LETTERS Issn 0012-9976 Ever since the first issue in 1966, EPW has been India’s premier journal for comment on current affairs and research in the social sciences. It succeeded Economic Weekly (1949-1965), which was launched and shepherded by Sachin Chaudhuri, who was also the founder-editor of EPW. As editor for thirty-five years (1969-2004) Krishna Raj gave EPW the reputation it now enjoys.
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Providing Healthcare
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he article “Public-Private Partnerships in Maternal Health Services” by T K Sundari Ravindran (EPW, 26 November 2011) is timely. It will be good to realise that the best way to care for the poor is through the public sector which does not have concerns of “economic viability”. If the idea is to supplement the public sector with the enormous resources that the country has created in the private sector, the paradigms and expectations need to be tailored accordingly. This is what the World Health Partners’ (whp) project in Uttar Pradesh (up), referred to in the article, attempts to do. We also focus on above-the-poverty line segments to build the service delivery infrastructure in order to reduce the onus on the public sector and, as a logical extension, use special subsidies to address the needs of the segments below the poverty line (bpl) through the same infrastructure. One point worth noting, which the article does not mention, is that WHP’s UP project is primarily focused on family planning. This being a preventive service, it does not induce too much interest among the private providers, particularly in rural areas where the need is the most but the caseload for individual providers is very limited. WHP deals with this challenge by creating an economic opportunity by the provision of curative care through a technology-based or business-linked service delivery system but makes provision of family planning mandatory. The investment in the technology was about Rs 1.2 lakh when WHP was established three years ago and has now been brought down to Rs 40,000 (and likely to come down further in view of cheaper hardware now being avail able). The entire investment is made by the rural entrepreneurs. An interesting progression is the option for rural providers which requires no investment – existing cell phones can connect rural patients with city doctors through special applications. While the clients indeed pay Rs 50 for consultations, BPL patients pay only Rs 10. The larger question is whether this is the best way to deliver healthcare. Absolutely not. Healthcare provision is a very people-sensitive affair, even more so in a
tightly knit society like ours. We ideally need patients to meet qualified providers in close confines where medical skills can combine with empathy. While we should work towards this ideal, our project focuses on the here-and-now so that people, particularly those in marginalised communities, can get services that are a little better than what they have access to. Gopi Gopalakrishnan World Health Partners New Delhi
Death of Kishenji and Peace Talks
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he encounter death of Communist Party of India (Maoist) politburo member Kishenji has raised some questions, which demand serious introspection by both the Maoists and the Mamata Banerjee government. The death of Kishenji was concordant with his philosophy of armed struggle, but the West Bengal government on its part should abide by the guidelines laid down by the National Human Rights Commission for investigating encounter deaths. This measure might help the state governmentappointed interlocutors initiate another round of talk with Maoists; with the death of Kishenji the process is now in tatters. On the other hand, it is high time the Maoists give serious thought to ending the murder of adivasis and popular activists of mainstream political parties in Jungalmahal of West Bengal. The gruesome murders of individuals cannot be legitimised as “punishment of agents of class enemy”. The villagers of the Jhargram, Belpahari, Kushbani regions, who once acted as “ears and eyes” for the slain leader and his organisation, might have refused to play that role any longer. This was evident from the tip-off on which joint forces acted successfully. Finally, notwithstanding the hostile attitude of both the government and Maoists, the mediators should strive to open dialogue between the two. Both sides need to realise that there is no winner or loser here, be it in the oppressive measures taken by the State or the prolonged people’s war waged against the State. Arnab Pal
Kharagpur, paschim medinipur, West Bengal
december 10, 2011 vol xlvI no 50 EPW Economic & Political Weekly
LETTERS
Murder of Sr Valsa
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he People’s Union for Democratic Rights (pudr) joins other rights organisations and civil liberties bodies as well as common grieved citizens of this country in condemning the gruesome murder of Sr Valsa John in Puchwara village of Amrapara block/ PS in Pakur district of Jharkhand. Sr Valsa was hacked to death by a gang of assailants on the night of 15 November 2011, inside her rented accommodation in the village. Sr Valsa, a native of Kerala, had been an ordained nun of the Sisters of Charity of Jesus and Mary. She had been staying in Puchwara, Jharkhand, for over a decade and had started a small programme of forest conservation. That had enraged the local timber mafia and stone-quarry owners in the neighbourhood. Afterwards she spearheaded the Rajmahal Pahar Bachao Andolan (RPBA) an assertion of rights of the adivasis of some 30-odd villages against “displacement” and pollution caused by the mining adventures of the PANEM coal company (a Punjab-based mining corporation). Following an agreement with the PANEM in 2006, on compensation and other related issues, the assertion softened. But before that a few select activists of the RPBA died in a series of “accidents” and Sr Valsa John had also received death threats. In 2007, despite court orders she was arrested by the local police in RPBA-related cases (which made the court censure the police and warn them against such acts of contempt of court). This was indicative of the inclination of the local police. And it is relevant to point out here that right-wing Hindutva forces, with the generous backing of the mining companies have always been active in the area. Sr Valsa was running a free school for the children of the village and also a dispensary. Last but not the least, on 8 November 2011, a rape victim was not allowed to file her FIR. Sr Valsa was meant to accompany her to the local police station the day she was murdered. Prior to the killing of Sr Valsa, three to four of her colleagues had died in mysterious circumstances. We are shocked to learn that the local police refused to help on flimsy grounds Sr Valsa despite her complaint the night before she was killed. Their failure to provide security to Sr Valsa and other adivasis there is not only appalling but of
c oncern for the future of civil society in general and rights/social activists in particular. The visit of a PANEM official to the crime scene is another glaring example of police negligence. PUDR strongly condemns the failure of police and administration in protecting Sr Valsa and demands an immediate judicial inquiry and stringent action against the culprits. We also condemn the tendency to shift the blame to Maoists in any case of loot and killing without proper verification and investigation. In this case, the blame was shifted from the company against whom Sr Valsa had so openly campaigned to Maoists by way of an irresponsible statement made by one IPS officer. Harish Dhawan, Paramjeet Singh PUDR, New Delhi
Kuruganti Krishnamurty
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uruganti Krishnamurty was born on Krishnashtami (22 August 1936) at Nellore in Andhra Pradesh. Over the years people started fondly calling him KK. He passed away on 23 November 2011 at Hyderabad. Kuruganti Krishnamurty did his MA in Economics and MSc in Statistics at Andhra University in the late 1950s. After his postgraduation he joined the Gokhale Institute of Politics and Economics as a member of the faculty (1958-60). It was there that he met D U Sastry who later became his colleague at the Institute of Economic Growth (ieg), Delhi, and their academic collaboration flourished till the end. Thereafter, he proceeded to the University of Pennsylvania at Philadelphia in the United States to do his doctorate under the guidance of Lawrence R Klein. He was a member of the research staff in the Econometric Research Unit of the Department of Economics in that university (1960-62). It was during his stay at Pennsylvania that he shared his apartment with Meghnad Desai. He also came in contact with C Rangarajan, Kanta Marwah, and V N Pandit among others. When he completed the defence of his thesis, he was persuaded by V K R V Rao, to join the IEG as a member of the faculty (August 1963 to October 1976). There he had a circle of economist colleagues like P N Dhar, Ashish Bose, D U Sastry, among others and at the Delhi School of Economics he had close
Economic & Political Weekly EPW december 10, 2011 vol xlvI no 50
friends like K L Krishna, V N Pandit and others. While at IEG he got an opportunity to work at the World Bank as an economist (December 1966-August 1968) and as a consultant (May-July 1975). Thereafter, he resigned from the IEG and joined the research department of the International Monetary Fund (November 1976-November 1979). Then he returned to India to join the IEG and was there until his retirement (August 1999). Thereafter, he joined the Administrative Staff College of India, Hyderabad, as an Honorary Visiting Professor and continued there until his death. I was a PhD scholar under K Krishnamurty at the IEG, joining the institute in 1981. He was very meticulous in reading data, which he learnt from his supervisor L R Klein and always insisted on researchers tabulating the estimated equation in the A4 ruled data sheets and mulling over them in the night as they lay in bed. After a gap of more than two decades, I had a chance to work with K Krishnamurty again in a different role at the Madras School of Economics when it was preparing the macro-model of the Indian economy with various sub-satellite models for the Reserve Bank of India. In spite of his age, his sharpness for minute details was the same and his eagerness to model the economy never diminished. He always said that for estima ting models you have to roll up your sleeves and get into the business in right earnest. I learnt the basics of modelling when he was working on the paper titled “Inflation and Growth: Model of Indian Economy”. In the early 1990s K Krishnamurty along with V N Pandit of Delhi School of Economics pioneered a large macro-model for India, under the Global Project LINK supported by UN-DESA and led by L R Klein, which was nicknamed the IEG-DSE model. This model was at a highly disaggregated level and had more than 200 behavioural equations. He was far-sighted and included contemporary issues such as thresholds in fiscal expansion and inflation, crowding-in and crowding-out, etc, into the model. Over the years the IEG-DSE model grew in popularity for its serious and rigorous exercise and was widely respected both in academia and policy circles. C Bhujanga Rao National Institute of Public Finance and Policy New Delhi
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december 10, 2011
Towards Healthcare for All Can we grasp an opportunity to provide health services to all Indians?
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ixty-five years after the Joseph Bhore Committee on health recommended that the State take full responsibility for providing preventive and curative services to all Indians, another opportunity to take a step in that direction is with us. The High Level Expert Group (HLEG) on Universal Health Coverage (UHC) for India, constituted by the Planning Commission, has offered a blueprint for introducing a National Health Package that would entitle all citizens to primary, secondary and tertiary care that is paid for by the state. This comes at a time when there is a momentum the world over – other than in the United States and China – to provide universal healthcare. India, which has one of the most indifferent records in the world in this area, must embark on the 10-year path laid out by the HLEG to move to universal care. It does not require mention that the health status of India’s people is poor. There are economic, social and regional differences but the larger picture is one of high mortality (of infants, children and mothers), low life expectancy and high morbidity. Only nine out of 191 countries spend less than the 4.4% of total government expenditure that India now devotes to health. The limited volume and quality of public services has been driving people to private health services. These are booming, but the large out-of-pocket expenses on healthcare and drugs are imposing a heavy burden on patients. Such expenditure is estimated to push 30 million people a year into poverty. It is no wonder that what Indians increasingly fear is not falling ill but what they have to pay to get better. In recent years the centre has hit on insurance schemes like the Rashtriya Swasthya Bima Yojana (RSBY) and state governments on healthcare like the Aarogyasri programme of Andhra Pradesh. But the RSBY is ineffective because it is inadequate and Aarogyasri does not look beyond surgical care. Programmes like the Aarogyasri are also cash cows for insurance companies and corporate hospitals. In a reversal of recent trends, the HLEG dares to ask the state to commit itself to providing “affordable, accountable, appropriate health services of assured quality…with the government being the guarantor and enabler, although not necessarily the only provider…” The committee makes recommendations in six important areas that are critical to realise the vision of UHC: (i) financing, (ii) service norms, (iii) human resources, (iv) community participation, (v) access to medicines, and (vi) management and institutional reforms. This, in effect, calls for a complete overhaul of the health sector and addresses in an integrated fashion all issues, from Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
establishing the infrastructure necessary to create human resources in health, to building healthcare institutions, delineating protocols for treatment, providing medicines, and, of course finding the required financial resources. The state will finance the National Health Package, but the services themselves will be provided by public and private providers who would be contracted for the purpose. There is no place for insurance companies and there will be no user fees. The focus is on healthcare but the HLEG also gives due importance to the social determinants of health (such as nutrition). The road map that the HLEG has laid out stretches to 2021-22. It has to be so since this is an ambitious plan to move from neglect to universal care. The big question, as always where it is a matter of state responsibility, is, “what will it cost and is it affordable?” There are, to be sure, many details to be filled, but in the vision of the committee UHC will require public spending on health to go from 1.2% of GDP today to 2.5% in 2017 and 3% in 2022. Considering the currently abysmally low level of outlays, this is not a huge increase to call for. And the committee rightly asks that this be financed from the general tax revenues and not from cesses. A system of UHC in which the state and not the private sector plays a predominant role will have to cope with major opposition from business interests that have entrenched themselves in everything from diagnostics to drug manufacture to health insurance to healthcare. These interests will also benefit from state-driven UHC, but it will not be on their terms. It is the state which will dictate terms. A phased introduction of UHC with the stakeholders – the people – immediately benefiting from the change in direction offers the best chance of success. Political formations will also be foolish to ignore the gains they can reap from introducing a system of rational and free healthcare that people of all classes are desperate for. A second major challenge is that this is a package that is being recommended to the centre for implementation. Where do the states – the providers of public healthcare in the constitutional scheme of things – stand? A package that the states do not have the autonomy to design and implement is destined to fail. So a federally-designed programme is essential. The challenges are many and the obstacles to implementation will not be minor. However, decent healthcare for every citizen is too important a matter to be delayed any longer by opposition of any kind. Will the United Progressive Alliance government be intelligent enough to pick up the blueprint that it has been offered?
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EDITORIALS
‘Republic Killing Its Own Children’ Has the Indian state decided that elimination of the leadership is the way to respond to the Maoists?
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nion Home Minister P Chidambaram, West Bengal Chief Minister Mamata Banerjee, and officials of the central and state governments down the line have all been bent on establishing one point – that the claimed encounter in the Burishol forest 10 km from the West Bengal-Jharkhand border in which Mallojula Koteswara Rao, popularly known by his nom de guerre Kishenji, was supposed to have been killed was “real”. Frankly, given that the news reports have only reproduced what the police have put out, the circumstances of his death must be accepted for now as unknown. The renowned radical Telugu poet Varavara Rao who accompanied Kishenji’s niece to bring the body back to his hometown of Peddapalli in Karimnagar district of Andhra Pradesh is reported to have said: “In the last 43 years, I have seen so many bodies killed in so-called encounters but have not seen a body like this one...There is no place on the body where there is no injury” (The Hindu, 27 November). Human rights activists who saw the body before the commencement of the post-mortem also claim that the body carried injuries of numerous kinds – bullet, knife and burns – all over. One must await the results of the autopsy for an assessment of whether the “encounter” was a cold-blooded murder or a killing under police fire. The Indian public knew Kishenji from the media’s cameras that showed his cotton-clothed back with a scarf around his head, a gun draped over his shoulder. The people who worked with him were the ones who were to lose the most from the private expropriation and exploitation of jal-jungal-zameen (water-forestsland), part of the natural resource base of India’s eastern and central states, by multinationals, Indian and foreign. Those who considered him and his party, the Communist Party of India (Maoist) [CPI(Maoist)], enemies of the people had, in the name of peace, declared war on the very people who backed him. The West Bengal government had handed over some 4,500 acres of forestland to the Jindal business group at Salboni in Paschim Medinipur district even as the government’s land reform programme of allotting pattas (formal rights) for cultivable forestland and forestland under cultivation to the adivasis was kept in cold storage. After the detonation of a landmine in November 2008 on the route of West Bengal Chief Minister Buddhadeb Bhattacharjee, when he was returning after a foundation stone-laying ceremony at the site of a mining project, a reign of terror was let loose on the people of the area. This was actively resisted by the adivasis with Maoist backing. The Pulishi Atyachar-er Birudhhe Janasadharan-er Committee (People’s Committee against Police Atrocities, the PCAPA) was soon formed to lead the mass struggle in Lalgarh and the adjoining areas. From December 2008 to June 2009, what was really heartening was the direct forms of people’s democracy in practice – each village now had a gram (village) committee with five women and five men; a man and a woman from each village were a part of the central coordinating committee; an utterly democratic
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manner of taking and ratifying decisions; and making officials sit on the ground on equal terms to negotiate with the committees. And, with the meagre resources at its command, the PCAPA-led mass movement was able to run health posts with doctors from Kolkata coming in once a week, construct and repair embankments, dig ponds, set up tube wells and teach the local language in some schools, a lot of all this through shramdaan (voluntary labour). For seven months the PCAPA and the CPI (Maoist), led at the local level by Kishenji, together, in tandem, seemed to have struck an astute balance between political mobilisation, and social welfare/“development” activity. But the last straw for the central and state governments was when they destroyed the palatial house of a local senior member of the Communist Party of India (Marxist) [CPI(M)] in June 2009. The joint forces of the central and state governments moved in with the CPI(M) harmads acting as their local collaborators. The Maoist tactics of successfully combining mass political mobilisation and armed struggle suffered a setback. It was the Trinamool Congress (TMC) which took advantage of the situation to defeat the CPI(M) candidates in the area in the assembly elections in April-May this year. As part of parivartan, Mamata Banerjee promised the withdrawal of the joint forces, the unconditional release of all political prisoners, especially the hundreds of their own folk arrested and dumped into jail in the course of the police operations, and a dialogue with the Maoists. But, on assuming power, the chief minister has reneged on all of these pledges. Instead, the recruitment of some 10,000 special police havildars (constables) on the lines of the Salwa Judum in Chhattisgarh is on the anvil. And, the TMC’s own Bhairav Bahini has been assisting the joint forces just like the CPI(M)’s harmads did. A “development package” with “surrender” sops, the redeployment of the joint forces, the setting up of police training facilities in jungle warfare and a strengthening of the state’s counter-insurgency force, all these are seen to have yielded results. A mood of triumphalism now prevails after the “hunting” down of Kishenji. Nevertheless, can contempt for the law go unchallenged? Early this year, a bench of justices Aftab Alam and R M Lodha of the Supreme Court, responding to two public interest litigations related to the encounter in which Cherukuri Rajkumar (“Azad”), CPI(Maoist) politburo member and party spokesperson, and journalist Hemchandra Pandey were shot dead in Adilabad district in July 2010 by the Andhra Pradesh police said: “We cannot allow the republic killing its own children”. Like the Azad case – now in court and where all independent evidence points to murder – the killing of Kishenji also seems to be one of a genre where “impunity breeds contempt for the law”. The central and state governments appear to have decided that the only way to tackle what the prime minister sees as “the most serious internal security challenge” is to eliminate the leaders one by one, even as development sops are offered to the people in the areas where the CPI(Maoist) has influence. december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
EDITORIALS
Islam and the Arab Spring Our inherited ways of seeing may perhaps be obsolete for the emerging revolution of ideas.
