The Peninsula Foundation

Category: Economy & Development

  • Indian Economy at 75: Trapped in a Borrowed Development Strategy

    Indian Economy at 75: Trapped in a Borrowed Development Strategy

    In 1947, at the time of Independence, India’s socio-economic parameters were similar to those in countries of South East Asia and China. The level of poverty, illiteracy, and inadequacy of health infrastructure was all similar. Since then, these other countries have progressed rapidly leaving India behind in all parameters. ‘Why is it so?’ should be the big question for every Indian citizen in this time of our 75th anniversary celebrations.

     

    Introduction

    India at 75 is a mixed bag of development and missed opportunities. The country has achieved much since Independence but a lot remains to be done to become a developed society. The pandemic has exposed India’s deficiencies in stark terms. The uncivilized conditions of living of a vast majority of the citizens became apparent. According to a report by Azim Premji University, 90% of the workers said during the lockdown that they did not have enough savings to buy one week of essentials. This led to the mass migration of millions of people, in trying conditions from cities to the villages, in the hope of access to food and survival.

    Generally, technology-related sectors, pharmaceuticals and some producing essentials in the organized sectors have done well in spite of the pandemic. So, a part of the economy is doing well in spite of adversity but incomes of at least 60% of people at the bottom of the income ladder have declined (PRICE Survey, 2022). The great divide between the unorganized and organized parts of the economy is growing. The backdrop to these developments is briefly presented below.

    Structure and Growth of the Economy

    In 1947, at the time of Independence, India’s socio-economic parameters were similar to those in countries of South East Asia and China. The level of poverty, illiteracy, and inadequacy of health infrastructure was all similar. Since then, these other countries have progressed rapidly leaving India behind in all parameters. So, India has fallen behind relatively in spite of improvements in health services and education, diversification of the economy and development of the industry.

    In 1950, agriculture was the dominant sector with a 55% share of GDP which has now dwindled to about 14%. The share of the services sector has grown rapidly and by 1980 it surpassed the share of agriculture and now it is about 55% of GDP. The Indian economy has diversified production `from pins to space ships’.

    Agriculture grows at a trend rate of a maximum of 4% per annum while the services sector can grow at even 12% per annum. So, there has been a shift in the economy’s composition from agriculture to services, accelerating the growth rate. The average growth rate of the economy between the 1950s and the 1970s was around 3.5%. In the 1980s and 1990s, it increased to 5.4% due to the shift in the composition. There was no acceleration in the growth rate of the economy in the 1990s compared to the 1980s. This rate again increased in the period after 2003 only to decline in 2008-09 due to the global financial crisis. Subsequently, the rate of growth has fluctuated wildly both due to global events and the policy conundrums in India.

    There was the taper tantrum in 2012-13 which cut short the post-global financial crisis recovery. Demonetization in November 2016 adversely impacted growth. That was followed by the structurally flawed GST. These policies administered shocks to the economy. Then came the pandemic in 2020. The economy’s quarterly growth rate had already fallen from 8% in Q4 2017-18 to 3.1% in Q4 2019-20, just before the pandemic hit.

    1980-81 marked a turning point. Prior to that, a drought would lead to a negative rate of growth in agriculture and of the economy as a whole. For instance, due to the drought in 1979-80, the economy declined by 6%. But, that was the last one. After that, a decline in agriculture has not resulted in a negative growth rate for the economy. The big drought of 1987-88 saw the economy grow at 3.4%. After 1980-81, the economy experienced a negative growth rate only during the pandemic which severely impacted the services sector, especially the contact services.

    Employment and Technology Related Issues

    Agriculture employs 45% of the workforce though its share in the economy (14%) has now become marginal. It has been undergoing mechanisation with increased use of tractors, harvester combines, etc., leading to the displacement of labour. Similar is the case in non-agriculture. So, surplus labour is stuck in agriculture leading to massive disguised unemployment.

    India is characterized by disguised unemployment and underemployment.Recent data points to growing unemployment among the educated youth. They wait for suitable work. The result is a low labour force participation rate (LFPR) in India (in the mid-40s) compared to similar other countries (60% plus).The gender dimension of unemployment and the low LFPR is worrying with women the worst sufferers.

    India’s employment data is suspect. The reason is that in the absence of unemployment allowance, people who lose work have to do some alternative work otherwise they would starve. They drive a rickshaw, push a cart, carry a head load or sell something at the roadside. This gets counted as employment even though they have only a few hours of work and are underemployed. So, India is characterized by disguised unemployment and underemployment.

