped, though the law signifies a social sanction. The child sex ratio is, in the end, a factor of the perceived gender inequality and to reverse the decline we need a change in attitudes. For starters, the provisional census figures should be read carefully for the indictment that they are.

2. Counting the ways Census

The provisional figures released by the Census of India are both heartening and challenging. Population growth has slowed this decade, by 3.9 per cent the biggest drop in the population growth rate since Independence, though it has been gently waning for the last four censuses. And for the first time ever, there are more people made literate than the number added to the population, shrinking net illiteracy by 31 million.

But once you measure it, you proceed to manage it. What these numbers reveal is that we are now firmly on the other side of the great demographic bulge, sloping downwards. They imply that a whole sea of children is growing up, moving towards primary and secondary school, then higher education and the employment market. We need to do much better by them than we have for previous generations. Literacy levels have climbed, especially for women, which means a cascade of benefits apart from simple parity of opportunity such as fewer children, lower infant mortality rates, better chances of children staying in school, and a more balanced workforce. But while the literacy spurt is a concrete, commendable improvement, it is nowhere near enough. India needs to convert this huge empty potential into something meaningful, for which it needs innovative policy in schooling, higher education and skills-training and employment. The value of schooling has clearly sunk in across India, but schools need to fulfil that aspiration. The right to education act is a good start, but is still riddled with problems, like an acute shortage of teachers. Meanwhile, we need to break free of old controlling paradigms in higher education, and expand institutional capacity and standards while opening up options for the private sector, since the state s capacity to deliver is being questioned. As of now, there is a dangerous abyss between the numbers of young people lining up for higher education and jobs, and the paucity of options that confront them. We need to close that in the coming years and that also involves pushing through better and more accessible skills acquisition programmes, which must expand employer involvement in curriculum design and training. With these preliminary numbers, we have been presented with a statistical atlas of the nation. But to turn these numbers into better numbers in the next census, we have to work desperately hard in this crucial window of time to harness the energies of a growing India.

3. Binayak Sen Case

The Binayak Sen case has been reduced to an ideological battleground, obscuring the real question of whether there is a solid legal case against him. Sen, who worked in Chhattisgarh for over three decades as a doctor and civil liberties activist, was first arrested in May 2007 on the charge that he carried communications back and forth for imprisoned Naxalite leader Narayan Sanyal. Chhattisgarh's Special Public Safety Act ensured that Sen stayed in jail for two years, until he was granted bail by the Supreme Court. However, in December last year, a Raipur sessions court sentenced Sen to life imprisonment, indicting him under Sections 124 (sedition) and 120 B (conspiracy) of the Indian Penal Code and other sections of the Chhattisgarh Special Public Security Act and the Unlawful Activities Prevention Act. Even as that appeal grinds on in the Bilaspur high court, the Supreme Court has now granted him bail, and observed that there did not seem to be a clear case for sedition. It highlighted crucial distinctions that the state has appeared to gloss over the difference between those who actively carry on armed insurrection against what they consider an illegitimate state, those who aid them, and others who are labelled sympathisers and intellectuals . Just as someone who possesses Mahatma Gandhi s autobiography is not necessarily a Gandhian, having Naxalite literature did not make someone a Naxalite, said the Court. These categories must be kept separate, to focus on what precisely constitutes guilt. In a situation of internal division as drastic as the war against Naxalism, or any extremist movement, it is important to expand the middle space that enables a dialogue. The state s instinct to clamp down on figures like Sen, and punish them as collaborators for any connection to the networks that are exploited by Naxalites, may not ultimately be the judicious approach. India s recent experiences of insurgency show the wisdom of engaging this middle ground, which enjoys some credibility in the disaffected community, and can potentially be a mediating force.

4. Defence
After doing little for years, things are moving in A.K. Antony s ministry of defence. First the armed forces spent the entire defence budget for fiscal 2010-11 after returning approximately Rs 5,000 crore in 2007-08, Rs 7,000 crore in 2008-09 and Rs 5,200 crore in 2009-10 unspent. Then the MoD asked for more, and the 2010-11 defence budget saw an 11.6 per

cent hike with 12 per cent more for capital expenditure meant for procuring, among other things, 126 medium multirole combat aircraft (MMRCA). For the MMRCA, French Dassault Aviation s Rafale and the Eurofighter consortium s Typhoon have been asked to extend their commercial bids. In the process, Boeing s F/A-18 Super Hornet and Lockheed Martin s F-16 IN Super Viper were rejected, along with Russia s MiG-35 and Sweden s Saab JAS-39 Gripen. The MMRCA contract is worth $10 billion, and the diplomatic investment made by bidding nations meant rejections could leave a sour taste.

The salient facts of the process this time round must be noted and cheered. First, it has been transparent, with rejections made on technical grounds. The two MMRCA selected performed the best in trials and were seen to be closest to the Indian Air Force s (IAF) requirements. Second, it was the IAF s technical expertise that determined which contenders stayed on, without political interference. Third, the spectre of scandal in defence procurement that has haunted the UPA government would stop arms purchase at the slightest hint of controversy. As a result, while trials and tenders were falling prey to such fears, the Indian armed forces were being undermined as an institution, blunting our conventional response capability. The IAF itself has seen a sharp decline in squadron numbers. The MMRCA bidding process so far is encouraging, and it should mark a new beginning. Large-scale military procurement must also consider offsets and indigenisation, access to technology, long-term time and cost optimisation. However, it is dangerous to reduce, or elevate, any military procurement to a purely political decision as might have been the case if the MoD had chosen Boeing and Lockheed Martin despite the IAF thumbs down. Those who will use the equipment must have the word on what best answers their needs.