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he threat of resurgent Islamic fundamentalism, or political Islam, has been repeatedly spoken about in connection with the series of popular revolts in west Asia and north Africa, collectively termed the Arab Spring. In Egypt, the Muslim Brotherhood was the largest and best organised political (and social) force opposed to former president Hosni Mubarak and has managed to emerge as a dominant party in the past year. In Tunisia, the Islamist Ennahda (Renaissance Party) has won the largest number of seats in the assembly that will draft a new constitution. In other places – Yemen, Syria, Bahrain, and Libya – the cry of “Allah-o-Akbar” has resounded from the streets as people have come out in ever larger numbers to challenge the tyranny of their despots. Earlier, after the decimation (and in some cases, co-option) of the left opposition by the Arab tyrannies, it was the Islamic parties or networks which gave expression to popular discontent. Often these became powerful, as in Algeria in the 1990s, and were brutally crushed by the faux secular-progressive rulers who obtained international support on the basis of their supposed opposition to Islamic fundamentalism. It was a piquant situation in which former anti-imperialists and left-progressives had turned authoritarian and aligned with the United States-led imperialist bloc while maintaining a facade of secularism and progressivism. On the other hand, during the 1940s and 1950s, the imperial powers used Islamic fundamentalism as a tool when they confronted the anti-colonial and left-wing movements in the Arab world. Many of the present-day authoritarian regimes came to power struggling both against colonialism/imperialism and Islamic fundamentalism. As these regimes changed their character from being liberatory movements to authoritarian governments, Islamic parties and networks often provided voice to growing popular opposition, at times under the garb of an equally faux anti-imperialism. This changeover was not sudden, rather it was a somewhat uneven process where both sides embodied some aspects of both progressive and reactionary politics. The takeover of the Iranian Revolution by clerical fascism and its depredations on the Iranian people was the most potent warning about the dangers of Islamic fundamentalism coming to power through popular mobilisations, and was used frequently by Arab despots to paint themselves and their authoritarianism as a necessary evil. Thus, it is not surprising that the political forces which are informed by Islamic political ideologies have been seen as a danger to the democratic revolution of the Arab Spring. However, something very interesting and unprecedented has come to pass. These Islamic movements are not necessarily asking for the imposition of the sharia or a curtailment of rights. Rather, they are actively aligning with non-religious parties on political programmes which can only be termed secular and progressive. In Tunisia, the Ennahda has formed a coalition government with two other secular, left-of-centre parties, and has promised a Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
defence of fundamental rights, including gender equality. It has also taken fairly radical stances on sexuality and freedom of speech. In Egypt, the youth and women’s wings of the conservative Muslim Brotherhood have formally split with their parent party and entered into an alliance with left-of-centre groups on an agenda which is at once politically liberal and economically radical. This new politics of Islamic groups was further highlighted when Turkey’s Islamist prime minister, R T Erdogan, publicly called for a secular constitution for Egypt in which religion is kept out of matters of the State. If such a call from a person who is seen as a threat to Turkey’s secular polity seems an anomaly, it must also be remembered that the massive public revolts in Iran two years ago too were expressed in a strongly Islamic form even as they were challenging the power of the clerics and fundamentalists, and asking for rights and freedoms. Even in Libya, the interim government has taken the unprecedented step of “unbanning” all books and authors in a highly visible and symbolic ceremony at the country’s main library. Today, controversial interpretations of the Quran as well as Salman Rushdie’s Satanic Verses, among others, are available for the Libyan citizen to read. It must also be remembered that there is now a much greater emphasis on public expressions of faith, and religious organisations and leaders are reclaiming many aspects of civic life from which they had previously been barred. It is therefore a complex process that is underway and while the growing popularity, and thus threat, of Islamic fundamentalism remains strong, it is equally true that a simple contrast between the secular and the fundamentalist (standing for progressive and reactionary, respectively) no longer helps us understand the dynamics of the ongoing upsurge in the Arab world. Outside the useless category of “moderate Islam”, some scholars have tried to explain this new politics as “civic Islam” or even “post-modern Islam”. These terms refer to the changed perception of Islam in the political sphere, where religious ideas and practices provide a template for civic engagement but are not seen as doctrines that need to be implemented against all odds. Islam provides a source of inspiration and this politics is willing to pick and choose its agenda. It is an open question whether this particular interpretation holds for the varied experiences of the Arab Spring or whether it is misreading the wolf (fundamentalism) in sheep’s clothing. However, it is undeniable that the movements in the region have unleashed massive energies for democracy and while imperialism, Islamic fundamentalism and other reactionary political forces try and steer them towards their own ends, it is equally obvious that the people are unwilling to be chaperoned anymore as the renewed rebellion in Egypt against military rule shows. This democratic upsurge, grounded as it is in popular support which refuses to be disciplined, may well change the very way we conceive of rights, freedom, secularism and religion. Are we ready for such a revolution of ideas?
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commentary
Turning the Page in Forest Governance: Science and Bureaucracy Meghna Krishnadas1,2, Umesh Srinivasan2, Nandini Velho3,2, Sachin Sridhara 1,2
Despite the legal provisions for the functioning of expert bodies like the National Board of Wildlife and the Forest Advisory Committee, the forest bureaucracy disdains the experts and often overrides scientific evaluations. The training course of the India Forest Service too lacks a social science component that can help new foresters understand the social ramifications of forest-related issues. It is time to create space for scientists and conservationists to liaise with the forest departments in the country.
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few months ago, three non-official members of the Forest Advisory Committee (FAC) wrote a letter to the minister of state for environment and forests. The letter spoke of the subversive actions of high-level forest department (FD) officials, who in blatant violation of the Forest (Conservation) Act, 1980 (FCA) withheld information and wilfully confused facts pertinent to several projects needing forest clearances (Sethi 2011). Public knowledge of the letter turned the spotlight of discomfort squarely on the state of governance in the forest department. They responded true to form by publicly slandering the academic credentials of the nonofficial members (Bahuguna 2011). Their offered solution is to weed out “non-professionals” (i e, independent scientists and academics), whom they consider an imposition on bureaucratic authority.
Fallacies of Governance
1 Postgraduate Programme in Wildlife Biology and Conservation, Wildlife Conservation Society–India Programme, Centre for Wildlife Studies, Bangalore, 2 National Centre for Biological Sciences, Bangalore, 3 Centre for Tropical Environmental and Sustainability Science and School of Marine and Tropical Biology, James Cook University, Cairns, Queensland, Australia. Meghna Krishnadas (
[email protected])
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The real issue is inaccuracy of information and the lack of accountability of the forest department’s administrative decisions. The department’s public response to the nonofficial members’ letter was that the nonofficials had “narrow” expertise, and the fields of wildlife ecology, environmental history, conservation policy, and sociology were irrelevant in evaluating forest clearances. This in spite of the Supreme Court ruling (2007) that mandates such expertise during forest clearances. Such knee-jerk reactions smack of anachronisms of a bygone era of top-down management while, in spite of rigid state control, vast areas of forests have been cleared in the last few decades even within reserve forests and protected areas. The Centre for Science and Environment’s (CSE) report on forest clearances documents these gargantuan conversions of forestland for industry,
coal, and mineral mining (CSE 2011) and an article in this journal used the CSE data to highlight the ills that plague forest clearance (Correspondent 2011). Notwithstanding FCA (1980), the forest officials continue to act capriciously and accord arbitrary clearances. Often, the basis of clearances has not been made public. Importantly, the scientific grounds for clearance decisions are wanting.
Impediments The three non-official experts in the FAC observe that even when a scientific evaluation is conducted, the predicted negative effects do not prevent forest officials from granting clearances – almost as if the process, and the law, did not matter (ibid). Similar allegations have also been made by members of the National Board for Wildlife (NBWL). The summary records of NBWL or FAC meetings do not detail the ecological basis and methods used to arrive at the effects of forest land diversion. Further, the Ministry of Environment and Forests (MoEF) website only provides titles of projects cleared, with no details of the process. With such poor and obscure documentation, right to information (RTI) queries are perhaps the only way for concerned citizens to obtain details and assess the adequacy of the clearance process. To worsen matters, now we have a group of ministers (GoM) that can take calls on clearance for developmental projects like coal mines (Chakravartty 2011). In spite of legal provisions for bodies like the NBWL and the FAC, the forest bureaucracy relegates the role of scientists to the fringes, often overriding scientific evaluations (Bhargav and Dattatri 2011). The rationale behind having independent members in government bodies such as the FAC and NBWL is to create a much needed democratic space for public participation. They provide an additional level of expertise to evaluate the multiple dimensions of forest and wildlife issues that affect natural resources and our society. Instead, arbitrary decision-making and bureaucratic inertia against the high level of expertise and contemporary scientific training from members of academia is subverting transparency and making a parody of the democratic
december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
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process (ibid) – present on paper but ineffective in practice. Unlike a few decades ago, India now has a cadre of well-trained and highly competent wildlife scientists, largely outside the FD’s confines. For instance, in the past five years, nearly 25% of all publications by Indian authors in international peer-reviewed journals have come from the theses of a single master’s programme in wildlife biology and conservation, reflecting the growth of high-quality ex pertise in this field. For the government to not make use of this available expertise in solving complex problems is like sending the doctor on vacation during a plague epidemic.
Ecology Lags Behind in India The current controversy regarding which science is “valid” or “necessary” is representative of the lack of respect for contemporary ecological science in the forest bureaucracy. An article by Madhusudhan et al (2006) in Current Science lucidly outlined the barriers posed by the forest bureaucracy to the practice of independent science from India’s forests – the wildlife laboratories, which can help us understand the wildlife and the ecosystems we are trying to conserve. Five years later, researchers and conservationists are still battling the same issues. Change is at best slow and resistance very strong. Globally, the science of understanding forests has long moved on from oldfashioned evaluation of timber yield and growth. The focus has shifted to ecological processes. The loss of a forest is not merely the number of cubic metres of timber lost, but the vital ecosystem links that are broken. When hydroelectric impoundments were created in Panama, the change in forest composition was part of a highly complex ecological process. The dam created islands where top predators became extinct, in turn, increasing densities of smaller animals like rodents and ants. Because these animals often destroy seeds and seedlings in forests, many plant species were wiped out and the forest changed drastically (Terborgh 2001). There are various such studies that detail the cascading effects of habitat loss on wildlife and ecosystems. Such knowledge, however, is rarely taken into account while
determining forest clearances and shoddy assessments remain the norm (Paliwal 2006). Over the past decades, it has been realised that the key idea behind protecting forests is not only the conservation of wildlife, but also the conservation of interactions between species and resulting processes. Furthermore, the biology of largebodied “umbrella” species like the tiger, elephant, and rhino should form an integral part of assessing the losses due to forestland conversion, and the same goes for biology of habitat specialists like the river dolphin, forest owlet, and lion-tailed macaque. In addition to species biology, studies on ecological processes that are likely to be altered with disturbance have to be factored into the canvas of decisionmaking. Wildlife biology, ecology, and conservation science form the bedrock of knowledge for predicting the effects of forest clearance on vital processes like pollination, seed dispersal, and its cascading effects on issues such as water security and climate change. The latter issues are especially relevant to a developing country with an agrarian economy such as India.
Obsolete Training, Incumbent Resistance Indian foresters, however, are primarily trained in forestry and silviculture, irrelevant to the conservation of our natural forests today.1 Most scientific document ation by the FD is restricted to internal journals, thereby circumventing the international norms of independent peer review. Scientific expertise within the department is a far cry from the current standards of international wildlife research. Moreover, attempts to incorporate more relevant and accurate science into the system are met with strong resistance. A case in point is the famous example of an eminent tiger bio logist being hounded for his disclosure of the FD’s negligence resulting in tigers disappearing from the Panna Tiger Reserve (Chundawat 2009). Or, take the smear campaign against another renowned tiger biologist regarding the radio-collaring of tigers (Sukumar 1990). Often vicious, these campaigns are outrageous, factually flawed and without evidence, and indicate intolerance of criticism and debate. The issue is not merely of forests and wildlife alone. Understanding the sociological
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impact of a forest clearance is as crucial as the ecological imperative. India also has many millions of people who are dependent on forests for their livelihoods. Diversion of forestland for industries, dams, or mines, irrevocably changes the relationship of these people with their environment. Many times, the loss of livelihoods is damaging. Yet, many in the forest bureaucracy steadfastly refuse to acknowledge the importance of sociological evaluations. The training course of the India Forest Service (IFS) lacks a social science component that can help new foresters understand the social ramifications of forestrelated issues, and thus their disdain for public dialogue and participation. Trained in the doctrinaire manner of decisionmaking, they often do not implement fair public consultations with the affected local communities.
Need for Reform The Indian public is clamouring for reform in governance, and accountability and transparency in administration. Meanwhile, the FD is trying hard to maintain its sole authority over decisions of forest clearances, through slander and intrigue. But forest officials are public servants working on taxpayers’ money. No longer can they assume the authoritarian role, without being questioned. The systemic malfunction and levels of corruption are comparable to the better-known political scandals that currently occupy the country’s column inches and airtime. Reform is not only necessary but mandatory. There are several lessons to be drawn from the larger public debate on civil society participation in governance. The British raj style vertical hierarchy of the bureaucracy should be opened up for horizontal entry of qualified personnel based on merit, and at par with officers from the vertical tier. Independent experts will then have a better say in matters of forest governance, improve the quality of debate, and therefore its outcome. Presently, people from civil society are reduced to activists and observers, with no real role for science and academia. Inclusion of independent scientists and academics, during the training and probationary period of IFS officers will promote collaborations and engender a healthy respect for other specialisations.