    Recent data points to growing unemployment among the educated youth. They wait for suitable work. The result is a low labour force participation rate (LFPR) in India (in the mid-40s) compared to similar other countries (60% plus). It implies that in India maybe 20% of those who could work have stopped looking for work. No wonder for a few hundred low-grade government jobs, millions of young apply. The gender dimension of unemployment and the low LFPR is worrying with women the worst sufferers.
    These aspects of inadequate employment generation are linked to automation and the investment pattern in the economy. New technologies that are now being used in the modern sectors are labour displacing. For instance, earlier in big infrastructure projects like the construction of roads, one could see hundreds of people working but now big machines are used along with a few workers.

    Further, the organized sectors get most of the investment so little is left for the unorganized sector. This is especially true for agriculture. Thus, neither the organized sector nor agriculture is generating more work. Consequently, entrants to the job market are mostly forced to join the non-agriculture unorganized sector, which in a sense is the residual sector, where the wages are a fraction of the wages in the organized sector. The unorganized sector also acts as a reserve army of labour keeping organized sector wages in check

    Lack of a Living Wage

    To boost profits, the organized sector is increasingly, employing contract labour rather than permanent employees. This is true in both the public and private sectors. So, not only the workers in the unorganized sector, even the workers in the organised sector do not earn a living wage. Thus, most workers have little savings to deal with any crisis. They are unable to give their children a proper education and cannot afford proper health facilities. Most of the children drop out of school and can only do menial jobs requiring physical labour. They cannot obtain a better-paying job and will remain poor for the rest of their lives.

    The Delhi socio-economic survey of 2018 pointed to the low purchasing power of the majority of Indians. It showed that in Delhi, 90% of households spent less than Rs. 25,000 per month, and 98% spent less than Rs. 50,000 per month. Since Delhi’s per capita income is 2.5 times the all India average, deflating the Delhi figures by this factor will approximately yield all India figures. So, 98 per cent of the families would have spent less than Rs.20,000 per month, and 90 per cent less than Rs.10,000 per month. This effectively implies that 90 per cent of families were poor in 2018, if not extremely poor (implied by the poverty line). During the pandemic, many of them lost incomes and were pauperized and forced to further reduce their consumption.

    Unorganized Sector Invisibilized

    In the unorganized sector, labour is not organized as a trade union and therefore, is unable to bargain for higher wages, when prices rise. It constitutes 94% of the workforce and has little social security. No other major world economy has such a huge unorganized sector. No wonder when such a large section of the population faces a crisis in their lives, the economy declines, as witnessed during the pandemic. India’s official rate of growth fell more sharply than that of any other G20 country.

    The micro sector has 99% of the units and 97.5% of the employment of MSME and is unlike the small and medium sectors. The benefits of policies made for the MSME sector do not accrue to the micro units.

    Policymakers largely ignore the unorganized sector. The sudden implementation of the lockdown which put this sector in a deep existential crisis points to that. The micro sector has 99% of the units and 97.5% of the employment of MSME and is unlike the small and medium sectors. The benefits of policies made for the MSME sector do not accrue to the micro units.

    Invisibilization of the unorganized sector in the data is at the root of the problem. Data on this sector become available periodically, called the reference years. In between, it is assumed that this sector can be proxied by the organized sector. This could be taken to be correct when there is no shock to the economy and its parameters remain unchanged.

    Demonetization and the flawed GST administered big shocks to the economy and undermined the unorganized sector. Its link with the organized sector got disrupted. Thus, the methodology of calculating national income announced in 2015 became invalid.

    The implication is that the unorganized sector’s decline since 2016 is not captured in the data. Worse, the growth of the organized sector has been at the expense of the unorganized sector because demand shifted from the latter to the former. It suited the policymakers to continue using the faulty data since that presented a rosy picture of the economy. This also lulled them into believing that they did not need to do anything special to check the decline of the unorganized sector.

    Policy Paradigm Shift in 1947

    Growing unemployment, weak socio-economic conditions, etc., are not sudden developments. Their root lies in the policy paradigm adopted since independence.
    In 1947, the leadership, influenced by the national movement understood that people were not to blame for their problems of poverty, illiteracy and ill-health and could not resolve them on their own. So, it was accepted that in independent India these issues would be dealt with collectively. Therefore, the government was given the responsibility of tackling these issues and given a key role in the economy.

