Tuesday, December 2, 2014

Development as a people’s movement / Madhav Gadgil

Development was a key issue in the 2014 Lok Sabha election. In his very first speech after taking over as Prime Minister, Narendra Modi asserted that his government is committed to carrying on development as a people’s movement. This, he has asserted, will draw upon India’s democratic, demographic and demand dividends. But are we genuinely moving towards organising development as a people’s movement while building on these strengths?
At the heart of democracy is access to information. We do have the vital Right to Information Act, but need to do much more since the public is being continually misled. To reap the demographic dividend, our youth should be well nourished. But what is the reality? The government’s statistics show that 28 per cent of school children were malnourished in 1993; this came down to 17 per cent by 1999 and declined further to 8 per cent by 2006. However, this is based on information provided by schools, and many of them are guilty of maintaining bogus records of enrolment and expenses towards the provision of mid-day meals. As a cross-check, we have the data provided by the carefully and professionally conducted National Family Health Survey. According to its very different and shocking results, 53 per cent of school children were malnourished in 1993. This came down slightly to 47 per cent by 1999 and changed a little by 2006, to 46 per cent.
To cater to India’s massive population of consumers, people should have adequate purchasing power, such as that enjoyed by people employed in the industries or services sector. Unfortunately, as the malnourishment statistics indicate, a vast majority of Indians are poor, with barely 10 per cent employed in the organised sector. We are being convinced that vigorous economic growth is generating substantial employment. But this is not so. When our economy was growing at 3 per cent per year, employment in the organised sector was growing at 2 per cent per year. As the economy began to grow at 7-8 per cent per year, the rate of growth of employment in the organised sector actually declined to 1 per cent per year since most of the economic growth was based on technological progress, including automation. At the same time, the increasing pressure of the organised sector on land, water, forest and mineral resources has adversely impacted employment in farming, animal husbandry and fisheries sectors. People who are being pushed out of these occupations are now crowding in urban centres. This is in turn leading to a decline in the productivity of the organised industries and services sector. Evidently, the ship of our development is sadly adrift.
What is development?
Undoubtedly, people aspire for development. But what is development? Joseph Stiglitz, a recipient of the Nobel Prize in Economics and one-time chairman of Bill Clinton’s Economic Advisory Council, offers an insightful analysis, asserting that development should result in an enhancement of the totality of a nation’s four-fold capital stocks: the capital of material goods, natural capital such as soil, water, forests and fish, human capital including health, education and employment, and social capital comprising mutual trust and social harmony. Our current pattern of economic development is by no means a balanced process resulting in the overall enhancement of the totality of these stocks. Thus, for instance, mining in Goa has severely damaged the State’s water resources and caused high levels of air and water pollution. The ever-increasing content of metals in drinking water reservoirs has adversely impacted health. When thousands of trucks were plying ore on the roads of Goa, the resulting chaos in traffic and accidents seriously disrupted social harmony. Evidently, the single-minded focus on industrial growth is not leading to sustainable, harmonious development, but merely nurturing a money-centred violent economy.
We must, of course, continue to develop modern technology-based industries and services, but these cannot generate employment on the massive scale required. It is therefore imperative that this modern sector must rein in its adverse impacts on labour-intensive, natural resource-based occupations and livelihoods. The modern capital-intensive, technology-based economic sector must nurture a symbiotic relationship with the nature-based, labour-intensive sector. Our democracy provides for fashioning such a mutual relationship through the 73rd and 74th constitutional amendments and the Biological Diversity Act, the Panchayats (Extension to Schedule Areas) Act and the Forest Rights Act. We must take advantage of this constitutional framework that promotes decentralised governance and work with nature and people to move forward on a path towards genuine development — a path that would be entirely compatible with making development a people’s movement.