5. Food security
The UPA 2 government has completed its first two years in office. The Food Security Bill continues to elude consensus. Every now and then there is a new announcement that a comprehensive bill is round the corner. In the meantime, foodgrain rots and hunger remains unabated. Uncertainty surrounds even the existing unsatisfactory arrangements. So, what are the key issues that need to be resolved? First and foremost, the scope of the bill. Should this only cover those who are below poverty line (BPL) or should it also cover the above poverty line (APL) families? After all, the right to food is the universal right of every citizen. It is true that those who are BPL, who are on the edge of hunger, must be our overriding priority. But how can we call something a right if everyone does not have it? Second, what is the methodology which should be used to define BPL? Should this only be based on minimum calorific intake without regard to nutritional efficiencies? It is well-recognised that unless the entitlement covers clean drinking water, sanitation, hygiene and primary healthcare, along with deficiencies of micro nutrients, the absorptive capacity for food would be seriously compromised. So the question is, what do we want to achieve from the Food Security Bill? After all, it must enable every child, woman and man to have an opportunity for a healthy and productive life beyond mere access to calories required for existence. Therefore, the food security legislation should aim at overcoming the challenges of food security without losing sight of the broad definition and components of food security that have come to be accepted across the world. The interrelation between food and social security cannot be ignored and any effort of guaranteeing one without the rest will render food security ineffective Third, even in the traditional sense in which poverty has been imperfectly defined, there are widely varying estimates of the number of poor people. As far as the number of BPL families are concerned, the Wadhwa committee estimates the number to be 20 crore, the state governments estimate the number as 10.5 crore, the Tendulkar committee put it as 9.5 crore, Arjun Sengupta committee 20 crore, N.C. Saxena 12.5 crore and the Planning Commission puts the figure at 7

crore. Recently, of course, the Planning Commission is inclined to accept the Tendulkar committee report which is half of the number suggested by the Wadhwa committee and is slightly below the state government estimates. Of course, the financial implications vary dramatically from Rs 82,000 crore under the Wadhwa committee to Rs 18,000 crore under the Tendulkar committee, over and above the present allocations for subsidies. Until recently, poverty was estimated in India by measuring calorie intake, though the Tendulkar committee moved away from that to a broader definition. Methodology for the computation of poverty needs to be restructured by taking into account the new multidimensional approach of estimating poverty. Fourth, related to the above is the issue of whether the entitlement should be 25 kg or 35 kg of foodgrain a month. There could also be a differentiated approach in which only those in the BPL category receive 35 kg, others like APL families receive the lower entitlement of 25 kg only. Price, no doubt, everyone has assumed, should be Rs 3 per kg. Fifth, a major unresolved issue is the distribution modality since the bill will entail a massive increase in the quantum of foodgrain. Reliance on the public distribution system alone may prove inadequate. Everyone is familiar with the inherent leakages in the existing PDS in terms of quality of foodgrain, bogus ration cards, hoarding, profiteering and multiple ways of denying food to the powerless and disadvantaged. Of course, if the current PDS is to be continued, it will also entail enormous problems of food procurement, storage, transportation and all the other attendant evils we are fully familiar with. So should we not think of more innovative ways of administering food subsidy? Two types of schemes are being increasingly mentioned. The first is a coupon system in which the intended beneficiary receives a food coupon which carries money value and gives him the option to buy foodgrain from any shop which gives him satisfaction. This creates competition between different outlets and will certainly improve the quality and enlarge consumer choice, minimise misuse and improve productivity. There is the second approach, that is, direct cash transfer by opening a bank account in the name of the intended beneficiary and transferring the money directly to the bank account. Countries like Brazil, which have experimented with conditional cash transfer, have achieved success in administering such schemes more efficiently. Sixth, production and livelihood of food producers, from the household to the national level, constitute the core element of food security. You cannot provide food to people if you do not first ensure that food is produced in adequate quantities. And to ensure adequate food production, the livelihood of food producers must be ensured. With continuing high growth in population and the stagnant area under foodgrain production, the right to food can only be ensured with a sustained growth in productivity levels, increased food procurement and by containing the colossal wastage of food. Enacting a Food Security Act cannot be postponed. What kind of superpower can India hope to be if it cannot address the basic issue of starvation and hunger? We cannot afford to hasten slowly.

6. Food security (2) ET

An article by the Commission for Agricultural Costs and Pricing chairman Ashok Gulati in this paper (ET, June23) made a telling point that the government and the leadership of the ruling coalition would do well to take on board while finalising their view on food security. Food security is achieved far more by boosting rural output and incomes than by distribution. Agricultural growth dents rural poverty directly and proportionately much more than growth in town-based activities such as industry and services. Fast growth on the farm was precisely the route that China took to bring down its poverty rate. Boosting farm output would also increase vital supplies and hold the price line. At a time when even the least developed economies of the world are registering sustained growth of 7% a year and more, it is inevitable that food demand would go up around the world. Without a coherent strategy to boost output, any attempt to identify food security with distribution would push up government dominance in the market for grain, jack up the subsidy bill, paying for expensive

imports as well, and leave demand squeeze as the only way to contain inflation, leading to higher interest rates and lower investment and growth. This is a recipe for ever-rising food subsidy without materially enhancing welfare. Another point the article highlights had been articulated by 40 noted economists in an open letter to UPA chairperson Sonia Gandhi as well: it would be a big mistake to rely on the public distribution system as the sole means of ensuring popular access to food. The procurement, storage and distribution through the Food Corporation of India and state civil supplies departments is riddled with corruption, inefficiency, pilferage, spoilage, special devolution to Punjab and Haryana which corner central funds in the name of mandi tax. Cash transfers to beneficiaries and an enhanced role for the private trade would cut costs and minimise leakages. Food security is not just distribution of food, but increasing production, and enhancing efficiency across the board: and that would call for organised retail and the supply chains they can bring, as Amul did in the case of milk.

7. Land Acquisition
Land acquisition is in the news again, and again for the wrong reasons. The agitation by Greater Noida farmers against forceful land acquisition without adequate compensation, and conferring huge benefits to corporates, has raised familiar issues. Optimising allocations of finite resources like land, mines, water and spectrum will remain challenging. Transparency on valuation and allocation need to reconcile conflicting objectives. A sensitive balance between maximising revenue, catalysing development, attracting private investment and so on, is needed. So what should be the key features of an efficient land policy for India? International examples are not replicable. For one, the land-man ratio (between habitable area and the total population) is very adverse. India has 18 per cent of world population, but only 2 per cent of the geographic area. Forest area is also a mere 0.08 hectare per capita against a global average of 0.8. The increased pressure of population on land will lead to a decline in land availability from 0.9 hectare per capita in 1901 to under 0.2 not in the too distant future. Of the 20 largest countries in the world, India has the most unfavourable land-man ratio. Compound this with the other demographic challenge that population is young and will look to livelihood patterns outside agriculture reducing the 60 per cent population which currently live on farm-related activities. The fact that we need to create large manufacturing hubs for generating new employment opportunity compounds the problem. And we have a long way to go to improve the cost and quality of infrastructure power, road density, rural road connectivity and airports. Any land policy must be shaped under these compulsions, challenges and limitations. To be credible, they must be based on the following five considerations. First, land must be priced more fairly whether acquired by the state or private players. Unfortunately the economics of the land market suffers from many deficiencies. High stamp duty, coupled with the practice of receiving substantial payments outside the banking system suppresses the official cost of land. The huge difference between the time when the intention of land acquisition is announced to its formal acquisition leads to huge cost differences. Besides the future value of land hardly gets reflected. Furthermore, population density, probabilities of economic growth and differences in governance patterns create wide variations in land price between states and regions. Not to mention serious delays in actual project implementation, given time and cost overruns. We therefore need to develop normative benchmarks for pricing land better given serious market imperfections and information asymmetry. While estimating the value of land, international practices like the special value principle adopted in Australia and the highest and best use method used in UK are worth considering. Second, acquisition for public purpose must be closely defined. Acquisition by the state for highways, rural roads, power projects or airports are globally accepted. But these must involve the consensual participation of all stakeholders. What is more complex are public-private partnerships, or when the government acquires land for auctioning to private players. What proportion of the final price realised by the government or windfall gains of private contractors should be shared by farmers whose land is being acquired? In the proposed Land Acquisition Amendment Bill 2007, public