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The Importance of Collaboration There are officials in the FD who in their individual capacities work closely with scientists, conservationists, and local people. Such an attitude is rare, and successful collaborations few. It is necessary to have a committed and outward looking “wildlife cadre” of young and enthusiastic IFS officers who are explicitly trained for wildlife conservation and willing to collaborate with scientists. The already overburdened FD must realise the impracticality of insularly juggling with governance, admi nistration, and science. Their counterparts in developed (e g, the United States, United Kingdom) and even developing (e g, Nepal) countries, actively seek the help of scientists, thereby making timely and scientific management decisions. This facilitates better focus on vital administrative activities and more importantly, protection. To illustrate the massive gains of external collaborations we need to learn from our neighbour, Nepal. Their department of national parks and wildlife conservation closely collaborates with a national nongovernmental organisation (NGO), the
National Trust for Nature Conservation, an international body the World Wildlife Fund and the Zoological Society of London, and others. One such successful collaborative example is the monitoring programme of the endangered one-horned rhino (DNPWC 2009). Based on the animal movement information collected by scientists, the department plans anti-poaching, and rescue operations when animals move beyond park boundaries. Such synergy has resulted in the recovery of rhino populations even during the recent civil insurgency. Nepal actively facilitates research by numerous independent scientists on a range of issues with a tradition of active dialogue between government officials, NGOs and villagers living on the fringes of the park. For example, NGOs have helped people to shift to cultivation of cash crops which are not eaten by elephants and rhinos. This has not only increased agricultural revenue and decreased human-animal conflict, but has won the trust of local people who actively help in patrolling and creating awareness of wildlife issues. Instead of a top-down bureaucracy, such collaboration
between villagers, scientists, and foresters works on multi-way knowledge transfer.
A Time for Change It is time to discard the black boxes of bureaucracy and create space for scientists and conservationists to liaise with the FD in a consequential manner, not just from the sidelines. This arrangement will not in any way undermine the workings of the department, but can be used to forge a relationship where each party brings their expertise to the table. With more than 1.2 billion people, and huge pressures on wildlife and forests, India stands at a juncture where issues of forest governance can no longer be separated from modern science and sociology. An increasingly aware society is seeking answers to uncomfortable questions on forest governance, and justifiably so. Decision making will certainly be bettered by taking on board the proficiency and know-how of scientists and academics, and creating formal positions for collaboration. An important and essential change will be to ensure that the ecological evaluations and assessments of forest clearance
IWMI-Tata Policy Research Program Water, Energy, Climate, Agriculture, Livelihoods, Environment
Inviting young researchers, development professionals, journalists to contribute previously unpublished field-based research papers, case studies for
Annual Partners’ Meet 2012 March 13-15, 2012 Session 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Theme
Theme Manager
Studies of innovative approaches in improving the working of public irrigation schemes in major, medium or minor sectors Costs and benefits of piped distribution (authorized or unauthorized) of canal or tank water Livelihood impacts of water infrastructure created/renovated under MGNREGA Impacts of the System of Rice Intensification (SRI) Issues in expanding groundwater irrigation in eastern India Impact of farm power supply policies on agriculture and rural development Water quality deterioration and its impact on public health Performance of policies and programs for promoting micro-irrigation Gender and equity issues in irrigated agriculture Water harvesting and groundwater recharge in a basin/catchment context
Meghna Brahmchari Tushaar Shah Shilp Verma K Palanisami Aditi Mukherji Aditi Mukherji Sunderrajan K and R Indu K Palanisami Seema Kulkarni Shilp Verma
Researchers are invited to submit field-based research papers, case studies, thought pieces, review articles (not exceeding 4500 words) on any of the 9 themes by January 15, 2012. Submission of a paper is no guarantee of selection for presentation in the Meet. IWMI-Tata Program will provide travel support to the lead author of each selected submission to participate in the Meet at Anand, Gujarat and present her/his paper. In addition, an honorarium of Rs 25,000 will be provided for each selected entry. Please mail your submission, mentioning the theme for which it is submitted to:
[email protected] IWMI-Tata Policy Research Program C/O INREM Foundation Smruti Park, Opp. Mangalpura, Anand 388001, Gujarat +91-2692-263816/7 +91-9825931984
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december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
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by such experts are not overridden by bureaucrats or politicians. The result might just be a brighter conservation future for India’s wildlife and forests. Notes 1 The syllabus of Indian Forest Service trainees is spread thin over a variety of topics. The emphasis is on silviculture, forestry, botany and allied disciplines, and training in the philosophy and practice of ecology as a science is limited. Rigorous schooling in the fields of ecology, wildlife, and conservation biology requires a minimum of two years of Master’s level training, often supplemented with a PhD in relevant specialisations. Lack of scientific capacity in the forest service is also prominent in the deficiency of peer-reviewed publications in international journals of repute. Formal training in social sciences for IFS trainees is also inadequate. The proposed revision to the syllabus does not include the Scheduled Tribes and Other Forest Dwellers (Recognition of Forest Rights) Act, 2006. http://ifs.nic.in/rt/probation/DPannex_II.doc, accessed on 8 November 2011. http://ifs.nic.in/rt/probation/DPannex_V.xls, accessed on 8 November 2011.
References Bahuguna, V K (2011): “Needed, Long Overdue Systemic Reforms”, The Pioneer, 5 October, http://www. dailypioneer.com/pioneer-news/oped/11363-needed-long-overdue-systemic-reforms.html, accessed on 3 November 2011. Bhargav, P and S Dattatri (2011): “Betraying India’s Wildlife”, Governance Now, 1-15 October. Centre for Science and Environment (2011): “System of Green Clearances Not Working for Environment and People and Clearances Not the Impediment to Growth, Says CSE’s New Study”, 22 September, http://www.cseindia.org/content/system-greenclearances-not-working-environment-and-peopleand-clearances-not-impediment-gro, accessed on 3 November 2011. Chakravartty, Anupam (2011): “Mahan at All Costs”, Down to Earth, 31 October, http://www.downtoearth.org.in/content/mahan-all-costs, accessed on 3 November 2011. Chundawat, R S (2009): “Panna’s Last Tiger”, unpublished report. Correspondent (2011): “Projects and Forests: Flawed Clearances and Complicit Foresters”, Economic & Political Weekly, 46(14): 15-17. Department of National Parks and Wildlife Conservation (2009): “The Status and Distribution of the Greater One-Horned Rhino in Nepal”.
Understanding the Andhra Crop Holiday Movement Vamsi Vakulabharanam, N Purendra Prasad, K Laxminarayana, Sudheer Kilaru
Why would farmers keep their own land fallow as part of a voluntary “crop holiday protest movement” in a part of Andhra Pradesh is a question that has puzzled many. A field visit to the Konaseema region reveals that the dynamics of class contradictions in the area are also responsible for the nature of the movement that goes beyond the issue of remunerative prices.
T
he declaration of a voluntary crop holiday by paddy farmers in coastal Andhra in the 2011 kharif season has become a major political issue in Andhra Pradesh (AP). Farmers and leaders from all the mainstream political parties and left parties (excluding the Communist Party of India (Marxist), which has maintained a critical distance, while acknowledging the serious crisis in farming) have been involved in this voluntary crop holiday declaration agitation. It is pertinent to not only understand the puzzling steps taken by the farmers to voluntarily leave their lands fallow but also the larger dynamics of agrarian change and crisis in the region in the context of neo-liberalism.
Motivation for Crop Holiday Vamsi Vakulabharanam (vamsi.vakul@gmail. com), N Purendra Prasad (purendra.prasad@ gmail.com), K Laxminarayana (kln_eco@yahoo. co.in) teach at the University of Hyderabad. Sudheer Kilaru (
[email protected]) is an independent researcher.
Paddy farmers in Konaseema region (located in the East Godavari district of coastal Andhra) declared a crop holiday in about 90,000 acres voluntarily, particularly in the mandals of Amalapuram, Allavaram, Uppalaguptam, Ainavalli and Ambajipeta. Data from revenue officials also indicated
Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
Forest Conservation Division, Website of the Ministry of Environment and Forests, Government of India. http://moef.nic.in/modules/others/?f=wildlife, accessed on 3 November 2011. Forest Clearances, Website of the Ministry of Environment and Forests, Government of India, http:// 164.100.194.5:8080/newforest/, accessed on 3 November 2011. Madhusudhan, M D et al (2006): “Science in the Wilderness: The Predicament of Scientific Research in India’s Wildlife Reserves”, Current Science, 91: 1015-19. Paliwal, R (2006): “EIA Practice in India and Its Evaluation Using SWOT Analysis”, Environmental Impact Assessment Review, 26: 492-510. Sethi, N (2011): “Forest Officials Pose Danger to Forests: Experts”, Times of India, 19 September, http:// articles.timesofindia.indiatimes.com/2011-09-19/ india/30175368_1_forest-officials-forest-advisorycommittee-forest-bureaucracy, accessed on 3 November 2011. Sukumar, R (1990): “The Nagarhole Tiger Controversy”, Current Science, 59: 1213-15. Terborgh, J (2001): “Ecological Meltdown in PredatorFree Forest Fragments”, Science, 294:1923-26. Wildlife Division, Website of the Ministry of Environment and Forests, Government of India, http:// moef.nic.in/modules/others/?f=wildlife, accessed on 3 Novemeber 2011.
that in the 2011 kharif season, transplantation did not take place in about 85,761 acres of farmland. About three lakh tonnes of paddy were not produced due to the crop holiday in the Konaseema region. In 2010, 70% of the kharif crop was damaged due to a cyclone. In the next season (rabi) 2010-11, farmers had a bumper crop (Ramanamurthy 2011). Farmers did not get reasonable prices either from the government or the market. The tenants and small farmers who do not have enough storage space sold it to shavukars (moneylenders) at distress prices. The moneylenders either stocked the paddy for better prices in the future or sold it to millers at a better price. However, farmers’ resentment grew against the state for it could not procure paddy (due to lack of storage space) at reason able prices. Also, farmers got agitated that state government did not release water by 15 April (important in the context of ensuring enough time for all the planned crops in the year) and they locked the gates of Ainavalli, Chintalalanka, Mukkamala canals for about four to five days. When government officials visited the Bendamuru village of Uppalaguptam mandal as part of farmers’ awareness programmes, farmers locked them up in the panchayat office. The news spread and farmers started questioning the government officials in other mandals as well. All these incidents culminated in the crop holiday movement.
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by such experts are not overridden by bureaucrats or politicians. The result might just be a brighter conservation future for India’s wildlife and forests. Notes 1 The syllabus of Indian Forest Service trainees is spread thin over a variety of topics. The emphasis is on silviculture, forestry, botany and allied disciplines, and training in the philosophy and practice of ecology as a science is limited. Rigorous schooling in the fields of ecology, wildlife, and conservation biology requires a minimum of two years of Master’s level training, often supplemented with a PhD in relevant specialisations. Lack of scientific capacity in the forest service is also prominent in the deficiency of peer-reviewed publications in international journals of repute. Formal training in social sciences for IFS trainees is also inadequate. The proposed revision to the syllabus does not include the Scheduled Tribes and Other Forest Dwellers (Recognition of Forest Rights) Act, 2006. http://ifs.nic.in/rt/probation/DPannex_II.doc, accessed on 8 November 2011. http://ifs.nic.in/rt/probation/DPannex_V.xls, accessed on 8 November 2011.
References Bahuguna, V K (2011): “Needed, Long Overdue Systemic Reforms”, The Pioneer, 5 October, http://www. dailypioneer.com/pioneer-news/oped/11363-needed-long-overdue-systemic-reforms.html, accessed on 3 November 2011. Bhargav, P and S Dattatri (2011): “Betraying India’s Wildlife”, Governance Now, 1-15 October. Centre for Science and Environment (2011): “System of Green Clearances Not Working for Environment and People and Clearances Not the Impediment to Growth, Says CSE’s New Study”, 22 September, http://www.cseindia.org/content/system-greenclearances-not-working-environment-and-peopleand-clearances-not-impediment-gro, accessed on 3 November 2011. Chakravartty, Anupam (2011): “Mahan at All Costs”, Down to Earth, 31 October, http://www.downtoearth.org.in/content/mahan-all-costs, accessed on 3 November 2011. Chundawat, R S (2009): “Panna’s Last Tiger”, unpublished report. Correspondent (2011): “Projects and Forests: Flawed Clearances and Complicit Foresters”, Economic & Political Weekly, 46(14): 15-17. Department of National Parks and Wildlife Conservation (2009): “The Status and Distribution of the Greater One-Horned Rhino in Nepal”.
Understanding the Andhra Crop Holiday Movement Vamsi Vakulabharanam, N Purendra Prasad, K Laxminarayana, Sudheer Kilaru
Why would farmers keep their own land fallow as part of a voluntary “crop holiday protest movement” in a part of Andhra Pradesh is a question that has puzzled many. A field visit to the Konaseema region reveals that the dynamics of class contradictions in the area are also responsible for the nature of the movement that goes beyond the issue of remunerative prices.
T
he declaration of a voluntary crop holiday by paddy farmers in coastal Andhra in the 2011 kharif season has become a major political issue in Andhra Pradesh (AP). Farmers and leaders from all the mainstream political parties and left parties (excluding the Communist Party of India (Marxist), which has maintained a critical distance, while acknowledging the serious crisis in farming) have been involved in this voluntary crop holiday declaration agitation. It is pertinent to not only understand the puzzling steps taken by the farmers to voluntarily leave their lands fallow but also the larger dynamics of agrarian change and crisis in the region in the context of neo-liberalism.
Motivation for Crop Holiday Vamsi Vakulabharanam (vamsi.vakul@gmail. com), N Purendra Prasad (purendra.prasad@ gmail.com), K Laxminarayana (kln_eco@yahoo. co.in) teach at the University of Hyderabad. Sudheer Kilaru (
[email protected]) is an independent researcher.
Paddy farmers in Konaseema region (located in the East Godavari district of coastal Andhra) declared a crop holiday in about 90,000 acres voluntarily, particularly in the mandals of Amalapuram, Allavaram, Uppalaguptam, Ainavalli and Ambajipeta. Data from revenue officials also indicated
Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
Forest Conservation Division, Website of the Ministry of Environment and Forests, Government of India. http://moef.nic.in/modules/others/?f=wildlife, accessed on 3 November 2011. Forest Clearances, Website of the Ministry of Environment and Forests, Government of India, http:// 164.100.194.5:8080/newforest/, accessed on 3 November 2011. Madhusudhan, M D et al (2006): “Science in the Wilderness: The Predicament of Scientific Research in India’s Wildlife Reserves”, Current Science, 91: 1015-19. Paliwal, R (2006): “EIA Practice in India and Its Evaluation Using SWOT Analysis”, Environmental Impact Assessment Review, 26: 492-510. Sethi, N (2011): “Forest Officials Pose Danger to Forests: Experts”, Times of India, 19 September, http:// articles.timesofindia.indiatimes.com/2011-09-19/ india/30175368_1_forest-officials-forest-advisorycommittee-forest-bureaucracy, accessed on 3 November 2011. Sukumar, R (1990): “The Nagarhole Tiger Controversy”, Current Science, 59: 1213-15. Terborgh, J (2001): “Ecological Meltdown in PredatorFree Forest Fragments”, Science, 294:1923-26. Wildlife Division, Website of the Ministry of Environment and Forests, Government of India, http:// moef.nic.in/modules/others/?f=wildlife, accessed on 3 Novemeber 2011.
that in the 2011 kharif season, transplantation did not take place in about 85,761 acres of farmland. About three lakh tonnes of paddy were not produced due to the crop holiday in the Konaseema region. In 2010, 70% of the kharif crop was damaged due to a cyclone. In the next season (rabi) 2010-11, farmers had a bumper crop (Ramanamurthy 2011). Farmers did not get reasonable prices either from the government or the market. The tenants and small farmers who do not have enough storage space sold it to shavukars (moneylenders) at distress prices. The moneylenders either stocked the paddy for better prices in the future or sold it to millers at a better price. However, farmers’ resentment grew against the state for it could not procure paddy (due to lack of storage space) at reason able prices. Also, farmers got agitated that state government did not release water by 15 April (important in the context of ensuring enough time for all the planned crops in the year) and they locked the gates of Ainavalli, Chintalalanka, Mukkamala canals for about four to five days. When government officials visited the Bendamuru village of Uppalaguptam mandal as part of farmers’ awareness programmes, farmers locked them up in the panchayat office. The news spread and farmers started questioning the government officials in other mandals as well. All these incidents culminated in the crop holiday movement.
