M.S. SWAMINATHAN
If farm ecology and economics go wrong, nothing else will go right in agriculture
The post-Independence history of Indian agriculture can be broadly grouped into four periods. Before describing them, I should mention that during the colonial era famines were frequent and famine commissions were abundant. The growth rate in food production during the 1900-1947 period was hardly 0.1 per cent. Most of the important institutional developments in agriculture emanated from the recommendations of famine commissions. The great Bengal Famine of 1942-43 provided the backdrop to India’s Independence.
It is to the credit of Independent India that famines of this kind have not been allowed to occur, although our population has grown from 350 million in 1947 to 1,100 million now.
Phase I: 1947-64
This was the Jawaharlal Nehru era where the major emphasis was on the development of infrastructure for scientific agriculture. The steps taken included the establishment of fertilizer and pesticide factories, construction of large multi-purpose irrigation-cum-power projects, organisation of community development and national extension programmes and, above all, the starting of agricultural universities, beginning with the Pant Nagar University established in 1958, as well as new agricultural research institutions, as for example the Central Rice Research Institute, Cuttack, and the Central Potato Research Institute, Shimla.
During this period, the population started increasing by over 3 per cent a year as a result of both the steps taken to strengthen public health care systems and advances in preventive and curative medicine.
The growth in food production was inadequate to meet the consumption needs of the growing population, and food imports became essential. Such food imports, largely under the PL-480 programme of the United States, touched a peak of 10 million tonnes in 1966.
Phase II: 1965-1985
This period coincides with the leadership of Lal Bahadur Shastri and Indira Gandhi, with Morarji Desai and Charan Singh serving as Prime Ministers during 1977-79. The emphasis was on maximising the benefits of infrastructure created during Phase I, particularly in the areas of irrigation and technology transfer. Major gaps in the strategies adopted during Phase I were filled, as for example the introduction of semi-dwarf high-yielding varieties of wheat and rice, which could utilise sunlight, water, and nutrients more efficiently and yield two to three times more than the strains included in the Intensive Agriculture District Programme (IADP) of the early 1960s. This period also saw the reorganisation and strengthening of agricultural research, education and extension, and the creation of institutions to provide farmers assured marketing opportunities and remunerative prices for their produce. The National Bank for Agriculture and Rural Development (NABARD) was set up. All these steps led to a quantum jump in the productivity and production of crops such as wheat and rice, a phenomenon christened in 1968 as the Green Revolution. C. Subramaniam (1964-67) and Jagjivan Ram provided the necessary public policy guidance and support.
The Green Revolution generated a mood of self-confidence in our agricultural capability. The gains were consolidated during the Sixth Five Year Plan period (1980-85) when for the first time agricultural growth rate exceeded the general economic growth rate. Also, the growth rate in food production exceeded that of the population. The Sixth Plan achievement illustrates the benefits arising from farmer-centred priorities in investment and in the overall agricultural production strategy.
Phase III: 1985-2000
This was the era of Rajiv Gandhi, P.V. Narasimha Rao and Atal Bihari Vajpayee, with several other Prime Minister serving for short periods.
This phase was characterised by greater emphasis on the production of pulses and oilseeds as well as of vegetables, fruits, and milk. Rajiv Gandhi introduced organisational innovations like Technology Missions, which resulted in a rapid rise in oilseed production. The Mission approach involves concurrent attention to conservation, cultivation, consumption, and commerce. Rain-fed areas and wastelands received greater attention and a Wasteland Development Board was set up. Wherever an end-to-end approach was introduced involving attention to all links in the production-consumption chain, progress was steady and sometimes striking as in the case of milk and egg production. This period ended with large grain reserves with the government, with the media highlighting the co-existence of “grain mountains and hungry millions.” This period also saw a gradual decline in public investment in irrigation and infrastructure essential for agricultural progress as well as a gradual collapse of the cooperative credit system.
Phase IV: 2001 to the present day
Despite the efforts of Prime Ministers Atal Bihari Vajpayee and Manmohan Singh, this phase is best described as one characterised by policy fatigue, resulting in technology extension and production fatigues. No wonder that the farmers, who keep others alive, are now forced to take their own lives and 40 per cent of them want to quit farming, if there is an alternative option.
The agricultural decline is taking place at a time when international prices of major foodgrains are going up steeply, partly owing to the use of grain for ethanol production. Land for food versus fuel is becoming a major issue. For example, the export price of wheat has risen from $197 a tonne in 2005 to $263 a tonne in 2007. Maize price has gone up from about $100 a tonne in 2005 to $166 a tonne now. International trade is also becoming free but not fair. Compounding these problems is the possibility of adverse changes in rainfall, temperature, and the sea level as a result of global warming. Melting of Himalayan ice and glaciers will result in floods of unprecedented dimensions in north India. If agricultural production does not remain above the population growth rate and if the public distribution system is starved of grain, there is every likelihood of our going back to the pre-Independence situation of recurrent famines. The grain mountains have disappeared and we are today in the era of diminishing grain reserves, escalating prices, and persistence of widespread under-nutrition.
Where do we go from here?
The Green Revolution of the 1960s was the result of synergy among technology, public policy and farmers’ enthusiasm. The post-60th anniversary era in agriculture will depend upon our determination to implement Jawaharlal Nehru’s exhortation, “Everything else can wait, but not agriculture” in both letter and spirit.
If farm ecology and economics go wrong, nothing else will go right in agriculture. This is the principal message of the current agrarian crisis. The agrarian crisis is likely to spread if the economics of small-scale farming is not improved. At the same time, State governments should not promote policies for ecocides (that is, acts of ecological suicide such as free electricity to pump groundwater, leading to the exhaustion of aquifers). How can we resolve the crisis? The first and foremost priority should go to making the era of farmers’ suicide history.
— Photo: K.K. Mustafah
Needed, a new deal: Progress in agriculture must be measured principally by the growth rate in the net income of farmers.
About 35 districts identified by the Union Ministry of Agriculture as the most affected by the agrarian crisis should be developed into Special Agricultural Zones (SAZ), where integrated attention will be paid to natural resources conservation and enhancement, eco-farming, improved local level consumption to overcome malnutrition, and pro-small farmer commerce. Most of these areas are rainfed and attention will have to be paid to the generation of multiple livelihood opportunities. These areas require the joint efforts of agricultural scientists, extension agencies, policy makers, and mass media. Unless the various government departments/ Ministries dealing with agriculture, animal husbandry, fisheries, forestry, environment, agro-processing and agri-business, irrigation, commerce, rural development and finance work on the principles of convergence and synergy, it will be difficult to find lasting solutions to the problems of small farmers. The major purpose of a Special Agricultural Zone is ecological restoration and the strengthening of the work and income security of farm families with about one hectare or less of land. While the Special Economic Zone (SEZ) is designed to enhance trade and export income involving mega-investment by the private sector industry, the SAZ is needed to save the lives and livelihoods of small farmers and landless labour by providing key centralised services to support decentralised small-scale production as well as market and income security. The SAZ concept will provide an effective method to end farmers’ suicides by creating a platform for collective action by all the departments and agencies concerned of the Central and State governments, private sector industry and civil society organisations. The present relief measures are fragmented both in design and implementation, and unless they are replaced with a holistic approach, with special emphasis on minimising risks and maximising net income, the crisis will get worse.
