Marching with BRIC

The BRIC countries (Brazil, Russia, India, China) are about to crash into the G-6 list, displacing France, U.K., Germany and Italy. According to a Goldman Sachs report prepared in 2003, called "Dreaming with BRIC's - the path to 2050", only Japan and the USA will remain in the top six economic powers by 2050. The ranking at that point, according to the report, will be

1. China
2. USA
3. India
4. Japan
5. Brazil
6. Russia

India is forecast to maintain the steadiest growth rate throughout this period. If the predictions are correct, India's GDP should outstrip that of Japan by around 2030. In the words of a recent article in "Accountancy" magazine, the journal of The Institute of Chartered Accountants in England & Wales "..India's the one to watch !"

Many aspects of the report have raised eyebrows. One is the prediction that Brazil will outrank Russia. Another is a forecast that the currencies of the BRIC countries will appreciate by 300% against the US Dollar by 2050 !

The currency outlook is one which requires careful scrutiny and is likely to be the main indicator that matters are progressing according to the Goldman Sachs projections. The Indian currency steadily declined against the dollar after Independence. Some of us remember that in the 1950s the Rupee was 7 to the dollar ! However, that trend may well have been reversed. In 2005 the Rupee declined to 49 to the dollar. Today it is around 40, an appreciation of 18% over two years. While the prediction of a 300% increase may sound unrealistic, it is worth recalling the history of another currency - the Japanese Yen. In the mid-1970s the Yen was app. 300 to the US Dollar. Today it stands at 120. So the analysts of Goldman Sachs may yet be proved correct.

Danger signals abound, though. The growing (and highly visible) disparity between the upwardly mobile urban middle class and the teeming masses mired in poverty, requires the most urgent attention on the part of India's social engineers. Even the Goldman Sachs report points to the risk that political and social instability could derail the Indian Express.

It's worth repeating the words of the late Archbishop Romero of El Salvador " What good are beautiful highways and airports, all these beautiful skyscrapers, if they are fashioned out of the clotted blood of the poor who will never enjoy them ? " Read more!

Farmers' widows & children in Wardha: RV Bhavani

R V Bhavani, Director, B V Rao Centre for Sustainable Food Security, M S Swaminathan Research Foundation has sent us the following article

Linisha and Bharti Bhatero outside their ramshackle hut in Wadgaon village, Seloo block, Wardha

Over 60 percent of India's population is rural and dependent on agriculture and allied activities for their livelihood. The landholding situation is highly skewed with the majority being small and marginal farmers with landholdings of 2 hectare and less. The share of agriculture in the Gross Domestic Product has however been falling over the years. So has investment in agriculture per se as well as investment on agriculture research and in rural infrastructure - a phenomenon that has characterised the neo-liberal reform period beginning in the nineties. Insurance for crop failure is virtually non-existent. The agriculture extension system has failed. The farmer is largely left to take a beating on the Input (Credit, Technology, Inputs) and Price and Market fronts. Increasing number of suicides by farmers in rainfed farming areas (mainly the states of Andhra Pradesh, Karnataka and Vidarbha region of Maharashtra) since the late nineties is a manifestation of a serious malaise afflicting the Indian economy today. In fact, these are danger signals for the policy makers to sit up and take note but that sadly is not happening.

Their husbands/fathers have taken their lives, leaving behind the mothers and children to cope with the harsh realities of everyday existence. The situation is bleak; what do they have to look forward to, is the question that keeps coming to mind when one meets and speaks with them. It is a question of surviving from day to day. Most of the widows now work as farm labour and the children also go to work during weekends and holidays. While the women/girls get Rs.25/- to Rs.30/-, for five hours of work, the boys get about Rs.50 (in both cases, less than a dollar). In some families, atleast one son has dropped out of school to help their mother with farm work. In some families, the older son had been in a crucial year at school when the father committed suicide and that put an abrupt end to studies. The land in most cases is joint property or in the in-laws’ name. One could feel the anger in 17 year old Linisha’s voice, from Wadgaon village in Wardha district, when she said that her uncle now cultivates the land they had and her mother goes out to work as farm labour. Linisha has given her class X exams and would like to study further. Her sister Bharti, 13 has gone to class VIII. Their home is a ramshackle hut with asbestos roofing and mud flooring in the front room.