purpose has been classified into three categories: strategic purposes, public infrastructure and projects useful for the general public. The Supreme Court in its 2010 judgment on the Yamuna Expressway project emphasised that so long as proper compensation is paid to the owners and the projects serve more than a small section of the populace, use of eminent domain power is justified. In view of the persisting ambiguity, we need a clearer policy while defining public purpose. Needless to say, the price also needs to be realistic, giving a reasonable return to private promoters, otherwise investments would not be forthcoming. The opportunity cost of land is not easy to define because intangible factors like future value, disruption to social and cultural habits and alternative livelihood patterns cannot be captured in economic terms. Third, while it is best to leave the land acquisition of private parties to their own negotiating skills, at what stage should the state be willing to help to prevent blackmail by few recalcitrant owners? Say if 70 or 80 per cent can be acquired by the private promoter, perhaps the last-mile acquisition can be helped by the state. The recent suggestion by the National Advisory Council (NAC) that all land should be acquired by the state, can protect small farmers from being outmanoeuvered by private entities. However, this places a huge obligation on the state to acquire land for private use. Would it be simpler if the acquisition is left to the private parties themselves while the state stipulates the compensation based on the formula finally arrived at? Fourth, land acquisition leads to displacement of original residents. Guaranteeing employment and giving them a stake in the proposed project is certainly helpful. Suggesting alternative livelihood patterns which do not lead to alienation of their social and cultural habits would also help. Finally India has a long way to go both to meet its infrastructure needs and for orderly urbanisation. Pressures on land will inevitably rise. Compulsions for development will need a sensible land acquisition policy which is not only humane but also facilitates rapid growth needed for improving life quality. Being either sentimental or mercenary cannot help. Solving the land riddle is central to our growth strategy.

8. Connectivity: North East

Following the death of former Arunachal Pradesh Chief Minister Dorjee Khandu in a helicopter crash, the Ministry of Development of Northeastern Region (DoNER) has requested the prime minister s intervention to get scheduled airlines to operate from Assam s Tezpur and Lilabari airports bordering Arunachal. Currently, no airline operates from these airports, even though the ministry spends money maintaining the Lilabari airport just 70-odd km from Itanagar. It has cited the strong resentment and lowered confidence among locals following three chopper accidents within 11 days and urged the Centre to improve air connectivity. These are people on rough and remote terrain, dependent on helicopters, services of which are now suspended, which again, the ministry claims, could affect development. There has always been so much to do, and do earnestly, in the Northeast that any specific and immediate need ties itself up with larger, long-term development. The DoNER ministry was set up to develop the region, after it was recognised that its deprivation and underdevelopment called for a dedicated Union department. However, it was left to Arunachal to remind New Delhi time and again that if the Centre was not to be bothered by periodic Chinese noises, it had to develop the state. That involves infrastructure to begin with, followed by trade and industry, encompassing the power projects. While the airline services are an immediate need, they are undoubtedly linked to the larger transportation project of roadways to enable freer movement of people. The Northeast is landlocked and needs gateways to markets. India may have lost out on rebuilding the Stilwell Road, but it still has the Sitwe port which can link the Northeast to the Bay of Bengal via NH 54 and the Kaladan river. There s also NH 39 and the border infrastructure project which can build a trans-Asian road system. However, Delhi hasn t moved on utilising the recast India-Bangladesh relationship. A rail and road connection through Bangladesh would make life and livelihood immensely simpler and richer for the Northeast. Within the region and without, Delhi has to act unilaterally

and quickly. The Northeast not only calls for redress of its underdevelopment but also offers the pivot of India s Look East policy and geopolitical calculations in the east.

9. Arunachal
Time and again, we hear a cry of anguish from Arunachal Pradesh, transmitted to New Delhi via a minister from the state, sometimes even the chief minister. The latest has been from Arunachal s finance and planning minister, Kalikho Pul, who has cautioned the Union government against a Kargil-like situation in the state. The ostensible reason is the persistent fear of China s claims over Arunachal, with the minister saying the Chinese marked territory on rocks inside the state. Rapid Chinese infrastructure development across the border on the Tibetan plateau has sharpened Arunachal s picture of deprivation. The Ministry of Development of Northeastern Region (DoNER) has brought Central attention to the Northeast; but despite the government working to develop the region, the Northeast has always needed so much work, and in earnest, that Delhi has had a tough job keeping up. It certainly has been no match for China in developing border infrastructure largely a failure of its political will. Arunachal, in particular, has always been in need of special attention, in a Northeast needing special attention. Not only is the state strategically important but it also has an extremely thin population density which leaves its remote, border areas practically uninhabited. The need for better road, rail and air connectivity for the state has been periodically reiterated. The people of Arunachal battle rough and remote terrain, with few means of mobility and livelihood as proven when chopper services were suspended in the aftermath of the crash that killed former CM Dorjee Khandu in April. So without commerce and industry Arunachal will languish in its sorry plight. The Northeast as a whole is landlocked and needs access to markets. But, for that, work on the roadways projects will need to be put on a warfooting. Besides, India has to move on building infrastructure and facilitating movement of goods and people to and from the Northeast through Bangladesh. As for Arunachal again, the home ministry has wisely relaxed some of the protected area regime to encourage tourism, and the Centre is now set to launch a programme promoting youth activities, to which the prime minister has given his consent. Arunachal, underdeveloped as it is, also has a lot to give. The hydel projects, which the environment ministry had carelessly called for a moratorium on, are necessary not only for the state s prosperity and integration but also for the development of the entire Northeast. In the end, the concern is less about China than India s capacity to develop its own border regions. In Arunachal, the Union government must keep in mind the larger geopolitical and humanitarian picture.