While carefully designed SAZs can help end the era of farmers’ suicides, the emerging larger agricultural production and food security crisis can be managed if the following steps are taken to achieve an evergreen revolution, leading to the enhancement of productivity in perpetuity without associated ecological harm. The five basic components of an evergreen revolution strategy are:
Conservation of prime farmland for agriculture and soil health care and enhancement, issue of Soil Health Cards indicating the organic matter and macro- and micronutrient status of the soil;
Water harvesting, management and conjunctive use of surface, rain, ground and treated effluent water and safeguarding water quality;
Credit and insurance reform;
Low-risk and environmentally friendly Green Technologies (such as integrated pest and nutrient management) and the provision of the needed inputs at the right time and place and at affordable cost;
Assured and remunerative marketing.
These five steps need to be taken and implemented in an integrated manner, so that we generate an Ever-green Revolution Symphony. The above steps are common to all farming zones. However, differentiated steps are needed in the following three areas:
First, we must defend the gains already made in the Green Revolution areas of Punjab, Haryana, and western Uttar Pradesh. This heartland of the Green Revolution, or India’s fertile crescent, is in a state of acute ecological and economic distress. Conservation farming and green agriculture should replace exploitative agriculture. Public policies promoting ecocides should be withdrawn and replaced with incentives for conservation farming. This region will remain a major source of foodgrains for the public distribution system, and hence needs urgent attention.
Secondly, we must extend the gains to additional areas like Bihar and the entire eastern India, which possess good soil and water resources, as well as to rainfed, hill and coastal areas. A second fertile crescent can be created immediately in the region comprising Bihar, eastern Uttar Pradesh, Chhattisgarh, West Bengal and Assam, where the untapped production reservoir even with technologies on the shelf is high.
Finally, we should make new gains, particularly in the areas of farming systems diversification and value addition. There is now a mismatch between production and post-harvest technologies. This should end. A quality literacy and value-addition movement should be launched.
The National Commission on Farmers has outlined a detailed strategy to achieve these goals. A draft National Policy for Farmers has been provided by the NCF, which if adopted will help make the growth rate in the net income of farmers as the principal criterion for measuring agricultural progress. Farmers are ready to help the nation. Are we ready to help them?
M.S. Swaminathan, eminent agricultural scientist, is founder-chairman of the M.S. Swaminathan Research Foundation, Chennai.
Friday, June 26, 2009
Inflation isn't unique to India, it's global
Indians tend to analyse economic events as though India was a case by itself. Yet the most causal look at our major issues inflation, economic slowdown, outsourcing, pollution, rising trade and remittances shows that they are also global issues.
Today, inflation is a problem across the world. Indians are worried that wholesale price inflation is approaching 13%, and consumer price inflation is approaching 9%. This is well above what is politically tolerable, and well above the RBI’s preferred range of 4.5-5%. The RBI has for two years been raising interest rates, and squeezing money supply through higher cash reserve ratios for banks, and open market bond sales.
Some analysts, such as Surjit Bhalla, protest that this policy is sadly misconceived and produces all pain and no gain. According to this view, tight money will hit growth and increase defaults without impacting inflation, which is mainly imported through booming global prices. After skyrocketing since early 2007, global commodity prices are now falling. This will automatically tame inflation, so the RBI should shift its focus to stimulating rather than slowing the economy, according to this view.
An opposite view comes from Friedmanite monetarists, who hold that inflation is always and everywhere a monetary phenomenon. Maybe commodity prices have doubled, but if money supply does not rise to accommodate higher purchases of commodities, people will be forced to buy less of other items, whose prices will fall. On balance, say monetarists, there will be no inflation.
I am not a pure monetarist. I believe that money matters, but that money alone does not determine outcomes. This puts me at odds with both Friedman and Bhalla. Global commodity prices are indeed a cause of inflation, in India and elsewhere.
Although financial dailies devote much space to monetary and fiscal policy, the main tools for curbing inflation in India have been trade policy and price control. The export of wheat, non-Basmati rice and (recently) maize has kept Indian grain prices much below world prices.
Import duty on edible oils has been scrapped. Export duties and arm-twisting has kept steel in India below world prices, and the current import policy for cement favours importers (who pay zero import duty and no countervailing duty) over domestic producers (who pay excise duty). Price control has kept the price of petrol, diesel, kerosene, LPG and fertilisers far below the world price, although this has serious fiscal consequences.
These measures could have terrible consequences if maintained for a long time, but in the short run have contributed greatly to inflation control. Neighbouring Pakistan suffers from 25% inflation, and so does Vietnam. The price of foodgrains in India is only 6-7% higher than a year ago, a remarkable feat considering that global prices have doubled. But this may not impress voters, who are concerned about the erosion of their living standard and are not consoled by the news that others are suffering even more.
Commodity prices have fallen sharply since early July. Given the slowdown in most economies, this trend may continue. So, should the RBI ease monetary policy, and stimulate growth? Can we say that food and fuel inflation represent imported inflation that is largely beyond the control of central banks, and so should be ignored both on the way up and down?
This is not an issue in India alone. It is an issue in countries across the globe. In many countries, central banks are reluctant to tighten money to slow growth in order to contain inflation, arguing that they cannot really tame imported inflation. Many central banks, in Opec as well as Asian manufacturing-exporters, have run up huge trade surpluses but resist currency appreciation. This tends to keep demand up and inflation high. Yet central banks persist, since they can much more easily check exchange rates than imported inflation.
This approach suffers from what Keynes called the fallacy of composition. A single central bank can legitimately argue that it lacks the power to check imported inflation, and so is better off stimulating growth. But if every country adopts this approach, the consequence will be global inflation stoked by central banks.
Any single country may import inflation, but the world as a whole cannot import inflation. Higher prices are not imported from Mars. They come from the actions of central banks and governments. So it is a serious mistake for any large country — including India — to feel that it cannot check imported inflation.
The US Fed has kept short-run interest rates extremely low at 2% to prevent a recession, even though inflation is running at 5.6%, the highest rate since 1991. China too has a negative real interest rate. It has tightened nominal interest rates for two years and raised the cash reserve requirements of banks to a huge 17%. Yet many economists — such as Arvind Subramaniam and Adam Posen in a recent op-ed in The Financial Times — accuse China of a loose monetary policy, arguing that China aims above all to resist currency appreciation through massive forex reserve accumulation. This artificial cheapening of the yuan is inflationary.
Subramiam and Posen argue that the US and China are currently refusing to share a reasonable part of the pain involved in inflation-fighting. Their monetary policies are much too loose, and they are free-riding on the inflation fighting efforts of others (notably the EU, India and Brazil). The two economists want co-ordinated central bank action to tackle inflation. Specifically, they want the US and China to do much more.
While agreeing, I would add two caveats. First, don’t overstate India’s inflation-fighting virtues: at 9%, its repo rate is negative or almost negative in real terms. Second, don’t overstate the looseness of US monetary policy: its structural credit crunch constrains lending even though interest rates are low.
What are the chances that we will really get purposive global action against inflation? Not high. Rich countries face recession, and politicians there will happily risk some inflation to save jobs and incomes. So, expect inflation to remain high despite falling commodity prices.
Today, inflation is a problem across the world. Indians are worried that wholesale price inflation is approaching 13%, and consumer price inflation is approaching 9%. This is well above what is politically tolerable, and well above the RBI’s preferred range of 4.5-5%. The RBI has for two years been raising interest rates, and squeezing money supply through higher cash reserve ratios for banks, and open market bond sales.
Some analysts, such as Surjit Bhalla, protest that this policy is sadly misconceived and produces all pain and no gain. According to this view, tight money will hit growth and increase defaults without impacting inflation, which is mainly imported through booming global prices. After skyrocketing since early 2007, global commodity prices are now falling. This will automatically tame inflation, so the RBI should shift its focus to stimulating rather than slowing the economy, according to this view.