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A deeper political economy of agrarian relations in the delta regions of coastal Andhra and the Konaseema region would understand the crop holiday movement better.
Agrarian Change in Coastal Andhra In the pre-green revolution period after Independence, due to the indirect effects (as opposed to actual land reforms) of tenancy and land-ceiling reforms, there was a decline in absentee landlordism in the region. There was considerable shift of land from the absentee urban resident to the resident landowner. This was coupled with the transformation of feudal agrarian relations (for example, the old zamindari system) into owner-cultivation practices through various peasant struggles. The owner cultivators accelerated the process of capitalist development in the region even as wage labour became “free” in the sense that it came out of the old watana systems, attached labour practices and kind-wage payments (Parthasarathy 2002). Once the green revolution had commenced, this new capitalist class utilised the new technologies of high-yielding inputs, tube well technologies, tractors and so forth to maximise the rates of return on its investments. The other important development was that tenancy showed a rapid decline during all those decades. By the 1980s, only one in eight cultivators was a recorded tenant as opposed to a ratio of one in five earlier. The earlier tenants had joined the ranks of agricultural workers. Combined with a high demographic pressure on marginal landholdings, there was a major increase in the agricultural labouring population (ibid). In the post-1980s period, a dramatic transformation occurred in the delta regions of coastal Andhra. The class of capitalist farmers generated huge surpluses that were channelled into aquaculture, large coconut farms, rice milling, petty investments (for example in cinema halls, hotels and restaurants) in towns – what were called by K Balagopal as provincial propertied classes. Later, there was a shift of capital into Hyderabad in various “new economy” enterprises – for example, in the information technology and pharmaceuticals sectors. There is also significant investment in education (engineering and medical colleges) and health (corporate hospitals).
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However, with increased speculation in real estate, with an added impetus due to the proposed Special Economic Zone activity in the coastal corridor, there is virtually no attempt by this class to sell off their lands in villages. The price of agricultural land has risen tremendously over the last 15 years, with price going up to more than 10-20 times. This has created a rebirth of absentee landlordism and tenancy. At the same time, decline of public investment in agriculture under the impact of neo-liberal policies, inadequacy of institutional credit, and the reduction in private investment (due to lack of incentives for absentee landlords) have meant that the present tenants are taking on high levels of risk.
Konaseema Region In the Konaseema region, Rajus and Kapus are the upper castes, Settibalijas constitute the middle castes, and dalits (mainly Malas) constitute the lower castes. Rajus and Kapus constitute the landlords and rich farmer classes in the region.1 They also constitute the interlinked moneylender-merchantinput agent class that manages all kinds of agricultural transactions related to commissions, inputs, credit, marketing of agricultural produce and so forth. They are also the owners of cinema halls, local rice mills, hospitals and engineering colleges. Settibalijas and Malas largely belong to the small farmer, tenant and agricultural labouring communities in the region. Some nursing colleges and vocational colleges are owned by a small Mala elite, and quite a few government officials (mandal revenue officers, mandal development officers, teachers, etc) hail from the same community. While Rajus and Kapus get remittances from US and other countries, Malas get remittances from the Gulf countries. The marketing hub for paddy is Mandapeta (35 kms from Amalapuram), where about 250 rice mills are owned by Reddys and Kammas who have migrated into this region, and some local Vysyas. The absentee landlordism phenomenon is quite widespread in this region. Tenants constitute about 75% of the farmers and agreements made between them and landowners are mostly oral. Therefore, it is the absentee landowners who are entitled to institutional credit and any other form of support that the state provides. For instance,
it has been the practice of the landowners in the last few decades to take bank loans at lower interest rates (7%) and give it to tenants at higher interest rates (24-36%). In fact, many of the landowners advance investment and buy the harvest (crop collateral) at a low price and sell it at a higher price. The tenants pay fixed rent in kind to the landowners, thereby taking all the risk inherent in production. Moreover, tenants, who are the actual producers, do not get any share in compensation in case of crop loss. There have been instances when cheques issued in the name of the tenants were cancelled by the landlords and reissued in their own names. This indicates a strong nexus between the landlords and government officials and social control over the tenants. The land rent has also been increasing steadily. In the year 2010-11, land rent varied between Rs 18,000 and Rs 25,000 per acre while an acre of land on an average cost about Rs 8-20 lakh in this region. Paddy is the main crop in both kharif and rabi seasons along with coconuts and banana plantations. The third crop grown was essentially pulses (green gram-pesalu), maize and fodder crops. During the kharif season, the yield of paddy was normally 25-30 bags per acre, while in the rabi season, the yield was around 35-40 bags per acre. The paddy variety grown here is predominantly, MTU-1010 – an inferior quality because of higher moisture in the soil in the region, and a short-term (3-3.5 months) crop. This variety of paddy is not consumed by the rich and middle peasants in the region. It is procured by the government for the purpose of the public distribution system. Millers procure and sell it in Tamil Nadu and Kerala, where it is used in par-boiled rice, and idli rice. In the Konaseema region, moneylenders advance investment for the crop to the tenants. After thorough assessment of the crop needs, they make direct payments to the input and seed dealers and the required material is delivered to the tenants. As part of the informal agreement, tenants will have to invariably sell the crop produced to the same shavukars, suggest an interlinking of the product, credit and the input markets. It is this class that extracts a significant chunk of the value of the produce from the cultivators.
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In AP (unlike Punjab), the procurement of paddy is largely done through the millers. This is quite evident when one looks at the grains procured in 2009-10, wherein 62.28 lakh tonnes of grains were procured by the millers, and government agencies procured only two lakh tonnes. The government market yards do not have enough storage facilities for farmers to stock their produce. When millers procure paddy from the farmers, they tend to depress the prices in the name of quality. Most of the tenant farmers try to sell in the fields immediately after the harvest, in order to cope with pressures from moneylenders/landowners, who advance loans for crop production. Millers procure lakhs of tonnes of paddy and evade the levy to the government by paying bribes to officials.
Why Crop Holiday Now? The crop holiday movement was initiated by Bharatiya Kisan Sangh (BKS), a farmers’ organisation affiliated to the Hindutva organisation, the Rashtriya Swayamsevak Sangh. Its social and political base has largely been the rich and middle farmers. The movement got wide publicity through one of the television channels – Sakshi, which is owned by the breakaway Congress faction, the YSR Congress’ leader Y S Jaganmohan Reddy. It is also the case that a large number of dalits and Settibalijas have moved their support to the YSR Congress from the Congress. After Chiranjeevi’s Praja Rajyam Party (dominated by the Kapus) merged with the Congress in 2011, the Telugu Desam Party also took great interest in this movement in order to consolidate its own Kapu farmers’ base in the region. Different political parties are involved in the movement to gain political mileage. Four explanations can be offered for the crop holiday movement. The first one is derived from the movement itself. The latter three are not visible on the surface but can be understood by looking at the class contradictions in the region. The costs of agricultural labour and other inputs are much higher than the support price that is being offered in the region. The leaders of the crop holiday movement argue that they incurred a production cost of Rs 20,400 per acre in the rabi season of 2010-11. Out of this, a large amount was spent on labour (Rs 14,000) while the rest
was spent on procuring seeds (Rs 660), pesticides (Rs 1,500), fertilisers (Rs 2,000), tractors (Rs 1,200), threshing (Rs 800), and water cess (Rs 250). Once we add the rental costs, in the year 2011 the estimated cost of production comes to Rs 1,800 per quintal while the support price has been fixed at Rs 1,080 even though the Andhra Pradesh government had recommended a remunerative price of Rs 2,070 for paddy in 2011. There is disagreement between the farmers and workers about the actual costs incurred, especially on labour (range between Rs 7,000 and Rs 14,000 per acre), but on the whole, the argument that paddy cultivation was not remunerative in 2011 is persuasive. In fact in the last five-six years, the costs of production data indicate that support prices have increasingly lagged behind the costs.2 In this sense, the demand for higher minimum support prices is legitimate. Second, the state government recently proposed to give identity cards for the tenants so that they become entitled to crop loans from banks. This process has already started and a small proportion of tenants have been given these cards. However, landowning classes have been apprehensive that tenants may claim ownership rights eventually because of this. Also, the tenants could possibly get free from their dependence on landowners for credit, labour, and marketing of the crop. The crop holiday movement allows the landowners to reassert control over tenants. Third, normally the daily wage rates for men and women are Rs 150 and Rs 100 in this region respectively. When there is high seasonal demand, daily wages tend to go up to about Rs 250 for men and Rs 150 for women. The introduction of the Mahatma Gandhi National Rural Employmet Gurantee Scheme (MGNREGS) is said to have increased these wage rates, and one of the explicit demands of the movement was to either scrap the MGNREGS or to include agricultural work as part of the scheme. Since the state has directly or indirectly been associated with the second and third contradictions, the movement is also directed against the state. Fourth, even with the crop holiday, the landowners and moneylender-merchants have stocked paddy reserves that could not be sold in the month of April-May 2011, because of low prices (hovering around Rs 600 per 75 kg bag). These classes will
Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
benefit now as the paddy prices have doubled by the month of October 2011. In a normal year, for the two seasons – kharif and rabi – put together, tenant farmers paid a fixed rent of 25 bags of paddy per acre to the landowners. Now with the crop holiday in the kharif season, the tenant farmers will have to pay about 20 bags of paddy for rabi crop alone. This essentially means that it is the tenants who lose out due to the crop holiday. If crop holiday is observed in the rabi season, then both tenants and landed classes will get hit. Revenue and bank officials have been insisting that the tenants will have to invariably get guarantees from the landowners in their respective villages to avail bank loans. Our discussion with the tenants in Tandavapalli village in Allur mandal, revealed that none of the landowners would provide guarantees – hence the identity cards issued by the state government served little purpose. In any case, the absentee landlords feel that their social and economic control over the tenants would weaken if tenant status is officially recognised, and therefore the crop holiday is a way to reassert their control over tenants. Another strand of evidence from the field is that in some cases where small farmers went ahead with the transplantation, particularly in Allavaram and Uppalaguntam mandals, the landowning class forcibly destroyed the crop, thus forcing them to participate in the movement. The agricultural wage labourer associations in this region argue that the landowning classes in the crop holiday movement have been deliberately projecting Rs 300 daily wages for all labourers as though it is paid uniformly for men and women, and for all the workdays in a year. The association said that the workdays per acre do not exceed 60 days in a year in this region because of increased reliance on agricultural machinery. Out of 60 workdays, it is women who are largely engaged for about 40 days because of lower wages, while men get only 20 days. In fact, prior to the implementation of the MGNREGS scheme, daily wage rates used to be between Rs 60 and Rs 75. After MGNREGS, wage rates have stabilised between Rs 100 and Rs 150. What this implies is that the bargaining power of the wage labourers has increased after the introduction of MGNREGS. This is what the landowners resent.
15
commentary
In reality, the agricultural workers face an inadequate demand for their labour power. The wage rates under MGNREGS are in fact lower than those specified under the minimum wage act and labourers are able to get no more than 35 workdays in Konaseema out of the promised 100 workdays. In addition, they face competition in agricultural work from migrants who come from Bengal and Orissa. As a result, workers from Konaseema migrate to other regions in the districts of West Godavari, Krishna, Guntur, and sometimes even to Hyderabad. They work in paddy fields, tobacco farms and brick kilns, etc. In pockets of Konaseema, such as Antarvedi, a large proportion of women belonging to Mala community migrate to Gulf countries to work as domestic labour (maids) and other low-end service occupations.
Way Forward From our field visit, we feel that there are both the issue of remunerative prices as
well as deeper class contradictions at work in the crop holiday movement. We see that the crop holiday movement is essentially an attempt by the landowning classes and market intermediaries to discipline workers, tenants and the welfare state (whatever is left of it). Of course, the state has to improve its procurement mechanisms (support prices, storage capa city) of paddy so that the dependence of actual cultivators on market intermediaries and landlords is reduced. Tenants need to be given access to institutional credit. They need better protection, while they should be able to directly access various other state support packages meant for actual cultivators (including crop insurance). However, there are important structural changes that need emphasis. First, the reappearance of widespread tenancy raises the old question of why the actual tillers (mostly dalit tenants) do not own land. The state should seriously revisit the question of land (and tenancy) reforms in this newly
Caste, Religion and Malnutrition Linkages Nidhi Sadana Sabharwal
The poor are not uniformly disadvantaged. Across most health indicators, the situation of the scheduled castes, scheduled tribes and Muslims is significantly worse than that of others. While nutritional status is closely linked with levels of income, education and public health services, the social belonging of persons also acts as an additional aggravating factor for nutritional inequity. The author would like to thank Sukhadeo Thorat for comments on this article. Nidhi Sadana Sabharwal (nidhi@dalitstudies. org.in) is with the Indian Institute of Dalit Studies, New Delhi.
16
T
he problem of malnutrition has of late received a great deal of attention at the policy level. The persistence of a high degree of malnutrition among the poor, particularly among certain social groups has led to a renewed concern at the governmental level. Increasingly, it is being recognised that although the malnutrition level is relatively high at the overall level, among the malnourished, some groups suffer more from malnourishment than the others. There are significant inter-group disparities in the nutritional levels between poor and non-poor, between caste, ethnic and religious groups. Earlier studies shed some light on the factors which result in high malnutrition and point towards low income, high illiteracy and poor access to health services as key determinants of malnutrition. However, these studies show limited insight into the causes of a relatively high level of malnutrition for caste, ethnic and religious
emerged context. The other important issue is that millers benefit significantly from paddy procurement. They get a huge margin for the marginal value addition that they make. In the medium run, why cannot paddy cultivators form their own milling cooperatives? This will help them own the value that they are creating, and in this process improve their livelihoods. Notes 1 In the Coastal Andhra and Rayalaseema regions of AP, the upper castes have been holding on to land but in Telangana region landownership has moved to OBC communities in a more pronounced fashion. 2 The cost of production in 2004-05 for paddy was Rs 578 per quintal while the support price was Rs 560. The loss of Rs 18 has risen to Rs 700 by 2010-11.
References Parthasarathy, G (2002): “Changing Agrarian Structure and Nature of Transition in Post-Green Revolution Period” in Y V Krishna Rao and S Subrahmanyam (ed.), Development of Andhra Pradesh: 1956-2001: A Study of Regional Disparities (Hyderabad: NRR Research Centre, CR Foundation). Ramanamuthy, R V (2011): “Paddy Glut and Farmer Distress in Andhra Pradesh”, Economic & Political Weekly, Vol 46, No 29.
groups such as the scheduled castes (SCs), scheduled tribes (STs) and Muslims. In this context, we develop an understanding of the possible reasons for a relatively high malnutrition level in general and among the SCs, STs and Muslims in particular. We first present the inter-group disparities in malnutrition and then provide reasons for the particularly high malnutrition among certain social and religious groups.
Inter-group Disparities The inter-group disparities in the nutritional level in rural areas are examined using the National Family Health Survey (NFHS) for 2005-06. Indicators of mal nutrition include percentage of the underweight children, a body mass index (BMI) below 18.5 kg/m2 and anaemia. The percentage of underweight children at the aggregate level was about 45.6. However, the nutritional problem is parti cularly serious for children, women and men belonging to the SCs, STs, and OBCs. Table 1 (p 17) shows that underweight rates are approximately 50% and anaemia 10-20% higher in the SC/ST children compared with the rest. A BMI of less than 18.5 kg/m2 which indicates chronic energy deficiency is particularly serious for the Sc/St and
december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
commentary
In reality, the agricultural workers face an inadequate demand for their labour power. The wage rates under MGNREGS are in fact lower than those specified under the minimum wage act and labourers are able to get no more than 35 workdays in Konaseema out of the promised 100 workdays. In addition, they face competition in agricultural work from migrants who come from Bengal and Orissa. As a result, workers from Konaseema migrate to other regions in the districts of West Godavari, Krishna, Guntur, and sometimes even to Hyderabad. They work in paddy fields, tobacco farms and brick kilns, etc. In pockets of Konaseema, such as Antarvedi, a large proportion of women belonging to Mala community migrate to Gulf countries to work as domestic labour (maids) and other low-end service occupations.
