An extract from my next book

Recently I made the following addition to my next book . You're free to comment on the following thought.

Rohan was climbing up the stairs to enjoy the weather when he was insisted by his mother to change clothes if he had any plans to get wet in the rain. She knew that he loved to dance in the rain since he was three. She remembered the day when on one rainy day as she returned from shopping Rohan was missing from the house. She called all her relatives if they took him away, but had to face disappointment. After three hours of nervousness and clenching and unclenching of the fingers she saw the neighbours bringing Rohan back as he stepped on their terrace enjoying the weather. The servant was immediately fired for not taking care of Rohan. For several years she restricted him to go out in rain but her extreme love for him and seeing his disappointed face whenever it used to rain, she readily let her go when one day he cried craving to get wet. From then on she never restricted him to go to the terrace after repeated contestations from her husband if he would catch cold.She hurriedly opened his cupboard and pulled out an old rugged grey t-shirt and his childhood patent shorts. Rohan climbed down and changed his clothes and went up to the terrace in a hurry. He felt ecstatic and drew his hands to the drizzling drops and finally pulled his whole body out in rain to get wet. He danced, rocked back and forth and laughed. The raindrops glistened under the sun’s rays. He anticipated a rainbow in the sky that could add to the dazzling environment. For a second his eyes stoned at the corner under a shed. Ample amount of water had been deposited and the rain drops falling from the edge of the shed created ripple effect. Seeing a single drop of rain gently piercing the surface of water and creating different circumference circles gave him a mixed feel. He realized that everything in life has some effect on the surroundings. One act affects many and if that act goes wrong, the whole process goes in the dust. He realized why his poor academic performance affected his parents. Why they were so concerned when he got bad marks. Why his mother was off when he refused to eat anything one day. Why his friend Raman refuted when his thinking process was going in the wrong direction. He imagined what if he the drops didn’t create a ripple effect and could absorb all the tension, however, couldn’t really get an image in his mind maybe because it was the code and conduct of nature. Similarly, he thought that it was the code and conduct of nature that the people in one’s orbit are affected by one’s actions.

you're not an aam aadmi

I don't know why everything just goes off my head. Is it that everyone is having complaints against me or I'm not understood by anyone?
We see only those things that we want to see and whatever we don't like, we just close our eyes and "LET" that "this isn't there". This assumption is a part of our lives and we assume that our this attitude makes a lot of difference to others. However, in reality- people give a damn to it. People don't care who the fuck are you. Not everyone caresses you like your parents; not everyone withstand by all odds and not everyone makes you feel that you're someone special knowing that you're too an aam aadmi into the colourful crowd.

The above is just a piece of thought dedicated to my parents. The contrasting trend that makes teenagers feel that their parents don't care for them or their parents' effort to make them independent being percieved as uncaring attitude seriously makes me unnerved and numb. Believe me teenagers, there's no one in this world who can think for you like your parents. Everyone in this world might just develop a negative attitude towards you, maybe for a second ever, but not your parents. They're with you and for you always.
Your best friend might be envious of your new laptop, but your parents are the only one who provided it; and above all, their effort to make you well equipped to use it.

In the wake of crises

The fiscal stimulus package of Rs.30,000 crore has been introduced by the government over the weekend to enhance the infrastructure sector. Now the question arises: Is this minimum or appropriate the government could do in the wake of the economic downtown? The aggregate fiscal package till now in the current year is $6 billion or 0.6% of the GDP. China, world’s fourth largest economy, just announced a $586 billion package or 18% of the GDP!
There’s a major debate on how the slack in demand for goods and services can be retreated. The fiscal stimulus package announced recently is for the infrastructure sector. There’s a growing nexus between what should be the amount of the fiscal package and the ways in which it could benefit the affected. An increase the spending over receipts creates a fiscal deficit which requires prior permission from the government if it goes beyond the planned deficit. Some amount of deficit in the economy stimulates demand but if the deficit continues for a larger period, the burden on the government increases, who finances it through the borrowings from internal and external sources. Investing in infrastructure is a risky affair because it may or may not increase consumption through a multiplier effect. Also the allocation of funds inside the infrastructure sector is not known which makes it unclear for the private investors as to where the funds are to be invested. Investment gives an opportunity to the people who are associated with the projects to increase their consumption which forms a major part of their income. Now, whether the increase in the incomes of the people leads to increased consumption remains a debatable issue. India, following a policy of neo-liberalization may escape the exact Keynesian view of stabilizing the economy; however, after the 1991 reforms where private sector emerged as a major player, Keynesian view cannot be knocked for a six. John Maynard Keynes brought a revolution in the history of economics in 1930s with his idea of combination of more government spending and tweaking taxes that will put more money in people’s hands. His major assumption was of a capitalistic economy where the government sector too played some role. Spending of the government in infrastructure sector is a component of the government spending, which in turn is the major component of the aggregate demand of the Keynesian theory. An increase in the government spending raises the interest rates which may lead to decline in investments. What needed is increasing the government spending while maintaining stable interest rates in the economy.
Interest rates can be adjusted by the central monetary authority which is Reserve Bank of India. Reserve bank adjusts the supply of through various options available like CRR, SLR, repo rate, reverse repo rates etc. An increase the interest rates reduces the demand for money in the economy because the interest bearing assets like bonds and debentures becomes more attractive and holding money becomes dearer. Interest rates play a major role since the money market is in immediate action in contrast to the lagged fiscal reforms.
What required is a policy-mix in action that spurs the growth and takes the economists by surprise by projecting a growth rate higher than expected. Also the restrictive labor laws needs to be made flexible to ensure greater flexibility and mobility of the labor. Flexibility of labor indeed doesn’t mean ‘hire and fire,’ it just means that greater attention is needed to provide security to the labor force. In the wake of deep crises, India would surely emerge as the fastest growing economy leaving China in the dust.

I really can't give it up

Hello to all again,

The very thought that I was not blogging pinched me like anything. I had the tickle in my bones and as soon as my internet problem was fixed, my fingers automatically started punching keys on the keyboard. So here I present a short poem

When I walk down the memory lane

everything seems devastated and against

the days when with you I associated my name

you were like an angel and made me feel like a saint

you promised to walk a million mile

showed me the positive side of life

i then had a chance to smile

presuming you being my wife

then you ditched me

as if it were a spree

I now bow on my knee

and request you to break me free

I weep in solitude

it feels like a cage

wish I could find your similitude

at least to pull out my rage

I really can't give it up

though you made me transfixed

I'm catching up

unable to bear anything

I'm coping up

Demographic Dividend

The demographic dividend is a rise in the rate of economic growth due to a rising share of working age people in a population. This usually occurs late in the demographic transition when the fertility rate falls and the youth dependency rate declines. The magnitude of the demographic dividend is primarily dependent on the ability of the economy to absorb and productively employ the extra workers rather than a pure demographic gift. Richer economies, where birth rates are lowest, are likely to suffer first. The effect in developing regions will be different: as fertility rates fall in countries such as India (births in India have dropped from 6 children per woman in 1950 to only 3 today - and fertility is continuing to fall) the number of dependents on each worker will decrease markedly. With a bulk of working age people and relatively few dependents, this might prove a demographic dividend for developing countries and will be important in increasing the global weight of countries like Brazil, China and India.
Developing nations can engulf the benefits of demographic dividend at par with developed economies because when fewer children are born; more women will now join the work force; so this can give a further fillip to the bread-winner ratio.
Human beings save most during the working years of their lives. When they are children, they clearly consume more than they earn, and the situation is the same during old age. Hence, a decline in the nation's dependency ratio is usually associated with a rise in the average savings rate.
The demographic dividend, however, does not last forever. There is a limited window of opportunity. In time, the age distribution changes again, as the large adult population moves into the older, less-productive age brackets and is followed by the smaller cohorts born during the fertility decline. When this occurs, the dependency ratio rises again, this time involving the need to care for the elderly, rather than the need to take care of the young. In addition, the dividend is not automatic. While demographic pressures are eased wherever fertility falls, some countries will take better advantage of that than others.
Some countries will act to capitalize upon the released resources and use them effectively, but others will not. Then, in time, when the window of opportunity closes, those that do not take advantage of the demographic dividend will face renewed pressures in a position that is weaker than ever.
Sub-Saharan Africa, on the other hand, is just now starting to enter its window, under the assumption of declining fertility rates over the next several decades. If those declines come to pass, and if the governments involved take actions that follow, to some extent, those of East Asia, the dividends may become real rather than potential.