An opposite view comes from Friedmanite monetarists, who hold that inflation is always and everywhere a monetary phenomenon. Maybe commodity prices have doubled, but if money supply does not rise to accommodate higher purchases of commodities, people will be forced to buy less of other items, whose prices will fall. On balance, say monetarists, there will be no inflation.
I am not a pure monetarist. I believe that money matters, but that money alone does not determine outcomes. This puts me at odds with both Friedman and Bhalla. Global commodity prices are indeed a cause of inflation, in India and elsewhere.
Although financial dailies devote much space to monetary and fiscal policy, the main tools for curbing inflation in India have been trade policy and price control. The export of wheat, non-Basmati rice and (recently) maize has kept Indian grain prices much below world prices.
Import duty on edible oils has been scrapped. Export duties and arm-twisting has kept steel in India below world prices, and the current import policy for cement favours importers (who pay zero import duty and no countervailing duty) over domestic producers (who pay excise duty). Price control has kept the price of petrol, diesel, kerosene, LPG and fertilisers far below the world price, although this has serious fiscal consequences.
These measures could have terrible consequences if maintained for a long time, but in the short run have contributed greatly to inflation control. Neighbouring Pakistan suffers from 25% inflation, and so does Vietnam. The price of foodgrains in India is only 6-7% higher than a year ago, a remarkable feat considering that global prices have doubled. But this may not impress voters, who are concerned about the erosion of their living standard and are not consoled by the news that others are suffering even more.
Commodity prices have fallen sharply since early July. Given the slowdown in most economies, this trend may continue. So, should the RBI ease monetary policy, and stimulate growth? Can we say that food and fuel inflation represent imported inflation that is largely beyond the control of central banks, and so should be ignored both on the way up and down?
This is not an issue in India alone. It is an issue in countries across the globe. In many countries, central banks are reluctant to tighten money to slow growth in order to contain inflation, arguing that they cannot really tame imported inflation. Many central banks, in Opec as well as Asian manufacturing-exporters, have run up huge trade surpluses but resist currency appreciation. This tends to keep demand up and inflation high. Yet central banks persist, since they can much more easily check exchange rates than imported inflation.
This approach suffers from what Keynes called the fallacy of composition. A single central bank can legitimately argue that it lacks the power to check imported inflation, and so is better off stimulating growth. But if every country adopts this approach, the consequence will be global inflation stoked by central banks.
Any single country may import inflation, but the world as a whole cannot import inflation. Higher prices are not imported from Mars. They come from the actions of central banks and governments. So it is a serious mistake for any large country — including India — to feel that it cannot check imported inflation.
The US Fed has kept short-run interest rates extremely low at 2% to prevent a recession, even though inflation is running at 5.6%, the highest rate since 1991. China too has a negative real interest rate. It has tightened nominal interest rates for two years and raised the cash reserve requirements of banks to a huge 17%. Yet many economists — such as Arvind Subramaniam and Adam Posen in a recent op-ed in The Financial Times — accuse China of a loose monetary policy, arguing that China aims above all to resist currency appreciation through massive forex reserve accumulation. This artificial cheapening of the yuan is inflationary.
Subramiam and Posen argue that the US and China are currently refusing to share a reasonable part of the pain involved in inflation-fighting. Their monetary policies are much too loose, and they are free-riding on the inflation fighting efforts of others (notably the EU, India and Brazil). The two economists want co-ordinated central bank action to tackle inflation. Specifically, they want the US and China to do much more.
While agreeing, I would add two caveats. First, don’t overstate India’s inflation-fighting virtues: at 9%, its repo rate is negative or almost negative in real terms. Second, don’t overstate the looseness of US monetary policy: its structural credit crunch constrains lending even though interest rates are low.
What are the chances that we will really get purposive global action against inflation? Not high. Rich countries face recession, and politicians there will happily risk some inflation to save jobs and incomes. So, expect inflation to remain high despite falling commodity prices.
High forex reserves can worsen recession
High foreign exchange reserves have, in the current global recession, saved Asian countries (including India) from the travails they suffered in the Asian financial crisis of 1997-2000. So, they must aim for rising forex reserves in future too, right? Wrong.
In truth, high Asian forex reserves are an important reason for the current recession. High reserves promise safety in a storm. But beyond a point this safety becomes illusory, because rising forex reserves worsen the global imbalances that have precipitated the recession.
The global recession has many roots. One is the erosion of traditional US household prudence. US households used to save 6% of their disposable income. But in recent years they went on a borrowing and spending spree, and household savings dropped to virtually zero. Corporations and financiers also ran up record debts, partly to buy assets such as houses, stocks and commodities. This created huge bubbles in all three markets.
When the bubbles finally burst, US households, corporations and financiers found themselves in dire straits. Many financial giants were rescued by the government. Meanwhile households, sobered by the turn of events, started saving 4% of disposable income, up from zero. More saving meant less spending, and made the recession deep and sharp.
Most Asians are smugly blaming US imprudence and loose financial regulation for the crisis, while portraying themselves as innocent victims. Yet they must share the guilt too. US profligacy did not arise in a vacuum. It arose in part because Asian insistence on high forex reserves meant that they poured dollars into the US to buy US securities. This flood of dollars from Asia drove down US interest rates, making it very attractive to borrow. That spurred the borrowing spree, and the accompanying bubbles.
Historically, rich countries had surplus savings, manifested in a trade surplus. Poor countries lacked savings, manifested in trade deficits, with the deficit being plugged by an inflow of dollars from rich to poor countries. For the world as a whole, current account surpluses and deficits of countries must necessarily balance. Historically, the surpluses of rich countries were offset by the deficits of poor ones.
But after the Asian financial crisis, something strange happened. Asian countries, above all China, began generating huge savings surpluses, manifested in huge current account surpluses. Many used undervalued exchange rates to artificially create trade surpluses, which were then invested in US treasuries (that is what foreign exchange reserves are).
However, poor Asians could not run huge surpluses unless others were willing to run huge deficits. Remarkably, the rich US began to do so. This arose partly from the sophistication of its financial system, which found many ways—too many, in fact-- of converting the flood of money from Asia into a borrowing and spending spree.
This sharp rise in US spending boosted the global economy, and created the record global GDP growth in 2003-08. US demand sucked in huge quantities of manufactures and services from Asia, above all from China. Asian manufacturing sucked in huge quantities of commodities from Africa and Latin America, raising incomes there too.
Alas, this boom was based on huge global imbalances that had to be corrected at some point. No country, not even the rich US, could keep running gargantuan trade deficits forever, to offset the surpluses of Asia. US asset bubbles burst, the boom ended, and US spending and imports plummeted.
Ending the consequent recession means reducing global imbalances to manageable proportions. Americans will have to save more, spend less and export more. Asian countries, especially China, will have to consume more, save less, and export less. This re-balancing will restore global balance, and enable global growth to rise sustainably again.
However, such re-balancing means that Asian countries must stop piling up ever-rising forex reserves (and trade surpluses). Such reserves represent excessive saving, excessive exports and insufficient imports. Excess forex reserves have provided apparent safety to Asian countries in a recessionary crisis, yet are also a cause of that very crisis.
What will happen if Asians insist on trying to keep savings and forex reserves high? Well, if Asians keep savings high and Americans and Europeans do so too, then world demand will collapse and the recession will become a Depression. Asians must recognize that high forex reserves serve as a safety cushion only up to a point, and beyond that exacerbate global imbalances that threaten disaster. Saving too much can be as harmful as saving too little. Unless Asian countries recognize this and go slow on future reserve accumulation, the recession may become worse than anyone dares imagine today.