Way Forward From our field visit, we feel that there are both the issue of remunerative prices as
well as deeper class contradictions at work in the crop holiday movement. We see that the crop holiday movement is essentially an attempt by the landowning classes and market intermediaries to discipline workers, tenants and the welfare state (whatever is left of it). Of course, the state has to improve its procurement mechanisms (support prices, storage capa city) of paddy so that the dependence of actual cultivators on market intermediaries and landlords is reduced. Tenants need to be given access to institutional credit. They need better protection, while they should be able to directly access various other state support packages meant for actual cultivators (including crop insurance). However, there are important structural changes that need emphasis. First, the reappearance of widespread tenancy raises the old question of why the actual tillers (mostly dalit tenants) do not own land. The state should seriously revisit the question of land (and tenancy) reforms in this newly
Caste, Religion and Malnutrition Linkages Nidhi Sadana Sabharwal
The poor are not uniformly disadvantaged. Across most health indicators, the situation of the scheduled castes, scheduled tribes and Muslims is significantly worse than that of others. While nutritional status is closely linked with levels of income, education and public health services, the social belonging of persons also acts as an additional aggravating factor for nutritional inequity. The author would like to thank Sukhadeo Thorat for comments on this article. Nidhi Sadana Sabharwal (nidhi@dalitstudies. org.in) is with the Indian Institute of Dalit Studies, New Delhi.
16
T
he problem of malnutrition has of late received a great deal of attention at the policy level. The persistence of a high degree of malnutrition among the poor, particularly among certain social groups has led to a renewed concern at the governmental level. Increasingly, it is being recognised that although the malnutrition level is relatively high at the overall level, among the malnourished, some groups suffer more from malnourishment than the others. There are significant inter-group disparities in the nutritional levels between poor and non-poor, between caste, ethnic and religious groups. Earlier studies shed some light on the factors which result in high malnutrition and point towards low income, high illiteracy and poor access to health services as key determinants of malnutrition. However, these studies show limited insight into the causes of a relatively high level of malnutrition for caste, ethnic and religious
emerged context. The other important issue is that millers benefit significantly from paddy procurement. They get a huge margin for the marginal value addition that they make. In the medium run, why cannot paddy cultivators form their own milling cooperatives? This will help them own the value that they are creating, and in this process improve their livelihoods. Notes 1 In the Coastal Andhra and Rayalaseema regions of AP, the upper castes have been holding on to land but in Telangana region landownership has moved to OBC communities in a more pronounced fashion. 2 The cost of production in 2004-05 for paddy was Rs 578 per quintal while the support price was Rs 560. The loss of Rs 18 has risen to Rs 700 by 2010-11.
References Parthasarathy, G (2002): “Changing Agrarian Structure and Nature of Transition in Post-Green Revolution Period” in Y V Krishna Rao and S Subrahmanyam (ed.), Development of Andhra Pradesh: 1956-2001: A Study of Regional Disparities (Hyderabad: NRR Research Centre, CR Foundation). Ramanamuthy, R V (2011): “Paddy Glut and Farmer Distress in Andhra Pradesh”, Economic & Political Weekly, Vol 46, No 29.
groups such as the scheduled castes (SCs), scheduled tribes (STs) and Muslims. In this context, we develop an understanding of the possible reasons for a relatively high malnutrition level in general and among the SCs, STs and Muslims in particular. We first present the inter-group disparities in malnutrition and then provide reasons for the particularly high malnutrition among certain social and religious groups.
Inter-group Disparities The inter-group disparities in the nutritional level in rural areas are examined using the National Family Health Survey (NFHS) for 2005-06. Indicators of mal nutrition include percentage of the underweight children, a body mass index (BMI) below 18.5 kg/m2 and anaemia. The percentage of underweight children at the aggregate level was about 45.6. However, the nutritional problem is parti cularly serious for children, women and men belonging to the SCs, STs, and OBCs. Table 1 (p 17) shows that underweight rates are approximately 50% and anaemia 10-20% higher in the SC/ST children compared with the rest. A BMI of less than 18.5 kg/m2 which indicates chronic energy deficiency is particularly serious for the Sc/St and
december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
commentary Table 1: Malnutrition among Children across Social and Religious Groups in Rural India Social Groups CMR
SC ST OBC Others Average
25.6 38.3 18.7 13.3 21.0
Children (Weight for Age) <Med-2SD
50.6 56.1 45.7 36.3 45.6
Women BMI 0 if α = 1. Declines as α declines. Ambiguous when α = 0. >0 for all values of α if Lr ≤ Idr .
Using the Cramer rule, we solve for equilibrium values of dY and dr in terms of the exogenous variables:
{
>0 if α = 1. Declines as α declines. Ambiguous when α = 0.
(– Mqdq + Xqdq + Sf . de) . Lr (α – 1). de . Sf .Idr dY EQ = + (1 – C Y + M Y ). Lr + Idr . LY (1 – C Y + M Y ). Lr + Idr . LY
– C Y dT + + dG – Mqdq + Xqdq (Pd)2 dMS + (α – 1) . e . dSf + (α – 1)Sf . de – dPd . L(Y,r)
dSf . e . Lr (α – 1). e . dSf .Idr dY EQ = + Pd [(1 – C Y + M Y ). Lr + Idr . LY ] Pd [(1 – C Y + M Y ). Lr + Idr . LY]
Case 2: de > 0, dPd = dG = dT = dSf = dMS = 0
]
Pd(dSf . e + Sf . de) – Sf .e.dPd
Case 1: dSf > 0, dT = dG = dPd = de = dMS = 0
>0 for all values of α. Rises as α declines.
>0
The LM curve is upward sloping. Rearranging the terms and writing in a matrix form, we get: Idr dY 1 – C Y + M Y d = d P . LY P . Lr dr
[
}
>0 for all values of α if Lr ≤ Idr.
0 for all values of α. Rises as α declines. Case 3: dpd > 0, dSf = dG = dT = de = dMS = 0 – dPd . L(Y,r) . Idr [– Mqdq + Xqdq – (e . Sf . dPd)/(Pd)2] . Lr dYEQ = + (1 – CY + MY). Lr + Idr . LY Pd[(1 – CY + MY). Lr + Idr . LY] < 0. (1 – C Y + M Y )[– dPd . L(Y,r)] LY . [– Mqdq + Xqdq – e.Sf .dPd/Pd] drEQ = – Pd[(1 – CY + MY). Lr + Idr . LY ] (1 – CY + MY). Lr + Idr . LY Ambiguous.
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Weak Bank Resolution Framework in India: Thumbs Up or Down? Prashant Saran, Tulasi Gopinath
Do mergers improve performance of the transferee banks in the post-merger period? This paper endeavours to provide empirical evidence to this question based on five case studies: three compulsory mergers and two voluntary mergers of recent origin. An index of stock success and an index of flow success assess the performance impact on the balance sheets and income of these banks. There is evidence that one of the transferee banks associated with a compulsory merger appears to have registered underperformance after the event, though there are incipient signs of turnaround in the recent period. Merger was a performance booster for the other transferee banks. Based on these findings, the paper concludes that the approach adopted by the Reserve Bank of India delivered value to the banking sector.
T
he global financial crisis underscored, inter alia, the imperative of effective bank resolution mechanism as part of crisis prevention and management framework. Within the realm of resolution mechanism, mergers and acquisitions (M&A) are often resorted to as the preferred option. Two broader issues of relevance with regard to M&A are: what was the net cost of M&A and has the merger process strengthened or weakened the transferee banks during the post-merger period. In an earlier paper we attempted to address (Saran and Gopinath 2010) the first issue based on select M&A case studies of recent origin in India. As a sequel, we endeavour in this paper to answer the second issue based on the same set of select case studies of M&A, involving three compulsory amalgamations/mergers1 of “a” with “A”, “b” with “B” and “c” with “C” and two voluntary mergers of “d” with “D” and “e” with “E”. The paper is organised into four sections. Section 1 briefly documents events preceding the five select mergers. Section 2 outlines the methodology employed for assessing the performance of the transferee banks in the post-merger period. Empirical estimates/results are analysed in Section 3. Concluding observations are enumerated in Section 4.
1 Events Preceding Select Mergers As indicated earlier, for the purpose of this study, three recent compulsory mergers of “a”, “b” and “c” and two recent voluntary mergers of “d” and “e” are considered. The rationale for selecting these five case studies has been explained in Saran and Gopinath (2010), which is reproduced here: first, experience with recent case studies is a better guide for future; second, there has been a significant change in the legal recovery environment in the aftermath of the introduction of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act in 2002. And, third, easy availability of systematic and reliable data on recent mergers. Against the above backdrop, a brief enumeration of events leading up to the above five mergers is presented below:
Case ‘a’
Prashant Saran (
[email protected]) is with the Securities and Exchange Board of India and Tulasi Gopinath (
[email protected]) is with the RBI.
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The Reserve Bank of India (RBI) granted licence to “a” as a part of the policy to set up new private sector banks. The bank was promoted by a group of professionals and with the participation of international agencies as associates. The financial position of “a” started weakening in 2001 due to very high exposure to capital market, which had turned into problem assets and, as a result, it was put under close monitoring of RBI in 2002. december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
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Directions were issued restricting dividend payment, prohibiting fresh advances to non-performing asset (NPA) accounts, entry into new lines of business, premature withdrawal of deposits of major shareholders, etc. Extension of time to publish the balance sheet was granted. Meanwhile, the bank’s position was continuously being monitored. The RBI inspection found that there was large divergence between the reported accounts and the RBI assessment of the NPAs and the required level of provisioning continued to be very large. The bank was not in a position to finalise the recapitalisation plan acceptable to the RBI. As the financial position of the bank was deteriorating progressively and the solvency of the bank was being seriously affected, the RBI had to place the bank under moratorium to protect the interests of the large body of small depositors of the bank and in the interest of the banking system. The select financial ratios of “a” at the time of imposing moratorium is presented in Annex 1 (p 109). After the order of moratorium was served, an assessment was made of the available options. A few banks, including “A” which was interested in expanding its presence in south India, had indicated their interest in taking over “a”. On examination of relevant factors, a draft scheme of amalgamation of “a” with “A” was put in public domain for suggestions. Based on the suggestions received, a revised scheme was sent for government approval. With necessary approval of and notification by the government, the branches of “a” opened as branches of “A”.
Case ‘b’ The bank “b” was established with its headquarters at a small town in western India. The bank held a small amount of capital and was urged to augment this to reach the minimum prescribed standard of Rs 300 crore net worth laid down in the guidelines on ownership and governance in private sector banks. In view of the deterioration in the financial health of the bank, it was placed under monthly monitoring of the RBI. The central bank identified serious financial, operational and managerial weaknesses that warranted a definite plan for corrective action. The RBI sensitised the promoters/directors of the bank about the immediate need for capital augmentation so as to make the net worth positive and comply with the minimum regulatory capital requirement. As the bank failed to comply, the RBI with no other option but to take necessary regulatory measures under the powers of the relevant statutes, on approval from the government imposed a moratorium for the period of three months. The financial health of “b” at the time of imposing moratorium is presented in Annex 1. An expression of interest for acquisition of “b” was received from “B” following the moratorium. As the proposal was acceptable to the RBI, a draft scheme of amalgamation of “b” with “B” was prepared and placed on the RBI website for feedback and suggestions. After considering the suggestions, the scheme was sent to the government for sanction. The Government of India sanctioned the draft scheme and the scheme for amalgamation was to come into force on a specified date. However, the scheme was contested in the court. Nevertheless, on upholding the scheme by the highest court, the Government of India issued Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
a notification bringing into force the scheme of amalgamation of “b” with “B”.
Case ‘c’ Bank “c” was established with its headquarters at a small town in western India. The bank was placed under monthly monitoring on account of its poor financials, especially high level of NPAs. A set of 13 directions relating to maintenance of capital to risk weighted asset ratio (CRAR), reduction of high cost deposits, reduction of NPAs, restriction on opening of branches, etc, was issued to the bank. In addition, the RBI attempted to persuade the bank to take expeditious steps to augment its capital funds in order to comply with the capital adequacy norms and also the requirement of a minimum net worth of Rs 300 crore laid down in the guidelines on ownership and governance. In the meantime, however, the financial position of the bank further deteriorated with a net loss of over Rs 106 crore for the second consecutive year. The bank was unable to come up with any credible plan to raise fresh capital to bring its CRAR to the prescribed level, as a proposal of capital infusion by a group of investors was not acceptable to the RBI on prudential and other considerations such as “fit and proper” issues. Subsequently, the CRAR of “c” turned negative. Given the deteriorating financial position and to preclude the possibility of a run on the bank, government, on an application from the RBI, issued an order of moratorium. The financial health of “c” at the time of imposing moratorium is presented in Annex 1. During the period of moratorium, the RBI considered various options, including amalgamation of “c” with any other bank. The RBI received expression of interest from 17 entities for taking over/restructuring “c”, on examination of which, it was found that proposal from “C”, apart from embodying greater synergy with “c” and regulatory comfort vis-à-vis capital adequacy and NPA management, offered the highest compensation to the shareholders, upfront. Thus, a draft scheme of amalgamation of “c” with “C” was placed on the RBI website for feedback and suggestions. After considering the suggestions/objections, the scheme was sent to the government for sanction. The government sanctioned the scheme and the amalgamation of “c” with “C” became effective subsequently.
Case ‘d’ The bank “d” was established with its headquarters at a town in north India as part of the policy to set up new private sector banks. The bank had a state-of-the-art technological architecture with a major presence in the north, especially in Punjab, Haryana and Delhi focusing on small and medium enterprises (SMEs) segment and agriculture. The financial health of the bank came under stress as manifested in CRAR falling below the regulatory minimum and ROA turning negative. The financial health of “d” at the time of merger is presented in Annex 1. Bank “D” had a strong presence in the west, particularly in Maharashtra and Goa and the south with a thrust on retail banking. The combined entity of “D” and “d” would have a nation-wide presence in retail, agriculture and SMEs segment. On account of the positive externalities in terms of revenue and cost synergies,
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boards of the two banks approved the scheme of merger between them and sought RBI approval. On examination of the proposal from various angles including compliance with regulatory and legal requirements, the RBI granted its approval and accordingly the “D”-“d” merger came into being.