The demographic dividend can be delivered through several mechanisms-
Labor Supply
Savings
Human Capital

Demographic situation in developing nations can be described as follows-
Childbearing and population growth rates in most of the developing countries has either declined or rising at a high diminishing rate.
The labor force growth rate has exceeded the total population growth rate.
There has been a massive increase in longevity.
Concomitant with these demographic trends, there has been massive economic growth.
There were several, interacting reasons for the East Asian economic success story:
1. Most countries were able to successfully meet the employment challenge posed by the growth of the working age population (i.e. more and more people seeking jobs), mainly through a rapid industrialization. The greater involvement of women in the labor force concomitant with improved female status, was a subsidiary factor.
2. Savings and investment rates grew rapidly. There is controversy over the contribution of different causes to this growth, especially the contribution of demographic factors like the increasing proportion of the working age population.
3. East Asian countries in the late 1950s and early 1960s changed from having positive views on large and expanding populations, to having concerns about the possible adverse effects of rapid population growth. They adopted and promoted corresponding population policies – adopting development plans with specific population growth reduction targets, legalising the manufacture and distribution of contraceptive devices and drugs. Some governments adopted comprehensive sets of incentives and disincentives to encourage small rather than large families. And population growth slowed down substantially during the 1960–1990 period.
4. Asian countries generally, experienced more political stability than in most of Latin America and sub–Saharan Africa. Consequently, their governments could realistically pursue long–term goals.
5. Taiwan and South Korea had relatively high levels of literacy and received substantial foreign assistance for reconstruction.
This account of change in East Asia is a general one. The picture is of an economic success story, partly brought about by a successful exploitation of the demographic dividend.



CONCLUSION
Demography lies at the heart of our socio-economic system. There is virtually no area that is not influenced by it, and the related trends around the world are not all pointing the same way. Especially the developing and emerging nations will see further population growth, while Europe and Japan will witness noticeable declines and an ageing of society due to the speed of fertility transaction. It is observed that in developed economies the second stage of demographic transaction, implying relative increase in the proportion of the work force (increasing with decline in fertility rate) goes unnoticed. This is causing enormous economic, political and social challenges in the “First World Countries.”
Timing is critical to harnessing the demographic dividend. Some countries—China, Brazil, and have “missed that demographic window of opportunity,” as the relative numbers of youth are now decreasing and dependency ratios are increasing. But in Egypt, India, and the Philippines, the window is still open: the number of youth relative to other age groups will continue to rise until 2015 when the relative number of youth will begin to level off and eventually decline, the World Development Report projects.

Asia and Crises

So across Asia, governments have taken measures to allay disquiet. In China the stockmarket has lost two-thirds of its value since last October; the property market is wobbling and growth is slowing. These trends all predated the latest panic. But the government has had to go further to shore up confidence. It tried to revive the stockmarket by abolishing a tax on share-buying and investing in the market itself. Japan, despite the giddy plunge of the stockmarket from October 8th-10th and the bankruptcy of a middling life insurer, Yamato Life, is confident that its financial system, recapitalised at massive public expense a decade ago, is robust enough to survive the latest shocks.
Japan’s money markets have gummed up far less than those in America and Europe. Even so, at a time when its economy is almost certainly in recession, the authorities are taking few risks. Backed by $1 trillion of reserves, the Bank of Japan has promised unlimited dollar funds to the markets. And the government has announced measures to support regional banks. It has also promised not to sell its remaining shares in the country’s biggest banks for the time being, and eased conditions for companies to own shares in each other as a way to support the stockmarket.
This year South Korea’s won has sunk more than any other Asian currency. The country’s current account, in surplus for many years, has slid into deficit. Banks have made a high number of loans in proportion to their deposits. Households are deep in debt and so are many smaller companies (many in dollars). In a radio address on October 13th President Lee Myung-bak insisted that the banks were sound and pointed out that the currency was backed by far larger foreign reserves than it was a decade ago. He begged South Koreans to cut down on foreign spending and energy use, and to increase spending at home.
In India, the closeted banking system is not heavily exposed to the financial crisis. Its most adventurous bank—ICICI—is the only one so far to cause jitters. Long lionised for financial sophistication, the bank is now associated with Western financial sophistry. After its share price halved in a month, it had to send text messages to its depositors reassuring them that their money was safe. Statements of support from the Reserve Bank of India, India’s central bank, and the rating agencies have helped restore confidence.
Indonesia’s government intervened more drastically, halting share trading for three days after sharp falls in share prices and the rupiah. When the stockmarket reopened on October 13th, the government strengthened its guarantee of bank deposits to deter a run on banks.

(Article reference: http://www.economist.com/world/asia/displaystory.cfm?story_id=12437723)

Fall in Exports first time in 5 years

Hello!!!!!!!
Where are the policy makers?
I know that they're doing their best besides the political pressure and sulking over-head financial crises, but urgent attention is needed yaar.
Did you come to know that exports fell for the first time in five years contrasting a declining trend in growth.
Exports in October(2008) contracted by 15 percent against 25%+ average export growth since 2003 when the FDI flows became prominent to push up the growth to over and above the earlier mark i.e. 6%.
The exports are declining due to a contraction in demand. OECD economies accounts for over 40% of the India's exports and are showing a declining trend besides availing themselves of an incentive of rupee depreciation. Well, what else they could do? There's a global slowdown, dear.
The fall in exports puts a great pressure on the balance of payments-accounts for country's transaction with rest of the world, since it reduces the aggregate demand in the economy.
The situation is not yet worst, thanks to the depreciation of the rupee which has reduced the import spending that will, at least to some extent reduce the pressure on BOP.
If this depreciation would have helped in increasing the exports, then India would not have been hit this much also. Unfortunately, there's a global contraction of demand of consumers and there's literally no-one to buy from us.

SENSE it up

I wish I were having sense to speak NON-SENSE

Are you religious?

Religious processions (Nagar Kirtans) across the country are in full swing awaiting Guru Purub scheduled for 13th November this year.
A similar procession took place near my house by some local Sikh community.
The very thought of a religious procession upbeats my feet to the drums being banged at first. The intensity to which drums are banged signal the quality of the procession-disciplined arrangement of people (particularly young children of Sikh community run schools) in an array producing tactics, mammoth chariots, elephants, camels, neat uniforms and desi ghee halwa as Prasad. Sikhism has always made me anxious-firstly because of their innocent attitude of catering people, no matter is it a marriage or a procession or whatsoever. Secondly, the delicious food they make, though it makes you look fatter than ever. Thirdly, the amount of fear they have from their God. A Sikh child's upbringing is such that he starts respecting and enjoying the religion. An initiative by parents to send them to a Sikh school, maintaining their own contacts with Sikh people around so that their children could get along well, a recurring visit to Gurudwara to make them realize the importance of their religion.
These were obviously the positive sides; and, not to mention, there's a declining trend followed in Sikhism too. Unfortunately, the procession this year didn't make me happy due its poor quality that is deteriorating year by year-shady uniforms, lethargic drum beats, casual attitude and small in length.(This couldn't be the inflation effect, for sure.)
Sikh's friendly attitude is now contrasted with their violent rage and anger as seen during the communal conflicts.
Though their visits to Gurudwara is one of the many things that has not been inflicted with time; however, if this trend continues people would go more for confessing rather then asking Him to fulfill their wishes.
This is not only observed is Sikhism only, every possible religion on earth is showing this trend. I'm not writing to hurt the sentiments of Sikh’s, but I’m writing to show the contrasted trend that needs urgent attention.
No matter whether you’re a Christian or a Sikh or a Hindu or a Muslim, what matters is your perspective towards life. Your own religion discards you being a follower if your deeds are imperfect. One should make sure that one’s work is one’s religion and should start chanting their work.
Let’s make one unified religion and make sure that it doesn’t deteriorate with time.

Didn't get confirmation mail!!!

Recently I participated in the ET Case Study Competition. The deadline was 3rd November 08 till midnight. Fortunately the date had been extended to 5th midnight.
I managed to snap up the answers to the given case study till 11'o clock on 5th and unfortunately, I've not yet received the confirmation mail.
The winner had a chance to write for The Economic Times, to which I'm desperately looking forward to.
God help me win!!!
Please give this desperate dude some appreciation. lolz..
Now c'mon, you also pray.

Happy birthday to INFINITY

HAPPY BIRTHDAY INFINITY-A SENSUAL BEGINNING.

Though I've not mentioned about it earlier but I was waiting for the good times to come. Now that the good times are here, I'd like to tell you that my book today completes one-full-year. Please don't ask how my copies sold and all sorts of swirling questions that blows up the writer's mind and knocks him for a six. Let me tell you that not all the writers are avid readers but those who are, they make the best of the writers. I'm being too generous in saying that I didn't even read a single book when I wrote INFINITY then. However, now I'm trying to be a better writer( I dare not to say THE BEST). For the writer the book is everything because his mother likes it and there's nothing more important than the verdict given by your mother, no matter if you didn't even manage to sell one extra copy outside your relatives' bounds.

So all the debutants just chill out. If publisher doesn't like your magnum-opus then just go out and roll out at least hundred copies in the market through self-publishing, as I did-that too makes you an author, for sure.

I'll tell about my book in the next post. Better, if my mind changes and I publish it on the internet as an e-book. Just watch for it.

5 hearts!!! Do you have them?

DID YOU KNOW THAT EARTHWORMS HAVE FIVE HEARTS?
Actually I didn't know till the time I read it on a television screen. You might be aware of the programmes that are telecasted on a gigantic LCD screens of Mc. Donalds and alike. (I guess those are company sponsored DVDs that they run, but, not pretty sure. Presuming that they are telecasted.)

