november 26, 2011
Greece and Italy in Europe One by one Europe’s economies are running into trouble, but the European Union has no solutions to offer.
T
here could be no better illustration of a nation under siege within and from without than Greece today. To remain functional and even pay salaries in the coming months, the Government of Greece needs access to the €8 billion available to it as the next tranche under its agreement with international lenders. But that access depends on the implementation of additional austerity measures that would severely hit a population already burdened with spending cuts and income losses. An analysis by writers of the Financial Times estimates that just the spending cuts and tax increases required by the austerity package would reduce the average post-tax income of Greek citizens by as much as 14%. But this does not factor in the loss of employment that would follow the fall in demand that would result from the austerity package; the official unemployment rate is already a high 18.4%. And, it does not take note of the inevitability of a demand shrinkage affecting the government’s tax revenues to an extent where it would find it difficult to meet “bailout targets” on deficits and borrowing, thereby keeping the nation locked into debt and austerity. Socialist Prime Minister George Papandreou recognised that popular opposition to the package would be difficult to address but lacked any short-term alternative to austerity-for-finance. He also had to deal with his political opponents, who had no alternative either but wanted to absolve themselves of any responsibility for the measures. In the event, Papandreou announced a referendum to win social sanction to proceed. If it had been held, Greece would have voted “No” and the country would possibly have had to step out of the eurozone with unforeseen consequences. What followed was a retraction of the referendum announcement, the resignation of the prime minister and the constitution of a national “unity” government involving all major parties, headed by the “technocrat” Lucas Papademos, and an undertaking by the new government that it would implement the austerity measures. But Papademos has limited political support, let alone any larger social sanction. He will therefore find it difficult, despite his declared intention, to implement the austerity programme. As of now the problem Greece faces is that it does not have a currency of its own that it can mint, it cannot devalue and it does not have the right to impose protectionist barriers against eurozone members. So it cannot even attempt to spend its way out of the crisis. It needs to be allowed to do that by its partners, who must Economic & Political Weekly EPW November 26, 2011 vol xlvi no 48
infuse liquidity on terms and in volumes that give the government a chance to push for recovery through means that are also politically feasible. The government must also be willing to tax the rich and regulate financial firms headquartered abroad. The first constraint is the unwillingness of finance capital, represented by the Institute of International Finance, to adequately share “adjustment costs” in a crisis substantially caused by them. Through the tortuous negotiations on burden-sharing for a Greek-rescue, one bottleneck has been the degree to which banks must be required to accept a haircut on the loans they made to Greece. In what is presented as an important concession, the relevant figure on offer has risen from nil to 20% to the recent 50% of loan value. But no sooner had the agreement been struck it became clear, as is typical of the banks, that they had put in accounting principles which erode the value of the cut. According to reports, the bankers’ offer under negotiation would involve the issue of new bonds for which the current paper would be swapped. However, those bonds would carry a higher 8% interest rate and conditions regarding additional annual payments, if and when the Greek economy recovers. The second constraint is that eurozone governments and finance capital are unwilling to accept financing measures to support desperate governments that would involve an expansion of liquidity that is backed by a joint guarantee from all of them. Moreover, even to the extent that liquidity is on offer outside the austerity-based restructuring package, such as through the European Financial Stability Facility, it is largely aimed at recapitalising banks rather than governments. No deficit-spending by governments but only spending cuts, seems to be the slogan. Given this scenario there is much to report but little to say about Greece. Notwithstanding all the negotiations, the little money and the political changes, there is no workable solution in sight. The eurozone needs Greece and Greece needs the eurozone for stability in the medium term at least. But both politically and economically it seems difficult for Greece to stay in Europe. But, it is now becoming clear that this impasse is not about Greece. Much bigger players are waiting in the wings. Attention has shifted to Italy whose gross debt to GDP ratio stands at 121% as compared with Greece’s 166%. Creditors are now declaring that the not-so-small steps that Italy took to cut spending are inadequate, and they are either declining to lend or are only willing
7
EDITORIALS
to lend at high interest rates to its government. That raises the issue as to where the Italian government can obtain the €650 billion it needs for the next three years. This is a huge sum compared with what Greece needed. The issue then is how Europe will deal with Italy without giving up on its unsustainable monetary and fiscal shibboleths. But deal it must, if the euro has
to survive: Italy accounts for close to 17% of eurozone GDP as compared with 2.3% for Greece. Hence there is talk of the need for a “big bazooka”. But no sign of who will wield the gun. Even China is being invited. The issue is not just the euro. It is one of preventing a European, and therefore a global, financial and economic crisis. But history does not seem to be a good teacher.
Truth and Justice: Buried in the Ground With laws like the AFSPA , when will truth and justice prevail in Jammu and Kashmir?
L
ike all Jammu and Kashmir (J&K) chief ministers after the dreadful years of president’s rule from 1990 to 1996, Omar Abdullah too stands discredited, especially in the wake of the 2010 uprising of the “stone pelters” which was later brutally suppres sed. A widely held opinion in the Kashmir Valley is that the chief minister, whether of the National Conference (NC) or the People’s Democratic Party, on matters of life and death, is not accountable to the people of J&K; he or she is answerable only to New Delhi. Union Home Minister P Chidambaram perhaps understands the importance of the change of public perception that Omar Abdullah needs if the Congress-NC coalition is to win another term in office. The home minister and the chief minister are also concerned about extending their turf in relation to that of the Ministry of Defence. The question of de-notifying two districts in Kashmir (Srinagar and Budgam) and two in Jammu (Jammu and Samba) under the Armed Forces (Special Powers) Act – AFSPA – must be seen in this light. Indeed, bringing the differences between the union ministries of home affairs and defence into the open also serves the purpose of conveying the impression of openness in decisionmaking. In a recent meeting of the unified command, the army’s senior-most commander in J&K is said to have argued (The Hindu, 11 November 2011) that the de-notification of the AFSPA would “provoke large-scale disturbances which in the context of looming withdrawal of western forces from Afghanistan and the enhanced pressures from members of the Organisation of Islamic Conference on the United Nations Security Council would lead to Jammu and Kashmir’s independence”. This, of course, is nothing but a reiteration of the official view that the AFSPA is a necessary measure to prevent secession and that without it, the insurgency will gain. But what has prompted all the theatrics? The year 2011 is a long way from 1989 when, under army occupation, it all began – rape, torture, enforced disappearance and extrajudicial execution (false encounters). The State Human Rights Commission (SHRC) of J&K, otherwise a fig leaf to cover up a state that stands naked on the human rights front, has begun to feel acutely embarrassed. In August this year it released a report on unmarked graves in four districts – Bandipora, Baramulla, Kupwara, and Handwara – taking suo motu cognisance of the matter after verifying 2,156 unidentified bodies in unmarked graves (“Buried Justice”, EPW editorial, 27 August 2011). Indeed, J&K’s SHRC acknowledges and corroborates part of the December 2009 report “Buried Evidence” of the International People’s Tribunal on Human Rights and Justice in Indian-Administered Kashmir (IPTK), and there is thus an implicit
8
a cceptance that atrocities have been committed. Now the DNA profiles can be used to identify the dead. The official claim that all the unidentified graves hold the bodies of Pakistani terrorists can thus be verified against the contrary view that those unmarked graves hold the bodies of local Kashmiris who were subjected to enforced disappearance and were subsequently killed in fake encounters. If the latter view is proved correct, will investigation, prosecution of the perpetrators, exemplary punishments and reparations follow? (Even in the former, international convention protects all persons from enforced disappearance.) Will the witnesses be protected? Omar Abdullah has called for a Truth and Reconciliation Commission. But can there be reconciliation without justice? The fact is that provisions in laws like the AFSPA and the Central Reserve Police Force (crpf) Act, and in Criminal Procedure Code (CrPC) 197 (where official sanction of prosecution is required) give legal immunity to army, paramilitary and police officers for their actions. Nevertheless, we need to know how many unmarked graves there are in J&K as a whole, the identity of the bodies in those graves, the circumstances of the deaths, whether the victims were tortured, killed in fake encounters, and so on. The accused have to be prosecuted and exemplary punishments then have to be meted out to the guilty. What is the record of governments so far? The virtual immunity to the armed forces, the paramilitary and the police means that they know that they are never going to be prosecuted and so they believe they have a licence to rape and kill (in fake encounters) in the discharge of their official duties. The Jammu and Kashmir Coalition of Civil Society, referring to an affidavit submitted to the J&K High Court by a joint secretary of the Ministry of Defence on 5 June 2009, finds that there is not a single instance where the ministry has given its sanction for prosecution under the AFSPA. Omar Abdullah may want to expand the turf area of the J&K police vis-à-vis the army, but the human rights record of the former is also despicable. Incriminating evidence that Kuldeep Khoda, the present J&K Director General of Police, when he was Deputy Inspector General 15 years ago, “instructed and provided arms and ammunition, and all the logistics” for the killing of three persons abducted from Bhaderwah in Doda district (whose bodies were allegedly thrown in the river Chenab and have not been found) has led to pleas that he be put on trial and be interrogated (Interview of Parvez Imroz, human rights lawyer and civil rights activist, The Kashmir Walla, 7 October 2011). Clearly, as long as laws like the AFSPA, Section 17 of the CRPF Act, and Section 197 CrPC are on the statute, one wonders if truth and justice will ever prevail in J&K. November 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
EDITORIALS
to lend at high interest rates to its government. That raises the issue as to where the Italian government can obtain the €650 billion it needs for the next three years. This is a huge sum compared with what Greece needed. The issue then is how Europe will deal with Italy without giving up on its unsustainable monetary and fiscal shibboleths. But deal it must, if the euro has
to survive: Italy accounts for close to 17% of eurozone GDP as compared with 2.3% for Greece. Hence there is talk of the need for a “big bazooka”. But no sign of who will wield the gun. Even China is being invited. The issue is not just the euro. It is one of preventing a European, and therefore a global, financial and eco nomic crisis. But history does not seem to be a good teacher.
Truth and Justice: Buried in the Ground With laws like the AFSPA , when will truth and justice prevail in Jammu and Kashmir?
L
ike all Jammu and Kashmir (J&K) chief ministers after the dreadful years of president’s rule from 1990 to 1996, Omar Abdullah too stands discredited, especially in the wake of the 2010 uprising of the “stone pelters” which was later brutally suppres sed. A widely held opinion in the Kashmir Valley is that the chief minister, whether of the National Conference (NC) or the People’s Democratic Party, on matters of life and death, is not accountable to the people of J&K; he or she is answerable only to New Delhi. Union Home Minister P Chidambaram perhaps understands the importance of the change of public perception that Omar Abdullah needs if the Congress-NC coalition is to win another term in office. The home minister and the chief minister are also concerned about extending their turf in relation to that of the Ministry of Defence. The question of de-notifying two districts in Kashmir (Srinagar and Budgam) and two in Jammu (Jammu and Samba) under the Armed Forces (Special Powers) Act – AFSPA – must be seen in this light. Indeed, bringing the differences between the union minis tries of home affairs and defence into the open also serves the purpose of conveying the impression of openness in decisionmaking. In a recent meeting of the unified command, the army’s senior-most commander in J&K is said to have argued (The Hindu, 11 November 2011) that the de-notification of the AFSPA would “provoke large-scale disturbances which in the context of loom ing withdrawal of western forces from Afghanistan and the enhanced pressures from members of the Organisation of Islamic Conference on the United Nations Security Council would lead to Jammu and Kashmir’s independence”. This, of course, is nothing but a reiteration of the official view that the AFSPA is a necessary measure to prevent secession and that without it, the insurgency will gain. But what has prompted all the theatrics? The year 2011 is a long way from 1989 when, under army occupa tion, it all began – rape, torture, enforced disappearance and extraju dicial execution (false encounters). The State Human Rights Com mission (SHRC) of J&K, otherwise a fig leaf to cover up a state that stands naked on the human rights front, has begun to feel acutely embarrassed. In August this year it released a report on unmarked graves in four districts – Bandipora, Baramulla, Kupwara, and Handwara – taking suo motu cognisance of the matter after verify ing 2,156 unidentified bodies in unmarked graves (“Buried Justice”, EPW editorial, 27 August 2011). Indeed, J&K’s SHRC acknowledges and corroborates part of the December 2009 report “Buried Evidence” of the International People’s Tribunal on Human Rights and Justice in Indian-Administered Kashmir (IPTK), and there is thus an implicit
8
a cceptance that atrocities have been committed. Now the DNA profiles can be used to identify the dead. The official claim that all the unidentified graves hold the bodies of Pakistani terrorists can thus be verified against the contrary view that those unmarked graves hold the bodies of local Kashmiris who were subjected to enforced disappearance and were subsequently killed in fake encounters. If the latter view is proved correct, will investigation, prosecution of the perpetrators, exemplary punishments and reparations follow? (Even in the former, international convention protects all persons from enforced disappearance.) Will the witnesses be protected? Omar Abdullah has called for a Truth and Reconciliation Commis sion. But can there be reconciliation without justice? The fact is that provisions in laws like the AFSPA and the Central Reserve Police Force (crpf) Act, and in Criminal Procedure Code (CrPC) 197 (where official sanction of prosecution is required) give legal immunity to army, paramilitary and police officers for their ac tions. Nevertheless, we need to know how many unmarked graves there are in J&K as a whole, the identity of the bodies in those graves, the circumstances of the deaths, whether the victims were tortured, killed in fake encounters, and so on. The accused have to be prose cuted and exemplary punishments then have to be meted out to the guilty. What is the record of governments so far? The virtual immu nity to the armed forces, the paramilitary and the police means that they know that they are never going to be prosecuted and so they believe they have a licence to rape and kill (in fake encounters) in the discharge of their official duties. The Jammu and Kashmir Coalition of Civil Society, referring to an affidavit submitted to the J&K High Court by a joint secretary of the Ministry of Defence on 5 June 2009, finds that there is not a single instance where the ministry has given its sanction for prosecution under the AFSPA. Omar Abdullah may want to expand the turf area of the J&K police vis-à-vis the army, but the human rights record of the former is also despicable. Incriminating evidence that Kuldeep Khoda, the present J&K Director General of Police, when he was Deputy Inspector General 15 years ago, “instructed and provided arms and ammunition, and all the logistics” for the killing of three persons abducted from Bhaderwah in Doda district (whose bodies were allegedly thrown in the river Chenab and have not been found) has led to pleas that he be put on trial and be interrogated (Interview of Parvez Imroz, human rights lawyer and civil rights activist, The Kashmir Walla, 7 October 2011). Clearly, as long as laws like the AFSPA, Section 17 of the CRPF Act, and Section 197 CrPC are on the statute, one wonders if truth and justice will ever prevail in J&K. November 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
EDITORIALS
Crime and Quick Punishment Fast-tracking criminal cases against MPs and election candidates will go some way in restoring faith in the system.
N
ever since Independence have so many politicians and corporate bigwigs involved in political “fixing” been lodged in jail at the same time, pending trial on criminal charges. This suggests that there is no better time to move on electoral reforms to deal with the increasing criminalisation of politics. There are several useful suggestions that are already under discussion. Recently, in a public interest litigation (PIL) before the Supreme Court, former Chief Election Commissioner J M Lyngdoh along with former Chief of Air Staff S Krishnaswamy, former Punjab Director General of Police Julio Ribeiro, former Border Security Force Director General of Police Prakash Singh and others appealed for quick disposal of criminal cases against Members of Parliament (MPs). Their PIL states that 162 MPs (of the total 545) are involved in different criminal cases and of these 76 face serious charges. “Such persons contaminate the sociopolitical fabric of India whereby the constituents of life and personal liberty of citizens suffer serious damage and lead to a serious weakening of the entire system which is already in evidence, and has been for some time”, says the PIL. The Court has issued notices to the Election Commission of India, and the central and state governments to respond to the petition. However, according to the Representation of the People Act, 1951, only those who have been convicted by a trial court and sentenced to more than two years’ imprisonment are prohibited from contesting elections for six years after the completion of their jail term. This means that a person facing serious criminal charges (like murder, rape, kidnapping and extortion) can contest elections. Furthermore, even if a sitting legislator or parliamentarian is convicted of an offence attracting more than two years’ imprisonment, he can continue in office by filing an appeal before a higher court and getting a stay. The PIL has reminded the apex court about suggestions made in 2002 by the National Commission to Review the Working of the Constitution. These included the establishment of special courts to decide cases against candidates within a period of six months or less. Potential candidates against whom charges are pending could take the matter to these special courts, which would decide if there was a prima facie case justifying the framing of charges. Special courts would be constituted at the level of high courts and decisions would be appealable only to the Supreme Court.
From 50 Years Ago
Vol Xiii, No 47, november 25, 1961
from the london end
Growth Target for Atlantic Community The American proposal for a 50% increase by 1970 of the gross national product of the twenty nations who are members of the OECD has certainly put the British in a
At the same time, the commission recommended that any person convicted for crimes of murder, rape, smuggling and dacoity should be permanently barred from contesting political office. Apart from the delays in the criminal justice system that allow those facing criminal charges to continue as lawmakers, equally insidious is the public cynicism that this state of affairs generates. Most voters are convinced that success in politics only comes with the help of muscle and money power, that it is the quickest way to more power and money and therefore “dirty politics” is not for those who do not have the stomach to indulge in it. The criminalisation of politics itself is nurtured by many factors. There is the issue of the “winnability” of a candidate based on his/her caste and religion and the ability to spend obscene amounts of money. At times, people vote for individuals charged with serious crimes and corruption because they believe they have helped the community in “times of trouble”. Often the winning party “withdraws” criminal cases against its supporters and the community leaders who campaigned for its candidates. In fact, many candidates even make such veiled electoral promises. These are practices that simply feed into the cesspool of crime and politics. The Election Commission of India and the Ministry of Law and Justice have held seven regional consultations on electoral reform in the last one year and an all-party meeting is awaited. The government is expected to introduce a bill in the forthcoming winter session that will prevent those charge-sheeted for serious crimes from contesting elections until the trial court acquits them. The bill also provides for a permanent debarring from elections of candidates with a criminal record who fail to disclose this history. Admittedly, there is always the prospect of false cases being foisted on political rivals. The present Election Commission chief has suggested that to circumvent harassment of this sort, only charges filed at least six months before polling would be considered cause to debar a person from contesting. Whether this bill will have smooth sailing is anybody’s guess. Even if it is enacted, meaningful change is ultimately possible only when the electorate recognises the link between crime and politics, its effect on democratic functioning and demands implementation of such laws.
very embarrassing position. This target for economic growth was discussed at the OECD conference which opened in Paris on Thursday last week. The American proposal quite obviously is an attempt to answer the Soviet challenge made by Mr Khrushchev at the 22nd Congress of the Soviet Communist Party when he set a similar growth target for the Soviet economy envisaging annual expansion of between 9 and 10% for the next 20 years. The American proposal has helped to highlight the fact that two of the most important countries of the industrialised West
Economic & Political Weekly EPW November 26, 2011 vol xlvi no 48
– the UK and the USA – have, over the last 10 years, achieved a remarkably slow rate of growth… …A pious phrase was also thrown in about the fact that OECD should not appear to be a “rich man’s club”, but should show that it intended to raise living standards, both inside and outside its membership. The proposal was also attacked by Western Germany, mainly because such a definite rate of growth might not be completely compatible with the idea of a free market economy. The French, on the other hand, were reported to be “not shocked” by the proposal.
9
EDITORIALS
Crime and Quick Punishment Fast-tracking criminal cases against MPs and election candidates will go some way in restoring faith in the system.
N
ever since Independence have so many politicians and corporate bigwigs involved in political “fixing” been lodged in jail at the same time, pending trial on criminal charges. This suggests that there is no better time to move on electoral reforms to deal with the increasing criminalisation of politics. There are several useful suggestions that are already under discussion. Recently, in a public interest litigation (PIL) before the Supreme Court, former Chief Election Commissioner J M Lyngdoh along with former Chief of Air Staff S Krishnaswamy, former Punjab Director General of Police Julio Ribeiro, former Border Security Force Director General of Police Prakash Singh and others appealed for quick disposal of criminal cases against Members of Parliament (MPs). Their PIL states that 162 MPs (of the total 545) are involved in different criminal cases and of these 76 face serious charges. “Such persons contaminate the sociopolitical fabric of India whereby the constituents of life and personal liberty of citizens suffer serious damage and lead to a serious weakening of the entire system which is already in evidence, and has been for some time”, says the PIL. The Court has issued notices to the Election Commission of India, and the central and state governments to respond to the petition. However, according to the Representation of the People Act, 1951, only those who have been convicted by a trial court and sentenced to more than two years’ imprisonment are prohibited from contesting elections for six years after the completion of their jail term. This means that a person facing serious criminal charges (like murder, rape, kidnapping and extortion) can contest elections. Furthermore, even if a sitting legislator or parliamentarian is convicted of an offence attracting more than two years’ imprisonment, he can continue in office by filing an appeal before a higher court and getting a stay. The PIL has reminded the apex court about suggestions made in 2002 by the National Commission to Review the Working of the Constitution. These included the establishment of special courts to decide cases against candidates within a period of six months or less. Potential candidates against whom charges are pending could take the matter to these special courts, which would decide if there was a prima facie case justifying the framing of charges. Special courts would be constituted at the level of high courts and decisions would be appealable only to the Supreme Court.
From 50 Years Ago
Vol Xiii, No 47, november 25, 1961
from the london end
Growth Target for Atlantic Community The American proposal for a 50% increase by 1970 of the gross national product of the twenty nations who are members of the OECD has certainly put the British in a
At the same time, the commission recommended that any person convicted for crimes of murder, rape, smuggling and dacoity should be permanently barred from contesting political office. Apart from the delays in the criminal justice system that allow those facing criminal charges to continue as lawmakers, equally insidious is the public cynicism that this state of affairs generates. Most voters are convinced that success in politics only comes with the help of muscle and money power, that it is the quickest way to more power and money and therefore “dirty politics” is not for those who do not have the stomach to indulge in it. The criminalisation of politics itself is nurtured by many factors. There is the issue of the “winnability” of a candidate based on his/her caste and religion and the ability to spend obscene amounts of money. At times, people vote for individuals charged with serious crimes and corruption because they believe they have helped the community in “times of trouble”. Often the winning party “withdraws” criminal cases against its supporters and the community leaders who campaigned for its candidates. In fact, many candidates even make such veiled electoral promises. These are practices that simply feed into the cesspool of crime and politics. The Election Commission of India and the Ministry of Law and Justice have held seven regional consultations on electoral reform in the last one year and an all-party meeting is awaited. The government is expected to introduce a bill in the forthcoming winter session that will prevent those charge-sheeted for serious crimes from contesting elections until the trial court acquits them. The bill also provides for a permanent debarring from elections of candidates with a criminal record who fail to disclose this history. Admittedly, there is always the prospect of false cases being foisted on political rivals. The present Election Commission chief has suggested that to circumvent harassment of this sort, only charges filed at least six months before polling would be considered cause to debar a person from contesting. Whether this bill will have smooth sailing is anybody’s guess. Even if it is enacted, meaningful change is ultimately possible only when the electorate recognises the link between crime and politics, its effect on democratic functioning and demands implementation of such laws.
very embarrassing position. This target for economic growth was discussed at the OECD conference which opened in Paris on Thursday last week. The American proposal quite obviously is an attempt to answer the Soviet challenge made by Mr Khrushchev at the 22nd Congress of the Soviet Communist Party when he set a similar growth target for the Soviet economy envisaging annual expansion of between 9 and 10% for the next 20 years. The American proposal has helped to highlight the fact that two of the most important countries of the industrialised West
Economic & Political Weekly EPW November 26, 2011 vol xlvi no 48
– the UK and the USA – have, over the last 10 years, achieved a remarkably slow rate of growth… …A pious phrase was also thrown in about the fact that OECD should not appear to be a “rich man’s club”, but should show that it intended to raise living standards, both inside and outside its membership. The proposal was also attacked by Western Germany, mainly because such a definite rate of growth might not be completely compatible with the idea of a free market economy. The French, on the other hand, were reported to be “not shocked” by the proposal.
9
HT PAREKH FINANCE COLUMN
Could It Happen Here? On Sovereign Debt and Bank Capital Suman Bery
India does not suffer the eurozone problem of a federal central bank with a restricted mandate. What India does have in common with Europe is capitalconstrained banks stuffed full of government debt issued by a fiscally over-extended sovereign, in a slowing economy.
Suman Bery (
[email protected]) is Country Director, India Central, International Growth Centre.
10
T
he crisis of the euro dominated the early November meeting of the leaders of the G-20 in Cannes. A week later, as this column is being written, the crisis threatens to move on from the relatively manageable scale of Greece to the potentially much more damaging case of Italy. The bold agenda for global monetary and financial reform articulated by President Nikolas Sarkozy when France assumed the presidency of the G-20 a year ago has been almost completely eclipsed, undermining France’s aspiration to assert European intellectual leadership against an errant United States (US) and a rising Asia. Instead, at their meeting in Poland some months ago euro area finance ministers had to endure being lectured to by the US secretary of the treasury, Timothy Geithner. More recently, the chief executive of the newly-created European Financial Stability Facility (EFSF), Klaus Regling, has travelled to Beijing for resources to support the rescue of European banks, to no apparent avail. Fearing that China might steal a march over India, Finance Minister Pranab Mukherjee has indicated that India may agree to contribute funds to a European rescue, if channelled through the International Monetary Fund. There is accordingly little question that India has important economic and political interests in the outcome of the euro crisis. In this column though, I wish to take a look at possible implications of the crisis for India’s domestic financial management. I do this recognising both that the crisis is far from over, and that with any major economic convulsion, there are likely to be multiple underlying causes, both political and economic. What has been on display in the case of Greece and now threatens Italy is a problem of debt management. Debt obligations of the sovereign are maturing and need to be refinanced (“rolled over”). The
interest rate now being demanded by the private markets to renew this debt implies insolvency. This in turn reflects a judgment that the fiscal adjustment (including asset sales) needed to ensure long-term sustainability at projected rates of growth of the economy is beyond levels that are politically feasible. Much of this debt is held by euro area banks, both within and outside Greece. The diversification of ownership to banks outside the host country was encouraged by the introduction of the euro, which was assumed to remove exchange rate risk within the eurozone, and by the riskadjusted capital requirements stipulated by the Basel Committee which have throughout assigned zero credit risk to sovereign obligations. This much is straightforward. What is trickier to understand is how the markets assessed country risk with the introduction of the euro. By the terms of the Maastricht Treaty that brought the euro into existence, each euro area government remained fiscally independent and sovereign. For those euro members on the periphery of the eurozone the big development was the sharp reduction in borrowing spreads over benchmark German bonds (bunds). This “convergence” was only partial, and resulted in two outcomes, both of which have turned out badly. On the one hand the yield premium over bunds provided an incentive for banks elsewhere in the euro area to load up on peripheral country debt. Second, the dramatic reduction in interest rates touched off by this flood of newly available capital was the trigger for the financial market boom and bust that has since followed, in some (though not all) of the weaker countries. More specifically, while Ireland, Spain and Greece clearly exhibited this syndrome, this was much less true for Italy. My understanding of these matters has been greatly assisted by recent contri butions in the Financial Times (FT) and The Economist both summarising work by Paul de Grauwe of Leuven University, and by the work of Viral Acharya of the Stern School at New York University. I have also been privileged to hear an oral presentation on this matter by the Director
november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
HT PAREKH FINANCE COLUMN
of the European think-tank Bruegel, Jean Pisani-Ferry.
Confidence Game As summarised in a FT article by Martin Wolf (“Be Bold, Mario, Put Out That Fire”, 26 October), de Grauwe asks the question: why do rates of interest on the debt of several big eurozone countries exceed that of the UK, even though the fiscal position of the UK is in many respects just as parlous? This leads to a further question: what determines the price of sovereign debt. As Wolf observes, “governments offer no collateral, while claims on tax revenue offer illusory security”. His conclusion is that government debt markets are “lifted by their bootstraps”; the willingness to lend depends on the perceived willingness of others to do so, now and in the future. In other words, at the end of the day it is a confidence game, and like all confidence games it is subject to runs, or to what economic jargon calls “multiple equilibria”. Wolf therefore endorses the view of de Grauwe that the fatal flaw in the constitution of the euro from this perspective is not the absence of fiscal union as is commonly asserted, but rather the inhibitions of the European Central Bank (ECB) to act as a lender of last resort. Put differently, in assigning a risk weight of zero to sovereign debt, the architects of the Basel rules on regulatory capital implicitly assume the existence of such a lender of last resort to ensure that sovereign debt markets remain in the good equilibrium. The continuing reluctance of the ECB to provide such comfort without limit out of concern to prevent moral hazard coupled with the German insistence on imposing losses on Greek bondholders are the underlying drivers of contagion in the euro area. This contagion has an impact on national solvency directly, by rendering the existing debt stock unsustainable at market rates, and indirectly by adding the bailout costs of insolvent banks to an already fragile fiscal position. What in any of this is of interest for India? Clearly India does not suffer the eurozone problem of a federal central bank with a restricted mandate. What India does have in common with Europe (and Japan) is capital-constrained banks stuffed full
of government debt issued by a fiscally over-extended sovereign, in a slowing economy. Our capital controls and asset portfolio requirements on the banks (SLR) together allow the RBI to impose an unnatural maturity structure on public debt thereby mitigating the problem of “rollover risk” that currently face Greece and Italy. That such financial repression does generate collateral damage is demonstrated by recent credit downgrades by Moody’s of the State Bank of India (SBI) initially and Indian commercial banks as a group more recently. In SBI’s case Moody’s explicitly referred to the difficulty being experienced by the SBI in raising capital because of the government’s fiscal constraints, a concern that would apply to the other public sector banks as well. In a recent paper commissioned by the International Growth Centre, Viral Acharya, citing the US experience with the so-called government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, points out that implicit guarantees have a way of being called (Acharya 2011). In the Indian
case the liabilities of the public sector banks are in effect entirely guaranteed by the central government. As such, they present a huge potential fiscal risk, one which India does not have the fiscal space to accommodate.
Similar Symptoms? To end where we started, the symptoms in the case of India are in many ways similar to those of peripheral Europe, with a potentially dangerous interaction between sovereign debt and bank solvency. But the policy implications are different. To protect its financial system, India needs urgently to demonstrate its commitment to sustained fiscal adjustment to make credible its implicit guarantee for banking system net worth, assuming that bank privatisation is not on the cards. For India, the route to financial stability lies as much through Delhi then, as through Mumbai. Reference Acharya, Viral (2011): “The Dodd-Frank Act and Basel III: Intentions, Unintended Consequences, Transition Risks and Lessons for India”, Inter national Growth Centre, London and New Delhi.
Krishna Raj Memorial Scholarships 2011 NSSKPT High School, Ottappalam, Kerala Six scholarships have been awarded in the school where Krishna Raj studied for a few years. The scholarships cover tuition fees, uniforms, books and special coaching. In 2011-12, the scholarships have been awarded to Sreedevi P K, Ajayan V (VIII standard), Arun C, Amal S R (IX standard) and Vipindas P, Induja V (X standard).
Delhi School of Economics Summer fellowships were awarded to 17 students (M.A. Economics & Sociology) working in eight groups, for conducting field surveys and writing reports under the supervision of faculty of the DSE: Ashwini Deshpande, Aditya Bhattacharjea, J V Meenakshi and Anirban Kar. The students awarded fellowships were Dheeraj Mamadule, Vimmy, Swati Sharma, Arnab Kumar Maulik, Ashutosh Kumar, Debapriya Bhowmik, Yesh Vardhan Agarwal, Sandhya Srinivasan, Keshav Maheshwari, Madhulika Khanna, Ravideep Sethi, Resham Nagpal (all Economics); Shagua Kaur Bhangu, Maria Ann Mathew, Ujjainee Sharma, Trishna Senapati, Aaradhana Dalmia (all Sociology). The seven projects were (i) Rehabilitation and Resettlement of Slums in Delhi, (ii) Social Networks of Migrant Women Employed at Construction Sites, (iii) Reading Spaces: A Study of Libraries and the Reading Public in India, (iv) Marriage Practices of the Knanaya Community of Kerala, (v) Socio-Economic Impact Analysis and Replicability Study of Alternative Energy Programme in the Sunderbans, (vi) Impact of FPS on Slums in Delhi, and (vii) Addressing Poverty through NTFPs: An Analysis of Madhya Pradesh.
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FROM THE STATES
Coastal Accumulation in Tamil Nadu Senthil Babu
S
even years after the 2004 tsunami, with the coastal communities in Tamil Nadu yet to reconcile with its after-effects, another disaster is gradually unfolding. A massive relief and rehabilitation campaign, largely driven by private aid with the state playing a mere regulatory role, has opened up the coast for investment, making it a most attractive zone for a new kind of disaster capitalism with ultra mega industrial projects of ports, thermal power plants and petrochemical industries. An investment-led growth regime is descending on the 1,076 kilometrelong coastline spread over 13 districts of the state. In the district of Cuddalore alone, along the 30 kilometre-long coast from Cuddalore Old Town to Parangipettai, roughly about 8,000 acres of land have been acquired since 2006 for an oil refinery, three thermal power plants, one shipbuilding yard, a textile processing unit with a common effluent treatment facility, and three captive ports. The combined investment in these projects will be about Rs 50,000 crore. South of Cuddalore, in the Sirkali, Tarangambadi and Kizhaiyur talukas of Nagapattinam district, which incidentally saw the most intense post-tsunami rehabilitation efforts, three captive ports and 12 thermal power plants together producing 14,700 MW of power are planned in the next three to five years. Further down, the Tuticorin coastline is to be lined with 16 power plants with a capacity of more than 20,000 MW. Between just these three districts Tamil Nadu would have about 50,000 MW of power-generating capacity by 2017. Land acquisition along the coast started in 2006 and continued through the subsequent years even as the coastal zone policy agenda shifted from regulation to management. With the state focusing entirely on exercising its power of eminent domain,
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a brokerage class of political patrons, organised along the lines of local lineage and caste kinship, has emerged to substitute for the state and mediate for capital. This brokerage class also anticipates acquiring contracts for supply of labour, transport, construction materials, etc. This class works in combination with the state machinery to ease the work of the state and capital. For example, it identifies parcels of land for the investor, goes from door to door promising people jobs, and often encourages revenue officials to open land registration offices at midnight to ensure instant transactions with farmers who have just provided their “consent”.
New Politics, Old Tensions Unlike before, when the political parties competed with each other to take up people’s issues, there is a new scenario today where people have to form their own collectives and run from pillar to post, pleading and petitioning the political parties to take up their cause. Farmers who lost land formed such “grievance collectives” which spanned class divides – in the village of Panchankuppam in Cuddalore district, the erstwhile mirasidar owning more than 10 acres of land as well as a widowed old woman with her 27 cents were part of the same collective. Some got relief from the judiciary while the leaders of other groups cut private deals with industry and left the landowners in the lurch. One of the reasons for the formation of such collectives has been the need for immediate organising to defend village commons from the new enclosures. For instance, the fisherfolk of Velingarayanpettai village in Chidambaram taluk, Cuddalore district, were shocked when they were told that 159 acres of their common beach land had been leased out by the Tamil Nadu Maritime Board to the Good Earth
Shipyard. In the neighbouring villages of Panchankuppam and Karikuppam, the IL&FS Tamil Nadu Power Company, purportedly a public sector-sponsored special purpose vehicle, has covered the irrigation channels, the Buckingham Canal and even a school playground, laying roads on them for their heavy trucks. When their brave efforts to protest through petitioning, dharnas, picketing and hunger fasts are blissfully ignored by the authorities or countered by false cases being foisted on them, they have worked out innovative and yet age-old ways to block the encroachment of their commons. Often subscriptions are raised to hire the excavator JCBs to dig up roads and fields to stop the trucks and cranes of the contractors from entering their village. Amidst all these struggles, further contradictions emerge. Dalit marginal farmers in the village of Kaarappidagai and the adjacent Stalin Nagar in Kilaiyur taluk of Nagapattinam district question the credibility of the caste Hindu aquaculture farmers in leading the local movement against the proposed Tridem Port and Power Company. They say it is aquaculture which destroyed their irrigation system in the tail end of the deltaic zone. Now since power plants threaten aquaculture, these aquaculturists have become leaders to oppose the company. The dalit farmers say that when they had protested against aquaculture, they were harassed and beaten up by the same people who now want them to join the struggle against the power plant.
Tool for Appropriation All the acquisitions of land have been based on the formality of the public hearings, which themselves are based on the “Executive Summary” of the environmental impact assessment (EIA) reports, prepared by contractual expertise. Not a single EIA report has mentioned the necessity of a cumulative impact assessment study on the entire Cuddalore coast, which will have to carry three ports (six breakwaters), four thermal power plants with their respective desalination plants, a textile processing unit, a shipbuilding yard, along with an already existing industrial cluster, the SIPCOT chemical complex. The
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latter has been ranked 16th among the most critically polluted areas in the country in a study conducted by none other than the Central Pollution Control Board. The EIAs also blatantly lie. The EIA report of the Good Earth Shipbuilding yard claims that the fishermen of Velingarayanpettai panchayat fish only 10 kilometres beyond the project zone and hence there will be a zero impact on them due to the shipyard. But this in a village dominated by artisanal fishermen without a single trawler. It does not care to mention the already present crises in the region’s fisheries, with serious depletion of resources amidst overcapacity and rising conflicts within the community, a common scenario in the post-tsunami fisheries in this part of the coast. In the Perumalpettai fishing hamlet near Tarangambadi (Tranquebar), the fisherfolk have been at the receiving end of a naphtha-based private power plant which uses sea water as coolant and discharges hot water back into the sea and thus has destroyed the marine life resources along this part of the coast, which has traditionally supported about 4,000 fishing families. When fisherfolk from this area try and base themselves in the nearby Nagoor port, they are being chased away and there have been frequent clashes among members of the fishing community themselves over fishing territory. This stretch, if the proposed projects are implemented, will soon have three power plants with a total capacity of 3,680 MW, each with their own desalination plants and a captive port under consideration, spread over 2,800 acres of land. Legal violations are common too. The fisherfolk of Velingarayanpettai village decided to boycott the public hearing held for the Good Earth Shipyard since they were not even informed about the hearing and no impact assessment report in Tamil was circulated. The company paid Rs 500 per head to attend the public hearing. However, the gathering became a stage to mobilise public opinion against the credibility of not just the EIA report but also the very intentions of the government. The people came to know at the hearing that the Tamil Nadu legislative assembly in its budget session of the previous year had sanctioned the construction of a superphosphate factory by the same company
on the same premises as the proposed shipyard. This information was passed on by the local member of the legislative assembly who belonged to the Communist Party of India (Marxist). Everyone, including the district collector who was presiding over the public hearing, was shocked since the Tamil Nadu Maritime Board’s lease agreement for the 159 acres of common land to this firm and the Coastal Regulation Zone (CRZ) clearance clearly stipulate that the agreement will be null and void if the land is used for any other purpose. To add to the illegality, it is the same department’s head who also moved the resolution in the state assembly, allowing the superphosphate factory. The collector was forced to conclude the hearing by a public announcement that there was a unanimous opposition to the shipyard!
The Struggles Continue Since the 2004 tsunami, this coast has witnessed numerous popular struggles and campaigns. These struggles have been against aquaculture, against the displacement of fishing communities beyond the 500-metre line immediately after the tsunami by the then Chief Minister J Jaya lalithaa, against the M S Swaminathan authored Coastal Management Zone recommendations and the CRZ Notification of 2011. All these struggles were spearheaded by the fishing community but it appears that the challenge before the entire coastal population requires a unified alliance of all communities – fisher families, marginal agriculturists and landless labour along with several other occupational communities. Such unity within the village seems to fragment under pressure from the new economic regime. The landed peasant incessantly looks for and constitutes his own grievance collectives and sometimes manages to get some compensation for the land lost. The compensation ranges from a few ten thousand rupees per acre to, in rare cases, more than Rs 10 lakh per acre, depending on the needs of the project and the peasants’ negotiating skills. The landless and the fisherfolk are left with no choice but to realign themselves with these collectives led by the landed peasantry, even if with guarded
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scepticism. They stay at the margins, yet add to the numbers. When these projects are justified in the name of “national development”, it is common to hear opinions like “we” need power or even that the alienation of the landless, the fisherfolk and the marginal agricultural classes is a necessary evil for the nation’s progress. This vicarious nationalism of such a “we”, which often tends to transgress ideological boundaries fails to represent the alienated classes in any meaningful democratic manner. In a recent demonstration in front of the Cuddalore collectorate demanding an end to the appropriation of commons by private capital and for a cumulative EIA by the state through a credible, public institution of science, some of the tensions mentioned here were evident. One could almost touch and feel the cautious, guarded sensibility of the representatives of the affected villages. Some of them were holding a microphone for the first time in their lives and were totally uncertain whether to use a chaste, literary Tamil on a public platform or to vent their anger in their own spoken Tamil. Immediately after the event, after the collector was petitioned, bills for the sound system and the tent were settled with frantic, desperate drives to collect Rs 4,000 from the assembled villagers. Then there were several groups in a huddle discussing the latest news about deals cut at the behest of “the minister” who already is the benami contractor for supplying construction material to a power plant. As we were leaving Cuddalore, this minister’s kin had beaten two youngsters who blocked the trucks passing through their villages. One more trip to the police station, demands to file an FIR and back to the villages, mobilising money to hire a JCB the next day to dig out the road laid on the commons. The struggle continues. Senthil Babu (
[email protected]) is a historian of science and an activist working with peoples’ movements in Tamil Nadu.
available at
Altermedia-Bookshop Ecoshop M G Road Thrissur 680 001, Kerala Ph: 2422974
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COMMENTARY
Cleansing the State Krishna Kumar
The anti-corruption movement has enabled the Indian middle class to feel smug about itself. Its members have gone through a vast range of emotions during the last two decades, from selfhatred to self-righteousness. Liberalisation of the economy has created for this class an excitement of many kinds. It has meant the freedom to pursue the quest for wealth without guilt and, at the same time, it has meant feeling set adrift from tradition and the culture it signifies. Life under the regime of liberalisation has also meant seceding from the physical spaces that constitute the shared habitation of the rich and the poor, by creating selfenclosed townships.
Krishna Kumar (
[email protected]) teaches education at Delhi University.
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D
uring the days Anna Hazare was fasting in Ramlila Maidan, Rubina was trying to acquire a certificate to prove to Delhi University that she belongs to the Other Backward Class (OBC) category. She comes from a small community of Muslims categorised as OBC in Delhi. A young entrepreneur living in her neighbourhood offered to help for a fee of Rs 500. She paid the amount, but the hope of getting a certificate in time for her to apply in a college was ticking away, so she decided to take help from one of her teachers who got her to fill up the required form and arranged, through a friend, to get a Class I officer to verify her claim. Then she discovered that one more signature was needed, and Rubina tried to get this second verification from the sitting MLA of her area. His office demanded Rs 200 and told her that it would take a month. This would have been too late for her admission, so she went back to her teacher who arranged a second signature from another officer. Armed with both these signatures, she went to the certification office. The clerk was impressed but also a bit suspicious, so he now demanded proof that Rubina’s family was residing in Delhi before 1992 which is when the OBC notification was issued. The idea was that the benefit should not have been availed of by someone who migrated to Delhi after 1992 in order to claim OBC status. By the time she got the certificate, admission was over in the college which she was interested in studying for a specialised course. Rubina is a beneficiary of the State’s drive to distribute entitlements as a political signal of its continued commitment to the Constitution. One can notice a sharp contradiction between the state’s desire and its capacity to deliver. On one hand, it is generously distributing entitlements, and on the other it is assiduously shedding its responsibility and capacity to fulfil the expectations aroused by the entitlements it has distributed. The constitutional agenda,
which requires the state to serve as an egalitarian force, is now competing with the responsibility to encourage free enterprise. Not surprisingly, the state itself has become a source of confusion and frustration. Different strata of society now view the state in sharply varying ways. The working classes find themselves defenceless in the face of the new industrial and business order. Post-Fordist industrial development is rapidly diminishing the distinction between the organised and the unorganised sectors, as far as the size and ownership of industrial outfit is concerned. Workers serving giant transnational companies are forced to remain unorganised so they can be exploited and treated like a permanently casual workforce. The new technology of production has greatly facilitated this remarkable situation by enforcing a low-skill regime across a fully automated assembly line. The freedom to shed is perceived as an essential part of business wisdom which the state understands and encourages by emulating. Lack of employment haunts vast numbers among youth, both in urban and rural areas. On the other hand, the upwardly mobile urban entrepreneurial classes rejoice in the freedom they have acquired in the various spheres of business. They resent every bit of remaining bureaucratic constraints and political uncertainty, especially in the new areas that have opened up for profit-making, such as education and health.
Social Composition Disappointment and anger with the state have made mobilising people an attractive and practical idea. The movement of which Anna Hazare became both a symbol and a vehicle developed an instant appeal and sustained it for a considerable length of time during the month of August. How ever, it is important to reflect on the social formation of the public anger it vented. The crowd of Delhi’s citizens which first gathered outside Tihar jail, then at Ramlila Maidan, and took part in late evening vigils at India Gate, exuded a sense of confidence and power. Those who were part of the crowd seemed to make others feel morally embarrassed for not participating.
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In many middle class colonies, they went from door to door, holding a candle and asking the residents to come out and join the procession. If you did not want to join, you knew that it was best not to argue. The mood conveyed a sense of final solution to the problem of corruption; so if you did not feel immediately supportive, you would rather give a personal rather than a political excuse. As the crowd in Ramlila Maidan swelled, its power rose and a feeling of being in control spread through the city, ultimately reaching parliament which saw little choice but to pass a statement that would pacify the crowd and save Anna Hazare’s life. The social composition of the crowd at Ramlila Maidan has been a matter of debate. Commentators who feel sympathetic to the movement insist that it was not merely a middle class crowd, that there were people from the lower rungs of the urban ladder too, and even some villagers and tribal people, from states like Madhya Pradesh. Some have chosen to call it a public movement. This is, of course, an accurate description, but it stops short of clarifying the nature of the articulate public in India, The label “civil society” does not help either, for it suggests a concerned segment of the population rather than a voice or an urge. No matter which term we use, it does not capture and explain what Delhi witnessed in the latter half of August. The city contains a vast ocean of the poor surrounding the colonies of comfortable classes. Had this ocean flooded Ramlila Maidan, Parliament would have adroitly gone beyond the modest resolution it passed after such prolonged and anguished deliberation. On the other hand, it is true that India now has a sizeable class of people who want to live in comfort and reap the fruits of their investments in education and business and consume these fruits without the embarrassment of looking conspicuous. This class consists of people who do not mind letting their car driver keep the AC on while the master is participating in an event. This behaviour is illustrative of the new business perspective which sees nothing morally wrong in wastage or exhibition so long as proper payments are being made. This kind of justification covers a wide range of practices now common
among the upwardly and globally mobile and more such practices are getting added every month.
Support for Formula 1 Two months after the anti-corruption demonstration in Ramlila Maidan, a vast crowd gathered to watch Formula 1 car racing a few kilometres away at NOIDA, and the media provided unanimous support of the same kind it had furnished for the anti-corruption movement. Not even the question of consumption of petrol for entertainment was raised as a question that might bother children who sometimes notice the huge signboards outside petrol stations saying that every drop of this fuel is precious and, therefore, it should not be wasted. Formula 1 acquired the same kind of obvious correctness in its claim – that it marked India’s progress and confidence – that the movement surrounding Hazare had acquired. Both had full backing of the articulate classes who perceive morality as efficiency. This perception is the primary factor shaping the distribution of odium and praise in the current ethos. State failures are targeted relentlessly, but market failures are seen as unfortunate. Post-dinner conversations rejoice in competitive raillery against the government. Everyone is convinced that nothing, absolutely nothing, gets done without graft, that no selection or appointment takes place without pulls and pressures being exercised, and so on. As the evening closes, the gathering feels satiated with a sense of truth and correctness about its knowledge of the state of affairs and its sense of the all-round lack of hope. The generalised contempt for the state is precisely what makes the participants of the anti-corruption movement so sure of their view that they cannot imagine why anyone in his right mind would not join them.