    Simultaneously, the leadership, largely belonging to the country’s elite, was enamoured of Western modernity and wanted to copy it to make India an ’advanced country’. The two paths of Western development then available were the free market and Soviet-style central planning. India adopted a mix of the two with the leading role given to the public sector. This path was chosen also for strategic reasons and access to technology which the West was reluctant to supply. But, this choice also led to a dilemma for the Indian elite. It had to ally with the Soviet Union for reasons of defence and access to technology but wanted to be like Western Europe.

    Both the chosen paths were based on a top-down approach. The assumption was that there would be a trickle down to those at the bottom. People accepted this proposition believing in the wider good of all. Resources were mobilized and investments were made in the creation of big dams and factories (called temples of modern India) that generated few jobs. They not only displaced many people trickle down was minimal. For instance, education spread but mostly benefitted the well-off.

    The Indian economy diversified and grew rapidly. An economy that for 50 years had been growing at about 0.75% grew at about 4% in the 1950s. But, the decline in the death rate led to a spurt in the rate of population growth. So, the per capita income did not show commensurate growth, and poverty persisted. Problems got magnified due to the shortage of food following the drought of 1965-67 and the Wars in 1962 and 1965. The Naxalite movement started in 1967, there was BOP crisis and high inflation in 1972-74 due to the growing energy dependence and the Yom Kippur war. Soon thereafter there was political instability and the imposition of an Emergency in 1975. The country went from crisis to crisis.

    Planning failed due to crony capitalism. The prevailing political economy enabled the business community to systematically undermine policies for their narrow ends by fueling the growth of the black economy.

    The failure of trickle-down and the cornering of the gains of development by a narrow section of people led to growing inequality and people losing faith in the development process. Different sections of the population realized that they needed a share in power to deliver to their group. Every division in society — caste, region, community, etc. — was exploited. The leadership became short-termist and indulged in competitive populism by promising immediate gains.

    The consensus on policies that existed at independence dissipated quickly. Election time promises to get votes were not fulfilled. For instance, PM Morarji Desai said that promises in the Janata Dal manifesto in 1977 were the party’s programme and not the government’s. Such undermining of accountability of the political process has undermined democracy and trust and aggravated alienation.

    Black Economy and Policy Failure

    The black economy has grown rapidly since the 1950s with political, social and economic ramifications. Even though it is at the root of the major problems confronting the country, most analysts ignore it.

    So, the black economy controls politics and to retain power it undermines accountability and weakens democracy.

    It undermines elections and strengthens the hold of vested interests on political parties. The compromised leadership of political parties is open to blackmail both by foreign interests and those in power. When in power it is willing to do the bidding of the vested interests. So, the black economy controls politics and to retain power it undermines accountability and weakens democracy.

    The black economy controls politics and corrupts it to perpetuate itself. The honest and the idealist soon are corrupted as happened with the leadership that emerged from the anti-corruption JP movement in the mid-1970s. Many of them who gained power in the 1990s was accused of corruption and even prosecuted. Proposals for state funding of elections will only provide additional funds but not help clean up politics.

    The black economy can be characterized as ’digging holes and filling them’. It results in two incomes but zero output. There is activity without productivity with investment going to waste. Consequently, the economy grows less than its potential. It has been shown that the economy has been losing 5% growth since the mid-1970s. So, if the black economy had not existed, today the economy could have been 8 times larger and each person would have been that much better off. Thus, development is set back. In 1988, PM Rajiv Gandhi lamented that out of every rupee sent only 15 paisa reaches the ground. P Chidambaram as FM said, `expenditures don’t lead to outcomes’.

    The black economy leads to the twin problem of development. First, black incomes being outside the tax net reduce resource availability to the government. If the black incomes currently estimated at above 60% of GDP could be brought into the tax net, the tax/GDP ratio could rise by 24%. This ratio is around 17% now and is one of the lowest in the world. Further, as direct tax collections rise, the regressive indirect taxes could be reduced, lowering inflation.

    India’s fiscal crisis would also get resolved. The current public sector deficit of about 14% would become a surplus of 10%. This would eliminate borrowings and reduce the massive interest payments (the largest single item in the revenue budget). It would enable an increase in allocations to public education and health to international levels and to infrastructure and employment generation.

    In brief, curbing the black economy would take care of India’s various developmental problems, whether it be lack of trickle-down, poverty, inequality, policy failure, employment generation, inflation and so on. It causes delays in decision-making and a breakdown of trust in society.