A traumatic incidence

Today, out of the blue, I discovered that I recovered from a traumatic incidence from my ‘lifeless’ life. Actually, I’m just too happy- not because I recovered from the incidence but I was over with that part of my life that never existed. It was yesterday that I decided to put a full-stop after reading the following message text(ed) to me randomly by a very random friend.
When people walk away from you, let them go. Your destiny is never tied to anybody who leaves you & it doesn’t even mean that they are bad; it just means that their part in the story is over.

What a thought provoking message, isn’t it?

STATUTORY WARNING: Don’t go that deep into it that you sink in thoughts.

Is it you, or an angel?

Hello...

I was really vella these days but still didn't blog. Just because ummmm.. didn't have anything so great to write on. 

Well, as of now, I present you a simple cheerful poem with a definite rhyming scheme (I swear, I didn't try too hard to make them rhyme. Well that's how you should write).

At the British council, during one of my lessons, I learnt that you shouldn't be making an effort to rhyme the poem. It should seem as a professional piece. 

To write a good poem, one needs to learn to read more and more poems. 

It's not compulsory either to give the poem a rhyming scheme, however, if it's having, it's great. 

Also, keep in mind that the length of the lines is somewhat similar (Though I know that I can never in my life keep them trimmed).However, I've not yet implemented all these with such a hard-and-fast rule, thanks to my lazy attitude.

Here I present to you a sensational poem : Is it you, or an angel?

When the door bell rings

An angel steps in and sings

She comes near to me, makes me numb

Puts her aura on me, with her two fingers and a thumb

She pans her magic wand in the air

Makes the devils dance with the flair

She smiles, she cheers, she glance

Makes me feel like a king in a trance

The angel’s like you or you’re like an angel

I see you now and here, probably everywhere

As I drew my hands to touch your white skin

My mom said ‘Just wake up, it’s nine in the morning’

 

Now you can feel free to comment on it.heheheh..

 

You make my day

Following is a short poem from an instance of my so callled bitchy life. It was, of course adolescence that I've realized now.

You're away

Still the budding twigs gives me the pleasure of your presence

Though I can't talk to you

Still I catch your splendid voice in my ears

I can't see you

Still I make you resemble with every face and cheer

Dumbstruck, gaping everyone

I do kill time

They call me insane 

As now you can't be mine

I'm still on my way

I see you everywhere, everyday

JUST BECAUSE SOMEWHERE DOWN THE LINE, IT'S EVERYDAY THAT YOU MAKE MY DAY.

A heart full of desires

Following is the motivational poem with a deep insight into something called LIFE- Rather for me it's an implicit concept where one has to dig deep to know what lies inside for you!!!

A heart full of desires

a pace to be ahead in the race

many expectations, many glories

but still have to face the diversities

crowded places, distinct people

claims passion, claims emotions

 

A heart full of desires

dwelling into illusions

mysteries unfolding, vanishing predisposition

different people, different emotions

claims similarity, claims execution

 

A heart full of desires

eyes welled with tears

struggling for words, struggling for themselves

oscillating dreams, mangled views

claims truth, claims acceptance

 

A heart full of desires

a body within a soul

emphasizing life, emphasizing hardships

claims struggle, claims life

 

a heart full of desires

The guilt is still alive!!!

Actually, I now don't even remember when had I scribbled this poem and which situation made me feel so immature. Still things are made for the very right moment and it's obviously meant to be enjoyed or cursed(according to your thinking)...

 

When I think of you

Tears roll down my eyes

My eyes speak the truth

And my truth is you

But the guilt is still alive 

The way I hurt you

I can't get out of it

I can't move on

Its guilt is still alive.

Could I've your trust like before?

Could I've your love like before?

Could I've those moments....?

Its guilt is still alive.

Hey please curse me

I’ve hurt thee

Without you

I'm incomplete

The guilt is still alive.

On the road of life

I want you to be my wife

Wish I could wish this

To make you mine for life

But the guilt is still alive.

In my absense

Never let tears roll down your eyes

I’d feel curtailed 

This guilt would never die………………..

THE GUILT IS STILL ALIVE

INFRASTRUCTURE

The stabilization in 92-93 in India was followed by major structural reforms, an important part of which was opening company infrastructure sectors to private and to foreign capital.

The report of the expert committee set up for the purpose, popularly called the Rakesh Mohan Committee (RMC) report, set the agenda for the reform of the infrastructure sector. The electricity sector has witnessed the so called independent power reducer policy that encourage the private sector to generate power to be sold to state electricity boards(SEBs) through long term contracts as early as in 1994. The RMC report served to highlight the importanc3e of bringing in the private sector to most areas of infrastructure. Following the report many states passed legislations that created umbrella organizations, typically Infrastructural Development Boards (IDBs), that have the mandate develop infrastructure especially through price capital. Through enactments, participation by the private sector, typically on a BOT basis was enabled in most states.

The much hoped for investments in urban areas have yet to materialize.
The creation of IDBs did not give these organizations sufficient power, and the new laws did not address the issues emanating from consistency with pass laws and authorities.
Thus turf wars between the IDB and the PWD, irrigation departments and roads and bridges department were not uncommon.

PROBLEMS
Ø Problems of land acquisition
The perception is that India’s democracy naturally makes land acquisition difficult while in China and elsewhere in East Asia the matter is easy since governments are not accountable. Land values in areas surrounding urban centers incorporate the sides the rents in agricultural use, the value arising out of the probability that they would be huge for non agricultural purposes such as housing. But in India since government have discretionary control over land use, the latter value does not uniformly accrue to all lands surrounding in urban area. This would depress the prices elsewhere while raising it for the land released from agricultural use and acquired. Thus post acquisition market prices are always very high, often by as much as 5-10 times the pre- acquisition ‘market’ prices paid.
Ø Institutional framework for acquisition is problematic.
There is far too much discretion and power available to the administrator and the government. This creates a conflict of interest that acts against landowners who do not have contacts in high places.
Ø Infrastructural failure
Among the visible evidence of the country’s infrastructure failure is its cities. In planning with very low space indices that have little relationship with location economics, the land cost share in infrastructure becomes too high. Since much urban infrastructure shows increasing return to density it too becomes expensive.

Ø Overambitious standards in infrastructure
Overambitious standards in infrastructure, especially in the layout of townships have also been a cause of failure. Thus the excessive provision of open and public spaces in the dsign invites violations since they are often ‘unaffordable’. Such violations then spread given the very high returns, so that the good chance of holding on to reasonable standards is lost.
Ø Coordination problem
The coordination among multiple agencies and authorities necessary for the seamless construction and management of a road, or in the realization of the benefits from the multimodal design has proved to be all but impossible to realize. The problem is fundamental and lies in the nature of the accountability of the key managers within the states. Politicians cannot credibly promise to get a local road or water supplies fixed.
Ø Retarded regulatory developments
Regulatory developments in infrastructure with notable exception of the TRAI in telecom have proved to be an added retardant to not only private investment but investments in general.
Ø Procurement failure
Procurement failure is another important reason for poor infrastructural performance. Service contracts that attempt to shift all risks on the private party, payment terms that do not recognize the experience nature of many foods and services, and frequent post-bid changes in scope, besides poor specifications are typical.

DEVELOPEMENTS
Ø From DFI to IDFC
The idea of a development finance institution (DFI) to merely direct government funds to infrastructure was an anathema in a liberalized financial environment. But the IDFC (Infrastructure Development Finance Company) which was setup in 1997, wisely interpreted its role to be market development, project structuring, viability gap financing, and leveraging private investments through crucial investments.
Ø Guarantees by the government
Similarly guarantees are given to merely cover avoidable risks emanating from poor policies and inadequate contractual framework. Therefore in seeking private investments, very large costs and risk, may ultimately be borne by the state. The worst example of this tendency is the framework that created the IPPs (Independent power Projects) under which cash strung state electricity boards (SEB) were encouraged to sign high cost power purchase agreements (PPAs) that shifted more significant business risks on to the government, while taking over political risks. And, to compensate for this reversal the private parties charged high-risk premium returns.
Ø Marginal success in development indicators
The failure of the state in infrastructure and more generally in the provision of public services is systematically reveled. Development indicators that depend upon the state and its activities and where the public aspect is large do relatively poor than do others that depend less on the state. Thus on infant mortality and infant childbirth, both of which depend more on the performance of public health and hygiene organizations, India’s score is far below of that other countries with similar levels of income. But, on adult mortality which can be mitigated by a private health sector- India’s low cost doctors and medicines- The performance is significantly above that of its peers.
Ø Demand side measures initiated by the government
Energy Conservation Building Code (ECBC) has been launched to reduce energy consumption in new commercial buildings.
The government has approved a scheme for capacity building at State level and Standards labeling programme to promote Energy Efficient Equipments and Appliances with allocation of 47.7 crores.
To promote Energy conservation, the Government initiated ‘Energy Conservation Awards’ in 1991.
Painting competitions at school levels are belong organized my the MOP to inculcate the message of Energy Conservation in children of classes IV to V since 2005.
Ø Reforms in many sectors
Roadways
Success has eluded reforms efforts in many sectors. But when realized, the effects have been revolutionary. Thus, the National Highway Authority of India (NHAI) got the essentials of the road construction contracts. Similarly the BOT and annuity frameworks were also essential incentives compatible though fewer stretches were to be build using these reforms. The resulting investments were overwhelming and in a year or so more investments than in an entire decade flowed into the highway sector. The approach and contract forms of the NHAI are also sought to be initiated by many state governments.
Airways
Airlines were thrown open to the private sector without much regulation except on the safety and technical aspects. Despite some major responsibilities limitations such as not allowing private airlines (until recently) to operate on international routes, the airline industry had completely changed from the vantage point of the consumer. New segments have been added and air travel is no longer a luxury, and threatens to challenge immovable railways in upper-class travel. Some improvements in roads, especially in the western and southern part of the country, have suddenly made possible multi-axle trucks with their superior efficiency.
Postal
Much the same is the story in overnight postal package delivery. A private sector, despite the higher cost of duplication of services on account of numerous players, has made it nearly impossible for the high-prices state owned carrier Speed Post to survive. In both airlines and posts, besides the superior operating efficiency of the private sector, the fact of significantly lower level cost for the private sector is important.
Telecom
In telecom, on the other hand, the basics of the regulations (price cap tariffs, independence, shifts from license fees to revenue sharing to lower risks, allowing multiple licenses to ensure competitive behavior even if such entities were under scale, but with no bar on merger and alliances) were right and the technology driver in reducing cost and increasing the overage potential was high. For these two reasons, telecom has grown very rapidly through both private and public investments. Telecom promises to cover all except the bottom 20 percent or so far of the population over the decade. For cellular telecom, India has the lowest tariff in the world. Internet access has also grown by leaps and bounds and a much lower penetration of both telecom and internet as compared to China is on account of factors that lie quite outside the sector (the income level in India being barely a fourth or less that of China, much better income distribution in China, besides higher levels of literacy and education). Problems of quality especially in mobile services have surfaced but are being systematically addressed by the regulator.