Arrival of the Middle Class The anti-corruption movement has enabled this class to feel smug about itself. Its members have gone through a vast range of emotions during the last two decades, from self-hatred to self-righteousness. Liberalisation of the economy created for this class an excitement which could be interpreted in divergent ways. It meant freedom
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to pursue the quest for wealth without guilt; at the same time, it meant feeling set adrift from tradition and the culture it signifies. Caring for the poor by letting them survive as recipients of occasional charity was a part of this tradition. Life under the regime of liberalisation meant seceding from the physical spaces that constitute the shared habitation of the rich and the poor, by creating a self-enclosed township, a heightened, fortified private civil line, except for the fact that the residents of the British era civil line thought that they were serving the poor. The new civil world is socially more distanced from the masses than the colonial civil line was, and yet it is a reincarnation of the older model. Its morale has greatly improved from the experience and the considerable success of Anna Hazare’s fast. For one thing, the leadership of Anna Hazare has enabled this class to relieve itself of the anger it feels against the state, in a public and quite dramatically democratic way. The experience meant that the state could be shown to be illegitimate, having lost the moral right to represent India. The flag in thousands of hands raised in protest at Ramlila Maidan was no other than the tricolours, and the songs included Vande Mataram. This was no political gathering; it was a carnival of angry nationalism of people who are convinced that their success in life owes nothing to the state. They find the state’s institutions and procedures much too cumbersome and the people who run these institutions dull and corrupt. Anna Hazare’s self-perception as an honest and practical man, who is interested in results, not politics, is shared by the consuming classes. To them, honesty is prudence, a form of smartness because it frees you to enjoy life in the middle of poverty, horror and injustice. The new technology of communication is a great resource for this kind of efficiency and it is no coincidence that mobilisation
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COMMENTARY
for Anna’s fast at Ramlila Maidan was done primarily through the new technology. In an interview with Vidya Subramaniam in The Hindu ( 31 August), Arvind Kejriwal spoke about some 2 crore SMS messages which were sent to people, asking for a missed call in return to signal their support. It is highly appropriate that the new technology of communication, both its machinery and its business, should have provided such a strong backing to the movement, for indeed, it is this technology which has made a significant contribution to India’s emergence from its conventional, sluggish rate of economic growth. It is no coincidence that this technology also forms the content of some of the biggest stories of state corruption. The role of communication technology in shaping the Anna movement goes well beyond facilitating it. The confluence of technological services enabled the movement to convert a struggle into a mega-event which was managed with technical finesse locally as well globally. Local management required motivating supporters to physically join the event and
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to maintain their morale despite adverse weather conditions. Global management was provided by several television channels which uninhibitedly supported the movement, serving both as a forum for discussing it and as a resource for enhancing its appeal. Corporate advertising interspersing the debates helped to maintain a sense of normalcy, bordering on romance as the movement traversed several zones of uncertainty and suspense about its outcome.
Liberalisation and Corruption In an article published in Seminar (Sept ember 2011), Prashant Bhushan points out that the “exponential growth of corruption in India after the end of the licencepermit raj and the introduction of LPG (liberalisation, privatisation, globalisation) policies in the hope of reducing corruption is no mere coincidence”. He is right, but the movement surrounding Anna Hazare has succeeded in separating the issues of corruption from liberalisation. Its fight is not directed against the neo-liberal state, but rather against the archetype of the state as a governing principle rooted in,
and drawing legitimacy from, its own history. Transparency and accountability are the bywords of the anti-corruption movement. In the interview mentioned earlier, when Vidya Subramaniam asked Arvind Kejriwal why the website of his NGO did not display the amounts it had received as donations for the Anna movement, he was quick to call it an “oversight” and promised to correct it “immediately”. That has now happened, and though the details provided are rather sketchy, we must appreciate that the NGO has provided these details as a matter of courtesy since the Right to Information (RTI) does not apply to private companies and NGOs. It only compels the state to provide full details of all its dealings and to do so quickly. This distinction is, indeed, a major part of the rebirth of the Indian state in the neo-liberal era. The state now lays bare the basis of its decisions. Only market forces, such as industries and business establishments, can now take a decision based on internal deliberation which they need not share. No RTI or WikiLeaks lies in wait for them.
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In the name of accountability, the state’s functionary alone must relinquish the exclusivity of the space available for formal deliberation with colleagues. The fact of corruption has provided an excellent ground for denying to the state any inner space to think. This denial also helps to paralyse the state, and that is what the historical forces representing the market needed. Earlier, they wanted the state to shrink, by withdrawing from several of its traditional functions, especially in welfare, and by outsourcing others. That wish has also been coming true quite rapidly over the recent years.
The NGO Phenomenon No wonder the beneficiaries of the state’s egalitarian entitlements feel disillusioned and angry when they finally get what they had aspired for. Already, many arms of the state have been captured by non-state players. The NGO phenomenon, established to provide a safety net to the poor, is linked to the planned erosion of the state. As the state got leaner, it started outsourcing its duties and responsibilities to NGOs. Though called “non-government”, NGOs are now serving as the state’s partners in governance in many areas of welfare and service delivery. As institutions, they represent both the market and the state, featuring the flexibility of the former and the moral legitimacy of the latter. They acquire the former quality by remaining softly institutionalised, and the latter quality by serving the poor, especially in areas and contexts where the state has putatively failed. In education alone there are thousands of NGOs on whom the state’s flagship programmes like the Sarva Shiksha Abhiyan depend. The situation is quite similar in health. Some of the NGOs serving the poor in these sectors are so big and handle such vast amounts of money that they should be rightly, and respectfully, called a state within the state. At any rate, the pervasive character of NGO presence in the country supports the claim that they are the new arm of the state which serves the poor. They are believed to be in a better position to serve the poor because they are not hampered by the impediments the state machinery places in its own working. Some of these impediments
are old and familiar, but the state is no more in any hurry to remove these impediments by reforming itself. It has outsourced the poor to outfits which are not covered by laws, such as the right to information, which might make them as accountable as the state is supposed to be. In many cases, the state’s own money is used to run an NGO, and in other cases, foreign funds are used to provide the services that the state is supposed to.
The Rich Declare Independence While the NGO phenomenon has made it unnecessary for the state to reform itself in relation to the poor, it has radically reformed itself in the spheres where the rich had to deal with it. Indeed, liberalisation is all about making the state wealthyfriendly. The much celebrated end of the licence-permit raj is nothing but the declaration of independence by the rich. They can now live, invest, and profit more freely. No wonder the gulf between the richer and the poorer classes has widened and their respective relationship with the state has become more differentiated. The rich believe that India can grow faster still if all remaining impediments are removed expeditiously. For now, they have identified corruption as one such impediment. They have essentialised it so that it forces us to stay blind to its origins in the sharp inequalities which characterise Indian society and are growing sharper. For now, Anna wants us to focus our attention on state corruption alone, and forget about the agents who corrupt the state machinery while they stay and prosper outside it. From their perspective, the machinery is too big and mostly redundant, so it is best to dismantle it. The leaner and weaker it gets, the better get the prospects for market forces. The state’s response to this dynamic is noticeably symbolic, in that it does not mind being used for the purely political purpose of distributing entitlements when its capacity to fulfil them is going through planned decline. Provision for more new social categories to be included in the reservation system in state employment and public institutions of higher education is an example of this purely symbolic politics.
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Rubina’s OBC certificate came too late to help her to seek admission in the specialised course she wanted to study. She hopes to apply for it again next year. In the meanwhile, she is getting used to the reality of her university life studying in a general course. She represents the first generation of her family to enter the university, but the university is no more what it stands for in public imagination. In many crucial aspects of its functioning, it has already become an empty shell. It has adopted the semester system in the name of efficiency and quality, but its capacity to conduct examinations has been going through continuous erosion over more than a decade on account of staff depletion. A vast number of vacancies have persisted and grown over the years in both academic and administrative apparatuses of the university, injuring its capacity to serve students. Contractual appointments are the order of the day and support services have sharply dwindled. Subsistence on a daily wage has become a norm in a wide range of functions, from cleaning to teaching. In any case, the implementation of the Sixth Pay Commission meant the end of permanence of lower level functionaries and contractualisation of several essential services. In the meanwhile, class-size has swollen on account of increased reservation, and libraries and laboratories are languishing. Loss of staff strength has also damaged institutional memory and maintenance of norms. Neither the faculty nor the students know how to make sense of a situation which is claimed to be driven by a fiscal crunch brought about by the University Grants Commission (UGC). No one knows why the UGC or the Delhi University is starved of funds when India has maintained an enviably high rate of economic growth. Nor can anyone know why the university is in no hurry to fill up vacancies so that it ceases to depend on a casual workforce. Analysis and informed explanation have been replaced by conjectures and rumours about the impending cut in sanctioned staff size, to be executed in the name of rationalisation. In the meanwhile, buildings of various sizes and shapes are rising in the horizons of Delhi, signalling the arrival of private universities and other institutions run quite transparently for profit.
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COMMENTARY
Pakistan-India Conundrum: Shades of the Past Sumanta Banerjee
Pakistan may appear to be a petty power in global politics today. But it can always wave its precious possession – nuclear weaponry – as the sword of Damocles over the US whenever the latter bullies it. As they frequently appear to reach the brink in this game of one-upmanship, the options are shrinking fast for both.
Sumanta Banerjee (
[email protected]) is a political commentator who is best known for his book In the Wake of Naxalbari: A History of the Naxalite Movement in India.
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recently sent an SOS to an old friend of mine in Lahore – I A Rahman, the architect of the human rights movement in Pakistan – wanting to know how he and my other friends were surviving in the midst of the bomb-a-day mayhem and the serial political assassinations in his country. He wrote back: “Your friends are safe”, adding the ominous sting, “for the time being”. It raises the spectre of the twin threat that progressive and secularminded people in Pakistan today face from the military Inter-Services Intelligence (ISI) and the Islamic terrorist groups, which both collide and collude at times to suit their respective interests. In India such collaboration between the State’s armed apparatus and government-sponsored vigilante groups is not unknown. We have witnessed the rise of the landlord-led Ranvir Sena under police protection in Bihar, the recruitment of Salwa Judum mercenaries by the government in Chhattisgarh, and the transformation of surrendered militants in Kashmir and the north-east into armed gangs by the Indian intelligence agencies to utilise them in suppressing popular protests and violating human rights. In a similar gruesome fashion, the ruling Bharatiya Janata Party in Gujarat had used the Bajrang Dal, RSS and other Hindu terrorist outfits to massacre Muslims. But there is a qualitative difference between the objectives of the state machinery in India and Pakistan in sponsoring armed extra-state agencies, as well as the responses of political parties and civil society to such acts in the two countries. The armed mercenaries in India are mainly employed by the government against domestic agrarian movements and hired by the Hindu politicians to bully and kill minorities within India. The two exceptions when the Indian state’s intelligence agencies became proactive in extra-territorial intervention were first, the grooming of Bangladeshi guerrillas to fight the Pakistan
army in 1971, and, second, the training of the Liberation Tigers of Tamil Eelam fighters in their war for secession from Sri Lanka in the 1980s (the latter having fatal con sequences for its strategist Rajiv Gandhi). But the Indian state’s domestic offensive against expressions of mass discontent, and the government machinery’s abetting at the massacre of Muslims have always provoked demonstrations of protest by a robust Indian civil society. Civil liberties groups have also consistently protested against the violation of human rights of the non-combatant citizens in insurgencyhit Kashmir and the north-east by the Indian army. The Indian judiciary – despite the class and religion-based bias of many of the judges – has quite often delivered landmark verdicts in favour of the victims of state oppression and discrimination. Compared with us, my friends in Pakistan are in a precarious situation. Their enemies are more powerful than the hired goons of the Indian state. The extra-state armed organisations which are sponsored by the ISI and are operating both within and outside Pakistan – Taliban, Al Qaida, Haqquani, and other similar groups – are a part of a global network. They are being used by the Pakistan state as ancillaries to serve its extraterritorial interests in Afghanistan, Bangladesh, Kashmir in India – and even as far as Xinjiang in China (the latter has blamed terrorist attacks in its territory on the Islamist fundamentalist groups based in Pakistan). Their leaders, masquerading as religious preachers (like the Lashkar-e-Taiba chief, Hafiz Mohammad Saeed, who was arrested, but released by the court) are allowed to propagate the message of jihad to implement obscurantist socio-religious norms within the country, and justify armed incursions abroad. When a few courageous souls from within the Pakistan civil society dare to protest against acts of religious fanaticism, or Pakistani journalists expose cases of violation of human rights, they are abducted, tortured, killed by the agents of a diabolic state that is based on a synergetic kinship between army generals and the religious clergy behind the façade of a wimpish civilian government. What is alarming is that substantial sections of the public in Pakistan seem to empathise with this kinship. They are driven by a
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congenital desire to assert military might as a symbol of national identity vis-à-vis their neighbour India. In this respect, funnily enough they share the same machismo of those sections of the Indian public which follow the Hindu saffron brigade’s parallel paradigm of identifying nationhood with military prowess against their neighbour Pakistan. This militarist and theocratic nationalist mindset that quite often explodes into violent demonstrations in the streets of Lahore, Islamabad and other cities of Pakistan has been further fuelled by the humiliation that Islamabad suffered at the hands of Washington, which outmanoeuvred the ISI by carrying out the execution of its most protected protégé Osama bin Laden in his own den in Pakistani territory. The US continues to snub its blustering army generals by carrying out daily drone attacks on Pakistani soil. The anti-US mood, generated by such acts among the public, is usurped by the orthodox clergy to establish its hegemony by branding every manifestation of scientific inquiry, assertion of secular values, and reiteration of women’s emancipation as a conspiracy by the US. Large sections of the public appear to be in a mood to accept the call of the clergy for jihad against expressions of faith in democracy and secularism – values which they are being trained to identify with the infidel west. The same articulate middle class professionals who led the movement to oust the military dictator Pervez Musharraf and for a civilian government, soon after came out on the streets in support of a totally outrageous cause – the right of a religious fanatic Mumtaz Qadri to kill Salman Taseer, the Punjab governor for defending a Christian woman against the charge of blasphemy. Important members of civil society like the legal fraternity hailed Qadri as a hero, and the judge who dared to sentence him to death has now gone into hiding fearing threats to his life. It is sad when we hear a high-profile, international figure like Imran Khan (during a recent interview on NDTV), confessing that it may not be safe to express one’s opinions in public in present-day Pakistan, because of the total polarisation of society. In what two sections is Pakistan society polarised? For an answer, we have to turn to
Pervez Hoodbhoy of the Quaid-e-Azam University of Islamabad, who sums up the history of the polarisation: “Pakistan once had a violent, rabidly religious lunatic fringe. This fringe has morphed into a majority. The liberals are now the fringe” (quoted in The Hindu, 19 October 2011).
Patriarchal Hegemony versus Patricidal Impulses The morphing of the “religious lunatic fringe” into a majority is an outcome of the growing conflict between Washington’s global hegemonic interests and Islamabad’s ambition to play an autonomous role in regional politics. To quote I A Rahman from an article of his which appeared in The News of Lahore of 2 October 2011: the root cause of the tension between them has been…the tendency on the part of each side to interpret their partnership exclusively in its own interests.” In fact, the tension started right from the US-Pak security pact of 1952. “The US took pains”, Rahman adds, “to make it clear that it was helping the modernisation and re-equipment of Pakistan defence forces solely for use against communist powers, but Pakistan stuck to the belief that it had a right to use the US military aid in its fight with India.” The same tension has reappeared today in US-Pakistan relationship over the mode of dealing with Al Qaida, Haqqani, Taliban and other numerous terrorist groups – the unruly children born of the secret CIA-ISI liaison in the hills of Afghanistan in the 1980s to be used by the US to oust the then communist regime there. Spiralling out of US control after the end of the Afghan war, they are now well-greased by funds from Saudi Arabian religious bodies, and indoctrinated by their Wahabi militant ideology they want to establish Shariadictated regimes all over the world. The Pakistani army generals with equally expansionist ambitions are hosting and arming these multinational groups (comprising Arabs, Tajiks, Uzbeks, Pakistanis, and even with a sprinkling of converted white Muslims), which are not only bent on destabilising regimes in Kabul and New Delhi, but have launched a war of patricide against their progenitor, starting with 9/11 in the heart of America and continuing with regular attacks on US and
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NATO forces in almost every part of the world. It is the same old story of Frankenstein devouring its creator! Pakistan has turned into the epicentre of global terrorism, with its army generals calling the shots, and its civil society and political parties out of the running. An “Arab Spring” in Pakistan does not appear to be an immediate possibility. If there is any anti-government agitation, it will be headed in all likelihood by the stronglyentrenched anti-US Islamist groups supported by middle class professionals, rather than secular forces or moderate Islamist political parties which received US backing in the recent anti-government demonstrations in Cairo, Tunis and Tripoli. The US, which sired Al Qaida and other Islamist terrorist groups, is now in a real quandary. Its secretary of state Hillary Clinton recently threatened Pakistan that her government might take unilateral action against these groups if Islamabad continued to nurse them as snakes in its backyard in the false hope that they would only bite the neighbours. It is an apt metaphor to describe Pakistan’s present policies. But then, Hillary Clinton should also remember the other story about the snake, which eager to devour a frog, ended up by getting stuck with it in its throat, unable either to swallow or disgorge it ! This is a more appropriate metaphor for the dilemma that Washington is facing today – stuck with a recalcitrant Pakistan that it fears to push to the wall because of its nuclear threat (reiterated by the army chief Kayani who reminded Washington that it should think 10 times before it tried an Iraq or Afghanistan in his country). But Washington can surely call Kayani’s bluff. It knows where Pakistan’s nuclear bases are exactly located. It can “snatch and grab” them – the term used by US defence advisors – as a pre-emptive strike. Is the sabrerattling between the two countries then an exercise in testing each other’s mettle to accommodate mutual interests till the last moment?
Shades of Europe of the 1930s? But a similar exercise by European powers in the past cost the world dearly. Remember the pre-second world war scenario in Europe? The defeated politicos and army generals in Germany, who were forced to
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sign the Versailles Treaty of 1919, nurtured a vengeful soil that raised the deadly weed called Hitler, a decade later. That past is coming back, grinning at us in the shape of present parodies. Pakistani politicians and armed forces suffered a disastrous defeat in the 1972 war with India, and were compelled to forgo their right to dominate and exploit their eastern limb – East Bengal. The sense of loss of territory was further accentuated by the humiliating public display on the international media, of the Pakistan army general surrendering with his jawans, and the latter being herded as prisoners of war in Indian camps. These scenes left a lasting scar on Pakistani national pride. Like the defeated German generals after the first world war, the Pakistani army brass also, smarting from the insult, developed a strategy for avenging the defeat – the stimulation of a national mood in favour of a permanent confrontation with India. It eminently served their institutional aspiration to be a decisive force in Pakistan’s politics, as well as their personal ambition to become a powerful money-making elite in Pakistan society (as well-documented by Ayesha Siddiqa in her book Military Inc: Inside Pakistan’s Military Economy).
As I listen to the voices of my friends in Pakistan today, their plight echoes the same fate that was faced by liberal humanists, socialists, communists, Jews, gypsies and dissidents in Germany under Hitler. In the 1930s, both the western democracies and the socialist Soviet Union, during this crucial period of Nazi consolidation, placated Hitler – each out of their respective motives: the capitalist powers hoping to use him as a lethal tool to destroy the socialist regime, and the latter to preempt such an eventuality forced to come to a deal with him. But Hitler out manoeuvred both the British Prime Minister Chamberlain (by tricking him into signing the Munich Agreement in 1938 under which the Sudetenland was ceded to Germany), and the Soviet leader Stalin (through the non-aggression treaty in 1939, which allowed Hitler to secure the Eastern Front for launching his future war). Had both the western democracies and the Soviet Union collaborated in nipping Nazism in the bud when Hitler re occupied Rhineland in 1936, and annexed Austria two years later, they could have saved the world from a destructive war. Compared to Hitler’s Germany, Kayani’s Pakistan may appear to be a petty
power in global politics today. But it can always wave its precious possession – nuclear weaponry – as the sword of Damocles over the US whenever the latter bullies it. As they frequently appear to reach the brink in this game of one-upmanship, the options are shrinking fast for both. Bled by its disastrous wars in Afghanistan and Iraq, Washington does not have the stomach to wage another war for a regime change in Islamabad, where the public mood is anti-US. It is therefore desperately looking for a face-saving device that would enable it to sneak out from Afghanistan after striking a deal with the Taliban that will neutralise the anti-US edge of the Islamist terrorist groups and dissuade them from launching attacks on the US. Once assured of its protection against such assaults, Washington will resort to its typical opportunist strategy of temporary withdrawal from regional conflicts (already evident from Hillary Clinton’s latest testimony at a US congressional hearing, where she hinted at reducing further pressures on Pakistan), leaving the conflicting states to sort out their problems through a messy war, and finally forcing both the devastated states to turn to the US for aid to revive their economy.
Nazism as a Forerunner To examine the parallels further, let us get back to Germany in the latter half of the 1930s, when democratic and secular forces there were systematically decimated by Hitler’s military regime. He turned his homeland into an epicentre of Nazi expansionist designs against sovereign European states. Large sections of German civil society was brainwashed into believing in the racist theory of Aryan superiority which branded the inferior Jews as targets of the “final solution”, and they rallied behind Hitler to advance Germany’s suzerainty over the world. In a certain sense, Nazism can be viewed as a forerunner of today’s Islamic fundamentalist forces, which in a similar style of proclaiming a self-righteous ideology and following global ex pansionist designs, annihilate religious minorities on the charge of blasphemy, persecute liberal-minded members of their own community, and seek to establish the dominance of their draconian Sharia laws all over the world.
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REVIEW OF URBAN AFFAIRS July 30, 2011 Urban Concerns: An Introduction Bypassing the Squalor: New Towns, Immaterial Labour and Exclusion in Post-colonial Urbanisation Urban Development and Metro Governance Branded and Renewed? Policies, Politics and Processes of Urban Development in the Reform Era
– Anant Maringanti, Amita Baviskar, Karen Coelho, Vinay Gidwani
– Rajesh Bhattacharya, Kalyan Sanyal – K C Sivaramakrishnan – Darshini Mahadevia
Translating Marx: Mavali, Dalit and the Making of Mumbai’s Working Class, 1928-1935
– Juned Shaikh
The Board and the Bank: Changing Policies towards Slums in Chennai
– Nithya Raman
For copies write to: Circulation Manager, Economic and Political Weekly, 320-321, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013. email:
[email protected] november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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Preventing Birth Defects in India Anita Kar
Evidences indicate that India has the highest number of children with birth defects. The lack of public health support for treatment often means lifelong suffering. Many of the tools to prevent birth defects are inherent in the existing reproductive and child health programme. With some additions, a prevention programme could be initiated in order to address this invisible public health problem.
I thank Joeeta Pal and Arti Nagarkar for valuable comments on the manuscript. Anita Kar (
[email protected]) is with the Interdisciplinary School of Health Sciences, University of Pune, Pune.
B
irth defects are childhood disorders of such severity that there are media reports of parents appealing for euthanasia to end the suffering of the afflicted child.1 Birth defects present as congenital anomalies such as when children are born with deformed or missing limbs, cleft palate, congenital heart defects or paralysis. Some of these conditions can be surgically corrected provided parents have the economic ability to pay for the treatment. Other birth defects arise due to chromosomal abnormalities. Children born with Down syndrome are mentally challenged and require special care throughout life. Birth defects caused by single gene disorders, such as haemophilia, thalassemia or sickle cell anaemia cause extreme pain and suffering. The affected children require expensive and specialised treatment such as repeated blood transfusions for thalassemics or repeated infusions of clotting factor concentrate for boys with haemophilia. While thalassemic children receive free transfusions, iron chelation therapy is unavailable at government hospitals. These children die by the second decade, enduring lifelong suffering. Without public health support for treatment, the families experience significant out of pocket expenditure whilst children receive suboptimal treatment (Disease Control Priorities Project 2008). Estimates indicate that globally, India has the largest number of affected children (Christianson et al 2006). This article presents the argument that a birth defects prevention programme is needed to address this invisible public health problem in India. It points out that many low cost interventions for prevention of birth defects are existent in the Reproductive and Child Health (RCH) programme of the Government of India (Government of India 2005). These interventions can be the starting point for mobilising an Indian birth defects prevention programme to address the issue of “dying and disabled children” (Christianson et al 2006).
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There is very little population-based research on birth defects in India. A global estimate suggests that every year around 1.6 lakh children are born with birth defects in this country (Christianson et al 2006). This number is the highest globally, being one and a half times more than that of China, which has the second highest global burden of children with birth defects. Birth defects have been ignored by public health services as they are considered to be rare conditions. The high estimate of children born with birth defects is however not unexpected, as India has the highest birth cohort as well as a high birth rate of 20.97 births per 1,000 population (Census of India 2011).
Prevention Strategies Birth defects have a significant genetic component which makes these conditions incurable (Disease Control Priorities Pro ject 2008). The genetic component gives the perception that birth defects prevention involves expensive medical genetics services which are too resource-intensive for public health services of Low Income Countries (LICs) (Christianson and Modell 2004). Low cost preventive interventions for birth defects are however available and these form a routine component of preconception pregnancy care. Congenital anomalies, for example, can be prevented by sensitising adolescent girls and pregnant women on five broad groups of teratogenic factors, that is, factors associated with the risk of birth defects (Christianson et al 2006). These factors include the need to treat infections such as syphilis, the need for rubella immunisation, the need to ensure proper management of diabetes and epilepsy during pregnancy, and appropriate intake of micronutrients such as iodine or folate through a balanced diet. Other factors include prevention of toxic chemical exposures, such as fertilisers or pesticides during pregnancy, prevention of exposure to physical agents like x-rays during pregnancy and avoiding non-prescribed medicines, recreational drugs, tobacco, and alcohol during pregnancy. These interventions are feasible through the existing RCH and Adolescent Reproductive and Sexual Health (ARSH) programmes under the National Rural Health Mission (NRHM). The risk of
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likely to be rare (for example, haemophilia has a prevalence of 1 per 10,000 Tertiary prevention population), some condiScreening women at ANC: tions such as the haemoSecondary prevention For syphilis, diabetes, hypertension, rhesus factor for testing family (at PHC/district history of genetic disorders globinopathies are likely to hospital/medical Referral to district hospital for testing for chromosomal abnormalities college/academic be high in specific parts of for parents of advanced age, carrier detection and prenatal tests for laboratory) families reporting history of single gene disorder. the country or amongst Education of newly married women and women in ANC: certain ethnic groups. For Promotion of healthy pregnancy: counselling on balanced diet, rich in folate, iodine, iron. example, haemoglobino Reducing environmental risks like exposure to agricultural chemicals, Primary avoiding tobacco and alcohol, treatment of vaginal infections. pathies affect 1.2/1,000 prevention Approaching the MO for other medical conditions Advice on avoiding non-prescription drugs during pregnany, family (subcentre and PHC) live births, amounting to planning advice including age at first pregnancy. Education of adolescents: 32,400 affected births Iodine, iron and folate in diet, health lifestyle including avoiding tobacco, rubella immunisation, treatment of medical conditions annually (Christianson et including vaginal infections. al 2006). These figures archildren being born with chromosomal gue the need for making genetic counselabnormalities increases with increased ling available through government hospiparental age. Effective family planning tals for some selected disorders like the services can reduce the risk of these condi- haemoglobinopathies. India has a large tions. Many of these strategies are already number of academic research laboratories existent within the RCH programme as a supported by the Indian Council of Medical part of continuum of care for ensuring a Research (ICMR) and by departments under healthy pregnancy outcome. Birth defect the Ministry of Science and Technology. prevention is however not one of the stat- These institutions can be developed as regional referral laboratories for providing ed goals of the RCH programme. genetic services at no or minimum costs. Prevention Activities Crucial to the genetic counselling servFigure 1 shows the inputs required at dif- ices is the need for psychosocial support. Inferent levels of the health system to prevent dia has non-governmental services like the birth defects. A major part of the low cost haemophilia or thalassemia societies creatprevention activities can be conducted at ed by parents, patients and volunteers. the level of the primary health centres These associations could provide psychoso(PHCs) and sub-centres and will require cial support to parents as they come to minimum resource investment. Many of terms with their genetic status or the sufthese activities are already a component fering of the child. of antenatal services, albeit without the stated goal of preventing birth defects. Research Inputs Secondary level services will require re- and Public Health Benefits source investment. For example, pregnant Research is needed to operationalise the women above the age of 35 years presenting birth defects prevention programme, initiat PHCs will need to be referred to district ating with an estimate of the number of hospitals for amniocentesis in order to test affected births. Birth defect rates are comfor chromosomal anomalies. Genetic coun- puted through population-based registries.2 selling will be required for parents report- Integral to the registry is the investigation ing family history of a genetic disorder, such of each birth defect so that toxic exposures as sickle cell anaemia in tribal areas. (like Endosulfan) can be identified and Data from the National Family Health the population can be protected from the Survey-3 shows that the number of preg- exposure. Research is needed to develop nant women over the age of 35 years using indicators for monitoring the impact of public health facilities is likely to be low as birth defects prevention activities. Health 85% of couples have achieved the wanted systems research is needed to identify family size by the time the woman is 25 routes by which patients can be referred years old (International Institute for Pop- from public health facilities to secondary ulation Sciences 2007). The number of and tertiary level of care. Finally, research parents requiring genetic counselling is is needed to determine the cost of providing likely to vary. While most conditions are these services and the benefits that birth Figure 1: Levels of Services for Prevention of Birth Defects
Disability limitation and rehabilitation: treatment such as transfusion at blood banks for thalassemics and psychosocial support through patient advocacy organisations.
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defects prevention can provide to public health services. As birth defects account for 7% of neonatal mortality (Lawn et al 2005) prevention programmes are likely to reduce neonatal mortality. The urgency of preventing birth defects in LICs is highlighted by resolution A63/10 of the 63rd World Health Assembly, which recommended that these countries should introduce birth defect prevention strategies in order to achieve Millennium Development Goal 4 which aims at reduction of child mortality in LICs (World Health Organisation 2010). Beyond this, the demographic indicators of India suggest that birth defects may represent an invisible and unaddressed public health problem, taking a severe toll on children and their family members. Notes 1
Bihar parents seek mercy killing for two sons, NDTV Indo-Asian News Service, 9 March 2011; “Will India Allow These Children To Die? The Times of India, 22 August 2009; “Muscular Dystrophy Patient Seeks Mercy Killing in AP”, The Hindu, 22 June 2008; “Tamil Nadu Carpenter Seeks Euthanasia for Ailing Son”, PTI, 17 February 2006; “Please Let My Son Die”, Mumbai Mirror, 29 December 2005; “Euthanasia Seeker Loses to Death”, PTI, 17 December 2004. 2 For example, the Birth Defects Registry of India hosted by the Foetal Care Research Foundation http://www.fcrf.org.in/bdri_abus.asp; The Federation of Obstetric and Gynaecological Society Birth Defect Registry http://www.fogsi.org/ birth_defect_registry.html. These registries provide information on the type of birth defects, they are unable to provide data on the rate of affected births since there may be considerable duplication of reporting amongst these registries.
References Census of India (2011): “Vital Statistics”, http://www. censusindia.gov.in/vital_statistics/SRS_Bulletins/ MMR_release_070711.pdf Christianson, A and B Modell (2004): “Medical Genetics in Developing Countries”, Annual Review of Genomics and Human Genetics, 5: 219-65. Christianson, A, C P Howson and Modell B (2006): “March of Dimes Global Report on Birth Defects”, March of Dimes Birth Defects Foundation, White Plains. Disease Control Priorities Project (2008): “Controlling Birth Defects: Reducing the Hidden Toll of Dying and Disabled Children in Low-Income Countries”, available at http://www.dcp2.org/main/Home.html. Government of India (2005): “Reproductive and Child Health Programme Phase II”, Ministry of Health and Family Welfare, http://mohfw.nic.in/ NRHM/RCH/Index.htm International Institute for Population Sciences (IIPS) and Macro International (2007): National FamilyHealth Survey (NFHS-3), 2005-06: India, Vol I (Mumbai: IIPS). Lawn, J E, S Cousens and J Zupan and For the Lancet Neonatal Survial Steering Team (2005): “Four Million Neonatal Deaths: When? Where? Why?”, Lancet, Vol 365, 5 March. World Health Organisation (2010): “Sixty Third World Health Assembly Provisional Agenda Item”, 11.7 A63/10, 1 April.
november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
COMMENTARY
What’s Wrong and Right with Microfinance David Hulme, Thankom Arun
Recent events in south Asia have led to an unexpected reversal in the narrative of microfinance, long presented as a development success. Despite charges of poor treatment of clients, exaggeration of the impact on the poorest as well as the risks of credit bubbles, the sector can play a non-negligible role in reaching financial services to low-income households. In regulating the sector, there is need for caution in setting interest rate ceilings on micro-loans and for greater openness to microsavings products.
M
icrofinance, once hailed as the best way to tackle poverty, is under attack. The paradox is that discussion of the downturn must start in south Asia where microfinance began and has flourished since the 1970s. In Bangladesh, often seen as the heartland of microfinance, the Grameen Bank is being criticised and its Nobel Prize-winning founder director Muhammad Yunus has been removed from the board in 2011. (Many people believe that Yunus deserved better treatment and that current events are an offshoot of his now abandoned intentions of engaging with politics in 2007.) In 2010, Andhra Pradesh, where one-third of India’s $5.3 billion micro finance industry operates, a specific law to regulate the bullying debt recovery practices of some microfinance institutions (MFIs) has been enacted. Supposedly, these practices led to a series of suicides. There has been an unexpected reversal in the narrative of microfinance, which has long been presented (particularly in the United States) as a development success. Is this a temporary setback or is this the end of the road for microfinance?
What’s Wrong
We would like to thank Stuart Rutherford for his insights and comments in developing this comment. David Hulme (
[email protected]) is with the Brooks World Poverty Institute and the Institute for Development Policy and Management, University of Manchester. Thankom Arun (
[email protected]) is at the Institute of Global Finance and Development, Lancashire Business School, University of Central Lancashire and an External Associate at the Brooks World Poverty Institute.
Let us start with what is wrong about microfinance. First, there are several different models of service delivery within the microfinance industry and these have varied impacts on poor people. However, the claims of some MFIs, and particularly their leaders, that microfinance reaches the “poorest of the poor” and that all loans are taken for investment in microenterprises are patently wrong. Existing studies on the impact of microfinance on the poor provide inconclusive results, ranging from a substantial positive one in Bangladesh (Khandker 2005) to an insignificant one in Thailand (Coleman 2006). Impacts are very varied and research findings depend on the analytical methods used (Hulme 2000).
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In a recent study on India, loans for productive purposes were found to be more important for poverty reduction in rural than in urban areas (Imai, Arun and Annim 2010). However, in urban areas, simple access to MFIs has larger average poverty-reducing effects than access to loans from MFIs for productive purposes. In brief, MFIs generally reach a combi nation of poor and non-poor people. Rarely do they reach the poorest. Reaching the poorest is the task for specialised programmes such as BRAC’s Targeting the Ultra Poor programme and Kudumbashree in Kerala (Hulme and Moore 2007; Arun, Arun and Devi 2011). Loans are commonly used for many different purposes – microenterprise, education and health expenses, repaying debt, on-lending, wedding celebrations and even dowry. Microfinance is fungible and that is probably good news: clients know what their needs are better than middle-class bankers. Second on the list of what is wrong with microfinance is the charge that MFI field staff have treated clients badly, encouraging them to take on bigger and bigger loans and then disgracing indebted clients in public and threatening them psychologically and physically. In India, politicians and newspapers claim this has led to scores of “microfinance suicides”. Whether the link between being indebted to an MFI and committing suicide is as direct as the media infer is unclear. What is clear is that the performance indicators used by many MFIs put pressure on field staff to achieve financial targets and ignore their social performance in the ways in which they relate to clients. In a recent report on microfinance in India, Srinivasan (2011) has exposed the role of “ring leaders”, unofficial microfinance intermediaries, who provide an easy entry for new MFIs setting up operations in an area. Most of these MFIs have concentrated around the same towns and rural hinterlands and often they serve the same sets of households, encouraging multiple loans. One might see these cases of unhealthy competition in the sector merely as anecdotes or alternatively as something deeper and more structural. In part, this massive expansion of microfinance in India was the result of a global trend towards attracting more private capital. By 2015,
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this private capital is expected to rise to $20 billion (Deutsche Bank Research 2007). With such high levels of commercial isation, it is only to be expected that some staff are encouraged to push their financial performance, i e, more and bigger loans, to the limit and, sometimes, beyond it. This is particularly likely to happen when the staff are male, middle-class university graduates and clients are uneducated women, as is usually the case in south Asia. MFIs need to get their houses in order by overhauling their management systems and staff incentive structures and making it clear that bullying clients is always unacceptable. It is a basic reminder that as a rule of thumb, it is bad loans and bad institutions that are res ponsible for delinquency rather than “bad clients”. (It must also be noted that many of the recent entrants to microfinance in Andhra Pradesh were following an antiquated model of microfinance that is rigid and inflexible. They used the Grameen Bank I model that got the Grameen Bank into financial problems in the late 1990s.)1 Third is the charge that MFI interest rates on loans are too high for poor people to pay (SKS charged 24-25% per annum and Grameen Bank about 22% per annum until recently). While the rates in south Asia may sound quite high, they are significantly lower than microcredit loans in south-east Asia, Africa and Latin America where annual percentage rates (APR) of 50% to 120% are common. Whether the interest rates are “too high” depends on the choice of comparison. Compared to the subsidised rates of government rural credit programmes, often 9% to 12% APR, MFI rates are high. But government programmes are not viable banking models – they depend on continuous subsidies – and there is much evidence that these loans have gone to rural elites and the betteroff rather than the small farmers who are claimed to be beneficiaries. In Sri Lanka and India, agricultural loans have often gone to “farmers in long trousers” – you do not wear long trousers if you grow rice! If one compares the MFI interest rates with private moneylender rates, then often MFI rates are lower and sometimes much lower. According to MFIs,2 their costs include borrowing from banks as well as employing staff to travel to villages to make and collect payments. Further,
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there are debt write-offs, all of which leave MFIs with only small margins. Our judgment, based on experience in Bangladesh, is that MFIs such as the Grameen Bank, BRAC and ASA charge fair rates of interest given the relatively high administrative costs of micro-loans and micro- savings. The intense competition between MFIs in Bangladesh means that interest rates are very much market set. The fourth problem, common to all lending operations, is that when the volume of microfinance lending expands rapidly, there may be an oversupply of credit, encouraging clients to exceed the debt burden they can manage. This has been the situation in Andhra Pradesh where the four big MFIs (and many smaller MFIs) were increasing client numbers at 5% to 10% per month in some districts in 2009. Large numbers of newly recruited and rapidly trained staff sought to achieve the financial targets they were set. The credit bubble burst. We suspect that Bangladesh may have been developing a smaller scale credit bubble in the late 1990s. But this bubble never burst, as key players in the microfinance market (BRAC, ASA and others) appear to have spotted the problem and decided to consolidate, rather than expand, their loans portfolios. In addition, MFIs in Bangladesh have a tool that Indian MFIs are not allowed. Bangladeshi MFIs hold compulsory savings from clients and if a client gets into difficulties with repayments, these savings provide a buffer (for the MFI and client) to manage potential defaults. The Reserve Bank of India’s (RBI) policy of not allowing MFIs to hold savings raises the risk of client default and MFI collapse. In addition, the sudden availability of multiple loans for rural people in southern India may have encouraged what Stuart Rutherford, in a personal communication with one of the authors, called the “diabetes effect”. People who could never get loans (sugar) grab as many as they can without thinking and become highly indebted.
What’s Right Turning the question around, we should also ask what is right about microfinance. Most obviously, MFIs increase the choices that millions of near-poor and poor people have to basic financial services – loans,
savings and (increasingly) insurance. This can help them manage their finances more effectively, as long as they do not borrow excessively. Effective MFIs provide valuable services to clients and add to the vibrancy of local economic life by facilitating production, exchange and consumption. This is not transformational as Yunus has claimed since economic transformations require technological, redistributional, and social breakthroughs, but it is an improvement for many poor and low-income people. Moreover, the microfinance movement has contributed to “democratising global financial markets through new contacts, organisations and technology” (Conning and Morduch 2011: 1). For instance, in Kenya, people already use a text message-based service known as M-PESA to transfer money electronically to other mobile users and this application has reduced their transaction costs significantly. The entry of commercial banks into the microfinance sector is another example of the growing recognition and viability of the concept. This is evident in the enhanced foreign investment, both debt and equity, in microfinance, which has quadrupled to reach $13 billion during the 2007-11 period (Reille, Forster and Rozas 2011). External finance is to be welcomed as long as it is sustainable and is not fuelling a credit bubble. Second, although proponents of MFIs emphasise micro-loans, many MFI clients praise improved access to micro-saving services. Going into debt often worries low-income households, and so many prefer to turn regular micro-savings into lumps of money that can be spent on major purchases or events (Rutherford 2000).
EPW Index An author-title index for EPW has been prepared for the years from 1968 to 2010. The PDFs of the Index have been uploaded, year-wise, on the EPW web site. Visitors can download the Index for all the years from the site. (The Index for a few years is yet to be prepared and will be uploaded when ready.) EPW would like to acknowledge the help of the staff of the library of the Indira Gandhi Institute for Development Research, Mumbai, in preparing the index under a project supported by the RD Tata Trust.
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Results from a recent field experiment study in rural Kenya suggests that households would save more if they had access to a broader array of saving devices, from simple safe boxes to commitment contracts (Dupas and Robinson 2011). Institutions such as SafeSave in Bangladesh and SANASA in Sri Lanka have spearheaded innovative approaches to micro-savings. But, there is often a major obstacle to MFIs offering savings products: the national banking authorities. In their enthusiasm for protecting poor people from fraudulent savings programmes, central banks formulate regulations that stop MFIs from offering savings products. This protects people from fraudulent operators but often means that they need to store savings at home or in petticoat banks on their person. The risk of losing such cash is a dis incentive to saving for many poor people. Finally come the social benefits of some MFI activities. South Asia’s MFIs have focused on female clients, and many organise women into loan groups or village organisations. There are detailed academic debates about the benefits and problems of microfinance groups – for example, if a woman gets a loan and passes it on to her husband for his business, is she empowered or simply manipulated? Our judgment, based on 20 years of monitoring microfinance in Bangladesh, is that on balance, the impacts have been positive. There is strong evidence that MFI group members have higher levels of contraceptive use (Schuler and Hashemi 1994) than non-members because they have impro ved information and choice. Much anecdotal evidence also suggests that joining MFIs leads to women becoming more physically mobile and being permitted to visit more public spaces by their husbands. So, is there a way forward? Yes, but it requires change on the part of MFIs and of banking authorities and governments. MFIs and their leaders (and the trusts, foundations and aid donors that initiate and support them) need to be more honest and more humble about their products and their impacts. MFIs need to be much more transparent about their charges, terms and conditions, and put them on the walls of all branches in an easy to understand form or print them in borrowers’ passbooks. (To his shame, Yunus did not
do this for the first 20 years of Grameen Bank.) MFIs can introduce low-cost systems to reduce the likelihood of client abuse and improve social performance. Sinha (2006) has conceptualised and developed a systematic format for social rating and social performance reporting for the annual reports of MFIs. Belatedly, MFIs across the world are showing more commitment to transparency and accountability with a growing number publicly reporting systematically on the social benefits of their activities through initiatives such as the social performance reporting awards by the Microfinance Information Exchange.3 Second, unless MFIs have rigorous and independent evaluations that provide credible evidence, they need to moderate their claims about reaching the poorest and reducing poverty. Providing fair cost microfinance services to people who have limited financial access is a good enough achievement. It does not have to be the poorest of the poor. Other services, such as cash transfers, are much more effective at helping these groups (Hanlon, Barrientos and Hulme 2010). Third, MFIs need to examine the ways in which they assess field staff performance. They need to reform these ways, so that field staff understand that the quality of their relationships with clients is as important as achieving financial targets, especially if the MFI proclaims a social mission. If they are really clever, they can recruit different types of staff. SafeSave in Bangladesh employs female slum-dwellers to be “collectors” in the settlements where they live. They have detailed knowledge of their clients, which helps the banking side; as neighbours, they treat their clients with respect. As one collector, Sharifa, told David Hulme: “I live here and I am not going to do things that upset people”.4
Regulatory Directions Changes also need to be made by the agencies that regulate MFIs. They need to be cautious about setting interest rate ceilings on microloans. If these are set too low, they will kill off MFIs and reduce the financial service choices available to nearpoor and poor people (Hulme and Arun 2009). In addition, there is a need to amend banking regulations in many countries so
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that well-managed MFIs can offer more savings services to their clients. As study after study shows, people on low incomes value access to secure savings services as much, and often more, than access to loans (Hulme and Mosley 1996; Collins et al 2009). Furthermore, recent empirical evidence from Sri Lanka shows that households’ probability of participating in microfinance services increases with rising self-perception towards risk (Arun and Bendig 2010). It is plausible that combinations of different financial products play a key role in providing a diversified portfolio of coping mechanisms to individuals. However, the nature and role of regulatory practices often blocks the creation of new financial products. Unfortunately, in many countries, governments have been lackadaisical in regulating MFIs. These institutions have as a result developed inappropriate practices. For instance, in India, a draft bill for the regulation of microfinance was presented to Parliament in 2007. However, it was neither treated as a priority, nor approved. The debacle in Andhra Pradesh forced the RBI to hurriedly initiate a committee to review crucial governance issues in the sector. The Malegam Committee report, submitted in 2011,5 tried to find a balance between the extremes of regulation – laissezfaire versus centralised control. It decided that all bank loans to MFIs, including nonbanking financial companies working as MFIs, would be treated as priority sector lending. The report has also suggested a cap on interest rates and supported the need for a nationwide regulatory regime in the sector. Following this, the government has placed a new draft, the Microfinance Institutions (Development and Regulation) Bill 2011, on its website for wide discussion.6 One significant feature of the draft version is the role of the RBI as the primary autho rity overseeing the sector, with supervisory powers over institutions engaging in microfinance activity. This is in an effort to discourage state-level legislation such as the one in Andhra Pradesh. Although there is industry-wide concern on possible dual regulation from the RBI and state governments, there is huge public support for state-level legislations due to the unethical practices in the sector. Sadly, the bill does
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not capture the range of issues addressed in the Malegam Committee report. Nor does it fully answer the specifics for a res ponsive regulatory framework to support sustainable delivery of diversified micro finance services, least of all to protect clients from unethical practices. Perhaps it is too much to hope that south Asia’s politicians will change their approach towards MFIs. In India, much of the overheated criticism of MFIs is an attempt by politicians to find a scapegoat. Successive Indian governments have failed to tackle the country’s agrarian crisis; criticising MFIs is a way of obscuring this failure. In Bangladesh, Yunus’s dismissal was perhaps more about the concerns of the political parties and the prime minister that Yunus could create a new political party. Many of the country’s major MFIs (BRAC, ASA, Buro Tangail) in Bangladesh have recently been gradually reducing their loan portfolio, merging branches, reducing average client debt load, introducing saving products and keeping quiet. In this way, they have reduced the likelihood of creating a credit bubble, followed by client defaults and delinquency, in recent years. Maybe that is the way forward across south Asia – a lower profile microfinance industry that keeps its costs as low as possible, expands incrementally and focuses as much on savings services as on loans. Microfinance is one small part of a national strategy for poverty reduction. We need to get it into perspective and keep it working effectively.
com/wp-content/uploads/2011/01/Malegam-Report-Issues-Microfinance-India.pdf 6 The Micro Finance Institutions (Development and Regulation) Bill, 2011, as of 20 June 2011. Accessed on 19 October 2011: http://finmin.nic.in/ the_ministry/dept_fin_services/micro_finance_ institution_bill_2011.pdf
References Arun, S, T Arun and S Devi (2011): “Transforming Livelihoods and Assets through Participatory Approaches: The Kudumbashree in Kerala, India”, International Journal of Public Administration, 34(3): 171-79. Arun, T and M Bendig (2010): “Risk Management among the Poor: The Case of Microfinancial Ser vices”, IZA Discussion Paper Series 5174, Institute for the Study of Labor, Bonn. Coleman, B E (2006): “Microfinance in North-east Thailand: Who Benefits and How Much?”, World Development, 34(9):1612-38. Collins, D, J Morduch, S Rutherford and O Ruthven (2009): Portfolios of the Poor: How the World’s Poor Live on $2 a Day (Princeton: Princeton University Press). Conning, J and J Morduch (2011): “Microfinance and Social Investment”, Financial Access Initiative and New York University Wagner Graduate School of Public Service, New York. Accessed on 19 July: http://dyson.cornell.edu/docs/microfinance-social-investment-conning-morduch.pdf . Deutsche Bank Research (2007): “Microfinance: An emerging investment opportunity”, Current Issues, Deutsche Bank Research, Frankfurt. Accessed on 19 October 2011: http://microrate.com/ wp-content/uploads/2009/03/deutsche-bankmicrofinance-an-emerging-investment-opportunity-dec-07.pdf Dupas, P and J Robinson (2011): “Why Don’t the Poor Save More? Evidence from Health Savings Experi ments”, unpublished manuscript, University of California, Los Angeles. Accessed on 19 July 2011: http://www.econ.ucla.edu/pdupas/DupasRobinson_HealthSavings.pdf Grameen Bank (2010): “Annual Report 2009”, Grameen Bank, Dhaka. Accessed on 19 October 2011: http://www.grameen-info.org/index.php?
option=com_content&task=view&id=786&Item id=756 Hanlon, J, A Barrientos and D Hulme (2010): Just Give Money to the Poor: The Development Revolution from the Global South (Sterling: Kumarian Press). Hulme, D (2000): “Impact Assessment Methodologies for Microfinance: Theory, Experience and Better Practice”, World Development, 28(1): 79-98. – (2009): “The Story of the Grameen Bank: From Subsidised Microcredit to Market Based Micro finance” in D Hulme and T Arun (ed.), Micro finance: A Reader (Oxford and New York: Routledge). Hulme, D and P Mosley (1996): Finance against Poverty, Volumes 1 and 2 (London: Routledge). Hulme, D and K Moore (2007): “Assisting the Poorest in Bangladesh: Learning from BRAC’s ‘Targeting the Ultra Poor’ Programme”, Brooks World Poverty Institute Working Paper 1, University of Manchester. Hulme, D and T Arun (2009): “The Future of Micro finance” in D Hulme and T Arun (ed.), Micro finance: A Reader (Oxford and New York: Routledge). Imai, K S, T Arun and S K Annim (2010): “Micro finance and Household Poverty Reduction: New evidence from India”, World Development, 38(12): 1760-74. Khandker, S (2005): “Microfinance and Poverty: Evidence Using Panel Data from Bangladesh”, World Bank Economic Review, 19(2): 263-86. Reille, X, S Forster and D Rozas (2011): “Foreign Capital Investment in Microfinance: Reassessing Financial and Social Returns”, CGAP Focus Note 71, Washington DC. Rutherford, S (2000): The Poor and Their Money (New Delhi Oxford University Press). Sinha, F (2006): “Social Rating and Social Performance: Reporting in Microfinance, Towards a Common Framework”, The SEEP Network for the Argidius Foundation. Accessed on 19 July 2011: http://www.m-cril.com/pdf/Framework-for-Social-Performance-Rating-and-Reporting.pdf Schuler, S R and S M Hashemi (1994): “Credit Programs, Women's Empowerment, and Contraceptive Use in Rural Bangladesh”, Studies in Family Planning, 25(2):65-76. Srinivasan, N (2011): Microfinance India: State of the Sector Report 2010 (New Delhi: Sage Publishers).