    Due to various misconceptions about the black economy, many of the steps taken to curb it have been counterproductive, like demonetization. Dozens of committees and commissions have analysed the issues and suggested hundreds of steps to tackle the problem. Many of them have been implemented, like reduction in tax rates and elimination of most controls but the size of the black economy has grown because of a lack of political will.

    Policy Paradigm Shift in 1991

    Failure of policies led to crisis after crisis in the period leading up to 1990. The blame was put on the policies themselves and not the crony capitalism and black economy that led to their failure. The policies prior to 1990 have been often labelled as socialist. Actually, the mixed economy model was designed to promote capitalism. At best the policies may be labelled as state capitalist and they succeeded in their goal. Private capital accumulated rapidly pre-1990. The Iraq crisis of 1989-90 led to India’s BOP crisis and became the trigger for a paradigm change in policies in favour of capital. The earlier more humane and less unequal path of development was discarded.

    Marketization has led to the ’marginalization of the marginals’, greater inequality and a rise in unemployment.

    In 1991, a new policy paradigm was ushered in. Namely, ’individuals are responsible for their problems and not the collective’. Under this regime, the government’s role in the economy was scaled back and individuals were expected to go to the market for resolving their problems. This may be characterized as ’marketization’. This brought about a philosophical shift in the thinking of individuals and society.

    Marketization has led to the ’marginalization of the marginals’, greater inequality and a rise in unemployment. These policies have promoted ’growth at any cost’ with the cost falling on the marginalized sections and the environment, both of which make poverty more entrenched. So, the pre-existing problems of Indian society have got aggravated in a changed form.

    Poverty is defined in terms of the ’social minimum necessary consumption’ which changes with space and time. Marketization has changed the minimum due to the promotion of consumerism and environmental decay imposing heavy health costs.
    The highly iniquitous NEP is leading to an unstable development environment. The base of growth has been getting narrower leading to periodic crises. Additionally, policy-induced challenges like demonetization, GST, pandemic and now the war in Ukraine have aggravated the situation. These social and political challenges can only grow over time as divisions in society become sharper.

    Weakness in Knowledge Generation

    Why does the obvious not happen in India? No one disagrees that poverty, illiteracy and ill health need to be eliminated. In addition to the problems due to the black economy and top-down approach, India has lagged behind in generating socially relevant knowledge to tackle its problems and make society dynamic.

    Technology has rapidly changed since the end of the Second World War. It is a moving frontier since newer technologies emerge leading to constant change and the inability of the citizens to cope with it. The advanced technology of the 1950s is intermediate or low technology today.

    Literacy needs to be redefined as the ability to absorb the current technology so as to get a decent job. Many routine jobs are likely to disappear soon, like, driver’s jobs as autonomous (self-driving) vehicles appear on the scene. Most banking is already possible through net banking and machines, like, ATMs. Banks themselves are under threat from digital currency.

    So, education is no more about the joy of learning and expanding one’s horizon. No wonder, the scientific temper is missing among a large number of the citizens.

    India’s weakness in knowledge generation is linked to the low priority given to education and R&D. Learning is based substantially on `rote learning’ which does not enable absorption of knowledge and its further development. So, education is no more about the joy of learning and expanding one’s horizon. No wonder, the scientific temper is missing among a large number of the citizens. Dogmas, misconceptions and irrationalities rule the minds of many and they are easily misled. This is politically, socially and economically a recipe for persisting backwardness.

    In spite of policy initiatives regarding education, like, the national education policy in 1968 and 1986, there is deterioration. This is because the milieu of education is all wrong. Policy is in the hands of bureaucrats, politicians or academics with bureaucratized mindsets. So, policies are mechanically framed. Like the idea that ’standards can be achieved via standardization’.

    Learning requires democratization. So, institutions need to be freed from the present feudal and bureaucratic control. Presently, institutions treat dissent as a malaise to be eliminated rather than celebrated. Courses are sought to be copied from foreign universities. JNU is told to be like Harvard or Cambridge. This is a contradiction in terms; originality cannot be copied. Courses copied from abroad tend to be based on the societal conditions there and not Indian conditions. Gandhi had said that the Indian education system is alienating and for many it still is.

    The best minds mostly go abroad and even if they return, they bring with them an alien framework not suited to India. So, as a society, we need to value ideas, prioritize education and R&D and generate socially relevant knowledge.

    Learning is given low priority because ideas are sought to be borrowed from abroad. So, the rulers have little value for institutions that could generate new ideas and inadequate funds are allotted to them. The best minds mostly go abroad and even if they return, they bring with them an alien framework not suited to India. So, as a society, we need to value ideas, prioritize education and R&D and generate socially relevant knowledge.