FAILURE IN ELECTRICITY REFORMS
Despite more than 10 years of ‘reform’ the electricity sector continues to be plagued by policy and regulatory uncertainty. The system having moved from the earlier Administered Price Mechanism to ad hocism in prices and tax rates. Private investments continue to be negligible and overall rates of investments or capacity additions in these sectors have come down.
The fundamental problems in these sectors emanates from the mode of subsidization. Low prices for electricity (zero prices for use given horsepower-based tariffs) that apply for agriculture major result in distortions on the user and utility sides. The user side distortions on the user and utility sides. The user side distortions include excessive use and wastage , environmental problems including salinity ingress, destruction of aquifers, water intensive crops being grown in dry areas, and cropping matter distortions more generally. India draws out more ground water than any other country by a wide margin. Similarly, the zero tariffs repel any investments in water-saving technologies such as drip and sprinkler systems with much potential since the costs here are private.
In response, the government and regulatory bodies instead of eliminating the price arbitrage try to work around it by having ‘tamper proof’ meters, ‘armored cables’, separation of rural agricultural feeders from others, all of which are not only enormously expensive but also doomed to fail since fundamentally there cannot be an accountability to revenue in a situation of ‘price arbitrage. What is even more remarkable is that there are central programmes that give funds and grants for such investments which are essentially wasteful. In many states electricity distribution officials have been given magisterial powers to resist theft under these conditions. So a simple task like management becomes quasi police and something that has to be mentioned at the highest level-by the prime ministers office.
In electricity the Electricity Act 2003 attempts to bring in open access and competition for the market in generation with trading as a distinct business, and reduction in cross-subsidies. Yet improvements have not taken place.

CHALLENGES AND OUTLOOK
The development of adequate infrastructure is a critical prerequisite for sustaining the growth momentum and to ensure the inclusiveness of the growth process. The Eleventh FYP states that the pattern of inclusive growth with targeted growth rate of GDP at 9 percent can be achieved only if the infrastructure debt can overcome and adequate investment takes place to support higher growth and an improved quality of life for both urban and rural communities.
Each segment in the physical infrastructure sector has its own specificities, be it of land acquisition, environment, regulation, financing or of designing of contracts. The need to develop appropriate mechanisms for financing infrastructure, especially the development of a domestic debt market is overreaching.
It’s also important to ensure synergy in the efforts being made to develop different type infrastructure through effective coordination between different agencies. Then only the sum total can be grater than its parts.
As with any sector, growth of the infrastructure has two dimensions: Growth in output and increment in its capacity. With year-on-year growth of infrastructural output is important in its own rights; it’s evident that addition to capacity is critical determinant of the output.

IRRIGATION

Irrigation plays an important role in Indian agriculture. Currently near 45 percent of the 175 million ha of the country’s cropped area is irrigated.

POST-INDEPENDENCE TRENDS
Irrigated area has nearly trebled since the early 1950s from around 24 million ha in 1953-54 to nearly 75 million ha in 1998-99. According to one recent estimate, nearly three-fourth of the increment in the total crop output between the early 1970s and early 1990s came from expansion of irrigated area and increase in per hectare yields on irrigated land. Un-irrigated cropped areas have actually declined and the rate of yield improvement on these areas has been far slower overall, compared to irrigated areas.
Expansion of irrigation has been central to the strategy for increasing agricultural production.
Ø Investments in agriculture
By far the largest part of government investment has been spent on construction of new reservoir base canal system and, to a much smaller extent on improvement of these systems.

Substantial amounts were also spent on small scale surface irrigation works (tanks, local stream diversions and lift irrigation) as well as public tube-wells. But, these were much smaller than investments on large scale surface works.
Irrigation accounts for by far the largest part of total investment in the agriculture sector. Overall public investment on irrigation (central and states together) during 10th plan was Rs. 97720 crores resulting in addition of 8.8 million ha potential. With this 42 million ha of potential have been created under major and medium irrigational at end of 10th plan out of an ultimate potential of 58.5 million ha, and corresponding figures for minor irrigation are 60.4 and 81.4 million ha respectively.

Ø Liberal policies
The government has also encouraged and stimulated exploitation of ground water by farmers for irrigation by giving liberal credit at concessional rate of interest and by implementing a huge rural electrification program and providing cheap electricity and diesel oil for pumping. There has also been surge of private investments in wells and tube-wells.
As a result, the importance of ground water as an irrigation source has increased from 20 percent in 1951 to early 60 percent in the mid 1990s.

UNEVEN ACCESS TO IRRIGATION
Given the size and diversity of the country, it is not surprising to find much interregional variation in the extent and sources of irrigation and their development overtime. Available data suggest that interstate disparity in surface irrigation is considerably less than in groundwater irrigation.
Disparity in the proportion of gross irrigated to total cropped area has also been widening over the years.
Access to irrigation among the farming population is also unequal. For the country as a whole, there is consistently positive association between size of holding and the proportion of household having access to any irrigation and a consistently negative relationship of holding size to the proportion of irrigated to total operated area.
In other words, smaller holdings have less access to irrigation but are able to irrigate a higher proportion of their land.
Expansion of irrigation has clearly favored those with higher holdings far more than those with small holdings.

AREAS OF CONCERN
Government strategy for irrigation development and its implementation has attracted criticism on several grounds. The bulk of public investment in the water sector has gone into construction of large surface irrigation projects.
Ø Under-estimation of costs
Inadequate preparatory investigations and laxity of preclearance upraisal have resulted in serious under-estimation of costs. Compounding this is the tendency to start far too many projects, unmindful of resources available to implement them.
The result has been inordinate delays in completing projects, overcapitalization, and underutilization of their potential and accumulation of a huge overhang of incomplete projects.
Ø Depletion ground water
Depletion ground water is another major area of concern. Despite significant and increasingly widespread fall in the groundwater table, Government policy continues to encourage and finance private investments in wells/tube-wells and there energization and deepening.
In this process, the distribution of access to groundwater is shifting in favor of larger farms at the expense of small holders.
In the case groundwater, there is growing evidence that groundwater exploitation is already at unsustainable levels in many areas and this is becoming more widespread. As the no. of wells and tube wells continue to grow, they are getting deeper and deeper, and more and more powerful pumps are installed to keep pace with the falling water tables.
There is progressive decline in the area irrigated per well and per tube-well.

NEEDED CORRECTIONS
The potential for further expansion of water supplies for both surface and groundwater irrigation is strictly limited.
In the case of surface water, nearly 60 percent of the utilizable potential of surface water is already been utilized and with the completion of projects under construction this proportion might reach 80-85 percent.
As the limits of potential are nearing, new projects are becoming more difficult and more costly.
Ø IMPROVING WATER USE EFFICIENCY
It is therefore imperative that the focus of irrigation programmes and policies has to shift to measures to facilitate and induce conversation and more efficient use of available supplies.
Productivity per unit water also depends on the extent to which the quantum and timing of irrigation can be managed flexibly to maintain an optimum soil moisture profile during crop growth. Flexibility in water application can be increased by creating small ponds or other devices close to user level and/or by more extensive recycling of seepage in canal commands.
Radical changes are needed in the institutional arrangements for water management and the way they function.
They need to be complemented by measures to create strong incentives for more prudent and economical use of water.
Ø WATER GOVERNANCE
The desirability of user involvement and active participation in management of irrigation is gaining acceptance. Some states have taken significant steps to implement this concept by entrusting water users associations with maintenance and collection of water at territory level.
Ø ECONOMIC INCENTIVES FOR EFFICIENT USE
Pricing of irrigation and inputs used for irrigation is critical.
Wasteful and inefficient use of water by the farmers as well as the overexploitation of ground water which is a glaring feature of the Indian scene is due is large measure to the policy of keeping water charges and the prices of electricity and diesel oil at levels far below cost.
This folly has been compounded by laxity in assessment and collection of dues, and by failing to adjust rates in the face of rising costs and output prices. With the effective cost of water relative to output prices falling progressively and steeply, user’s interest in reducing waste and improving water use efficiency, already weak, has become weaker and weaker.
With few takers for price reforms and indifference towards institutional reforms, it is difficult to be optimistic about the prospect of achieving prudent, efficient, and sustainable management of irrigation.