Who watches the media?
Notes 1 The Grameen Bank model II, launched in 2001, was equipped with more suitable and comprehensive financial services for the poor. As of 2009, it had nearly 8 million depositors and 6.4 million active borrowers, with branches covering 99% of all villages in Bangladesh (Grameen Bank 2010). This phenomenal growth was due to the diverse product range, and more significantly, the element of flexibility built into the Grameen II system. In contrast, the basic goal of Grameen I was to prove that the poor are creditworthy; Grameen II was built on the principle that the poor will always pay back (see Hulme 2009 for further detail). 2 Based on primary research with BRAC, SafeSave and SANASA, among others. 3 For more detail see: http://www.cgap.org/p/ site/c/template.rc/1.26.12224/ 4 Interview with SafeSave Field Officer, Hindupara, Kapashia, Bangladesh, 21 February 2011. The name is disguised. 5 “Report of the Sub-Committee of the Central Board of Directors of Reserve Bank of India to Study Issues and Concerns in the MFI Sector”, accessed 19 October 2011: http://indiamicrofinance.
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WE DO. www.thehoot.org november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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The Crisis and the Global South: From Development to Capitalism Hugo Radice
Current trends in the world economy and global politics provide evidence that the global south has now arrived, at last, at “normal” capitalism, bringing with it new patterns of uneven development, inequality and injustice. Its newly confident élites, now fully engaged in global circuits of trade, investment and finance, and in global governance too, appear to have left behind their previous colonial-comprador role.
This paper was presented at a workshop on “Global Crisis: Responses and Impacts in the Global South”, Global Development and Justice Research Group, School of Politics and International Studies, University of Leeds, UK, on 4 March 2011. Hugo Radice (
[email protected]) is Life Fellow, University of Leeds.
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hirty years ago, ambitions for a New International Economic Order based on autonomous postcolonial development foundered on the debt crisis that shattered the unity of the Third World as we then conceived it. Today, rapid economic growth appears to have spread from east-south Asia to Latin America and now Africa, and, while much of the old capitalist heartland is mired in economic stagnation and fiscal crisis, the “emerging economies” face an investment glut. In this essay I argue that current trends in the world economy and global politics provide evidence that the global south has now arrived at “normal” capitalism, at last, bringing with it new patterns of uneven development, inequality and injustice. Its newly confident élites, now fully engaged in global circuits of trade, investment and finance, and in global governance too, appear to have left behind their previous colonial-comprador role. While the true import of the banking and financial crisis of 2008 remains contested, its impact on the world economy has followed a path that diverges sharply from the experience of past crises, and from the expectations of most western observers. Overall, it is clear that the global south, or in élite-speak the “emerging economies”, has suffered less and recovered more quickly than the advanced capitalist heartland. In addition, in 2011 it now seems that the patterns of political impact – not in the sense of immediate crisis measures, but of longer-term “tectonic” shifts – may be equally significant and unexpected. While political élites in the United States (US), western Europe and Japan struggle to find paths of recovery that are acceptable to their confused and divided electorates, remarkable changes of various kinds are observable across Asia, Africa and Latin America. Many commentators have tried to identify specific historical crises in the hope that a comparative analysis could shed
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light on current events, the most common being the crisis that followed the 1929 Wall Street crash. After all, that was also a crisis that had its immediate origin in excessive financial speculation centred in the US, and soon assumed a global scale with dramatic effects both economic and political (notably the collapse of world trade and the rise of Hitler). But while there are clear parallels in relation to the points of origin of the two crises and their unfolding in the economies of the US and Europe, the effects on the wider world have been so different in so many ways that we are immediately drawn to an examination of the intervening decades in search of deeper understanding. I think that it is more fruitful, therefore, to situate the present crisis in the context of the post1945 period, which for this purpose can be divided into two: from 1945 until 1982 (the Mexican debt crisis), and from 1982 to 2007 when the current crisis began. In the next section, I sketch these two periods as the rise and fall of developmentalism as a unified global process. I will subsequently argue that the present crisis reveals that the unravelling of developmentalism since 1982 can be reinterpreted as the transition to what I call normal capitalism in the global south.
1 The Rise and Fall of Developmentalism After 1945, the “golden age” of post-war economic growth and the worldwide move ment for decolonisation provided not only a new historical subject on the global stage, the Third World, but a strategic task for that subject: development. Given the intensity of the political and military struggle for liberation from colonial rule, and the global context of confrontation between capitalism and communism, there was in retrospect a remarkable degree of agreement on the actual objective – the condition of having achieved development. In essence, this centred on industrialisation, urbanisation and the building of an effective modern state apparatus. In pursuit of this common objective, the political economy of development could of course be elaborated from a wide variety of ideological positions, from free-market liberalism, through the mainstream of Keynesian theory and the critical school of underdevelopment and
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dependency, to the orthodox communist model of central planning. As the post-war boom drew to a close in the late 1960s, both the theory and the practice of development were debated in academic and policy circles primarily between the mainstream and the dependency school. For the mainstream, a benevolent and hopefully democratic state could guide the development of a mixed economy, in which the public sector mobilised resources for physical and social infrastructure, while the private sector – including foreign investors – implemented the transformation from agricultural predominance to that of manufacturing. For the dependency critics, this rosy vision ignored the realities of extreme inequalities of wealth and power, and above all, the pervasive dependence of postcolonial economies on access to the finance, technology and markets that only the advanced industrial countries could provide. Aside from advocating complete national closure – a strategy which became associated for all time with the brutalities of Cambodia under Pol Pot – the critics typically argued for a larger role for the state in economic development. But they also recognised that Third World élites were substantially complicit in the reproduction of external dependency, maintaining a comprador character linked to the persistence of a colonial international division of labour (Baran 1957). The implication was that the interests of workers and peasants needed to be explicitly recognised in the policy practices of development, especially with regard to limiting reliance on foreign capital and nurturing an autonomous national industrial base.
1970s Events In the 1970s the economic dynamism of the capitalist west was hit by a series of more or less unexpected blows. The collapse of the post-war international monetary order, created at Bretton Woods in 1944, in large part the result of western Europe and Japan challenging US industrial hegemony, created uncertainty in international trade and investment, and transmitted inflationary pressures around the world economy. The action taken by the Organisation of Petroleum Exporting Countries (OPEC) in 1973 to reverse the declining purchasing power of its oil generated a global
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recession, and spurred developing countries to come together and shape demands for a New International Economic Order to redress the north-south balance of wealth and power. This coincided with the period of east-west détente after Nixon’s visit to China and the negotiations to end the Vietnam war. The availability of recycled petrodollars as an alternative way to finance development, together with economic and political stagnation in the US and the fall of the Shah of Iran, seemed at the decade’s end to presage a dramatic shift in the dynamics of world economy and the international order. A clear implication was that the development of the Third World might at last be freed from its postcolonial shackles. Yet within a few years, the US and its allies, particularly Britain, had achieved a dramatic turnaround in these trends. Carter’s 1979 appointment of Paul Volcker as chair of the US Federal Reserve signalled a return to free-market economics after the stagflation and policy muddles of the previous 10 years. The Fed’s ultra- restrictive credit policies drove up interest rates and shocked the US economy into the deepest recession since the war. By 1982, developing countries that had relied on cheap foreign loans to finance faster growth were hit by a triple whammy: primary export volumes declined, export prices fell, and the cost of servicing and rolling over dollar-denominated loans soared. The Mexican default of August 1982 ushered in the Third World debt crisis, a “lost decade” in Latin American and African development, and the rebirth of the International Monetary Fund (IMF) and the World Bank as global enforcers of market discipline. By the time the Soviet bloc collapsed in 1989-91, the Washington Consensus was firmly in place, imposing neo-liberalism in almost every corner of the world. The exception was, of course, east Asia, where South Korea and Taiwan adapted the post-war growth strategy and policies of Japan and launched the final flowering of post-war developmentalism: the developmental state (DS) model. While African economies shrank and Latin America stagnated, this model scored remarkable successes, notably in high levels of economic growth, rapid modernisation, and an end to reliance on foreign capital. A major factor, already evident by the late
1980s, was the even more remarkable transformation of China, as market reforms opened up its economy to foreign trade and investment, and unleashed an unprecedented growth dynamic that has continued, with only minor slowdowns, even since. Both South Korea and Taiwan also underwent considerable democratisation, something that was clearly absent (and remains so) in mainland China. The widespread emulation of the DS model across southeast Asia led to break-neck but uneven regional growth. Although the inflow of hot money from the new circuits of global finance led to the east Asian financial crisis of 1997-98, recovery was remarkably quick and rapid growth resumed; but by then, the DS pioneers had pretty much abandoned their distinctive pattern of state-led development, and the model lost its iconic status (Radice 2008).
Changes in Latin America The 1990s also saw significant changes in Latin America, centred on the retreat of the generals, the easing of the debt crisis and the adoption of more liberal economic policies. Growth in output and trade recovered, although the distribution of its benefits was extremely uneven. Privatisation of state enterprises and the erosion of populist and clientelist welfare systems also signalled a substantial departure from the development model of earlier decades. Perhaps most dramatically in the 1990s Mexico, despite a major financial crisis in 1994, joined the North American Free Trade Area (NAFTA), liberalised trade and investment and abandoned the corporatist model that the Institutional Revolutionary Party (PRI) had presided over for seven decades. Between 1982 and the century’s end, then, both the geopolitical unity of the Third World and the ideology of developmentalism had largely disappeared. The Third World had fragmented into a growing number of criss-crossing regional and sectoral groupings, making it relatively easy, especially after the demise of the Soviet Union, for the advanced capitalist states to dictate the terms of engagement within the world economy. A good example is the question of state policies on inward foreign direct investment. In the mid-1990s, the Organisation for Economic Cooperation and Development (OECD) proposed a
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Multilateral Agreement on Investment (MAI) which would severely restrict the right of host governments to impose conditions on transnational investments. When the MAI came up against stiff resistance from both developing countries and the increasingly active development NGOs, it was quietly dropped. Instead, leading investor states negotiated a web of bilateral investment treaties (BITs) which achieved very much the same outcome. It has become commonplace to see the years after 1982 as the age of neo-liberalism. But before examining the events of 2007-08, let alone the question of whether that age might be drawing to a close as a result of the current crisis, it is vital to look more closely at the political sociology of neo-liberalism during this period. In particular, it seems clear that the new order was by no means just the result of economic (and at times military) coercion by the US and its allies. Instead, it can only be understood as a set of transformations in the nature of class divisions and political régime norms that was not just reluctantly accepted, but enthusiastically embraced by élites throughout the global south. It is these changes that lie at the heart of “normal capitalism”.
2 Normal Capitalism in the Global South Between 1994 and 2001 a sequence of dramatic financial crises struck the global south, most notably in Mexico 1994, via east and south-east Asia 1997-98, Russia 1998, Brazil 1999 and on to Turkey and Argentina in 2001. This succession of crises, characterised in particular by capital flight, financial sector insolvencies and huge fiscal deficits, were seen at the time by the mainstream as the consequence of incomplete liberalisation and inadequate economic governance; and by left critics as a clear indication of excessive or at least poorly-sequenced liberalisation and the abandonment of developmentalist policies. The critics also saw them as symptomatic of broader strains in a global financial sector characterised by rampant speculation and greed, part and parcel of a “financialised” global capitalism that also generated the collapse of the brilliantly misnamed investment fund Long Term Capital Management, the dot.com crash of 2000, the Enron and WorldCom scandals, and increasingly
frequent asset bubbles in securities, commodities and property markets. From this perspective, the 2007-08 crisis is seen as confirming such a diagnosis, leading critics to forecast the end of neoliberalism, the end of globalisation, and for many, a lengthy global slump. However, it is important not to see these dramatic financial episodes collectively as evidence of an aberrant form of capitalism. Rather, they are the consequence of much broader changes in global capitalism encompassing the international division of labour, the rise of new centres of capital accumulation, and the social and political order both within nation-states and at the regional and global levels. Perhaps because of a reluctance to abandon the developmentalist perspective, the focus of attention has largely been on a global capitalism understood as external to and imposed upon the global south, for example in relation to the agendas of the Bretton Woods Institutions, such as the World Trade Organisation’s Doha Round. We still far too often assume that a common and collective national interest still exists in the global south, despite the abundant evidence to the contrary, and despite a longstanding central tenet in dependency theory, that foreign (i e, northern) capital “disintegrates” the national political economies of the south, socially and politically as well as economically (Sunkel 1973). In the sphere of production, the vast literatures on supply or value chains in both industry and agriculture, chart the everdeeper nature of that national disinte gration. Strategies of national food selfsufficiency have been abandoned in pursuit of foreign exchange from supposedly highvalue agri-exports, hoping that imports can substitute for domestic food staples. In manufacturing, host governments compete fiercely to move up the value chains, finding that securing lasting success in this regard requires not just cheap labour, but expensive infrastructure and high-quality local supply networks. In turn, these develop ments imply the nurturing of a more educated “middle class” of small entrepreneurs, professionals and technicians who need to be trained, and to be persuaded to stay by the promise of a middle-class lifestyle: hence the growing importance of higher education, a western-style consumption
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infrastructure, and practical good gover nance in the sense of a public administration more effective in both collecting and spending tax revenues, dispensing justice and providing existential security. And a central requirement for all these things is a dynamic financial services sector that can provide credit to households, businesses and government, and services such as pension funds and insurance. If the developmentalist creed was one of catching up with the advanced capitalist countries, then the new capitalism in the south surely amounts to development. But this is not development towards the benign capitalism of the post-war Keynesian welfare states of Europe and North America, because those states have themselves been transformed under neo-liberalism. The east European experience has been especially poignant in this regard: urged to overthrow an oppressive and economically stagnant communism, the peoples of the region imagined that they would arrive in Sweden, but instead found themselves in Mexico. Meanwhile, the Mexicans, abandoning the comforts of authoritarian corporatism for NAFTA and electoral demo cracy, found themselves not in Johnson’s full-employment “Great Society” of the 1960s, but instead in an extreme form of the grotesque inequalities of wealth and power that now characterise the US. In these circumstances, management of the vast discrepancy between expectation and reality becomes central to both domestic and international politics. It is commonplace to see the ruling classes of the global south as facing both ways – externally towards the rapacious powers of foreign capital and internally towards their own fractious citizenry. But we need to take full account of how these social forces are structured in a given period, as well as across different regions and individual countries. Externally, the ruling classes have been increasingly integrated into the global networks of business and politics, with their supportive realms of higher education, finance, media and culture. Internally, they have mostly come to realise that their position is more effectively ensured by the nurturing of a signi ficant middle class of the kind outlined earlier, and a “democracy lite” of competing parties to provide a semblance of voice
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COMMENTARY
SAMEEKSHA TRUST BOOKS
China after 1978: Craters on the Moon The breathtakingly rapid economic growth in China since 1978 has attracted world-wide attention. But the condition of more than 350 million workers is abysmal, especially that of the migrants among them. Why do the migrants put up with so much hardship in the urban factories? Has post-reform China forsaken the earlier goal of “socialist equality”? What has been the contribution of rural industries to regional development, alleviation of poverty and spatial inequality, and in relieving the grim employment situation? How has the meltdown in the global economy in the second half of 2008 affected the domestic economy? What of the current leadership’s call for a “harmonious society”? Does it signal an important “course correction”? A collection of essays from the Economic & Political Weekly seeks to find tentative answers to these questions, and more.
Pp viii + 318 ISBN 978-81-250-3953-2 2010 Rs 350
Windows of Opportunity By K S KRISHNASWAMY
A ruminative memoir by one who saw much happen, and not happen, at a time when everything seemed possible and promising in India. K S Krishnaswamy was a leading light in the Reserve Bank of India and the Planning Commission between the 1950s and 1970s. He offers a ringside view of the pulls and pressures within the administration and outside it, the hopes that sustained a majority in the bureaucracy and the lasting ties he formed with the many he came in contact with. Even more relevant is what he has to say about political agendas eroding the Reserve Bank’s autonomy and degrading the numerous democratic institutions since the late 1960s.
Pp xii + 190 ISBN 978-81-250-3964-8 2010 Rs 440
Global Economic & Financial Crisis In this volume economists and policymakers from across the world address a number of aspects of the global economic crisis. One set of articles discusses the structural causes of the financial crisis. A second focuses on banking and offers solutions for the future. A third examines the role of the US dollar in the unfolding of the crisis. A fourth area of study is the impact on global income distribution. A fifth set of essays takes a longterm view of policy choices confronting the governments of the world. A separate section assesses the downturn in India, the state of the domestic financial sector, the impact on the informal economy and the reforms necessary to prevent another crisis. This is a collection of essays on a number of aspects of the global economic and financial crisis that were first published in the Economic & Political Weekly in 2009.
Pp viii + 368 ISBN 978-81-250-3699-9 2009 Rs 350
1857 A compilation of essays that were first published in the EPW in a special issue in May 2007. Held together with an introduction by Sekhar Bandyopadhyay, the essays – that range in theme and subject from historiography and military engagements, to the dalit viranganas idealised in traditional songs and the “unconventional protagonists” in mutiny novels – converge on one common goal: to enrich the existing national debates on the 1857 Uprising. The volume has 18 essays by well-known historians who include Biswamoy Pati, Dipesh Chakrabarty, Peter Robb and Michael Fisher. The articles are grouped under five sections: ‘Then and Now’, ‘Sepoys and Soldiers’, ‘The Margins’, ‘Fictional Representations’ and ‘The Arts and 1857’.
Pp viii + 364 ISBN 978-0-00106-485-0 2008 Rs 295 Available from
Orient Blackswan Pvt Ltd www.orientblackswan.com Mumbai Chennai New Delhi Kolkata Bangalore Bhubaneshwar Ernakulam Guwahati Jaipur Lucknow Patna Chandigarh Hyderabad Contact:
[email protected] 30
november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
COMMENTARY
and choice. The democratic revolution that ended fascism in Europe in the 1970s, Latin American dictatorships in the 1980s and communism in the 1990s even appears to be reaching west Asia and North Africa through the Arab Spring.
3 The Crisis of 2007-08 and After As already noted, the crisis of 2007-08 was not a rerun of the 1929 Wall Street crash. For the global south, two major differences are critical. First, in remarkably short order the existing structures of global governance were mobilised to support, and at least minimally coordinate, the deployment of the fiscal and monetary powers of the central banks and Treasuries of the largest economies. The responses of the IMF, the Bank for International Settlements (BIS) and the G7-G20 stand in stark contrast to the utter failure of the international system after 1929, when international trade and finance collapsed, and the great powers each sought their own salvation. Through the summer of 2011, it has become clear that maintaining the momentum of such international collaboration, in the face of the eurozone debt crisis and the threat of a return to global recession, is proving to be very difficult. Critics have castigated our global governors for not having yet agreed on measures to re-regulate the banks, to tame financial speculation, or to coordinate macroeconomic management. However, we should remember that after 1929 it took four years before the GlassSteagall Act was passed in the US, while only Hitler and Stalin achieved full employment in their respective national economies before war broke out in 1939. Second, again in stark contrast to the 1930s, both the credit crunch and the recession have had more impact on the advanced capitalisms of the north than on the global south. Of course, the immediate response of mobile global capital, as in earlier crisis episodes, was flight to the safe havens of the US and Europe, to gold and to “triple-A” securities; and of course the immediate impact upon working people in the global south was far more severe. But as economic growth resumed in 2009, it was the so-called emerging economies that recovered far more quickly, and it has become a cliché that the BRIC economies, and China in particular, were driving a
recovery that, at the level of aggregate global production and trade, was remarkably robust. Even if some of the bubble markets around the world remained deflated (US and most European housing most notably), once short-term speculative forces are taken into account the rising prices of food and industrial commodities reflected that recovery. What is more, this was a resumption of a decade-long higher growth trend in Africa as well as Asia and Latin America. The apparent return to slower global growth and renewed financial uncertainties in 2011 has not reversed the shift in the relative dynamism of north and south. Despite the grossly unequal distribution of the benefits of this growth, it seems hard to deny that capitalism – normal capitalism – is working across the global south. For normal capitalism is not the capitalism of the post-war “golden age”, or of the developmental ambitions of the 1960s and 1970s. It is an economic system prone to destructive booms and slumps, to financial crises that wipe out household savings and government fiscal strategies alike, to polar extremes of wealth and poverty, and to a continuing reckless consumption of the global commons. It is also a political order constituted first and foremost on the defence of private property, in which the reach of democratic and electoral accountability stops at the entrance to the gated communities and tax havens of the super-rich, whether they hail from Omaha or Beijing. In the Davos World Economic Forum, the
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Bilderberg meetings and the Group of Thirty (set up in 1978 as a think tank of top bankers and finance experts), the eager and willing servants of the super-rich figure out how to manage the affairs of the rest of us, so as to keep the global “middle classes” onside and the rest too fascinated by the possibility of prosperity and too terrified of exclusion from it, to contemplate a real and sustainable alternative. Two years before the Wall Street crash, the French writer and journalist Julien Benda published La Trahison Des Clercs (Benda 1927), in which he indicted the intellectuals of the day for abandoning the Enlightenment ideal of a disinterested pursuit of knowledge and truth, in favour of serving one or another earthly power. Today as always, society should expect that those citizens who possess the necessary knowledge will analyse and expose the workings of capitalism, and do all they can to develop an alternative order based on equality and social justice. The present crisis may not signal an end to neo-liberalism, but it should certainly signal the urgency of this task. References Baran, Paul (1957): The Political Economy of Growth (New York: Monthly Review Press). Benda, Julien (1927): La Trahison Des Clercs (Paris: B Grasset). English translation: The Betrayal of the Intellectuals (Boston: Beacon Press, 1955). Radice, Hugo (2008): “The Developmental State under Global Neoliberalism”, Third World Quarterly, 29(6): 1153-74. Sunkel, Osvaldo (1973): “Transnational Capitalism and National Disintegration in Latin America”, Social and Economic Studies, 22(1): 132-76.
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EPW 5-Year CD-ROM 2004-08 on a Single Disk
The digital versions of Economic and Political Weekly for 2004, 2005, 2006, 2007 and 2008 are now available on a single disk. The CD-ROM contains the complete text of 261 issues published from 2004 to 2008 and comes equipped with a powerful search, tools to help organise research and utilities to make your browsing experience productive. The contents of the CD-ROM are organised as in the print edition, with articles laid out in individual sections in each issue. With its easy-to-use features, the CD-ROM will be a convenient resource for social scientists, researchers and executives in government and non-government organisations, social and political activists, students, corporate and public sector executives and journalists. Price for 5 year CD-ROM (in INDIA) Individuals - Rs 1500 Institutions - Rs 2500 To order the CD-ROM send a bank draft payable at Mumbai in favour of Economic and Political Weekly. The CD can also be purchased on-line using a credit card through a secure payment gateway at epw.in Any queries please email:
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Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
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On Constructing the Idea of Gujarat Kiran Desai
I
n the present context, the “identity” or “asmita” of Gujarat and the Gujarati have been flaunted aggressively through a discourse generated by a hegemonic religious-political group largely supported by the elites and the middle class. Gujarat is projected for its profoundly “liberal” business and industrial policy as well as its overall milieu. Gujarat with respect to its hegemonic regional-social-politicaleconomic entity as well as specific appearance, shape and “idea” had been conceived, constructed and imagined at different points of time mainly by the leading political figures and literati as well as institutions of that period such as K M Munshi, Alexander Forbes and the Gujarat Research Society to name a few. This was well before the state came into existence in its present geographical and administrative form in 1960. As Edward Simpson has mentioned elsewhere, Gujarat is a political and cultural construction and there is nothing “natural” or self-evident about the population and the land of Gujarat (Simpson 2011). He has affirmed how the middle class, the bourgeoisie, and the literati with all the acumen, resources and influence at their behest not only created a blueprint of the region in terms of the idea but also in their representation of this imagined region and the “Gujarati” community; the identities, voice and culture of the less-vocal majority were subsumed and marginalised. They had not only projected the images of different parts of the region in a specific manner for serving the interests of a definite “developmental and political” paradigm, but also vouched for a “paternalistic hierarchy”. The present day hegemonic Gujarat is a reflection and manifestation of the “emergence of the idea of Gujarat, as an entrepreneurial, urban and Hindu and Jain society” and the same took shape in the late nineteenth century under particular cultural and economic conditions. The period saw the rise of a new class, not only of urban professionals, but of
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book review The Idea of Gujarat: History, Ethnography and Text edited by Edward Simpson, Aparna Kapadia (Hyderabad: Orient Blackswan), 2010; pp vi + 268, Rs 595. moneyed urban people with commercial as well as professional interests. This critical historical moment left a distinct mark on the ways Gujarat would be defined in the coming decades.
The volume under review makes an effort to capture various interpretations concerning the construction of the “idea of Gujarat”, some of which are known but revisited and reinterpreted, while others were ignored until now. The collected articles by scholars with long-term personal and academic investment in the affairs of Gujarat “...aim to either challenge or explain something that is conventionally thought about Gujarat...in order to better understand the epistemological practices that have gone into the making of the region” (pp 8-9). Simpson has made the valid point that many variations of Gujarat are derived from the British writings that have been reproduced with varied purpose and hence the relationship between texts and the broader truths have to be determined cautiously.
Culture and Geography From the perspective of cartography, various maps of “Gujarat” prepared at various points of time indicate the politics involved as the article authored by the editors point out. Citing illustrations of Watson and Forbes they underlined how “(P)ersonal interest was presented as strategic interest to the colonial government, but in the process produced different forms of knowledge about the region which reverberate in the present” (p 22). Interestingly the Maha Gujarat movement got in the end, the present geographical-administrative unit, which was
carved out by an unknown cartographer in the second edition of Forbes’ Ras mala. Aparna Kapadia has observed that Ras mala was “a representation of Gujarat unified in both culture and geography”. She has made two significant points: Forbes had undermined the Mughal and Maratha reigns in terms of their contribution, while glorifying the Rajput rulers and he did that in order to justify the British rule that succeeded the Maratha rule. Secondly, the British government encouraged the use of English and the standardisation of administrative vernaculars and “thus the idea of Gujarat associated with Gujarati increasingly excluded languages such as Kathiawadi, Kutchi and Bruj bhasha, and in the process many institutes and traditions with deep roots in the region’s culture were also gradually marginalised” (p 58). Forbes’ idea of the Gujarat region with a distinct identity was later on utilised by the urban elites of the mainland. Caste has been one of the key categories pertaining to Gujarati society and hence how it has been addressed by and interacted with dominant discourse of the idea of Gujarat should be an integral part of any academic endeavour on Gujarat. A mrita Shodhan’s article “Caste in the Judicial Courts of Gujarat, 1800-60” narrates how the colonial judicial courts’ treatment and understanding of castes in terms of their customs and prevailing practices have shaped characteristics of castes and their associations in present day Gujarat. Simpson has curiously observed that (T)he early tangles of colonial law and caste groups contributed to the formation of the distinct corporate-like identity of many castes in the region. Today, caste associations often have strong and clear systems of internal regulation and hierarchy, taxation and credit systems, and philanthropic trusts and institutions dedicated to the management of the births, lives and deaths of their members (p 9).
Oversimplifying Caste? It is uncertain whether he is attributing the present-day characteristics of caste associations to the colonial legacy or not. In the present context, however, the
november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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phenomenon of ever-increasing permeation of caste associations in various spheres of lives of their members have to take into account for the purpose of explanation, the current neo-liberalisation regime that has compelled members to go back to their social roots for empathy and security. This is an aspect the volume has failed to address barring a few exceptions. Herald Tambs-Lyche has deciphered the politics involved in the construction of the imagined community of Gujarat through his “centre-periphery” concepts, illuminating how the centre’s hegemonic block of a Kanbi-Vania dominant axis of central Gujarat undermined peripheral groups, both with regard to subregions and social groups. And he has delineated how this construction was countered by peripheral regions such as Saurashtra and Kutch. The author has sharply pointed out that the reinvented Gujarat identity by the hegemonic allied forces was Hindu and tended to ignore the fact that the region had known some of its greatest development under Muslim rule (p 106). However, the essay has oversimplified the complexities pertaining to caste structure and has not addressed the complex web of caste relations intermingling with class and communal relations and tension. Equating the JP movement with fascism due to strong and rebellious views against the state of the democratic system too seems far-fetched as it reflects a rather bookish venerability towards the system. Edward Simpson has pointed out that the history of Kutch has been rewritten, especially after the 2001 earthquake, in a manner that suits “popular political Hinduism” overturning a rich Muslim heritage. The author, however, has made another significant observation, that through this alteration in history telling, this present-day group of history makers are also striving to defy the linguistic, religious and cultural appropriation of their region by the mainlanders. They “remind us that sense in the history of Kutch is not (the) same as it is in the history of Gujarat” (p 83). These two articles not only delineate how regional identity has been constructed by dominant social forces but also how they were countered in different ways.
Even in spatial configuration in terms of social groups in urban areas the elites have given shape to it in such a way that suits their interest as Rubina Jasani’s case study of Ahmedabad brings out. The author, however, has drawn attention to the complexities pertaining to the reconfiguration that has taken place after the violence stretching from 1969 to 2002, as nostalgia and bickering especially among Muslims and dalits who are still neighbours are a reflection and response of the violent events in the past. “Elites” is a complex category. The role of the elites in confluence with other hegemonic forces in the construction of the idea of Gujarat to serve their parochial interests has been well captured. Again, Howard Spodek has underscored the role of the elites in pre-Independence Ahmedabad with regard to maintaining harmony and cordiality among various communities, not out of any parochial design driven by self-interest but motivated by the prevalent norms and values of that time which were highly influenced by the independence movement and Gandhi’s ideas. It seems that Jasani has completely ignored this dimension. To treat any subject from the perspective of instrumentality either of parochial interest or conspiracy and disregard humanitarian values and traits might be wrong.
Double Identities Taking two subgroups of Hindu Sindhis who have mainly settled in urban mainland Gujarat and Muslim Sindhis who are found in rural areas of Kutch district, Rita Kothari narrates how a minority of Sindhis, who had to migrate to India due to Partition are coping with the hegemonic Gujarati
identity. The point of cultivating “double” identities – one, a hegemonic imposed “Gujarati” identity and the other, representing the cultural traits of the social group they belong to, and display in public sphere in an organic manner – has been well articulated. Though she has clinically depicted the agony of the minority group that migrated from Pakistan, Kothari has ignored certain obvious facts. Hindu Sindhis too are a stratified group (she has not mentioned that), a large segment of them having settled in Gujarat’s urban centres. Likewise, the Vohras among Muslims, have assimilated with the hegemonic Gujarati identity in a seamless manner as both these groups are in trade and business that are part of the mainstream economy and have thereby positioned themselves in the higher echelons of the class configuration. This group of Hindu Sindhis has become an integral part of the hegemonic Hindu right axis without compromising space for maintaining its cultural identity. So Kothari’s assumption of the psychological cost to the Hindu Sindhis may be a far-fetched generalisation that overlooks grey areas.
Impact of Homogenising Hinduism How the “homogenising Hinduism influenced Gujarati politics” is threatening regional particularity has been deliberated with reference to Bahucharaji – a shrine of the goddess located in the hilly region of north Gujarat by Sameera Shaikh’s article. She has underlined the efforts for appropriation by the mainland hegemonic Hindu upper crust forces motivated by religiouspolitical design. However, commercial inte rest too has played a part in such moves.
REVIEW OF LABOUR May 28, 2011 Global Crises, Welfare Provision and Coping Strategies of Labour in Tiruppur – M Vijayabaskar Extending the Coverage of Minimum Wages in India: Simulations from Household Data – Patrick Belser, Uma Rani Labour and Employment under Globalisation: The Case of Gujarat – Indira Hirway, Neha Shah Impact of the Economic Crisis on Workers in the Unorganised Sector in Rajasthan – S Mohanakumar, Surjit Singh
For copies write to: Circulation Manager, Economic and Political Weekly, 320-321, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013. email:
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Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
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BOOK REVIEW
Three articles have stretched their subjects from past history to the present context and evoke an interesting debate. Spodek deliberates on the changing ethics with time, from the ethos and values influenced by Gandhian ideals to the ethics of violence manifested in 2002. In his view the ghastly events reflected an ethic of contesting for political power, without regard for means. Nikita Sud in her article delineates politics involved in the State’s land policies in postcolonial Gujarat; from “land to the tillers” to the “land liberalisation policy”. She argues that lack of synchronisation among the three “layers” of the State – ideas, administrative machinery and political lobbying – has created a space for manoeuvring at different junctures. Eitund Edwards in her anthropological account of the Rabari group of Kutch (with focus on their attire) has shown that the advance of textile techno logy along with varied policy measures promoted by the State have affected the Rabaris adversely. In order to cope, they have opted for a settled urban life and a literacy drive, but as the author points out,
“...the desire to blend in with the mainstream and to enjoy an urban model of living, have resulted in them becoming less visibly Rabari” (p 201).
Overlooking Parochial Forces Spodek, while attributing the violence of 2002 only to the mainstream politics of power has presented an oversimplified interpretation and overlooked the parochial socio-religious-cultural forces. He has signed off on a positive note saying that the current paradigm of a “vibrant” Gujarat would neutralise the communal forces. Perhaps in his concern about the parochial communal forces he has espoused the current path of “development” with a set of ethics that is anti-human and violates all sorts of human and constitutional rights. Nikita Sud has highlighted the “high statebig business alliance” which is clearly manifest in the acquisition of public and privately-owned land. But the space she has mentioned is shrinking as all the three dimensions of the “stateness” has converged into one. However, the recent events at Mahuva and Hajira, suggest that the
public sphere is simmering with dissent over the explicit pro-business houses policy of the Gujarat government. A few general observations on the volume. First, it is perplexing to find Hanna Kim’s article on the Swaminarayan sect in this volume as it does not fit in with the book’s theoretical underpinning and line of argument. It is relevant to mention that the Bochasanwasi Shri Akshar Purushottam Swaminarayan Sanstha (BAPS) is one of the chief architects of the present day aggressive identity of Gujarat. Nevertheless Hanna has raised a fundamental issue on the nature of epistemological inquiry of confining the subject of interpretation within a preferred set of ideas that forecloses true understanding of the subject. The articles make critical comments on how the idea of Gujarat is being constructed in a homogenised manner by a hegemonic section undermining the unique cultural identities of the various groups. As mentioned in the “Introduction”, the collection of essays is not exhaustive. Especially conspicuous is the absence of any on tribals, dalits,
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Negotiating Communication Rights explores some of the most important aspects of communication rights movements in India. Beginning with the theoretical aspects of communication rights, the book deals with five case studies related to significant movements of our times, namely, the Right to Information, Free and Open Source Software, Women and Media, Community Radio, and Citizen Journalism. It also analyses the complexity of specific rights issues in India, such as women’s rights, citizen activism and the role of media. The book explores the processes through which ordinary citizens have developed spaces for self-expression—a concept synonymous with media democratisation. The author argues for the need for streamlining of communication rights movements in India and for an India-specific framework for communication rights. 2011 / 284 pages / ` 695 (Hardback)
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Tracking Change and Continuity Sanjukta Dasgupta, Dipankar Sinha and Sudeshna Chakravarti Media, Gender, and Popular Culture in India critiques media representations of popular culture and gender since the 1950s and tracks the changes that have taken place in Indian society. The authors give us incisive analyses of these transformations, represented through the candid lens of the camera in films, television, advertisements and magazines, all of which focus on gender and familial representations and patriarchal norms in Indian society. The strength of this book is that it rejects grand narratives in favour of the micro-politics of daily living. In the course of exploring the metamorphosis of India, the authors succeed in dissolving the boundaries between mass/low culture, elite/high culture and local/ national/global affiliations. 2011 / 232 pages / ` 595 (Hardback) Los Angeles
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november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
BOOK REVIEW
uslims and the working class. Simpson M though has remarked on the hegemonic tendencies of the literati and elites of “mainland” Gujarat. Barring two articles on Kutch, the “peripheral” regions have been ignored. But the volume has two articles on the centre of the “mainland”, Ahmedabad. This is paradoxical. Are there no works of substance addressing the other subregions? The presence of the local Gujarat scholarship is nil, a clear indication of the debilitating state of Gujarat’s intellectual and academic life which is starkly reflected in the absence of critical
deliberation among the region’s intelligentsia on the forceful projection of the “idea” and “identity” of Gujarat as “development” oriented with rapid industrialisation. It also has an extremely aggressive and assertive face and form, celebrated and supported by the growing Hindu middle class. In turn, it intensifies the marginalisation of minorities, dalits, adivasis and working class as well as diminishes the cultural identities of groups such as the Rabaris, the Chharas, the Bharwads, the Madaris, etc. The volume has certainly provided a compelling
Correcting Popular Misconceptions of Marx Devdatt Dubhashi
T
he financial crisis and the Great Recession seemed to present, for many of us, a good opportunity to reconsider the current economic, political and social system and alternatives to it. However, mention the “M” word, and it is a non-starter. No matter how apolitical a person otherwise is, they seem to have a firm opinion on Marx – he is authoritarian, he advocates violence.... he is passé. Professional economists dismiss him with nothing more than “He got it all wrong”. The one thing all critics have in common is that they have never actually bothered to read a word of Marx (or a secondary good account of his life and thought). It is quite a stunning achievement of propaganda that people nevertheless hold forth confidently with these opinions. Terry Eagleton considers 10 such claims from the street: each chapter begins with a short para summarising a claim and then compares it with the evidence and what Marx (and Marxists) actually said: (1) Marxism is passé – How can the rantings of a man 150 years ago be relevant to the modern world is the question. Strange that we do not ask the same question of Darwin and why modern biologists today swear by him. Eagleton argues that while the details have changed radically, the
Why Marx Was Right by Terry Eagleton (New Haven and London: Yale University Press), 2011; pp ix+258.
fundamental ideas are in fact more relevant than ever before. (2) Marxism in practice leads to tyranny and horrors – This claim blames all the horrors of Stalin and Mao on Marx. Never mind that Marx was foremost an analyst of the capitalist system and said hardly anything about the post-capitalist future, let alone how it should be implemented. A bit like placing the blame for the horrors of the atom bomb on Einstein for his ana lysis of mass-energy equivalence. (3) Marxism is pure determinism and strips people of their freedom and individuality – Of all the invectives hurled at him, this should be one of the most perverse and unfair ones. After all, Marx’s whole project was the liberation of the individual from the prison of wage slavery so they would be able to realise their full creative potential. No cause was dearer to Marx than the liberty of the individual. Equality for Marx was more about opportunity and absolutely not about creating nameless clones. (4) Marxism is a Utopian dream that ignores human nature – Marx hated abstract utopian thinking and certainly had no illusions about a conflict-free
Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
reason to reflect on the “idea of Gujarat” not only in academic terms but also as it pertains to the public sphere. Kiran Desai (
[email protected]) is with the Centre for Social Studies, Surat.
Reference Simpson, Edward (2011): “Introduction: Two Historians, a Research Society and a Freedom Fighter: On the Life of the Sociological Ideas in the Mesocephalic Province of Gujarat” in Edward Simpson (ed.), Society and History of Gujarat since 1800: A Select Bibliography of the English and European Language Sources (New Delhi: Orient BlackSwan).
harmonious
communist future. Strange that he is accused of both believing in peaceful humans and class conflicts (see below) at the same time. (5) Marxism reduces everything to economics – In fact Marx was a multifaceted thinker and not primarily an economist, as Eagleton observes. But it is true he believed economic relations were nonetheless very fundamental and Eagleton explains why. (6) Marxism is purely materialist and dismisses morality, religion and spirituality – Marx was a very modern thinker and his attitude to these issues was exactly that of a rational enlightenment thinker, then or today. (7) Marxism is obsessed with outdated notions of class – We are all middle class, and so the Marxist obsession with class and conflict is outdated, says this claim. Some statistics on this in today’s financialised world are revealing. Americans are now deriving their income principally from finance, insurance and real estate (FIRE). In terms of types of financial wealth, the top 1% of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income- producing assets, we can say that just 10% of the people own the United States of America (Domhoff 2005). (8) Marxism advocates violence – Marxism is always associated with violent revolution but Eagleton argues that Marx
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BOOK REVIEW
uslims and the working class. Simpson M though has remarked on the hegemonic tendencies of the literati and elites of “mainland” Gujarat. Barring two articles on Kutch, the “peripheral” regions have been ignored. But the volume has two articles on the centre of the “mainland”, Ahmedabad. This is paradoxical. Are there no works of substance addressing the other subregions? The presence of the local Gujarat scholarship is nil, a clear indication of the debilitating state of Gujarat’s intellectual and academic life which is starkly reflected in the absence of critical
deliberation among the region’s intelligentsia on the forceful projection of the “idea” and “identity” of Gujarat as “development” oriented with rapid industrialisation. It also has an extremely aggressive and assertive face and form, celebrated and supported by the growing Hindu middle class. In turn, it intensifies the marginalisation of minorities, dalits, adivasis and working class as well as diminishes the cultural identities of groups such as the Rabaris, the Chharas, the Bharwads, the Madaris, etc. The volume has certainly provided a compelling
Correcting Popular Misconceptions of Marx Devdatt Dubhashi
T
he financial crisis and the Great Recession seemed to present, for many of us, a good opportunity to reconsider the current economic, political and social system and alternatives to it. However, mention the “M” word, and it is a non-starter. No matter how apolitical a person otherwise is, they seem to have a firm opinion on Marx – he is authoritarian, he advocates violence.... he is passé. Professional economists dismiss him with nothing more than “He got it all wrong”. The one thing all critics have in common is that they have never actually bothered to read a word of Marx (or a secondary good account of his life and thought). It is quite a stunning achievement of propaganda that people nevertheless hold forth confidently with these opinions. Terry Eagleton considers 10 such claims from the street: each chapter begins with a short para summarising a claim and then compares it with the evidence and what Marx (and Marxists) actually said: (1) Marxism is passé – How can the rantings of a man 150 years ago be relevant to the modern world is the question. Strange that we do not ask the same question of Darwin and why modern biologists today swear by him. Eagleton argues that while the details have changed radically, the
Why Marx Was Right by Terry Eagleton (New Haven and London: Yale University Press), 2011; pp ix+258.
fundamental ideas are in fact more relevant than ever before. (2) Marxism in practice leads to tyranny and horrors – This claim blames all the horrors of Stalin and Mao on Marx. Never mind that Marx was foremost an analyst of the capitalist system and said hardly anything about the post-capitalist future, let alone how it should be implemented. A bit like placing the blame for the horrors of the atom bomb on Einstein for his ana lysis of mass-energy equivalence. (3) Marxism is pure determinism and strips people of their freedom and individuality – Of all the invectives hurled at him, this should be one of the most perverse and unfair ones. After all, Marx’s whole project was the liberation of the individual from the prison of wage slavery so they would be able to realise their full creative potential. No cause was dearer to Marx than the liberty of the individual. Equality for Marx was more about opportunity and absolutely not about creating nameless clones. (4) Marxism is a Utopian dream that ignores human nature – Marx hated abstract utopian thinking and certainly had no illusions about a conflict-free
Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
reason to reflect on the “idea of Gujarat” not only in academic terms but also as it pertains to the public sphere. Kiran Desai (
[email protected]) is with the Centre for Social Studies, Surat.
Reference Simpson, Edward (2011): “Introduction: Two Historians, a Research Society and a Freedom Fighter: On the Life of the Sociological Ideas in the Mesocephalic Province of Gujarat” in Edward Simpson (ed.), Society and History of Gujarat since 1800: A Select Bibliography of the English and European Language Sources (New Delhi: Orient BlackSwan).
harmonious
communist future. Strange that he is accused of both believing in peaceful humans and class conflicts (see below) at the same time. (5) Marxism reduces everything to economics – In fact Marx was a multifaceted thinker and not primarily an economist, as Eagleton observes. But it is true he believed economic relations were nonetheless very fundamental and Eagleton explains why. (6) Marxism is purely materialist and dismisses morality, religion and spirituality – Marx was a very modern thinker and his attitude to these issues was exactly that of a rational enlightenment thinker, then or today. (7) Marxism is obsessed with outdated notions of class – We are all middle class, and so the Marxist obsession with class and conflict is outdated, says this claim. Some statistics on this in today’s financialised world are revealing. Americans are now deriving their income principally from finance, insurance and real estate (FIRE). In terms of types of financial wealth, the top 1% of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income- producing assets, we can say that just 10% of the people own the United States of America (Domhoff 2005). (8) Marxism advocates violence – Marxism is always associated with violent revolution but Eagleton argues that Marx
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was just being a hard-headed realist. While not opposed to reforms as such, he was sceptical about elites voluntarily and peacefully relinquishing their power. While Marxism is inseparable from violence in some peoples’ mind, they are oblivious that the routine functioning of capitalist state and society is built on daily exercise of violence, as Slavoj Zizek (2008) observes. (9) Marxism advocates an authoritarian all powerful state – The phrase “dictatorship of the proletariat” has been used ad nauseam to vilify Marx as endorsing something like Stalin, Mao or Saddam Hussein. In fact, as Eagleton shows, there could have been no more implacable opponent of a powerful state or of such despots. The phrase itself was coined by Marx’s political sparring partner Louis Auguste Blanqui to mean rule on behalf of the common people. (10) Marxism is one of several alternate approaches today and is overridden by them – Feminism, postmodernism, postpositivism, eco-green movements, gay and ethnic politics, animal rights, anti-globalisation, peace movements…all these are said to be the new thing. In some cases (as with post-positivism) this is a bit like saying “intelligent design” is an alternative to Darwinism. With others (anti-globalisation and peace) Eagleton argues that the movements have a strong basis and inspiration in Marxism. To these we can no doubt add other claims we have heard, for example: (11) Marxism failed in its predictions – The claim is that Marx predicted the demise of capitalism and failed utterly. This is a strange argument when you consider who is complaining. In November 2008, the Queen on a visit to the Mecca of mainstream economists, the London School of Economics, asked: “How come nobody could foresee it?” referring to the recession. In reply, she received a pathetic threepage missive, which blamed “a failure of the collective imagination of many bright people”. With all their modern techniques and resources, these mainstream gurus had no clue about something happening right under their noses, yet they expect Marx to predict with pinpoint accuracy, global societal disruptions way into the future. Besides, Marx made this sort of
36
claim in a political propaganda tract (the Manifesto) not in his deeper analysis (Capital) and at various places he clearly indicates that the system will not change by itself without strong political organisation pushing it. True, he may have been guilty of wishful thinking: “Workers of the world unite!” is easier said than done. True, he may have underestimated the ability of capitalism to wiggle out by pushing the can down the road and devise ever more ingenious ways to get the populace to bail it out as it lurches from one crisis to another as we are seeing again today. As Eagleton says in conclusion: Marx had a passionate faith in the individual and deep suspicion of abstract dogma ... he was wary of the notion of equality ... [he] was even more hostile to the state than rightwing conservatives are and saw socialism as the deepening of democracy... [he was] a staunch champion of women’s emancipation, world peace, the fight against fascism or the struggle for colonial freedom ... Was ever a thinker so travestied?