NE Autonomous Councils

Less than a month after assuming office, West Bengal chief minister Mamata Banerjee said that her administration has hammered out an agreement with the agitating Gorkha Janmukti Morcha (GJM) to solve the festering Gorkhaland problem. If negotiations end successfully, this will be a major breakthrough, solving a separatist problem that has laid waste picturesque north Bengal since the early 1980s. The initial agreement says that the Darjeeling area will get substantial autonomy. This promise needs to be upheld sincerely unlike in 1988, when autonomy was promised, a Darjeeling Gorkha Hill Council (DGHC) formed, but not allowed to function. The Left allowed the DGHC to become a fiefdom of Subhash Ghising, did not hold elections promised in 2004 and made Ghising the sole 'caretaker' of the council. The movement split, creating the powerful GJM, which now holds power in all three hill constituencies of Darjeeling, Kalimpong and Kurseong. Electoral participation and success will be major factors in normalising relations. The Bodo Territorial Council of Assam, which has administrative, financial, legislative and executive powers in four districts of the state, and the nine other autonomous councils in the northeast serve as viable models for the new-

improved DGHC. There are several things to be negotiated, among them the status of the forests and mountains in the area and what territories to include in the DGHC. Both sides should remember that Darjeeling's magnificent mountains, rolling tea estates and forests are its principal attractions (inspiring, for example, Satyajit Ray). Mamata has promised to turn Darjeeling into the Switzerland of the East. To do that, it will require big investments, deployed efficiently. The state, not just the DGHC, should have a role in funding development and monitoring progress. The territorial question is trickier, with the GJM claiming Gurkha-majority tracts in the Terai region as well as the three hill constituencies. A committee with representatives from the government as well as of people from the hills and the Terai should draw this line.


Should Bribe-givers be offered immunity? (ET)

Kaushik Basu's objective has been achieved provoking debate on an issue that truly deserves acute attention, not just because of the currently heightened anti-corruption consciousness in the country. 'Harassment bribes' - essentially, bribes that people are forced to pay, not to get a favour done, but to get what one is legitimately entitled to - indeed have a corrosive impact on society. The person demanding and extracting a harassment bribe is an extortionist. The person constrained to pay a harassment bribe is a victim. To treat the perpetrator and the victim as co-conspirators is truly unjust. Basu proposes that the victim's role be decriminalised, with full immunity from punitive action, and a legal entitlement to a refund to incentivise him to complain. He hopes that such a framework would induce the victim to speak up and attempt bringing the extortionist to book. There is real merit in this game theory. Such a framework, when backed by a reasonably expeditious enforcement platform in the form of criminal courts, conducting a free and fair trial, would indeed preempt the extortionist from even demanding the harassment bribe in the first place. Such a framework should indeed be attempted. The Prevention of Corruption Act, 1988, which makes no distinction between a victim and an abettor, is Utopian in intent, and therefore, hopelessly ineffective. The concept of not treating a bribe giver as a criminal may seem shocking at first blush, but truly it has other parallels in law. Illegal incomes, including bribe earnings, are indeed subject to incidence of income-tax. Over a decade ago, when Mumbai was reeling under criminal extortion by the underworld, the Income Tax Appellate Tribunal was forced to take note of ground realities and ruled that payment of extortion money was an allowable business expense. This was reversed by legislative amendment. In fact, the only catch could be that over time, the victim of harassment bribes could fall in love with the bribe extortionist - the Stockholm Syndrome in the world of bribery. The harassment would cease to be harassment and would become a way of life - precisely the concept acknowledged by the US' anti-bribery law as permissible 'facilitation payments'. Negative viewpoint The suggestion floated by the chief economic advisor to the finance ministry in a recent working paper that bribe giving for a class of bribes - 'harassment bribes' - be decriminalised is quite dubious. If the class of bribes he refers to as 'harassment bribes' involves a payment that a citizen has to make in order to get a good or a service which she is legitimately entitled to - like a tax refund, a pension, a telephone connection, a school admission, etc. - then the suggestion is a trivial one.

Logically, the 'harassed' citizen can approach a superior public official, elected representative or an ombudsman to complain against such harassment. The complaint can be probed, the 'harasser' warned or removed, and the 'harassment' of the citizen redressed. Such an institutional arrangement exists in most cases, or can be put in place with much lesser effort than to implement what the economic advisor suggests. He proposes an institutional arrangement where citizens can pay bribes, get their job done and then report it to the authorities without the fear of being punished. This begs the question why an authority, which can punish a bribe-taking official ex post facto, cannot prevent it prospectively . The logic of lack of evidence of the bribe is trivial in this case, because the fact that a citizen is being denied of a good or a service which she is legitimately entitled to, is prima facie mala fide. The reason why such institutional arrangements have almost ceased to work in our setting, however, has less to do with the incentive structure within the arrangement vis-a-vis whistle-blowing , but because of the sabotage of our institutions by the collusion of greedy profiteers, seeking illegitimate and windfall gains, and venal officials and corrupt ministers who are only too happy to oblige. This has been aggravated by the growing power of big capital and commodification of all aspects of our life. Arms of the state, which are supposed to draw the boundaries between the legal and illegal, are colluding with profiteers in pushing those boundaries into extinction. What we need is a reversal of this process and not a legitimisation of bribe-giving , which will possibly strengthen such collusion. Let us not miss the wood for the trees.


Endosulfan (ET)

The Indian pesticide industry has opposed listing endosulfan as a persistent organic pollutant (POP) under the Stockholm Convention, suggesting that the proposal is inspired by European agrochemical interests. Endosulfan was manufactured and exported out of Europe for over 55 years. There were no issues until 2001, when the sole European manufacturer (Bayer Crop Science) decided to phase out the product to promote their new products. After this, the EU in 2005 withdrew all authorisations for use of plant protection products containing endosulfan on account of data supports by the inventor. Two years later, the same MNC stopped manufacturing endosulfan, while continuing with its sales. The same year, the EU sought its listing as a POP before the Stockholm Convention. Endosulfan is the world's third largest selling generic insecticide, with a 40 million litre-plus market, valued at over $300 million. India is the world's No 1 producer and exporter of endosulfan with 80% of the global market, which accounts for about 450 crore of its 5,200 crore pesticide industry. This is the reason the EU banned endosulfan to make way for patented products manufactured by EU nations. Endosulfan has been in use in India for 40 years. We consume around 12 million litres annually, of which more than a third is by AP, Maharashtra and West Bengal. When no such harmful effects have been reported from these and other major consuming states, how can endosulfan cause problems in Kerala, which, even at its peak, was consuming a few kilolitres in 2005? Endosulfan was reviewed four times by central government committees and twice by the Kerala government. All gave a clean chit to endosulfan. We have full sympathy for the suffering of people of Kasargod in Kerala and the government must find out the real reason for their health problems. BARC studies indicate high level natural radiation areas off Kerala's coast. After the Japan nuclear crisis, World Nuclear Association also indicates high level of background radiation in Kerala and in Chennai. Coastal Kerala also has vast amounts of thorium in its soil. This indicates endosulfan isn't the cause for health problems faced by people of Kasargod.