In truth, high Asian forex reserves are an important reason for the current recession. High reserves promise safety in a storm. But beyond a point this safety becomes illusory, because rising forex reserves worsen the global imbalances that have precipitated the recession.
The global recession has many roots. One is the erosion of traditional US household prudence. US households used to save 6% of their disposable income. But in recent years they went on a borrowing and spending spree, and household savings dropped to virtually zero. Corporations and financiers also ran up record debts, partly to buy assets such as houses, stocks and commodities. This created huge bubbles in all three markets.
When the bubbles finally burst, US households, corporations and financiers found themselves in dire straits. Many financial giants were rescued by the government. Meanwhile households, sobered by the turn of events, started saving 4% of disposable income, up from zero. More saving meant less spending, and made the recession deep and sharp.
Most Asians are smugly blaming US imprudence and loose financial regulation for the crisis, while portraying themselves as innocent victims. Yet they must share the guilt too. US profligacy did not arise in a vacuum. It arose in part because Asian insistence on high forex reserves meant that they poured dollars into the US to buy US securities. This flood of dollars from Asia drove down US interest rates, making it very attractive to borrow. That spurred the borrowing spree, and the accompanying bubbles.
Historically, rich countries had surplus savings, manifested in a trade surplus. Poor countries lacked savings, manifested in trade deficits, with the deficit being plugged by an inflow of dollars from rich to poor countries. For the world as a whole, current account surpluses and deficits of countries must necessarily balance. Historically, the surpluses of rich countries were offset by the deficits of poor ones.
But after the Asian financial crisis, something strange happened. Asian countries, above all China, began generating huge savings surpluses, manifested in huge current account surpluses. Many used undervalued exchange rates to artificially create trade surpluses, which were then invested in US treasuries (that is what foreign exchange reserves are).
However, poor Asians could not run huge surpluses unless others were willing to run huge deficits. Remarkably, the rich US began to do so. This arose partly from the sophistication of its financial system, which found many ways—too many, in fact-- of converting the flood of money from Asia into a borrowing and spending spree.
This sharp rise in US spending boosted the global economy, and created the record global GDP growth in 2003-08. US demand sucked in huge quantities of manufactures and services from Asia, above all from China. Asian manufacturing sucked in huge quantities of commodities from Africa and Latin America, raising incomes there too.
Alas, this boom was based on huge global imbalances that had to be corrected at some point. No country, not even the rich US, could keep running gargantuan trade deficits forever, to offset the surpluses of Asia. US asset bubbles burst, the boom ended, and US spending and imports plummeted.
Ending the consequent recession means reducing global imbalances to manageable proportions. Americans will have to save more, spend less and export more. Asian countries, especially China, will have to consume more, save less, and export less. This re-balancing will restore global balance, and enable global growth to rise sustainably again.
However, such re-balancing means that Asian countries must stop piling up ever-rising forex reserves (and trade surpluses). Such reserves represent excessive saving, excessive exports and insufficient imports. Excess forex reserves have provided apparent safety to Asian countries in a recessionary crisis, yet are also a cause of that very crisis.
What will happen if Asians insist on trying to keep savings and forex reserves high? Well, if Asians keep savings high and Americans and Europeans do so too, then world demand will collapse and the recession will become a Depression. Asians must recognize that high forex reserves serve as a safety cushion only up to a point, and beyond that exacerbate global imbalances that threaten disaster. Saving too much can be as harmful as saving too little. Unless Asian countries recognize this and go slow on future reserve accumulation, the recession may become worse than anyone dares imagine today.
Building Infrastructure is not Keynesian
Across the globe, politicians from Manmohan Singh to Barack Obama plan to boost government spending to revive flagging economies. Especially popular are big infrastructure projects, widely seen as an excellent way to give a Keynesian boost to economies. Yet this represents a misunderstanding of Keynes.
In a recession, many things fall together—production, employment, prices and business profits. Businesses go bust, and this can lead to runs on banks and a crisis in the financial system. Keynes emphasized that the root cause of a depression was a vicious downward spiral of consumption. Tackle that, he said, and a flagging economy can revive.
Andrew Mellon, US Treasury Secretary in 1929-33, viewed the Great Depression as moral retribution for wicked over-spenders, and a recipe for increasing prudence and savings. By contrast, Keynes realized that a recession was caused by excess saving, which drove down demand and GDP in a vicious downward spiral. To escape the spiral, Keynes proposed government action to boost consumption and end over-saving. The government could boost its own spending through public works. Or else it could cut taxes to boost private consumption.
Keynes did not advocate building infrastructure. Instead, he suggested that governments should pay people to dig ditches and then fill them up again. This would not create infrastructure. But it would put money into the pockets of people, and that was the aim of the exercise.
Why, then is infrastructure creation so widely equated with Keynesian economics? Because of public misunderstanding of the history of the Great Depression. US President Roosevelt launched the New Deal to combat the 25% unemployment he faced on being elected in 1932. The New Deal created jobs in projects to build roads, dams and electric systems. It was a huge political success, and aided his re-election in 1936 and 1940. Yet economists remain sharply divided on its economic impact.
The economy revived from 1932 to 1936, but then plunged into a fresh depression in 1938, wiping out most earlier gains. So, the New Deal created jobs quickly, but not sustainably. It failed to address the financial collapse and deflation that many economists believe turned a mere recession into a Great Depression. T he downturn was finally cured not by the New Deal but by World War II: the wartime economy needed all the manpower available.
In the middle of the Great Depression, Keynes produced his seminal General Theory, explaining the interaction of production, wages and employment. During the New Deal, Roosevelt swore by balanced budgets, the ruling economic orthodoxy. But Keynes’ General Theory argued that this was a mistake, and that governments should run large fiscal deficits during a recession to pump more demand into the economy. Roosevelt’s budget-balancing efforts typically failed, and he often ended up with budget deficits without meaning to. So he was a Keynesian by accident more than intention.
Yet the public remembers Roosevelt as the first leader to try to spend his way out of a recession, exactly what Keynes advocated. After World War II, Keynesian demand management became the new economic orthodoxy. Governments everywhere began pumping money into flagging economies to stimulate growth.
Hubris followed. In the 1970s, constant pumping of money led in many countries to inflation rather than growth. Clearly, Keynesian spending did not boost GDP in all situations. But it retained its reputation as a useful tool, though not a panacea, in recessions.
Global experience showed that Keynesian demand management did not require infrastructure spending. The simplest, quickest way to increase purchasing power was to cut taxes. This increased demand instantly.
However, it also had drawbacks. When consumers were given additional purchasing power, they did not necessarily buy domestic goods: they also bought imported goods. Thus the Keynesian stimulus could leak out of the domestic economy through imports, and boost foreign economies instead.
Public spending on infrastructure stood out as a way to minimise such leakages. In most countries, infrastructure utilized mostly domestic equipment and labour. So, the stimulus remained mainly within the country and did not leak out through imports.
Besides, infrastructure projects were popular with politicians keen to channel projects into their constituencies. Politicians hated Keynes’ idea of paying people to dig and fill up ditches. They preferred job creation to build infrastructure, creating a base for future growth.
Manmohan Singh thinks this is the best way to combat the recession. So do many economists. But I have reservations.
In Rooosevelt’s time, road building was labour intensive. But today, it is highly mechanised, using little labour. Dams are no longer built by armies of workers. Power plants, ports and airports are hugely capital-intensive. With today’s technology, infrastructure is not a massive job creator, unless we insist on obsolete, inefficient techniques.