The insensitivity with which the agrarian distress relief packages are being implemented and the general apathy especially at the lower levels of administration also comes to light. Usha Dhale of Rohankheda village shelled out Rs.4000/- for a cow under the relief package. The cow is not yielding any milk and is an additional liability. Her father has taken it to his village so that it is not a burden on her. Asha Kurwade from Khambit village in Ashti block with one acre of land and no well was thrust with an engine for which she had to shell out Rs.5000/-. She has since borrowed from a moneylender at a rate of 5% per month to meet expenses when her children fell ill.
Asha Kurwade with her children, Khambit village, Ashti block, Wardha - what does the future hold for them?


The license for the fair price shop that Sushila’s husband Prakash Taksande used to run in Kharda village of Deoli block in Wardha district was withdrawn when he committed suicide. His wife, young Sushila who, hats off to her resilience, manages to have a smiling face all the time, was not considered for running the same, inspite of being class IX pass. She has not got any suicide relief either. The household of mother and two sons aged 12 and 7, runs on the rupees ten thousand she gets annually by leasing her four acre plot of land. In one village, the post office cuts Rs.20/- per child from the instalment deposited in the post office savings account as monetary support for education by a NGO.

Most families still have the debt outstanding, to the pressure of which their husbands succumbed, hanging over their heads. Some suffer from health problems, following the trauma of the husband’s death. What is however heartening in the scenario of gloom, are the aspirations of some of the children to study and the endeavor of the mothers to stand by them and strive to ensure that their desires are fulfilled. Nineteen year old Amol from Ashti village whose mother works as a helper at the anganwadi centre in the village will be completing an ITI course in wire work this year and hopes to take admission in class XI. Some of the families have children who are going to take their first steps in schooling and go to the balwadi or class I, and have a long way ahead.

The least the larger community could do is to ensure that these children do see some hope at the end of the tunnel and their aspirations are not thwarted even before they have taken shape. While it is a fact that by and large the scenario is not going to improve unless the ground realities of the agriculture that they do changes and necessary infrastructure and support services are in place, immediate support to the widows and their children is imperative. A small pilot initiative steered by the M S Swaminathan Research Foundation, a non-profit trust, is on in Wardha district of Vidarbha, where children of school going age from farmer suicide families are getting monetary support to ensure that they continue their education. 77 children from 37 families spread across the eight blocks of the district are covered at present. Children completing class X and XII now need help and counseling by way of courses they could join that would also give them some income earning skills instead of just leading to a run of the mill degree with no assurance of a job at the end of the day. The Rural College at Pipri, Wardha for instance offers a two-year diploma course in agriculture. Students undergoing the programme can if they wish to study further apply for admission to any degree programme other than engineering and medicine. Alternately, the diploma is also considered as valid qualification for certain jobs in the district administration. Children who had to drop out due to the sudden tragedy can also benefit by acquiring some vocational training skills that will help them to earn some additional income besides working just as farm labour. For instance, Nilesh, 19 of Paloti village is class X fail; so are brothers Narayan, 23 and Nitin, 22 of Sawli Wagh village. The Community Polytechnic at Pipri, Wardha offers six-month certificate courses in computer hardware repair, TV repair, two-wheeler repair, welding, electrical work etc. Undergoing such training can help them have an additional income earning skill in hand.

Ranjana with sons Abhishek (Class I) and Suraj (Class VI), Chincholi village, Karanjha block, Wardha: A long way to go...


Livelihood rehabilitation for the widows is also a matter of concern. Many have qualification ranging from class VIII pass to Class XII pass. Many are quite young too, in their early twenties to mid thirties. Most as mentioned earlier now work as farm labour. Life has virtually stopped midway on the tracks for them. Training in some skill that they can put to use while in their respective villages and make some money can help them get confidence, but it is also a challenge. A village may have only one such affected woman. The villages are spread out across the district, some being a hundred kilometers from the district headquarter, making a plan to bring them together for long periods of training difficult. Some of the women are members of self help groups. But only in one case we heard of a Self Help Group (SHG) having started a goatery enterprise with bank loan. Moving from just saving and lending to enterprise development and management is crucial if the quality of life is to improve. Uppermost on the minds of the mothers however, is the worry on what the future holds for their children, on what will happen after they have completed schooling so that they get a better deal in life.

Wardha abounds in educational institutions some with international renown; there are also many research institutes in the vicinity like the Central Institute of Cotton Research and National Bureau of Soil Science and Landuse Planning at Nagpur, just 70 kilometres away; The College of Agriculture in Nagpur is a century old. There is no dearth of intellectual capital either. The banks in the district led by Bank of India and State Bank of India, have undertaken a financial inclusion initiative. Historically, Wardha happens to be the base from where Gandhiji steered India’s freedom struggle and had all the potential for developing as a ‘Gandhi Zilla’ where everyone has a means of secure livelihood and can lead a life of dignity. Sixty years on however, the challenge is to stave the ignominy of being labeled a farmers’ suicide district. Read more!