Marx Explains Indeed, reading a good biography of Marx1 is revealing. Was ever a journalist as much a champion of liberty and freedom for the individual as the young Marx editing the Neue Rheinische Zeitung? Was there ever a greater lifelong fighter against authority and for the downtrodden? In his long exile in London, he was a dedicated scholar who spent all his time engrossed in a mountain of books at the reading room of the British Museum, digesting the work of the leading economists of his day and locking horns with them despite no formal training in the subject, and at great personal cost and suffering to himself and his family. Could any contem porary academic even contemplate such daring ambition or show greater personal and intellectual courage and be so vilified for it? Talking of economics, how could one leave that out of a discussion of whether Marx was right? Especially in the wake of the Great Recession? The smug world of “perfect, self-regulating free market” economics was torn to shreds. Mainstream economists like Paul Krugman wrote detailed mea culpas2 while Wilhem Buiter complained about “the unfortunate
selessness of most ‘state of the art’ acau demic monetary economics”. Contrast a Marxist analysis such as that of the Monthly Review (Foster and Magdoff 2009) with the utter bewilderment and incoherence of mainstream economists even today. Eagleton is a literary critic, not an economist, and perhaps this is why he does not get into the details of the economics. Today we need not argue abstractly about “surplus value” or be worried about being accused of conspiracy theories if we call the state an agent of capitalists – the banksters have made it all too vivid. “Exploitation” is as alive and well in the manufacture of shiny Apple iPads in Foxconn’s hellholes in China3 today as in the cotton mills in Manchester in Marx’s time. Kieran Allen (2011) has tried to give a simple Marx 101 exposition relating it to contemporary events in his new book. Whether Marx was right or wrong, at least we should start the discussion by getting him right first. Eagleton has done yeoman service to correct a number of vulgar misconceptions about Marx. He has done it in his inimitable style with ironies, jokes and provocative similes. While great fun, they may be confusing to people unfamiliar with his style. Perhaps we also need a distilled version of the book shorn of its clever ironies and jokes and presented in a more direct (if less entertaining) fashion. Devdatt Dubhashi (
[email protected]) is with the department of computer science, University of Gothenberg, Sweden.
Notes 1 Wheen (1999) is eminently readable. 2 Paul Krugman, “How Did Economists Get It So Wrong?”, New York Times, 2 September 2009. 3 http://www.youtube.com/watch?v=V3YFGixp9Jw
References Allen, K (2011): Marx and the Alternative to Capitalism, Pluto Press. Domhoff, G William (2005): “Wealth, Income and Power”, http://sociology.ucsc.edu/whorulesamerica/power/wealth.html. Foster, John Bellamy and Fred Magdoff (2009): The Great Financial Crisis, Monthly Review Press. Krugman, Paul and Robin Wells (2011): “The Busts Keep Getting Bigger: Why?”, review of J Madrick, Age of Greed, Knopf (2011), New York Review of Books, July-August. Wheen, Francis (1999): Karl Marx (London: W W Norton). Zizek, Slavoj (2008): Violence, Profile Books.
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The Poverty Line: Getting It Wrong Again S Subramanian
There has been an upsurge of public discussion on a number of inter-related issues revolving around official assessments of poverty, the linking of welfare entitlements to poverty status, the reasonableness of officially stipulated money-metric poverty lines, the relative virtues of universalisation and targeting of welfare benefits, and the fiscal sustainability of increased public spending in the cause of poverty redress. The present essay offers a very brief evaluation of the methodology of poverty identification advanced by an Expert Group of the Planning Commission in 1993, and undertakes more elaborately what is essentially a critical assessment of the 2009 Tendulkar Committee’s approach to specification of the poverty line.
This essay is based in considerable measure on a part of a much more extensive working paper (Subramanian 2010). I would like to thank D Jayaraj and Sanjay Reddy for many helpful discussions, over a long period of time, on the subject of this paper, and A Arivazhagan for help with the graphics. S Subramanian (
[email protected]) is on the faculty of the Madras Institute of Development Studies, Chennai, and a Visiting Fellow at the Indian Institute of Technology Madras.
1 Background
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ndia’s poverty line has been in the news once more, following on an affidavit filed by the Planning Commission in response to certain clarifications sought by the Supreme Court. The Court’s reservation about the adequacy, at today’s prices, of the Tendulkar Committee’s rural and urban poverty lines for 2004-05 at 2004-05 prices has been sought to be addressed in the affidavit by simply “updating” the 2004-05 poverty lines to 2011 via the Consumer Price Index of Agricultural Labourers for the rural areas of the country, and the Consumer Price Index of Industrial Workers for the urban areas. This is the procedure by which the rural and urban poverty lines of, respectively, Rs 26 per person per day and Rs 32 per person per day have been arrived at. Additionally, and citing the Tendulkar Committee Report, the Planning Commission affidavit upholds the adequacy of these poverty lines. Paragraph 5 of the affidavit states: “The recommended poverty lines ensure the adequacy of actual private expenditure per capita near the poverty lines on food, education and health and the actual calories consumed are close to the revised calorie intake norm for urban areas and higher than the norm in rural areas”. In the wake of the public outcry against these poverty norms, and in particular the opposition to linking welfare (especially food) entitlements to poverty caps derived from the headcount ratios of the population living below the rural and urban poverty lines stated above, it has been clarified by the Planning Commission that these lines will not be employed to cap entitlements. One hopes the clarification is seriously and sincerely intended. If it is, then at least one incentive for understating poverty through understated poverty lines would be eliminated. (It is instructive, in this regard, to recall that even the
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Tendulkar Committee’s estimates were assessed as being too high for one specific welfare intervention on behalf of the poor, as reflected in the prime minister’s expressed reservation, in 2010, over the Supreme Court’s directive on free distribution of foodgrains to the poor: in his reckoning, it was unrealistic to expect that foodgrains could be delivered free to as many as 37% of the Indian population – which, precisely, is the Tendulkar Committee’s estimate of the national headcount ratio of poverty in 2004-05.) If the declared determination to dissociate welfare entitlements from poverty caps should afford a reprieve to the overriding concern of confining poverty estimates to “manageable” magnitudes and trends, then this could pave the way for a somewhat more relaxed and rational consideration of the principles by which a money-metric poverty line might be derived. An important guiding principle in this regard is the elementary requirement of an unvarying poverty standard to be employed in poverty comparisons across space or over time. “Resourcist” approaches to specifying a money-metric poverty line have generally tended to identify this unvarying poverty standard in some given level of “real income” (that is, income corrected only for variations in price levels), or in some given basket of commodities (to be valued at the prices that are relevant for the context under examination). “Capabilitybased” approaches, on the other hand, seek invariance of the poverty standard in some identified set of absolute capabilities, seen as being reflected in the achievement of a set of corresponding functionings, such as, for example, freedom from hunger, illiteracy and ill-health: the poverty line is then the total cost of achieving these functionings. Viewing poverty as a capability deprivation is compatible with drawing a moneymetric poverty line which is not unique across individuals or contexts/environments. Specifically, personal heterogeneities can be reflected in variations across individuals in the ability to convert resources into functionings: disabled individuals or lactating mothers, for example, would typically require more resources than others
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to achieve some given combination of “minimally satisfactory” functionings. Similarly, variations across contexts and environments could also call forth variable resources to address the requirements of a given set of functionings: people living in cold climates would require more clothing than those living in temperate climates to be adequately protected, for instance, just as people exposed to the risk of gastrointestinal infection may require more nutritional input than others to achieve a given level of nutritional adequacy. This is the basis for Amartya Sen’s (1983) well-known observation to the effect that poverty postulated in an absolute sense in the space of functionings is compatible with relative, or variable, real incomes or commodity bundles or resources in general that are required to achieve these functionings. The reader is referred to Sanjay Reddy (2004) for a lucid explication of the principles underlying the capabilitybased approach to specifying a moneymetric poverty line, and of the conceptual soundness of seeking invariance of the poverty standard in the space of functionings rather than in that of real incomes or commodity bundles. Official approaches to the specification of a poverty line for India have unfortunately not been inspired by any easily discernible conceptual clarity underlying the identification exercise. In particular, it is hard to confer any meaningful inter pretation of the official poverty lines – whether we speak of the lines derived from a methodology advanced by a 1993 Expert Group appointed by the Planning Commission or of the lines implied by the methodology advanced by the recent Tendulkar Committee – as actually constituting the amount of income that would be required in order to achieve a set of basic pre-specified human functionings needed for escaping the condition of deprivation. In this brief critique, I shall concentrate on aspects of the Tendulkar Committee’s Report, which has served as the basis for the controversial poverty lines mentioned in the Planning Commission’s affidavit. As a preliminary, I present a very short discussion of the 1993 Expert Group’s methodology, the perceived inadequacies of which, presumably, led to the setting up of the Tendulkar Committee.
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2 The 1993 Methodology The Expert Group appointed by the Planning Commission endorsed, in a Report submitted in 1993, a methodology that had earlier been advanced by a task force in 1979. The approach consisted in deriving a “poverty line consumption bundle” as the one revealed by National Sample Survey data on the distribution of both consumption expenditure and calorie intake across expenditure size-classes, as corresponding to that level of expenditure at which a predetermined calorific norm (2,400 kilo calories per person per day for the rural areas of the country and 2,100 kilocalories for the urban areas) was observed to be achieved in 1973-74. The poverty line in other years was, effectively, taken to be simply the expenditure level yielded by the “reference year (1973-74)” commodity bundle valued at current prices. It is, naturally, difficult to comprehend why 1973-74 – or, indeed, any other parti cular year – should be accorded the privileged status of a “reference year” by (implicitly) imbuing the pattern of consumption expenditure that obtained in that year with some special normative signi ficance. As it happens, if we employ the 1973-74 poverty line consumption bundle as the unvarying standard for poverty comparisons, and proceed to obtain the poverty lines in subsequent years by simply revaluing the reference year commodity bundles at current prices, then we obtain a pleasing trend of declining headcount ratios over the period 1973-74 to 2004-05. Elementary demand theory – see Subra manian (2005) – suggests that, under plau sible conditions relating to the relative rates of price increases in food and nonfood items, changes in preferences in favour of non-food, and the dwindling free availability of common property resources (such as fuel for firewood), the declining poverty trend mentioned earlier must be an inbuilt and logically inevitable feature of the Planning Commission methodology – as, indeed, would be a drift over time of actual calorific intake at the poverty line from the original calori fic norm one started out with. (For important critiques of the Planning Commission methodology, the reader is also referred to Ray and Lancaster (2005) and Patnaik (2007).)
Indeed, it can be shown that if we were to progressively move the reference year forward from 1973-74 (to 1977-78, 1983, 1987-88, 1993-94, 1998-99, and 2004-05, which are the years for which official consumption expenditure surveys are available), then while the declining trend obtained from treating 1973-74 as the reference year is preserved, the magnitudes of the poverty rate keep increasing. One can go further and ask: if any one year may be treated as a reference year, what is the logical bar on treating each year as a reference year? Utsa Patnaik (2007) resorted to just such a procedure, and presented, on the basis of this approach, an increasing trend in India’s rural poverty! As Sanjay Reddy (2007) points out, none of these wholly inductive approaches to determining the poverty line has anything to commend it. It is, of course, possible to advance the case for a normative poverty line commodity bundle which is not based entirely on any particular year’s pattern of consumption expenditure – but then it is still not clear why one must also demand invariance of that bundle over time or across space. Conceptually, it would appear – and this takes us back to the discussion in the introductory section of this essay – that what is dictated is invariance of the poverty standard in the functionings space. Briefly, the possibility of initiating appropriate anti-poverty policy on the basis of approaches to poverty identi fication such as those subsumed in the 1993 Expert Group’s methodology is poorly served by the unreliable diagnostics – in relation to magnitudes and trends of a substantively meaningful conception of poverty – yielded by these approaches. Much was therefore expected of the Expert Group to Review the Methodology for Estimation of Poverty which was appointed in December 2005, under the Chairmanship of Suresh Tendulkar. The Report of the Tendulkar Committee was submitted in November 2009 (Planning Commission 2009). It is this Report that will be the principal concern of the rest of this essay.
3 Some Aspects of the Tendulkar Committee’s Report The present discussion of the 2009 Expert Group’s recommendations will be confined to the identification aspect of the
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methodology. That is, the innovations relating to price indices employed to express the poverty lines at “constant prices”, both across space and over time, will not be taken up for discussion. Similarly, I will not discuss here the recommendations made in respect of the appropriate recall period to be selected in employing the National Sample Survey Office’s (NSSO) consumption expenditure estimates. These issues, properly speaking, do not fall within the purview of the basic principles that (should) govern the specification of a money-metric poverty line. If one takes the identification issue to constitute the heart of the problem of conceptualising money-metric poverty, then it is hard to escape the conclusion that the 2009 Expert Group’s recommendation in this regard is quite disappointing. This is the more so when one considers the principal motivation for the group’s work, as it has been set out in the Report itself (Planning Commission 2009: 1): “There has been a growing concern on the official estimates of poverty released by the Planning Commission. The official poverty estimates have been severely criticised on various counts. In view of this, the Planning Commission set up an Expert Group …to examine the issue and suggest a new poverty line and estimates.” To continue with the 1993 Expert Group’s poverty lines would have been a plainly unsustainable prescription, so it is not surprising that the 2009 Group advocates a different set of rural and urban poverty lines. What, however, is regrettable is the failure – as I see it – of the 2009 Group to come up with an alternative methodo logy that lends itself to cogent, convincing, and logically argued justification. It is difficult not to see this exercise as a wasted opportunity. It is noteworthy that the 2009 Expert Group, like its 1993 predecessor, perceives comparability of poverty estimates across space and over time as residing in the requirement of an invariant “poverty line” commodity bundle. The 2009 Group parts company from the old one in the matter of the precise commodity bundle that is to be treated as invariant across poverty comparisons. In the 2009 exercise, the commodity bundle identified is the one pertaining to the year 2004-05, the latest
year (at the time) for which the NSSO’s quinquennial consumption expenditure survey (61st Round) was available. The bundle is identified as the one corresponding to a consumption expenditure level, in urban India, of Rs 578.8 per person per month at current (2004-05) prices. This consumption expenditure level, in turn, simply happens to be the 2004-05 urban poverty line that would be dictated by the 1993 Expert Group’s methodology – it is, that is, the “updated” version of the per capita monthly expenditure level, for urban India, at which the urban nutritional norm of 2,100 kilocalories per person per day was realised in 1973-74. It is therefore puzzling to find the following observation in the Report (Planning Commission 2009: 7-8): “…a conscious decision was taken by the Expert Group to move away from anchoring the PL [poverty line] in [a] calorie norm as in the past…”. One can only interpret this to mean that while the urban poverty line of Rs 578.8 per person per month which the Expert Group plumped for happens to be the updated value of the observed expenditure level in 1973-74 corresponding to the nutritional norm of 2,100 kilocalories per person per day, this fact in itself apparently had nothing to do with the 2009 Group’s choice; but then what fact did actually dictate the Group’s choice remains something of a mystery.
Poverty Line Basket The choice in question is sought to be explained in the Expert Group’s Report (Planning Commission 2009: 1) in terms, inter alia, of “…an inescapable element of arbitrariness in specifying the numerical nominal level of [the] PLB [Poverty Line Basket]”, and of what might be dictated “…in the interest of continuity…”. Indeed, there is some considerable vagueness in the rationalisation resorted to, and one suspects the reason for this resides in some divergence between the Expert Group’s theory and its practice. In theory, the Group has apparently been guided by the belief that it is some normative commodity basket that ought to yield the poverty line, whereas in practice it is actually a pre-determined poverty line that has been employed to gen erate the commodity basket in question. This confusion is suggested by the cumbersome
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semantics of the Report’s assertion (Planning Commission 2009: 1) that “[u]nderlying [the] consumption poverty line is the reference poverty line basket (PLB) of household goods and services consumed by those households at the borderline separating the poor from the non-poor”. A simpler expression for the phrase “borderline separating the poor from the nonpoor” is, presumably, that old-fashioned term “poverty line”. It follows then that the just-cited assertion in the Report can be rephrased to read: “Underlying the consumption poverty line is the reference poverty line basket…consumed by those households at the poverty line.” This approach seems to require that we need a normative commodity bundle to determine the poverty line in order to determine the normative commodity bundle to… Such circularities were surely avoidable. If they have not, in fact, been avoided, it is perhaps because of the Expert Group’s anxiety to specify some poverty line that could be judged to be plausible from some independent (unspecified) considerations, and then come up with an empirically corresponding commodity bundle, one that would be invariant across space and over time, and would allow for its contextspecific valuation at context-specific prices as a means of generating context-specific poverty lines. This stratagem, in turn, may well have been dictated by the anxiety to advance an estimate of poverty which escapes both the charge of being unrealistically low and the sin of being demoralisingly high. The objective, presumably, was to discover the virtue of a golden mean between the somewhat credulity-straining niggardliness of the official (1993 Expert Group) poverty line and the disturbingly anarchic generosity of the Rs 20 per person per day poverty line of the National Commission for Enterprises in the Unorganised Sector. The most pressing rationale for the method adopted by the 2009 Expert Group appears to have been – ironically – a desire to avoid controversy. At the official Planning Commission poverty lines endorsed by the 1993 Expert Group, the rural headcount ratio in 2004-05 was 28.3%, while the corresponding urban headcount ratio was 25.7%. As the Report of the 2009 Expert Group puts it (Planning Commission 2009: 1): “…[the
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urban headcount ratio] is generally accepted as being less controversial than its rural counterpart at 28.3%… [which] has been heavily criticised as being too low.” Again, on page 6 of the Report, we have: …the latest available official estimate of rural poverty ratio of 28.3% for 2004-05 is widely perceived to be too low …while the corresponding urban proportion of 25.7%…is less controversial in terms of the broad order of magnitude of extent of urban poverty. [Arising from this,] …the PLB was taken to be [the] MRP [Mixed Recall Period] equivalent of [the] PCTE [per capita total expenditure] corresponding to 25.7% of the urban BPL [below poverty line] population…As urban living standard is generally regarded as better than and preferable to its rural counterpart, the Expert Group recommends that the purchasing power represented by the MRP-equivalent PCTE underlying [the] allIndia urban HCR [headcount ratio] of 25.7% be taken as the new reference PLB for measuring poverty and made available to both the rural and the urban population in all the states after correcting for urban-rural price differentials as well as urban and rural staterelative-to-all-India price differentials.
Briefly, the commodity composition of the urban poverty line of Rs 578.8 in 2004-05
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(the so-called PLB) is revalued at rural prices to yield a corresponding rural poverty line (which turns out to be Rs 446.7 per person per month at 2004-05 prices); similarly, the PLB is valued at state-level rural and urban prices respectively, to yield state-level rural and urban poverty lines for 2004-05, which is the new reference year. Inter-temporally, poverty lines in any year are to be derived by revaluing the 2004-05 PLB at current prices. This brings us back to a point made earlier: while the Report is careful to distance itself from the charge of anchoring its poverty line in a calorie norm, one wishes it had been equally careful to amplify on the issue of what its poverty line actually is anchored in. As far as one can tell, the choice of poverty line has been predominantly determined by a view of what constitutes a plausible headcount ratio. This is a very hard act to follow for those of us who have been brought up to believe that one infers the headcount ratio from a normative poverty line, and not the poverty line from the less unacceptable of two headcount ratios, which are distinguished
only by the fact that they happen to be the latest available estimates thrown up by an earlier faulty methodology. Indeed, under the latter approach, one might choose as the reference year any year – for example 1993-94 – in which the official estimate of the urban headcount ratio (32.6%) was more “plausible” than that of the rural headcount ratio (37.2%). The problems associated with choice of the reference year are here on all fours with those attending the 1993 Expert Group’s approach. Thus, it is not immediately clear why it is a virtue that the “PLB” “…incorporates the latest available data on observed pattern of consumer behaviour in 2004-05” (Planning Commission 2009: 7): this may afford some comfort if we are comparing 2004-05 poverty estimates with 2009-10 numbers, but by the same token, there may be a case for employing 1993-94 as the reference year if we are comparing 1987-88 poverty estimates with those for 1993-94. Yet another case that has been advanced in favour of the new poverty line (Planning Commission 2009: 8) is that “…the revised minimum calorie norm for
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4 On the Adequacy of the Poverty Lines The 2009 Expert Group is also of the view that “external validation checks” carried out by it suggest that the actual expenditures incurred on nutritional, educational, and health outcomes at the prescribed poverty line expenditure levels in 2004-05 are adequate to cover normative levels stipulated by the Expert Group in this regard. In the matter of normative food expenditure, the Expert Group specifies this level by reading off the level of food expenditure, from the cumulative density function (CDF) of expenditure on food, corresponding to the proportion of the population under nutritional stress (interpreted as the simple average, obtained from National Family Health Survey-III data for 2005-06, of the headcount ratio of under-5 underweight children, the headcount ratio of women in the age group 15-49 with low body mass index, and the headcount ratio of men in the age group 15-49 with low body mass index).
Cumulative Density Function of X Cumulative density function of X
Assuming, for a moment, some merit to age-group) children in the household at this method of estimating the normative the PCTE to school…” (Planning Commisfood expenditure level, at least one diffi- sion 2009: 9). The normative level of exculty with such a “validation check” is rep- penditure on health is taken to be given by resented in Figure 1. We have three (hypo- the expected value of expenditure on thetical) cumulative density functions (cdfs) treatment/hospitalisation, itself the prodFigure 1 : Determining Normative Food Expenditure Levels uct of the probability of the onset of illness Figure 1: Determining Normative Food Expenditure Levels requiring treatment/hospitalisation (taken to be represented by the incidence of treat ment/hospitalisation) and the median cost of treatment/hospitalisation. A couple of 1.0 HH0 remarks are in order. Why is the median cost a normative cost? Costs are likely to H H1 H H2 rise when treatment/hospitalisation tends towards greater completeness/comprehensiveness: the median cost in a poor econ omy is scarcely likely to be reflective of the 00 X1* X X0* X X 2* X cost that would be incurred in order to Food expenditure Food Expenditure X X finance a reasonably comprehensive course for food expenditure, where expenditure of treatment or hospitalisation. Second, is represented in “real”, i e, “constant pric- the proportional incidence of treatment/ es” terms. The cdf labelled 1 refers to the hospitalisation is unlikely to be the probareference year, the cdf labelled 0 refers to bility of the onset of illness requiring treata year preceding the reference year, and ment/hospitalisation: the true incidence the cdf labelled 2 refers to a year succeed- of illness requiring treatment will, in an ing the reference year. Suppose H1 is the environment of poor affordability, typiheadcount ratio of those under nutritional cally be larger than the incidence of illness stress in the reference year. From cdf 1 we actually treated. There is therefore good can see that the expenditure level corre- reason to believe that these “normative” sponding to the headcount ratio H1 is X *1. expenditure levels on education and Effectively, the Expert Group employs X *1 health are underestimates. as the normative level of adequacy for Indeed, a simple back-of-the-envelope food expenditure. Suppose also that X *1 is exercise should provide a rather more the observed level of expenditure on food robust “external validation” (or failure of at the poverty line in each of the years 0, 1 validation) than is afforded by the convoand 2. Additionally, suppose that H0 and H2 luted tests proposed by the Expert Group. are the proportions of the nutritionally de- The 2009 Expert Group’s urban poverty prived populations in years 0 and 2 re- line for Tamil Nadu in 2004-05 is reported spectively. Then Figure 1 suggests that the to be nearly Rs 560 per person per month, normative levels of food expenditure in or (without allowing for economies of scale), years 0 and 2 should be, respectively, X *0 Rs 2,240 for a household of four members (> X *1 ) and X *2 (> X *1 ). The actual food ex- per month. To suggest that such a housependiture is adequate to cover the norma- hold would not, in 2004-05, have been in tive requirement in year 1, but not in years poverty strikes the present author (as a 0 and 2. How, in other words, can we tell resident of Tamil Nadu’s capital city) as a priori that just because the poverty line being optimistic in a grimly determined expenditure on food is adequate for a cer- way. In 2004-05, a modest tea-shop singletain “normative” food expenditure level dish meal (such as a plate of lemon rice) in the reference year, this will also hold would have cost Rs 10. Allowing two for all other years? meals a day to keep out hunger, a houseThe normative level of expenditure on hold of four would require Rs 80 per day education is taken to be given “…by the to spend on food. Let us cut this requireexpenditure required at state-specific ment down to Rs 60 per day to take (exagmedian cost (derived from the 61st round geratedly unreal) account of the fact that employment-unemployment survey) for home-cooked food is cheaper. This works sending all school-going (in 5-15 year out to Rs 1,800 per month (30 days). A 0
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India recommended by Food and Agriculture Organisation (FAO) is currently around 1,800 calories per capita per day which is very close to the average calorie intake of those near the new poverty lines in urban areas (1,776 calories per capita) and higher than the revised FAO norm (1,999 calories per capita) in rural areas in the 61st round of NSS.” But, surely, this is a purely fortuitous outcome, and one fails to see the significance of these sorts of circumstantial detail. On the other hand, if the choice of the poverty line had indeed been influenced by congruence with a nutritional norm, then we would be back in the world of the 1993 Expert Group! Also apparently counting in favour of the 2009 Group’s choice of poverty line is that it “…happens to be close to, but less than, the 2005 PPP $1.25 per day poverty norm used by the World Bank in its latest world poverty estimates” (p 8, op cit). Whether or not this is good advertisement for the poverty line is at least debatable: it must be noted that the World Bank’s global poverty estimates are by no means widely perceived as being acceptable, and are, indeed, severely discredited in certain quarters (the reader is referred to the particularly important work, in this context, of Reddy and Pogge 2010).
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modest (by which one means cramped and depressing) one-room house with attached kitchen and common toilet (for a family of four!) would have easily commanded a monthly rental of Rs 1,500 in Chennai in 2004-05. Adding this to the food expenditure requirement of Rs 1,800 already brings up the total to Rs 3,300 – making for a deficit, in relation to the poverty line of Rs 2,240, of Rs 1,060. And we have not even counted the cost of education or clothing or transport or the occasional movie or cigarette, not to mention such exotica as a broken bone or a bout of typhoid. This does mark a contrast from the situation as projected by the Report of the Expert Group (Planning Commission 2009: 2) when it says: Even while moving away from the calorie norms, the proposed poverty lines have been validated by checking the adequacy of actual private expenditure per capita near the poverty lines on food, education and health by comparing them with normative expenditures consistent with nutritional, educational and health outcomes. Actual private expenditures reported by households near the new poverty lines on these items were found to be adequate at the all-India level in both the rural and the urban areas and for most of the states.
One is irresistibly reminded, here, of the fate of G V Desani’s immortal comic hero H Hatterr when he recalls the head of his orphanage-school from the days of his childhood: The sort of loco parentis who’d shower on you a penny, and warn you not to squander it on woman, and wine, and song!1
5 Concluding Observations The preceding discussion suggests that there is good reason why official assessments of poverty have met with the sort of generalised public dissatisfaction that has been in evidence in the wake of the recent Planning Commission affidavit submitted to the Supreme Court. As we have seen, the identification methodologies advanced by successive task forces and expert groups have little by way of logical appeal or outcome-plausibility to commend them. A major cause for this must be attributed to the absence of any real effort made by our planning agencies to identify a set of reasonably spatially differentiated and discriminating poverty lines based on a costing of minimally satisfactory levels of functioning with respect to an agreed-upon
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list of basic human capabilities. The case for setting up a permanent poverty monitoring and assessment bureau for this purpose presents itself (Reddy 2007). There is also, of course, a strong case for a direct assessment of multidimensional poverty in functioning space, and an example of an exercise of this nature is available in Jayaraj and Subramanian (2009). Meanwhile, if what one is after is a purely money-metric indicator of how the relatively income-poor sections of the population are faring, then it makes sense to get out of the standard identificationcum-aggregation mould of conventional poverty measurement. An alternative approach might be to track a statistic such as the “quintile income”, as has been suggested by Kaushik Basu (2001, 2006), which is just the average income (or consumption expenditure) of the poorest 20% of a population. Subramanian (2011) deals with the case for presenting an annual time-series of the quintile income in the Economic Survey, and of contrasting the actual achievement in this regard with targeted levels of the quintile income based on an appropriate reckoning of an inclusive and egalitarian pattern of overall and quintile growth. This should be a helpful stratagem for confining planning exercises and purely money-metric poverty-related assessments to the straight and narrow. In any event, the worst possible stratagem for addressing the problem of poverty would be to seek to delude oneself and others by defining it out of existence through the mechanism of postulating unrealistically low and substantively meaningless poverty lines. The issue is of far too much moral gravity to be dealt with in such terms. Or, if that sounds needlessly high-minded, there is still available to one
the argument based on enlightened selfinterest. Taking poverty seriously should do little harm to the prospects of reelection to power. Note 1 G V Desani, All About H Hatterr, Penguin Modern Classics Series, Penguin Books, London, 1972 (first published 1948).
References Basu, K (2001): “On the Goals of Development” in G M Meier and J E Stiglitz (ed.), Frontiers of Deve lopment Economics: The Future in Perspective (New York: Oxford University Press). – (2006): “Globalisation, Poverty, and Inequality: What Is the Relationship? What Can Be Done?”, World Development, 34(8): 1361-73. Jayaraj, D and S Subramanian (2009): “A ChakravartyD’Ambrosio View of Multidimensional Deprivation: Some Estimates for India”, Economic & Political Weekly, 45(6): 53-65. Patnaik, U (2007): “Neoliberalism and Rural Poverty in India”, Economic & Political Weekly, 48 (32): 3132-50. Planning Commission (2009): Report of the Expert Group to Review the Methodology for Estimation of Poverty, Government of India, New Delhi. Ray, R and G Lancaster (2005): “On Setting the Poverty Line Based on Estimated Nutrient Prices: Condition of Socially Disadvantaged Groups during the Reform Period”, Economic & Political Weekly, XL(1): 46-56. Reddy, S G (2004): “A Capability-Based Approach to Estimating Global Poverty” in In Focus: Dollar a Day – How Much Does It Say? International Poverty Centre, United Nations Development Programme: Brasilia, September, pp 6-8. – (2007): “The Great Indian Poverty Debate”, Deve lopment, 50(2): 166-71. Reddy, S G and T W Pogge (2010): “How Not to Count the Poor” in J Stiglitz, S Anand and P Segal (ed.), Debates in the Measurement of Poverty (Oxford: Oxford University Press), For a longer version, the reader is referred to www.socialanalysis.org. Sen, Amartya (1983): “Poor, Relatively Speaking”, Ox ford Economic Papers, 35(2): 153-69. Subramanian, S (2005): “Unravelling a Conceptual Muddle: India’s Poverty Statistics in the Light of Basic Demand Theory”, Economic & Political Weekly, XL(1): 57-66. – (2010): “Identifying the Income-Poor: Some Controversies in India and Elsewhere”, Courant Research Centre “Poverty, Equity and Growth in Developing Countries” – Discussion Paper Number 46, November, Goettingen. – (2011): “‘Inclusive Development’ and the Quintile Income Statistic”, Economic & Political Weekly, XLVI (4): 69-72.
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Public-Private Partnerships in Maternal Health Services T K Sundari Ravindran
In recent years public-private partnerships have been offered as the miracle-cure that would help fix all the challenges to the health sector. Over the last decade, a number of ppps providing maternal health services have come into existence but few have been evaluated. This paper examines whether ppps with the for-profit private sector which provide maternal health services have contributed or are likely to contribute to making quality maternal health services accessible at affordable prices to the poor and marginalised sections of the population, as envisaged by policymakers. The limited evidence indicates that they have not increased either availability or physical access to services for a vast majority of women living in rural areas. The investment of substantial government and donor resources in ppps without robust evidence on their contribution to reduction of maternal mortality does not appear justified.
This paper draws on research done for a report on “Public-private Partnerships in Reproductive Health in India – A Mapping” prepared for and with funding support from CEHAT, Mumbai. T K Sundari Ravindran (
[email protected]) is with the Achutha Menon Centre for Health Science Studies, Sree Chitra Tirunal Institute for Medical Sciences and Technology, Thiruvananthapuram. Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
1 Introduction
P
ublic-private partnerships (PPPs) have in recent years been offered as the miracle-cure that would help fix all the problems affecting the health sector. The National Rural Health Mission (NRHM), launched in 2005, mentions the promotion of PPPs in health as being among its supplementary strategies. A Task Force on PPPs set up to advise the government recommended that this is a useful strategy for meeting the massive requirement for resources, manpower and management capacity under the NRHM. The report emphasised that the purpose of PPPs should be to contribute to the goal of providing basic healthcare to all citizens of India, and that super-speciality services were therefore not to be considered under PPPs. Regulation of the private sector and putting in place quality-control and accountability mechanisms were also highlighted by the report (NRHM 2009). Despite these policy pronouncements, some state governments have proceeded to enter into partnerships for tertiary and specialised care. For example the Andhra Pradesh government has entered into agreements with B Braun, a private health company from Germany to set up 11 dialysis centres in teaching hospitals and tertiary care centres across the state (CHMI 2011). Similarly the Gujarat government has entered into partnerships with international healthcare companies such as Wockhardt and Fortis and local private hospitals for the provision of super-specialty services (Singh nd). Further, actors other than the government who have been active in the promotion of PPPs in health do not necessarily share the government’s perspective on the role of PPPs in health services. This is true of PPPs promoted as an explicit objective under the Health Systems Development Projects supported by the World Bank and numerous private provider networks and social franchises in reproductive health promoted with United States Agency for Inter national Development (USAID) funding (Ravindran 2011). The past decade has witnessed the emergence and proliferation of PPPs in maternal health and family planning services in a number of states. A recent exercise at mapping these showed that state governments are public-partners in PPPs for maternal health services with for-profit private sector providers in seven states: Assam, Delhi, Gujarat, Haryana, Madhya Pradesh, Uttar Pradesh and West Bengal. In most states, the state government is involved in contracting-out to private for-profit providers but in Haryana, the government has initiated a voucher scheme which women from low-income groups can use in private facilities for accessing a package of maternal health services. There are 10 public-private
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interactions (PPIs) that do not involve the federal or state governments located in 16 sites in India, spread over five states: Uttar Pradesh (7), Uttarakhand (3), Jharkhand (3), Bihar (2) and Assam (1) (Ravindran 2011). This paper attempts to examine whether PPPs providing maternal health services have contributed/are likely to contribute to making quality maternal health services accessible at affordable prices to the poor and marginalised sections of the population, as envisaged by policymakers. For this, I have used the limited number of evaluations and assessments available for a subset of PPPs engaged in maternal health service provision in India. This introductory section defines the concepts used and presents information on policy positions on PPPs in India. Sections 2 to 4 present examples of different modes of PPPs in maternal health in India, and evidence on their performance. The concluding section discusses the implications of PPPs for equitable access to quality maternal health and family planning services.
Concepts and Definitions There are numerous definitions of “public-private partnerships” because of the many different ways in which each of its component terms: “public”; “private” and “partnership” is used by different authors. “Public” is usually defined as all sectors of the government at different levels, but other definitions include inter-governmental agencies such as the World Health Organisation (WHO) and the United Nations Children’s Fund (UNICEF) and bilateral donors as well as private foundations who provide major funding support to countries to develop public services. Some protagonists of “public-public” partnerships have argued for including within the “public” category community organisations, other non-governmental organisations (NGOs) and trade unions that function in the interest of public welfare and do not have a profit motive (Kitchen 2003; Hall et al 2005). The private sector in health has been defined by Mills et al (2002) to include all providers who exist outside the public sector, whether their aim is philanthropic or commercial, and whose aim is to treat or prevent disease. According to this definition, the private sector includes large and small commercial companies, groups of professionals, such as doctors, national and inter national NGOs, and individual providers and shopkeepers. PPP appears to stand for “a continuum of loose to tight ar rangements” (Njau et al 2009) between actors in the public and private sectors towards achieving a specific objective. PPPs maybe arrangements between multiple partners or between just two; they maybe global, national, sub-national or local in scope; maybe traditional arrangements between the public and private sector such as contracting-in or contracting-out, or new entities that includes representatives from the public and private sectors, however each of these sectors maybe defined. Some authors, for example WHO and Richter (2003) have chosen to use the term “public-private interactions” rather than PPPs (WHO 2001; Richter 2003). The choice of the term “interaction” is deliberate, and is meant to emphasise that most of the public-private arrangements are not in fact partnerships at all, in that there is neither equality in relationship nor reciprocity in obligations. Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
Although in agreement with WHO and Richter’s critique of the term “partnership” I use the term PPP in this paper because of its widespread use in the field. The paper focuses on the for-profit private sector whose aims are commercial, and non-profit and philanthropic organisations are excluded from the discussion. Henceforth, private sector in this paper would mean the for-profit private sector. The following are some common forms of PPPs (or interactions) involved in maternal health services in India: • Contracts • Voucher-Schemes • Private-provider networks and social franchises Governments often enter into “contracts” with private parties for acquiring a specific product or service of a defined quantity and quality at an agreed-upon price. Contracting implies an ongoing (as opposed to a one-off) relationship between two parties based on a legally binding agreement or contract (Harding and Preker 2003). Voucher schemes involve the distribution of vouchers to a specific group of beneficiaries for availing a specific package of health services free or at subsidised costs from a panel of accredited health facilities. Providers collect the vouchers and provide the intended services, and claim reimbursement from a voucher management agency who in turn receives funding from the government, a bilateral or multilateral donor, a private foundation or a combination of these. Voucher schemes are a form of “demand – side-financing”. They provide low-income groups with purchasing power to choose from among a panel of service providers. There is scope for quality assurance by contracting with facilities which meet minimum standards. Impanelled providers have to compete with each other to attract voucher-holding clientele and this is also expected to encourage providers to ensure acceptable quality standards. The strategy is meant to be efficient because it allows for targeting a specific population before services are sought rather than at the point of service delivery (Meyer et al 2011). A social franchise in health is a network of private health providers who own and operate their own health facilities; provide a set of standardised “franchised” health services (and may also provide other non-franchised services and products); offer clinical services with or without franchise-brand commodities; and receive payments on the basis of services provided, although the mechanism of payment may vary and include client out-ofpocket, voucher, third party insurance or other systems (UCSF Global Health Sciences 2011). Subsequent sections examine different types of PPPs currently engaged in the provision of maternal health and family planning services in India.
2 Contracting In India, the most common form of contracting in the area of maternal health is contracting out to for-profit providers and facilities.
Chiranjeevi Yojana – Gujarat One of the best known and widely acclaimed examples of contracting-out to for-profit private sector providers in health is the Chiranjeevi Yojana in Gujarat. The scheme was initiated in December 2005 with five under-served tribal districts with the
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aim of reducing maternal and infant mortality and increasing institutional deliveries. The scheme was subsequently extended throughout the state. Chiranjeevi Yojana is an arrangement between the department of health and family welfare, Government of Gujarat and obstetrician/gynaecologists based in private clinics, nursing homes and/or private hospitals (Venkataraman and Bjorkman 2009). Payment to providers was fixed at Rs 1,79,500 for 100 deliveries, factoring in a certain proportion of normal and C-section deliveries and other related costs. Providers are given an advance payment of Rs 1,50,000 and reimbursed the additional expenses incurred (Barai-Jaitley 2010). The scheme provides free pregnancy and delivery related care to women from households living below the poverty line (BPL). To be eligible, a woman should produce her BPL card or a certificate from a village official stating that she is from a BPL household. She is also required to register for antenatal care in a government hospital (ibid). Private providers in the scheme conduct normal as well as complicated deliveries, and are provided medication for a pre-determined fee. Pregnant women are reimbursed for conveyance costs incurred and the accompanying health worker is given an honorarium (ibid). One of the earliest evaluations of the scheme was carried out in 2007, and covered one of the five pilot districts. This study focused on the socio-economic profile of beneficiaries and the extent to which the Chiranjeevi Scheme had provided financial protection to the poor. The study found that the vast majority (94%) of beneficiaries belonged to households with an annual income of less than Rs 12,000, or a daily income of less than Rs 32.90, and the scheme achieved its objective of targeting the poor. The costs incurred by each beneficiary was Rs 727 as against Rs 4,000 incurred by non-beneficiaries of the scheme, thereby saving Rs 3,273, a major amount for families with BPL income. There were also limitations. A significant proportion – about 20% – of deliveries to women from BPL households were not covered by the scheme and they spent on an average Rs 4,000. Beneficiaries had to pay out-of-pocket for additional drugs and for some part of the transportation. Moreover, only 30% of beneficiaries received post-partum care (Bhat et al 2009). A subsequent article based on interviews with a small number of providers in Surat district reported that impanelled private providers were situated in urban areas, implying that access to delivery care for rural women may not have improved significantly because of the scheme. Further, most private providers under the scheme took only “safe” cases and sent those in need of emergency obstetric care (EMOC) to public hospitals. The article seriously questioned the claim that the scheme could, under these circumstances, have made any substantial impact on maternal mortality ratios given that obstetric emergencies contribute most to maternal deaths (Acharya and McNamee 2009). A qualitative study from the predominantly tribal Sabarkanta district found that 75% of the 32 women interviewed did not know about the Chiranjeevi Scheme. Those of them who knew about it said that the scheme’s private providers were located very faraway and that they could not afford to pay for the transportation. The providers interviewed said that they referred obstetric patients to the government facility when blood transfusion was required including in instances of severe anaemia in women (Kastia and Bisht 2009).
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The 2010-11 annual report of the Comptroller and Auditor eneral (CAG) of India stated that the five-year-old Chiranjeevi G Scheme, launched by the Government of Gujarat had failed to reduce maternal mortality ratio from 389 per 1,00,000 live births to 100 per 1,00,000 live births as set out in its objectives. According to the CAG report, in 40% of the talukas (93 out of 231), no private doctors had opted for the scheme. In six tribal-dominated districts Dahod, Banaskantha, Panchamals, Vadodara, Sabarkantha and Kutch, a fund of Rs 27.93 crore for the scheme remained un utilised, probably because of the non-availability of eligible providers and/or facilities (Indian Express, 31 March 2011).
Mamta Friendly Hospital Initiative – Delhi Delhi’s equivalent of the Chiranjeevi Yojana is the Mamta Friendly Hospital Initiative. This is a scheme meant to provide free delivery and EMOC for pregnant women from urban slums in Delhi. Nursing homes registered under the Delhi Nursing Home Registration Act were eligible to apply for the scheme. By 2008, memoranda of understanding (MoUs) had been entered into with 36 Mamta Friendly Hospitals (NIHFW 2010). An evaluation was carried out in 2009 covering 35 Mamta Friendly Hospitals, and also interviewing beneficiaries and nonbeneficiaries. The evaluation found that private providers registered with the scheme found it unattractive and two-thirds of them were planning to discontinue. The main reason stated by private providers was that the remuneration was lower than the prevailing market prices, and in some instances – e g, for C-section, lower than the actual costs incurred. They also found the reimbursement process cumbersome and paperwork heavy (ibid). Beneficiaries reported having to pay extra for many services. For example, they had to pay for the ultrasonography carried out during pregnancy. About seven of 10 beneficiaries had incurred an average expense of Rs 750 per delivery. Complications in delivery and post-partum and neonatal complications were referred from the Mamta Friendly Hospitals to government health facilities, and patients had to pay out-of-pocket for referral transport. No postnatal care was provided by the Mamta Friendly Hospitals (ibid). Of the non-beneficiaries interviewed, 59% were unaware of the scheme. The others had been unable to use the scheme because they could not produce evidence of their BPL status or provide documented proof of residence in Delhi; yet others were located too far from a Mamta Friendly Hospital to be able to access it (ibid).
Janani Sahyogi Yojana – Madhya Pradesh The Janani Sahyogi Yojana in Madhya Pradesh contracted out services to private for-profit and also to not-for-profit health facilities. The aim was to provide maternal and child healthcare including delivery services and EMOC for BPL households. The scheme was implemented in 2006. The intention was to cover the underserved rural populations (NIHFW 2008). However, an evaluation carried out in six districts of the state in 2007-08 found that 91% of the 83 providers registered under the scheme were located in urban areas, and only 9% were located in rural areas. Half of all private health institutions under the scheme did not have blood availability, critical for saving the lives of women in an obstetric emergency. In 15% of the facilities november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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there were not enough reagents to carry out pathological tests during pregnancy and 28% of facilities did not routinely provide immunisation for pregnant women or infants. Forty-six per cent of the facilities charged patients for some of the services. A large proportion (60%) of heads of health facilities were not satisfied with the remuneration package offered by the government and wished for substantial increases: e g, an increase from Rs 1,200 to Rs 2,000 for normal deliveries and from Rs 5,500 to Rs 8,000 for C-sections. More than half (59%) of the beneficiaries were from non BPL households. High C-section rates were found: 24% among BPL and 46% among non-BPL women (ibid).
3 Voucher Schemes Voucher schemes for maternal health have been implemented in partnership with the for-profit private sector in three states: Haryana, Uttarakhand and Uttar Pradesh. A voucher scheme for maternal healthcare funded by USAID and the World Bank was implemented in Uttarakhand and Uttar Pradesh since 2007. USAID supported voucher schemes in seven rural blocks of Agra, 35 urban slums of Kanpur and two rural blocks of Haridwar while the World Bank supported the voucher scheme in two rural blocks of Bahraich (SIFPSA 2011). The voucher schemes in both states had a number of common features. The recipient of a voucher was eligible to have three antenatal visits (check-up, tetanus toxoid immunisation, iron and folic acid tablets and nutritional counselling) with an accredited health facility; institutional deliveries (normal and C-section); two post-natal visits and family planning services including sterilisation; child immunisation; reproductive tract infection (RTI)/sexually transmitted infection (STI) check-up and treatment, partner counselling and diagnostics. However, EMOC is not included and women are referred to the district hospital (ibid). The schemes have as front line workers the Accredited Social Health Activists (ASHAs) of the government in rural areas, and community health volunteers of NGOs in urban areas. Their responsibilities include dissemination of information on vouchers, distribution of vouchers to eligible women, accompanying women to private hospitals, arranging for transportation for doing so, etc. NGOs were appointed to be the interface with the community. They train ASHAs and community health volunteers, verify the receipt and use of vouchers by women and are also responsible for monitoring and evaluating the scheme (ibid). Private hospitals are accredited by a voucher management committee (VMC) headed by the district magistrate or the chief medical officer (CMO). In Agra, the government medical college hospital does the accreditation of private hospitals. Other players involved in the scheme are State Innovations in Family Planning Service Agency (SIFPSA) and the Futures Constella (USA) group – the latter plays a major technical support role to VMCs. The VMCs have to train the private sector providers, devise a system of financial disbursement, set up a management information system (MIS) and carry out project audit and beneficiary feedback (ibid). The Agra-Voucher Scheme: Started in 2007, it lasted for 24 months. In the first year, 10 nursing homes were accredited in Agra. From 15 March-31 July 2007, 2,857 women used vouchers Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
for antenatal services but only 351 institutional deliveries were recorded. Of 3,51,154 deliveries 44% were C-sections. An early assessment in 2007 (USAID 2007) found that emergency care, postpartum care and neonatal care were not being covered by private hospitals and that quality assurance varied considerably across different hospitals (NRHM 2005; USAID 2007). Another assessment (2009) reported that only 15 of 100 private clinics had accredited themselves under the scheme by the end of the project period. There had been an increase of 0.5% in contraceptive prevalence among “eligible couples” within the first 15 months of implementation. Three major problems that impeded successful implementation were: • The number of accredited providers was small and almost all were located in Agra city. This limited the increase in access for rural women. • Private providers did not find remuneration adequate for some of the procedures and they routinely referred the women to government health facilities. • The ASHA was not given any incentive for family planning services and she therefore de-prioritised family planning services and focused exclusively on promoting pregnancy and delivery care (URHI 2009). The Kanpur Voucher Scheme: It was started a year after the Agra Scheme, in November 2008 and lasted for 24 months. Only 13 of 75 private nursing homes were accredited under the voucher scheme. The programme targeted the urban poor. Taking lessons from the Agra Scheme, the remuneration for complicated deliveries was increased and a corpus fund was created to pay for some services. However, this scheme also showed poor performance. At the end of the project period, contraceptive prevalence among eligible couples had increased marginally by 0.4% and better access to delivery care was reported (ibid). Janani Suvidha Yojana: This is a state-initiated voucher scheme by the Haryana government started in 2006. Under this scheme, vouchers are distributed to pregnant women and mothers with children and infants who can use it to seek services from private providers impanelled in the scheme. Private providers then redeem the vouchers from the government who compensate them. The Department of Health Services also provided drugs and vaccines free of cost to private health providers (NRHM). Rather than a straightforward contract between the Government of Haryana and the private providers, this was a more complex partnership which involved also the mother NGOs (MNGOs) and field NGOs (FNGOs) under the reproductive child health (RCH) scheme. The scheme was to cover urban slums in eight districts. The MNGOs and FNGOs were to do community sensitisation, voucher distribution and ensuring redemption of vouchers to the private providers. The FNGOs were to engage sakhis who would escort women and children to the private health facility. An early report up to March 2007 showed that the scheme covered only about 13% of all deliveries and that the per formance was particularly poor in the districts of Sonepat, Gurgaon and Narnaul (http://www.esocialsciences.com/data/.../ Document12072007230.7838556.pdf.). As of January 2008, 666
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sakhis had been recruited, 28,507 pregnancies registered, and 118 private providers were empanelled (NRHM). No further report of performance could be found.