APPROACH TOWARDS IRRIGATION IN THE 11th FYP
The 11th plan envisages creation of an additional potential of 16 million ha at an estimated required outlay of about Rs. 210,000 crores. Since irrigation is a state subject, most of this has been year-marked for financing by States and an analysis of States’. Own preliminary 11th plan allocations show that this might actually be exceeded.
Although financial resources appear adequate except some poorer States, guidelines for the Accelerated Irrigational Benefits Program (AIBP) have already been changed to expand its scope and to increase the Central share for selected areas.
With some States wiling to commit adequate funds, but with actual water use lagging well behind the potential created, it needs to be recognized that the scope for new large surface irrigation projects is getting smaller and that the focus should be on completing on going irrigation projects and on modernizing existing ones.
The ongoing programmes of rural electrification under Bharat Nirman is likely to help, although it is vital to ensure both that adequate credit is available for pump sets and that electricity rates are not reduced to the unsustainable levels reached elsewhere.
A sharp focus is required on making the use of groundwater sustainable in other parts of the country where withdrawal currently exceeds recharge.
Ø There must be regular and accurate assessment of actual groundwater use in both rural and urban areas to correlate this with recharge and extraction.
Ø Separation of feeders for domestic and agricultural power and its timely but controlled supply for irrigation can be an effective mechanism.
Ø Ways must be explored to empower and entrust village communities with the tight and responsibility to collect electricity charges and in dark blocks to regulate access through, for example, obligation on groundwater users to undertake rainwater harvesting and groundwater recharge.
Substantial irrigation potential has been created though major, medium and minor irrigation schemes. The total irrigation potential in the country has increased from 81.1 million ha in 1991-92 to 102.8 million ha in 2006-07. Of the total potential created, only 87.2 million ha (84.9 percent) is actually utilized.

INDIA's GROWTH EXPERIENCE SINCE 1980s

India’s economic performance during the first 3 decades since independence was christened the ‘Hindu rate of growth’. The growth rate was not enough to meet the needs of a country where the initial level of income was so low.

Since 1980, its economic growth rate has more than doubled, rising from 1.7 per cent (in per capita terms) in 1950-80 to nearly 4 per cent thereafter. Shackled by the socialist policies and the ‘license-permit-quota raj’ of the past, India used to serve as an exemplar of development strategies which went wrong. It has now become the latest poster child for how economic growth can be unleashed with a turn towards free markets and open trade. Thanks to its solid democratic institutions and impressive performance in information technology, the country is increasingly trying with china as the country of the future.

Its documents the facts on India’s aggregate growth performance over time and presents a view on when and why it turned around. It lists the facts relating to growth across states within India, and offers explanations for the variation in state-level economic growth. It raises some questions for the future, relating aggregate and state-level growth.
India’s performance in terms of economic growth was about the same as in most countries in the world. It was not as good as East Asia but, definitely not as bad as Africa. The rate of growth predicted for India, based on its initial output per worker, its share of investment in GDP and its population growth rate was also very close to world’s average.

There was a sharp acceleration in the growth rate since 1980. It went almost unnoticed and India grew almost by stealth. It came into limelight in early 2000s. The growth rates achieved on an average, during the period from 1980 to 2005, means that GDP doubled in 12.5 years where GDP per capita doubled in 20 years. In fact between 1980-81 to 2004-05, GDP multiplied by 3.81 while GDP per capita multiplied by 2.37.

AGGRERATE GROWTH
There were few significant policy changes in the early 1980s, and the changes later on were restricted largely to some internal liberalization relating to the relaxation of industrial licensing. The limited nature of these changes, as well as the form they took, is best understood by appreciating the political logic of Indira Gandhi.
Output per capita, output per worker as well as total factor productivity accelerated sharply after 1980. For example, total factor productivity, which grew at about 0.2 per cent per annum during the 1960-80 period, grew at close to 2 per cent per annum in the following 2 decades.
India has become the model for high and efficient growth and this acceleration in the growth rate can be attributed to several factors.
Ø Expansionary macroeconomic policies
Expansionary macroeconomic policies which led to an increase in aggregate demand did stimulate an increase in the rate of growth of output.
Ø Increase in public investment
Starting with 1970s there was a significant increase in the public investment which was sustained through the 1980s which contributed to an increase in aggregate demand.
Ø External liberalization
Trade liberalization began in late 1970s, combined with some deregulation in industrial policies introduced in early 80s, contributed to productivity increase and economic growth. Very little internal reform, of products and labor markets, was witnessed in the 1980s, and the only serious effort in this area- the delicensing of Indian manufacturing-started late in the 1980s and was fairly limited in the scope.
It’s even argued that external liberalization could not have been a factor because the Indian trade regime actually became more restrictive during the 1980s, and the full impact of trade reforms implemented in the 1990s was only felt at the end of the 1990s.
Ø Attitudinal shift
There was an attitudinal change on the part of the government of the 1980s, signaling in shift in favor of the private sector, with this shift validated in very haphazard and gradual manner through actual policy changes.
This shift and the limited policy charges were pro business rather than pro competition, aimed primarily at benefiting incumbents in the formal industrial and commercial sectors. The pro market focuses on removing impediments to markets and aims to achieve this through economic liberalization. It favors entrants and consumers. A pro business, on the other hand, is one that focuses on the raising profitability of the established industrial and commercial establishments. It tends to favor incumbents and producers. Nevertheless, this shift towards a pro business orientation was the essential trigger that set of the boom of the 1980s.
These small shifts elicited a large productivity response because India was far away from its income possibility frontier.
Ø Reduction in the instability of growth
The surge in Indian growth after 1980 was accompanied by a reduction in the instability of growth. The standard deviation in the growth of output per worker which was 3.7percent pre-1980 declined sharply to 1.9 per cent thereafter, a performance that surpassed that of nearly every other country.
Ø Other factors related to poverty and agriculture
During the 1980s poverty alleviation programmes were in full swing coupled with increase in productivity of agriculture. Both of them gave rise to significant share in the GDP. Agricultural factors played an important role since the green revolution in the 60s and 70s had a tremendous impact on the output which made the country self-reliant. Also irrigational facilities became prominent in this era with nearly 65 percent of the area was under irrigation in 1980s. A decline in poverty observed during this period was of some sort of significance. There was a marginal decline in the poverty due to the adoption of massive poverty alleviation programmes that made it possible for the people to buy better goods and services to contribute to the growth of the country.

The cumulative impact of economic policies or public actions over the preceding 30 years possibly played an important role in the turnaround.
The social institution and the legal framework for a market economy were put in place.
A system of higher education was developed.
Entrepreneurial talents and managerial capabilities were fostered.
Science and technology was accorded a priority.
Capital goods sector was established.

This turnaround has also been true at the level of the three major sectors, especially manufacturing and services. Agricultural growth accelerated by about 2.7 per cent between the 1970s and 1980s, and manufacturing and services posted growth rates over 6 per cent in the 1980s and the 1990s.
One way to control the demand induced increase in productivity is to compute the productivity aggregates incorporating changes in capacity utilization. One estimate for the 1970s and 1980s implies an increase in capacity utilization of about 2.7 per cent, which would have the effect of reducing measured TFP growth in the 1980s by about 1 per cent per year.