Education reforms (ET)

The surge in the number of students from outside Delhi seeking admission to the capital's prestigio US colleges only shows the crisis of our higher education system. The lack of quality education in home states compels students to turn to Delhi, while the elite opt for foreign universities. Indian students rank second after their Chinese peers, accounting for 15% of all foreign students in US higher education. Drastic reform is called for, given the extent of rot in the system - poorquality school graduates, inadequate facilities, lack of accountability and poor quality outcome. We need to expand the higher education sector and improve quality at all levels. The National Knowledge Commission (NKC) holds that the higher education system needs around 1,500 universities nationwide to enable India to attain a gross enrolment of at least 15% by 2015. Such an expansion would need major changes in the funding and regulation of education. Expanding the base of education is also a key component of reform. The government should step up support for higher education. It should make education loans cheap and also explore lending directly to educational institutions as is done in the US. The cost of education will increase when private institutions fill the gap between demand for education and statefunded supply. Student loans should, therefore, be made available easily. Private companies should also expand their endowments and scholarships to build a rich talent pool. An improvement in the quality of education is a must in all segments, starting with primary schooling, given that only 15% of our graduates are fit to be employed. Making schools accountable to the local community, rather than to a distant state capital, would be a key reform. We also need a radical overhaul in our examination system and teaching. Standardised tests like the Scholastic Aptitude Test and Graduate Record Examination (GRE) to assess the study potential of students enrolling in universities in the US, are worth emulating. It should possible for students to take the tests throughout the year, and also multiple times.



Environment minister Jairam Ramesh has kicked off a furore, saying that faculty at the IITs and IIMs are not world class, unlike their students. What, if anything, is wrong with the IITs which were perceived to be among the finest science and engineering institutes anywhere? First, there's a grain of truth in what Ramesh has said: though there are individual faculty members in the IITs who research and publish in global journals, their numbers are low and likely to be falling. Professors and researchers at the cutting edge of any field find themselves stifled in most Indian campuses. Funds for primary research are tiny and hard to come by, governments and businesses in India are stingy when it comes to financing fundamental research or hiring PhDs, limiting the scope for research and knowledge creation. Serious scientists lack the environment for research and discussion here, and are forced to travel frequently. Unsurprisingly, many who sample the scholarly environment overseas, decide to stay over permanently. If you're world class, the rest of the world is ready to welcome you, but not India. We should be thankful to the existing faculty for staying put in this country and focusing at least on teaching, which, Ramesh would grant, has its uses. Outing the inconvenient truth is not enough. The government and the private sector must work to build and sustain centres of scientific excellence in India. History proves that funding is necessary but not sufficient for this. Other factors also matter. For example, for science and research to flourish you need a certain number of people working closely to generate and churn new ideas. As happened at the Cavendish labs, Cambridge, which attracted academic stars from all over the world in disciplines as diverse as nuclear physics and genetics in the inter-War years, or in the US, post-War.

In recent years, tiny Singapore is trying, with some success, to nurture a dynamic global academic community. India should liberalise its higher education policies to get similar results. We might not create MITs out of IITs overnight, but unless we make a start now, we'll never get there.


Philanthropy in India

Philanthropy of the corporate variety, to those prompted by piety, has always been integral to Indian social mores and tradition. In recent times, Azim Premji and his cohorts in technology-Sunil Mittal and Shiv Nadar--have helped it achieve a national profile through their work in education. Now, another of their ilk, Nadathur S Raghavan, or NSR, as he is popularly known, cofounder of Infosys, wants to deploy his millions, expertise and network to change the dynamics of philanthropy itself: how it is set, organised , governed and practised. Samhita Social Ventures , the newlyminted arm of the Nadathur Trust, hopes to alter the Indian philanthropic landscape through a series of initiatives. The first of these is, a philanthropy exchange or aggregator, like Give India or GuideStar India, that connects givers with causes and NGOs. This is just for starters. What NSR hopes to do is chaperone Indian philanthropy from a charitable, crisis-alleviation mode to a sector that can perhaps take on, and address, larger developmental issues. The emphasis is on engendering transformational change. He would like to do this by catalysing meaningful collaborations between foundations and donors on one side of the spectrum, and by building capacities and synergies among recipient NGOs on the other. Much of philanthropic money is directed at core causes, and little is deployed to strengthen and build capacities of institutions. If this continues, the absorptive capacity for funds among recipients will remain stunted, to the detriment of the entire sector. As a technocrat, NSR would also like to see greater infusion of technology in improving systems and processes, efficiency and impact. "We have to seriously look at the consortium approach to issues and delivery of services ," says Raghavan. "There has been little innovation (of the institutional type) in the social sector." From isolated impact... NSR, since his voluntary retirement from Infosys as joint managing director in 2000, has nurtured a bouquet of investments in tech-enabled and lifescience start-ups , and today manages an investment portfolio of about $600 million. His interests include management education-NSR Centre for Entrepreneurial Learning at IIMBangalore-and the social sector through Fame India, his NGO that focuses on children with autism and learning disabilities. Motivated by his work with children, especially the 'uttejana programme', which seeks to expose school children to social issues, Raghavan would like to start from the roots itself. "The feeling that 'I have to give' should be inculcated from childhood itself; it generates empathy," he says, while lamenting that the 'act of giving' is not as it ought to be in India. There is a degree of truth in his opinion . For a very long time, Indian philanthropy has been characterised by wellmeaning initiatives on alleviation of misery across swathes of the underprivileged and some forward movement on issues like education. But all this has been in small, geographic pockets, and in doses that fit the vision, reach and capacity of individual givers or grant-making organisations. The Indian social sector is littered with silos of exemplary activity, but with little interaction, cooperation, common standards, pooling of investments, or sharing of resources. Even credible data is hard to come by. "We can no longer fritter away resources sub-optimally ," insists Vijay Mahajan of Basix, a livelihoods and microfinance group. This is perhaps the reason why, despite decades of giving, India is still bereft of a vibrant philanthropy ecosystem : that resonates countywide, that influences public policy and the citizenry, that bares tangible, measurable impact, or that begins to inspire a whole new generation of givers. "Unfortunately, collaborations and partnerships are seen as new-fangled ideas thrown up by the west," says Priya Naik, CEO of Samhita. "It's an imperative for emerging economies." Naik, an alumna of Yale and the University of Michigan, has worked with the Poverty Action Lab of the Massachusetts Institute of Technology in the US. What is this new approach that Samhita is championing? And, why is the timing right for a transformational shift in Indian philanthropy?