    Conclusion

    The growth at any cost strategy has been at the expense of the workers and the environment. This has narrowed the base of growth and led to instability in society — politically, socially and economically.

    India is a diverse society and the Indian economy is more complex than any other in the world. This has posed serious challenges to development in the last 75 years but undeniably things are not what they were. The big mistake has been to choose trickle-down policies that have not delivered to a vast number of people who live in uncivilized conditions. Poverty has changed its form and the elite imply that the poor should be grateful for what they have got. They should not focus on growing inequality, especially after 1991, when globalization entered the marketization phase which marginalizes the marginals.

    The growth at any cost strategy has been at the expense of the workers and the environment. This has narrowed the base of growth and led to instability in society — politically, socially and economically. The situation has been aggravated by the recent policy mistakes — demonetization, flawed GST and sudden lockdown. The current war in Ukraine is likely to lead to a new global order which will add to the challenges. The answer to ’why does the obvious not happen’ in India is not just economic but societal. Unless that challenge is met, portents are not bright for India at 75.

    This paper is based substantially on, `Indian Economy since Independence: Persisting Colonial Disruption’, Vision Books, 2013 and `Indian Economy’s Greatest Crisis: Impact of Coronavirus and the Road Ahead’, Penguin Random House, 2020.

    This article was published earlier in Mainstream Weekly.

    Feature Image Credit: Financial Express

    Other Images: DNA India, news18.com,  economictimes, rvcj.com

  • Valuing Folk Crop Varieties for Agroecology and Food Security

    Valuing Folk Crop Varieties for Agroecology and Food Security

    India’s Ministry of Environment, Forest and Climate Change (MoEFCC) has recently, through an office memorandum, excluded the new generation genetically modified (GM) plants – also known as genetically edited (GE) plants – from the ambit of India’s biosafety rules. The use of GMO plant seeds like Monsanto’s Bt Cotton gave promising results initially but over a longer period it has resulted in many problems leading to large number of marginal farmer suicides. Based on this bitter experience the Government of India has brought in place very stringent bio-safety rules. However, with new biotech breakthroughs like Genome Editing techniques, there is a huge pressure from corporate giants like Monsanto, Bayer etc to open up agricultural markets in major countries like India and the global south. There is a fear that American capitalism driven biotech companies may destroy indigenous bio-diversities that could result in food insecurity in the long run. India adopted ‘Green Revolution’ in a big way to increase its food production. It lead to the use of High Yield Variety seeds and mono-cultural farming in a big way. Half a century later, there is a need to review the after effects of the ‘Green Revolution’ as the country is plagued by over use of fertilisers, pesticides, water scarcity, increasing salinity, and battling loss of nutrition in farmlands due to the loss of traditional crop diversity. India was home to a vast gene pool of 110000 varieties of native rice before the Green revolution, of which less than 600 are surviving today. The use of GMO crops will lead to further destruction of Indian food diversity. Genome editing, a newer technology, should be examined carefully from a policy perspective. The European Union treats all GMO and GE as one and therefore it has a single stringent policy. Dr Debal Deb has done a pioneering work in saving many of the indigenous rice varieties and campaigns against the industrial agriculture. His is a larger and vital perspective of Agricultural ecology. The Peninsula Foundation revisits his article of 2009 to drive home the importance of preserving and enhancing India’s bio-diversity and agricultural ecology as pressures from capitalist biotech predators loom large for commercial interests.

    – TPF Editorial Team

    On May 25, 2009, Hurricane Aila hit the deltaic islands of the Sunderban of West Bengal. The estuarine water surged and destroyed the villages. Farmer’s homes were engulfed by the swollen rivers, their properties vanished with the waves, and their means of livelihood disappeared, as illustrated by the empty farm fields, suddenly turned salty. In addition, most of the ponds and bore wells became salinized.

    Since Aila’s devastation, there has been a frantic search for the salt-tolerant rice seeds created by the ancestors of the current Sunderban farmers. With agricultural modernization, these heirloom crop varieties had slipped through the farmers’ hands.

    But now, after decades of complacency, farmers and agriculture experts alike have been jolted into realizing that on the saline Sunderban soil, modern high-yield varieties are no match for the “primitive,” traditional rice varieties. But the seeds of those diverse salt-tolerant varieties are unavailable now; just one or two varieties are still surviving on the marginal farms of a few poor farmers, who now feel the luckiest. The government rice gene banks have documents to show that they have all these varieties preserved, but they cannot dole out any viable seeds to farmers in need. That is the tragedy of the centralized ex situ gene banks, which eventually serve as morgues for seeds, killed by decades of disuse.