4 Private Provider Networks and Social Franchises Private provider networks and social franchises offering maternal health and family planning services are found predominantly in Bihar, Jharkhand, Uttar Pradesh and Uttarakhand. Uttar Pradesh seems to have the highest concentration of social franchises in health.
Janani One of the earliest social franchises in India is the Janani, set up by the US based NGO, DKT, in 1995 with financial support from USAID. The franchise is now operational in Bihar and Jharkhand. According to an early report (2002), Janani consisted of a twotiered system with Surya clinics in towns linked to rural medical practitioners (RMPs) at the village level.1 The RMPs were selected by the organisation, and were required to have literate wives. The RMPs and their wives received training in primary care for reproductive and sexual health. The women were trained to diagnose reproductive tract infections using the WHO protocol for syndromic management. This network of RMPs provided basic primary care and RTI diagnosis and treatment using the protocol for syndromic management, and distributed condoms and oral contraceptive pills. They referred patients to the Surya clinics for intrauterine device (IUD) insertion, abortion and voluntary sterilisation, for which they received a referral fee (Gopalakrishnan et al 2002). Recent reports state that each Surya clinic has at least one doctor with a minimum qualification of MBBS, one Auxilliary Nurse and Midwife and an anaesthetist on call. It provides oral contraceptives, condoms, injectables, T Copper, emergency contraceptive pills, sterilisation and abortion, both medical and surgical (Montagu et al 2009). The Janani franchise also markets its own brand of contraceptives through the Surya clinics and Titli centres. Their products include Mithun and Style condoms, Apsara oral contraceptive pills, Urvashi multi-load IUDs, Pari three-monthly injectable contraceptive, Postpil, emergency contraceptive pill and safe-t-kit medical abortion pills (Janani 2011a). Reports published in 2003 indicate that the franchise was facing a number of problems. The volume of clients for family planning and abortion services was not large enough to retain the interest of franchisees. The franchise began to explore the possi bility of adding on new services in order to make franchise membership worthwhile for private providers (Janani 2003). Several changes seem to have been made to the Surya clinics network after 2005. Newsletters of Janani published during 2009-10 mention that after the launch of NRHM and the Janani Suraksha Yojana, the Surya clinics stopped providing institutional deliveries and began to focus on family planning and safe abortion services. They now receive government support of Rs 1,500 per sterilisation operation performed, and provide the procedure free of cost to the client. Although clients would get a cash incentive if they underwent sterilisation in a government facility, many clients were happy to get free services in a Surya clinic and were willing to
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forego the cash incentive (Manthan 2010). Health providers who ran Titli centres were renamed “Surya Health Promoters”, who carried out family planning education and referred clients for services to the Surya clinics. As before, they are paid according to each case that is referred to them (Manthan 2009a). A new category of women service providers were introduced since 2007 in about 4,000 villages of Bihar. Known as “Women Health Outreach Workers” or “WOW”, these women were trained by Janani and provided the following services: messages on prenatal, natal and postnatal care; provision of family planning and reproductive health products; prevention of sexually transmitted diseases and HIV/AIDS; pregnancy testing; measurement of blood pressure and body weight; breast examination and examination for reproductive tract infections and STIs (Manthan 2009b). According to its website, the network currently consists of 36 of its own clinics, 21 private sector doctors who are fractional franchisees and about 9,000 Surya Health Promoters (Janani 2011b). Data on performance of Surya clinics is available from a study conducted sometime in 2001-02 by Janani. We were unable to locate more recent studies. The 2001-02 study was a cluster evaluation which compared the Surya clinics with public facilities and other private facilities. The study found that these clinics catered to relatively better-off and literate clients and to women from the “higher” castes. The proportion of SC/ST clients in Surya clinics was 12.6%, as compared to 17.7% in non-franchised private provider clinics and 25.2% in public facilities. The average monthly family income of a Surya clinic client was Rs 3,156 as compared to Rs 3,046 of those attending non-franchised private clinics and Rs 2,380 of those attending public health facilities. According to the same study, the waiting time in Surya clinics (43.2 minutes) compared poorly with that in non-franchised private clinics (25.8 minutes) and government facilities (15.1 minutes). The quality of contraceptive counselling in Surya clinics – in terms of discussion of side effects and offering space for the client to ask questions – was no better than that in nonfranchised private clinics or government health facilities (ibid).
The Merrygold Network In Uttar Pradesh, the Hindustan Latex Family Planning Promotion Trust (HLFPPT) together with SIFPSA launched a social franchising network in 2007 called the Merrygold. This network consists of four tiers. At the village level are the “Tarang” partners who are RMPs and the Merry Tarang partners who are practitioners of Indian systems of medicine, chemists and the ASHAs. They provide counselling for family planning, and are mainly engaged in social marketing of a range of products: condoms, oral contraceptive pills, sanitary napkins, test kits for pregnancy and malaria (URHI). At the next level are the Merrysilver clinics which have one or two beds and offer immunisation, antenatal and postnatal care, conduct normal deliveries and antiretroviral therapy (ARV). All those who require EMOC are referred to the next level of Merrygold hospitals (ibid). The third-tier – Merrygold hospitals have 20 beds, and offer diagnostics and laboratory tests, a round-the-clock pharmacy, november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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conduct normal and complicated deliveries and run well-baby clinics. They also have ambulances to transport referral patients from Merrysilver clinics to their facility. The fourth tier consists of two tertiary care hospitals one in Agra and one in Kanpur, called Life Spring hospitals. All the facilities in this franchise charge fees but these are 50-60% below the market prices (ibid). According to 2011 reports, the network covers 35 out of 70 districts in UP, has 64 Merrygold hospitals, 367 Merrysilver clinics and 10,880 Tarang and Merry Tarang members in 36 districts of UP. Since its launch, this network is reported to have provided safe delivery services to 84,489 women, antenatal care to 4,63,714, IUCD services to 23,370 women and sterilisation to more than 5,993 women (Press Trust News 2011). A Masters’ dissertation published in 2010 provides some in formation on the performance of the Merrygold network. This research report states that almost all the clinics in Lucknow block, where the study was conducted, were located in urban or semi-urban areas. Franchisees of Merrysilver clinics from Lucknow were dissatisfied with the franchising arrangements. Franchise membership had not brought them new patients; the advertising of the brand was not adequate. Community health promoters who were supposed to refer clients/patients to them were hardly referring any client, and demanded incentives for each and every task. Quantitative data collected on clients indicated that 70% of the SC/ST clients and clients from low-income households in the sample used public sector facilities and only 30% used Merrysilver clinics. In contrast, 60% of non-SC/ST women and 75% of women from higher income groups in the sample used the franchised clinics. In other words, the franchise catered predominantly to better-off sections of the population. According to the manager of one of the franchised clinics, the poor could simply not afford their services. At the same time, users of public sector facilities were more likely to report that they were not satisfied with the quality of services (Blanco 2010).
Drishtee Maternal Healthcare Drishtee Maternal Healthcare is a social franchise of informal providers operational in Assam, Bihar and Uttar Pradesh. Women are trained to be “health entreprenuers” called Drishtee Health Franchisees (DHF) who run Drishtee Health Kiosks. They provide maternal health services for a nominal fee. The network is reported to be operational in areas where government health facilities do not exist, in order to avoid duplication of efforts. DHFs are trained in basic maternal care, and to provide non-invasive diagnostic and pathological tests such as determining blood pressure; estimating glucose levels and reading body temperature (Changemakers 2011). The Drishtee Health Kiosk is equipped with a digital thermo meter, blood pressure monitor, digital blood glucose monitor, weighing scales, pregnancy test strips, etc. The amount to set-up such a kiosk is financed by Drishtee and is repaid by the DHF in the form of easy monthly instalments. Ten DHFs are linked to one ANM and also to an obstetrician/gynaecologist. The ANM visits a Drishtee Health Kiosk once a week, and the gynaecologist visits Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
once a month. At other times they are available to the DHFs for consultations over the phone. The pregnant women are charged a small user fee for the registration. The ANM, the gynaecologist, Drishtee and the franchisees share the revenue generated by the registration of the pregnant women (ibid). The DHF registers all pregnant women in her target area. She holds community meetings advocating for greater priority to maternal healthcare and educated pregnant women about selfcare, and birth preparedness and complication-readiness. She holds once a week antenatal clinics in her DHK with the support of the ANM, and once a month check-ups with the specialist to screen for complications. The DHF also ensures that the pregnant woman is prepared for institutional delivery and makes post natal visits (ibid). This project is highly acclaimed as an innovation in maternal healthcare and received the Asoka Prize for social innovations. It was started in the state of Assam and has now expanded to Bihar and Uttar Pradesh. No reports assessing the performance of Drishtee were available to us.
The Saadhan Network The Saadhan Network of the Population Services International launched in 2004, works in the urban slums of Uttarakhand. The network consists of 1,000 clinics run by obstetrician/gynae cologists and general physicians and offers condoms, T Copper, Injectables and medical abortion services. A team of community health workers make house-to-house visits, counsel and refer women to network doctors. Most of the doctors are also members of the Federation of Obstetric and Gynaecological Societies of India (FOGSI). The partnership with FOGSI is reported to be enhancing the visibility of the programme, thus encouraging doctors to join the network and has helped to increase the standards of quality related to IUD and medical abortion services (PSI 2005; Saadhan 2010). An evaluation carried out in 2005, 16 months into the programme, reported an increase in the use of Saadhan’s branded oral contraceptive pills from 38% to 41%, and its clean delivery kits from 18% to 28%. Tetanus toxoid coverage among pregnant women increased from 84% to 89% and coverage of pregnant women with Saadhan’s brand of iron and folic acid tablets increased from 61% to 72% (PSI 2005). From the outcome indicators measured in the evaluation, it appears that the Saadhan network is a mechanism for promoting and marketing PSP-One’s contraceptive brands, clean delivery kits, iron and folic acid tablets and other health products. There is no mention of any health outcomes, and success has been evaluated in terms of successful marketing and sales.
Sky Care Network Yet another social franchise in Uttar Pradesh is the Sky Care Project operating in Meerut, Muzzafarnagar and Bijnore districts of UP. The project was launched by World Health Partners (WHP) in late 2008. This is a complex, many layered network consisting of rural health providers or RMPs, telemedicine centres, franchised clinics, pharmacies, diagnostic laboratories and a central medical
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unit. Figure 1 summarises the structure of this network (World Health Partners 2010). The local informal providers or RMPs who already live in each village are the first tier in the network. They receive training in delivering basic diagnostic services and also serve as social marketing agents for non-clinical contraceptives and
education through consultations with other physicians and specialists in the WHP network. Diagnostic laboratories which support the Sky Health centres and the franchisee clinics are also part of the network. Representatives from the labs visit the Sky Health Centers on a pre-determined schedule to collect samples. Reports are
Figure 1: Structure of the SKY Care Network Framchise Clinics (FCs) • In towns • In-person physician care from RHP and TPC referrals • Further workup of cases with unclear diagnosis • Speciality services for e g, pediatrics gyne, surgery.
Diagnostic Labs • In towns • Process samples in high quality manner • Provide lab collection materials to TPCs for distribution • Arrangement of specimen transport with RHPs and TPS.
Shops/Pharmacies • Rural and urban • Stock and sell WHP branded medicine • Ahderence to WHP set price structure • Counsel patients of proper use of medication.
Telemedicine Provision Ventres (TPCs) Sky Health Centre • Local coordination centre in a central village – supply of medicines, and diagnostic and training tools; oversight of local communication activities; financial settlements; localised training facilites • identification and management of RHPs in catchment area • Disease case identification • Counselling of patients. • Internet-based tele-consultations with diagnostics. • Referrals and transportation arrangements and to higher levels of care. FC/Labs.
Rural Health Providers (RHPs): SKY Care • One per village • Disease case identification • Counselling of patients • Management of complicated cases through cell phone consultation. • Referrals to higher levels of care-TPC/FC/Labs.
Source: http://www.worldhealthpartners.org/service.html
over-the-counter products. They also act as agents of WHP and refer patients to for advanced treatment to other tiers in the network (ibid). The second tier consists of Sky health centres which are telemedicine centres. Its field staff approach families to run these telemedicine centres. The centres are usually run by a woman entrepreneur in close partnership with a male member of the family. The women are high school educated with good standing in the community. They provide space, attend trainings, maintain and promote the telemedicine centres and invest about Rs 1.5 lakh. WHP provides computer, satellite equipment, generator, furniture, promotional materials, technical support and training (ibid). The entrepreneur records patient-information, operates diagnostic equipment and this is communicated to the physicians in the central medical facility. The physician in the central medical facility reviews electronic medical history, “examines” patients, electronically records notes and prescribes medication. The software incorporates diagnosis/treatment algorithms. When necessary, the physician refers the patient to a franchisee clinic for follow-up (ibid; Lo 2008). The central medical facility houses a panel of experienced, accredited physicians who consult with clients in Sky Health Centres located in the villages of the WHP network. These doctors, many of them specialists, provide long-distance medical consultations to patients via the internet (ibid). Clients who require surgical or inpatient care involving specialised procedures and healthcare services that cannot be delivered via telemedicine are referred to the nearest franchisee clinic. Clinic doctors receive ongoing professional training and
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delivered electronically to doctors at the central medical facility. Sky Care is also linked to rural shops, most of them pharmacies, to ensure patients’ access to medicines and products. Sky Care Providers, Sky Health Centres, and franchisee clinics also have stocks of medicines and contraceptives, including condoms and birth control pills (ibid). The fee for each consultation in the telemedicine centre is Rs 50. Of this, Rs 10 goes to the RMP who refers the patient to the telemedicine clinic, while Rs 20 is shared between WHP and the entrepreneur (Lo). Many would consider the Sky network a welcome intervention that brings consultation with qualified doctors within reach of rural women and men. This may be the case, and an evaluation of the proportion of cases successfully treated/problems resolved would be important to understand the scope and potential of such interventions. A student intern who visited this project reports that villagers wanted the telemedicine centres to also provide drugs and diagnostic services. He also raises some important concerns. One is about the pricing of services. The RMP in the village charges only Rs 20 per consultation and also gives medicines. Why then would a patient be willing to pay Rs 50 only to be given a prescription for drugs or diagnostic tests? The other concerns relate to the ethics of providing care through a standardised syndromic diagnosis and treatment procedures (ibid). We share the same concerns. The first point of contact at the telemedicine centre is an entrepreneur with no training in health, and she will therefore not be able to provide any immediate relief to the patient. Worse still, she may miss signs of distress and danger and contribute to delays in care-seeking, november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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worsening the prognosis. The use of hi-tech equipment like, for example, the neurosynaptic diagnostic attachments – thermometer, electrocardiography (EKG), stethoscope – may give the illusion of high quality care without actually being so.
5 Conclusions With one or two exceptions (e g, the Chiranjeevi Yojana in Gujarat) there are very few independent assessments of the contribution of PPPs to the promotion of maternal health, and health overall. This is especially true of PPPs that do not involve the Government of India or state governments. Further investments in PPPs however, continue unabated, despite the lack of evidence that they work well.2 This raises some key concerns, based on the evidence presented in this paper.
Private Sector Providers
• Government contracting of private sector providers for providing maternal health services does not have scope for improving access to care for the poor except in instances where affordability alone is the major barrier constraining access. Since most qualified private health providers are located in urban and semi-urban areas, low-income women from such settings may possibly benefit from such arrangements, although we do not have concrete evidence that this has been the case. For a majority of rural women the major problem is non-availability of services of a qualified professional – public or private – within a reasonable distance, and they are far less likely to benefit from contracting arrangements between the government and urban private sector providers. • Despite major investments by government to ensure maternal healthcare free of cost to low-income (mostly urban) women through private providers and facilities, users are often required to pay out-of-pocket for many services. This would discourage the very poor from using the services. There are other barriers. Some – most probably from the most marginalised groups – find it difficult to produce documentary evidence of their BPL status or proof of residence. Further, many of those eligible to benefit from the schemes are not aware of their existence. • A significant proportion of private facilities does not have blood storage or blood banking facilities and refer patients with obstetric emergencies to government hospitals. This leads us to question the claim that contracting with private providers would help reduce maternal mortality. • The government does not seem to be in a position to monitor quality of care. The report of the high number of C-sections under some schemes causes serious concern about the quality of maternal healthcare provided by contracted partners. • In a scenario where there are few regulations governing private sector health facilities, the government is often in a weak bargaining position vis-à-vis the private sector. Private providers demand payment at market rates and threaten to withdraw from the schemes if the arrangement is not lucrative enough.
Voucher Schemes
• Voucher schemes are a form of demand-side financing, suitable for contexts where there are a variety of providers that users can Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
choose from, and where affordability is the main barrier to access. For those who have no maternal health service facilities available within easy access, vouchers make no difference. • Some of the voucher schemes examined in this paper did not include EMOC in its services package, and therefore, are likely to contribute little to the reduction of maternal mortality. The impact on contraceptive prevalence was observed to be marginal. On the other hand, in one of the schemes the C-section rate was as high as 44%, indicative of unnecessary medical procedures. • Voucher schemes are difficult to administer. Users are often told that some components of services are not covered by the voucher and have no recourse to help to ascertain if this is true. • In the voucher schemes implemented thus far, willingness of private providers to seek accreditation has been a major challenge. Private providers are usually located in urban or semiurban areas where government services are also available, and it does not make business sense to them to be competing with the government’s heavily subsidised or free services, and especially when users receive incentives as in the case of the Janani Suraksha Yojana.
Private Provider Networks and Social Franchises
• These pose some of the same problems as the other two types of PPPs: these are also concentrated mainly in urban areas, and do not increase availability for those located in rural and far-toreach areas. • Unlike the other two forms of PPPs, social franchises charge for services provided. Evidence thus far clearly shows that they cater mainly to the economically better-off and non-SC/ST caste groups, and that low-income women find socially franchised facilities unaffordable. • There are no mechanisms in place to ensure the technical quality of care in socially franchised clinics. There is reason to be concerned especially about outlets run and services provided by unqualified providers who are an integral part of many social franchises described above. Experiences from other countries indicate that the quality of services in some franchised facilities could be far from satisfactory (Ravindran 2010). In addition, there are three overarching concerns. One is that there appears to be considerable duplication of efforts in many places. This is especially so in terms of deploying community health volunteers and “women entrepreneurs” as part of social franchises to render the same services that public-sector employed ASHAs currently provide. In some instances (e g, Merrysilver clinics, Sky clinics) a new cadre of volunteers is not employed but government employed personnel are also employed by the private social franchises. For example ASHAs are expected to refer women for antenatal care and delivery to Merrysilver clinics and to government institutions; ANMs are counted as service providers in the Drishtee network and Sky clinics. Under the circumstances, it becomes unclear whether the performance indicators quoted by social franchises indeed represent their own contribution or include the work done by government health personnel.
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The second important concern relates to the wisdom of heavy investment by government and donors in strengthening already existent private for-profit providers and facilities as compared to creating more service-delivery points closer to where the majority of women reside. Given that most private facilities refer women requiring EMOC to government facilities, would not the money invested in private providers be better spent in equipping government facilities to provide better quality and timely EmOC? Also, it is important to question whether the government can af ford to invest increasing amounts in payments to private providers without any guarantees Notes 1 RMPs are a group of unqualified private health providers, almost all male, used widely by rural low-income groups in many states of India. 2 For example, the World Health Partners were reported to be launching in 2011 in Bihar a large scale replication of their SKY health care network model that has been operational in UP for the past few years.
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that this would contribute to improving access to care for the poorest. The third concern relates to the accountability of private-provider network and social franchises which are completely private initiatives funded by international donors. They appear to be proliferating in a few states even before there is any evidence to show that they are a good investment. It is not clear who the projects are accountable to and there is nothing to inform the concerned citizen about their impact except what the organisations themselves choose to report. The need for a comprehensive assessment of these initiatives cannot be overemphasised.
(http://www.indianexpress.com/news/chiranjeevischeme-failed-to-deliver-cag-report/ 769645/1). Janani (2003): “Research Findings on Franchised Surya Clinics in Bihar and Jharkhand”, Indica Research Centre, New Delhi, unpublished report. – (2011a): “Cluster Evaluation of Clinic Franchising Programme of Janani in Bihar, Final Report”, undated, viewed on 4 July (http://www.janani. org/ resources_6.htm). – (2011b): “Products and Services”, viewed on 5 July (http:// www.janani.org/products.htm). Kastia A and R Bisht (2009): “Investigating PPP Health Model – Chiranjeevi Yojana: District: Sabarkantha”, Paper presented at the National Conference on ‘Emerging Healthcare Models: Engaging the Private Health Sector’ on 25-26 September (Mumbai: Centre for Enquiry into Health and Allied Themes). Kitchen, H (2003): “Public-Public Partnerships”, Newsletter 14, MacIntosh Xaba and Associates: City, December. Lo, T (2008): “Telemedicine as an Integrated Health Services Innovation, Rural Uttar Pradesh, India”, PowerPoint presentation, 23 September, viewed on 20 October 2010, (http://www.courses.ischool.berkeley.edu/i290-8/f08/lectures/ Terrence.ppt). Manthan (2009a): “Surya Health Promoters, Leading by Example”, Manthan, January: 2, viewed on 4 July 2011 (http:// www.janani.org/manthan/ manthan_ january _2009_english.pdf). – (2009b): “The WOW Women”, Manthan, November: 6. viewed on 4 July 2011 (http:// www.janani.org/manthan/manthan_november_2009 _ english.pdf). – (2010): “A Private Intervention”, Manthan, 12-13 December, viewed on 4 July 2011 (http:// www. janani.org/newsletter/manthan/manthan_dec_ 2010_english.pdf). Meyer, C, N Bellow, M Campbell and M Potts (2011): “The Impact of Vouchers on the Use and Quality of Health Goods and Services in Developing Countries: A Systematic Review” (Berkeley: Venture Strategies for Health and Development). Mills, A, R Brugha, K Hanson and B McPake (2002): “What Can Be Done About the Private Health Sector in Low-income Countries?” Bulletin of the World Health Organisation, 80(4): 325-30. Montagu, D et al (2009): Clinical Social Franchising: An Annual Compendium of Programmes (San Fransisco: The Global Health Group, Global Health Sciences, University of California-San Fransisco). NIHFW (2008): An Appraisal of Janani Sahyogi Yojana in Madhya Pradesh (New Delhi: National Institute of Health and Family Welfare). – (2010): Evaluation of MAMTA Scheme in National Capital Territory of Delhi. Report (New Delhi: National Institute of Health and Family Welfare), January. Njau, R J A, F W Mosha, D De Savigny (2009): “Case Studies in Public-Private Partnerships in Health with the Ocus of Enhancing the Accessibility of
Health Interventions”, Tanzania Journal of Health Research, 11(4): 235-49. NRHM (2009): Directory of Innovations Implemented in the Health Sector (New Delhi: National Rural Health Mission, Ministry of Health and Family Welfare). Press Trust News (2011): “Merrygold Health Network: A Successful Journey of Three Years”, viewed on 27 March (http://www.indiaprline.com/2011/ 01/ 03/merry-gold-health-networku-p-a-successful-journey-of-three-years%E2%80%A6%E2% 80%A6). PSI (2005): Final Evaluation, Social Marketing Strategies for Maternal and Child Health in the States of Uttar Pradesh, Uttaranchal and Jharkhand, India, October 2002-May (New Delhi, Population Services International-India), March. Ravindran, T K S (2010): “Privatisation in Reproductive Health Services in Pakistan: Three Case Studies”, Reproductive Health Matters, 18(36): 13-24. – (2011): Public-Private Partnerships in Reproductive Health in India: A Mapping (Mumbai: Centre for Enquiry into Health and Allied Topics (CEHAT)), Unpublished report. Richter, J (2003): ‘We the Peoples’ or ‘We the Corporations’? Critical Reflections on UN-Business ‘Partnerships’ (Geneva: IBFAN/GIFA). Saadhan (2010): Centre for Health Market Innovations, viewed on 19 October 2010 (http://healthmarketinnovations.org/program/saadhan?display= views-mode-map). SIFPSA (2011): “Voucher System”, State Innovations in Family Planning Services Project Agency (SIFPSA), viewed on 1 July (http:// www.sifpsa. org/initiatives /voucher_sys.htm). Singh, A (2011): Public-Private Partnerships in Gujarat – The Way Forward, Ministry of Health and Family Welfare, Government of Gujarat, Power point presentation, viewed on 22 February (http:// www.mohfw.nic.in/NRHM/.../PDFs/02...pdf/.../ Dr%20Amarjeet%20Singh.pdf). UCSF (2011): “Social Franchising for Health”, Global Health Sciences, viewed on 17 March (http:// www.sf4health.org/socialfranchises/definition.) URHI (2009): “Intervention Assessment: Voucher Scheme”, Urban Reproductive Health Initiative Discussion document, December, PowerPoint presentation. USAID (2007): IFPS- II Evaluations: Annexes (Washington: United States Agency for International Development), September. Venkataraman, A and J W Bjorkman (2009): PublicPrivate Partnerships in Healthcare in India: Lessons for Developing Countries (Oxon: Routledge). WHO (2001): Public-private Interactions for Health: WHO’s Involvement, Note by the Director-General. Executive Board 109th Session, Geneva, World Health Organisation, 5 December, EB109/4. “WHP Rural Health Network” (2010): World Health Partners, viewed on 20 October (http://www. worldhealthpartners.org/service.html).
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Children in the Mind: Paginated Childhoods and Pedagogics of Play Ranjana Saha
This paper examines in detail the transnational growth in literature for and about children in 18th and 19th century Britain and France. This development hinges on the Lockean and Rousseauian “pedagogy of play”, and how it has determined the emergence and growth of the “permissible” and the “prohibited” in a child’s world. Locke and Rousseau’s imageries of childhood had a profound impact on 18th and 19th century discourses on childhood and children’s literature in Europe. The paper presents a detailed analysis of the development of respectable, modern, middle-class children’s literature of the time.
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his paper explores children’s literature as a significant repository of adult intellection on children and childhood. As the title suggests, children’s literature or model playful childhoods flowing from minds and pens of select literary figures forms the spine of this essay. Adult ruminations shape the imperatives defining child, childhood and child-rearing. Literary prescriptions and proscriptions on childhood are crucial tools for multidisciplinary historical research of collective patterns of any society, namely, family, education, public health, civic duty, nation, and empire, to name a few. They form the crucial link between the domestic and the public since they ultimately shape the future of a polity and its citizens. My interest in a historical study of ideas on childhood stems from the fact that social histories have usually tended to bypass childhoods of any members of society. When childhood has been examined, it has usually been studied within the institutions of production, education and discipline but rarely play. I would like to contribute to childhood studies, as a field of enquiry, by emphasising how the Aristotelian tabula rasa, or blank slate, and the amalgamation of freedom, play, learning and amusement in the form of John Locke1 and Jean Jacques Rousseau’s2 popular notion of the “pedagogy of play”,3 aimed at the destruction of the naughty child (Sen 2000: 3, 11-12, 44), pivots the transnational growth in literature for and about children in 18th and 19th century Britain and France.
Primary and Secondary Sources
Ranjana Saha (
[email protected]) is a research scholar in the department of history, University of Delhi. Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
In this study, both primary and secondary sources provide the framework for my arguments. Primary sources include selections from Locke and Rousseau’s works on child education.4 Colin Heywood, Peter Hunt, Linda A Pollock and Nivedita Sen, among others, provide significant interventions in relation to historicisation of intellection on childhood. I begin with a clear delineation of the thematic interconnectedness between ideas on childhood and children’s literature. Children’s literature is historicised as a broad category that has evolved over time to specifically include children’s needs in 18th and 19th century Britain and France. I will argue that this entire development, chequered by race, class and gender, hinges on the Lockean and Rousseauian “pedagogy of play”. My primary argument is that the specifics of their pedagogics of play determined the emergence and growth of the permissible and the prohibited in a child’s world. I provide here a detailed analysis of the development of respectable, modern, middle-class children’s literature, like works for children by Maria Edgeworth and Madame de Genlis, in contemporary Britain and France. I present a micro study of the contribution of
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Locke and Rousseau’s pedagogics in the very definitions of the allowable/forbidden binary within fictional children’s literature in 18th and 19th century England. This section concentrates on how a child’s play in England came to be defined by pedagogy, morality, fantasy, and property. I start with an in-depth study of John Newbery’s A Little Pretty Pocket-Book Intended for the Instruction and Amusement of Little Master Tommy (1744) to illustrate the interconnections between Locke, Rousseau and mid18th century, middle-class children’s literature. Object tales or itnarratives have been selected to highlight how Lockean notions of property and possession transform the fantastic. Finally, moral lessons have also been chosen as another significant arena of respectable, interactive children’s literature featuring key 18th century literary figures like Anna Laetitia Barbauld. The aim is to highlight how perceptions of childhood and play actively took part in the process of “Other-ing”, both positively and negatively. I hope that this article on ideas of childhood encourages further research on childhood and reinterpretations of historiographies on nation and empire. Childhood and children’s literature are blurred, inseparable and context-specific concepts. They are temporally and spatially variegated depending on their ties with the local. Childhood marked by biological immaturity is a socially constructed, reactive, age-bound, adult-imposed, legal demarcation of the calibre and choices available within it. Children’s literature constantly evolves progressively towards a better understanding of children and childhood by incorporating different ways of including children inside, and engaging them with, the book designed for their own good.5 Locke and Rousseau’s imageries of childhood had a profound influence within and beyond 18th and 19th century discourses on childhood and children’s literature in Europe. It must be borne in mind that the Lockean and Rousseauian models of the child were fictional “ideals”. Child’s reasoning, desire and play are cardinal among the fundamentals defining the Lockean and Rousseauian child. Locke declares that a child is like “white paper”, neither good nor bad but pure and innocent (Locke 1849: 35). Rousseau goes a step further as he outlines the child as being born essentially good, capable of learning but ignorant, and often corrupted by society (Rousseau 1911: 2, 3, 20). Their ideal child usually had specific gender roles to play and most often belonged to the propertied class (Heywood 2008: 40).6 They abandon the notion of a tutor who merely instructs. They allow agency to children thereby favouring a playful and interactive mode of learning in order to stimulate their curiosity and all-round development. Locke would permit children to learn reasoning from an early age. Locke’s child represents a progressive, linear, moral, growing consciousness whose understanding and analysis of the adult world has begun early and in an unconfused manner. The child begins rationalising the world like his virtuous adult role models. By way of contrast, Rousseau’s child was given the desire to distort moral pedagogy. Rousseau argues that children might distort and miscomprehend adult, didactic moral reasoning in, for instance, fables. He pointed out that it is not always necessary that children side with the virtuous characters in a narrative like the fables. The child may often end up supporting villains in the stories (Rousseau 1911: 53). He
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therefore argues that the ability to reason was a properly adult ability; it should be inculcated last, on the verge, as it were, of the departure from childhood. He supports simple, repetitive, cyclical or tautological reasoning for the child which he calls “the inevitable circle” (ibid: 37).
Interactive To grab the attention of the child, both books and learning had to be made interactive. Locke and Rousseau prioritised experience of the world or interaction with the environment by children. Specifically, Locke had a social interaction in mind that was very different to Rousseau’s stance on the natural man, natural sciences and natural elements. To aid the child’s learning and experience, however, they both preferred interactive, illustrated books for children. They deployed the “pedagogy of play” in educating their “ideal” child. “Pedagogy of play” or instruction through play aimed at the subconscious and conscious learning of the child. Locke wanted reading to be made into a sport for children: “…children may be cozened into a Knowledge of the Letters; be taught to read, without perceiving it to be anything but a sport, and play themselves into that which others are whipped for” (Locke 1712: 224). He proposed “educational toys” such as dice, or an ivory ball with 25 to 32 sides, with alphabets pasted on each side (ibid: 225; Brown 2006: 353). Similarly, in Book III of Emile, Rousseau analogises Locke on the essentiality of the physical well-being of children. Rousseau’s call to “love childhood; promote games, its pleasures, its amiable instinct” (1911: 79) has been viewed by Colin Heywood as “a head-on challenge to traditional thinking” on childhood (2008: 52). I would argue that Locke and Rousseau’s “pedagogy of play” was novel because it included both physical exercise and learning made into play. In other words, both would be concomitant stimulants of the child’s mind. Rousseau highlights: …how bodily exercise and manual work unconsciously arouse thought and reflexion in my pupil, and counteract the idleness which result from his indifference to men’s judgements, and his freedom from passion. He must work like a peasant and think like a philosopher, if he is not to be as idle as a savage. The great secret of education is to use exercise of mind and body as relaxation one to the other (1911: 111).
In Rousseau’s Emile, Emile was allowed to read only particular sections of Robinson Crusoe, selected by Rousseau the tutor. It was viewed as an interactive novel, which would give Emile an opportunity for playful learning in Nature, in direct correlation with the various exercises in the book. It is precisely this model of education which stood out as novel and became a significant determinant of the discovery of the modern child, childhood and children’s literature, alongside a burgeoning printing industry (Brown 2006: 353; Farné 2005: 169-73). While Locke and Rousseau juxtapose pedagogy and play, Linda A Pollock (1983) argues that 18th century British diarists mostly mention “training” and “play” as separate learning activities performed by their children. She highlights that, unlike 16th century diaries, play was not viewed as a hindrance to a child’s education. She adds that “fantasy play” was seen as aiding the child’s understanding of the world. Blundell,7 father of two daughters aged eight and six, did not find death and “mock november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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f unerals” of dolls an alarming, adult topic for “fantasy play” either. In short, Pollock argues that play found mention in most adult and child diaries from every century, but both training and play concomitantly began to increasingly appear from the 18th century onwards. Whether this was a direct consequence of contemporary theories around the “pedagogy of play” is not known (Pollock 1983: 237-39).8
‘Pedagogy of Play’ It must be remembered that the Lockean and Rousseauian “pedagogy of play” was underlined by a careful rationing of the freedom of children’s desires. Locke allows children diversion and play, neither of which inculcates “disorder”. Despite making a child’s education proportional to the child’s capacity, Locke fails to understand that creating an arbitrary boundary between permissible and natural, and prohibited and acquired desires – for instance, the desire to play or hunger versus the fancy to own anything new a child sees another person owning – might stifle the creative potential of the child’s desires (Locke et al 1708: 54, 60). Similarly, Rousseau the tutor designed and controlled Emile’s environment. His authority would be implicit at every step of Emile’s development, including play. Rousseau, therefore, failed to conceptualise play as an undefined and free educational enterprise for children. Deliberate elimination of fantasy was concomitant to the cautious measurement of freedom within the Lockean and Rousseauian pedagogics of play. Even though the opposition between fantasy and reason or imaginative and didactic literature has been called into question now, there was widespread belief in this dichotomy in early 19th century Britain (Bottoms 2006: 212). Locke’s famous warning about female servants and their superstitions, ignorance and stories about spirits and goblins was especially echoed by François Fénelon,9 Henry Home or Lord Kames10 and Rousseau. It became a standard ingredient in almost any work on child education in 18th and 19th century Britain and France. This reflects the fight between elite and plebeian culture, as it became embodied in the very act of storytelling in the nursery or early childhood in general. For instance, Mary Weightman’s The Friendly Monitor: Or Dialogues for Youth against the Fear of Ghosts, and Other Irrational Apprehensions, with Reflections on the Power of Imagination, and the Folly of Superstition (1791) was designed for the “use and benefit of children” in order to drive out the tales of nursery as told by servants (Wroth 2006: 52). In Maria Edgeworth and Richard Edgeworth’s Practical Education (1798) on children’s education similar fears are reiterated. Maria Edgeworth considered “The Hobgoblin” in The Children’s Friend, a 1788 translation of Arnaud Berquin’s L’Ami Des Enfants, to have been popular enough “to be found in every house where there are any children”. Maria Edgeworth considered this story unsuitable for children, as she felt black-faced goblins and spending time with servants in the kitchen would adversely affect child development (Wroth 2006: 53-54). M O Grenby (2005) argues that Sarah Trimmer was the most significant individual influence on late 18th and early 19th century children’s literature. She wrote extensively for children, but her significance lies in the creation of what became the Bible for most parents and educationalists: Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
her periodical, The Guardian of Education, created in June 1802, which ran till September 1806. It came to an abrupt halt not for lack of demand but due to her ill health. It was supposed to do precisely what its title read: guide parents and educationalists in the choice of books for educating children. In toto, it contains nearly 400 reviews of children’s books, analysed and categorised in terms of suitability for children. It was a new genre which itself justified the existence of the field of the emergent respectable, modern children’s literature (ibid: 137). In short, late 18th century children’s literature as a respectable category for the perusal of middle- and upper-class children was specifically designed to rupture fantasy and play.
Forbidden Narrative In Britain and France, the most successful late – 18th century children’s stories “are sheep in wolves” clothing, acknowledging the appeal of a forbidden narrative while “deliberately turning it on its head”. Madame de Genlis, whose work was immensely popular and emulated in Britain, as in France, set the pattern for instructive children’s stories with her Les Veillées Du Chateau, ou cours de morale à l’usage des enfants (Tales of the Castle; or, Stories of Instruction and Delight) (1784). Myers argues that she was successful in preserving the old peasant custom of the veillée or the evening fireside narrating of old wives’ tales to be passed on by nannies and servants to children of the elite, as evident from one of the stories in its translated version Tales of the Castle (1785) where a girl child is caught reading fairy tales by a servant. The mother scolds the child and replaces all the fairy tales with counter fairy tale material, namely, scientific facts that she had read. Thus, de Genlis’ solution, as is evident in most of 18th and 19th century children’s literature, fairy tales and popular literature, was to follow many of the narrative conventions of popular literature or a French salon fairy tale but replacing its content. Mary Pilkington’s Tales of the Cottage (1798), inspired by de Genlis, would be an apt example (Wroth 2006: 63). Educating children by playfully attracting the eye of the child through pictures or woodcuts was hardly prevalent in the late 17th century. Roger l’Estrange was the first to adapt fables for children in 1692 while John Locke linked fables to woodcuts and interlinear translation: an edition which appeared in 1703. In 1694, one J G introduced his book for children which circulated widely as evident from the fact that it had to be reprinted in 1703 and also from the following blurb: “A Play-book for children to allure them to read as soon as possible. Composed of small pages on purpose not to tire children and printed with a fair and pleasant letter. The matter and method plain and easier than any yet extant.” The book had wide margins, large type and simple language – all within the scope of children’s comprehension. In fact, in the preface to the book, the author explicitly states his objective “to decoy Children in to reading”. By 1703, other authors like William Ronksley were attempting to introduce teaching by verse according to the metre of the Psalms (Plumb 1975: 81). By the 1740s, however, changes in children’s literature become discernible. Thomas Boreman (who published children’s books in the 1730s) and John Newbery (1713-67) were British publishers who made children’s literature a profitable enterprise in the literary
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market of 18th century Britain. Their books were meant to entice children and make learning simpler for them. John Newbery’s A Little Pretty Pocket-Book (1744) was popularised by selling it with a ball or a pincushion, depending on the gender of the child. This book has come to be viewed as one of the many pioneering respectable, middle-class children’s books in Britain.
No Dividing Line Hugh Cunningham argues that before the advent of modern (respectable) children’s literature, there had been no clear dividing line between adult and children’s literature. Books for teaching children grammar, alphabets, morality, and so on existed since printing began but almost none of them were designed specifically for children (Plumb 1975: 80). Authors and publishers hardly made any effort to charm children’s minds. Popular literature was consumed by both adults and children. The term popular has been loosely used to refer to literature of the people, or that which sold well, or was well-liked (Grenby 2008a: 23). Popular literature, or what Maria Edgeworth and other contemporary educationists were trying to exclude from children’s reading, included chapbooks (cheap books for children and adults), which were an integrative part of the narrative tradition of the lower classes. Narrative content usually included popular romances like The Seven Champions of Christendom, and Valentine and Orson; ballads such as “The Children in the Wood”, folktales, fairy tales (the translations and various adaptations of the 16th century French Contes de fée or literary fairy tales), bawdy jokes, crime stories, ghost stories, medieval romances, broadside ballads, and other chapbook stories (Wroth 2006: 57). Factual, pseudo-factual or didactic texts like hagiographies, histories, biographies, and almanacs alongside religious and political matter also existed. Their commercial practicability was realised by William Caxton and his successor, Wynkyn de Worde, in the 15th and 16th centuries as Caxton printed The Golden Legend in 1483 while Worde printed The Friar and the Boy and Gesta Romanorum (Deeds of the Romans) around 1512. Gesta Romanorum: Containing Fifty Eight Remarkable Histories, Collected Originally from the Best and the Most Ancient Roman Records. With Morals and Applications, Tending to the Suppressing of Vice and the Encouragement of Virtue, and the Love of God is cited as a possible starting point of modern children’s literature in Britain as it prefigures many of Locke’s messages on religious and moral education while hinting at his motto of educating to delight (Grenby 2008b: 25-27).
Chapbooks Children and adults between the 17th and 19th centuries heavily read chapbooks11 as a sub-genre of popular literature. In early modern Britain, chapbooks may be termed as the specific predecessors and contemporaries of literature designed solely for children. They were small, short, cheap, and often with poor print which were sold by chapmen or itinerant traders or hawkers. Chapbooks, alongside fairy tales written for the French court by Madame d’Aulnoy and Charles Perrault, were often elements of middle- or upper-class culture, abridged and modified to fit into the plebeian associations of popular culture in order to attain the widest possible readership. Peter Burke warns us that elite and
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lower cultures cannot be easily demarcated as there is evidence of the affluent having consumed popular literature, including chapbooks. In fact, respectable children’s literature and popular literature inter-borrowed from one another as the chapbook had positioned itself as a connective between popular and children’s literature.12 If children’s literature as a category developed in Britain from the 1740s, chapbooks did not stay far behind in the competition. Chapbooks modified themselves to target children, sold directly by their printers and publishers. This new category of children’s chapbooks emerged during the late 18th and early 19th century. Their inexpensive price, crude printing and borrowing of religious, didactic, historical, mythical or other material from older chapbooks were all that they had in common with its earlier version. The new chapbooks, exclusively focusing on children, were smaller in size and often had a woodcut on every page to make them more attractive to children. In fact, rather than be displaced by the more respectable middle- and upper-class oriented children’s literature, as produced by John and Elizabeth Newbery, and John Marshall and William Darnton, children’s chapbooks often became abridged and pirated editions of them. They became a form of response to respectable children’s literature since they were catering to a much larger, poorer readership that could not afford the expensive, well renowned publishers’ books. For instance, Kendrew of York published the usual chapbook tales like The House that Jack Built, The Cries of London, an abridged Robinson Crusoe alongside a concise version of John Newbery’s The History of Giles Gingerbread, A Little Boy Who Lived Upon Learning, as well as a 31-pages long imitation of the child- and rationality-centred Mrs Lovechild’s Golden Present for All Good Little Boys and Girls. Popular for being turned into chapbooks were also the moral lessons of Maria Budden, Maria Edgeworth and Dorothy Kilner (Grenby 2008b: 43). The popularity of the so-called popular literature may also be discerned from Samuel Bamford’s13 account of how every farthing that he could scrape together was spent on purchasing Jack the Giant Killer, Saint George and the Dragon, Tom Hickathrift, Jack and the Beanstalk, The Seven Champions of Christendom, and Fair Rosamond. Furthermore, Charles Dickens’ childhood filled with hardship also incorporated readings such as Faust, the Norwood Fortune Teller, Fairburn’s Comic Songsters, Tom Thumb, Fair Rosamond, Fortunatus, The Seven Champions, and Mother Bunch’s Wonders which, he admitted, brought “infinite delights” to him (ibid: 40). Similarly, in France, chapbooks (also known as Bibliothèque bleue or Blue Library, so-called due to the blue paper in which they were bound) and popular literature had a wide readership in the 17th, 18th and 19th centuries. In France, as in Britain, popular literature interpenetrated the growth of children’s literature (Brown 2008: 17). They were heavily influenced by Charles Perrault’s (1697) Contes du Tempes Passé and Madame d’Aulnoy’s Contes des Fées (Four Volumes, 1710-15) which inaugurated tales about fairies and fairy tales in France. Popular literature catered mostly to the lower sections of the French populace from which nurses came. It is believed that the popular myth about fairy tale orality or fairy tales having originated orally is generated by the november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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belief that nurses read and popularised these chapbook stories when they interacted with children of the respectable classes (Hunt 1996: 153). Both religion and chapbooks were significant in contemporary child-rearing. This is evident from the predominance of chapbooks and religious texts in most French households, especially in the towns. Religious matter dominated 84 private libraries in major western French towns between 1785 and 1789 (Van Horn Melton 2001: 87). This is significant as up to 30-40% of chapbook content was predominantly religious while the rest consisted of medicinal recipes and popular legends and literature like “Fortunatus”, “Gargantua” and “Till Eulenspiegel” (ibid: 88). Chapbooks most often found their way into readings at family gatherings or among people who shared a life together, for instance, early 18th century shepherds of Lorraine according to Jamerey-Duval’s testimony. This also occurred in village homes and gatherings where a literate member of the family or community read such texts aloud (Castan et al 1989: 154). Abbé Gregoire circulated a questionnaire among the people of the French countryside between 1790 and 1792. The questionnaire was about the mores of these people. The statements sent in response to Abbé Gregoire’s questionnaire supports the argument on the classed nature of popular literature and how popular literature and religion predominated in domestic intimacy, including child-rearing in the French countryside. Question 37 of this questionnaire is especially pertinent. It asks: “What sort of books are most commonly found in their homes?” His respondents presented an inventory of works in French, owned by peasants prior to 1789, which included the Bibliothèque bleue prominently among other books like almanacs or books on sorcery. In his report to the Convention of the Prairial, Year II, Gregoire mentions that peasant homes only had “peurile tales of the Bibliothèque Bleue, old wives’ tales, and [tales] of the Sabbath” (Chartier 1991: 139-40). This evidence is cited here to draw a connection between domestic intimacy and books.