STATE-LEVEL GROWTH
Prior to 1980, the growth rate of the Indian states was mediocre but relatively uniform.
It appears that two sets of factors played a role.
Ø Different states with different pre-existing capabilities.
Different states have different pre-existing capabilities. But these remained latent and could not find expression until the economic environment changed. It turns out that this capability was something more than a states level of development or educational level or geography. It is the best captured by how diversifies a state’s manufacturing base was. This diversified base is probably a proxy for some generalizes capability-human capital, entrepreneurial spirit, organizational capital-that could exploit a favorable economic environment.
Ø Liberalization
The trigger-the second set-was liberalization begun in 1980, and especially the decentralization of economic power that was changed by the changing political landscape after the 1980. The triggers of liberalization and decentralization-While the formal reforms at the centre received tremendous publicity, perhaps less noticed was the growing decentralization of policy.
The centrifugal forces created by the dispersion of political power in India did not sit well with the enormous centralization of economic power, and the inter-state cross-subsides the centre affected through its investment strategy. Something had to give, and it was the centralization of economic power.
Greater economic decentralization meant states could differentiate themselves, not least in their ability to attract the private-sector investment. This was, of course, facilitated by the gradual dismantling of the industrial licensing system that used regional equity as one of the primary criteria guiding industrial investments. Further contributing to differentiation over this period was the rising trend in private investment, as well as the falling trend in public investment with private investment likely to be more sensitive to differences in policies across states.
Economic development results from the interaction of growth triggers with the right fundamentals that allow the triggers to be exploited.
The fundamentals were not just the pools of skilled human capital built through the technology, management, and research institutes –a sort of import substitution effort is skilled human capital development-tat was integral to the Nehruvian vision.
Free mobility of capital and labor should facilitate convergence the process of divergence within India. But capital will not flow into the lagging states, which are stuck in a governance trap: because basic state functions such as law and order, an efficient bureaucracy, and competent courts have not been provided, they have remained poor, which in turn has led to exist of the middle class and the skilled, leading to the further skill groups there hollowing out of state capabilities. If this continues, the process of arresting divergence could take the form of large labor outflows from the backward states. Averting them by crafting the conditions for greater economic convergence over states and skill groups will be a big challenge for India in the years ahead.
As India faces the new century, the Indian economy stands at a crossroads. Either it can take the "business as usual" road, which also means continued poverty and a low growth trap, or take the high road to achieve prosperity, global prominence and a more egalitarian society through accelerated reforms and by energising the national innovation system. This means that government's national orientation has to shift from religious fundamentalism, re-writing history and terrorising minorities to achieving economic goals, and concomitantly the voter has to rise, or be encouraged by the intellingentsia to rise, above caste, religion and inducements to vote for performance. The task is achievable, but not by wishful thinking and armchair pontification of intellectuals.

The fiscal expansionism of the 1980s, accompanied by some liberalization controls on economic activity, generated real GDP growth of more than 5 per cent a year. This expansionism was, however, was not sustainable and led to macroeconomics of 1991.

PRIVATIZATION

PRIVITAZATION
The past quarter century has witnessed a significant move towards privatization in economics across the globe. Several industrial countries have embraced it after decline of communism in the Erstwhile Soviet Bloc. In India privatization and disinvestment of the public sector emerged as a major public policy after the country embarked on a process of economic reforms in 1991.
Even though the question of the average appropriate balance between public and private enterprise is one of the foundations issues in political economy, it has received relatively little attention in mainstream economic analysis until quite recently.
Privatization maybe broadly defined as a transfer of various activities from the public to private sphere. Specifically, it would mean the sale by government or state-owned-enterprises (SOEs) to private economic agents. It could refer to a sale that is effected in full or in part. It can also mean a partnership between the public and private sector through a transfer of responsibilities from the public to private sector. In terms of broad political economy, it could also simply mean a shrinking of the welfare state.

Since privatization has been accepted as a legitimate, and even a code, too of statecraft by more than a hundred governments in the past two decades of economic merits are firmly settled.

There is in fact a widespread perception that privatization brings about outcomes that are superior to the point of efficiency in terms of resource allocation as compared to the situation under public ownership.
Privatization theory

Within the standard of microeconomics literature, it’s well established that under perfectly competitive conditions, absence of information asymmetries, and complete contracts, it does not matter whether one is operating under private or public ownership. Under conditions of natural monopoly, denoted by decreasing average cost in the relevant range of demand, the possibility of monopoly power by a private owner created the rationale for public ownership.
Public ownership brings about efficiency loses that are non negligible. They could well be higher than the gains that may be ensured by solving a market failure problem. This comes about especially when the scope of competition becomes larger with an increase in the price of the market, with the economy possibly getting opened up to the international trade and adopting higher levels of technology.

There are two broad perceptive viz. political and managerial, that maybe used to explain the presence of inefficiency under the public sector. The managerial perceptive holds that monitoring is poorer in publicly owned firms and therefore the incentives for efficiency are weak.
The political perceptive contends that it’s political interference that distorts the objective and brings in the possibility of soft-budget constraints faced by public sector managers. Using simple gain theoretic tools, it’s possible to demonstrate that the political loss in closing a publicly owned company is grater than the cost of using taxpayer money or public debt to bail out a public sector company. It’s argued that privatization would effectively drive a wedge between politicians and managers and would make restructuring more likely by making it too costly for politicians to subsidize firms.

The choice between public and private provision of goods involve significant delegation of authority. The main difference between two modes concerns the transactions costs faced by the government when attempting to intervene in the delegated production activities. Such an interception is generally less costly under public ownership than private. They then proceed to put forward what they call the fundamental privatization theorem.
It’s shown that the conditions under which privatization is optimal are rather stringent.
Major gains in efficiency can be expected by increasing market contestability via deregulation of policies. Competition implies not only free entry into the market, but the freedom, especially on the SOEs, to fail. Competition also facilitates performance comparisons that can generally improve trade-offs between incentives and risk when several agents, or managers, facing uncertainties are being monitored.

One needs to also consider the macroeconomic implications of privatization. Privatization may be used as a tool for improving the government’s fiscal condition. When carried out through public offerings and mixed sales it can help increase the level of stock market capitalization and the development of the fiscal sector generally.

EMPERICAL EVIDENCE

One needs to determine the correct measure of operating performance, selecting an appropriate benchmark with which to compare performance, and to decide the appropriate statistical tests to be employed.
Empirical studies on privatization may be broadly divided into three categories
Ø Case studies
Ø Cross sectional comparisons of public and private sector performance
Ø Statistical analysis of pre and post divestiture performance of enterprises
Most statistical anal uses of pre and post privatization performance are marked by the failure to control for the economic environment.

There were several experts who had advocated overnight mass privatization programmes in the early 1990s. Many of these measures were simply ‘robbery by the old elite and the new oligarchs’. It’s very important to consider whether it’s desirable to go in for a ‘big bang’ policy of massive overnight asset transfer, or whether one should promote an evolutionist and organic transformation of business enterprises.

The first purports to ending state ownership in drastic manner, using giveaway through voucher schemes and tolerating takeover by managers and management buyouts. The latter maybe described as a bottom-up development of a new private sector but no giveaway of state property.

INDIAN EXPERIENCE SINCE 1991
A consideration of the privatization experience in India may well focus on the period after 1991, when the government embarked on a comprehensive process of economic reform and liberalization. At that time public sector in India accounted for more than one-fifth of the country’s GDP. Since a large number of PSEs regularly showed negative profit margins, the government was keen on a program of privatization, calling it disinvestment instead.
In the interim budget on 1991-92 the government took a policy decision to disinvest upto 20percent of the equity in selected PSUs in favor of mutual funds and financial or investment institutions in the public sector. The disinvestment was to improve management and enhance the availability of resources of these enterprises. The Rangarajan Committee reports on the Disinvestment of Shares in PSEs in April 1993emphasized the need for substantial disinvestment, and recommended that the percentage of equity to be divested could go up to 49 percent for industries especially reserved for the public sector. It recommended that in exceptional cases, such as enterprises that had a dominant market share or where separate identity had to be maintained for strategic reasons, the target public ownership level could kept at 26 percent, that is disinvestment could take place to the tune of 74 percent.
In all other cases it recommended 100 percent disinvestment of the public stake. Holding of 51 percent or more equity by the government was recommended only for six scheduled industries
Ø Coal and lignite
Ø Mineral oils
Ø Arms, ammunitions, and defence equipments
Ø Atomic energy
Ø Radio active material
Ø Railway transport
In 1996 the government established a Disinvestment Commission. The purpose of this body was to formulate procedures so that any decision to disinvest would be taken and implemented in a transparent manner.
The revenues generated from such disinvestment were to be allocated for education and health and for creating a fund to strengthen PSEs.
The recommendations indicated a shift from public offerings to strategic/trade sales, with transfer of management. The Commission also observed that the essence of a long term disinvestment strategy should be not only to enhance budgetary receipts, but also to minimize budgetary support to unprofitable units while ensuring their long-term viability. By 1998 government was of he view that ‘in the generality of cases its shareholding in PSEs will be brought down to 26 percent’.
By 2000-01 the government’s policy regarding privatization and public sector restructuring comprised the following considerations:
Ø restructure and revive potentially viable PSEs
Ø Close down PSEs that cannot be revived
Ø Bring down government equity in all strategic PSEs to 20percent or lower
Ø Fully protect the interests of workers

The Ministry of Disinvestment was converted into Department under the Ministry of Finance with effect from 27 May 2004 after the UPA government assumed office.
All privatizations were from now in to be considered on a transparent and consultative case-by-case basis.

The government constituted ‘National Investment Fund’ in January 2005 into which the realization from sale of minority share holding of the government in profitable PSEs would be channelized. The fund would be maintained outside the Consolidated Fund of India and the income from his Fund would be used for the following purposes
Ø Invest in social-sector projects that promote education, health care, and employment
Ø Capital investment in selected profitable and revivable PSEs that yield adequate returns, in order to enlarge their capital base to financial expansion or diversification.
After the initial phase of enthusiasm in the 1980s and then the onrush during the 1990s, we are now at a stage where we can take a more measured approach to privatization.

