22 July 2011

Growth and Poverty-the great debate

CUTS-International has brought out a compilation of the various views on growth and poverty, sparked off  by Jagdish Bhagwati's lecture posted in the group forum in January. The discussion online did get quite heated and involved many noted economists, CUTS has made this available to everyone through their website - enjoy!

Some Reflections
I believe that the differences between Sen and Bhagwati are less substantive than what is popularly made out to be. On a variety of important policy matters, they use different languages but say very similar things. My only worry is that even on this Sen and Bhagwati will agree that I am wrong.
Kaushik Basu, Chief Economic Adviser, Ministry of Finance, Government of India
There is a case for land reforms that make the conversion of land into industrial use less fraught; there is a case wide-ranging educational reform which makes it easier for the poor to access quality education; and there is a case for revamping primary healthcare to make it much more functional.
Abhijit Banerjee, Department of Economics, Massachsetts Institute of Technology, US
Obviously, higher incomes are a necessary condition for better state-funded welfare, better jobs and so forth. This is simply not debatable. Indeed, only in India, do serious intellectuals dream of debating these issues.
Martin Wolf, Chief Economics Commentator, Financial Times, London

20 July 2011

Famine and food security

As the UN declares the first famine in Africa in three decades, Cambridge University has a whole section in its research page profiling food security looking at all aspects of food security, including the environment.
Whose fault is famine?What the world failed to learn from 1840s Ireland by David Nally makes the important point of 'structural violence':

a term used to describe how certain institutional arrangements can render entire communities vulnerable to famine and at the same time impede alternative reforms that nurture local resiliencies.  For Nally, the current emphasis on increasing food production through market integration and technological fixes, ignores the well-established fact that there is enough food to feed the world’s present population – in fact recent estimates suggest that there is 20 per cent more food than the world needs. The relationship between food supply and starvation has long been a contentious issue and the Irish Famine is no exception. Contemporary accounts describe ships carrying relief from England passing ships sailing out of Ireland with cargos of wheat and beef to be sold for prices out of reach to the starving population.
“In the analogous way,” Nally suggests, “Africa, a land synonymous with disease and starvation, is a major supplier of raw materials including diamonds, gold, oil, timber, food and biofuels that underpin the affluence of Western societies. The current focus on food availability and supply effectively masks how resources are unevenly distributed and consumed.”
“At present, the problem of ‘food insecurity’ – to adopt the modern, sanitised term for widespread starvation – is generally conceptualised as a scientific and technical matter: geneticists and plant scientists will engineer harvests that produce more efficient, more abundant crops that are more tolerant of climatic stress, more resistant to attacks by pathogens, and so on. This, we are told, will be the basis for ending global hunger. While the physical sciences do have an important role to play, it is wishful thinking to believe that hunger can be avoided by simply ‘turbocharging’ nature  – that we can, if you like, engineer our way out of scarcity,” he argues.

What is the future of the world when the solution of distribution of resources remains unresolved?

13 July 2011

Interoperability for financial inclusion

My article on interoperability in today's Hindu Business Line makes the point:
'Both banks and MNOs need to recognise that financial inclusion can be a win-win situation and learn to work together in an environment that is co-operative and competitive. While there will be stumbling blocks along the way, with regulators and governments across the developing world bent on achieving financial inclusion, such a scenario of what is termed ‘co-option' is not as improbable as it sounds' 

The point that telcos need to cooperate has been stressed in a speech by RBI Dy Gov  KC Chakrabarty 
'as regards MSPs (mobile service providers) acting as BCs reports reaching us still suggest that the true spirit of co operation is yet to stabilise with each still trying to destabilise the other. The entire world is looking at this experiment in India and I would urge all of you to get your acts together.'

Anecdotal evidence actually shows that the RBI was making the point rather mildly! Can telcos learn to share the space and infrastructure or will they have to be made to do so?

28 June 2011

Manufacturing and development

A live debate begins in the Economist..'The house believes that an economy cannot succeed without a large manufacturing base' Ha-Joon Chang, University of Cambridge is for the motion while Jagdish Bhagwati, Columbia University is opposing it.
As Moderator Patrick Lane writes in his opening remarks:
This promises to be a lively debate. There are conceptual arguments to be played out. How, for example, is manufacturing defined? What constitutes a "base": having factories on home soil, or keeping hold of intellectual property? What difference does it make if supply chains are spread around the world? And in a debate with such a long history, there are surely plenty of data to be brought to bear too. These are not just questions for Mr Chang or Mr Bhagwati, or for the guest commentators who will contribute later. They are questions for you, too, the readers on the "floor" of our virtual debating chamber. I do hope that you will join in—and that you enjoy the debate.