    The only rice seed bank in eastern India that conserves salt-tolerant rice varieties in situ is Vrihi, which has distributed four varieties of salt-tolerant rice in small quantities to a dozen farmers in Sunderban. The success of these folk rice varieties on salinized farms demonstrates how folk crop genetic diversity can ensure local food security. These folk rice varieties also promote sustainable agriculture by obviating the need for all external inputs of agrochemicals.

    Folk Rice Varieties, the Best Bet

    Not only the salinization of soil in coastal farmlands but also the too-late arrival of the monsoon this year has caused seedlings of modern rice varieties to wither on all un-irrigated farms and spelled doom for marginal farmers’ food security throughout the subcontinent. Despite all the brouhaha about the much-hyped Green Revolution, South Asia’s crop production still depends heavily on the monsoon rains and too much, too late, too early, or too scanty rain causes widespread failure of modern crop varieties. Around 60 per cent of India’s agriculture is unirrigated and totally dependent on rain.

    In 2002, the monsoon failure in July resulted in a seasonal rainfall deficit of 19 percent and caused a profound loss of agricultural production with a drop of over 3 percent in India’s GDP (Challinor et al. 2006). This year’s shortfall of the monsoon rain is likely to cause production to fall 10 to 15 million tons short of the 100 million tons of total production forecast for India at the beginning of the season (Chameides 2009). This projected shortfall also represents about 3 percent of the expected global rice harvest of 430 million tons.

    In the face of such climatic vagaries, modern agricultural science strives to incorporate genes for adaptation — genes that were carefully selected by many generations of indigenous farmer-breeders centuries ago. Thousands of locally-adapted rice varieties (also called “landraces”) were created by farmer selection to withstand fluctuations in rainfall and temperature and to resist various pests and pathogens. Most of these varieties, however, have been replaced by a few modern varieties, to the detriment of food security.

    Until the advent of the Green Revolution in the 1960s, India was believed to have been home to about 110,000 rice varieties (Richharia and Govindasamy 1990), most of which have gone extinct from farm fields. Perhaps a few thousand varieties are still surviving on marginal farms, where no modern cultivar can grow. In the eastern state of West Bengal, about 5600 rice varieties were cultivated, of which 3500 varieties of rice were shipped to the International Rice Research Institute (IRRI) of the Philippines during the period from 1975 to 1983 (Deb 2005). After an extensive search over the past fourteen years for extant rice varieties in West Bengal and a few neighboring states, I was able to rescue only 610 rice landraces from marginal farms. All others–about 5000–have disappeared from farm fields. The 610 extant rice varieties are grown every year on my conservation farm, Basudha. Every year, these seeds are distributed to willing farmers from the Vrihi seed bank free of charge.

    Vrihi (meaning “rice seed” in Sanskrit) is the largest non-governmental seed repository of traditional rice varieties in eastern India. These varieties can withstand a much wider range of fluctuations in temperature and soil nutrient levels as well as water stress than any of the modern rice varieties. This year’s monsoon delay has not seriously affected the survivorship and performance of the 610 rice varieties on the experimental farm, nor did the overabundant rainfall a few years earlier.

    Circumstances of Loss

    If traditional landraces are so useful, how could the farmers afford to lose them? The dynamics are complex but understandable. When government agencies and seed companies began promoting “miracle seeds,” many farmers were lured and abandoned their heirloom varieties. Farmers saw the initial superior yields of the high input–responsive varieties under optimal conditions and copied their “successful” neighbors. Soon, an increasing number of farmers adopted the modern, “Green Revolution” (GR) seeds, and farmers not participating in the GR were dubbed backward, anti-modern, and imprudent. Seed companies, state agriculture departments, the World Bank, universities, and national and international development NGOs (non-governmental organizations) urged farmers to abandon their traditional seeds and farming practices–both the hardware and software of agriculture. After a few years of disuse, traditional seed stocks became unviable and were thereby lost. Thus, when farmers began to experience failure of the modern varieties in marginal environmental conditions, they had no other seeds to fall back on. Their only option was, and still is, to progressively increase water and agrochemical inputs to the land. In the process, the escalating cost of modern agriculture eventually bound the farmers in an ever-tightening snare of debt. After about a century of agronomists’ faith in technology to ensure food security, farming has become a risky enterprise, with ever greater debt for farmers. Over 150,000 farmers are reported to have committed suicide between 1995 and 2004 in India (Government of India 2007), and the number grew by an annual average of 10,000 until 2007 (Posani 2009).