This is exactly what we do in the National Rural Employment Guarantee Scheme. This mandates that 60% of the cost must be in wages. But such labour-intensive techniques yield low-quality roads that disappear after every monsoon. Decades of rural employment schemes have failed to create permanent assets. This approach cannot create good infrastructure.
Keynes would not have been surprised. He would have said that creating jobs should not be confused with creating infrastructure. He would have opted for digging and filling ditches.
Building infrastructure is time-consuming. Every big project requires a lengthy environmental impact assessment, with public hearings. Land acquisition disputes can hold up projects for years. So infrastructure projects disburse money slowly, and cannot provide a quick Keynesian boost.
Now, India badly needs infrastructure. But this requires massive long-term spending. Don’t confuse this worthy aim with providing a rapid Keynesian boost.
The fastest, most effective boost comes from slashing slash taxes. In the West, cutting income tax is a popular Keynesian nostrum. But in India only a tiny fraction of people pay income tax. So the right taxes to slash are excise duty and sales tax. These are paid by everybody (notwithstanding substantial tax evasion), and will immediately boost purchasing power. There will be no time lag, as in project spending. That is the Keynesian way to go.
In a recession, many things fall together—production, employment, prices and business profits. Businesses go bust, and this can lead to runs on banks and a crisis in the financial system. Keynes emphasized that the root cause of a depression was a vicious downward spiral of consumption. Tackle that, he said, and a flagging economy can revive.
Andrew Mellon, US Treasury Secretary in 1929-33, viewed the Great Depression as moral retribution for wicked over-spenders, and a recipe for increasing prudence and savings. By contrast, Keynes realized that a recession was caused by excess saving, which drove down demand and GDP in a vicious downward spiral. To escape the spiral, Keynes proposed government action to boost consumption and end over-saving. The government could boost its own spending through public works. Or else it could cut taxes to boost private consumption.
Keynes did not advocate building infrastructure. Instead, he suggested that governments should pay people to dig ditches and then fill them up again. This would not create infrastructure. But it would put money into the pockets of people, and that was the aim of the exercise.
Why, then is infrastructure creation so widely equated with Keynesian economics? Because of public misunderstanding of the history of the Great Depression. US President Roosevelt launched the New Deal to combat the 25% unemployment he faced on being elected in 1932. The New Deal created jobs in projects to build roads, dams and electric systems. It was a huge political success, and aided his re-election in 1936 and 1940. Yet economists remain sharply divided on its economic impact.
The economy revived from 1932 to 1936, but then plunged into a fresh depression in 1938, wiping out most earlier gains. So, the New Deal created jobs quickly, but not sustainably. It failed to address the financial collapse and deflation that many economists believe turned a mere recession into a Great Depression. T he downturn was finally cured not by the New Deal but by World War II: the wartime economy needed all the manpower available.
In the middle of the Great Depression, Keynes produced his seminal General Theory, explaining the interaction of production, wages and employment. During the New Deal, Roosevelt swore by balanced budgets, the ruling economic orthodoxy. But Keynes’ General Theory argued that this was a mistake, and that governments should run large fiscal deficits during a recession to pump more demand into the economy. Roosevelt’s budget-balancing efforts typically failed, and he often ended up with budget deficits without meaning to. So he was a Keynesian by accident more than intention.
Yet the public remembers Roosevelt as the first leader to try to spend his way out of a recession, exactly what Keynes advocated. After World War II, Keynesian demand management became the new economic orthodoxy. Governments everywhere began pumping money into flagging economies to stimulate growth.
Hubris followed. In the 1970s, constant pumping of money led in many countries to inflation rather than growth. Clearly, Keynesian spending did not boost GDP in all situations. But it retained its reputation as a useful tool, though not a panacea, in recessions.
Global experience showed that Keynesian demand management did not require infrastructure spending. The simplest, quickest way to increase purchasing power was to cut taxes. This increased demand instantly.
However, it also had drawbacks. When consumers were given additional purchasing power, they did not necessarily buy domestic goods: they also bought imported goods. Thus the Keynesian stimulus could leak out of the domestic economy through imports, and boost foreign economies instead.
Public spending on infrastructure stood out as a way to minimise such leakages. In most countries, infrastructure utilized mostly domestic equipment and labour. So, the stimulus remained mainly within the country and did not leak out through imports.
Besides, infrastructure projects were popular with politicians keen to channel projects into their constituencies. Politicians hated Keynes’ idea of paying people to dig and fill up ditches. They preferred job creation to build infrastructure, creating a base for future growth.
Manmohan Singh thinks this is the best way to combat the recession. So do many economists. But I have reservations.
In Rooosevelt’s time, road building was labour intensive. But today, it is highly mechanised, using little labour. Dams are no longer built by armies of workers. Power plants, ports and airports are hugely capital-intensive. With today’s technology, infrastructure is not a massive job creator, unless we insist on obsolete, inefficient techniques.
This is exactly what we do in the National Rural Employment Guarantee Scheme. This mandates that 60% of the cost must be in wages. But such labour-intensive techniques yield low-quality roads that disappear after every monsoon. Decades of rural employment schemes have failed to create permanent assets. This approach cannot create good infrastructure.
Keynes would not have been surprised. He would have said that creating jobs should not be confused with creating infrastructure. He would have opted for digging and filling ditches.
Building infrastructure is time-consuming. Every big project requires a lengthy environmental impact assessment, with public hearings. Land acquisition disputes can hold up projects for years. So infrastructure projects disburse money slowly, and cannot provide a quick Keynesian boost.
Now, India badly needs infrastructure. But this requires massive long-term spending. Don’t confuse this worthy aim with providing a rapid Keynesian boost.
The fastest, most effective boost comes from slashing slash taxes. In the West, cutting income tax is a popular Keynesian nostrum. But in India only a tiny fraction of people pay income tax. So the right taxes to slash are excise duty and sales tax. These are paid by everybody (notwithstanding substantial tax evasion), and will immediately boost purchasing power. There will be no time lag, as in project spending. That is the Keynesian way to go.
Government unveils stimulus package
Across-the-board
4 per cent cut
in Cenvat
Package aims to revive various crucial sectors
NEW DELHI: Unveiling the much-awaited stimulus package to shore up various sectors of the economy from the global downturn, the government on Sunday effected an across-the-board 4 per cent cut in Cenvat to bring down the prices of cars, cement, textiles and other products, and earmarked an additional Rs. 20,000 crore for infrastructure, industry and export sectors for the current fiscal.
In what may be dubbed as a mini-budget of sorts to lessen the impact of the global slowdown and recession in the West on the Indian economy, the package, while entailing a revenue loss of Rs 8,700 crore in the remaining four months of 2008-09, seeks to revive various crucial sectors such as housing, exports, automobile, textiles and small and medium enterprises (SMEs).
In an all-encompassing measure, the Cenvat on all products — barring non-petroleum goods — have been reduced from 14, 12 and 8 per cent to 10, eight and 4 per cent for various categories.
Full exemption from basic customs duty has been effected on naphtha to provide relief to the power sector. While the export duty on iron ore fines has been withdrawn, the levy on export of iron lumps has been cut from 15 to 5 per cent.
Apparently, the package, drawn up at the instance of Prime Minister Manmohan Singh, who also holds the Finance portfolio, seeks to boost power, exports, housing, auto, SMEs and infrastructure sectors through additional funding.
Tax-free bonds
The 10-point package, with significant incentives for the sectors affected by the slowdown, has also permitted India Infrastructure Finance Company Ltd. to raise Rs. 10,000 crore through tax-free bonds by March as part of the exercise to support the Rs. 1,00,000-crore highways development programme.