There is certainly no clear superiority of private vis-à-vis public ownership from the standpoint of economic theory. Ultimately it’s the consideration that should be of relevance rather than simplistic presumption that the public sector is necessarily inefficient or that privatization is an all-purpose panacea.

Food procurement policy

FOOD PROCUREMENT POLICY
The Indian government’s food procurement policy is geared to achieve the twin objective of serving consumers through price subsidy and supporting the price for producers.
The major elements of the food policy are:
Ø Procurement of grain at Minimum Support Prices (MSP).
Ø Maintenance of buffer stocks.
Ø Distribution at subsidized rates through the Public Distribution System (PDS).

The Government of India (GoI) allocates states to grain at Central Issue Price (CIP) for distribution to consumers. The Food Corporation of India (FCI), an agency of the GoI, handles procurement, storage, and transportation of grains to states. The state in turn distributes to consumers at subsidized prices of a network to more than 460,000 Fair Price Shops (FPSs). The ‘food subsidy’ comprises the cost of procurement incurred by the GoI net of sales realization (for rice, wheat and sugar) and the carrying costs for maintaining the central pool of buffer stock incurred by the FCI reimbursed by the GoI.

The policy is effective for rice and wheat in major surplus states. For wheat, the government offers to buy all grain that comes forth for sale at the announced MSP. In the case of rice, part of procurement is in the form of paddy at the MSP, which is custom milled at the rest, which is the major part, is procured as rice in the form of a statutory levy imposed by all major rice- producing states on rice millers/dealers. The levy percentage varies widely from 10 percent in Pondicherry to 75 percent in Haryana, Punjab, and Orissa. Rice millers are paid levy rice prices fixed by the state government. The Commission for Agricultural Costs and Prices (CACP) recommends levels at which the MSP should be fixed on several considerations. These include cost of cultivation, the overall shortage of grains as reflected by the trend in wholesale prices, and the need to keep in check the rate of inflation in the consumers’ interest.

Apart from supporting farmer’s prices the government’s policy of procurement helps supply grain to the PDS, the scheme to distribute subsidized grain to consumers. In order to reduce the budgetary costs of these schemes well as to direct subsidy mainly to the poor, the government shifted from a universal PDS to as Targeted PDS (TPDS) in 1997. However, in general the TPDS suffers diversion of grain to the open market due to lack of transparent and accountable delivery systems. The move by the government to decentralize the procurement and PDS operations to states is in part meant to rectify these problems.

CRITICISMS
The policy has come under criticism not only for increasing the fiscal burden that it causes but also for administrative inefficiencies and creating market distortions.
Fixing of the MSP to cover the full cost of cultivation imposes a heavy burden on the government’s finances. Although the MSP is fixed supposedly based on a cost – formula, the actual priced offered in practice is higher and influenced by high expectations of rich farmers represented by politically strong farm lobbies.
The high and rising MSPs provided by the GoI for wheat and more recently for paddy increased profitability of these crops and motivated farmers to shift greater areas to these crops from coarse cereals, pulses and oilseeds.
Moreover, the income transfers accrued disproportionately to large farmers confined mainly to surplus states.
The policy also led to an accumulation on buffer stocks of grains and the credit blocked in these stocks put pressure on interest rates and possibly crowded out more productive investment.
These adverse fiscal and environmental implications led to increased recognition of the need to reform farm support policies.

SUMMING UP
Ø Large shift to rice and wheat from cereals, pulses and oil seeds.
Ø Skewed income transfers
Ø Price distortions in the output market
Ø Environmental costs
Ø Accumulation of buffer stocks of grains
Ø Blocking of credit that puts pressure on the interest rates that crows out productive investments.

SUGGESTIONS
Ø Reduce the MSP
Recommendations were made to reduce the MSP so that it served as a price stabilization mechanism and not an income guarantee to farmers and to cover only the variable costs, namely the costs of inputs and wages (including family labor). The High level Committee on Long-term Grain Policy examined the cost effectiveness and liabilities arising from some alternative programmes to support farmers to lieu of the MSP scheme.
Ø Removal of both the rice levy and restrictions on grain trade
Among other things, the Committee proposed removal of both the rice levy and restrictions on grain trade, limiting their use to emergencies.
Ø Encourage private participation
In the last few years, the government initiated steps to encourage private participation. The role of FCI is proposed to be restricted to timely sales and purchases to maintain stability in food prices.
Ø Promotion of exports
As part of the new strategy, the government plans to promote exports through long term credit, removal of export restrictions, establishment of Agricultural Export Zones (AEZ), and transport subsidies for export of wheat and rice from government warehouses.

1) In order to take full advantage of growing exports, the exporters would need better ports and other domestic infrastructure facilities, which are currently very meagre.
Undertaking reforms in these areas would allow India to take on competition from major exporting countries such as Vietnam and Pakistan for rice and the United States for wheat.
2) Domestic marketing reforms also need to be undertaken so that there is one integrated market for food within India and restrictions do not prevent inter-regional flows in a timely and efficient manner.
3) The private sector should be allowed to operate more freely in the market and to trade and store grains based on its expectations from the market.
4) The public sector needs to play a facilitating role by providing the appropriate economic environment and creating a level playing field for private operators and traders.
5) Several government committees have recommended the abolition of statutory and non-statutory charges such as MANDI charges and purchase tax to reduce transaction costs and encourage free movement of grains domestically.
6) The high costs of maintaining public stocks can be reduced through encouraging private storage, which plays a complementary role to public storage.
7) Support price should not be fixed at unduly high levels. The level of the MSP should be such that it provides protection against distress sales during surplus situations and not a guarantee for fixed returns on the cost incurred.
8) The cost of operation of the FCI can be reduced by decentralizing procurement to local market, carrying out storage operations at state levels, and by avoiding cross-hauling of grain that takes place in the current centralized system.
Reforms to the GoI’s food procurement policy in these directions would help achieve in its twin objectives more efficiently.

Writing on SEX

At the British Council, I was asked to write on SEX. The main motive for this part of the course was to encourage the Indian mentality towards SEX. The teacher knew that Indians often feel offended to talk about sex and writing about it was something that was meant to be encouraged as it's the part of life we've to live with. Therefore, he asked us to prepare a writing on which sexual feelings arise. Now, let me tell you that sexual feelings are of different types. It maybe there even when the couple are miles apart like telephone sex or even when their souls are fused into one while you're having SEX. So the following is my piece of writing on SEX. Now do comment if I sound somewhat creative at my fantasy.

I gently lashed the door confirming her presence inside the room. I drew my feet to hers. She lay on the bed uncomfortably clenching and unclenching her fingers on the bed sheet. I held her by her hands and directed her to stand beside the bed. She smiled innocently as she stood and probably knew what I was going to do then. Penetrating through her t-shirt, she was naked with her well shaped breasts, and I never wanted to lose a chance to admire them. I slipped my hands into her t-shirt making a clear way through the navel to stroke her breasts. Slowly we undressed each other and I stopped to admire her hips. We both were naked. I drew her nearer to me so that we could have a kiss and she readily stood on my feet. In a flash we had our first ever kiss. Her eyes shone bright and I could realize the depth of her love for me. ‘I love you Natasha’- I whispered softly in her ears. She blinked her eyes to say that she loved me too, and in some way or the other more than I did. My finger tips moved like a pendulum to feel her soft skin from her ribs to her arms and after reaching her fingers, to her waist along the same path. Our bodies integrated through sex to form a single body and we shared the best experience of our lives. It was more than sex that happened between us and that experience was enough to keep us apart for two years.

Generation reforms

An assessment of the first generation reforms and recommendations on the 2nd generation reforms.

The economic reforms removed policy-induced entry barriers, relaxed constraints on private-sector initiatives, and led to the emergence of domestic as well as external competition. The reforms resulted in several favorable outcomes.

1)The composition as well as direction of imports and exports shifted away from barter trade with former Soviet Bloc.
2) Shares of exports in domestic production increased. Output and employment in the factory segment of the manufacturing sector expanded.
3) Finally, the GDP growth rate in the first 3 post-reform years exceeded 7 percent for the first time since Independence.

The beneficial effects on the economy, though significant, have been modest, Still more reforms are needed to put India on a path of sustained rapid growth. For example, although the post-reform Indian export performance was superior to that of the pre-reform era, it was vastly outdone by that of small economies like Malaysia, South Korea, Taiwan, and Thailand, and large economies like China and Indonesia. Political and external factors played a role in the slowdown.

However, the failure to bring the overall fiscal deficit of the central and state governments as well as those of non financial public enterprises, significantly what it was as a proportion of GDP in 1990-91 just before the crises was a major contributing factor. The persistent deficit led to rise in real interests rates on borrowed capital and crowded out private investment.

The burden of the fiscal reforms that has occurred since the reform has fallen in a large part on public investment, particularly in infrastructure. The lack of adequate investment in additional capacity, and the poor maintenance and inefficient operation of infrastructure facilities and services, have acted as a drag on growth. Although there have been improvements in ht e performance indicators on power, telecommunications, railways, road transport, and ports, concrete progress has been too slow to meet progressively demanding requirements of the globalizing economy.

