SELLING THE WRONG IDEA by Jagdish Bhagwati & Rajeev Kohli

Normally developing countries vie with each other to attract FDI in several sectors where the domestic savings and investments cannot ensure the latest technology and the robust infrastructure - both trade-related and manufacturing on its own. Gradually but slowly FDI has been permitted in India with some amount of restrictions like the maximum cap on the percentage of foreign investment, but a flood of opposition against FDI in retail has sprung up from various sections especially the constituents of UPA coalition Government at the Centre. Generally speaking the foreign direct investment is opposed on the following grounds:-

'First, there is the fear that the small 'mom-and-pop' retailers, who number in the millions will be crushed. This is a common fear when restrictions on the expansion of the larger retailers, even when entirely domestically owned, are proposed. When the Japanese restrictions on such expansion were repealed under US pressure, there was a similar fear. But little of what had been feared transpired. Supachai Panitchpakdi, Secretary General of UNCTAD, told one of us (Bhagwati) recently that when he had overseen similar Thai reform as deputy prime minister there had been widespread such fears; again they proved groundless. The same is true of China. What enables the little shop keepers to survive, even flourish?

In the absence of refrigerators and cars, most Indian customers do their shopping daily and from local stores 'down the road' or 'around the corner'. It is impossible also to establish personal rapport, which many consumers seek, with a Wal-Mart employee, the way one can with the local storekeeper.

Second, the proposed Indian reform additionally raises the traditional bogeyman about foreign direct investment (FDI) because the opening of the large stores is linked to the entry of foreign multi-brand retail grants such as Wal-Mart, Tesco and Carrefour. India today is perhaps the only developing country where the jaundiced view of FDI persists, everywhere else it has been consigned to the dustbin. In fact, most developing countries today compete to attract FDI".

If one cound recollect the days when the banking centre was computerised there was a huge opposition from the employees' unions, fearing that they would become unemployed due to the computers, but the reality is that nowadays no banking office can afford to work without the computer. Similar is the case in railway / airport reservations and also in the working of any Government or Corporate office in the country. Employment opportunities have neither fallen nor have the existing employees been thrown out of employment. On the other hand computerisation like mechanisation in other sectors has only added to the productivity and comfort levels of the workers involved in any human endeavour although individual attention is needed to maintain the specific quality or uniqueness in quality. When you speak of quality of products in large numbers there is no way of producing them unless it is done in large scale by sophisticated machines and trained manpower. Quality of work or service both at the production level and marketing level can be ensured only when large players are allowed to operate and maintain services. One reason for general opposition for FDI in retail is that small retailers will go out of job. Right now we are aware of the predicament of small farmers in regard to production of agri produce. Their operation is mostly uneconomical and they are either confronted with surplus production with uneconomical prices offered or not getting the full price for their products due to too many middle-men in the process. Similarly, the consumers may not have the variety of goods they would like to select from, and at a reasonable price. One remotest possibility at a future date could be that major players might become monopolists and corner the profits at the cost of producers and consumers. Such an eventuality can be averted by a strong democratic government at the centre and in the states.

I for one having seen the plight of both the producers and the consumers for more than four decades in the field would advocate the opening of the gates for FDI in retail during the next 10-20 years so that the Indian farmers start enjoying the latest technologies with huge investments from FDI and the retail market gets a boost-up on the lines we see normally in other developing and developed nations.

Cost-Vs-Price? OR Life-Vs-Death?

The Indian Express "From the Fields", new Delhi, Friday, November 18, 2011, reports through its correspondent Vivek Deshpande from Nagpur that 'even as political parties in Maharashtra, ruling and opposition alike, and farm activists have upped the ante for a hike in cotton minimum support price (MSP), a study of the cost-benefit ratio of cotton farming shows that there does exist a ground for immediate hike."

It's like the proverbial riddle -whether egg-first or hen-first? Is it the cost of cultivation that justifies the hiking support price or the uneconomical support price that leads to area-reduction in cotton cultivation?

Production/productivity varies from state to state mainly based on assured or protected irrigation to the farmers. In Punjab, Haryana and Rajasthan irrigation is 100% for their cotton crop, while Maharashtra enjoys 7% and Vidarbha still less at 3%. Probably MSP is fixed for certain crops at the national level and the uniformity is maintained, whereas the conditions prevalent and the hardships undergone by the farmers in farming operation and crop returns differ widely from place to place. NCP leader Ajit Pawar has said at Yavatmal recently that the MSP be hiked to Rs.6,000/-. A study conducted by the Central Institute for Cotton Research (CICR) has estimated that the cost of cotton production in backward regions like Vidarbha has gone up by 42% per quintal this year as compared to last year. In rupee terms, as against Rs.25,662/- it has gone up to Rs.36,359/- this year as indicated by economists A.R. Reddy and Anuradha Narala. Thus with the current MSP, the Vidarbha cotton farmer ends up suffering losses, which would certainly prove crippling for small and marginal farmers in particular. Many farm activists have claimed that cotton production has been hit this year due to erratic rains, a claim however, refuted by state officials. "A farmer with two acres of land will ideally produce up to 10 quintals with Bt cotton. And under the circumstances, he would lose Rs.7,000/- per annum at the MSP rate. That the open market prices save them from that blow, is a fact," said an official without wanting to be quoted.