Your views?

01 June 2011

Financial inclusion

Haven't blogged in quite a few months as we have been working on financial inclusion, here is my latest article, published in today's Hindu Business Line that talks of the new payment system coming into place in India, the Inter-Bank Mobile Payment Service or IMPS There is a lot happening in this space recently, and along with the spread of business correspondents in the country, finally we are working towards bringing the fruits of technology and growth to every section of the society.

27 January 2011

Food prices up again...

Food prices are once again posing problems for monetary policy, across the globe. A recent article by Luis AV Catão and  Roberto Chang 'Global food prices and inflation targeting' gives an overview of the issues at hand, arguing that 'food tends to have stronger predictive power on global inflation cycles than oil. The problem is more severe in emerging markets where consumption basket weights for food are two or three times larger than in rich nations. Central banks should pay close attention.'
The Reserve Bank of India had flagged this issue sometime back, looking at the structural reasons and a speech by Deputy Governor Subir Gokarn had focused on the changing consumption patterns that had raised the price of proteins, 'Persistent price increases in commodities for which there are no effective substitutes will, other things remaining equal, raise the potential rate of inflation over a period of time. This means that either actual inflation or interest rates will be higher than they would be in the absence of such increases.' Further, 'Rapid economic growth is contributing to the emergence of persistent demand-supply imbalances which, in turn, are making proteins more expensive. In the absence of a significant positive supply shock, this might result in the weakening of the economy's most productive resource - its people.'
Going ahead, the FAO Food Price Index can provide valuable cues to the prices, meanwhile as the FAO points out in the case of food, and Catao and Chang point out in the case of monetary policy response, short term policy actions can disrupt long term stability and coordination across the key players will be crucial to avoid aggravation of the problem world-wide.

19 January 2011

Guest Post- Financial Inclusion in India

Swabhiman (pronounced as  swaa-bhi-maan) meaning self-respect comes from Swa-(meaning Self) and -abhiman (meaning Respect or Pride) in Sanskrit language.

Swabhiman is the new Financial Inclusion Program that Government of India is planning to roll in the year 2011. The program targets opening of 5 crores no-frills accounts by March 2012 spanning over select 73,000 villages. The plan is not just to open accounts, but to keep them active by regular transactions. The basic idea here is to spread financial literacy while achieving financial inclusion. Government plans to use handheld computers and banking correspondent model to achieve scale and efficiency in the program. 

In an interview about Swabhiman, Shri K.V. Eapen, the joint finance secretary of India told media that banks are expected to popularize the electronics benefit transfer (EBT) scheme for efficiency of the program. EBT is mode through which the government currently makes payments to the workers involved in various public welfare schemes. Thus, Swabhiman will provide a platform for banks to launch their products and services like small overdraft facility, remittance, small loans and small deposits to the rural poor.

Swabhiman, though is in planning stage, has some assured benefits for the common man. A common man can now be included in the organized financial sector without the tedious paperwork.  It will not only ensure availing of a variety of financial services at doorstep but also easy enrolment to all public welfare schemes.

 Reaching out at such a grand scale can face a number of challenges that are meticulous in nature. Ranging from connectivity of handheld devices, geographical connectivity to literacy rate of the population can raise issues in smooth implementation of the program.  But, tackling these challenges and bottlenecks is now expected from Indian Government.

Government has surely come a long way since the days of implementing public welfare schemes without proper consideration of ground level realities. This means, the earlier top down approach of govt. towards development is now becoming more and more area specific approach. Increase in variety of work in MG-NREGA, implementation of SGSY- Special plan, launch of  RIDF from NABARD et al are examples of the recent changes that can be seen regarding change in approach of the govt.. These kind of changes are a proof to Governments increased concern and involvement in solving the individual ground level problems which were earlier oblivious at the centre level.

Thus, with a fool proof plan, GoI is all set to launch Swabhiman that will ensure smiles on the faces of those who are still unbanked.

By Chitra Nayak (chitra.nayak@fino.co.in)
About Chitra Nayak: Currently a member of business strategy team at FINO, Chitra Nayak is fond of reading and writing whenever possible. She has done her post graduation from XIMB in rural management and believes that achieving a stabilized bottom of the economic pyramid will ensure a sustained growth of the country.