Courtesy Books Two early children’s textbooks that came from abroad and influenced generations of illustrated textbooks in France and Europe were livres des cilivité or courtesy books for the “social formation” of a child like Erasmus’ De Civilitate Morum Peurilium (1530) and John Amos Comenius’ The Orbis Sensualium Pictus (1658). Penny Brown argues that John Amos Comenius’ The Orbis Sensualium Pictus published in Latin or German in 1658 in Nuremberg may be seen as a significant forerunner of illustrated books for children. He foreshadowed Locke and Rousseau’s messages of how learning should be an imperceptible process as play. In this book, Comenius used illustrations to mediate words in Latin and the vernacular. It became one of the first books to use the variegated potential of printing for educational purposes and be deployed as the first illustrated school textbook (Brown 2008: 18). In toto, respectable children’s literature, like popular literature and chapbooks, therefore, is a category that “shifts across boundaries” in 18th and 19th century Britain and France. For instance, the fairy tales of Charles Perrault and Madame d’Aulnoy began outside the three concepts of popular literature, chapbooks and Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
children’s literature. They began life in Britain as expensive reading material for adults, which became absorbed in children’s literature as texts for teaching French to, and entertainment for, the child. They were supplemented by other texts like “Beauty and the Beast” by Madame Le Prince de Beaumont in 1756. By the early 19th century, all of these had also been transformed into chapbooks for children, which gradually became part of a wider popular literature. However, unlike “Jack and the Beanstalk” with which they started to be clubbed in publications, they did not emerge out of popular literature. Children’s literature including Alice’s Adventures in Wonderland, Peter Pan, Cinderella, and The History of Goody Two-Shoes, only to name a few, all mutated between boundaries of children’s literature, chapbooks and popular literature (Grenby 2008b: 45). Following is a case study on how Locke and Rousseau’s visions of child and childhood have made their presence felt in the new, middle-class oriented children’s literature in contemporary England. I begin with an analysis of John Newbery’s A Little Pretty Pocket-Book (1744). Its first page begins with the caption “Instruction with Delight”, same as the Lockean and Rousseauian “pedagogy of play”. The child was unaware of learning. Instruction and interaction took place through illustrations and moral messages in the book as play and amusement. Newbery follows Locke’s idea of a moral “pedagogy of play” by having aimed at instilling “principles of morality” into children “early”. Therefore, unlike Rousseau, both Locke and Newbery’s interactive and playful learning involved fables. The concluding sections of the book include “Select Proverbs for the Use of Children” with proverbs like “A Good Beginning, a Good Ending” and “Nothing’s So Certain as Death”; and “Rules for Behaviour in Children: Chapter I Mixt Precepts” and “Chapter II Containing One Hundred and Sixty Three Rules for Children’s Behaviour, viz. At the Meeting House At Home At the Table ... When Among Other Children”. Possible indirect references to child sexuality may be noted in Chapter II, subsection entitled “When Among Other Children”, rule number ‘12. Avoid sinful and unlawful Recreations...the Welfare of Body or Mind”. It is possible that Newbery was aware of Locke’s reservations about reward and punishment, and how it corrupts the child, yet Newbery inserts this clause anyway to ironically further Lockean moral pedagogics. The functions of the ball and pincushion used to market the book are rather interesting. They both have a red and a black side. The nurse is advised to tie a string and hang it up as a record of a child’s behaviour. Being in full view, people will not forget; it will serve as a diary on how the child’s character is developing from moment to moment. The red and black sides are the good and bad sides respectively. For each good action, a pin is inserted into the red side while the reverse entails a pin into the black side. If a child is good he is enticed with the hope of getting a penny from Jack the Giant-Killer, while if he has been bad, he is to be “whipt” (ibid: 7-18, 23, 90-122).
Coupling of Instruction of Play Newbery’s book, therefore, allows parents as well as nurses or governesses to take effective action in the destruction of the “untamed” naughty child through the coupling of instruction and
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play. The History of Little King Pippin; with an Account of the Melancholy Death of Four naughty Boys, who were devoured by wild Beasts. And the Wonderful Delivery of Master Harry Harmless, by a little white Horse, listed at the end of the book as recommended reading, allows Newbery to naturalise death which is taught to the child as severely as an inescapable punishment proportional to unwanted naughtiness in children. Respectable middle-class terminology and imageries are also generously laid out throughout the book. For Locke, Rousseau and Newbery, gender is a constant undercurrent, understated and understood, in “respectable” child development. The alphabets and concomitant moral fables seem to instruct both boys and girls. The only overt instances of gender would be pictures where boys and girls seem to be stunted grown men and women – since they are dressed in adult clothes, set in the open or in a gentlemanly house environment, possibly to highlight Newbery’s ultimate goal of child instruction as responsible citizens. Also, in the letter to Polly from Jack the Giant-Killer, the item “needle” is inserted as indicative of her ultimate expected gender role – to be primarily within the home and family (ibid: 75). John Newbery’s Life and Adventures of a Fly (1789), alongside Dorothy Kilner’s Life and Perambulation of a Mouse (1783-84) and Rational Brutes; or, Talking Animals (1799) for instance, reflect the Lockean and Rousseauian concern about “purposeless violence” in the tormenting of animals or insects and to project it as inhumane and wicked to the child. The child is often threatened to be put in the place of the tormented animal to internalise this moral message (Festa 2007: 321). Locke argued that children often “torment” animals and insects with a sense of “pleasure” that is frightening: This I think should be watched in them, and if they incline to any such cruelty, they should be taught the contrary usage. For the custom of tormenting and killing of beasts, will, by degrees, harden their minds even towards men; and they who delight in the suffering and destruction of inferior creatures, will not be apt to be very compassionate, or benign to those of their own kind (Locke 1712: 172; Festa 2007: 321).
Rousseau makes a similar claim: To become sensitive and pitiful the child must know that he has fellow-creatures who suffer as he has suffered, who feel the pains he has felt, and others which he can form some idea of, being capable of feeling them himself. Indeed, how can we let ourselves be stirred by pity unless we go beyond ourselves, and identify ourselves with the suffering animal, by leaving, so to speak, our own nature and taking his. We only suffer so far as we suppose he suffers; the suffering is not ours but his. So no one becomes sensitive till his imagination is aroused and begins to carry him outside himself (1911: 451-52).
Even in his autobiography, Rousseau conveys this message by taking pride in never having taken any interest in wasteful violence (Rousseau 1923: 10). In short, it was made absolutely imperative that the child’s playful experience be ethically demarcated. Lynn Festa argues that this “satiric world of disenchantment” promoted by the object tales or it-narratives of the 18th century was transformed into the new “enchanted province of childhood” in late 18th and 19th century England: If delighted coaches, chatty pens, and long-winded waistcoats of the 18th century primarily solicit adult readers with their scandalous histories of human misconduct, 19th century tales told by things turn
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from the quasi-public domain of the 18th century novel of circulation to address themselves to the private world of children, creating a pedagogical wonderland in which animated objects and speaking animals delight and instruct humans (2007: 309).
In the satiric object tales meant for adult readership, objects were annihilated as “a reminder of vanity in earthly things”. Conversely, in the it-narratives for children, objects are usually restored to their rightful owners, instilling “moral lessons” in children as “future masters” who need to become worthy of their possessions. Moral blackmail is used in the sense that if the child strays from his moral path, the object withdraws its affections for the child (ibid: 309-14).
Moral Lessons Moral lessons in the form of Anna Laetitia Barbauld’s primer entitled Lessons for Children (1779) and a six-volume collection of stories called Evenings at Home (1793) reconstruct Lockean and Rousseauian pedagogics of play. In Lessons for Children, like Locke and Rousseau, she couples ordinary day-to-day experiences with easy moral lessons to the child. Yet, she revolutionises child-rearing by making the mother, an ordinary middleclass woman, into the philosophe. Michelle Levy (2006) argues that Evenings at Home treaded “many prose genres” and thoroughly reconstructed the very concept of childhood. Evenings at Home is structured in a dialogic mode, as a conversation between different family members and children on adult topics like war. It is shocking to see that a child is let into the adult world of war and politics from its early childhood. Whether boy or girl, their roles were redrawn in order to fit Barbauld and co-author John Aikin’s expectations of what their ideal child was to be. Sarah Trimmer, posing as the saviour of children from the radical influence of Barbauld and her brother John Aikin’s Evenings at Home wrote: It is therefore very wrong to endeavour to inspire children with a prejudice, which will, in all probability, lead them when they become men, not only to be discontented with the government they live under, should the nation be engaged in war; but to arraign even the Almighty himself as the instigator of the very crime he has expressly forbidden. For has not God commanded, saying, Thou shalt do no murder? (Levy 2006).
On the other hand, Betty T Bennett argues in British War oetry in the Age of Romanticism: 1793-1815 that Evenings at P Home highly politicised childhood which had been the norm, and not an aberration, in 18th and 19th century Britain and France (ibid: 121-24). Lockean and Rousseauian ideas on child-rearing have been directly deployed by Barbauld and Aikin in Evenings at Home, as Barbauld believed that “…education goes on at every instant of time; it goes on like time; you can neither stop it nor turn its course” (ibid: 126). They, therefore, “amplify”, and carry forward, Lockean and Rousseauian theories on child education and its significance for the future of the nation because parents are held responsible for bridging micro and macro histories, the private and the public, as the child is taught at home to question everything (ibid: 127). Lockean pedagogy, as symptomatic of undoing gendered segregations to a large extent,14 has also been deployed by Barbauld and Aikin in a limited fashion as boys and november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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girls are taught by both parents, as also about domestic and political economy in Evenings at Home and other works (Fyfe 2000: 459). However, significant paradigmatic shifts occurred in Evenings at Home especially because as the family broke away from being “feminised”/“privatised”, it incorporated men, women, children, and, most importantly, visitors. As the family became a key element of the public sphere, tight categorisations blurred (Levy 2006: 128). Levy argues that domestic intimacy involved discussions with children on adult topics of war and nation. The chapter entitled “Things by Their Right Names” rightly encapsulates the underlying Enlightenment(s) tradition of “demystification” through “instructive conversation”, demanding “rational critique from children” in the unravelling of Britain’s imperialist and warring traditions as mass murder. In short, what Sarah Trimmer opposed was Aikin and Barbauld’s mixing up of the neat category of children’s literature by allowing children the adult capacities for “intellectual and moral judgement” (ibid: 132-47).
Wider Changes in Perceptions Peter Hunt detects a drastic shift in children’s literature from the mid-19th century onwards as having been symptomatic of wider changes in perceptions of childhood, child behaviour and society. The late 18th and early 19th centuries incorporated Romanticism and altered overt moral lessons in favour of extending explicit freedom to the child while making parental authority an unstated and toned down reality. William Roscoe’s The Butterfly’s Ball and the Grasshopper’s Feast (1807) may be cited for bringing about a marked shift towards entertainment of children. Also, Charles Kingsley’s The Water Babies: A Fairy Tale for a Land-Baby (1863) marks a further break in children’s literature by ridiculing 18th century moral lessons. It encourages children’s imaginations to grow through a combination of the rational with the fantastic while inserting religious and political symbolisms, also taken up on a grander scale by Lewis Carroll in The Adventures of Alice in Notes 1 1632-1704, English physician and philosopher of early Enlightenment Rationalism and Empiricism. 2 1712-78, Genevan philosopher and writer who had intellectual ties with the French Encyclopaedists, Enlightenment and Romanticism. 3 I have borrowed the notion of the “pedagogy of play” from Roberto Farné’s article (2005: 169). 4 Locke (1849, 1712), as well as particular personal letters; and, Rousseau (1911, 1923) are used as the main basis of my arguments. 5 Peter Hunt (1996: 24) cites this viewpoint as a side effect of the Lockean and Rousseauian discoveries of childhood. 6 The intellectual atmosphere of the time maintained a divide between the elite and popular education of children. Many, including French philosophes like Voltaire, disregarded the “need for literacy” of peasants. 7 British adult diarist, 1669-1737. 8 Linda A Pollock argues that perceptions and experiences of childhood exhibit continuities and changes from antiquity onwards, a direct challenge to the most influential work in the field of childhood studies, namely, L’Enfant et la Vie Familiale sous l’Ancien Regime (Ariès 1962). Ariès’ main thesis underscores that, in general, an awareness of childhood was absent during the Middle Ages in France and Europe (Pollock 1983: 1-32). 9 1651-1715, French writer and poet.
Wonderland (1865) and Through the Looking Glass and What Alice Found There (1871) (Hunt 2000: xiv, 10, 164, 240).
Conclusions In conclusion, there have always been conflicting and intersecting viewpoints on what childhood and proper management of a child has entailed. I have argued throughout this article that comprehension of socially constructed and variegated conceptualisations of childhood and parenthood needs educative foregrounding. Lockean and Rousseauian “pedagogy of play” is a stable and recurrent theme which correlates reason, morality, physical exercise, amusement, learning, child’s desires, property, destruction of the “untamed” naughty child, and servants’ negative influence in the fields of philosophy and fiction for and about children. Literary models of childhood prove to be significant entry points in the understanding and remodelling of any society, undercut by class, gender and race. In this essay, classed and gendered notions of childhood have been underlined within the purview of redefining childhoods in Britain and France. Variegations in perceptions of childhood also often emphasise power imbalances which define one as nation and the Other as colony. For instance, parallels between Lockean and Rousseauian pedagogics of play as learning through exercise and play and 19th century medical science on athletic education and mental development highlights the interconnections between nation and empire, as exemplified in Satadru Sen’s Colonial Childhoods (2006). In Europe, a child was made into an adult from the ages of five to seven, that is, from the “age of discernment” through the interchangeability of learning, exercise, work, and play, while colonial reformatories in India had ruled out exercise and allowed only work for these “perverse little adults”.15 In short, my paper has been an amateur endeavour to encourage the future deployment of ideas on childhood as a transnational, multidisciplinary historical tool for research in any field of interest.
10 1696-1782, Scottish philosopher. 11 The term chapbook itself “cannot easily be delimited generically” as it comprised myths, legends, verse, prose, abridged romances, ABCs, religious testaments, fairy tales, biographies and crime. Prayers, catechisms, fairy tales and other material issued as chapbooks by organisations such as the Society for the Propagation of Christian Knowledge (SPCK) and the Religious Tract Society (RTS) were also produced in huge numbers (Grenby 2008a, 2008b: 30). 12 Peter Burke, Popular Culture in Early Modern Europe (1978: 30-32), cited in Briggs et al (2008: 3234). Also, Chartier (1989: 169). 13 1788-1872, English writer. 14 In relation to religion and gender, I would argue that whereas Rousseau, in Emile, denied Emile the child any inclination towards religion, even at 18, Locke was milder in this regard. Locke argues that there is no essential difference between a girl and a boy when it came to virtue, truth and obedience. The girl child must pay heed to sunlight and preservation of her beauty by playing in the shade. Locke’s letter to Mary Clark (28 January-7 February 1685) inserts the element of “beauty” and “tender skins” in relation to girl’s play. He argues that their beauty needs to be heeded to from a tender age and, therefore, a “little shady grove near the house would be convenient for them to play”. Letter from “John Locke to Mary Clarke, 28 January-7 February 1685” cited in Benjamin (2006: 19). Rousseau believed
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that a girl child was prone to “pleasing”, “coquetry”, with an “instinctive bent towards her life’s work”, and what “appeal to the eye” in general. She devotes her time mostly to dressing up her dolls and “in due time she will be her own doll”. He counterposes this natural disposition of girls to boys’ instinctual need for “authority”, “movement”, “noise”, “drums”, and “toy-carts” as suited to their specific gender roles. He argues that expected social class norms must be maintained as a man must marry a woman from a social class that is beneath him in order to command authority over his wife, although the wife would often “lead” and “guide” him. In case the woman marries above her class, she would exhibit tyrannical authority over, rather than gratitude to, her husband. See Rousseau (1911: 221-32, 247). 15 The notion of the “age of discernment” has been cited from Colin Heywood (1988: 14). Satadru Sen argues that “bodily labour” rather than “physical exercise” were allowed to colonial childhoods in reformatories in 19th century British India. I would like to question whether the scientific notion of “athletic education” to prevent “arrested development” in principally povertystricken, underfed, stressed, labouring children in mid- and late 19th century Britain may have been classed and racialised and not applied in colonial reformatories in British India (Sen 2006: 26-28). The relationship between athletic education and arrested development has been paraphrased from Lucy Bending (2002: 205-16).
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SPECIAL ARTICLE References Ariès, Philippe (1962): Centuries of Childhood: A Social History of Family Life, trans. Robert Baldick (New York: Vintage Books). Originally published as L’Enfant et la Vie Familiale sous l’Ancien Regime, 1960. Bending, Lucy (2002): “From Stunted Child to ‘New Woman’: The Significance of Physical Growth in Late 19th Century Medicine and Fiction”, The Yearbook of English Studies, Children in Literature, 32: 205-16. Benjamin, Jr, Ludy T (2006): A History of Psychology in Letters (Oxford: Blackwell Publishing). Briggs, Julia, Dennis Butts and M O Grenby, ed. (2008): Popular Children’s Literature in Britain (Aldershot: Ashgate). Bottoms, Janet (2006): “The Battle of the (Children’s) Books”, Romanticism, 12(3): 212-22. Brown, Gillian (2006): “The Metamorphic Book: Children’s Print Culture in the 18th Century”, 18th Century Studies, 39(3): 351-62. Brown, Penny (2008): A Critical History of French Children’s Literature Volume One 1600-1830 (New York: Routledge). Castan, Yves, Francois Lebrun and Roger Chartier (1989): “The Practical Impact of Writing” in Ariès, Phillippe and Georges Duby (ed.), A History of P rivate Life III. Passions of Renaissance. Edited by Roger Chartier, Translated by Arthur Goldhammer (London: Bellknap Press of Harvard University Press), 111-60. Chartier, Roger (1989): “Texts, Printings, Readings” in Lynn Hunt (ed.), The New Cultural History (California: University of California Press), 154-75. – (1991): The Cultural Origins of the French Revolution (Durham: Duke University Press). Farné, Roberto (2005): “Pedagogy of Play”, Topoi, 24: 169-81. Festa, Lynn (2007): “The Moral Ends of 18th and 19th Century Object Narratives” in Mark Blackwell (ed.), The Secret Life of Things: Animals, Objects, and
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It-Narratives in 18th Century England (New Jersey: Rosemont Publishing and Printing Corp) 309-28. Fyfe, Aileen (2000): “Reading Children’s Books in Late-18th Century Dissenting Families”, The Historical Journal, 43(2): 453-73. Grenby, M O (2005): “‘A Conservative Woman Doing Radical Things’: Sarah Trimmer and The Guardian of Education” in Donelle Ruwe (ed.), Culturing the Child: Essays in Memory of Mitzi Meyers (Oxford: Scarecrow Press), 137-62. – (2008a): “Introduction” in Julia Briggs, Dennis Butts and M O Grenby (ed.), Popular Children’s Literature in Britain (Aldershot: Ashgate), 23-24. – (2008b): “Before Children’s Literature: Children, Chapbooks and Popular Culture in Early Modern Britain” in Julia Briggs, Dennis Butts and M O Grenby (ed.), Popular Children’s Literature in Britain (Aldershot: Ashgate), 25-46. Heywood, Colin (1988): Childhood in 19th-century France: Work, Health and Education among the Classes Populaires (Cambridge: Cambridge University Press). – (2008): Growing Up in France From the Ancien Régime to the Third Republic (Cambridge: Cambridge University Press). Hunt, Peter, ed. (1996): International Companion Encyclopedia of Children’s Literature (New York: Routledge). – (2000): Children’s Literature: An Anthology 18021902 (Oxford: Blackwell). Levy, Michelle (2006): “The Radical Education of Evenings at Home”, 18th Century Fiction, 19(1): 123-50. Locke, John (1712): Some Thoughts Concerning Education. 15th edition (London: A and J Churchill at Black Swan in Paternoster Row). First edition 1693. – (1849): An Essay Concerning Human Understanding With Notes and Illustrations of the Author and An Analysis of His Doctrine of Ideas. Revised 30th edition (London: William Tegg&Co), First edition 1690. Newbery, John (1744): A Little Pretty Pocket-Book Intended for the Instruction and Amusement of
Little Master Tommy and Pretty Miss Polly With Two Letters from Jack The Giant-Killer As Also a Ball and Pincushion; The Use of which will infallibly make Tommy a good Boy and Polly a good Girl. To which is added A Little Songbook Being A New Attempt to teach Children the Use of the English Alphabet, by Way of Diversion. First Worscester Edition (Printed at Worcester, Massachussetts, np). Viewed on 15 February 2009 (http://lcweb2.loc. gov/cgi-bin/ampage?collId=rbc3&fileName=rbc 0001_2003juv05880page.db). Plumb, J H (1975): “The New World of Children in 18th Century England”, Past and Present, 1(67): 64-95. Pollock, Linda A (1983): Forgotten Children Parentchild Relations from 1500-1900 (Cambridge: Cambridge University Press). Rousseau, Jean Jacques (1911): Emile, or On Education. 10th edition. Translated by Barbara Foxley (London: J M Dent & Sons Ltd). First edition 1762. – (1923): The Confessions of Jean Jacques Rousseau, Vol 1, Preface by Edmund Wilson (New York: A lfred A Knopf). First edition 1782. Sen, Nivedita (2000): “The Child Protagonist – Rebel and Conformist: Bengal’s Response to the Child in Western Literature”, Department of Modern Indian Languages and Literary Studies, PhD Thesis (unpublished), University of Delhi. Sen, Satadru (2006): Colonial Childhoods the Juvenile Periphery of India 1850-1945 (London: Anthem Press). Van Horn Melton, James (2001): The Rise of the Public in Enlightenment Europe (Cambridge: Cambridge University Press). William Molyneux, Thomas Molyneux and Philippus van Limborch (1708): Some Familiar Letters between Mr Locke, and Several of His Friends (London: A and J Churchill at Black Swan in Paternoster Row). Wroth, Celestina (2006): “‘To Root the Old Woman Out of Our Minds’: Women Educationists and Plebian Culture in Late 18th Century Britain”, 18th Century Life, 30(2): 48-73.
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Development of What? On the Politics of Development Economics Arup Maharatna
It could possibly be sheer historical coincidence that development economics as a distinct branch of economics was born at a time when the cold war was blossoming. But the question as to what has subsequently happened to the fate of the sub-field along with the trajectory of the cold war – the great “intangible” battle fought mainly in the spheres of ideology, economics, politics and propaganda between the capitalist and socialist blocs – cannot be similarly left as a historic fluke. A detailed substantive academic attempt at examining/establishing the latter apprehension has so far remained suspended or sometimes just taken for granted in most retrospective accounts of development economics. This paper makes a systematic study of the issue and argues that the evolution of development economics has been heavily mediated by international politics and that development economics, as it exists in the post-cold war era, entails a great delusion in relation to its original purpose, promise and priorities.
I am deeply thankful to Jean Drèze and N Krishnaji for their encouragement and comments on an earlier and larger version of this paper. Arup Maharatna (
[email protected]) teaches at the Gokhale Institute of Politics and Economics, Pune. Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
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hat development economics (DE hereinafter) had encoun tered – within only about three decades since its birth in the late 1940s – stern academic attacks against its inde pendent identity and even survival, is “a thing of the past” now, especially to the dominant mood of current economics profes sion.1 There have, of course, been a few glitters of counter arguments (Sen 1983; Chakrabarty 1987, 1988; Stewart 1985; Martin 1991; Dutt 1992; Naqvi 1993, 2002; Toye 1987, among others), but they all proved to be too feeble for salvaging the so-called “formative period development economics” (hereinafter FPDE).2 A few subsequent attempts at the latter’s resurrection turned like a formal homage to the “deceased” (Krugman 1992; Murphy et al 1989; also select chapters in Mookherjee and Ray 2001). Meanwhile, DE found itself “alive” in its predominantly neoclassical/neo-liberal incarnation – and this time, however, with a firm lease of long life. Rhetorically speaking, development economics was hardly “baptised” after its birth. For example, there had been no entry for the term “economic development” in the Encyclopedia of Social Sciences at least till early 1980s (Arndt 1981: 457). While the “magisterial survey” of growth economics appeared in the Economic Journal in less than two decades after its “birth” (Hahn and Mathews 1964), DE had to wait for about four decades to see its survey of comparable “majesty” published in the journal (Stern 1989).3 In fact, DE used to be like a “problem child” of the economics discipline, with students grumbling that “they can see no underlying structure or framework within the study of deve lopment economics” (Hall 1983: 1; see also Basu 1984, 1997).4 By now, there is considerable survey literature of DE both in the nature of routine stock-taking of academic contributions (Bardhan 1988, 1993; Stern 1989; Meier and Rauch 2000) and in the spirit of broad-brushed, reflective and evolutionary narratives (Chakravarty 1988; Sen 1997; Krugman 1996; Thorbecke 2006; Bardhan 1993; Dutt 1992; Toye 2003). However, direct (and indi rect) influences/bearings of global dominant politics and powers on the directions of DE remain generally filtered away in most of these accounts. For instance, the justly celebrated survey of DE by Stern (1989) is structured around the questions/themes/issues that have propelled it to bear “fruits” for economics generally. Consequently, “[i]t is not a history of thought, nor research mani festo, nor an attempt to adjudicate or settle the major debates” (Stern 1989: 597). Likewise, Sen (1997), while sketching the trajectory of development thinking up to the beginning of the 21st century, makes a binary division between a strand that he called BLAST (short for “blood, sweat and tears”) and a paradigm
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he called GALA (getting-by with a little assistance), bypassing more familiar dilemmas over “market versus state”, “profit versus planning” or “classical versus neoclassical”. Textbooks in DE purge off even more rigorously political underpinnings/undercurrents (see Nafziger 1976 for a critique of leading US textbooks on DE). While DE contains occasional – albeit casual – hints at influences of global dominant politics on shifts of development paradigms, attempts at closely-documented expositions of this linkage are conspicuously rare (though it is not so in political science and sociology). For example, a correspondence in the early 1980s between the conservative parties coming to power in the US, Britain, Germany and elsewhere, and swings of donor opinion and deve lopment thinking towards market and monetarism is almost routinely noted in passing in DE literature (Killick 1986: 99; Toye 1987; Martin 1991: 53, among many others). However, a distinct dearth of documented elucidations of such historic contingence/ coincidence leaves some deeper questions open. One, for instance, is whether neo-liberal/neoclassical resurgence in economics was cause or effect of the rise of conservatives to power or of the world economic crises in the 1960s and 1970s (Frank 1980, 1981), which interestingly, least affected “social corporatist” countries such as Austria, Finland, Norway, Sweden, where Keynesian in stitutions were most well-developed (Banuri 1991: 5).5 Similarly unexplained remains what Bardhan (2000: 3) calls an irony, namely, “the international agencies” sponsorship of injecting market fundamentalism across a hapless debt-ridden third world at a time when the faith itself was being shaken among “mainstream economic theorists”. Such seemingly stray claims/ statements leave otherwise deeper contradictions or questions unresolved in the absence of detailed investigations into the mechanisms by which global hegemony makes DE its “hand maiden”.6 For example, mainstream DE literature hardly heeds such revelation that the US oligarchs and their foundations pour “hundreds of millions into setting up of ‘think-tanks’, founding business schools and transforming university economics depart ments into bastions of almost totalitarian neo-liberal thinking”.7
Filling the Gaps However, standard critiques of “neoclassical resurgence” or “counter-revolution” are not really rare in DE literature; indeed, there are also some recent critical evaluations of methodological and intellectual contents of so-called “new” or “post-Washington Consensus” DE (Fine 2006a; Jomo and Fine 2006). But detailed analyses from a historical standpoint towards unfolding a syste matic symbiosis between cold war trails in global politics, dominant ideological swings and the directions of DE are conspicuously rare.8 The chief object of the present paper is to fill up this gap by identifying the contours and ingredients of this historic “chemistry”. We argue that DE, once a field for creative contestations among ideas, ideology, and committed scholarship on development issues, has, over the post cold-war era, been fast becoming an edifice of elegant/abstruse “models” far distant from the profound forma tive period concerns, visions and dilemmas which gave rise to the birth of the subject in the first place. The seriousness of this lies, inter alia, in its deep (potentially) adverse ramifications for pace and pattern of development in developing countries.
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Birthmarks of Development Economics Economic realities of colonies in the past hardly found place in the mainstream economics discourse – a fact which Gunnar Myrdal described as “pre-war unawareness” (1973: 65-67). As Meier (1984b: 209) remarked: “Out of intellectual tradition, academic economics excluded the problems of underdeveloped countries until after World War II” (italics added). However, DE began to emerge as a separate sub-discipline and indeed as a triumphant event in economics discipline since the end of the formal imperial/ colonial era around the 1940s (Galbraith 1994: 172-82). By the end of the 1950s and the early 1960s, FPDE strived on “creative rediscoveries and adaptations of earlier historical writings”, and set out with a commitment to planning and with a strong conviction that “for understanding of the problems of development – even if qualified as economic development – one needs to look beyond the boundaries of contemporary economics” (Martin 1991: 50). Indeed, with a clear-headed recognition of the irrelevance of much of the neoclassical premises and tools, FPDE had engaged itself with broader issues of poverty, misery, unemployment and fulfilment of basic human needs (Myrdal 1968). Albert Hirschman wrote about the formative period of development economists thus: “[they] had taken up the cultivation of development eco nomics in the wake of World War not as narrow specialists, but impelled by the vision of a better world”. This vision entailed es sentially a move from, to use Paul Rosenstein-Rodan’s words, “the national welfare to the international welfare state” (both quoted in Yergin and Stanislaw 1998: 75-79). Unsurprisingly, FPDE could not help feeling more directly the heat and hazards of ideological warfare unleashed by the cold war. An early edition of the textbook on DE by Meier and Baldwin (1957: 11-12) made plain enough the stakes of developed western countries on the subject: “[e]ncouragement of development is a prominent feature of American and British foreign policy in order to confine the spread of communism, to expand trade between industrial nations of the free world and the poor countries, and to lead the new expressions of nationalism into democratic pro-Western forms”. A strong affinity between classical economists’ queries and key concerns of FPDE is fairly discernible (Bardhan and Udry 1999: 1; Meier 1984a: 3). However, the latter has still been distinct by its task of evolving strategies for rapid economic development in a vastly different postcolonial setting of Asian, African and Latin American countries. Since “development theory has from the start been closely related to development strategy” (Hettne 1990: 3), the recognition of the key role of the state and public policies – concordant as they were with the lasting Keynesian resonances spanning up to the 1960s (Toye 1987, Chapter 2; Hettne 1990, Chapter 2; Hosseini 2003) – served almost as a binding force of FPDE. This, however, did not preclude highly illuminating and concerned debates within FPDE (Hirschman 1998; Alacevich 2007: 18). Indeed, there had been fairly fast growth of the latter over the post-war quarter century, largely by way of addressing development strategies amidst structural rigidities and market imperfections (see, e g, Meier 1984b, Chapter 6 for a summary). This period was one of rising prominence of “a variety of interventionist theories”, culminating into what is sometimes called a “Golden Age Economics” (Chang 2002: 540). Although, november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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initially, the concept of development was narrow, with its exclu sive concentration on GDP per head and its growth, powerful criticisms both from within (Stewart and Streeten 1976; Streeten et al 1981) and outside (World Bank 1977, ILO 1976) against this bias led, by mid-1970s, to a broadened notion of development seen as a means (not just goal) to the fulfilment of basic human needs (poverty elimination, minimum provisions of education, nutrition, health, employment, sanitation, etc) (see Morawetz 1977, chapter 3; Streeten et al 1981). Yet, a stark antipathy against independent foothold for DE since the time of raging cold war of the 1960s and 1970s continued its presence not fully felt as yet (Bauer 1957, 1972 and others). For example, Bauer opined openly that no notion of a third world could emerge on earth if the “west” did not begin to commit itself to providing aid.9 By the late 1970s, the shock inflicted by the oil crisis of 1973 precipitated in the developing world an economic downturn and debt crisis, which was greatly compounded by stalling industrial growth in developed countries and hence, the latter’s growing scepticism about aid, its rationale and efficacy. All this set in motion a unwarranted choking effect on the fountains of FPDE. By as early as 1981, Albert Hirschman, a staunch pioneer of FPDE, could not resist from lamenting the puzzling signs of its retreat: “[i]t is something of a puzzle why development economics flourished so briefly, even though considerable advances have taken place in many erstwhile ‘underdeveloped’ countries [and] encouraging inroads on the problem [of world poverty] have been and are being made” (quoted in Kanth 1997: 192). The clue to the “puzzle”, according to many, lay in “unlikely” or “abnormal” historical times. As Leys (1996: 25) notes, “the 1950s and 1960s were not ‘normal’ times but, on the contrary, a special interlude in the history of the worldwide expansion of capitalism in which ‘development theory’ could be born”. In a similar vein, Hirschman (1981) ascribes this “extraordinarily productive” FPDE to “an a priori unlikely conjunction of distinct ideological currents”, which carried seeds of problems in the future (quoted from Kanth 1997: 192; italics added). The uneasy question as to how FPDE, which had been relatively pro-state and planning, with some times even Marxian overtones (see Bardhan 1986), could gain increasing ground amidst the cold war decades of the 1950s and 1960s, is often pushed off into irrelevance by hardliner neoliberal analysts in their subsequent heydays (Krueger 1990: 9). Of course, the birth of DE embodied a destiny of its own extinc tion, that is, when “poor” countries become “developed”. Indeed, FPDE had focused on its mission to obliterate the gulf between rich and poor nations, in August Heckscher’s eloquent words, “without hope of seeing [our] efforts crowned with rapid success or ourselves blessed with appreciation and gratitude” (Myrdal 1968, Vol 1, p vi; see also Hettne 1990: 2). However, the profound heterogeneity of developing countries has always been a source of tough potential challenge towards holding DE as a coherent branch of economics. As Todaro (1994: 9) remarked, “there can [also] be no single development economics”. Indeed, this chal lenge of dealing with the heterogeneous gave in to neoclassical/ neo-liberal attacks (more on this shortly). In turn, DE became “a field on the crest of a breaking wave”, but textbooks kept on pointing to its yet-to-be fulfilled ultimate purpose “to help Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
improve the material lives of three-quarters of the global popula tion” (Todaro 1994: 9) – a dilemma to which we turn now.
Stage-Work for the Drama of DE since the 1980s The prominent organising role ascribed to the state by FPDE towards rapid industrialisation and self-reliant growth in devel oping countries became increasingly at variance with the ideology of the capitalist bloc in the cold war (Engerman 2004: 31).10 To use Meghnad Desai’s (2002: 251-52) eloquence: [t]he free-market radicals were working hard in the 1950s and 1960s, thinking not the ‘unthinkable’ but the ‘unthought of’. .. They were ruthless in their self-criticism, as well as in examining their rivals’ arguments. The battles were fought in learned journals, conference volumes, books. No blood was spilt, but a most profound change in economists’ thinking – a veritable revolution was brought about.
That the cold war had predicated a close networking between the US Department of Defence, corporate giants and academia over about a quarter century following the war, with its adverse ramifications for academic “independence” and “self-image”, is well-documented in political science literature (Leslie 1993; Chomsky et al 1997).11 With the efforts to bring academia closer to terms with the cold war agenda, came, by the 1960s, a stern rethinking about aid to developing countries through the Bretton Woods institutions. Jacob Viner, an influential American neoliberal economist, made it plain: “The only factor which could persuade us [US] to undertake a really large program of economic aid to the underdeveloped countries would be the decision that the friendship and alliance of those countries are strategically, politically, and psychologically valuable to us in the cold war” (quoted in Mason 1964: 16). In the early 1960s, a good deal of academic energy was har nessed towards gauging the “value” of developing countries to the US in the cold war context. The US’ concern is best echoed in what the then one US secretary said: “If you don’t pay attention to the periphery, the periphery changes, and the first thing you know, the periphery is the center” (quoted in Wolf 1963: 634). In this vein, a more close influence of the US on India’s eco nomic policies was strongly recommended by some American scholars in the 1960s: “[I]n spite of the high quality of India’s economists and officials, the United States must play a more active role than heretofore in influencing Indian plans and imple mentation policies on development. It [the US] must try to use its instruments of aid and trade to stimulate those policies it thinks desirable” (Rosen 1966: 272; italics added). By the late 1960s, the Area Studies Programme sponsored a series of evaluations of economic performance of individual developing countries by using neo-liberal yardsticks. For example, the foreword written by the president of the Brookings Institute to a Ford Foundation-funded book, Quiet Crisis in India, authored by J P Lewis, reads thus: “[t]he United States is far more than an interested observer in India’s concerted effort to speed her economic expansion. ….Americans have a vital stake in India’s attempt to achieve radical economic transformation by constitutional procedures” (Lewis 1962: vii; italics added). In the Nehruvian era of the 1960s, dominated by the vision of a “socialistic pattern of society”, Lewis (1962) discovered, inter alia,
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a “quiet crisis” brewing in what he describes as “the first and, in many ways, the most significant non-Communist economic experiment in Asia” (ibid: vii). Multilateral agencies like the World Bank and corporate foundations in the US had begun financing “modelling exercises” in universities, with a view to making “political use of model results to modify policies of the developing country that was modelled” (Srinivasan 1998: 125). For instance, an attempt – albeit abortive – was made by some at the Centre for International Affairs at the Massachusetts Institute of Technology to modify India’s Third Five-Year Plan model even by influencing the then Indian ambassador in Washington, thereby bypassing the experts of the Indian Planning Commis sion and those from outside (ibid). Research programmes were initiated in the 1960s to establish “infallibility” and “universality” of the neoclassical laws of ration ality – even in the economies of the poorest of the world (see, e g, Schultz 1980 for arguments and evidence). As Ian Little writes (1982: 137), “[r]searchers were hard at work in the late 1960s, under the umbrellas of either the OECD [Organisation for Economic Cooperation and Development] or the World Bank project or both” to challenge what they called “myths” of FPDE, namely, pro tectionist policies, infant industry argument, import substitution (IS) industrialisation, worsening terms of trade). Indeed, this was largely because of such “hard work” in the 1960s and 1970s that nearly the whole world had witnessed, by the 1980s, “a harsh reversal of economic policies followed hitherto and a move to wards neo-liberal and neoclassical policies that emphasised priva tisation and liberalisation” (Emmerij 2006: 1). Chang (2002: 540) has recently explained the latter in terms of an “unholy alliance” between neoclassical economics, which provided most of the analytical tools, and what we may call the Austrian-libertarian tradition, which provided the political and moral philosophy. The advanced countries at the OECD’s Convention held in Paris on 14 December 1960 resolved to “contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accord ance with international obligations”.12 Accordingly, it became imperative for the new paradigm and its articulation which could convince the developing world about the impeccable potential benefits of opening up of foreign trade, particularly by augment ing exports to pay for increasing imports. For example, in 1954, the Foreign Operations Administration established an Institute on Economic Development at Vanderbilt University to apprise the “returning foreign trainees” across developing countries about “development problems from a more general perspective”, which was, understandably enough, the US’ official one (Worley 1988: S1). In fact, three years later, the International Cooperation Adminis tration commissioned the Vanderbilt University to inaugurate “a comprehensive, year-round program designed to meet the train ing needs of officials in developing nations who were charged with creating and/or implementing development plans”. This programme was subsequently supported for many years by the United States Agency for International Development (USAID), Ford Foundation and Rockefeller Foundation (ibid: S1-S2). Similarly instructive are Bela Balassa’s (1988: S275) remarks, reflecting the concerns of the US and its efforts towards making developing countries adopt “liberal trade” policies: “In late 1959,
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people in Washington were searching for a country that would adopt outward-oriented policies in exchange for initial help by the United States, a bargain to be announced in President Eisen hower’s January 1960 State of the Union message”. Accordingly, Taiwan turned to be a good “choice” of USAID for such “experimental” aid “in exchange” for a country’s commitment to the “manufacturing for exports”, culminating in what is perhaps loudly echoed in Bela Balassa’s somewhat historic remark: “[t]he rest is history” (ibid).13 In the same vein, South Korea’s readiness to adopt a policy of “export-led industrialisation” in the 1960s could fetch her massive economic assistance and “extensive tech nical support” provided by USAID, apart from sumptuous US mili tary aid and foreign assistance received for improvements in health, education and agriculture. Almost overflowing US aid since the 1960s with watchful eyes on its intended effects (for example, boost to export-led industrialisation) affected much of south-east Asia, particularly those which were soon to be portrayed as “tigers” in the developing world and thereafter as “poster boys” of market-based outward-looking development strategy (see e g, Stubbs 1999: 344-46, and references cited therein).
OECD Project In the mid-1960s, the OECD Development Centre had launched a massively funded, centrally designed and monitored, multicountry research project on patterns of both industrialisation and foreign trade in select developing countries. The specific country studies were assigned to “individuals with close firsthand knowledge of the countries concerned in collaboration with some research institute in each”. Its authors, who were all made consultants of the OECD Development Centre in Paris, had to undergo two major workshops – one, in involvement with the World Bank’s two closely related projects, to set a uniform design prior to the start; and the second, only after completion of the first drafts (Little et al 1970: xiii). Little wonder, the project arrived at the recommendations coterminous with the OECD mission and its ideological predilections: a withering away of IS strategy followed so far, opening up foreign trade with a boost to exports in particular, liberalisation of industrial policies and administrative controls to create larger free space for private market and capital (ibid, especially Chapter 1). In the mid-1970s, the National Bureau of Economic Research (NBER) sponsored a series of 10 country studies with a view to demonstrating the merits of export-orientation and outwardlooking policies (vis-à-vis IS industrialisation) from the standpoint of efficient use of scarce domestic resources (Meier 1984b: 176-79, and references cited therein; Little 1982). Not surprisingly, the major empirical studies commissioned by the OECD and NBER could find “the enormous waste that attended the IS strategy” (Bhagwati 1984c: 201). As Little (1982: 118) writes, “it has taken years of patient work to undermine the myths” [of FPDE] (e g, the IS strategy, export pes simism, market failures). Mainstream economics, with its longpreached neutrality from political and ideological overtones, could rather quickly yield itself to accepting and trumpeting the hollow ness of FPDE (Karunaratne 1982; Healey 1972). However, the forego ing leaves one sceptical as to whether “the patient work” of the former did anything more than mere replacement of what it saw as november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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“hypotheses [of FPDE] accepted as facts” with the neo-liberal dogmas craftily posed and presented as facts (Banuri 1991: 9-11). For instance, one World Bank-sponsored comparative study on trade and protectionism is found to have “extracted very strong pro-liberalisation conclusions from limited and imperfect infor mation” by relying on subjective indicators of trade orientation (Edwards 1997: 44). Indeed, studies sponsored by the World Bank and other multinational agencies often face criticisms, parti cularly from outside and sometimes even from within (Wade 1996; Stiglitz 2002; van Waeyenberge 2006; Dreher et al 2009). As Wade (2001: 127) writes: “The World Bank has been especially useful instrument for projecting American influence in developing countries, and one over which the US maintains discreet but firm institutional control”. Not surprisingly, these issues often remain subtly suspended in the mainstream DE curricula and textbooks.14
Trumpeting East Asia On the contrary, increasingly adverse economic impact since the oil shock of the 1970s on the heavily-indebted developing countries having faced rising world rates of interest along with inter national climate shifting towards “monetarism”, a direct offshoot of neoclassical resurgence, began soon to be interpreted as a sign of failure of FPDE (Martin 1991: 53). This, in turn, was often used as an opportune backdrop for projecting and trumpeting an euphoria of rapid growth of four south-east Asian countries in the 1970s and 1980s as an “acid-test” of the superiority of the neo-liberal development paradigm. As Datta (1987: 602) writes, “An endlessly repeated theme of this literature [on ‘east Asian Miracle’] is that it was the magic of the unhindered free-market mechanism with its concomitant of unrestrained export-orientation which did the trick of these countries”. Notwithstanding clear evidence of the exacerbation of poverty and inequality in these so-called “tiger” countries, “ideological propaganda leads from generalised special cases to panaceas” (Karunaratne 1982: 268). By the mid-1980s “even the dividing line between developing and developed countries” began to be questioned, with the develop ing world seen merely as “a great political achievement” in the form of a pressure group at the United Nations and other inter national bodies (Haberler 1987: 62-63). In 1986, Anne Krueger (1986: 62-63) amplified what remained subdued in the preceding decades, namely, the vainness of DE as a separate branch: Once it is recognised that individuals respond to incentives, and that ‘market failure’ is the result of inappropriate incentives rather than non-responsiveness, the separateness of development econo mics as a field largely disappears. Instead, it becomes an applied field, in which the tools and insights of labour economics, agricultural eco nomics, international economics, public finance and other fields are addressed to the special questions and policy issues that arise in the context of development.
To some, the rise of South Korea, Taiwan and others even marked the end of the third world (Harris 1986). Also, a lethargic reluctant mood of the North towards the NorthSouth dialogue since the 1960s (Haq 1976, Chapter 8) culminated in a “stalemate” by the early 1980s over the issues of international resource allocation and distribution (Ruggie 1984), leaving “a frus trated southern monologue ever since” (Bhagwati 1984b: 1). The 1980s had not only witnessed declines in flow of concessional funds, Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
but there had indeed been increases in reverse flows of resources (i e, from developing to developed economies). As Chishti (1989: 244) writes: “Not that the developed market economies are completely oblivious of their interests being linked with those of the developing countries. They have identified those developing countries which are of strategic importance to them either as mar kets or as sources of raw materials. But they focus their attention on them in accordance with case-by-case approach.” By the mid-1980s, the world at large began to witness the replacement of “the full-blooded Ministry of Planning... by the mild-mannered Central Office of Project Evaluation” along with the domineering new view of development as opening up of trade (Bell 1987: 825). There was feeble resistance even from the DE pioneers to such neo-liberal intrusions into the development discourse. Louis Emmerij’s (2006: 2) eloquence on this academic indifference is worth quoting here: [w]here had all the Nobel laureates gone who had been so instrumen tal in the early years to shape development thinking both in the UN and in the world at large?...[N]o consistent counteroffensive was mounted in the early 1980s. ….[S]o the purse won [over ideas] mainly because the existing ideas of the 1970s were not defended and adapted strongly and carefully enough and no alternative ideas were brought forward in a sufficiently authoritative fashion.
Although this passivity in defending FPDE against the onslaught is thought to be precipitated by the so-called “government failures” (corruption, vested interests, rent-seeking motives, etc) across the developing world (Krueger 1990), it is far from clear, and can still be debated, as to how far the development experience up to the 1970s is justly branded as a failure of FPDE per se (Lewis 1988; Chakravarty 1988; Naqvi 2002). Indeed, FPDE has been neither blind to, nor dismissive of, the evidence and practical/potential difficulties associated with the typical character and weaknesses of the state in the developing world (see Myrdal 1968, among many others). Many pioneers of FPDE were themselves much worried about the extent to which the suggestions and insights based on their painstaking research could be actually implemented by the governments of developing countries (Streeten 1995: 195-200). Meanwhile, there was a growing voice and research towards fo cusing directly on immediate needs for improvements in human development rather than in aggregate growth rate (Sen 1983), culminating in the first Human Development Report in 1990. Indeed, the entire exercise of discrediting FPDE took off amidst fairly encouraging performance of the developing world as a whole: “[i]n average per capita income the developing countries grew more rapidly between 1950 and 1975 – 3.4% a year – than either they or the developed countries had done in any comparable period in the past” (Morawetz 1977: 67; italics added; Griffin 1999: 6; Nayyar 2009: 10-12; Chang 2003a: 46; Yusuf and others 2009: 10-12). However, a recent World Bank-commissioned book almost summarily brands in retrospect FPDE’s contribution to this unprecedented income growth even during its “heady times”, 1950-1975, “arguably trivial” (ibid: 12). Indeed, despite well-argued cases and optimisms for FPDE (Sen 1981; Chakravaty 1987, 1988; Singh 1992; Stiglitz 1996; Naqvi 1999; Stewart 1997; among others), the neo-liberal claims to the supremacy through inter alia care fully exaggerated (and convenient) interpretations of the east Asian miracle swayed over the development thinking and policy.
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Despite considerable legitimacy gained by the human develop ment perspective over the years, it could never take on the domi neering neo-liberal arguments and programmes. Indeed, the former, by not challenging the latter’s basic premises, could never free itself from the deep contradiction “that makes it possible to denounce what one urges, and to practise what one regards as unacceptable” (Rist 2008: 209-10). Although the east Asian crisis of the late 1990s did occasion a (temporal) “showdown” of the neo-liberal ideological “imperialism” (Stiglitz 2002, Chapter 4; see also Wade 2001), its tendency to dismiss its own predictive failures or to explain them away in circular fashion has bred “a new form of scholasticism where facts are made to fit the theory rather than vice versa” (Portes 1997: 254). We turn now to a closer look of the role played by the Bretton Woods institutions in shaping the evolution of DE along the trails of the cold war.