Briefing journalists here on the package, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “The market forces would compel manufacturers in a competitive environment to bring down prices and pass on tax benefits to customers.”
He pointed out that as part of steps to create demand in the economy, which was expected to grow by over 7 per cent, “the total spending programme in the balance four months of the current fiscal year, taking Plan and non-Plan expenditure together is expected to be Rs. 3,00,000 crore.”
Close watch
Mr. Ahluwalia stressed that the government was keeping a close watch on the evolving economic situation and “will not hesitate to take additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity.”
An official statement said: “The government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem.”
It also noted that monetary measures effected by the Reserve Bank of India were being “supplemented by fiscal measures designed to stimulate the economy. In recognition of the need for a fiscal stimulus the government had consciously allowed the fiscal deficit to expand beyond the originally targeted level.”
“The economy will continue to need stimulus in 2009-2010 also and this can be achieved by ensuring a substantial increase in Plan expenditure as part of the budget for next year,” the statement said.
4 per cent cut
in Cenvat
Package aims to revive various crucial sectors
NEW DELHI: Unveiling the much-awaited stimulus package to shore up various sectors of the economy from the global downturn, the government on Sunday effected an across-the-board 4 per cent cut in Cenvat to bring down the prices of cars, cement, textiles and other products, and earmarked an additional Rs. 20,000 crore for infrastructure, industry and export sectors for the current fiscal.
In what may be dubbed as a mini-budget of sorts to lessen the impact of the global slowdown and recession in the West on the Indian economy, the package, while entailing a revenue loss of Rs 8,700 crore in the remaining four months of 2008-09, seeks to revive various crucial sectors such as housing, exports, automobile, textiles and small and medium enterprises (SMEs).
In an all-encompassing measure, the Cenvat on all products — barring non-petroleum goods — have been reduced from 14, 12 and 8 per cent to 10, eight and 4 per cent for various categories.
Full exemption from basic customs duty has been effected on naphtha to provide relief to the power sector. While the export duty on iron ore fines has been withdrawn, the levy on export of iron lumps has been cut from 15 to 5 per cent.
Apparently, the package, drawn up at the instance of Prime Minister Manmohan Singh, who also holds the Finance portfolio, seeks to boost power, exports, housing, auto, SMEs and infrastructure sectors through additional funding.
Tax-free bonds
The 10-point package, with significant incentives for the sectors affected by the slowdown, has also permitted India Infrastructure Finance Company Ltd. to raise Rs. 10,000 crore through tax-free bonds by March as part of the exercise to support the Rs. 1,00,000-crore highways development programme.
Briefing journalists here on the package, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “The market forces would compel manufacturers in a competitive environment to bring down prices and pass on tax benefits to customers.”
He pointed out that as part of steps to create demand in the economy, which was expected to grow by over 7 per cent, “the total spending programme in the balance four months of the current fiscal year, taking Plan and non-Plan expenditure together is expected to be Rs. 3,00,000 crore.”
Close watch
Mr. Ahluwalia stressed that the government was keeping a close watch on the evolving economic situation and “will not hesitate to take additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity.”
An official statement said: “The government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem.”
It also noted that monetary measures effected by the Reserve Bank of India were being “supplemented by fiscal measures designed to stimulate the economy. In recognition of the need for a fiscal stimulus the government had consciously allowed the fiscal deficit to expand beyond the originally targeted level.”
“The economy will continue to need stimulus in 2009-2010 also and this can be achieved by ensuring a substantial increase in Plan expenditure as part of the budget for next year,” the statement said.
Fighting terrorism by reforming governance
C. Raj Kumar
A framework for action at the highest levels of the government is suggested so that an actionable plan can be evolved within a time-frame to fight terrorism and prepare a response mechanism.
The terror attacks in Mumbai have once again demonstrated how incapable India is as a nation to prepare itself to fight against terrorism. This is notwithstanding the courage and bravery displayed by the members of the National Security Guard (NSG), the Mumbai police and other law enforcement agencies. The anger and outrage that the citizenry has expressed against the politicians needs to be understood well as they do play a leading role in governing India and have a duty and responsibility to act now. In doing this, they will indeed have the full support of the people of India.
The following framework for action at the highest levels of the government is suggested so that an actionable plan can be evolved within a time-frame both to fight terrorism and prepare a response mechanism in the aftermath of terrorist attacks.
1. Formation of a Central anti-terrorism commission
On July 30, 2008, this writer wrote in these columns on the need to establish a Central Anti-Terrorism Commission (CAT-COM) under the Prime Minister’s Office. Despite numerous acts of terrorism in India, the governance machinery has not adequately responded to the issue. Responding to terrorism should be done in a methodical, legal and strategic manner, and it should be done by an exclusive body vested with the necessary powers and resources along with a legal mandate to seek fundamental reforms in the law enforcement machinery. The internal security of India is a serious matter. It deserves attention at the highest level, and professionals with the highest degree of competence and integrity should be appointed to this commission. CAT-COM should not be merely an advisory body, but a commission that has powers to seek legal, administrative, and institutional reforms and formulate policies with a view to fighting terrorism and implementing them swiftly. The government is fully empowered to establish such an institution and this is a good time and opportunity to do that.
2. Strengthening law enforcement machinery across all States
The law enforcement machinery across all States needs to be significantly improved. The police are not adequately equipped to deal with new threats. The NSG and the officers of the Mumbai police demonstrated courage and bravery in responding to the latest attacks. But our law enforcement machinery functions under stressful and inhospitable conditions. Some of the problems the machinery at the State and Central level faces include, but are not limited to, political interference, lack of autonomy, lack of proper training and resources, and lack of adequate compensation and career development opportunities. While these are some of the problems the law enforcement machinery faces as an institution, it also constantly faces a credibility deficit, given the numerous cases of human rights violations and other abuses relating to civil liberties which the police in India have been involved in. It is important that the police force ensure transparency and accountability in its functioning. It has also to be ensured that it functions independent of and free from interference.
3. Reforming governance
When terrorist attacks happen, India as a country expresses shock and at times gets carried away in the zeal to seek justice. But getting justice in India is inextricably connected to seeking reforms in our dysfunctional criminal justice system, which is also corrupt and inefficient. We need police reforms and reforms relating to the criminal justice system: both are urgent imperatives. There have been a number of reports based on careful studies of each of these issues, but little or no effort has been taken to implement the recommendations. Institutionalised corruption in India is a social reality across all governmental institutions. This has also affected India’s ability to effectively ensure national security. The governance reforms relating to fighting terrorism should take place at three levels:
a. Intelligence machinery: Our intelligence machinery should be urgently reformed so that institutions such as the Research and Analysis Wing (RAW) and the Intelligence Bureau (IB) are better prepared to perform their functions in an effective manner. The RAW, the IB and other agencies need to be empowered and made more relevant so that they are able to gather information that would be useful in preventing attacks. There is no doubt that intelligence-gathering is a long and arduous task, but the Central government needs to put good governance systems in place so that effective gathering of intelligence becomes possible. A related issue is the sharing of intelligence between the Central government and the State governments and among the state governments. Terrorism is an issue of utmost importance in national security and the Central government has to work closely with State governments so that any information relating to possible terrorist attacks or movements or security risks is quickly shared. The legal and constitutional framework should be put together to ensure that fighting terrorism jointly becomes the legal obligation of both the State and Central governments.
b. Vigilance apparatus: There is a lot more to be done to empower the vigilance apparatus. When the investigations into the latest Mumbai terrorist attacks move forward, we will get a lot more information as to how there were so many security lapses that led to less than a dozen individuals holding a city to a ransom for three days. For example, there should have been many more closed circuit television (CCTV) cameras that actually work and are able to provide information in real time to the security establishment. Security needs to be stepped up in all public places. Police officers should have better equipment than they currently have, in order to be able to respond to the kind of terrorist threats that are being faced today. Airports and seaports need to be made more secure. But security should not mean harassment. Rather, there should be effective systems that use the latest technology and communications systems, to ensure that security is tighter and more effective but without involving harassment of any kind.
c. Anti-terror response: The State police forces are phenomenally ill-equipped and do not have the training or support to fight terrorism. While it may be useful to establish anti-terror cells in every State, the focus ought to be on creating a framework to develop sound anti-terror response mechanisms that will involve huge coordination between various agencies including disaster management teams, fire-fighters, State police forces, Central government security agencies, the RAW, the IB and others at the State and Central level.