Two factors constrain investment for creating needed additional capacity. The public sector, as a whole, has become a net dissever. More public borrowings at market rates, not only for investment but also to sustain public consumption, would worsen the already serous issue of fiscal solvency besides crowding out private investment. The alternative- attracting significant private investment (domestic and foreign) into infrastructural sectors- is impossible as long as investors have to absorb, in effect, the cost of subsidized sales to privileged users. Besides adding capacity through investments, the efficient operation of already existing capacity is essential.

The regulation of the infrastructure sectors is also a key concern. Scale economies and network externalities are clearly significant in infrastructure sectors. Atomistic competition among price-taking enterprises is unlikely, because there are few firms of significant size relative to the market in such sectors. Regulation of their operation is common around the world, although the nature and scope of regulation have changed.
In these circumstances, a well-formulated and effectively enforced competition law could be better social policy than regulation. India’s experience with regulation is very recent. The Telecom Regulatory Authority of India (TRAI) had to be reconstituted twice within its short life.

The states and the central government have set up regulatory agencies for electricity, but the legislation defining their functions and interrelation was approved by the Central Cabinet.

COMPLETING FIRST GENERATION OF REFORMS
Even after the substantial reduction in the import tariffs and of all quantitative restrictions (QRs) on imports, there is still a long way to go before India’s trade barriers are as low as those of its neighbors. All finance ministers in the post-reform era have declared their intention of bringing down average tariff rates to the levels prevailing in East India.
The more quickly these intentions are translated into concrete actions, the more quickly will Indian industry become internationally competitive and better placed to receive the benefits of expanding trade opportunities. Unfortunately, by replacing QRs that were removed with high tariffs and by imposing antidumping duties on some imports from China, the government seems to have taken a step away from acting on its intentions.
The first generation of reforms is also not complete with regard to the power sector. Draft legislation for the power sector allows for the unbundling of generations, transmission, and distribution and also permits private enterprises to undertake some of these functions. The unbundled functions of the State Electricity Boards (SEBs) should be corporatized as an interim measure, because privatization is unlikely anytime soon. This would formally distant them from government and may be expected to improve the efficiency of operations, rationalize the structure of tariffs, and bring revenues in line with the costs.

SUMMING THE FIRST GENERATION REFORMS
• Industrial de-licensing and simplification and rationalization of tax structure to promote investment and expansion.
• Liberal FDI regime to supplement domestic resources.
• Current account convertibility to have a liberal trade regime.
• Public sector divestment to ensure government does what it does best.
• WTO compatibility to plug into the global economy.

LAUNCHING THE SECOND GENERATION REFORMS
Following should be included in the second generation reforms:-
• Reducing Fiscal deficit
• Amendments to crucial Economic Statutes
• Financial sector reforms
• Agriculture and Labor reforms
• Power Sector Reforms
• Corporate governance
"Talking of second generation reforms is a fuss when you are yet to complete the first generation reform process," said former Financial Minister and the current Prime Minister Manmohan Singh. The unfinished task of fiscal restructuring is standing in the way of more investments in education, healthcare, energy and physical infrastructure sector, he said.
The first generation reforms are still in various stages of completion after a decade attracted by political support. The second generation reforms are those yet to be undertaken in any significant measure but which are critical for restoring and sustaining rapid growth.

There are four critical second-generation reforms of domestic policies and institutions:-
1) Reform of the labor laws
2) Privatization of enterprises that have no compelling social rationale to be in the public sector
3) Reform of laws of bankruptcy and liquidation
4) Restructuring of centre-state relations.




LABOR LAWS AND REFORMS
An overwhelming majority (60 percent) of the labor force is engaged in agriculture. The inefficient functioning of the market for land constrains the movement of labor out of agriculture into more productive activities. The labor market has dual structure: a few large enterprises have dominant share of output due to use of more capital per worker, thereby increasing their productivity per worker. Large enterprises substituted relatively cheap capital for labor as labor laws increased the cost of hiring and firing. Although reforming the labor laws has been on the agenda since 1991, not much has happened.

PROBLEMS
1) Despite recent growth, India’s manufacturing sector still accounts for less than 15 percent of GDP and employs less than 15 percent of the work force. This is in simple contrast to the fast-growing East Asian countries such as Korea, China and Thailand where rapid expansion in manufacturing has generated large scale employment that has lifted millions out of poverty.
The sector is clearly facing constraints that are hindering its expansion. China’s remarkable success – with exports of 20 billion finished garments or roughly 4 for every person in the world - has largely been explained by its state-of-the-art factories and efficient transport infrastructure. While huge infrastructure bottlenecks have undoubtedly kept India’s textile and clothing industry small and fragmented, what is perhaps less well-known is how India’s archaic labor regulations are hurting the sector’s growth.

2) For most Indians, especially the poor and marginalized, labor is the principal asset. If India is to sustain its current levels of growth and reduce poverty, it has to provide jobs with good wages for the vast majority of its people, as well as for the 80 million new entrants who are expected to join the work force over the next decade.

Of course, labor laws are needed. Workers need protection. But labor laws should protect workers, not jobs. In India, current regulations end up doing more harm than good. In international comparisons, India stands out as having one of the most rigid labor laws in the world. A recent study estimated that in 1997, India could have had more than 1 million more jobs in the textiles and clothing sector alone if its labor regulations had been less restrictive.
There are currently 47 central laws and 157 state regulations that directly affect labor markets. These are often inconsistent and at times overlapping. Active labor market programs and policies (ALMPs), as recommended by the International Labor Organization and other bodies internationally, are starting in India and may need to be strengthened. For now, the rural employment guarantee program is an important start. If implemented well, it promises to provide an important form of job security for the rural labor force. More is possible and could include effective information and employment exchanges, social insurance mechanisms for informal sector workers, and strengthened technical and vocational education programs. Amending the plethora of existing labor regulations is itself an integral part of the job-creating ALMP strategy for India.

PRIVATIZATION
Resistance to meaningful privatization is one, and not the only reason for the lack of significant progress in assuring an adequate, inexpensive and reliable supply of infrastructural goods and services such as power, transport and telecommunications. This is not to deny that there has been some progress. For example, the private sector is now allowed to construct and operate ports and toll roads. The establishment of state regulatory authorities for power could depoliticize the setting of power tariffs. Still there is a long way to go and without well-functioning infrastructure prospects for rapid growth and for attracting FDI are not good.
Reforms since 1991 have considerably eased the entry of domestic and foreign firms into the industrial sector. However, the legal hurdles continue to hamper the exit of unviable enterprises. The experience with the Bureau of Industrial and Financial Restructuring in ensuring orderly exit of sick enterprises is extremely discouraging

REFORMS OF BANKRUPTCY AND LIQUIDATION
In the reforms initiated in 1991, the emphasis was on reforms of product markets by abolishing industrial licensing and import barriers. These reforms, however, left the factor markets such as labour markets, land markets and capital markets, the natural resources market such as water, and institutions mostly untouched.
India's present laws of bankruptcy (exit policy) and corporate control require reforms so that the market for corporate control becomes competitive. The financial sector reforms would involve reforms of the banking sector, equity markets, debt markets and foreign exchange markets. In this, privatization of state-owned banks is perhaps the most essential, but preceded by strengthening of the regulation and supervision of financial institutions and of capital markets, which are really non-existent at present. The recent developments in the Indian stock market vividly show how the actions of one private bank, one cooperative bank, one major stock exchange management, and a giant mutual fund of 20 million subscribers can have a deleterious impact on national equity markets and particularly on small shareholders, because of a lack of strong supervision.

RESTRUCTURING OF CENTRE-STATE RELATIONS
The relevant recommendations of the Sarkaria commission on the restructuring of centre-state relations are not being accepted and implemented in true spirit by the NDA government, as a result of which there is a persistent trend of centralization of economic and political powers in the country.
In the administrative sphere, no safeguards against the abuse of Article 356 have been instituted. On the other hand, when the states have asked for the assistance of Central Reserve Forces, there has often been undue delay on the part of the central government.
In the legislative sphere, not only has the formal central intrusion into the state list been left unreversed, but further intrusions have also been made into the state list in terms of proliferation of so-called Centrally Sponsored Schemes in the state subjects. Moreover, after the centre’s adoption of neo-liberal policies, a new form of assault is now being made on the constitutionally assigned decision-making powers of the states, by the government of India discussing issues on state subjects with IMF, WTO, World Bank and similar external agencies, and then, on the guidance of these external bodies, imposing conditionalities on the state government without any concurrence of the states.
In the financial sphere, confronted with a long prevailing imbalance arising out of the fact that, while in the Constitution, the major responsibilities in the sphere of developmental and administrative expenditure have been given to the states, all the more important powers of revenue-raising have remained concentrated in the hands of the centre, the states have been correctly demanding over the years for increasing the share of central taxes to the states to at least 50 per cent. However, this share is only 30.5 per cent.
Discussions at the national and the state levels would be urgently necessary as the above disturbing trends, specially keeping in mind that the Thirteenth Finance Commission has recently been set up, and a new Commission on Centre-State relations has also started working. At the same time, discussions would also have to be taken down to the level of common people and this Party Congress gives a call for a wide mass movement across the states in support of a radical restructuring of the centre-state relations in the interest of working people of the entire country.