    The government gave ample subsidies for irrigation and fertilizers to convert marginal farms into more productive farms and boosted rice production in the first decade that GR seeds were used. Soon after, however, yield curves began to decline. After 40 years of GR, the productivity of rice is declining at an alarming rate (Pingali 1994). IRRI’s own study revealed yield decreases after cultivation of the “miracle rice variety” IR8 over a 10-year period (Flinn et al 1982). Today, just to keep the land productive, rice farmers in South Asia apply over 11 times more synthetic nitrogen fertilizers and 12.8 times more phosphate fertilizers per hectare than they did in the late 1960s (FAI 2008). Cereal yield has plummeted back to the pre-GR levels, yet many farmers cannot recall that they had previously obtained more rice per unit of input than what they are currently getting. Most farmers have forgotten the average yields of the traditional varieties and tend to believe that all traditional varieties were low-yielding. They think that the modern “high-yielding” varieties must yield more because they are so named.

    In contrast, demonstration of the agronomic performance of the 610 traditional rice varieties on Basudha farm over the past 14 years has convinced farmers that many traditional varieties can out-yield any modern cultivar. Moreover, the savings in terms of water and agrochemical inputs and the records of yield stability against the vagaries of the monsoon have convinced them of the economic advantages of ecological agriculture over chemical agriculture. Gradually, an increasing number of farmers have been receiving traditional seeds from the Vrihi seed bank and exchanging them with other farmers. As of this year, more than 680 farmers have received seeds from Vrihi and are cultivating them on their farms. None of them have reverted to chemical farming or to GR varieties.

    Extraordinary Heirlooms

    Every year, farmer-researchers meticulously document the morphological and agronomic characteristics of each of the rice varieties being conserved on our research farm, Basudha. With the help of simple equipment–graph paper, rulers, measuring tape, and a bamboo microscope (Basu 2007)–the researchers document 30 descriptors of rice, including leaf length and width; plant height at maturity; leaf and internode color; flag leaf angle; color and size of awns; color, shape and size of rice seeds and decorticated grains; panicle density; seed weight; dates of flowering and maturity; presence or absence of aroma; and diverse cultural uses.

    Vrihi’s seed bank collection includes numerous unique landraces, such as those with novel pigmentation patterns and wing-like appendages on the rice hull. Perhaps the most remarkable are Jugal, the double-grain rice, and Sateen, the triple-grain rice. These characteristics have been published and copyrighted (Deb 2005) under Vrihi’s name to protect the intellectual property rights of indigenous farmers.

    A few rice varieties have unique therapeutic properties. Kabiraj-sal is believed to provide sufficient nutrition to people who cannot digest a typical protein diet. Our studies suggest that this rice contains a high amount of labile starch, a fraction of which yields important amino acids (the building blocks of proteins). The pink starch of Kelas and Bhut moori is an essential nutrient for tribal women during and after pregnancy, because the tribal people believe it heals their anemia. Preliminary studies indicate a high content of iron and folic acid in the grains of these rice varieties. Local food cultures hold Dudh-sar and Parmai-sal in high esteem because they are “good for children’s brains.” While rigorous experimental studies are required to verify such folk beliefs, the prevalent institutional mindset is to discard folk knowledge as superstitious, even before testing it– until, that is, the same properties are patented by a multinational corporation.

    Traditional farmers grow some rice varieties for their specific adaptations to the local environmental and soil conditions. Thus, Rangi, Kaya, Kelas, and Noichi are grown on rainfed dryland farms, where no irrigation facility exists. Late or scanty rainfall does not affect the yield stability of these varieties. In flood-prone districts, remarkable culm elongation is seen in Sada Jabra, Lakshmi-dighal, Banya-sal, Jal kamini, and Kumrogorh varieties, which tend to grow taller with the level of water inundating the field. The deepest water that Lakshmi-dighal can tolerate was recorded to be six meters. Getu, Matla, and Talmugur can withstand up to 30 ppt (parts per thousand) of salinity, while Harma nona is moderately saline tolerant. No modern rice variety can survive in these marginal environmental conditions. Traditional crop varieties are often recorded to have out-yielded modern varieties in marginal environmental conditions (Cleveland et al. 2000).