Role of the Bretton Woods Institutions Against a backdrop of the growing triumph of neo-liberal ideas over FPDE since the 1980s and of a concomitant retreat of the Keyne sian lending principles of earlier decades, the World Bank could not help changing its “identity” (Carlos and Pereira 1995). In fact, it increasingly took over the task of promoting neo-liberal ideo logical agendas in the wake of what is popularly known as the Washington Consensus. To quote from a recent book on the World Bank and IMF: “[w]here the World Bank was used, its work became inextricably linked to the geopolitical imperatives of the Cold War” (Woods 2006: 33; also Wade 1996). In the same vein, Kofi B Hadjor (1988: 49), editor and publisher of Third World Communications, remarked in 1988: “It is now customary for western powers and international agencies like the IMF to work out the economic policies that the nations of the South should pursue. Even the UN has joined in the act.” Indeed, the World Bank’s predilection for free-market neoliberal paradigms was apparent even as far back as the 1950s: “The single most important component of the Bank’s develop ment ‘philosophy’ which emerged at the outset, was its firm and pronounced bias in favour of the advantages, not to say virtues, of a market economy and a system of private ownership and enterprise” (Adler 1972: 34). Although the role of the Bank as a source of development theory was neither anticipated by its founders, nor a part of its original charter, it has always had – by dint of “its financial clout” – “tremendous powers to spread and popularise ideas that it latches on to” (Gavin and Rodrik 1995). By the 1970s, the Bank had launched several innovative initiatives towards establishing academic leadership in DE. First, the World Bank had inaugu rated in 1978 what its “insiders” retrospectively describe as the birth of a “star”, namely, the World Development Report (Yusuf and others 2009: 1). Second, the Bank’s centrally admini stered Research Support Budget (RSB) is one of the major ave nues through which “non-Bank researchers become involved in the Bank research” (Fischer and de Tray 1990: 8). One basic requirement for a project under RSB is that it must be rooted within the Bank, “specifically that it be sponsored by a Bank unit, which will administer it and take responsibility for its successful completion” (ibid: 8-9).
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By the mid-1980s, the Bank had also commissioned a major research project covering 21 developing countries, with a view to carrying forward its intellectual/ideological agendas through centrally monitoring, managing, and funding the entire project. For example, the monograph representing the synthesis of the findings of the diverse country studies under this project (Lal and Myint 1996: 5) writes as follows: The comparative studies method, which is largely based on the classi cal method, can also be looked upon as a form of story-telling. More over, as a story-teller tries to tell a story which is both interesting and persuasive, so the method is attuned to the multifaceted aspects of persuasion. These concern the selection of “facts”, the crafting of the story, and choosing from amongst a number of competing stories the one which fits the “facts” better than another.
Indeed, its concluding chapter ends with just an excerpt from Peter Bauer (1984), in which the ideal role of government is de limited strictly to four arenas, namely, external affairs including defence and public security; the administration of monetary and fiscal system; the promotion of institutional framework condu cive to market operations; and “the provision of basic health and education services and of basic communications” (quoted from Lal and Myint 1996: 406). The authors added only a slight modifi cation – albeit of stronger neo-liberal stance – by substituting the term “provision” in the fourth area above by the words “possible finance” (ibid). And, Bauer’s above excerpt is then hailed as “enough to be getting on with to promote poverty-alleviating growth in much of the Third World” (ibid). Meanwhile, the World Bank had launched in 1984 a series of conferences with the “first generation development economists” (Meier and Seers 1984; Meier 1987), with the purported aim of instating a newly domineering neo-liberal/neoclassical stance through creating an informed/reasoned consensus about the failings of FPDE. It should not have been easy initially to get the DE pioneers to patronise the new neo-liberal/neoclassical approaches, which were not grounded on the notion of developing countries as a sepa rate group. In its sequel, an “intergenerational” symposium involv ing both the first and second generation development economists was organised in 1999 by the World Bank, with a view to bolster ing more recent neo-liberal/neoclassical thrusts among the “next generation” development economists (Meier and Stiglitz 2001). In 1989, the World Bank had embarked on an annual series of Work Bank Conference in Development Economics, with the major aim of bringing “researchers from the Bank’s member countries together with Bank staff to stimulate interaction and exchange of ideas and information” (Fischer and de Tray 1990: 1). This soon culminated in the “single largest gathering of the deve lopment economics community in the world” (Kaji 1996: 8; italics added). While all this could fetch the Bank its recognition as “intellectual actor” (Stern 1993), its role as “intellectual leader” in DE remains more subtle. For example, it is nearly impossible to ascertain, as writes Adler (1972: 49), “as to how much of the Bank’s development ‘philosophy’ was original and how much of it was the result of conscious or osmotic acceptance of new ideas generated ‘outside’” – thanks both to multi-channelled profes sional-intellectual intercourses between the Bank and other in stitutions, and to the propensity of innovative ideas to change shape between conception and ultimate application. november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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Instances emerged of newer DE textbooks being written at the behest of “stimulating environment provided” by powerful multi national agencies such as the IMF (Agénor and Montiel 1996). That this could contribute to intellectual and ideological capture of DE by the latter gets reinforced by inadequate academic freedom and freehand of the latter’s research staff – a fact that has been revealed by a recent report of a panel of experts’ evalu ation of World Bank research (Banerjee et al 2006: 161). Thus, almost exponential expansion of readings under the Handbook in Development Economics series can hardly be beyond the idea tional shadows of the Bretton Woods institutions. It cannot but be hugely ironic if DE, which used to be seen, by the post-war neo-liberal camp of the cold war, as a “pressure group” in the UN and other multilateral offshoots, is transformed into the latter’s “flagship” itself.
Pulling DE into the Neo-liberal Mainstream The link between much of post-war research programmes in economics (for example, Keynesian militarism, rational choice, game theory, advanced general equilibrium analysis, US mone tarist school) and the cold war imperative of forging “the ideas of fundamentalist capitalism” is fairly well known.15 For example, as Fusfeld (1998: 5) writes: “In summary, during the cold war a high theory came to dominate economics that explained the suit ability and superiority of a particular set of social institutions whose defence and extension was the goal of the cold war. It also became the high theory of fundamentalist capitalism, helping to forge a conservative political reaction against activist government”. As noted already, the need for effacing the distinctiveness of DE has long been on the agenda of the neo-liberal camp in the cold war. In the aftermath of the Keynesian revolution, this seemed almost impossible without distinct conceptual renovation of the neoclassical/neo-liberal approach. The latter task was urgent, as the “neoclassical counter-revolution” failed to make a convincing case for “the re-absorption of development economics into general economics” (Martin 1991: 56). The overhaul of the neo classical mode of argumentation is required to have been such that “the main changes of perspective that have affected develop ment economics are the same as those that have affected eco nomics as a whole” (Toye 2003: 36). First, while over the preceding centuries economics virtually never treated human beings as the embodiment of “capital goods”, this was done effectively for the first time through introduction of the notion of “human capital” in the early 1960s (Blaug 1976). Strikingly, research on the role of historical contingency in the origin of this momentous swing in economic thought is nearly absent relative to the attention devoted to its wide theoretical and practical ramifications.16 A wide potential of human capital notion, particularly towards merging DE within the fold of neoclassical mainstream, was possibly well augured by Theodore W Schultz’s famous remark in his Nobel lecture: “Most of the people in low-income countries are poor, so if we know the economics of being poor we would know much of the economics that really matters” (Schultz 1980: 639). The notion of human capital inspired endogenous growth (EG) models which, in turn, could offer simultaneous resolutions to two Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
outstanding dilemmas of the neoclassical school: first, reconcil ing the logically inevitable precept of convergence of national incomes per capita in the long run with the contrary actuality obtained; second, bringing DE to the mainstream economics/ theory (Romer 1986; Lucas 1988).17 For example, treating devel opment of developing countries within a general dynamics of EG bypasses deep historical, institutional and organisational issues, “which are less amenable to neat formalisation” (Bardhan 1998: 107). The EG theory reinstates the long-despised bias for income growth per head as the essential measure of development (see Sen 1983 for the latter’s critique). By the time the EG theory took off, many ripples had already been made in the new horizons of development thinking, namely, human development and capabilities (Sen 1981, 1984, 1985), but the latter finds no refer ence in the former. Apart from doubts about net “newness” of the EG theory over the earlier neoclassical models, the former’s potential for ideological backing to the dominant global power is clear enough: “as far as the revolution in economics is concerned, endogenous growth theory might not be in the vanguard, but it is certainly liable to be one of the new wave of following colonisers” (Fine 2000: 263). Putting developed and developing countries into a single theory of growth arguably provides an intellectual blueprint of the new scheme of globalisation in the postcolonial era. This, however, calls for recasting the Anglo-America-centric history of economic thought. (Note that this long-standing course in economics curriculum had begun since the 1980s to be scrapped in many a university department globally). This task of reinterpreting economic history along the lines of the neo-liberal world view is partly addressed by the “new/neoclassical institutional economics”, which seeks to explain cross-country economic differences essen tially in terms of the efficacy of promoting “economic institutions” conducive to market capitalism (for a survey, see Lin and Nugent 1995). This induced a subtle – but firm – move away from the earlier relatively humane and practical questions as to how developing countries could be made free of poverty, to the question of why some countries have remained poor, while others have not: “There is one central, simple, question in the study of economic development: why are some countries developed, and others less so?” (Mookherjee and Ray 2001: 1). This question admittedly circumscribes the inquiry into why “institutions”, which historically had evolved in advanced countries, did not (and/or do not) similarly emerge in developing countries. As Douglas North (1990: 134), one of the chief architects of the new institutional economics, writes: “To attempt to account for the diverse historical experience of economies or the current differential performance of advanced, centrally planned economies and less-developed economies without making the incentive structure derived from institutions as an essential ingredient appears to me to be a sterile exercise.” Rhetorically speaking, only about half a dozen comparatively slim (but widely regarded as seminal) books and/or articles could re-interpret – in terms of neoclassical optimising behavioural universalism – the entire global economic history spanning more than half of the preceding millennium ((North 1981, 1990; North and Thomas 1973; Williamson 1985; Olson 1965, 1982; Grief 1992, 1997;
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Grief and Weingast 1994; Coase 1960; among others). Strikingly, many of the articles on reinterpreting the economic history in terms of such notions as transaction cost, incentive structure and economic institutions appear, not in the leading specialist jour nals of economic history, but in the journals of mainstream eco nomic theory.18 In fact, doubts are often cast as to whether reinter preting history in the new institutional economics perspective is a historical exercise at all (Woolcock et al 2008). In one variant of this new neoclassical perspective, the role of geography and geophysical features in the patterns of economic development through complex interactions with institutions, politics, and culture is also highlighted (Krugman 1995; Hasan 2007). In any case, “in the economics of institutions theory is now out stripping empirical research to an excessive extent” (Matthews 1986 quoted in Lin and Nugent 1995: 2362). The contribution of new institutional economics to the institutional reforms in a country is often considered as an area where development economists “can do well while doing good” (Tullock 1984 quoted in Lin and Nugent 1995: 2363; also Chang 2003b). Joseph Stiglitz’s oft-quoted remark in 1989 for placing DE at the centre stage of economics is worth noting here: “A study of LDCs is to economics what the study of pathology is to medicine; by understanding what happens when things do not work well, we gain insight into how they work when they do function as de signed. The difference is that in economics, pathology is the rule: less than a quarter of mankind lives in the developed countries” (quoted in Bardhan 2000: 3). Notably, the same year, the World Bank’s annual series of DE conferences was launched with its new notion of DE seen quintes sentially as a “commons” accessible to most major branches and specialities of economics: Although often seen as a subdiscipline of economics akin to labour economics or international trade, in fact it [development economics] embodies all economic subdsciplines, distinguishing itself by applying these subdisciplines to a particular set [of] countries. Because devel opment economics is not a separate discipline, experts in virtually any of the traditional economic and other social science disciplines can contribute to ‘development’ research if they direct their expertise to the specific circumstances – the institutional and social character – of developing countries (Fischer and de Tray 1990: 9, italics added).
In its sequel, there emerged a new breed of DE textbooks in clearer facades of mainstream economics and hence, with far more mathematical abundance than ever before, keeping away from deeper “quintessential problems” and/or “questions impos sible to answer” attributable to FPDE, towards the questions answerable elegantly by virtue of the “results in pure economic theory” (Basu 1984: viii). The North-Holland publishing house launched, by the late 1980s, the Handbook in Economics series of bulky readings in DE – all commissioned, centrally edited and richly updated survey papers on diverse issues written by respective international authorities. By the 1990s, the DE profession was further endowed with such impressive (albeit somewhat stunting to the older generations) titles as Develop ment Microeconomics and Development Macroeconomics – in line with the newer dominant view of DE as a common ground for display and application of expertises of major sub-disciplines of economics. In the following section, we conclude by exemplifying
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the major contours and more recent directions of DE in the post-cold war era.
In Lieu of a Conclusion: Development of Development Economics? A triumphant voice is frequently heard now from the DE profession for its hard-earned respectability within mainstream economics, as if the effacement of the allegedly “low” status of DE has been its prime motivation: “Once upon a time there was an ugly duck ling called development economics…full of strange assumptions and contrary logic and all the other economics made fun of it…as it grew up, it beefed up its theoretical muscles and ugly assump tions…it became the envy of all the rest” (Banerjee 2001: 464). Of late, there has been an outpouring – under the so-called “new development economics” (NDE) – of narratives of its success in obliterating its (long-perceived) “stigma” or “ugliness”.19 Note, for example, a recent remark in the glorification of NDE: “Deve lopment economics stands in beleaguered ascendancy, atop development studies and development policy. Economists and economic thinking dominate the leading development institu tions. The prestige of development economists within academia… has never been so high” (Kanbur 2002: 477; italics added). Likewise, contemporary DE textbooks appear keen to capture its “changing face” (Basu 1997: xvii), leaving in doubt as to whether this means – even remotely – depicting the changing face of peoples of developing countries.20 Meanwhile, DE has had so huge a “facelift” that it looks like a “stranger” or as if “it no longer exists” (Krugman 1992: 15). Moreover, of late, the DE profession keeps consolidating periodically their own share of credit in the advances of economic science generally (Bardhan 1993, 2000; Banerjee and Duflo 2005; Stiglitz 1988), even though “the problems of the world’s poor remain as over whelming as ever” (Bardhan 2000: 13). This growing state of “separation” between the two “faces”, namely, between DE and the peoples of developing economies, cannot but be worrying. Indeed, in view of the original zeal embodied in the genesis of DE, one could only wish that these “applauses” at its advances had not been devoid of the consideration for the extent of im provements in, in Arthur Lewis’ words, “the level of living of the masses of the people in LDCs” (quoted in Streeten 1982: 110). The latter concern assumes deeper seriousness, particularly because per capita income growth in developing countries halved from 3% in 1960-80 (i e, FPDE era) to 1.5% (meagre 1% when India and China are excluded) during 1980-99 (Chang 2003b: 6; Weisbrot et al 2006). No less worrying is an increasing air of uncertainty as to what presently constitutes DE. It is often considered to be so “very frus trating” a subject that “two scholars can with equal justification write two completely different textbooks” (Meier and Rauch 2000: xvii). As it strives in reductionist fashion on “more widely cast and methodologically opposed methods”, Ben Fine has named it “zombieconomics” (Fine 2009: 885). “There is currently a thick ening air of scepticism about the original ‘proposition that deve lopment economics’ is actually little more than ‘the economics of developing countries’ ” (Tribe and Sumner 2006: 957; italics added). Faltering on the notion of development and hence about november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
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ideal yardsticks for assessing achieved development is still as germane as ever (Krugman 1996; Shin 2005). Neoclassical per spectives founded on market-based growth, capital accumula tion, productivity and technical progress exist alongside broader multi-disciplinary perspectives on quality of well-being, func tioning, freedom, rights, governance, and ethics of development (see Clark 2006 for a summary; see also Loxley 2004; Harriss 2002). This coexistence reflects not mutual regard, but rather, in difference. For example, out of 62 chapters published so far in 13 parts of the Handbook of Development Economics series, there are hardly any chapters on human development, capabilities and freedom perspectives. On the other hand, a fairly vigorous growth of initiatives such as the setting up of the Human Devel opment and Capability Association, and multiplying the number Notes 1 See, e g, Bauer 1972, 1984; Seers 1979; Hirschman 1981; Little 1982; Lal 1983, 1992; Bhagwati 1984a. There has, of course, been some variation in the spirit and argument with which this dismissive voice was expressed by respective scholars (Chakravarty 1988). 2 This term – FPDE – which refers to the 1950s and 1960s, was coined by Meier (1984a,b). Subsequently this was called “high development theory” by Krugman (1992). The neo-Marxist or dependency school of development/underdevelopment expe rienced broadly the same life course as of FPDE. We do not deal with the former separately. For an excellent concise treatment of the former’s rela tively brief career, see Rist (2008), Chapter 7. 3 Although the Journal of Economic Literature pub lished survey articles focusing on some specific new areas both in growth theory and DE (Britto 1973; Healey 1972; Griffin and Gurley 1985 and Williamson 2000), a comprehensive survey of DE has never appeared in JEL to my knowledge. 4 No less illustratively, the Twentieth Century Fund happened to sponsor only within about 15 years both Gunnar Myrdal’s masterpiece, Asian Drama, an epitome of deep concerns, commitments and passionate scholarship on economic develop ment, as well as Ian Little’s Economic Development that sought to almost bury the former. This vola tility reflects (at least partly) ideological diver gences that perhaps make for the uniqueness of economics in which “the [Nobel] prize is often split between one person who has developed a certain thesis and another who has laboured mightily to prove it wrong” (Hirschman 1981, quoted from Kanth 1997: 196). 5 The terms “neoclassical” and “neo-liberal” – while remaining distinct in the pre-war period of economic thought – became increasingly interchangeable over the post-war years (Chang 2003b: 3). 6 See, e g, Toye 1987: 159; 2003: 37; Martin 1991: 52; Naqvi 1998: 975; Bardhan 2000: 2; Mehmet 1999: 8); Kiely 1998: 35, among others. 7 Quoted from George Manbiot’s article in The Guardian (London) reprinted in The Hindu (a leading Indian daily, Chennai), 29 August 2007: 13. Of late, however, new research has documented the impact of the cold war on the social sciences academia too (e g, Lowen 1997; Westad 2005). 8 One exception perhaps is Rist (1997) who has sketched how changing global economic and political order and circumstances have shaped the various incarnations of the notion of “development” starting from the early days of economic thought. 9 For a succinct discussion on such perspectives, see Toye 1987: especially Chapter 1, among others. 10 For discussions on the major perceptions and ideological predilections of FPDE, see e g, Meier and Seers 1984, especially papers by G M Meier and A W Lewis and Meier 1984b, Chapter 6, among others.
of journals and research centres on human development studies is simultaneously a reality. DE is now alleged to have grown to a point of “the embarrass ment of riches” in terms of the variety of “models” (Mookherjee 2005). The latter’s value admittedly lies in testifying to researchers’ high levels of mathematical skill, intuitive ingenuity, productivity in producing elegant algebraic “mechanics” between impersonalised economic categories such as incentives, resources, prices, compen sation and pay-off (Ray 2007). This growing academic output seems particularly useful in announcing further development of DE. Ironically, there would surely not be many who can dare deny that DE, while remaining open to newer ideas and methods evolved both in its own area and in the subject of economics in general, must “keep alive the foundational motivation” of its own.21
11 Strikingly, the collection of papers in Chomsky et al (1997) contains no chapter dealing specifically with the economics discipline (let alone DE). 12 Visit the OECD website. The OECD, which was set up in 1961 in the wake of decolonisation, with the opening up of the new field in Africa, southern Asia, the Pacific and the Caribbean, was an outgrowth of the Organisation for European Economic Coop eration founded in 1948 to organise the distribu tion of the Marshall Plan Aid, chiefly amongst the member European countries. 13 That the foreign aid during the 1950s-1970s was used to a large extent as an instrument of both the camps in the cold war for acquiring control over the political regimes in the recipient countries is often noted and well documented (Griffin 1996). But the role and ramifications of foreign aid as an instrument for manoeuvring of economic policy of recipient developing countries towards estab lishing the neo-liberal ideology as economic regime are relatively less researched. 14 There are some universities – particularly in parts of Europe – where these issues are made part of some specialised taught programmes in develop ment or development studies. 15 This was also possibly complemented by the Soviet bloc’s “discernible shift in emphasis away from ideology towards a growing understanding of the importance of underpinning aspirations with eco nomic deeds” (Machowski and Schultz 1987: 244). 16 As Mark Blaug (1976: 849) wrote, “[a] research program …can only be adequately appraised in relation to its rivals of roughly equal scope. The human-capital research program, however, has no genuine rival of equal breadth and rigor”. 17 The idea of distinguishing between growth and development has not been recognised for long by many of the neoclassical persuasion, mainly on the ground that both essentially mean increases in per capita incomes (Dorfman 1991: 573fn1; see also Hosseini 2003). 18 For instance, Lucas’ seminal paper on economic development appeared in the Journal of Monetary Economics in 1988. Similarly striking is the recent appearance in this journal of a paper that deals statistically with the effects of tropical germs and crops through “institutions” on the long-run incomes of various countries (Easterly and Levine 2003). 19 See, for example, the collection of papers prepared for a symposium on New Directions in Develop ment Economics: Theory and Empirics, and sub sequently published in Economic & Political Weekly, 1 October 2005, No 4. 20 W Arthur Lewis – while sketching the progress of developing countries since the publication of his seminal contribution to the development model some 30 years back – kept vivid his concern for the face of developing countries (not DE): “if economic growth continued at this pace for another 30 years, the standard of living of the third world would be unrecognisable” (Lewis 1988: 23; italics added).
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21 This sentence, of course, draws on (or rather para phrases) Amartya Sen’s earlier remark: “Develop ment economics, it can be argued, has to be con cerned not only with protecting its ‘‘own’ territory, but also with keeping alive the foundational moti vation of the subject of economics in general” (Sen 1988:11).
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Deregulation of the Savings Bank Deposit Rate EPW Research Foundation
Deregulation of the interest rate on savings bank deposits will allow more room for non-price competition for improving the quality and diversification of customer service rather than result in a rate war. Given the nature of savings bank deposits vis-à-vis other deposits, some further regulatory guidelines would be required to complete the rationalisation of these accounts. It is the category of current account deposits in the current plus savings bank deposits segment that essentially determines the differences in the cost of funds between banks.
Team led by K Kanagasabapathy and supported by Anita B Shetty, Vishakha G Tilak, V P Prasanth, Rema K Nair, Bipin K Deokar, Shruti J Pandey, R Krishnaswamy and Sharan P Shetty.
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1 Introduction
A
lmost culminating in full interest rate deregulation, the Reserve Bank of India (RBI) in its October 2011 policy announced that the banks are free to determine their savings bank deposit interest rate (SBR). The RBI has also fixed a threshold size of Rs one lakh up to which a uniform rate will apply and beyond that level, the banks are free to apply differential rates. Though apparently there was opposition to this move parti cularly from the public sector banks, the RBI needs to be commended for the way in which it prepared the ground for deregulation well ahead by releasing an excellent discussion paper and inviting public comments. For obvious reasons, the non-resident deposits will continue to be administered and freeing of those rates has to await full convertibility of the rupee. Yet another set of rates on small savings schemes of the government, though remaining regulated for practical reasons, has been bench marked against appropriate market-related rates in the system. In a recent speech, K C Chakrabarty, deputy governor of the RBI has mentioned that the RBI has set the tone for increased competition by deregulating the saving deposit rate. The measure would go a long way in encouraging thrift behaviour in the economy. This step is also expected to further strengthen the rate channel of transmission in monetary policy besides resulting in better integration of financial markets. To promote competition, the RBI has also charted out a course for entry of new private sector banks and also given a clear indication that foreign banks are encouraged to come by setting up a bank subsidiary. The RBI has also allowed domestic scheduled commercial banks to set up new branches in Tier 2 centres. All these augur well for improved competition in the financial industry and financial market development.
An attempt is made in this note to analyse certain related issues concerning the pattern of ownership of savings bank deposits (SBDs) and facilities associated with these deposits. It is proposed that given the nature of SBDs vis-à-vis other forms of deposit, some further regulatory guidelines would be required to complete the rationalisation of these accounts. Second, it is established that it is the component of current account deposits in the current plus savings bank deposits (CASA) segment that essentially determines the differences in the cost of funds between banks. It is argued that rather than result in a rate war the SBR deregulation will allow more room for nonprice competition for improving the quality and diversification of customer service.
1.1 Some Distinguishing Features of SBDs The nature of SBDs in India differs with international practices in two respects. First, there is a diversified ownership and, second, cheque writing facility is allowed practically without limits. As a result, apart from individuals, including high net worth individuals, SBDs are owned by a variety of persons including government, financial and non-financial sectors. This may perhaps be attributed to historical factors. Table 1 (p 73) shows the ownership pattern of SBDs in terms of deposit amounts. Though the household sector held about 85%, farmers and wage earners together accounted only for about 25% of the ownership, while businesspersons and the nonhousehold sector accounted for the rest. While the government sector accounted for about 9%, a somewhat nebulous category, “other individuals”, within the household sector accounted for about 39%.
1.2 Price and Non-Price Factors in Competition One of the arguments for not freeing interest rate on SBDs thus far was that it could increase the cost of funds for the banking system, particularly for public sector banks. There could be possibilities of competitive hikes of deposit rates parti cularly by the foreign banks and private sector banks and this could wean away the deposit base from the public sector banks.
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Since these accounts are operated more as current accounts, there is no reason why banks should be willing to pay significantly higher rates of interest on these accounts.
Overall, the safety factor lies with the public sector. In spite of lower rates, public sector banks should be in a position to retain their deposit base.
Table 1: Ownership of CASA Deposits with Scheduled Commercial Banks 2010 (Rs crore)
Current
I Government sector 92,140 (15.9) II Private corporate sector (non-financial) 1,91,309 (33.0) III Financial sector 46,379 (8.0) IV Household sector 2,37,317 (41.0) of which Individuals (including Hindu 1,06,018 undivided families) (18.3) Farmers 4,250 (0.7) Businessmen, traders, professionals 47,190 and self-employed persons (8.2) Wage and salary earners 6,615 (1.1) Shroffs, moneylenders, stockbrokers, 4,753 dealers in bullion, etc (0.8) Other individuals V Foreign sector Grand total
Savings
CASA
Total
Current/ CASA
Savings/ CASA/Total CASA
1,05,378 19,7,518 6,55,091 46.6 53.4 (8.6) (10.9) (13.5) 6,965 1,98,274 7,13,696 96.5 3.5 (0.6) (11.0) (14.8) 4,817 51,196 4,82,043 90.6 9.4 (0.4) (2.8) (10.0) 10,48,573 12,85,890 28,04,875 18.5 81.5 (85.2) (71.0) (58.0)
30.2
9,13,807 10,19,825 21,84,273 10.4 89.6 (74.2) (56.3) (45.2) 1,02,452 1,06,702 2,11,842 4.0 96.0 (8.3) (5.9) (4.4) 1,19,750 1,66,940 3,41,997 28.3 71.7 (9.7) (9.2) (7.1) 2,08,327 2,14,942 4,29,811 3.1 96.9 (16.9) (11.9) (8.9) 5,044 9,797 29,162 48.5 51.5 (0.4) (0.5) (0.6)
46.7
43,209 4,78,234 5,21,443 11,71,461 8.3 91.7 (7.5) (38.8) (28.8) (24.2) 11,704 65,450 77,154 1,80,657 15.2 84.8 (2.0) (5.3) (4.3) (3.7) 5,78,849 12,31,183 18,10,032 48,36,362 32.0 68.0 (100.0) (100.0) (100.0) (100.0)
27.8 10.6 45.8
50.4 48.8 50.0 33.6 44.5 42.7 37.4
Figures in bracket are percentage to total. Source: RBI.
Table 2: Bank Group-wise Pattern of CASA Deposits of Scheduled Commercial Banks (March 2010) Bank Group
% to Total Current Savings
SBI and Associates Nationalised Banks Total Public Sector Private Sector Banks Regional Rural Banks Foreign Banks All SCBs
21.2 42.0 63.3 23.5 1.3 11.9 100.0
26.2 49.5 75.7 15.2 6.2 3.0 100.0
Deposit Amount per Account in Rs Current Savings
1,53,343 23,342 1,33,349 21,601 1,39,454 22,174 2,62,841 36,647 57,865 8,886 19,87,639 1,14,010 1,74,955 21,992
Current to CASA No of Amount Accounts in Lakh
5 6 6 9 1 9 5
27 28 27 41 9 65 31
CASA to Total Deposits No of Amount Accounts in Lakh
81 80 80 75 86 81 80
43 36 38 39 58 45 39
Cost of Funds
5.32 5.37 5.35 4.83 2.83 5.10
Source: RBI, Compiled by EPWRF.
The fear that deregulation of SBR would result in a rate war has been belied. So far, only four new relatively smaller sized private sector banks have revised their rates upward from the earlier administered rate of 4% to a range of 5.5% to 6%. All these banks had a very low savings bank deposits to total deposits ratio of 10% or less, excepting Ratnakar Bank with a ratio of 19.5%. In terms of value, the public sector banks accounted for about 76%, private sector about 10-15% and the foreign banks a meagre 1-3%. This can be attributed to the implementation of regulated branch licensing policy and traditional dominance of the public sector. Overall, the safety factor favours the public sector. In spite of lower rates, public sector banks should be in a position to retain their deposit base (Table 2). When the price is administratively mandated, it stifles competition. In a public sector-oriented banking system, administered rates on SBDs provided a protective umbrella to the public sector. Given the limitations, the private sector and foreign banks tended to focus upon non-price factors to sustain their deposit base and minimise the cost of funds. The reach of branches is an important factor in deciding competitive power. On this score, public sector banks still hold an advantageous position. Studies have shown that the deregulation of banking sector had not improved significantly the competitive efficiency of banking system precisely for this reason. However, despite a regulated branch licensing policy, it has been observed that the private sector banks have
Table 3: Bank Group-wise Growth in Deposits (1999-2000 to 2009-10)
No of Branches CASA Deposits (Rs lakh) Current (Rs lakh) Savings (Rs lakh) Total Deposits (in crore) Per Branch Amount of Deposits (Rs lakh) Per Branch Saving Deposits (Rs lakh) Per Branch Current Account Deposits (Rs lakh)
State Bank Group 1999-2000
13,356 84,19,179 29,56,174 54,63,005 2,03,049 1,520 409 221
No of Branches CASA Deposits (Rs lakh) Current (Rs lakh) Savings (Rs lakh) Total Deposits (in crore) Per Branch Amount of Deposits (Rs lakh) Per Branch Saving Deposits (Rs lakh) Per Branch Current Account Deposits (Rs lakh)
2009-10
Nationalised Banks CAGR
1999-2000
17,229 (2.9) 32,568 4,40,90,496 1,64,67,903 117,95,174 49,72,015 3,22,95,322 1,14,95,888 10,18,666 4,42,493 5,913 (16.3) 1,359 1,874 (18.4) 353 685 (13.4) 153 Private Sector Banks
5,010 26,81,409 14,43,835 12,37,574 97,001 1,936 247 288
10,027 (8.0) 3,17,44,055 1,30,55,320 1,86,88,735 8,06,569 8,044 (17.2) 1,864 (25.2) 1,302 (18.3)
2009-10
Public Sector Banks CAGR
41,596 (2.8) 8,41,96,033 2,33,33,351 6,08,62,682 23,65,598 5,687 (17.2) 1,463 (17.1) 561 (15.5)
1999-2000
45,924 2,48,87,082 79,28,189 1,69,58,893 6,45,542 1,406 369 173
Foreign Banks
186 15,42,007 10,42,831 4,99,176 46,842 25,184 2,684 5,607
308 (5.8) 1,02,48,915 66,18,838 36,30,077 2,28,186 74,086 (12.7) 11,786 (17.9) 21,490 (16.1)
2009-10
58,825 12,82,86,529 3,51,28,525 9,31,58,004 33,84,263 5,753 1,584 597
CAGR
(2.8)
(17.0) (17.6) (14.8)
All SCBs
51,120 2,10,28,170 1,05,45,802 1,99,73,368 8,21,420 1,607 391 206
69,160 17,85,72,304 5,55,23,683 12,30,48,621 45,61,029 6,595 1,779 803
(3.4)
(17.0) (18.3) (16.3)
Source: RBI, Compiled by EPWRF. Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
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exception of a few banks most of Graph A: Relationship between CASA and Cost of Funds (March 2010) 8 the banks had a good CASA base, 7 the current accounts to CASA ratio varied in a wide range. The 6 ratio was more favourable in 5 the case of private sector banks 4 and foreign banks. Thus, despite 3 the fact that current accounts do not earn any interest, these banks 2 were able to attract huge current 1 11 14 17 20 23 26 29 32 35 38 41 44 47 50 53 56 account deposits perhaps because CASA to Total Deposits of non-price factors in the form of the quality and diversity of services freeing of SBR would result in further these banks provide to customers. The intensification of this competition. Such competition can become more intensive Table 4: Pattern of CASA Deposits and Cost of Funds: Select Banks (March 2010) with the entry of new private sector banks. Savings to Current to CASA Current to CASA to Cost of
A B C
Public Banks Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank State Bank of India IDBI Bank Ltd Average Private Banks ING Vysya Bank Ltd Tamilnad Mercantile Bank Ltd The Federal Bank Ltd The Jammu & Kashmir Bank Ltd The Karnataka Bank Ltd The Karur Vysya Bank Ltd The Ratnakar Bank Ltd The South Indian Bank Ltd Axis Bank Ltd HDFC Bank Ltd ICICI Bank Ltd IndusInd Bank Ltd Kotak Mahindra Bank Ltd Yes Bank Ltd Average Foreign Banks Bank of America NA Citibank NA Standard Chartered Bank The Bank of Nova Scotia HSBC Average
Source: RBI, Compiled by EPWRF.
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Total Deposits
25.1 26.9 20.8 25.4 22.1 27.1 21.8 26.1 16.3 27.8 25.1 24.4 16.5 19.6 31.9 26.5 18.6 22.9 29.1 17.3 33.0 5.6 23.1 23.7 21.2 13.4 21.2 30.6 16.1 13.1 19.5 19.6 24.9 30.2 27.8 7.9 10.4 1.6 18.4 16.1 10.0 21.3 18.9 3.2 19.5 14.6
Cost of Funds
expanded their branches at a faster pace compared to the public sector and so was the case with foreign banks as well. The per branch mobilisation of deposits by private and foreign banks had recorded a faster growth over the last decade compared to public sector banks (Table 3, p 73). An analysis of the relationship between the cost of funds and the type of deposits held by the banks shows that the cost of funds was influenced equally by the extent of current accounts component in the CASA besides the extent of CASA in total deposits (Table 4 and Graph A). While with the
Total Deposits
9.9 7.9 8.6 8.6 7.2 9.7 7.8 9.2 16.8 9.1 7.6 8.5 8.5 6.6 9.0 9.8 7.4 9.2 9.6 7.3 14.6 9.6 9.2 16.5 19.0 12.0 4.8 14.3 7.2 10.8 18.0 4.8 22.7 21.9 15.4 17.8 20.6 10.1 14.2 29.3 44.1 30.4 29.2 12.5 28.8 29.0
(Rs crore)
12,36,158 36,530 22,761 70,360 63,660 23,301 67,720 55,126 26,448 18,320 28,360 35,700 29,947 12,255 1,00,087 36,079 29,706 52,886 25,719 15,225 3,71,135 23,891 54,534 3,16,270 8,234 2,906 9,321 15,054 5,518 4,530 567 5,319 64,673 86,048 82,730 6,262 7,364 2,818 21,525 1,02,699 2,887 27,942 22,115 306 26,556 15,961
CASA Ratio
28.2 22.6 29.2 25.3 24.5 26.3 26.4 26.1 50.8 24.6 23.2 25.9 33.9 25.3 21.9 26.9 28.5 28.7 24.8 29.6 30.6 63.2 29.4 41.1 47.4 47.2 18.3 31.8 30.9 45.2 48.0 19.7 47.6 42.0 35.7 69.4 66.4 86.1 45.4 64.5 81.5 58.8 60.8 79.8 59.7 68.1
Total Deposits
35.0 34.8 29.4 34.0 29.3 36.8 29.7 35.3 33.1 36.9 32.7 32.9 25.0 26.2 40.9 36.3 26.1 32.2 38.7 24.6 47.5 15.2 32.3 40.2 40.2 25.4 25.9 44.9 23.3 23.9 37.5 24.4 47.6 52.2 43.2 25.7 31.0 11.7 32.6 45.4 54.1 51.7 48.0 15.7 48.2 43.6
Funds
5.35 5.37 5.38 4.37 4.97 5.28 5.61 6.06 5.08 5.67 5.56 6.14 6.21 5.75 4.90 5.42 5.78 5.28 5.92 5.84 5.14 5.19 5.47 4.83 4.10 6.96 6.11 5.32 7.45 6.79 5.86 6.42 4.03 4.66 4.18 5.69 4.50 6.05 5.58 2.83 1.85 2.67 3.04 2.40 3.17 2.63
1.3 Suggestions SBDs like in other countries could offer minimum facilities such as withdrawal and ATM/debit card with modest interest payment but it may not offer cheque writing facility, beyond a certain limit. RBI should allow price competition without attempting micromanagement of fixing or restricting bank charges for services rendered. That kills both price as well as non-price competition. The accounts with cheque writing facility like current accounts should not offer any interest payment on balances. Opening of SBDs may be allowed only by individuals and family, and all other categories of account holders like government organisations, trusts, non-banking organisations, etc, should be made to switch over to chequable deposit accounts. With these measures, RBI would be moving a further step ahead towards rationalisation of deposit accounts.
2 Money, Forex and Debt Markets The continuing and high inflation forced a series of hikes in policy rate clearly showing its repercussions on the growth front. Still, the RBI continued its hawkish stance and raised the key policy repo rate once again on 25 October in its Second Quarterly Monetary Policy Review. However, the central bank signalled a possible pause in rate hikes largely hoping that inflation might start easing after December 2011. Money market rates sustained their upward movements in October with key interest rates touching their peaks. After
november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
MONEY MARKET REVIEW Table 5: Money Market Activity (Volume and Rates) Instruments
October 2011 Daily Average Monthly Volume Weighted (Rs Crore) Average Rate (%)
Range of Weighted Average Daily Rate (%)
Daily Average Volume (Rs Crore)
September 2011 Monthly Weighted Average Rate (%)
Range of Weighted Average Daily Rate (%)
Call Money
9,848
8.24
7.61-8.39
10,320
8.11
7.48-8.28
Notice Money
3,356
8.27
6.99-8.54
3,027
8.10
7.25-8.29
Term Money @
235
-
6.85-10.01
353
-
7.00-10.65
CBLO
43,076
8.01
5.98-8.45
43,408
7.95
6.56-8.24
Market Repo
13,674
8.07
7.41-8.42
13,714
8.03
5.25-8.27
@: Range of rates during the month. Source: www.rbi.org.in. and www.ccilindia.com
Table 6: RBI’s Market Operations (Rs crore) Month/Year
Jun-2011 Jul-2011 Aug-2011 Sep-2011 Oct-2011
OMO (Net Purchase(+)/ Sale(-))
981 -6 -6 5 6
LAF Net (Average Daily Injection (+)/ Absorption(-))
72,204 37,683 36,948 52,194 50,708
Source: RBI’s Weekly Statistical Supplement.
experiencing some normality in the beginning of October, the liquidity in the system showed signs of tightness following festive season demand along with the huge market borrowing programme by the government, which absorbed more than Rs 50,000 crore from the system. A massive fall in deposits growth to the extent of around Rs 90,000 crore and outflows caused by a fall in currency circulation amounting to Rs 36,000 crore also resulted in a severe cash crunch. However, the drop in credit growth by Rs 66,000 crore and a fall in bankers’ deposits to the extent of Rs 52,000 crore supported the system in managing the funds crunch. The RBI continued to meet the liquidity deficit and banks borrowed around Rs 50,000 crore on a daily basis in the RBI’s LAF window during the month. Impressive fund inflows and positive stock market movements coupled with euro area developments propelled the Indian rupee to recover from its lows during the month and the local currency marginally gained by 0.2% against the dollar. Following the government’s move to raise its bond sale target by Rs 53,000 crore in the second half of the current fiscal, yields advanced further on supply concerns. Notably, sale of government bonds devolved on three occasions on primary dealers in October as investors sought higher yields. India’s benchmark 10-year bonds yield saw its worst since May 2009 on speculation that the government’s debt sale target could further dampen overall demand. Corporate bond
yields also inched up on the back of rising government bond yields.
2.1 Money Market
the notice money segment, the remaining four money market instruments reported a lower trading volume. The overnight segment recorded a 5% fall in its daily turnover due to a sharp rise in rates during the month over the previous month. Similarly, CBLO and market repo also registered reduction in their trading volume though only marginally over the period. The heightened expectation of an easing in rates induced a sudden fall in the term money trading. However, borrowers preferred to borrow funds from the notice money segment which registered a 11% rise in its trading activity during the review period (Table 5). As per the latest available data by RBI, the short-term certificates of deposit (CDs) market had seen a fall of Rs 22,000 crore in its outstanding amount during September over August primarily due to lessening credit demand and rising interest rates. Still, in the fortnight ending 23 September, the issuance of CDs amounted to Rs 66,000 crore. The range of discount rates hardened notably and crossed the 10% mark in the upper-bound in both the fortnights of September. Contrary to CDs, the outstanding amount of commercial papers (CPs) improved by Rs 17,000 crore during a period of one month till 15 September. The rates continued to rule in an upper range of 8.47% and 14.00% in the fortnight ending 15 September. During the same period, the CPs reported Rs 31,000 crore issuances. According to the trading platform – Fixed Income Money Market and Derivatives Association (FIMMDA) – CDs and CPs recorded a notable fall in their daily trading activity
Another round of policy rate hikes and the emergence of a liquidity crunch in the system again prompted short-term money market instruments to sustain their northward trend in the month of October. A possible pause in the rate hike was belied in the beginning of October itself with RBI officials clearly signalling the significance of controlling inflation. Thus, despite the slowdown in growth, the government officials also expressed preference for following strict monetary action. However, in the policy review there was a softening of tone when it indicated by way of forward guidance about some ease in inflation, as well as of interest rates in coming months. Following all these developments, the overnight and 14-day weighted average rates increased by 13 basis points (bps) and 17 bps, respectively over a period of one month. However, the likely pause in rate increase in the coming policy review influenced the movements of rates on term and the collateralised instruments which ruled in a relatively lower bound compared to call and notice money rates. In October, the CBLO and Table 7: Foreign Exchange Market: Select Indicators Rs/$ Reference Appreciation (+)/ FII Flows BSE Sensex Dollar Index market repo rates inched Month Rate (Last Friday Depreciation (-) (Equity +Debt) (Month-end (Month-end up slightly by 6 bps and 3 of the Month) of Rs/$ (in %) in $ Million Closing) Closing)# * 44.72 1.10 4,883 18,846 69.36 bps, respectively over Sep- Jun-2011 Jul-2011 44.16 1.27 2,399 18,197 68.53 tember. Overall, compared Aug-2011 46.05 -4.12 -7,903 16,677 68.85 to September, all the shortSep-2011 48.93 -5.87 -1,866 16,454 72.81 term money market instru- Oct-2011 48.82 0.21 634 17,705 70.52 ments ruled in a wider *: Data relates to last day of the month. #:Nominal Major Currencies Dollar Index. Source: www.rbi.org.in, www.bseindia.com, www.sebi.gov.in, www.federalreserve.gov. range despite witnessing Table 8: Average Daily Turnover in the Foreign Exchange Market* ($ billion) less volatility. Merchant Interbank Spot Forward Total Uncertainty in rates Month Jun-2011 12.7 -(5.8) 48.1 -(0.5) 27.4 -(5.2) 33.4 (1.5) 60.8 -(1.7) coupled with liquidity Jul-2011 14.0 (9.5) 45.1 -(6.3) 28.5 (4.0) 30.5 -(8.8) 59.0 -(3.0) crunch in the system Aug-2011 17.0 (21.6) 46.6 (3.3) 30.3 (6.2) 33.3 (9.0) 63.5 (7.7) resulted in varied trading Sep-2011 15.1 -(11.2) 44.8 -(3.8) 29.6 -(2.3) 30.3 -(9.0) 59.8 -(5.8) behaviour across the money *: Includes trading in FCY/ INR and FCY/FCY. Figures in brackets are percentage change over the previous month. market instruments. Except Source: RBI’s Weekly Statistical Supplement, various issues.
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during October. Over a period of one month, both the products reported 40% and 33% fall in their total turnover, respectively. The severe cash crunch experienced during September sustained itself in October also due to a fall in currency circulation and deposit growth, in addition to the huge market borrowing programme which put huge cash demands on banks. To manage the situation, the borrower’s dependence on the RBI’s LAF window increased remarkably during the period as overnight money
market rates also crossed the prevailing repo rate. In the aftermath of advance tax payments by companies for the second quarter of 2011-12, the system experienced some moderation in the liquidity situation in the beginning of October with the repo tendered amount coming down to just Rs 11,000 crore on a daily average basis in the first week. However, banks borrowings spurted immediately from the second week onwards with the government starting its borrowing programme for the second
Table 9: Details of Central Government Market Borrowings (Amount in Rs crore) Date of Auction
Nomenclature of Loan
07-Oct-11 8.07% 2017 R 8.08% 2022 R 8.28% 2027 R 8.30% 2040 R 14-Oct-11 7.83% 2018 R 7.80% 2021 R 8.26% 2027 R 28-Oct-11 7.99% 2017 R 8.13% 2022 R 8.28% 2027 R 8.30% 2040 R Total for October 2011 Total for September 2011
Notified Amount
3,000 6,000 3,000 3,000 4,000 6,000 3,000 4,000 6,000 2,000 3,000 43,000 22,000
Bid-Cover Ratio
Devolvement on Primary Dealers
1.84 nil 1.74 nil 1.98 193 1.84 706 1.51 1,614 1.79 2,424 3.10 nil 1.84 149 1.74 nil 1.98 nil 1.84 nil 1.88 2.21
YTM at Cut-off Price (in %)
8.64 8.70 8.87 8.92 8.79 8.78 8.95 8.92 8.95 8.98 8.98 8.85 8.44
Cut-off Price (in Rs)
97.61 95.68 95.00 93.59 95.31 93.75 94.21 95.90 94.35 94.12 93.03 94.79 97.44
R: Reissue. Source: RBI press releases.
half of the current fiscal. The situation remained the same for the remaining weeks of the month with the average daily borrowing lingering above Rs 61,000 crore. Despite a lower demand for credit, the last week of the month reported the banks borrowings crossing Rs 1 lakh crore on 25 October. Overall, during the month of October, the injection of funds by the RBI averaged around Rs 55,000 crore as in the previous month. During the same period, banks parked around Rs 4,000 crore in RBI’s reverse repo window. However, RBI’s marginal standing facility (MSF) as also its OMO window remained inactive (Table 6, p 75). The interest rate futures (IRFs) segment of NSE reported nil trading activity in October, However, to revive the segment by attracting huge participation from banks, SEBI is planning to allow the launch of derivatives based on 2-year and 3-year bonds on cash-settled basis.
2.2 Forex Market In the domestic market, the rupee completed its first monthly gain after a span of two months as the central bank increased
Table 10: Secondary Market Outright Trades in Government Papers – NDS and NDS-OM Deals (Amount in Rs crore) Descriptions
Last Week (28) AMT YTM
October 2011 First Week (7) AMT YTM
Total for the Month AMT YTM
Previous Month September 2011 AMT YTM
Three Months Ago (July 2011) AMT YTM
Six Months Ago (April 2011) AMT YTM
1 Treasury Bills 2,613 6,167 16,102 27,761 43,075 17,843 A 91-Day Bills 1,531 8.62 3,834 8.29 8,780 8.38 21,065 8.31 33,678 8.04 12,653 B 182-Day Bills 771 8.62 900 8.29 3,258 8.48 2,787 8.35 3,730 8.16 2,526 C 364-Day Bills 311 8.56 1,432 8.47 4,064 8.51 3,909 8.34 5,667 8.24 2,665 2 GOI Dated Securities 28,274 8.80 33,202 8.57 1,68,357 8.74 2,45,522 8.35 2,36,766 8.36 1,00,608 Year of (No of Maturity Securities) 2011 317 9.08 1,353 2012 (4) 1,010 8.68 29 8.34 2,546 8.61 1,003 8.32 923 8.08 3,453 2013 (2) 56 8.36 56 8.37 822 8.27 210 8.16 371 2014 (5) 221 8.35 342 8.42 266 8.26 122 8.21 796 2015 (3) 55 8.53 210 8.56 321 8.59 1,067 8.32 826 8.33 2,285 2016 (3) 95 8.73 111 8.51 422 8.65 997 8.33 2,968 8.32 2,845 2017 (4) 823 8.87 1,056 8.53 3,375 8.70 5,405 8.33 2,649 8.34 4,114 2018 (4) 1,778 8.78 2,477 8.53 13,088 8.72 12,051 8.34 12,173 8.34 3,941 2019 25 8.34 101 8.45 16 2020 (1) 630 9.06 970 9.06 1,590 8.97 1,136 8.81 1,759 2021 (2) 18,689 8.78 17,976 8.53 1,13,304 8.73 1,74,377 8.32 1,54,392 8.32 24,634 2022 (3) 5,008 8.86 8,994 8.61 26,885 8.73 42,386 8.41 53,783 8.41 51,697 2023 1 8.65 2 8.29 2 2027 (3) 453 8.92 1,004 8.75 4,827 8.88 4,218 8.57 3,777 8.63 1,927 2028 1 8.51 25 8.77 4 2032 (1) 102 8.91 231 8.58 1,411 8.58 8 2034 4 8.51 1 8.56 2 2035 2 8.92 105 2040 (1) 363 8.95 440 8.89 2,118 8.94 1,076 8.63 1,947 8.61 1,297 3 State Govt. Securities 129 9.01 678 8.82 2,353 8.94 2,042 8.62 3,960 8.59 1,785 Grand total (1 to 3) 31,016 40,046 1,86,812 2,75,325 2,83,801 1,20,236
7.09 7.19 7.37 8.09
7.58 7.73 7.79 7.98 8.02 8.17 8.01 8.00 7.91 7.98 8.03 8.16 8.20 8.41 8.31 8.37 8.46 8.37 8.46 8.30
(-) means no trading YTM = Yield to maturity in per cent per annum NDS = Negotiated Dealing System OM = Order Matching Segment (1) Yields are weighted yields, weighted by the amounts of each transaction. (2) Trading in 2024-26 and 2036-39 securities were negligible. Source: Compiled by EPWRF; base data from RBI, CCIL.