The truth of the matter is that cotton farming and marketing has been thoroughly mismanaged both at the national and regional levels. Each region requires a thorough study of its local economy and the measures needed to be taken so that both the farming community in different states as well as the processing industry in the country are benefited at the end of the day. The Planning Commission in New Delhi and the Maharashtra State Planning Board at Mumbai need to study this aspect of farming economics in detail and suggest solid and viable remedies for implementation by both the Central and State Governments.

Ambitious Aim with Costly Consequence

A few decades ago higher education was not in the reach of many except for those scoring first divisions in their higher secondary exams and enjoying the loan scholarships granted by the state governments. But the scenario has changed since then and now a majority of the students with reasonable scores in the exams have started availing the educational loans made possible by the financial institutions liberally and at times vying with each other in disbursal of targeted sums in the presence of V.I.Ps.

The students are lucky to get loans for a variety of courses not only in India but also abroad. The employment opprtunities are also on the increase but not at the speed to all of them in which they are offered loans by the banks. In Tamil Nadu esp due to the efforts of Mr P.Chidambaram, the then Union Minister of Finance, the educational loans were disbursed with a vengeance. The aim was indeed praise-worthy.

Sometimes the provision is misused in such away that the undeserved too do get into the queue and the unscrupulous and mischievous staff in the banking sector has played a negative role resulting in the increase of non-performing assets (NPA) in educational loans. The latter stood at Rs 528.16 crore accounting for 5.02 % of educational loan business on June 30, 2011. There is no security required for educational loans up to Rs 4.00 lakh. Educational loans in India normally range between Rs 4 lakh and Rs 45 lakh with the repayment period being seven to 10 years. "Many students from North India pursuing engineering degrees in Tamil Nadu don't have a permanet address and it becomes difficult to track them once they complete the course" said S.N.Mishra , the convenor of State level Bankers ' Committee (SLBC) in Tamil Nadu.

There is no mechanism in the banking sector to ensure proper implementation of a scheme as usual in our delivery system. Educational loan scheme is no exception!

Stop-dams to store surplus rain water

One of the important inputs for profitable farming is irrigation through canals from dams and reservoirs or from underground sources. Umpteen are the ways and means by which we can store rain water for economical use during non-monsoon days, but unfortunately the successive governemnts both in the Centre and the states have been found wanting in their attempts to do the needful so far with the result most of the rain water gets drained into the ocean for ages. Construction of structures for storing rain water in several ways is one of the most important infrastructure development projects for agrarian revolution and prosperity to the farming community. A writer by name S Sheikh Abdul Khader ( Dinmani Daily, Tuesday, December 6, 2011) has emphasised the need for a series of stop dams and check dams along the river Tamirabarani in South Tamil Nadu so that the surplus rain water can be conserved for irrigaion and drinking water purposes in Tirunelveli and Tuticorin districts during lean days. As per his reporting the river originates from the Western Ghats (Poongulam) and runs for 120 KMs irrigating as much as 2.55 lakh acres before meeting the sea. It is a perennial river by receiving rains from both the South-West and North-East monsoons.

The author of this posting too has been advocating this idea for the last 30 years in several of his writngs on water resources of Madhya Pradesh and Chhattisgarh states.

Farmers at the Receiving End?

Tirumalisai near Chennai is set to be a new satellite town that has been in the offing for quite sometime now. The idea was originally floated in 1996 keeping in mind some five villages of Tiruvallur District with 2500 acres for the purpose. But the exercise was dropped looking to the opposition from the farming community. An attempt was mde in 2001 with 1700 acres. Again in 2006 the area was reduced to 466 acres. The present government again renewed its plan to start the project in 2011 with a proposal to acquire some 311 acres from those five villages namely Tirumalisai, Kuttambakkam, Chembarabakkam, Parvadarajapuram and Vellavedu. The allegation of the farmers is that the authorities mainly of Tamil Nadu Housing Board have been falsely representing to the state government that the lands proposed for acquisition are rain-fed areas whereas they are actually irrigated paddy fields. Some 300 farmers with 2000 agricultural labourers and their families are dependent on farming. They are apprehensive of not only losing their livelihood but also getting uprooted from their households.

It is better to inspect the spot by a committee of ministers and higher officials before deciding on the proposal of setting up the satellite town on this stretch of land near Chennai.

There is no doubt that we need a town nearby to ease this situation from Chennai city but at the same time one has to be careful and sympathetic towards the concerns of the farmers. And we can hardly afford to lose the paddy fields for the sake of concrete jungles. Otherwise we may have to face another Singur-type of a situation in Tamil Nadu too.