Case ‘e’ Bank “e” was established with its headquarters at a small town in western India. The bank had a major presence in Maharashtra and thin presence in Karnataka, Gujarat, Andhra Pradesh, Tamil Nadu, Delhi and Goa. About 50% of the branches of “e” were in rural and semi-urban areas. The performance of “e” was deteriorating and the CRAR was negative at 64% and the ratio of net NPA to net advances was over 7%. The select financial ratios of “e” at the time of merger are presented in Annex 1. Bank “E” is a big new generation private sector bank, contemplating implementation of a comprehensive strategy for rural banking. The boards of “E” and “e” approved the merger resolution as it was felt that the proposed amalgamation would be beneficial to depositors, creditors and employees of “e” and would be a strategic fit for “E”. An application was then forwarded to RBI for the approval of the scheme of amalgamation, which the central bank examined from the point of view of adherence to the relevant guidelines, legal requirements, effect on balance sheet of “E”, available synergies and prospects of the transferee bank. As the proposal was satisfactory on all these counts, RBI approved the scheme and the merger became effective subsequently. It is evident from the foregoing case studies that in the process of resolving weak banks, RBI was confronted with substantially different set of regulatory, supervisory and legal challenges. It is also clear that the process was carried out in a consultative and transparent manner. In all the above cases, the interests of the depositors were fully protected without any recourse to the Deposit Insurance Credit Guarantee Corporation (DICGC). On imposition of a moratorium, the draft amalgamation scheme was in the public domain within two days in two of the three of the compulsory merger case studies; none of the three com pulsory merger case studies involved regulatory forbearance. Shareholders were not compensated except in one case study wherein the weak bank had a positive net worth at the time of amalgamation.2
2 Methodology, Data Sources and Limitations Mergers of banks, especially voluntary ones, result in overall benefits to the stakeholders only when the consolidated postmerger bank is more valuable than the simple sum of the two separate pre-merger banks. The primary cause of this gain in value is supposed to be the performance improvement following the amalgamation. The research for post-merger performance gains has focused on any one of the following areas, namely, efficiency improvements, increased market power, or heightened diversification (Pilloff and Santomero 1996). This paper focuses on measuring efficiency improvements. Efficiency improvements for a bank involve two aspects of solvency and sustainable profitability and the interplay between
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them. Solvency affects bank’s balance sheet while profitability affects bank’s income and hence these are referred as stock and flow aspects of a bank, respectively (Bolzico et al 2007). Improved efficiency in general signifies the ability to profit from scale economies, scope economies or marketing efficiency. Scale economies may enable the surviving/transferee bank to augment the customer base, while scope economies may facilitate increasing the market share of the targeted customer activity/base by offering more products and services. The transferee bank may also generate greater revenue by cross-selling various products of each merger partner to customers of the other partner. The post-merger income position of the surviving/transferee bank needs to improve on an ongoing basis by reducing expenses and increasing income so that rising profitability will enable the bank to boost capital and improve its solvency and economic viability. In this paper, evaluation of merger-related gains of the transferee banks is attempted on the basis of the accounting data approach,3 under which both the pre-merger and post-merger performance of transferor banks using accounting data is compared to determine whether amalgamation leads to changes in stock and flow aspects. Data from both premerger and post-merger periods are used in the analysis and evaluated for evidence of a change in the performance around the merger event. Generally speaking, the transferee bank in a merger case tends to acquire large holdings of troubled assets of the weak transferor bank and thereby have high provisioning costs and must provide for losses on a significant portion of these assets. This reduces net earnings and, eventually, capital. Thus, for merger to have positive impact on the balance sheet of the transferee bank, during the post-merger period, while NPAs and loan loss provisions as a ratio to total loans should come down, ratio of capital to assets needs to rise. Therefore, in this paper, the stock aspects of the bank performance are represented by three ratios, viz, gross NPA to gross advances, loan loss provisions to gross advances and capital to assets. On the other hand, the flow aspects of the bank performance are represented by the structural determinants of profit ability, viz, ratio of net interest income to total assets, non-interest income to total assets, operating expenses to total assets and net profits to total assets. The structural determinants of profitability are those items of income and expense that satisfy three conditions: they arise from the operational activities of a bank, can properly be considered sustainable, and are not particularly subject to misrepresentation. They are the core income and expense items of a bank, and are determined by essential banking factors such as the asset/client base size, profit margins, capitalisation and cost efficiency. It is the basic hypothesis that for a bank operating in a competitive market, these factors are relatively stable and the past behaviour of the structural determinants may therefore be considered a fair indication of the future. In the analytical framework, these are the best indicators of the earnings trend, because it reflects the evolution of the main underlying factors of the banking business (Rodrigo 2002). Gross operating income, defined as the difference between structural income and december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
SPECIAL ARTICLE
e xpenses, should be sufficient to cover provision charges that would adequately fund the reserves for loan losses and contingent liabilities and provide an attractive return on assets, after income taxes. These stock and flow indicators are analysed both before and after the merger event to gauge the impact of merger on bank performance. The data required for the estimation of the model presented above are sourced from the off-site returns submitted by banks (OSMOS) to the RBI. The frequency of the data is annual.
amalgamation, as observed in Figures 1.4 and 1.5, meaning thereby that the value of wealth creation by the proposed merger rose post-merger.
Transferee Bank Post-Merger Performance Empirical results relating to assessment of the transferee bank performance based on the accounting ratios for pre- and postmerger periods are presented in Tables 1 and 2 (p 108). The following findings are discernible from the ratios presented in the tables.
3 Empirical Results This section presents the empirical results obtained on the basis of the above-mentioned methodology. However, as a prelude, the stock market reaction to the compulsory merger announcements of the three compulsory merger case studies are analysed below:
‘A’
• There has been an overall deterioration in the stock aspects in
the post-merger period, as the decline in gross NPA ratio and stable provisioning ratio was more than offset by capital erosion. Thus, the index of stock success fell by 5.6%. Stock Market Reaction • There has been an overall deterioration in the flow aspects as all the flow indicators, barring operating expenses, worsened. Amalgamation of ‘a’ with ‘A’: The stock market reacted nega- Particularly, non-interest income (NONII) and net interest income tively as the share prices of “A” and “a” fell sharply, as evident (NII) slid significantly. The core business indicators appear to from the Figures 1.1 and 1.2 below, following the announcement have weakened in the post-merger period. This situation seems of the draft amalgamation scheme of “a” with “A”. In other words, to reflect the fact that impaired assets of “a” were really large, the value of wealth created by the proposed merger declined in and were more than initially assessed. the post-merger period as compared to the pre-merger period. • Notwithstanding the deterioration in both stock and flow success indices during the post-merger period as a Figure 1.1: Share Price of ’A’ on BSE Figure 1.2: Share Price of ’a’ on NSE 275 16 whole, an attempt is made to see whether Scheme of merger Draft merger scheme there are any incipient signs of turnaround 260 12 in the performance of “A” recently. Indices 245 of stock and flow success are computed on 8 a three-yearly rolling basis since the merger 230 4 event and are presented in Annex 2 and Annex 3 (p 109). As can be observed, index 215 0 of stock success was positive during each Amalgamation of ‘b’ with ‘B’: The share price of “B” declined of the three-year rolling average periods. Index of flow success sharply as may be observed from Figure 1.3 in the immediate after- turned positive during the last three-year rolling average period math of the draft Figure 1.3: Share Price of ’B’ on BSE ending March 2010. It, thus, appears that by end-March 2010 “A” scheme of amalga- 195 has completely shed the baggage of acquired net liabilities of “a”. mation of “b” with Draft scheme on website ‘B’ “B” being posted on 185 the RBI website. Bank • Considerable progress has been achieved by “B” in addressing “b” was not listed and both the stock and flow effects arising out of merger. 175 hence could not be • An overall strengthening of stock aspects during the postobserved during the merger period is observed as evidenced by index of stock success corresponding period. 165 rising by 46.5%. • There has been an all-round improvement in the flow aspects Amalgamation of ‘c’ with ‘C’: Unlike in the case of the earlier as measured by the index of flow success (rise of 11.3%), reflectmerger cases, the share prices of both “C” and “c” went up in the ing the strength of declined operating expenses and increased immediate aftermath of the announcement of the draft scheme of profitability. Figure 1.5: Share Price of ’c’ on NSE Figure 1.4: Share Price of ‘C’ on BSE • Decline in the ratio of NONII to assets ob130 26 served during the post-merger period could Draft merger scheme 24 possibly be arrested and reversed in future 120 by virtue of enhanced viability. 22 Merger scheme
110
100
20
Moratorium
‘C’
18
• Considerable progress has been achieved
16
by “C” in addressing both the stock and
Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
107
SPECIAL ARTICLE
• The flow effects of merger improved by 7.6% in spite of rising
Table 1: Ratios of Stock and Flow Measures: Pre- and Post-Amalgamation (in %) ‘A’1
‘B’2 Pre Post
‘C’3 Post
Pre
Post
‘E’5 Pre Post
2.2
1.5
10.1
3.0
2.4
5.4
0.7
0.5
6.4
1.6
1.2
3.0
0.8
0.4
2.5
0.8
0.5
0.4
0.7
0.8
4.9
3.7
2.0
2.2
0.4
0.7
3.6
2.8
1.8
2.1
1.1
2.1
2.3
2.1
2.6
0.5
-0.8
0.5
1.0
1.0
Pre
GNPA/GA
6.0
4.0
6.9
2.7
PLL/GA
3.2
3.2
4.2
2.3
PUC/A
0.6
0.3
0.3
0.4
OE/A
1.7
1.4
1.8
1.5
NII/A
3.2
2.3
2.9
3.0
NONII/A
1.3
0.9
1.6
1.2
1.0
PAT/A
1.2
1.1
0.8
1.2
0.5
Post
Pre
‘D’4
1 Pre- and post-merger periods consist of five years and six years, respectively. 2 Pre- and post-merger periods consist of four years each. 3 Pre- and post-merger periods consist of three years each. 4 Pre- and post-merger periods consist four years and two year, respectively. 5 Pre- and post-merger periods consist of three years each. GNPA= Gross NPA; GA = Gross Advances; PLL = Provisioning for Loan Losses; PUC = Paid Up Capital; OE = Operating Expenses; A= Assets; NII = Net Interest Income; PAT = Profit After Tax. The year of merger is included in the pre-merger period, if there were more than six months in that year, after the occurrence of merger, excluding month of merger. Otherwise, it is included in the post-merger period.
Table 2: Post-Amalgamation Improvement of Bank Performance* (in %)
Progress in Addressing Stock Effects
Progress in Addressing Flow Effects
Decline in Decline in Increase Index of GNPA/GA PLL /GA in Capital/ Stock Assets Success#
Decline Increase Increase Increase Index of in OE/ in NII/ in NONII/ Profits/ Flow Assets Assets Assets Assets Success#
‘A’
33.3
0.0
-50
-5.6
17.5
-28.1
-30.8
-8.3
-12.4
‘B’
60.9
45.2
33.3
46.5
16.7
3.4
-25.0
50.0
11.3
‘C’
31.8
28.6 -50.0
3.5
-14.3
75.0
10.0
0.0
17.7
‘D’
70.3
75.0 -68.0
25.8
24.5 -22.2
9.5
106.3
29.5
‘E’
-125.0
23.8
0.0
7.6
-150.0
-20.0
-98.3
-10.0
16.7
* Measured as percentage change in ratio between pre- and post-amalgamation period. # Calculated as simple averages of three indicators in each category. GNPA= Gross NPA; GA = Gross Advances; PLL = Provisioning for Loan Losses; PUC = Paid Up Capital; OE = Operating Expenses; A= Assets; NII = Net Interest Income; PAT = Profit After Tax.
flow effects arising out of merger. Index of stock success rose by 3.5% on the back of robust decline in bad loans and provisioning ratios, notwithstanding decline in capital vis-à-vis assets. • There has also been an overall improvement in addressing the flow effects of merger as evidenced by an increase in the index of flow success by 17.7%. • Further, as the core banking business indicators are healthy and increasing, adverse stock effects of merger on capital could be addressed effectively in future through rising viability.
‘D’ 4
• Considerable progress was achieved by “D” in addressing both the stock and flow effects arising out of merger. • Overall strengthening of stock aspects during the postmerger period is observed as evidenced by index of stock success rising by 25.8%, notwithstanding the decline in capital vis-à-vis assets. • There has been an all-round improvement in the flow aspects as measured by the index of flow success (rise of 29.5%), reflecting reduced operating expenses and robust profitability indicators. • Decline in the ratio of capital to assets could possibly be arrested and reversed in future by virtue of enhanced viability on the back of sustained increase in profits.
‘E’
• The stock effects of merger worsened as the overall index of stock success slid by 98.3% in post-merger period.
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operating costs. • However, these stock and flow effects of merger on “E” need to be interpreted with caution as the size of “E” was very big relative to the size of “e”.
4 Concluding Observations Resolution of weak/failing banks is critical as it embodies the potential for preventing contagion in and improving viability of the banking industry. This is particularly of significance for emerging market economies characterised by institutional weaknesses. In this context, the relevant question is do M&As lead to augmented viability of transferee banks. This paper attempts to provide empirical evidence to this question in the Indian context based on the select five cases studies, three compulsory mergers and two voluntary mergers of recent origin. The paper estimates the index of stock success and index of flow success for the post-merger period for these transferee banks. While the former measures the health indicators of the balance sheet, the latter gauges the health indicators of the profit and loss account of these banks. Barring bank “A”, all other transferee banks’ viability, assessed on the basis of both the indices, has improved significantly during the post-merger period. These banks were able to post efficiency gains, manifest in the form of its ability to profit from scale and scope economies and/or marketing efficiency through offering more products/services and/or cross selling various products. Evidently and generally, as a result, while NII and NONII rose, operating expenses and provisioning for loan losses fell in the post-merger period. However, “A” does not seem to have harvested such potential benefits from the merger, as reflected in a sliding NII and NONII. Nevertheless, in the case of “A”, there is evidence to suggest that the adverse merger impact on performance has tapered off and there are incipient signs of turnaround. Thus, the approach to weak bank resolution adopted by the RBI has delivered value to the Indian banking sector.
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SPECIAL ARTICLE Notes 1 For the purpose of this study, amalgamation and merger are used interchangeably. 2 In compulsory amalgamation under section 45 of the Bank Regulation Act, 1949, shareholders are not completely precluded from getting compensation. The scheme of amalgamation provides for final valuation of the Not Readily Realisable Assets at the end of 12 years. If there is a surplus after adjusting the liabilities, the shareholders get compensation on a pro rata basis. 3 In the literature, there is an alternative approach known as market data approach under which the value-weighted sum of acquirer and target returns, as measured by the relevant stock market indices, is the measure of overall gains stemming from merger and acquisition activity (Pilloff and Santomero, 1996). However, this approach is not favoured basically for two reasons: some of the banks involved in select BR case studies were not listed and, Indian stock market reactions may not necessarily reflect perceptions of a true market as the floating stock of listed company/bank in India is limited with two banks being in the public sector. 4 “D” has since merged with another leading private sector bank.
Annex 1: Salient Financial Ratios of Transferor Banks (At the time of imposing moratorium on ‘a’, ‘b’ and ‘c’ and at the time of merger of ‘d’ and ‘e’) Ratio
‘a’
‘b’
‘c’
‘d’
‘e’
-27.68
-1.99
-0.74
7.72
-63.90
Core CRAR (%)
-27.68
-1.99
-0.74
4.95
-63.90
Coverage Ratio
-32.88
-1.13
-3.56
1.76
-19.31
Efficiency (Cost Income) Ratio
436.30
130.83
71.50
76.85
182.35
Interest Spread (Qtr)
-0.26
0.70
0.65
0.77
1.02
Interest spread
-0.26
1.72
1.41
1.43
2.95
Net NPAs to Net Advances
32.66
6.86
7.86
4.39
7.25
OP to Total working funds
-0.55
-0.73
0.59
0.55
-2.88
CRAR
Return on Equity Return on Total Assets Staff Expenses to Total Income
5.51
-39.24
-51.25
0.66
134.70
-0.92
-0.73
-0.79
0.03
-24.28
9.57
17.91
17.85
11.73
56.36
OP: Operating Profits. Source: OSMOS.
Annex 2: Ratio of Stock and Flow Measures of ‘A’: Post-Amalgamation (On a three-year rolling average basis)
GNPA/GA
PLL/GA
PUC/TA
OE/TA
NII/TA
NonII/TA
PAT/TA
Mar-07
6.1
5.4
0.4
1.5
2.6
0.9
1.3
References
Mar-08
3.8
3.2
0.3
1.4
2.3
0.8
1.1
Bolzico, Javier, Yira Mascaró and Paola Granata (2007): “Practical Guidelines for Effective Bank Resolution”, Policy Research Working Paper 4389, World Bank, November. Pilloff, Steven J and Anthony M Santomero (1996): “The Value Effects of Bank Mergers and Acquisitions”, The Wharton School, 97-07, University of Pennsylvania, October. Rodrigo, Luís Rosa Couto (2002): “Framework for the Assessment of Bank Earnings, Financial Stability Institute”, Bank for International Settlements, September. Saran, Prashant and Tulasi Gopinath (2010): “Resolution of Weak Banks: The Indian Experience”, Vol XLV, No 2, Economic & Political Weekly, 9 January.