76
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MONEY MARKET REVIEW
interest rates again and Europe stepped up efforts to contain a debt crisis that drove funds from emerging market assets. The downward pressure on the Indian rupee was sustained in the beginning of the month with data showing a widening of the current account deficit and increasing concerns about the global and domestic economic outlook. The rupee lost 50 paise against the dollar and crossed the 49-mark on 3 October. The restrained demand for emerging market assets resulted in huge portfolio outflows in the first week of October and the stock market activities also remained bearish. Overlooking all the negative indicators and tracking the strengthening of the Asian currencies, the rupee reversed the trend from 4 October and recovered by 39 paise till 11 October. Thereafter, the local currency displayed see-saw movements till 17 October but again turned to a depreciating mode. Huge dollar demand by oil importers put enormous pressure on the rupee and the currency lost a substantial 117 paise versus the dollar till 21 October and crossed the psychological 50-mark. At this point, the RBI was also reported to have intervened in the market to arrest the rupee’s slide. However, a smart rebound in local stocks along with fresh dollar selling by exporters amid dollar weakness overseas coupled with the resumption of capital inflows supported the domestic currency in its bounce back in the last week of October. The rupee recovered by a smart 117 paise and closed at
Rs 48.87 per dollar on 31 October register- one-year of operation in domestic exchan ing 0.1% appreciation over 30 September. ges but was able to achieve just a 13% The forward premia across three matu- market share towards total currency rities displayed a hardening trend during derivatives turnover. October on a likely depreciation of the rupee in the near term. The premia of three 2.3 Government Securities Market different maturities remained relatively The government securities market entered volatile and moved in a wide range. During a difficult phase with both central and state the month as a whole, the one-month premia governments increasing their primary issues inched up by 99 bps over the previous even as the selling pressure mounted in month to 6.63% as on 31 October. Similarly, the secondary market. Primary auctions the 3-month and 6-month premia increased saw more devolvement and yields in both by 58 bps and 105 bps, respectively to 5.73% primary and secondary markets moved and 4.75% during the review period. northward. Continued inflationary presDespite a spurt in exports and imports, sure combined with prospects of lower the total and average daily turnover in the economic activity weighed down on the foreign exchange market plummeted by fixed income markets. 5.8% each, during September over August. During October, three auctions of governThe highest fall was registered by merchant ment securities were held for Rs 43,000 transactions (-11.2%) followed by forward, crore in the aggregate. As expected, the inter-bank and spot market dealings overall yield inched up to 8.85% from (Table 8, p 75). 8.44% in September. A dip in investors’ Imposition of transaction charges for cur- response for auctions, measured by the bid rency derivatives trading by the exchanges cover ratio was also witnessed as it came from August continued to pinch trading down to 1.88 from 2.21 during the last activity in the currency derivatives market month. Since 29 September, when the RBI in October. The segment reported a 41% announced increased market borrowings, fall in its collective turnover traded in three almost worth Rs 53,000 crore for the secdifferent exchanges. The average daily turn- ond half of the current financial year, yields over also plunged by 38% to Table 12: Yield Spreads (Weighted Average) – Central Government Securities Rs 30,000 crore during the (Basis points) October 2011 Previous Three Six Months month. Both options and Yield Spread in bps Last Week First Week Entire Month Month Months Ago Ago futures segments reported a 1 Year-5 Year 5 17 4 0 24 44 5 2 8 -1 0 -14 38% fall each in their average 5 Year -10 Year 10 Year-15 Year -7 daily trading. Options trad- 1 Year-10 Year 10 19 12 -1 24 30 ing in currencies completed Source: As in Table 10.
Table 11: Predominantly Traded Government Securities (Amount in Rs crore) Descriptions
Last Week (28) AMT YTM
October 2011 First Week (7) AMT YTM
Total for the Month AMT YTM
GOI Dated Securities 7.40 2012 1,010 8.68 29 8.33 2,439 7.27 2013 55 8.36 56 7.17 2015 55 8.53 160 8.42 251 7.59 2016 95 8.73 91 8.48 401 7.49 2017 1 8.52 1 7.99 2017 667 8.90 185 8.51 1,067 8.07 2017 152 8.75 870 8.54 2,304 7.83 2018 1,778 8.78 2,476 8.53 13,087 7.80 2021 18,689 8.78 17,976 8.53 1,13,304 8.08 2022 1,000 8.81 5,835 8.63 13,995 8.13 2022 4,008 8.87 3,159 8.57 12,885 8.20 2022 8.26 2027 117 8.90 20 8.75 1,785 8.28 2027 336 8.92 984 8.75 3,041 8.28 2032 103 8.30 2040 363 8.95 440 8.89 2,118 Total (All Securities) 28,274 8.80 33,202 8.57 1,68,357
8.61 8.36 8.46 8.65 8.52 8.80 8.65 8.72 8.73 8.71 8.76 8.60 8.91 8.87 8.91 8.94 8.74
Previous Month September 2011 AMT YTM
364 750 991 970 76 2,477 2,802 12,041 1,74,374 9,931 32,390 60 562 3,656 218 1,076 2,45,522
8.28 8.23 8.28 8.31 8.30 8.36 8.32 8.34 8.32 8.40 8.41 8.57 8.57 8.57 8.58 8.63 8.35
Three Months Ago (July 2011) AMT YTM
676 210 786 2,700 275 646 1,460 11,976 1,54,349 20,292 33,428 45 2,375 1,382 1,361 1,947 2,36,766
Six Months Ago (Aril 2011) AMT YTM
8.05 2,665 8.16 370 8.34 2,278 8.31 2,812 8.32 190 8.32 1,479 8.34 8.35 3,930 8.32 24,634 8.42 28,681 8.41 22,978 8.40 37 8.61 1,914 8.64 8.59 4 8.61 1,297 8.36 1,00,608
7.77 7.79 8.02 8.17 8.02 8.03 8.00 8.03 8.18 8.13 8.11 8.41 8.36 8.46 8.09
(-) means no trading YTM = Yield to maturity in percentage per annum. 1) Yields are weighted yields, weighted by the amounts of each transaction. Source: as in Table 10. Economic & Political Weekly EPW november 26, 2011 vol xlvi no 48
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pressures in the secondary market contributed to the overall secondary market 04-Oct-11 9 7,735 1.58 8.88 8.86 yield increasing significantly 13-Oct-11 1 300 6.1 8.98 8.95 from 7.74% to 8.35% in 18-Oct-11 11 7,735 2.03 9.07 9.06 October over the previous Total for October 2011 21 15,770 1.89 8.98 8.96 month. Secondary market Total for September 2011 11 9,050 1.72 8.64 8.63 Source: RBI press releases. trading also fell steeply by Table 14: Auctions of Treasury Bills (Amount in Rs crore) 31% during the month to Date of Auction Bids Bid Cover Cut-off Weighted Cut-off Weighted Rs 1,68,357 crore. The most Accepted Ratio Yield (%) Average Price (Rs) Average Yield (%) Price (Rs) traded security was the A: 91-Day Treasury Bills 10-year benchmark, 7.80% 05-Oct-11 4,000 3.69 8.44 8.44 97.94 97.94 2021, which alone contrib 12-Oct-11 4,000 2.85 8.48 8.48 97.93 97.93 uted to 67% of total traded 19-Oct-11 4,000 2.88 8.65 8.60 97.89 97.90 volume, while the top-five 25-Oct-11 4,000 3.33 8.65 8.65 97.89 97.89 traded securities including Total for October 2011 16,000 3.19 8.55 8.54 97.91 97.92 Total for September 2011 28,000 2.70 8.41 8.40 97.95 97.95 8.08% 2022, 7.83% 2018, B: 182-Day Treasury Bills 8.13% 2022 and 8.28% 12-Oct-11 4,000 1.82 8.62 8.57 95.88 95.90 2027 accounted for 93% of 25-Oct-11 4,000 2.33 8.71 8.66 95.84 95.86 the total turnover. The conTotal for October 2011 8,000 2.08 8.66 8.62 95.86 95.88 tribution of the top 10 secuTotal for September 2011 6,000 2.69 8.43 8.41 95.97 95.98 rities was almost 99%. The C: 364-Day Treasury Bills 05-Oct-11 4,000 2.66 8.52 8.51 92.17 92.18 yield curve assumed an unu 19-Oct-11 4,000 2.67 8.68 8.66 92.03 92.05 sual and quite an inverted Total for October 2011 8,000 2.67 8.60 8.58 92.10 92.12 shape even as yields firmed Total for September 2011 5,742 3.49 8.40 8.39 92.27 92.28 up more towards the highD: 48-Day Cash Management Bills er end of maturities as 17-Oct-11 10,000 2.19 8.69 8.61 98.87 98.88 Source: RBI’s press releases. compared to shorter maturities. The yield spread was Table 15: Details of Private Placement in Corporate Bonds in NSE during October 2011 narrowed by 12 bps for Institutional Category No of Volume in Range of Range of Maturity 1-year and 10-year maturi Issues Rs Crore Coupon Rates in Years (y) NS (in %) Months (m) ties and 4 bps for 1-year and Corporates 7 214 9.95-10.25 3-5 years 5-year maturities (Table 10, NBFCs 10 3,408 7.51-10.10 2-17 years p 76 and Tables 11 and 12, Central Undertakings 3 2,015 8.97-9.35 5 years p 77). Total for October 2011 20 5,637 7.51-10.25 2 to 17 Total for September 2011 6 6,329 9.38-10.15 1 to 15 Through three auctions Source: www.nseindia.com state governments raised have been moving upwards. Primary market Rs 15,770 crore in the aggregate during yields during October auctions were far the month, 74% larger than in September. higher than one or two months before. A total of 16 states took part in these aucDespite elevated cut-off yields, every auc- tions out of which Andhra Pradesh, Kerala, tion in the month partially devolved on the Maharashtra, Rajasthan and Tamil Nadu primary dealers. This amounted to 12% of accessed the market twice. A strengthening the aggregate notified amount for the of cut-off yields was seen over the aucmonth. The cut-off yields as also devolve- tions. Overall, the average cut-off yield ment could have been much higher, but firmed up to 8.98% from 8.64% over the for the passive injection of liquidity by the month. The bid cover was almost equal to RBI through its LAF window. The average that of central government auctions. In borrowing from the repo window in the the second auction, Punjab was the only month was Rs 57,806 crore, a bit higher participant with a very high bid cover than RBI’s comfort zone of Rs 50,000 of 6.10 (Table 13). crore, and touched its high of more than A sharp surge in yield was also seen in Rs 1 lakh crore on 25 October, the day of the secondary market trades of SDLs as it the policy announcement (Table 9, p 76). moved to 8.94% from 8.62% in SeptemElevated yields in primary auctions ber; but some improvement was seen in coupled with devolvement and the selling the turnover at Rs 2,353 crore. Table 13: Details of State Government Borrowings (Amount in Rs crore) Date of Auction
78
Number of Total Participating Amount States Accepted
Bid Cover Ratio
YTM at Cut-Off Price (%)
Weighted Average Yield (%)
2.4 Treasury Bills Treasury bills (TBs) with regular maturities were issued for lower notified amounts as compared to the pervious month, but after 21 July, the RBI resumed issuance of cash management bills (CMBs) on 17 October, with maturity of 48-days, for Rs 10,000 crore. In the month, a better response was realised only by 91-day TBs, 3.19 times the aggregate notified amount. A firming up of cut-off yields was seen across maturities. For 91-day, 182-day and 364-day TBs cut-off yields were set at 8.55%, 8.66% and 8.60% in October against 8.41%, 8.43% and 8.40% in the previous month. Forty-eight day CMBs were issued at a cutoff yield of 8.69% (Table 14). Overall, the turnover of the TBs fell over the month by 42% to Rs 16,102 crore. Among different maturities, 91-day TBs recorded a 58% fall in traded volume. Yields in general moved up but it was the highest for 364-day TBs by 17 bps to 8.51% over the month.
2.5 Corporate Bond Market Private placement issues at Rs 5,637 crore on NSE was lower by about 11% over the previous month, though the number of issues was more in October at 20 against only six in the previous month. IDFC mopped up Rs 1,510 crore through three issues, followed by two issues of the Rural Electrification Corporation which raised Rs 1,415 crore. The Airport Authority of India, NABARD, L&T Infrastructure Finance Company and Power Finance Corporation of India were others raising funds of above Rs 400 crore. The largest amount was raised by NBFCs during the month followed by central undertakings. A few issues did not disclose coupon rates. Corporates offered highest coupon rates ranging between 9.95% and 10.25% followed by central government undertakings and NBFCs. Maturity wise, the shortest bonds were issued by corporates followed by central government undertakings and NBFCs (Table 15). According to data published by SEBI, the total turnover in the secondary market of corporate bonds, reported by BSE, NSE and FIMMDA, dropped further by about 4% in October to Rs 43,263 crore in comparison to the previous month, mainly due to a fall in NSE trades.
november 26, 2011 vol xlvi no 48 EPW Economic & Political Weekly
DISCUSSION
Alternative National Water Policy: A Response to Comments Ramaswamy R Iyer
T
his is in response to the comments made by Rahul Banerjee (“National Water Policy”, 13 August 2011) and Chetan Pandit (“Alternative National Water Policy: A Critique”, 10 September 2011) on my article “National Water Policy: An Alternative Draft for Consideration” (25 June 2011).
Epigrammatic Style I have no serious disagreements with Rahul Banerjee, but I offer a few clarifications here. Rahul Banerjee has observed that some important matters are referred to late in the policy draft. The order in which issues or aspects appear in the A lternative National Water Policy (ANWP) does not indicate their relative importance. Data and information are, of course, relevant and important for several of the other sections, but instead of repeated references in several sections, data and information are discussed fairly elaborately in one section, which necessarily had to come at the end after all the physical and other aspects had been dealt with. High consumption, high demand for water, waste: these are referred to not merely in the section on water pollution, but also in the Sections 5 and 6. Rahul Banerjee wishes that some issues had been discussed more elaborately. That would have made the policy document much longer. Besides, I deliberately adopted an epigrammatic and not a discursive style. I thought that this would be the appropriate style for a policy document as distinguished from an essay or academic paper.
Not ‘My Axiom vs Yours’ I am grateful to Chetan Pandit (CP) for taking the trouble of commenting in detail on my draft policy. It is not for me to question his overall adverse judgment on it. I leave it to the readers to form their own
views. However, there are some specific points that I must answer. (1) I had clearly stated that I was not putting forward a programme or action plan or strategy, but CP faults the policy draft precisely on that ground. I wish he had made an effort to understand what was being attempted and why. In our quasi-federal system, there could be some differences of policy and principle in relation to water among the States, but a degree of convergence seems desirable. The recognition of a need for a national consensus on certain basic aspects and issues relating to water led to the National Water Policies of 1987 and 2002; and my draft policy belongs to that lineage, but is offered as an alternative to the official draft under preparation, because it is driven by the feeling that a transformation in our thinking about water is called for. Once a national consensus on basics is brought about, strategies, programmes, action plans, etc, at the central, state and local levels, can follow; and these must be governed by the policy. (2) That explains the absence of numbers in the policy draft, which in CP’s view is a grave defect. The starting point of the policy draft was a diagnosis of past and present ills, of which a summary statement is given in Section 1. It was not my diagnosis but the gist of what many commissions and committees have said in their reports over the years. All the numbers that one might want will be found in those reports. Incidentally, there can be both rigorous and non-rigorous thinking with numbers and without numbers. I venture to claim that the draft policy is a rigorous document. (3) It is not a question of “my axiom versus yours”; I was not putting forward a set of dogmas, but making statements that were definitional and/or likely to find a resonance in many minds. I was also stating
Economic & Political Weekly EPW november 26, 2011 vol xlvI no 48
certain propositions that had been for gotten or ignored, but would be instantly recognised once they were stated. For instance, when I say “a river must flow; if it does not flow, it is not a river” it is both a definitional statement and one that is likely to be widely accepted; and it is meant to remind us of a truth that we have forgotten. When CP offers the counter-statement that a river is not a river if it does not feed a reservoir or provide water for irrigation, it is neither a self-evident statement nor one that will be widely accepted. (4) When he says that “there are many instances all over the world, including many in India, where rivers have been turned in different directions, yielding huge benefits, and no calamity has befallen” (my italics), he takes my breath away. I refrain from comment. Let me merely say that there is plenty of material on what human intervention has done to rivers. I cannot give a reading list here. (5) CP refers to my “ideological” approach. I put ecology, social justice and harmony first, subordinating engineering and economics to that triad. If that is “ideology”, so be it. May I add that putting engineering and economics first is also ideology. (6) CP seeks to educate me on hydrology. I am not a hydrologist or an engineer but have indeed heard of the concepts hydrological cycle and hydrological unity, and of the distinction between consumptive and non-consumptive uses of water. What follows? That economy in non-consumptive water use is of no consequence? CP himself does not say so. The fact is that water returned to the hydrological cycle after non-consumptive use is not always readily accessible or usable, though efforts need to be made to recover and use as much of that water as possible. Despite such efforts, a part of that water will be virtually unavailable for further use. Economy in non-consumptive uses of water is therefore not meaningless. It makes sense to talk of reducing the agricultural, industrial, municipal or domestic demand for water. All over the world thinkers have been pointing to the looming water crisis and urging improvements in water use and resource-conservation.
79
DISCUSSION
Why do they do so if nothing that we do is going to affect total demand? If indeed we simply cannot restrain the growth of demand for water, and if CP’s hydrology tells us that it is not important that we should do so, then I have nothing further to say.
Quantity and Quality (7) CP says that with industrial use, the problem is not one of quantity but of quality. I should have thought that it was both. In Plachimada, Palar and Tirupur, both quantity and quality issues have figured. It is not necessary to argue this, because industries themselves in many cases are aiming at a long-term goal of both zero effluent and zero net water budget. (8) CP considers the idea of large projects as projects of the last resort nebulous and ill-defined. It is, in fact, quite simple. What I meant was that in each case the objective should be clearly formulated, all available options to meet that objective identified, and a large project chosen if it is the unique option or the best available option in a given case. Of course, dubious efforts may be made to prove that the proposed option is in fact the best option in a given case, but a good, rigorous appraisal procedure will take care of this. (9) CP has completely misunderstood the proposal of a professional, independent environment impact assessment (EIA). He assumes (in knee-jerk fashion) that by “independent” I mean “independent of the Government” and magisterially pronounces that “civil society lingo” unacceptable. Once again, I have to say “Understand before you pass judgment”. (May I add that while he is free to disagree and criticise, impolite language is, in his own words, unacceptable?) “Independent” in the EIA context means “independent of the proposers, approvers and implementers of projects”. What I had in mind was the following. If an EIA profession is instituted with a statutory charter, a professional council, a code of conduct, etc, as in the case of medicine or chartered accountancy; if the (proposed) National Environment Protection Agency (NEPA) maintains a panel of approved EIA agencies (on the analogy of the panel of charted accountants maintained by the comptroller and accountant general for nominating auditors to public enterprises) and nominates
80
an agency for doing the EIA in each case; if payment to the EIA agency is made after approval by the NEPA; and if NEPA maintains quality control; then we will have objective EIAs of good quality. (10) CP repeats the familiar statement that there will be more evaporation from a large number of small storages than from one large reservoir. I have heard this many times over the years but it is not a self-evident proposition. Let me put forward, in a tentative, exploratory spirit, a different hypothesis for consideration. The estimated “available” water resources (1953 BCM of surface water + 436 BCM of groundwater, according to the National Commission on Integrated Water Resource Development Plan – there may be some double counting here) are substantially lower than the precipitation over the Indian landmass (4000 BCM) because of evapotranspiration. (The late T N Narasimhan thought that we were underestimating evapotranspiration and overstating the availability of water.) However, the available surface water flows are measured at certain points of river systems, after evaporation has taken place over a part of the length of the river and from the reservoirs that exist on the river. (There will also be evaporation from the canals flowing to considerable distances from the reservoirs.) Instead of a few large centralised reservoirs, if we were to capture the rainwater extensively in a decentralised manner at earlier points (i e, as the rain falls, or at early points of the run-off) would not the loss by evaporation be less? On the other hand, capturing the rain as it falls may slightly reduce the runoff to the river. Taking both factors into account, would we perhaps be able to achieve some net additionality? (Kanchan Chopra and Biswanath Goldar estimated “additional runoff capture” at 140 BCM.) This hypothesis may turn out to be untrue, but perhaps some work on this required. When I put this possibility to Narasimhan, he was not dismissive; he thought that there could be something in it.
Minimum Flows (11) With reference to “minimum flows”, CP says: “Whether a maximum is prescribed for abstraction, or a minimum is
prescribed for river flow, it amounts to allocation of water to the environment”. In terms of numbers the two approaches may yield the same figure, but there is a world of difference between (a) thinking of abstraction as the norm and leaving water in the river as an unfortunate necessity, and (b) thinking of natural flows as the norm and abstractions as interventions to be carefully and minimally resorted to. Similarly, there is a world of difference between (a) giving primacy to eco logy (nature) that gives us water, and (b) thinking that we should put our “demands” first and then “allocate” some water to nature. It seems to me that the way we think is a matter of some importance. CP may not agree. (12) CP says: “At any point of time, there exists a land acquisition and rehabilitation policy, and also relevant laws. There is no justification for a separate policy for water resources projects...” (p 79). I entirely agree. The idea is not to prescribe a separate land acquisition (la) and rehabilitation policy for water pro jects, but to bring in the elements of the LA and rehabilitation and resettlement (RR) policies by reference. Section 17.9 of the draft mentions the various laws and policies that will govern water resource projects. If the LA and RR Bill gets enacted by the time the new national water policy is approved, reference will have to be made to that Act, and of course, the two will have to be harmonised. (13) With his last sentence (“The targets should determine the policy, and not the other way round”) (p 79) I do not agree at all. Without certain assumptions and principles, we cannot set targets. There are implicit policies behind targets. What we need to do is to make them explicit and change them where necessary. That is what the ANWP has tried to do. Ramaswamy R Iyer (ramaswamy.iyer@gmail. com) is with the Centre for Policy Research and has written extensively on issues related to water.
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november 26, 2011 vol xlvI no 48 EPW Economic & Political Weekly
CURRENT STATISTICS
EPW Research Foundation
The buildup of inflation as measured by the wholesale price index during 2011-12 until October has been driven by food, fuel and power. Inflation in food products increased by 4.8% against a decline of 0.5% the previous year, and inflation in fuel and power showed an increase of 7.9% against 5.7%. The food index, including of primary food articles, showed a much higher increase of 9.5% compared with 6.4%. On the other hand, inflation in non-food articles declined by 6.5% against an increase of 10.5%, and in manufactured products remained subdued at 2.6%.
Macroeconomic Indicators Index Numbers of Wholesale Prices (Base Year: 2004-05 = 100)^ All Commodities Primary Articles Food Articles Non-Food Articles Fuel & Power Manufactured Products Food Products Food Index (computed) All Commodities (Monthly average basis)
Weights 100.0 20.1 14.3 4.3 14.9 65.0 10.0 24.3 100.0
October Over 2011 Month 156.8 0.6 204.3 1.0 200.9 2.2 178.9 -3.0 170.0 1.0 139.1 0.4 152.0 0.2 180.8 1.5 154.2 –
Variation (in %): Point-to-Point Over 12 Months 2011 2010 9.7 9.1 11.4 18.1 11.1 14.6 7.7 25.7 14.8 11.0 7.7 5.1 7.8 3.8 9.9 10.6 9.5 9.1
Fiscal Year So Far 2011-12 2010-11 4.9 4.8 8.6 10.5 12.2 10.6 -6.5 10.5 7.9 5.7 2.6 2.4 4.8 -0.5 9.5 6.4 9.6 9.8
2010-11 9.7 13.4 9.4 27.3 12.5 7.4 2.4 6.8 9.6
Full Financial Year 2009-10 2008-09 2007-08 10.4 1.6 7.8 22.2 5.4 9.6 20.6 8.0 5.6 20.4 0.6 16.3 13.8 -3.4 7.4 5.3 1.7 7.2 15.1 6.3 8.4 18.5 7.3 6.7 3.8 8.1 4.9
2006-07 6.8 12.8 13.2 10.6 1.1 6.5 4.3 9.6 6.5
^The date of first release of data based on 2004-05 series wef 14 September 2010.
Cost of Living Indices Industrial Workers (IW) (2001=100) Agricultural Labourers (AL) (1986-87=100)
Latest Month 2011 1979 6159
Variation (in %): Point-to-Point
Over Month 1.5 0.8
Over 12 Months 2011 2010 10.1 9.8 9.4 9.1
Fiscal Year So Far 2011-12 2010-11 6.5 5.3 5.1 4.9
2010-11 8.8 9.1
2009-10 14.9 15.8
Full Fiscal Year 2008-09 2007-08 8.0 7.9 9.5 7.9
2006-07 6.7 9.5
2005-06 5.3 5.3
Note: Superscript numeral denotes month to which figure relates, e g, superscript 9 stands for September. Variation Money and Banking (Rs crore) 21 October Over Month Over Year Fiscal Year So Far Full Fiscal Year 2011 2011 2011-12 2010-11 2010-11 2009-10 2008-09 Money Supply (M3) 6958664 99835(1.5) 878162(14.4) 459116(7.1) 477770(8.5) 896817 (16.0) 807920 (16.8) 776930 (19.3) Currency with Public 952190 10932(1.2) 111449(13.3) 37993(4.2) 73248(9.5) 146704 (19.1) 102043 (15.3) 97040 (17.1) Deposits Money with Banks 6005314 90086(1.5) 769550(14.7) 423675(7.6) 404364(8.4) 750239 (15.5) 707606 (17.2) 683375 (19.9) of which: Demand Deposits 646007 8085(1.3) -83689(-11.5) -71652(-10.0) 11726(1.6) -310 (-0.0) 129281 (22.0) 10316 (1.8) Time Deposits 5359307 82001(1.6) 853239(18.9) 495327(10.2) 392638(9.5) 750549 (18.2) 578325 (16.4) 673059 (23.5) Net Bank Credit to Government 2181908 44076(2.1) 387648(21.6) 199137(10.0) 125074(7.5) 313584 (18.8) 391853 (30.7) 377815 (42.0) Bank Credit to Commercial Sector 4447127 57466(1.3) 693916(18.5) 211720(5.0) 261802(7.5) 743997 (21.3) 476516 (15.8) 435904 (16.9) Net Foreign Exchange Assets 1598117 48977(3.2) 251288(18.7) 204790(14.7) 65361(5.1) 111858 (8.7) 367718 (-5.2) 57053 (4.4) Banking Sector’s Net Non-Monetary Liabilities 1281800 51036(4.1) 455849(55.2) 157119(14.0) -24652(-2.9) 274078 (32.2) -9050 (-1.1) 94672 (12.4) of which: RBI 578538 51888(9.9) 245345(73.6) 210263(57.1) 31578(10.5) 66660 (22.1) -86316 (-22.3) 177709 (84.5) Reserve Money (4 November 2011) 1375263 33345(2.5) 142470(11.6) -1619(-0.1) 77106(6.7) 221195 (19.1) 167688 (17.0) 59696 (6.4) Net RBI Credit to Centre 380167 38161(-) 118575(-) -13868(-) 50011(-) 182453 149821 176397 Scheduled Commercial Banks (21 October 2011) Aggregate Deposits 5618986 88719(1.6) 741394(15.2) 411017(7.9) 384766(8.6) 715143 (15.9) 658716 (17.2) 637170 (19.9) Demand 566892 7890(1.4) -90392(-13.8) -74814(-11.7) 11674(1.8) -3905 (-0.6) 122525 (23.4) -1224 (-0.2) Time 5052094 80829(1.6) 831786(19.7) 485830(10.6) 373092(9.7) 719048 (18.7) 536191 (16.2) 638395 (23.9) Investments (for SLR purposes) 1706649 6450(0.4) 202936(13.5) 205030(13.7) 118961(8.6) 116867 (8.4) 218342 (18.7) 194694 (20.0) Bank Credit 4150520 57365(1.4) 671021(19.3) 208437(5.3) 234711(7.2) 697294 (21.5) 469239 (16.9) 413635 (17.5) Non-Food Credit 4081598 56688(1.4) 649314(18.9) 203798(5.3) 235985(7.4) 681500 (21.3) 466961 (17.1) 411825 (17.8) Commercial Investments 169903 11117(7.0) 18705(12.4) 22302(15.1) 33127(28.1) 28872 (24.5) 11654 (11.0) 10911 (11.4) Total Bank Assistance to Comml Sector 4251501 67805(1.6) 668019(18.6) 226100(5.6) 269112(8.1) 710372 (21.4) 478615 (16.9) 422736 (17.5) Note: Government Balances as on 31 March 2011 are after closure of accounts. Index Numbers of Industrial Production September* Fiscal Year So Far Full Fiscal Year Averages (Base 2004-05=100) Weights 2011 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 General Index 100.00 163.2(1.8) 166.0(5.0) 158.1(8.2) 165.4(8.2) 152.9(5.3) 145.2(2.5) 141.7(15.5) 122.6(12.9) Mining and Quarrying 14.157 111.0-(5.7) 122.6-(1.0) 123.8(7.2) 131.0(5.2) 124.5(7.9) 115.4(2.6) 112.5(4.6) 107.6(5.2) Manufacturing 75.527 175.7(2.1) 176.6(5.4) 167.6(8.8) 175.6(8.9) 161.3(4.8) 153.8(2.5) 150.1(18.4) 126.8(15.0) Electricity 10.316 144.1(9.0) 148.2(9.4) 135.5(3.8) 138.0(5.6) 130.8(6.1) 123.3(2.8) 120.0(6.4) 112.8(7.3) * Indices for the month are Quick Estimates Fiscal Year So Far 2010-11 End of Fiscal Year Capital Market 11 Nov 2011 Month Ago Year Ago Trough Peak Trough Peak 2010-11 2009-10 2008-09 BSE Sensitive Index (1978-79=100) 17193(-16.5) 16536 20589(22.2) 15792 19702 16022 21005 19445(10.9) 17528(80.5) 9709(-37.9) BSE-100 (1983-84=100) 8944(-18.3) 8644 10947(23.1) 8283 10262 8540 11141 10096(8.6) 9300(88.2) 4943(-40.0) BSE-200 (1989-90=100) 2099(-19.8) 2033 2618(24.7) 1950 2427 2034 2753 2379(8.1) 2200(92.9) 1140(-41.0) S&P CNX Nifty (3 Nov 1995=1000) 5169(-16.6) 4974 6194(23.8) 4748 5912 4807 6312 5834(11.1) 5249(73.8) 3021(-36.2) Skindia GDR Index (2 Jan 1995=1000) 2299(-33.4) 2299 3449(35.5) 2146 3441 2477 3479 3151(9.3) 2883(134.2) 1153(-56.2) Net FII Investment in (US $ Mn Equities) - period end 102762(1.5) 101567 101273(45.2) – – – – 101454(31.5) 77159(43.1) 51669(-18.6) September* Fiscal Year So Far Full Fiscal Year Foreign Trade 2011 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 Exports: Rs crore 118234 723432 (49.3) 484687 (23.2) 1118823 (32.3) 845534 (0.6) 840754(28.2) 655863(14.7) 571779(25.3) 456418(21.6) 375340(27.9) US $ mn 24822 160049 (52.1) 105241 (30.0) 245868 (37.5) 178751 (-3.5) 185295 (13.6) 163132(29.0) 126361(22.6) 103091(23.4) 83536(30.8) Imports: Rs crore 164759 1055339 (30.0) 811773 (30.4) 1596869 (17.1) 1363736 (-0.8) 1374434(35.8) 1012312(20.4) 840506(27.3) 660409(31.8) 501065(39.5) US $ mn 34589 233510 (32.4) 176360 (37.6) 350695 (21.6) 288373 (-5.0) 303696(20.7) 251654(35.5) 185749(24.5) 149166(33.8) 111517(42.7) Non-POL US $ mn (* Provisional figures) 25379 163161 (28.5) 126955 (40.0) 249006 (23.7) 201237 (-4.2) 210029(22.2) 171940(33.5) 128790(22.4) 105233(37.1) 76772(33.2) Balance of Trade: Rs crore -46525 -331907 -327085 -478047 -518202 -533680 -356449 -268727 -203991 -125725 US $ mn -9767 -73461 -71119 -104827 -109621 -118401 -88522 -59388 -46075 -27981 * Provisional figures. Variation Over Foreign Exchange Reserves (excluding 4 Nov 5 Nov 31 Mar Fiscal Year So Far Full Fiscal Year gold but including revaluation effects) 2011 2010 2011 Month Ago Year Ago 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 Rs crore 1399410 1225500 1245284 18790 173910 154126 53254 73038 -57826 33975 359500 189270 US $ mn 285129 276511 278899 4172 8618 6230 16820 19208 18264 -57821 107324 46816 Figures in brackets are percentage variations over the specified or over the comparable period of the previous year. (–) not relevant. [Comprehensive current economic statistics with regular weekly updates, as also the thematic notes and Special Statistics series, are available on our website: http://www.epwrf.in]. Economic & Political Weekly EPW November 26, 2011 vol xlvi no 48
81
STATISTICS
Secondary Market Transactions in Government Securities and the Forex Market – Weeks Ending November 4/11, 2011 1 Settlement Volume of Government Securities Transactions
Outright Number of Trades
Repo
Volume (Face Value in Rs Crore)
Number of Trades
Total
Volume (Face Value in Rs Crore)
Number of Trades
Volume (Face Value in Rs Crore)
Daily Average (Outright) Number Volume of Trades (Face Value in Rs Crore)
Daily Average (Repo) Number Volume of Trades (Face Value in Rs Crore)
Nov 11, 2011
3774
29767
274
34737
4048
64504
1258
9922
69
8684
Nov 04, 2011
7865
60997
621
93206
8486
154204
1573
12199
104
15534
Nov 12, 2010
4644
39163
478
46076
5122
85239
929
7833
80
7679
2011-12*
205622
1736294
17964
2481763
223586
4218057
1479
12491
102
14101
2010-11**
233021
2121965
17054
2671188
250075
4793153
1523
13869
94
14677
2 Instrument-wise Settlement Volume of Government Securities Transactions Weeks Ended
Dated Securities Central Government State Governments (Face Value in Rs Crore) (Face Value in Rs Crore)
Treasury Bills Total (Face Value in Rs Crore) (Rs Crore)
Dated Securities Treasury Bills Central Government State Governments (Face Value in Rs Crore) (Face Value in Rs Crore) (Face Value in Rs Crore)
Outright
Total (Rs Crore)
Repo
Nov 11, 2011
26053
741
2974
29767
16582
279
17876
34737
Nov 04, 2011
54697
273
6027
60997
56137
63
37006
93206
Nov 12, 2010
35225
970
2968
39163
34362
153
11561
46076
3 Per Cent Share in Outright – NDS & NDS-OM Reported Government Securities (G-Sec) Trades, Repo Trades, Reverse Repo Trades
G-Sec Trades
Reserve Repo Trades
Buy Side (Weeks Ending)
Category
Sell Side (Weeks Ending) 11 Nov 2011
Repo Trades
(Weeks Ending)
(Weeks Ending)
11 Nov 2011
04 Nov 2011
04 Nov 2011
11 Nov 2011
11 Nov 2011
04 Nov 2011
Primary Dealers
31.83
28.88
43.61
35.11
1.76
04 Nov 2011
2.33
54.68
25.35
Foreign Banks
26.98
27.09
27.13
29.02
36.54
44.16
14.32
18.81
Private Sector Banks
14.92
13.86
14.29
10.57
14.37
9.59
29.01
42.93
Public Sector Banks
14.41
19.47
7.08
16.55
2.37
6.36
1.60
12.52
Mutual Funds
6.77
5.84
5.63
5.55
29.79
26.03
0.00
0.00
Cooperative Banks
2.26
2.17
1.57
1.88
0.05
0.06
0.39
0.38
Ins Cos
1.68
2.07
0.55
1.24
15.13
11.47
0.00
0.00
Others
0.73
0.42
0.13
0.04
0.00
0.00
0.00
0.00
FIs
0.42
0.20
0.00
0.03
0.00
0.00
0.00
0.00
4 Settlement Volume of Collateralised Borrowing and Lending Obligation (CBLO) Weeks Ending 11 November 2011 04 November 2011 12 November 2010 2011-12* 2010-11** Number of Trades Volume Number of Trades Volume Number of Trades Volume Number of Trades Volume Number of Trades Volume (FV in Rs Crore) (FV in Rs Crore) (FV in Rs Crore) (FV in Rs Crore) (FV in Rs Crore)
Overnight
1119
84549
2700
226009
2218
129923
73449
6503743
75961
6392411
Term
521
32333
376
21104
494
29234
15219
1073450
15656
1125968
Total
1640
116882
3076
247113
2712
159157
88668
7577193
91617
7518379
410
29220
513
41186
452
26526
504
43052
503
41310
Average
5 Settlement Volume of Forex Segment 11 November 2011
Weeks Ending 04 November 2011
Number of Deals Volume (US $ mn)
12 November 2010
Number of Deals Volume (US $ mn)
Number of Deals
Volume (US $ mn)
2011-12*
2010-11**
Number of Deals Volume (US $ mn)
Number of Deals Volume (US $ mn)
Cash
480
5004
1038
11112
722
11896
27730
326236
23540
Tom
670
5800
1532
15768
878
11193
42000
408966
38342
398314
Spot
21978
21981
49192
46859
40906
54801
1330824
1413299
1262258
1356030
Forward
309646
268
3057
16454
77249
742
12961
120898
607643
99422
513439
Total
23396
35843
68216
150989
43248
90850
1521452
2756144
1423562
2577428
Average
11698
17921
13643
30198
10812
22713
10946
19828
9955
18024
6 Tenor-wise Forward Trades
Weeks Ending 04 November 2011
11 November 2011
Tenor
Number of Deals
Value (US $ mn)
% to Total Value
Number of Deals
< 30 days
94
1407
46
2766
> 30 days & < = 90 days
72
461
15
> 90 days & < = 180 days
62
998
> 180 days & < =365 days
38
> 1 year
2
Total
268
Value (US $ mn)
12 November 2010 % to Total Value
Number of Deals
13304
17
356
Value (US $ mn)
8800
% to Total Value
4490
21142
27
202
1705
13
33
2208
10575
14
80
2040
16
191
6
6472
29476
38
96
367
3
0
0
518
2752
4
8
50
0
3057
100
16454
77249
100
742
12961
100
68
* Data pertains to 1 April 2011-11 November 2011. ** Data pertains to 1 April 2010-12 November 2010. Source: Clearing Corporation of India Limited (CCIL).
82
november 26, 2011 vol xlvI no 48 EPW Economic & Political Weekly
LETTERS Issn 0012-9976 Ever since the first issue in 1966, EPW has been India’s premier journal for comment on current affairs and research in the social sciences. It succeeded Economic Weekly (1949-1965), which was launched and shepherded by Sachin Chaudhuri, who was also the founder-editor of EPW. As editor for thirty-five years (1969-2004) Krishna Raj gave EPW the reputation it now enjoys.
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Value of Democracy
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his letter is to register my distress regarding the inference drawn by the two researchers in their paper “Democracy and Health: Evidence from Indian States” (EPW, 1 October 2011). After presenting infant mortality rate data on Indian states and drawing inference about India’s health status, they virtually conclude that the lives of more than 2.5 billion people of India and China are unaffected by regime type. I think this is too sweeping a generalisation on democracy which has an intrinsic value. (On the instrumental importance and potential of democracy the authors may do well to read Amartya Sen’s Development as Freedom (1999) and The Idea of Justice (2009) among others.) If democracy is governance by public reasoning (scientists cannot equate it with electoral democracy and will have to go into the essence of it), papers like this provide depressing news. As Bourdieu observes, every fact is related to a value. Therefore inferences have to be drawn with caution. M A Oommen Thiruvananthapuram
Capital Punishment
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large section of Indians would agree with the views of S V Rajadurai, (“Politics and the Death Penalty”, EPW, 17 September 2011) that capital punishment must be abolished. The letter refers to those who had been condemned to death for murdering Rajiv Gandhi in 1991. Recently, Arputham Ammal, the mother of Perarivalan who is languishing in a Chennai jail for nearly two decades, said that the ultimate victims of the death sentence are the backwards, the minorities and the weak. The judge who pronounced the death sentence had said that Perarivalan supplied a battery for the suicide bomber who blew up Rajiv Gandhi. A retired police inspector now admits that he severely assaulted the condemned men to make them talk and that now he would confess to his own crime. He also wants the hanging called off. Perarivalan and the other two coconspirators, who were to be executed on 9 September, awaited a response from the president to their mercy petitions. It had been rejected. Ironically, a local court issued
a further stay to decide whether the years of delay, largely in solitary confinement, were a cause for commutation! India has a notorious reputation for such delays. Of about 300 persons on death row, many have been waiting for years. The lawyer of an Assamese murderer said that by postponing execution at the last moment, “you are virtually killing him everyday”. Justice P V Thomas who presided over the Supreme Court bench that upheld the death penalty had famously said that its use is “inhuman” and merely “revengeful”. The death penalty in India is fatally flawed. The ruling Congress Party is afraid that abolishing the death penalty might encourage the police to act as “illegal executioners” in the practice of “fake encounters” or “extra-judicial killings”. This is a false alarm, because “fake encounters” take place in several Naxal-hit states despite the existence of death sentence law in the statute book. Fake encounters, in fact, are murders and the involved police personnel must be severely punished. EPW deserves our gratitude for its relentless crusade against capital punishment. A K Dasgupta Hyderabad
On a CPI (Maoist) Apology
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n a statement of apparent self-criticism dated 1 September 2011 (EPW, 17 September 2011), the Communist Party of India (Maoist) has offered an apology for the posters threatening Aruna Roy, Jean Dreze, Gokul Vasant and Nandlal Singh and members of Gram Swaraj Abhiyan. But they have not tendered an unconditional apology for the brutal murder of National Rural Employment Guarantee Act (NREGA) activist Niyamat Ansari and the threat to Bhukhan Singh for allegedly being “police informers” and “cheating local people” of their forestland. Eighty-six families in Kope Gram Panchayat, including Bhukhan and Niyamat, were part of a larger movement to secure legal entitlements to forestland under the Forest Rights Act, 2006, which was opposed by the same corrupt contractors involved in committing malpractices in the NREGA programme. The team exposed a scam involving Rs 2.5 lakh leading to an FIR being
november 26, 2011 vol xlvI no 48 EPW Economic & Political Weekly
LETTERS
filed against the local block development officer. Within days, on 2 March 2011, Niyamat was beaten to death. The factfinding report published by Gokul BasantNandlal Singh hinted at the possible involvement of Maoists with corrupt middlemen, illegal contractors, forest department and local administration. Maoists have temporarily withdrawn their threat to Bhukhan Singh. However, there is no mention of any action being taken against the “one member of their lower level committee” whom the Maoists hold responsible for issuing threats to Gokul Basant and others for condemning Niyamat’s killing. Nor do we find any commitment towards rectification to prevent such crimes by their cadre against those working for demo cracy, transparency and accountability. All this raises serious questions about the political methods of Maoists and their “people’s court” that does not have any respect for universally accepted procedures of law and jurisprudence. Democratic rights and respect for a different opinion or dissenting views have been the bedrock of people’s resistance and mass struggle against corporate plunder, state repression and neo-liberalism in its various avatars. We feel that such actions are highly reprehensible and should be unequivocally condemned. We further think that the CPI (Maoist) should put an end to settling political and other differences through murder and a threat to life. We also take this opportunity to express our concerns regarding the investigation of the murder, the dearth of a larger policy for protection of grass-roots activists and the need to adequately compensate and provide a secure job to Niyamat’s wife and sister immediately. Ashish Ranjan, Harsh Kapoor, Himanshu, Jairus Banaji, Jayati Ghosh, Jyoti Punwani, Kamayani Bali-Mahabal, Karen Coelho, Nagaraj Karkada, Ranjani Kamala Murthy, Rohini Hensman, Satya Sivaraman, Shalini Gera, T N Gopalan, Xavier Dias, and other concerned academicians, students and activists
Quantifying this with the number of polled votes and with socially gathered impressions can prove erroneous. It is well known that many social, political, economic, psychological, national and even international concerns are major deciding factors during an election which mobilises people in large numbers. By persistently sticking to a hackneyed reading of political behaviour and attempting to co-relate the outcome with the factional, parochial and religious or caste factors, an analyst can go wrong. The author erroneously categorised the outcome of the Hisar bye-elections a as “phenomenon” and said that it was so because of the “mishandling” of the Mirchpur and Mayyar incidents. While rejecting this categorisation I would like to be educated on the ways and means that would have been more appropriate for handling the incidents. Lastly, the place name Narnaul that occurred at two places – once in the table and second time in the text – should be read as Narnaund. Ranbir Singh Rohtak, Haryana
Growth with Equity
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homas Weisskopf’s concern for equity (“Why Worry about Inequality in the Booming Indian Economy?”, EPW, 19 Novem ber 2011) shows that India needs to “walk on two legs” of growth and equity. This is the only way mass-based changes can be implemented or else India will not be able to cope with bigger challenges like climate change and displacement of people in a fair way. Weisskopf has shown that growth and equity can be achieved simultaneously and there need not be any conflict bet ween the two. This he shows by outlining macroeconomic policies. The Indian experience shows that the sectoral policies can also help in bringing equity and growth. V S Vyas had shown as far back as 1979 that for agriculture, technology adoption
Hisar Elections
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he outcome of a bye-election cannot become an indicator of either a loss or gain in the popular standing of a political party (“The Hisar Bye-elections: Myth and Reality”, EPW, 12 November 2011). Economic & Political Weekly EPW november 26, 2011 vol xlvI no 48
and output growth are faster where equity in landownership is also greater. The past experience of land reforms in West Bengal further supports this finding that equity can bring growth. However, to mainstream the goal of growth with equity requires an awakening at the political level, and an understanding of the history of when and where this happened, and the related reasons for the synergy between the two legs. Chandrashekhar G Ranade Centreville, Virginia, Usa
SGSY and the NRLM
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he article “Subverting Policy, Surviving Poverty: Women and the SGSY in Rural Tamil Nadu” by K Kalpana (EPW, 22 October 2011) was enlightening. The Swarnajayanti Gram Swarozgar Yojana was launched in rural India in April 1999 by merging six programmes, not two. The six self-employment program mes were IRDP, TRYSEM, SITRA, DWCRA, GKY and MWS. The study has revealed that loans were equally distributed among the members of self-help groups (SHGs), which, of course, has been taking place in many parts of the country. The requirement will undoubtedly vary from person to person in a SHG. To address the issue, in the National Rural Livelihoods Mission (NRLM), the concept of a Micro Investment Plan (MIP) has been introduced which is in line with the concept of the Micro Credit Plan (MCP) as followed in Andhra Pradesh. The plan is simple: each member in a SHG will get a loan according to his/her individual need. Many of the issues mentioned in the article have been proposed to be addressed in the NRLM, which is an offshoot of the R Radhakrishna Committee’s report. One of the features of the NRLM is that staff will be recruited exclusively for the mission. Shanker Chatterjee NIRD, Hyderabad
EPW at Bangalore Book Fair Economic and Political Weekly will be at the Bangalore Book Fair — Palace Grounds November 18-27, 2011 Do visit us at stall No. 153 We look forward to seeing you there. 5