Civil Aviation

The government's decision to expand the powers of the Directorate General of Civil Aviation (DGCA) and form a Civil Aviation Authority (CAA) is welcome. Today, the DGCA looks after aviation safety, issues licences and investigates crashes. In addition to these, the CAA will also have powers to monitor ticket prices and rule on consumer grievances. These are necessary powers, because in the past, airlines have shown that they are capable of colluding to raise prices during peak season or in sectors where some flights have been temporarily disrupted. In addition to these powers, the CAA should also be the agency monitoring India's air traffic control (ATC), a key component of our air safety systems. India's ATC, said to be among the most efficient in the world, operates under tremendous pressure in fairly adverse circumstances to keep an ever-growing number of aircraft safe in air and guide them through landing and takeoff, in mostly-congested airports. The cloud of aircraft hovering above India is getting bigger - and is forecast to only grow over time. To minimise the chances of accidents, it is necessary to boost safety measures, the quality of airports and the ATC's capability. For example, India's civil aviation sector will need 1,500 aircraft over the next 20 years. In another 10 years, the number of people travelling by air is forecast to rise six times, from today's 60 million to above 360 million. The government has realised that this will need a massive boost to building physical infrastructure and has called in the private sector to build and operate airports. Already, Delhi, Mumbai, Bangalore, Hyderabad and Kochi have airports built by private players; more will surely come. When private airports and airports owned by public sector Airport Authority of India coexist, it makes sense to divest ATC from the Airports Authority and bring it under the umbrella regulator. Air safety, like policing, is too vital a task to be left to private players; therefore, the government will need agencies like the CAA and the ATC to make sure that the ever-growing crowd of people taking to the skies finish their journeys safely.



Creating an enabling environment for people with disability should be among the foremost policy concerns for India, as it makes large investments in infrastructure. The national approach to the question of improved accessibility and opportunity for the disabled has barring a few exceptions such as access to polling booths been one of halfmeasures. Last year, the Centre took the welcome step of constituting a committee to draft a new law to replace the ineffective Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 but failed to press ahead. The Ministry of Social Justice and Empowerment should hasten the framing of this law with emphasis on removing barriers that affect people with disabilities of different kinds. This is no doubt a demanding task but the World Report on Disability by the World Health Organisation offers comprehensive resources for policy-making. The overarching goal must be to help the disabled achieve physical mobility, social interaction, and gainful employment. Universal design is the core principle guiding accessibility. For that to become the norm, India must adopt a culture of accessibility at all levels of government. It must also set mandatory standards. The benefits of changes produced by such measures as friendly footpaths, properly designed toilets, ramp-equipped public buildings, and easy-to-use transport will not be confined to the disabled but will cover a broader range of citizens, including parents with small children and the elderly. Transport access brings new opportunity, and in the case of people with disability the entire travel chain has to be considered for modification. Mainstreaming these goals would require a robust law and a regime of audits and certification. For existing public facilities, an active retrofitting programme will be necessary. Information and Communication Technology has immense potential to assist the disabled, and legal standards would make many more gadgets accessible; the United States has laws that lay down such requirements for telephones, television, and information kiosks. Beyond physical and systemic barriers, though, there is the attitudinal. A glaring example of prejudice is discrimination in employment, which the United Nations Convention on the Rights of Persons with

Disabilities prohibits. These are major challenges, but there is no reason why they cannot be addressed with sufficient political will, given the assertive national mood seeking measures to benefit different classes of citizens.


Agriculture reforms

In the rapidly transforming Indian economy all the attention has consistently centered on the emerging sectors, almost by default. Though not by design, agriculture has ended up a much neglected sector despite the fact that more than 60% of the population still depend on it for their livelihood. It's time we relooked at the sector in the context of new priorities like controlling food inflation, managing food security, improving productivity, reducing wastages and increasing farmers' income. Economic reforms have done wonders for various sectors in terms of productivity, income generation and consumer welfare. It does not make any sense to deprive agriculture of similar benefits any longer. Since it's not possible to go into all the issues facing the sector in this piece, I would rather limit myself to two most critical areas in the sector crying for reforms. While one relates to the marketing and distribution of agricultural produce, particularly for fresh produce; the other relates to the structure of ownership and leasing of land in the country. Laws and regulations governing these areas were created long time back in a different environment, and were probably relevant at that time. Ironically, a large section of these laws were originally created to protect the small farmers from unscrupulous landlords, moneylenders and traders. They have largely turned dysfunctional and counterproductive in the changed environment. Presently, they are working against the interest of both the farmers and consumers. In fact, agri produce is the only sector where one needs a licence to purchase through the Adhtiyaasin the mandis. First, let's look at trade in agricultural products in the country. Since farmers are prohibited by regulation to sell directly to aggregators, food processing companies and retailers, they are compelled to sell their produce to the middlemen at the mandis. The worst part of this arrangement is the lack of transparency in the price discovery process. Small farmers invariably fall prey to the middlemen and Adhtiyaasworking in tandem. The plight of the farmers is aggravated particularly in the case of perishable produce like fruits and vegetables. Distress sale remains a common phenomenon given the farmers' inability to store or transport products at will. Lack of adequate cold storage network in the country clearly remains a big hurdle. There is a very strong case for amending the Agricultural Produce Market Committees (APMC) Acts in different states to exempt fruits and vegetables and other perishables like fisheries from the ambit of the law. Exempting them from the restrictions will help streamline the distribution channels of the products, shortening the distance between the producer and consumer. Reducing the number of hands through which the product passes through will have a direct impact on the degree of wastage. It's worth mentioning here that about 25-40% of India's agri produce goes waste due to improper transportation, storage, warehousing and lack of cold chain infrastructure. Eliminating the middlemen's margins and reduction in wastage can have a twin impact; increasing realisation for farmers and decreasing consumer price. Reforming the APMC Acts to allow big organised retailers to buy directly from farmers, I believe, will lead to bigger investments in the cold chain infrastructure in the country. There is a strong case to give complete freedom to farmers to sell perishable produce directly to wholesalers, aggregators, food processing companies and retailers, in addition to selling in mandis. Fragmentation of landholdings in the country is another serious problem facing the sector today. The average size of landholding in the country has declined progressively from 2.63 hectares in 1996 to 1.06 hectares in 2004-05. Around 60% of the households today possess less than one hectare of land for cultivation. This has seriously affected the scale of operations, crop diversification and scope of aggregation of farm produce. Subsistence and marginal farming has unfortunately become the norm.