Mar-09
2.3
1.6
0.3
1.3
2.0
0.8
0.9
Mar-10
1.9
1.0
0.2
1.2
1.9
0.8
0.9
Source: Calculated by the author.
Annex 3: Improvement in Performance of A: Post Amalgamation (On a three-year rolling average basis)
Decline in GNPA /GA
Progress in Addressing Stock Effects Decline in Increase in Index of PLL /GA Capital/Assets Stock Success
Decline in OE/Assets
Progress in Addressing Flow Effects Increase in Increase in Increase in Index of NII/Assets NONII/Asset Profits/Assets Flow Success
Mar-08
37.7
40.7
-25.0
17.8
6.7
-11.5
-11.1
-15.4
-7.8
Mar-09
39.5
50.0
0.0
29.8
7.1
-13.0
0.0
-18.2
-6.0
Mar-10
17.4
37.5
-33.3
7.2
7.7
-5.0
0.0
0.0
0.7
Source: Calculated by the author.
Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
109
DISCUSSION
Microfinance Industry in India: More Thoughts M S Sriram
Microfinance institutions need not be treated as holy cows. They do not need any soft regulation. They should be treated on par with any non-banking companies. A comment on Y V Reddy’s article on microfinance and a response from the author.
I
n the article “Microfinance Industry in India: Some Thoughts” (EPW, 8 October 2011), Y V Reddy has expressed some thoughts about the microfinance industry (MFI) and the current crisis. Reddy’s thoughts on this matter are critical and cannot be easily ignored not only because of what he is saying, but also because of who he was – the governor of the Reserve Bank of India (RBI).
Through a Regulatory Lens
M S Sriram (
[email protected]) is a former professor of Indian Institute of Management, Ahmedabad and currently an independent researcher.
110
In his article, Reddy talks about the state of the microfinance industry from a regulatory lens and bases his arguments on the incidents that happened in 2006 in Andhra Pradesh. While Reddy argues that the RBI adopted a softregulatory approach, almost amounting to being hands-off and claims that “…significant interest was expressed by RBI in regard to extending microfinance activity, essentially as extended arms of the individual branches of the banks and not as parallel financial inter mediaries…” (p 46). We find this argument untenable. In fact, the approach of the RBI was that of encouragement and promotion of these parallel financial intermediaries. A review of the regulatory history shows the remarkable consistency in the hands-off approach on regulation, with an active tone of encouragement adopted by the RBI, starting with the recommendations of the Task Force on Supportive Policy and Regulatory Framework for Microfinance in 1999. While we do not intend to delve on the significant regulatory commitments of the RBI that encouraged MFIs of all types (for-profit as well as the notfor-profit), attention should be drawn to a communication addressed by the RBI to all scheduled commercial banks in
February 2000 with the title “Microcredit”,1 in fact, defined microcredit as Microcredit is defined as the provision of thrift, credit and other financial services and products of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve living standards. Microcredit institutions are those which provide these facilities.
In fact, the notification actually makes the following six significant points vis-à-vis microfinance: (1) no interest rate cap on loans to MFIs and their loans to clients, (2) freedom to banks to formulate their own model/conduit/intermediary for extending microcredit, (3) no criteria prescribed for selecting MFIs, (4) banks to formulate their own lending norms, (5) banks to formulate a simple system, minimum procedures and documentation for augmenting the flow of credit by removing all operational irritants, and (6) the banks were to include microcredit at the branch, block, district and state credit plans with quarterly progress to be reported to RBI. Microfinance also crept into the annual Trend and Progress of Banking in India report, without a formal definition of what microfinance is (except for the definition in the notification above). The approach of the RBI since 1999 has been (and rightly so) to promote plurality of institutions.
For Profit/Non-Profit Debate The essence of Reddy’s argument in his lecture is that the RBI took a soft regulatory approach with the MFIs because they were initially not-for-profit institutions; they were working with the poor; and there was an underlying assumption about the commitment of these institutions to their stated values. Arguing about the for-profit/non-profit debate, he even brings in the principled stand of RBI, divesting its share from the Infrastructure Development Finance Corporation the moment it decided to go in for a public issue. There is a difference between being an active shareholder in a government promoted institution and divesting its stake on a matter of principle and taking a “principled stand” with respect
december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
DISCUSSION
to regulating for-profit MFIs. The RBI was not a shareholder in any MFI. It has not taken a principled stand that for-profit institutions should not be in banking. Indeed, all the institutions in banking are for-profit and most of them are listed. So, how these principles of not participating in equity apply to regulating non-banking financial companies (NBFCs)-MFIs, which are for profit is not clear.
Arguments and Diagnosis While there are some internally contradictory arguments in Reddy’s paper, we should try and look at the role of RBI from a perspective of a regulatory failure afresh, so that the debate on MFIs and the crisis of microfinance can be carried forward. Reddy’s article provides a good platform to open up the debate. We shall place our arguments and diagnosis from a regulatory point of view below: (1) The MFIs, after trying to find their feet in the initial years started growing at an unbelievable pace. Most MFIs grew at a rate higher than 100% for several years. Such a fast pace of growth in the financial sector in itself should have raised redflags in the regulatory set-up like RBI. Any sector growing at such a pace consistently is obviously attracting enough capital and funding, and if such funding is unlimited, there is a return that is beyond normal. If we dissect this we find that such growth was initially fuelled by innovative loan products offered by the ICICI Bank and the Small Industries Development Bank of India (SIDBI) that made the capital adequacy of the MFIs irrelevant. The ICICI Bank offered on-tap securitisation and partnership product, which lent the strength of the ICICI balance sheet to small MFIs that had soft-touch regulation. Clearly, there was a regulatory arbitrage. SIDBI apart from funding MFIs very aggressively also offered liquidity support in the form of an innovative “transformation loan” at subsidised interest rates for the not-forprofit MFIs to “convert” to for-profit entities, which opened up the flood gates for equity investments. Both these institutions were very much under the supervisory oversight of RBI. (2) Following this there were huge inflows of capital into MFIs from private equity
firms, including significant amount foreign funds. The valuations at which these entities bought into MFIs should have waved a red flag to the regulator. The valuations were astronomical not only by standards of banks and NBFCs, but also when compared with the valuations got by similar MFIs in other countries. Clearly, if such capital was flowing in, it would continue to expect consistently high returns. RBI being a regulator of the financial sector, was best place to look at the nature of capital flows and its impact on “usurious interest rates”.
into the MFI sector. Reddy is right when he says that the assumption that for-profit MFIs are committed to a particular activity, viz, microcredit for the poor, has also become suspect going by the plans of some of these institutions to enter the gold loans business. Clearly, the investors were demanding their pound of flesh from the MFIs and the MFIs were desperately looking for some opportunities to survive, when their basic bread and butter business has become untenable.
Behavioural Problems
If we were to accept the above argument, we would then realise that the solution possibly did not lie in increasing capital adequacy, changing prudential norms or even imposing interest rate caps. At the source, the RBI did not pay enough attention to the “quality” of capital that was flowing in – whether such capital was patient enough to do business with the poor. At the customer level, the RBI failed to protect the customers adequately from predatory lending practices. While Reddy says that putting faith in the commitments of the MFIs through a code of conduct
If the RBI had looked at these two signals, then it would have reacted differently. The current crisis in microfinance is attributed to three significant behavioural problems of the MFIs. These problems are: (1) the allegation that the MFIs are charging usurious interest rates, (2) the clients have borrowed from multiple MFIs and gone into a debt-trap like situation, and (3) the MFIs are resorting to coercive recovery practices. All the three elements can be traced back to the nature of capital that has flown
Institutional Plurality
REVIEW OF WOMEN’S STUDIES October 22, 2011 Subverting Policy, Surviving Poverty: Women and the SGSY in Rural Tamil Nadu Small Loans, Big Dreams: Women and Microcredit in a Globalising Economy
– Kumud Sharma
Women and Pro-Poor Policies in Rural Tamil Nadu: An Examination of Practices and Responses
– J Jeyaranjan
Informed by Gender? Public Policy in Kerala
– Seema Bhaskaran
Addressing Paid Domestic Work: A Public Policy Concern Reproductive Rights and Exclusionary Wrongs: Maternity Benefits
– Nimushakavi Vasanthi – Lakshmi Lingam, Vaidehi Yelamanchili
Reinventing Reproduction, Re-conceiving Challenges: An Examination of Assisted Reproductive Technologies in India
Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
– K Kalpana
– Vrinda Marwah, Sarojini N
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[email protected] 111
DISCUSSION
was inappropriate, he also admits that “RBI should have insisted on enforceable regulation and not been content with an advisory role” (p 47). Taking this point further, Ramesh Ramanathan2 in a recent article argued: Unbridled laissez-faire is perilous when it comes to the poor. Relying solely on market equilibrated prices and behaviour is misplaced for three reasons: structurally inappropriate due to massive information asymmetries in the marketplace; morally unacceptable, given the vulnerability of the poor; and politically unfeasible given the entrenched patron-client relationship between politicians and the poor.
Clearly the response of the RBI to the issues arising out of the crisis of 2006 was inadequate. However, to suddenly turnaround and term microfinance as leveraged moneylending might be mis placed. We argue that MFIs are certainly a better option than moneylenders for one significant reason. MFIs are legal entities, are visible, fall within the regulatory radar, can be called to table and reasoned, can be penalised, and can be made to behave. Therefore, while it is important to understand the role of MFIs and their limitations which Reddy has adequately
pointed out in his article, we also need to argue for institutional plurality when it comes to the agenda of inclusion. Yes, the MFIs need not be treated as holy cows. They do not need any soft regulation. They should be treated on par with any NBFC. They should not be allowed to take a back door entry into banking functions. However, as a formal company registered with the RBI, they not only deserve to exist and negotiate their survival, they also deserve the regulatory attention of the body that has permitted them to operate. The proposed microfinance bill is a different matter and as Reddy points out, it has serious flaws in the “soft” clauses that allow them to do bank like activities. There has to be a regulatory level-playing field. The best example of providing such a framework is available in the recent report on NBFC regulations submitted by a committee headed by Usha Thorat.3 Unfortunately that report has kept MFIs out of its recommendatory purview. That indeed is a tragedy because the RBI seems to continue to keep MFIs out of the mainstream regulatory discourse and deals with these institutions somewhat guardedly and carefully, and sometimes with an unnecessary
A Response Y V Reddy
M
S Sriram in his comments on my article has articulated views on the subject mainly from the point of view of the microfinance industry, and this is therefore a very useful supplement to the comments made by me, which were mainly from the regulatory point of view, based on my limited personal experience. I am sure this debate will lead to consideration of a broader set of issues, keeping the totality of the management of the macroeconomy, monetary policy, and financial sector for promotion of growth with equity. The debate should ideally encompass the role of the monetary authority, the difference between banks (which operate the
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payment system as well as accept retail deposits) and non-banks, the deposit taking institutions, etc. The optimal level and composition of the activities that could be undertaken by an institution like the RBI is also relevant. The regulation of cooperative credit institutions which are also active in rural areas should form part of the broader analysis. Incidental, if not integral to this debate, should be the role of moneylenders and that of the Moneylenders’ Act in the past, present and in future, given the reality and magnitudes of their presence, and the fact that they are not leveraged. By way of clarification, I would like to mention that my account of RBI’s policy
vehemence as indicated by the postMalegam notifications.
Conclusions In conclusion, while the RBI could use the state governments as instrumentality to carry out its inability to deal with the last mile issues – as it does with a series of memoranda of understanding executed in the context of urban cooperative banks, it cannot abdicate its responsibility of regulation. The debate between monetary management and regulation raised by Reddy is a separate debate. However, this debate is about regulatory convergence. Since the RBI is the regulator for banks as well as NBFCs, it cannot treat MFIs that are NBFCs as a problem of the state governments. These are formal institutions, inviting capital flows and trying to list themselves. Therefore, it is important for RBI to play its role rightfully and effectively. Notes 1 RBI (2000), Communication No: RPCD.NO.PL. BC. 62 /04.09.01/99-2000, dated 18 February. Accessed from the RBI website on 6 February 2011. http://www.rbi.org.in/scripts/NotificationUser. aspx?Id=127&Mode=0 2 Ramesh Ramanathan, “A Place under the Sun for Microfinance”, Mint, 4 November 2011. 3 Working Group on the Issues and Concerns in the NBFC Sector: Report and Recommendations submitted to the RBI.
was mainly in terms of my personal involvement, and hence more focused on the post-2003 developments. During this period, financial inclusion became a more formal agenda in the policy of the RBI. The illustration of IDFC was essentially relating to the RBI’s involvement and our approach to the incentive framework of an institution that is funded by equity capital and is seeking to maximise returns, while simultaneously seeking special treatment for a particular type of promotional work that it was claiming to be doing. It will be useful to assess whether the analysis made by Sriram implies a distinction between for-profit and not-for-profit MFIs, from the point of view of the regulators, consumers, and state governments. It will also be useful to verify whether moneylenders are required to be registered (though many may not) under the relevant Acts.
december 10, 2011 vol xlvi no 50 EPW Economic & Political Weekly
CURRENT STATISTICS
EPW Research Foundation
The budgeted increase in gross tax revenue in 2011-12 was 17.3% against the increase of 27.3% in 2010-11. The actual performance during April to September has turned out to be much lower at 13.9% against 25.3% in the first half of 2010-11. Non-tax revenue also declined by 69.2% against an increase of 180.3% during the same period. With borrowings and other liabilities jumping by 110.7% against a decline by 32.6%, the fiscal deficit touched 68.0% of the budgeted annual level during April to September in 2011-12 against only 36.1% in 2010-11.