Examples of people’s movements
In Chandrapur and Gadchiroli districts of Maharashtra, both of which are Naxal-torn, there are hopeful examples emerging of how development may be nurtured as a people’s movement. A number of tribal and other traditional forest-dwelling communities of these districts now have management rights over Community Forest Resources under the Forest Rights Act. The state retains ownership over such resources, and these cannot be diverted to other purposes. But now these resources are being managed holistically with a fuller involvement of the people. The citizens of Pachgaon, for instance, have, through two full-day meetings of their entire Gram Sabha, decided upon 40-odd regulations. Tendu leaves are a major forest produce, but their harvest entails extensive lopping and setting of forest fires. So, Pachgaon has decided to forego this income and instead focus on marketing the edible tendu fruit. By stopping the collection of tendu leaves, the trees are healthier and both fruit yield and income from its marketing have gone up. Incomes from bamboo harvest have also gone up manifold, and for the first time the people are moving out of the earlier precarious existence. Notably, they have on their own initiated protecting part of these forests as newly constituted sacred groves. Such community management of forest resources is the only sane way to combat extremism, and I have every hope that the new government, with its commitment to making development a people’s movement, will wholeheartedly support these initiatives.
Verle village, perched atop Sahyadri mountains in Goa’s Sanguem taluk, provides another instance of how we can make development a people’s movement. In this charming village, the locals have initiated a cooperative tourism project. Visitors stay in the homes of the locals, which are now equipped with modern amenities, and enjoy home-cooked food. They can wander around to their heart’s content with three well-trained local youth who serve as nature guides. This is a neat example of how development benefits people at the grassroots level while safeguarding the natural heritage.
Recently, I had requested Goa University students to write an essay on any issue of their interest. Many chose tourism; they were very concerned with the negative fallout of the flourishing hotel industry. These included depletion and pollution of ground water, ever-growing piles of solid waste, encroachments on public beaches and alarming growing drug abuse, associated crimes and women’s insecurity. They also felt that few economic benefits actually reach the people of Goa. Why then can we not focus on enterprises that are nature-friendly and give full scope to local initiatives like Verle to develop tourism? Why do we not organise activities such as these that genuinely promote development as a people’s movement?
Furthermore, Goa could revive its currently stagnating mining business through novel people-oriented initiatives such as the proposal from the tribals in Caurem village in Goa’s Quepem taluka. There, extensive community lands that harbour a large sacred grove — lands that ought to have been assigned as Community Forest Resources — have been encroached upon by palpable illegal mining, which has damaged water resources, affected farming, and created social dissonance. The mines are currently closed because of the illegalities, and the Gram Sabha has unanimously resolved that if they are to be restarted, this should be done through the agency of their multi-purpose cooperative society.
The Goa government ought to seize this golden opportunity and do all that it can to ensure that it succeeds. When the first cooperative sugar factory in the country was established at Pravaranagar in Maharashtra 60 years ago, many doubted if the farmers could manage such an enterprise. But it succeeded beyond people’s wildest dreams because of capable farmer-leaders like Vitthalrao Vikhe Patil and a sympathetic Finance Minister like Vaikunthbhai Mehta. Let us therefore hope that the Goa government with its commitment to making development a people’s movement will vigorously support the Caurem initiative and create for the country a new model of how mining can be developed as a people’s activity.