A possible solution to the above problem lies in legalising the leasing of agricultural land on long tenure basis through legislation. Fear of landowners about losing ownership rights while leasing it out to another party remains the biggest obstacle to leasing. Hence, one focal point of any proposed legislation should be to ensure that the landowner is not dispossessed of his land in the process of leasing and that the lessee has no tenancy rights. Prolonging the lease period to 10-15 years and removing any ceiling on size of lease would be two other important requirements for the private sector to contemplate entry into agriculture. Long duration and large size of leases will enable corporates to invest in technology to make the farms more productive. It's time the central government introduces a model land leasing Act in line with the model APMC Act. The state governments also need to align their own land tenure and tenancy Acts accordingly. Proper utilisation of farmland resources will help augment rural employment opportunities, which are generally not available, particularly for women. These opportunities will emerge both in cultivation and food processing. Growth of food processing in particular holds important implications for rural employment and income generation, besides acting as a key instrument against ruralurban migration. India has completed two decades of economic reforms. By and large, reforms have taken roots in large swathes of the economy. But the process will clearly remain incomplete as long as the long-overdue reforms in the agri sector are not completed. They are all the more important for being the most powerful instrument of inclusive growth in the country, a clear and unambiguous priority for the government today.


FM Radio expansion

The Union cabinet on Thursday gave the go-ahead to the third phase of FM radio expansion in India. There are many aspects to this that need to be celebrated. The first is that the maximum foreign-owned stake in a channel has been raised, if marginally, to 26 per cent. The government can be bolder in allowing foreign ownership. There s also the good news that licences in this stage will be assigned through an auction, as is best practice. Most importantly, however, the third phase means that FM radio will be extended to 227 more towns. (Currently, 86 cities have FM stations.) This will create, according to the government, 839 new radio channels, mostly in small towns that have no current radio footprint. This is excellent news. Smaller communities deserve the chance to have a local radio station all their own. Such stations, even if their content is owned by a larger corporate entity, frequently create a competitive edge by embedding themselves firmly in the community they serve, becoming an on-air billboard for its concerns those, at least, not directly political and a vocal, virtual public square. That this should happen to glue new, growing communities together is particularly helpful. In another aspect of the order, FM companies will be allowed to operate more than one station per city. This is also good news; the nature of marketing in this sector is that, while a single station might drift towards median tastes, the ability to diversify will encourage the development of niche stations. If too many FM stations sound the same, this restriction is the culprit and one might look forward to that changing very soon. Things have come a long way since private FM radio started broadcasting in our largest cities almost two decades ago. This next jump might be the largest, and most influential yet.


Disbanding SPOs: tackling Maoists

The Supreme Court s recent order to disband the anti-Maoist special police officers in Chhattisgarh is based on ideology, not on the Constitution. The Supreme Court has quashed the appointment of Special Police Officers (SPOs) by the state of Chhattisgarh as unconstitutional and violative of Articles 14 and 21 of the Constitution. The effect of the judgment is that the institution of SPOs working in Chhattisgarh and in other parts of the country under similar conditions will cease to operate.

SPOs have been appointed to perform the functions of regular police by protecting themselves and fellow citizens in areas where the environment has been threatened by insurgency. In Jammu and Kashmir, SPOs are the ones who constitute village protection committees that protect village communities from insurgents. The same mechanism was effectively used in Punjab during the days of militancy. In the SPO system , the members of the community are empowered to protect the community. Policemen can t be present in every house or village. Areas where there is an apprehension of breach of peace and security due to insurgency require the appointment of SPOs. The Police Act, 1861, provides for the appointment of SPOs. The language of the legislations may be different but various state police legislations have similar provisions. Those familiar with the ground realities will realise the utility of such SPOs who are representatives of the community to protect the community and supplement the normal police administration. The court s judgement creates a crisis situation. The state will now have to recover arms from the SPOs. This, in itself, is a daunting task. Every SPO realises he would be on the Maoists hit list. He would have only two options left: either join the Maoists or continue to retain arms to protect himself from the Maoists. Having been identified as an SPO without the backing of the state or arms to protect themselves, these SPOs will now be sitting ducks. The battle against the Maoists has been loaded against the Indian State. Maoists are now laying down terms for grant of amnesty to the SPOs. The vacuum created by their removal can t be filled easily by the local police. A reading of the court s judgement prima facie indicates that the ideology of its authors has prevailed over constitutionalism. A legitimate question that arises is whether the courts enforce the Constitution or ideologies? The Maoists are no reformers. Their principal objective is to destroy India s parliamentary democracy and establish a communist dictatorship in India. If the Maoists were to take over India, the judgement s authors and other well-meaning judges like them will not be manning the courts. The courts would be controlled by a Maoist ideology. The judgment itself makes for interesting reading. It s an ideological rationalisation of why the Maoists exist and fight for their causes and a denunciation of those who fight the Maoists. The State of Chhattisgarh claims that it has a constitutional sanction to perpetrate, indefinitely, a regime of gross violation of human rights in the same manner and by the same mode as done by the Maoists, it states, adding: Set against the backdrop of resource rich darkness of the African tropical forests, the brutal ivory trade sought to be expanded by the imperialist-capitalist expansionary policy of European powers, Joseph Conrad describes the grisly and the macabre states of mind and justifications advanced by men, who secure and wield force without reason, sans humanity, and any sense of balance. The judgement rationalises Maoist ideology by stating: People do not take up arms, in an organised fashion, against the might of the State, or against human beings without rhyme or reason. Guided by an instinct for survival and, according to Thomas Hobbes, a fear of lawlessness that is echoed in our conscience, we seek an order. However, when that order comes with the price of dehumanisation, of manifest injustices of all forms perpetrated against the weak, the poor and the deprived, people revolt. The judgement approvingly quotes The Dark Side of Globalisation: Thus the same set of issues, particularly those related to land, continue to fuel protest politics, violent agitator politics, as well as armed rebellion Are governments