Macroeconomic Indicators Variation (in %): Point-to-Point Index Numbers of Wholesale Prices Weights 12 November Over Over 12 Months Fiscal Year So Far Full Financial Year (Base Year: 2004-05 = 100)^ 2011 Month 2011 2010 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 Primary Articles 20.1 201.9 -1.3 9.1 15.2 7.2 11.1 13.1 22.4 5.3 9.1 Food Articles 14.3 198.5 -1.1 9.0 11.4 10.8 10.8 8.9 21.1 7.5 5.8 Non-Food Articles 4.3 174.7 -2.8 4.1 23.6 -8.9 11.5 27.3 19.6 1.8 13.3 Fuel & Power 14.9 171.5 0.8 15.5 10.6 8.6 6.0 12.7 13.8 -4.9 9.2 Manufactured Products* 65.0 139.1 0.4 7.7 5.1 2.6 2.4 7.4 5.3 1.7 7.2 Food Products* 10.0 152.0 0.2 7.8 3.8 4.8 -0.5 2.4 15.1 6.3 8.4 Food Index (computed)* 24.3 180.8 1.5 9.9 10.6 9.5 6.4 6.8 18.5 7.3 6.7 All Commodities (point to point basis)* 100.0 156.8 0.6 9.7 9.1 4.9 4.8 9.7 10.4 1.6 7.8 All Commodities (Monthly average basis)* 100.0 154.2 – 9.5 9.1 9.6 9.8 9.6 3.8 8.1 4.9 * Data pertain to the month of October 2011 as weekly release of data discontinued wef 24 Oct 2009. ^The date of first release of data based on 2004-05 series wef 14 September 2010. Variation (in %): Point-to-Point Cost of Living Indices Latest Over Over 12 Months Fiscal Year So Far Full Fiscal Year Month 2011 Month 2011 2010 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 9 Industrial Workers (IW) (2001=100) 197 1.5 10.1 9.8 6.5 5.3 8.8 14.9 8.0 7.9 6.7 10 Agricultural Labourers (AL) (1986-87=100) 619 0.7 9.4 8.4 5.8 5.6 9.1 15.8 9.5 7.9 9.5
2006-07 12.9 12.7 13.4 0.9 6.5 4.3 9.6 6.8 6.5
2005-06 5.3 5.3
Note: Superscript numeral denotes month to which figure relates, e g, superscript 9 stands for September and 10 stands for October. Variation Money and Banking (Rs crore) 4 November Over Month Over Year Fiscal Year So Far Full Fiscal Year 2011 2011 2011-12 2010-11 2010-11 2009-10 2008-09 Money Supply (M3) 7010561 47739(0.7) 970085(16.1) 511013(7.9) 437744(7.8) 896817 (16.0) 807920 (16.8) 776930 (19.3) Currency with Public 968051 18819(2.0) 103113(11.9) 53854(5.9) 97445(12.7) 146704 (19.1) 102043 (15.3) 97040 (17.1) Deposits Money with Banks 6041202 29979(0.5) 869945(16.8) 459564(8.2) 339857(7.0) 750239 (15.5) 707606 (17.2) 683375 (19.9) of which: Demand Deposits 644057 -7862(-1.2) -18534(-2.8) -73602(-10.3) -55379(-7.7) -310 (-0.0) 129281 (22.0) 10316 (1.8) Time Deposits 5397145 37841(0.7) 888479(19.7) 533166(11.0) 395236(9.6) 750549 (18.2) 578325 (16.4) 673059 (23.5) Net Bank Credit to Government 2192844 34871(1.6) 356722(19.4) 210073(10.6) 166937(10.0) 313584 (18.8) 391853 (30.7) 377815 (42.0) Bank Credit to Commercial Sector 4476698 30945(0.7) 672318(17.7) 241291(5.7) 312970(9.0) 743997 (21.3) 476516 (15.8) 435904 (16.9) Net Foreign Exchange Assets 1551778 9712(0.6) 188425(13.8) 158451(11.4) 81884(6.4) 111858 (8.7) 367718 (-5.2) 57053 (4.4) Banking Sector’s Net Non-Monetary Liabilities 1224070 27789(2.3) 248539(25.5) 99390(8.8) 124929(14.7) 274078 (32.2) -9050 (-1.1) 94672 (12.4) of which: RBI 530784 11966(2.3) 182733(52.5) 162510(44.1) 46437(15.4) 66660 (22.1) -86316 (-22.3) 177709 (84.5) Reserve Money (18 November 2011) 1401226 12036(0.9) 169327(13.7) 24344(1.8) 76212(6.6) 221195 (19.1) 167688 (17.0) 59696 (6.4) Net RBI Credit to Centre 415623 21277(-) 157528(-) 21589(-) 46514(-) 182453 149821 176397 Scheduled Commercial Banks (4 November 2011) Aggregate Deposits 5654106 29174(0.5) 841320(17.5) 446137(8.6) 319960(7.1) 715143 (15.9) 658716 (17.2) 637170 (19.9) Demand 564735 -7944(-1.4) -25820(-4.4) -76971(-12.0) -55055(-8.5) -3905 (-0.6) 122525 (23.4) -1224 (-0.2) Time 5089371 37118(0.7) 867140(20.5) 523107(11.5) 375015(9.7) 719048 (18.7) 536191 (16.2) 638395 (23.9) Investments (for SLR purposes) 1731638 -3140(-0.2) 243407(16.4) 230019(15.3) 103479(7.5) 116867 (8.4) 218342 (18.7) 194694 (20.0) Bank Credit 4180474 31876(0.8) 650078(18.4) 238392(6.0) 285608(8.8) 697294 (21.5) 469239 (16.9) 413635 (17.5) Non-Food Credit 4103011 17729(0.4) 626363(18.0) 225211(5.8) 280349(8.8) 681500 (21.3) 466961 (17.1) 411825 (17.8) Commercial Investments 170559 1284(0.8) 17468(11.4) 22958(15.6) 35020(29.7) 28872 (24.5) 11654 (11.0) 10911 (11.4) Total Bank Assistance to Comml Sector 4273570 19013(0.4) 643831(17.7) 248169(6.2) 315369(9.5) 710372 (21.4) 478615 (16.9) 422736 (17.5) Note: Government Balances as on 31 March 2011 are after closure of accounts. Index Numbers of Industrial Production September* Fiscal Year So Far Full Fiscal Year Averages (Base 2004-05=100) Weights 2011 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 General Index 100.00 163.2(1.8) 166.0(5.0) 158.1(8.2) 165.4(8.2) 152.9(5.3) 145.2(2.5) 141.7(15.5) 122.6(12.9) Mining and Quarrying 14.157 111.0-(5.7) 122.6-(1.0) 123.8(7.2) 131.0(5.2) 124.5(7.9) 115.4(2.6) 112.5(4.6) 107.6(5.2) Manufacturing 75.527 175.7(2.1) 176.6(5.4) 167.6(8.8) 175.6(8.9) 161.3(4.8) 153.8(2.5) 150.1(18.4) 126.8(15.0) Electricity 10.316 144.1(9.0) 148.2(9.4) 135.5(3.8) 138.0(5.6) 130.8(6.1) 123.3(2.8) 120.0(6.4) 112.8(7.3) * Indices for the month are Quick Estimates Fiscal Year So Far 2010-11 End of Fiscal Year Capital Market 25 Nov 2011 Month Ago Year Ago Trough Peak Trough Peak 2010-11 2009-10 2008-09 BSE Sensitive Index (1978-79=100) 15695(-18.8) 17255 19318(12.3) 15695 19702 16022 21005 19445(10.9) 17528(80.5) 9709(-37.9) BSE-100 (1983-84=100) 8157(-20.0) 8955 10191(12.7) 8124 10262 8540 11141 10096(8.6) 9300(88.2) 4943(-40.0) BSE-200 (1989-90=100) 1915(-21.3) 2098 2432(14.0) 1905 2427 2034 2753 2379(8.1) 2200(92.9) 1140(-41.0) S&P CNX Nifty (3 Nov 1995=1000) 4710(-18.8) 5192 5800(13.5) 4706 5912 4807 6312 5834(11.1) 5249(73.8) 3021(-36.2) Skindia GDR Index (2 Jan 1995=1000) 1980(-38.0) 2375 3196(22.3) 1980 3441 2477 3479 3151(9.3) 2883(134.2) 1153(-56.2) Net FII Investment in (US $ Mn Equities) - period end 101806(0.1) 101796 101727(44.3) – – – – 101454(31.5) 77159(43.1) 51669(-18.6) September* Fiscal Year So Far Full Fiscal Year Foreign Trade 2011 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 Exports: Rs crore 118234 723432 (49.3) 484687 (23.2) 1118823 (32.3) 845534 (0.6) 840754(28.2) 655863(14.7) 571779(25.3) 456418(21.6) 375340(27.9) US $ mn 24822 160049 (52.1) 105241 (30.0) 245868 (37.5) 178751 (-3.5) 185295 (13.6) 163132(29.0) 126361(22.6) 103091(23.4) 83536(30.8) Imports: Rs crore 164759 1055339 (30.0) 811773 (30.4) 1596869 (17.1) 1363736 (-0.8) 1374434(35.8) 1012312(20.4) 840506(27.3) 660409(31.8) 501065(39.5) US $ mn 34589 233510 (32.4) 176360 (37.6) 350695 (21.6) 288373 (-5.0) 303696(20.7) 251654(35.5) 185749(24.5) 149166(33.8) 111517(42.7) Non-POL US $ mn (* Provisional figures) 25379 163161 (28.5) 126955 (40.0) 249006 (23.7) 201237 (-4.2) 210029(22.2) 171940(33.5) 128790(22.4) 105233(37.1) 76772(33.2) Balance of Trade: Rs crore -46525 -331907 -327085 -478047 -518202 -533680 -356449 -268727 -203991 -125725 US $ mn -9767 -73461 -71119 -104827 -109621 -118401 -88522 -59388 -46075 -27981 * Provisional figures. Variation Over Foreign Exchange Reserves (excluding 18 Nov 19 Nov 31 Mar Fiscal Year So Far Full Fiscal Year gold but including revaluation effects) 2011 2010 2011 Month Ago Year Ago 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 Rs crore 1433191 1241568 1245284 -4101 191623 187907 69322 73038 -57826 33975 359500 189270 US $ mn 279103 274319 278899 -7953 4784 204 14628 19208 18264 -57821 107324 46816 Figures in brackets are percentage variations over the specified or over the comparable period of the previous year. (–) not relevant. [Comprehensive current economic statistics with regular weekly updates, as also the thematic notes and Special Statistics series, are available on our website: http://www.epwrf.in]. Economic & Political Weekly EPW december 10, 2011 vol xlvi no 50
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Budget Heads
April - September 2001-02 Actuals
2002-03 Actuals
2003-04 Actuals
december 10, 2011 vol xlvI no 50 EPW Economic & Political Weekly
2011-12 Actual
15 as 12%
A Gross Tax Revenue 187060 216266 254348 304958 366151 473512 593147 605299 624528 795063 932440 324397 40.8 369353 (-0.8) (15.6) (17.6) (19.9) (20.1) (29.3) (25.3) (2.0) (3.2) (27.3) (17.3) (25.3) (13.9) 1 Corporation Tax 36609 46172 63562 82680 101277 144318 192911 213395 244725 299422 359990 123161 41.1 127375 (2.6) (26.1) (37.7) (30.1) (22.5) (42.5) (33.7) (10.6) (14.7) (22.4) (20.2) (17.9) (3.4) 2 Income Tax 32004 36866 41387 49268 55985 75093 102644 106046 122370 139147 164526 56480 40.6 66249 (0.8) (15.2) (12.3) (19.0) (13.6) (34.1) (36.7) (3.3) (15.4) (13.7) (18.2) (13.6) (17.3) 3 Customs Duty 40268 44852 48629 57611 65067 86327 104119 99879 83324 136058 151700 61051 44.9 74808 (-15.3) (11.4) (8.4) (18.5) (12.9) (32.7) (20.6) -(4.1) -(16.6) (63.3) (11.5) (61.8) (22.5) 4 Union Excise Duties 72555 82310 90774 99125 111226 117613 123611 108613 102991 138372 163550 52058 37.6 59315 (5.9) (13.4) (10.3) (9.2) (12.2) (5.7) (5.1) -(12.1) -(5.2) (34.4) (18.2) (41.1) (13.9) 5 Other Tax* 5624 6066 9996 16274 32596 50161 69862 77366 71118 82064 92674 31647 38.6 41606 (10.8) (7.9) (64.8) (62.8) (100.3) (53.9) (39.3) (10.7) -(8.1) (15.4) (12.9) (5.4) (31.5) Surcharge of Financing NCCF 686 1600 1600 1565 2825 2000 1800 1800 3160 2970 4525 1204 40.5 1448 Assignment to States 52842 56122 65766 78595 94385 120330 151800 160179 164831 219303 253458 89778 40.9 113174 (2.2) (6.2) (17.2) (19.5) (20.1) (27.5) (26.2) (5.5) (2.9) (33.0) (15.6) (24.5) (26.1) B Centre’s Finances 1 Revenue Receipts (a+b) 201306 230834 263813 305991 347077 434387 541864 540259 572811 794277 789892 398234 50.1 305528 (4.5) (14.7) (14.3) (16.0) (13.4) (25.2) (24.7) -(0.3) (6.0) (38.7) -(0.6) (62.9) (-23.3) (a) Tax Revenue 133532 158544 186982 224798 270264 351182 439547 443319 459444 572790 664457 233415 40.8 254731 (Net to centre) (2.3) (18.7) (17.9) (20.2) (20.2) (29.9) (25.2) (0.9) (3.6) (24.7) (16.0) (25.7) (9.1) (b) Non-Tax Revenue 67774 72290 76831 81193 76813 83205 102317 96940 116014 221487 125435 164819 74.4 50797 (24.7) (6.7) (6.3) (5.7) -(5.4) (8.3) (23.0) -(5.3) (19.7) (90.9) -(43.4) (180.3) (-69.2) 2 Non-Debt Capital Receipts 20049 37432 84118 66467 12226 6427 43895 6705 33194 35599 55020 6491 18.2 12755 of which: (40.2) (86.7) (124.7) -(21.0) -(81.6) -(47.4) (583.0) -(84.7) (395.1) (7.2) (54.6) -(1.7) (96.5) 2.1 Recovery of Loans 16403 34191 67165 62043 10645 5893 5100 6139 8613 12752 15020 4256 33.4 10024 2.2 Other Receipts 3646 3151 16953 4424 1581 534 38795 566 24581 22847 40000 2235 9.8 2731 3 Borrowing and Other Liabilities 140955 145072 123273 125794 146435 142573 129814 336992 418482 369043 412817 133252 36.1 280810 (8.6) (2.9) -(15.0) (2.0) (16.4) -(2.6) -(8.9) (159.6) (24.2) -(11.8) (11.9) -(32.6) (110.7) 4 Total Receipts (1+2+3) 362310 413338 471204 498252 505738 583387 715573 883956 1025883 1198919 1257729 537977 44.9 599093 (8.6) (14.1) (14.0) (5.7) (1.5) (15.4) (22.7) (23.5) (16.1) (16.9) (4.9) (19.9) (11.4) 5 Revenue Expenditure 301468 338713 362074 384329 439376 514609 594433 793798 911809 1039130 1097162 473155 45.5 527308 (9.6) (12.4) (6.9) (6.1) (14.3) (17.1) (15.5) (33.5) (14.9) (14.0) (5.6) (15.6) (11.4) of which: (a.1) Interest Payments 107460 117804 124088 126934 132630 150272 171030 192204 213093 234739 267986 102779 43.8 122499 (9.6) (9.6) (5.3) (2.3) (4.5) (13.3) (13.8) (12.4) (10.9) (10.2) (14.2) (18.6) (19.2) 6 Capital Expenditure 60842 74535 109129 113923 66362 68778 118238 90158 112678 159789 160567 64822 40.6 71785 (9.6) (22.5) (46.4) (4.4) -(41.7) (3.6) (71.9) -(23.7) (25.0) (41.8) (0.5) (64.5) (10.7) of which: (a.1) Loans Disbursed 2468 6409 1938 2494 2014 1497 1593 1709 1143 24985 17151 11194 44.8 23027 (9.6) (159.7) -(69.8) (28.7) -(19.2) -(25.7) (6.4) (7.3) -(33.1) (2085.9) -(31.4) (4045.9) (105.7) 7 Total Expenditure (5+6) 362310 413248 471203 498252 505738 583387 712671 883956 1018526 1198919 1257729 537977 44.9 599093 (12.3) (14.1) (14.0) (5.7) (1.5) (15.4) (22.2) (24.0) (15.2) (17.7) (4.9) (19.9) (11.4) 8 Revenue Deficit 100162 107879 98261 78338 92299 80222 52569 253539 338998 244853 307270 74921 30.6 221780 (17.5) (7.7) -(8.9) -(20.3) (17.8) -(13.1) -(34.5) (382.3) (33.7) -(27.8) (25.5) -(54.6) (196.0) 9 Fiscal Deficit 140955 145072 123273 125794 146435 142573 129814 336992 418482 369043 412817 133252 36.1 280810 10 Primary Deficit 33495 27268 -815 -1140 13805 -7699 -41216 144788 205389 134304 144831 30473 22.7 158311
39.6
* : Includes Service Tax, Securities Transction Tax, Banking Cash Transaction Tax, Fringe Benefit Tax, Wealth Tax, etc. Actuals are unaudited provisional. BE: Budget Estimates. NCCF: National Calamity Contingency Fund. Figures in brackets are percentage growth over the corresponding period of the previous year. Source: http://www.cga.nic.in/data0212.htm and Central Government Budget Documents, various issues.
2004-05 Actuals
2005-06 Actuals
2006-07 Actuals
2007-08 Actuals
2008-09 Actuals
2009-10 Actuals
2010-11 Actuals
2011-12 BE
2010-11 Actual
13 as 11%
35.4 40.3 49.3 36.3 44.9 32.0 44.7
38.7 38.3 40.5 23.2 66.7 6.8 68.0 47.6 48.1 45.7 44.7 134.3 47.6 72.2 68.0 109.3
STATISTICS
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Finances of Government of India (April-September) (Rs crore)