Crisis response mechanisms need to be put in place in the aftermath of terrorist attacks so that no individual or institution is caught unawares in dealing with such situations. The anti-terror response mechanism should have a wide range of facilities properly put in place so that in the event of a terrorist attack the government is equipped to deal with it. Since many developed countries of the world including the U.S. and the U.K. have been victims of terrorism in the past, it will be useful to discuss with the institutions they have in place to respond to terror. In addition to the police-based law enforcement machinery, fire fighting systems need to be on the ready, experts trained in hostage negotiations should be available, hospitals should be equipped to meet sudden contingencies, and doctors, social workers, and trauma psychologists should be oriented to meeting crises situations. All of them will have a critical role in the aftermath of terrorism.
Depoliticising national security and making renewed efforts to fight terrorism are essential steps to radically reform India’s internal security structure. The terror attacks in Mumbai provide an opportunity for the politicians to get their act together to build a safer and more secure India.
(Professor C. Raj Kumar is an honorary consultant to the National Human Rights Commission and is on leave of absence from the School of Law of the City University
A framework for action at the highest levels of the government is suggested so that an actionable plan can be evolved within a time-frame to fight terrorism and prepare a response mechanism.
The terror attacks in Mumbai have once again demonstrated how incapable India is as a nation to prepare itself to fight against terrorism. This is notwithstanding the courage and bravery displayed by the members of the National Security Guard (NSG), the Mumbai police and other law enforcement agencies. The anger and outrage that the citizenry has expressed against the politicians needs to be understood well as they do play a leading role in governing India and have a duty and responsibility to act now. In doing this, they will indeed have the full support of the people of India.
The following framework for action at the highest levels of the government is suggested so that an actionable plan can be evolved within a time-frame both to fight terrorism and prepare a response mechanism in the aftermath of terrorist attacks.
1. Formation of a Central anti-terrorism commission
On July 30, 2008, this writer wrote in these columns on the need to establish a Central Anti-Terrorism Commission (CAT-COM) under the Prime Minister’s Office. Despite numerous acts of terrorism in India, the governance machinery has not adequately responded to the issue. Responding to terrorism should be done in a methodical, legal and strategic manner, and it should be done by an exclusive body vested with the necessary powers and resources along with a legal mandate to seek fundamental reforms in the law enforcement machinery. The internal security of India is a serious matter. It deserves attention at the highest level, and professionals with the highest degree of competence and integrity should be appointed to this commission. CAT-COM should not be merely an advisory body, but a commission that has powers to seek legal, administrative, and institutional reforms and formulate policies with a view to fighting terrorism and implementing them swiftly. The government is fully empowered to establish such an institution and this is a good time and opportunity to do that.
2. Strengthening law enforcement machinery across all States
The law enforcement machinery across all States needs to be significantly improved. The police are not adequately equipped to deal with new threats. The NSG and the officers of the Mumbai police demonstrated courage and bravery in responding to the latest attacks. But our law enforcement machinery functions under stressful and inhospitable conditions. Some of the problems the machinery at the State and Central level faces include, but are not limited to, political interference, lack of autonomy, lack of proper training and resources, and lack of adequate compensation and career development opportunities. While these are some of the problems the law enforcement machinery faces as an institution, it also constantly faces a credibility deficit, given the numerous cases of human rights violations and other abuses relating to civil liberties which the police in India have been involved in. It is important that the police force ensure transparency and accountability in its functioning. It has also to be ensured that it functions independent of and free from interference.
3. Reforming governance
When terrorist attacks happen, India as a country expresses shock and at times gets carried away in the zeal to seek justice. But getting justice in India is inextricably connected to seeking reforms in our dysfunctional criminal justice system, which is also corrupt and inefficient. We need police reforms and reforms relating to the criminal justice system: both are urgent imperatives. There have been a number of reports based on careful studies of each of these issues, but little or no effort has been taken to implement the recommendations. Institutionalised corruption in India is a social reality across all governmental institutions. This has also affected India’s ability to effectively ensure national security. The governance reforms relating to fighting terrorism should take place at three levels:
a. Intelligence machinery: Our intelligence machinery should be urgently reformed so that institutions such as the Research and Analysis Wing (RAW) and the Intelligence Bureau (IB) are better prepared to perform their functions in an effective manner. The RAW, the IB and other agencies need to be empowered and made more relevant so that they are able to gather information that would be useful in preventing attacks. There is no doubt that intelligence-gathering is a long and arduous task, but the Central government needs to put good governance systems in place so that effective gathering of intelligence becomes possible. A related issue is the sharing of intelligence between the Central government and the State governments and among the state governments. Terrorism is an issue of utmost importance in national security and the Central government has to work closely with State governments so that any information relating to possible terrorist attacks or movements or security risks is quickly shared. The legal and constitutional framework should be put together to ensure that fighting terrorism jointly becomes the legal obligation of both the State and Central governments.
b. Vigilance apparatus: There is a lot more to be done to empower the vigilance apparatus. When the investigations into the latest Mumbai terrorist attacks move forward, we will get a lot more information as to how there were so many security lapses that led to less than a dozen individuals holding a city to a ransom for three days. For example, there should have been many more closed circuit television (CCTV) cameras that actually work and are able to provide information in real time to the security establishment. Security needs to be stepped up in all public places. Police officers should have better equipment than they currently have, in order to be able to respond to the kind of terrorist threats that are being faced today. Airports and seaports need to be made more secure. But security should not mean harassment. Rather, there should be effective systems that use the latest technology and communications systems, to ensure that security is tighter and more effective but without involving harassment of any kind.
c. Anti-terror response: The State police forces are phenomenally ill-equipped and do not have the training or support to fight terrorism. While it may be useful to establish anti-terror cells in every State, the focus ought to be on creating a framework to develop sound anti-terror response mechanisms that will involve huge coordination between various agencies including disaster management teams, fire-fighters, State police forces, Central government security agencies, the RAW, the IB and others at the State and Central level.
Crisis response mechanisms need to be put in place in the aftermath of terrorist attacks so that no individual or institution is caught unawares in dealing with such situations. The anti-terror response mechanism should have a wide range of facilities properly put in place so that in the event of a terrorist attack the government is equipped to deal with it. Since many developed countries of the world including the U.S. and the U.K. have been victims of terrorism in the past, it will be useful to discuss with the institutions they have in place to respond to terror. In addition to the police-based law enforcement machinery, fire fighting systems need to be on the ready, experts trained in hostage negotiations should be available, hospitals should be equipped to meet sudden contingencies, and doctors, social workers, and trauma psychologists should be oriented to meeting crises situations. All of them will have a critical role in the aftermath of terrorism.