"The" scam of the century?

Subroto Roy in the The Statesman claims that a huge scam is in the making:

The scheme involves private companies “borrowing” India’s foreign exchange reserves from the RBI, allegedly for the purpose of “infrastructure” creation ~ in collaboration with the American bank Citigroup, the American financial business, Blackstone Group, and possibly the American corporate giant, GE Capital too. Chidambaram took the unprecedented step of naming Parekh as well as Citigroup and Blackstone in the text of his Budget speech.

He then goes on to show how a similar Wall Street scam has defrauded the Central Banks of Poland, Malaysia, Portugal and Yugoslavia, and this is what is coming to India. Roy also tells us that he worked for a Wall Street firm founded by the same people who orchestrated this act, and he resigned when he was asked to develop contacts in India. Read more!

Crony Capitalism in India? Take II

During his keynote address at the Steel Summit 2007 organised by the Ministry of Steel and the Confederation of Indian Industry (CII), our Prime Minister made some interesting observations:

A comment has been made recently that most of our business leaders who have become billionaires seem to be operating in either relatively protected business environments, in oligopolistic or monopolistic markets or are dealing in scarce resources. If this observation is true then someone could say that we are promoting crony capitalism. That certainly should not be the case. (full speech available at pib.nic.in)

Now, what exactly is crony capitalism? It is somewhat more complex than corruption, although that distinction is often not made. Let us start with none less than Gary Becker and Richard Posner:

Crony capitalism is a system where companies with close connections to the government gain economic power not by competing better, but by using the government to get favored and protected positions. These favors include monopolies over telecommunications, exclusive licenses to import different goods, and other sizeable economic advantages. Some cronyism is found in all countries, but Mexico and other Latin countries have often taken the influence of political connections to extremes.

Of course, much of the discourse on crony capitalism is associated with Asia (in particular in the wake of the Asian crisis) and Latin America. Paul Krugman has been one of the few US economists to talk about cronyism in the US. In 2003 he wrote in an NYT column entitled Who's Sordid Now?

Cronyism is an important factor in our Iraqi debacle. It's not just that reconstruction is much more expensive than it should be. The really important thing is that cronyism is warping policy: by treating contracts as prizes to be handed to their friends, administration officials are delaying Iraq's recovery, with potentially catastrophic consequences. ... It's rarely mentioned nowadays, but at the time of the Marshall Plan, Americans were very concerned about profiteering in the name of patriotism.. Iraq's reconstruction, by contrast, remains firmly under White House control. And this is an administration of, by and for crony capitalists.

While at the wake of the Asian crisis everyone was keen to show how the Korean miracle was really no miracle at all and the crisis was really an effect of the cronyism that went unnoticed until then, one critical question about the so-called "cronyism" went unanswered. It was raised by Alice Amsden in her pioneering work: why is that in South Korea, an extremely tight nexus between the state and business could bring about such tremendous increase in growth rates whereas everywhere else it has only resulted in the enrichment of a few at the cost of national development? Authors have offered many different answers. Amsden's own answer was that the South Korean state was able to get businesses to contribute to national development in exchange for the favours it granted them. Nothing as given for "free". I have argued in my book, Indian capitalism worked quite differently from Japanese of South Korean or Taiwanes capitalism. In these miracle economies, the focus of the state was on macro-economic growth and businesses were forces to operate in sectors, and with prices and costs where macro-economic growth would be maximized. The emphasis was not on corporate profits, but on maximizing revenue and productivity and capacity utilization. This focus away from profits and on growth was the most important thing the state could extract from business in exchange of all the resources it supplied. In India, and in most parts of the world, the state simply supplied subdized resources to its corporations and the corporations did what was in their interest: increase profits by whatever means possible, in most cases through practices through cartels, creating barriers to new competition and price manipulation. In East Asia, innovation and maximization of productivity were the only means to corporate growth (the data comparing profits in India and East Asia are quite illuminating, the methodological problems of comparing profitability not withstanding). Of course, the brunt of this was born by East Asian workers, who gain much by way of income, but lost a lot by way of rights and political freedoms.

In India, the state focused on creating many procedural and bureaucratic controls on business, which could all be bypassed if you were large enough a player but became insurmountable barriers for the small entrepreneur. This did little to create a synergy between corporate growth and profitability, macro-economic growth, productivity and innovation.

Globalization was supposed to cure these ills, by having the state withdraw from its regulatory role. Really, did it? Well, if Manmohan Singh is asking that question, then surely I cannot be blamed for being skeptical. Read more!