(Madhav Gadgil is D.D.Kosambi Visiting Research Professor, Goa University.)

Lower petroleum prices: A mixed blessing for India / Mahesh Sachdev

The Oil Ministers of 12 member states of Organization of the Petroleum Exporting Countries (OPEC) concluded their meeting in Vienna on November 27 by deciding to continue with their three-year-old production quota of 30 million barrels per day (mbpd). Thus, they calculatingly ignored nearly one mbpd oversupply in the global oil market which has pushed the crude prices down by over 30 per cent since June 2014. The global oil glut, in turn, has been caused by a number of factors which include OPEC’s own overproduction, rising non-OPEC production (particularly by the U.S.-based “Shale Revolutionaries”) and lower demand from China and Europe. By declining to cut their output to shore up the prices, OPEC in general, and Saudi Arabia in particular, have refused to play the role of global “swing producer.”
As most factors responsible for the current global demand-supply disequilibrium are systemic in nature, the world faces prospects for relatively bearish oil prices over the foreseeable future. Indeed, the prices have continued to fall with the Indian basket touching $72.51/barrel on November 27 — a decline of nearly $9 from the average during the first fortnight of the month.
As the world’s fourth largest importer of crude, India can afford to exult at this precipitous crude price decline. Still, given the strategic importance of this development, a more comprehensive analysis is desirable.
A virtuous cycle in the economy
From the limited perspective of India’s consumer economy, lower global oil prices undoubtedly augur well. Lower pump prices reduce pressure on the consumer who can spend the savings elsewhere, spurring the demand side of the economy. As petroleum products form a large part of the consumer price indices, lower crude prices result in reduced inflation, which in turn paves the way for lower interest rates and greater buoyancy in investments. Thus, lower oil prices can trigger a virtuous cycle in the Indian economy. After all, with India’s imports running at an estimated 3.7 mbpd in 2013, a $30/barrel decline in oil prices amounts to a $40 billion savings bonanza on annual imports. The impact would be best felt on the petroleum sector where marketers have been groaning under subsidy burden. The transport sector would also be a direct beneficiary.
If we widen the impact analysis to consider the totality of the Indian economy, some challenges also appear. First, as oil producers are India’s major markets and investment destinations, their economic decline may affect the country. Recent decline in the share prices of Bharti Airtel and Bajaj Auto due to the devaluation of the Nigerian Naira illustrates this more complex trend.
Second, apart from being the fourth largest oil importer, India is also the world’s sixth largest petroleum product exporter earning over $60 billion annually — nearly a fifth of global exports. A bearish oil market would hurt this segment with reduced demand, lower unit prices and lower margins.
Third, the oil price decline coincides with resumed foreign interest in investing in India. It is difficult to assess their mutual correlation, but lower oil revenues may attenuate arrival of petrodollars into India.
Fourth, whenever oil revenues decline, countries that export Gulf oil try to tighten their belts by emphasising local production and downsizing their foreign labour force in which Indians dominate. Thanks largely to over five million Indian expatiates there, India was the world’s largest recipient of remittances which topped $70 billion in 2013. The possibility of these remittances being reduced cannot be ruled out. This would have a serious impact on remittance-dependent States such as Kerala and Goa.
Fifth, lower crude prices may cast a shadow over the sputtering controversy over natural gas pricing norms in India as the latter generally follow the oil prices. Future investment decisions in oil-related sectors may get delayed.
Sixth, lower pump prices may cause higher fuel consumption as sales of automotive products soar. This would worsen commuter woes as well as cause increased urban pollution.
Finally, a decline in oil prices generally accompanies a global decline in commodity prices, particularly those of minerals and agricultural products. India remains a major exporter of these and would see lower realisation, particularly of Guar Gum, a critical input for the shale industry.
The long-term impact of lower oil prices is likely to be felt beyond the economic domain. Geopolitically, persistent lower oil revenue could propel a number of emerging exporters towards domestic political instability as the ruling elites lose their capacity to provide “stomach infrastructure” to the common man. Countries with lower per capita oil revenue such as Nigeria, Iran, Algeria and Venezuela may be more at risk. In general, however, lower oil revenues may have a dampening effect on regional or domestic disputes.
Measures to leverage oil prices
India can leverage the current low oil prices for long-term gains. To this end, the following measures can be considered. One, it can foster long-term crude supply relationships with exporters in return for stable prices, upstream engagements, inbound investments, etc. Two, it can enter into oil-for-infrastructure barter deals to boost project exports. Three, it can restructure public sector oil companies to make them more productive and globally proactive for leaner times ahead. Four, it can channel some of the oil bonanza to mitigate the increased cost disadvantage of renewable and alternative energy sources. Five, it can build its own strategic oil reserves.
The current downturn in oil prices underlines the cyclic nature of commodity trade and illustrates OPEC’s reduced regulatory capacity consequent to it supplying only a third of global demand. While Shale Revolution may be a new and price-sensitive factor, it is unlikely to vanish with time or with lower prices. During past oil bear-hugs in 1986, 1993-99 and 2008, the lower prices invariably spurred consumption and the oil bounced back. There is no reason to believe that the oil prices shall not rise again. India would do well to recall an old oil adage, “The cure for high oil price is high oil price itself” — and use this rare, cyclic opportunity for long-term gains.

(Mahesh Sachdev has served as Indian ambassador to Algeria, Norway and Nigeria — all major oil exporting countries.)

Source : http://www.thehindu.com/todays-paper/tp-opinion/a-mixed-blessing-for-india/article6645245.ece