Depoliticising national security and making renewed efforts to fight terrorism are essential steps to radically reform India’s internal security structure. The terror attacks in Mumbai provide an opportunity for the politicians to get their act together to build a safer and more secure India.
(Professor C. Raj Kumar is an honorary consultant to the National Human Rights Commission and is on leave of absence from the School of Law of the City University
Has the Kyoto protocol worked?
David Adam
The world is on track to meet its Kyoto targets for greenhouse gases. But the drop has little to do with climate policies.
Agreed in 1997, the Kyoto protocol aimed to cut emissions of greenhouse gases across the developed world by about 5 per cent compared with 1990. It came into force in 2005, following ratification by Russia, which means the deadline for the legally binding cuts to be made is 2008-12. It was based on the “common but differentiated responsibility” approach to global warming, with countries most able to make cuts asked to do so. Many countries were allowed to incre ase pollution, including all those in the developing world. Most controversially, Kyoto introduced mechanisms such as carbon trading to help countries meet their targets in “flexible” ways — often in other countries — rather than by making cuts at home.
Figures released by the U.N. last month suggest the world is on track to meet its Kyoto targets for greenhouse gases — carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, hydrofluorocarbons and perfluorocarbons. Emissions by the 40 industrialised nations that agreed binding cuts in pollution are down 5 per cent on 1990 levels. But the drop has little to do with climate policies: the bulk of the decline is down to the collapse of the Soviet Union and the subsequent economic decline in eastern Europe in the 1990s. Without these so-called “economies in transition,” greenhouse gas emissions have grown by almost 10 per cent since 1990.
Yvo de Boer, executive secretary of the U.N. climate secretariat, said the figures showed emissions were rising once again in eastern Europe. “The biggest recent increase in emissions of industrialised countries has come from economies in transition, which have seen a rise of 7.4 per cent in greenhouse gas emissions within the 2000 to 2006 time frame,” he said.
Among industrialised nations, 16 are on target to meet their Kyoto obligations, including France, the U.K., Greece and Hungary, the U.N. said. Some 20 countries are off-course, including Canada, Germany, Ireland, Italy, Japan, New Zealand and Spain. Nations that miss their Kyoto target in 2012 will incur a penalty of an additional third added to whatever cut they agree under a new treaty in Copenhagen.
Has Kyoto worked? “In terms of emission reductions achieved, the answer would be no,”De Boer said. “A 5 per cent cut is a pretty small step on what will be a long and arduous journey. On the other hand, Kyoto has had great success in putting an architecture in place. Monitoring and verification systems, carbon markets, technology transfer and funds for adaptation have all been mobilised by Kyoto,” he said. “I think this is a fabulous architecture that we can build on on the road to Copenhagen.”
There are seven key issues on the road to Copenhagen.
Global vision
The world has yet to formally agree a goal in the battle against global warming. This could be a maximum temperature rise, such as 2{+0}C, or concentration of carbon dioxide in the atmosphere. More likely, it will be a vaguer ‘direction of travel’ such as the G8 pledge to halve global emissions by 2050.
Mitigation
The key issue - who will cut their carbon by how much and by when. To be meaningful, targets must be short-term, perhaps something like 25-40 per cent by 2020 for the developed world. Developing countries, such as China, could be allowed to increase pollution, as long as they reduce the rate of increase, and agree to take on proper reductions within 15 years or so.
Adaptation
How much rich countries will pay poorer ones to cope with floods and droughts. And how the developed world can make sure the promised money is paid.
Technology
How developing countries will access affordable clean technology to reduce emissions, such as carbon capture and solar power, developed by companies in industrialised countries.
Finance
How developed countries will provide funds for adaptation and mitigation in the developing world, and how those funds will be managed.
Forests
How developing countries with tropical forests can be paid to keep them intact — deforestation causes about a fifth of all greenhouse gas emissions.
Carbon trading and offsets
How systems such as the UN clean development mechanism and the European emissions trading scheme set up under Kyoto can be strengthened and expanded. — © Guardian Newspapers Limited, 2008
The world is on track to meet its Kyoto targets for greenhouse gases. But the drop has little to do with climate policies.
Agreed in 1997, the Kyoto protocol aimed to cut emissions of greenhouse gases across the developed world by about 5 per cent compared with 1990. It came into force in 2005, following ratification by Russia, which means the deadline for the legally binding cuts to be made is 2008-12. It was based on the “common but differentiated responsibility” approach to global warming, with countries most able to make cuts asked to do so. Many countries were allowed to incre ase pollution, including all those in the developing world. Most controversially, Kyoto introduced mechanisms such as carbon trading to help countries meet their targets in “flexible” ways — often in other countries — rather than by making cuts at home.
Figures released by the U.N. last month suggest the world is on track to meet its Kyoto targets for greenhouse gases — carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, hydrofluorocarbons and perfluorocarbons. Emissions by the 40 industrialised nations that agreed binding cuts in pollution are down 5 per cent on 1990 levels. But the drop has little to do with climate policies: the bulk of the decline is down to the collapse of the Soviet Union and the subsequent economic decline in eastern Europe in the 1990s. Without these so-called “economies in transition,” greenhouse gas emissions have grown by almost 10 per cent since 1990.
Yvo de Boer, executive secretary of the U.N. climate secretariat, said the figures showed emissions were rising once again in eastern Europe. “The biggest recent increase in emissions of industrialised countries has come from economies in transition, which have seen a rise of 7.4 per cent in greenhouse gas emissions within the 2000 to 2006 time frame,” he said.
Among industrialised nations, 16 are on target to meet their Kyoto obligations, including France, the U.K., Greece and Hungary, the U.N. said. Some 20 countries are off-course, including Canada, Germany, Ireland, Italy, Japan, New Zealand and Spain. Nations that miss their Kyoto target in 2012 will incur a penalty of an additional third added to whatever cut they agree under a new treaty in Copenhagen.
Has Kyoto worked? “In terms of emission reductions achieved, the answer would be no,”De Boer said. “A 5 per cent cut is a pretty small step on what will be a long and arduous journey. On the other hand, Kyoto has had great success in putting an architecture in place. Monitoring and verification systems, carbon markets, technology transfer and funds for adaptation have all been mobilised by Kyoto,” he said. “I think this is a fabulous architecture that we can build on on the road to Copenhagen.”
There are seven key issues on the road to Copenhagen.
Global vision
The world has yet to formally agree a goal in the battle against global warming. This could be a maximum temperature rise, such as 2{+0}C, or concentration of carbon dioxide in the atmosphere. More likely, it will be a vaguer ‘direction of travel’ such as the G8 pledge to halve global emissions by 2050.
Mitigation
The key issue - who will cut their carbon by how much and by when. To be meaningful, targets must be short-term, perhaps something like 25-40 per cent by 2020 for the developed world. Developing countries, such as China, could be allowed to increase pollution, as long as they reduce the rate of increase, and agree to take on proper reductions within 15 years or so.
Adaptation
How much rich countries will pay poorer ones to cope with floods and droughts. And how the developed world can make sure the promised money is paid.
Technology
How developing countries will access affordable clean technology to reduce emissions, such as carbon capture and solar power, developed by companies in industrialised countries.
Finance
How developed countries will provide funds for adaptation and mitigation in the developing world, and how those funds will be managed.
Forests
How developing countries with tropical forests can be paid to keep them intact — deforestation causes about a fifth of all greenhouse gas emissions.
Carbon trading and offsets
How systems such as the UN clean development mechanism and the European emissions trading scheme set up under Kyoto can be strengthened and expanded. — © Guardian Newspapers Limited, 2008
Subscribe to:
Posts (Atom)
Posts