and political parties in India able to grasp the socio-economic dynamics encouraging these politics or are they struck with a security-oriented approach that further fuels them? The judgement also denounces a contrarian approach: The culture of unrestrained selfishness and greed spawned by modern neo-liberal ideology, and the false promises of ever increasing spirals of consumption leading to economic growth that will lift everyone, under-gird this socially, politically and economically unsustainable set of circumstances in vast tracts of India in general and Chhattisgarh in particular. Undoubtedly, the judges have entered the political thicket. They have chosen a preferred course of economic policy and substituted the wisdom of the executive for their own wisdom of how Maoism is to be tackled. Effectively, the judgement disregards the basic constitutional feature of separation of powers. The law declared by the apex court binding on all subordinate authorities now is: Predatory forms of capitalism supported and promoted by the State in direct contravention of constitutional norms and values, often take deep roots around the extractive industries. After a detailed ideological discourse, the court goes on to find faults with the deployment of SPOs even though the Centre and the state legislation specifically empower them. It is held to be violative of Article 14 equality before the law as youngsters with little education background from among the tribals are being given these appointments, and violative of Article 21 the right to life and liberty as SPOs have low educational qualification and can t be expected to understand the danger of fighting Maoism. Hiring such SPOs would endanger their lives and the lives of others and, therefore, encouraging them is violative of Article 21. The payment of honorarium while performing the onerous task is yet another ground for quashing their appointments. If the court found the honorarium inadequate it could always direct a more humane honorarium. If it found that educational qualifications for becoming SPOs were inadequate, it could always direct the state to formulate a policy so that persons with reasonable qualification are appointed as SPOs. The court failed to realise that lives of ordinary citizens, including SPOs, are threatened by the Maoists. Thanks to the Supreme Court, it is now Advantage Maoists . The rationale of the judgement is ideology, not the Constitution. When a court acquires an ideology, it decides to frame a policy. It dismantles the constitutional mandate of separation of powers and enters the domain of the legislature and the executive. The rationale in this judgement has upset the constitutional balance. If the ideology of a judge decides constitutionality, the socio-political philosophy of the judge would become relevant. When the social philosophy of a judge is relevant, you are back to the dark days leading up to the Emergency. There is no greater threat to judicial independence than a judiciary committed to a socio-political ideology and not the Constitution. India s political process and Parliament must seriously consider the consequences of this judgement. (Arun Jaitley is the leader of Opposition in the Rajya Sabha. The views expressed by the author are personal)


Disbanding SPOs: tackling Maoists (2)

Laws cannot remain silent when the cannons roar, the Supreme Court of India declared earlier this week, upturning Cicero's dictum to pronounce a historic judgment on the violent darkness that has enveloped the heart of India in Chhattisgarh. While the State and Union governments have predictably announced their intention to seek a review, the court's decision to disarm and disband the forces of mostly young, barely literate, and poorly trained Special Police

Officers (SPOs) deployed by the state in the fight against Maoist insurgents is a blow for constitutional order. Modern constitutionalism, the court noted, posits that no wielder of power should be allowed to claim the right to perpetrate ... violence against anyone, much less its own citizens, unchecked by law and notions of innate human dignity of every individual. The burden of the judgment is simple: the country does face a threat from the Maoist insurgency but any attempt by the state to use lawless violence as a counter will only perpetuate and intensify the cycle of violence, as the death toll revealed by the Government of Chhattisgarh itself indicates. By default as well as design, the SPOs whether organised under the name of Salwa Judum' or Koya Commandos' have become the chief instrument of this lawless and failed counter-insurgency strategy. Innocent tribals have been the primary victims, either as targets of the SPOs or as poorly trained foot soldiers in a bloody war the government is not even prepared to properly finance. In demanding an end to the SPO system, the Supreme Court has acted as much out of concern for the hapless tribal population of Dantewada as for the tribal youth who were press-ganged by their individual circumstances into becoming cannon fodder for the state. Chhattisgarh as well as the Union of India were guilty of violating the fundamental rights of citizens at large and the SPOs themselves. The court has also made the link between Chhattisgarh's illegal counterinsurgency strategy and the wider neoliberal approach being followed by the government at the Central and State levels. This approach is spawning disaffection among the poor and giving a boost to insurgency. The Salwa Judum is the illegitimate product of a system that sees nothing wrong in giving tax breaks to the rich and guns to the poor to fight each other, the court said. But the Constitution is most certainly not a pact for national suicide', it concluded in ordering an end to this state of affairs. These are profound words. Both the Union of India and Chhattisgarh must immediately implement this splendid expression of judicial wisdom, not waste time in seeking a review.



"Archean to Anthropocene, the past is the key to the future is the theme of the annual meeting of the Geological Society of America to be held in Minnesota in October 2011. Anthropocene is not part of the geological timescale; it's the name of a new epoch and is yet to be formally adopted by the International Commission on Stratigraphy. The concept of Anthropocene, proposed in 2000 by Nobel Laureate Paul J. Crutzen, brings into focus the several human activities that have adversely impacted and caused irreversible damage to more than half of the earth's ice-free landmass. It also stands to represent the indelible imprint left behind by man on many natural systems. The global concentration of carbon dioxide, coinciding with the advent of the industrial revolution, marks the beginning of the new epoch. Large-scale conversion of forests into cropland and the lethal combination of industrial revolution and fossil fuel use have led to a sudden increase in carbon dioxide and other environmentally harmful gases in the atmosphere. The increase in CO{-2} has happened despite the presence of many natural buffering systems and in an extraordinarily brief geological time frame. The increased levels of the greenhouse gas have caused a cascading effect: the global mean temperature has gone up by 1C during the last century, and will probably keep rising. The oceans, which act as carbon sinks, have turned acidic by absorbing more carbon. But the expected rise in acidity by 0.3-0.4 pH by the end of this century may affect corals and dissolve the carbonated shells of many marine organisms. Nearly 20 per cent of the species found in large areas are invasive, and the disappearance of many species has certain markings of large-scale extinction. The current epoch Holocene is just about 11,500 years old. Epochs typically extend for many million years, and the beginning is defined as changes preserved in the rocks. Since the epoch-changing events by humans have taken place at an astonishingly accelerated rate, the rocks may not have registered them. But the chemical and biological changes unleashed by humans are set to have a long-lasting effect on the environment and ecology. They are bound to leave their footprints on the rocks even if the man's destructive activities were to end tomorrow. Anthropocene, if it is formally accepted, will probably be called an age,' a subunit of an epoch. But the concept is powerful: it can bring about radical changes in the mindset of scientists and policymakers in understanding the effects of human-nature interactions.