    Farmer-selected crop varieties are not only adapted to local soil and climatic conditions but are also fine-tuned to diverse local ecological conditions and cultural preferences. Numerous local rice landraces show marked resistance to insect pests and pathogens. Kalo nunia, Kartik-sal, and Tulsi manjari are blast-resistant. Bishnubhog and Rani kajal are known to be resistant to bacterial blight (Singh 1989). Gour-Nitai, Jashua, and Shatia seem to resist caseworm (Nymphula depunctalis) attack; stem borer (Tryporyza spp.) attack on Khudi khasa, Loha gorah, Malabati, Sada Dhepa, and Sindur mukhi varieties is seldom observed.

    Farmers’ agronomic practices, adapting to the complexity of the farm food web interactions, have also resulted in selection of certain rice varieties with distinctive characteristics, such as long awn and erect flag leaf. Peasant farmers in dry lateritic areas of West Bengal and Jharkhand show a preference for long and strong awns, which deter grazing from cattle and goats (Deb 2005). Landraces with long and erect flag leaves are preferred in many areas, because they ensure protection of grains from birds.

    Different rice varieties are grown for their distinctive aroma, color, and tastes. Some of these varieties are preferred for making crisped rice, some for puffed rice, and others for fragrant rice sweets to be prepared for special ceremonies. Blind to this diversity of local food cultures and farm ecological complexity, the agronomic modernization agenda has entailed drastic truncation of crop genetic diversity as well as homogenization of food cultures on all continents.

    Sustainable Agriculture and Crop Genetic Diversity

    Crop genetic diversity, which our ancestors enormously expanded over millennia (Doebley 2006), is our best bet for sustainable food production against stochastic changes in local climate, soil chemistry, and biotic influences. Reintroducing the traditional varietal mixtures in rice farms is a key to sustainable agriculture. A wide genetic base provides “built-in insurance” (Harlan 1992) against crop pests, pathogens, and climatic vagaries.

    Traditional crop landraces are an important component of sustainable agriculture because their long-term yield stability is superior to most modern varieties. An ample body of evidence exists to indicate that whenever there is a shortage of irrigation water or of fertilizers–due to drought, social problems, or a disruption of the supply network– “modern crops typically show a reduction in yield that is greater and covers wider areas, compared with folk varieties” (Cleveland et al. 1994). Under optimal farming conditions, some folk varieties may have lower mean yields than high-yield varieties but exhibit considerably higher mean yields in the marginal environments to which they are specifically adapted.

    All these differences are amply demonstrated on Basudha farm in a remote corner of West Bengal, India. This farm is the only farm in South Asia where over 600 rice landraces are grown every year for producing seeds. These rice varieties are grown with no agrochemicals and scant irrigation. On the same farm, over 20 other crops, including oil seeds, vegetables, and pulses, are also grown each year. To a modern, “scientifically trained” farmer as well as a professional agronomist, it’s unbelievable that over the past eight years, none of the 610 varieties at Basudha needed any pesticides–including bio-pesticides–to control rice pests and pathogens. The benefit of using varietal mixtures to control diseases and pests has been amply documented in the scientific literature (Winterer et al. 1994; Wolfe 2000; Leung et al. 2003). The secret lies in folk ecological wisdom: biological diversity enhances ecosystem persistence and resilience. Modern ecological research (Folke et al. 2004; Tilman et al. 2006; Allesina and Pascual 2008) supports this wisdom.

    If the hardware of sustainable agriculture is crop diversity, the software consists of biodiversity-enhancing farming techniques. The farming technique is the “program” of cultivation and can successfully “run” on appropriate hardware of crop genetic and species diversity. In the absence of the appropriate hardware however, the software of ecological agriculture cannot give good results, simply because the techniques evolved in an empirical base of on-farm biodiversity. Multiple cropping, the use of varietal mixtures, the creation of diverse habitat patches, and the fostering of populations of natural enemies of pests are the most certain means of enhancing agroecosystem complexity. More species and genetic diversity mean greater complexity, which in turn creates greater resilience–that is, the system’s ability to return to its original species composition and structure following environmental perturbations such as pest and disease outbreaks or drought, etc.

    Ecological Functions of On-Farm Biodiversity

    Food security and sustainability at the production level are a consequence of the agroecosystem’s resilience, which can only be maintained by using diversity on both species and crop genetic levels. Varietal mixtures are a proven method of reducing diseases and pests. Growing companion crops like pigeonpea, chickpea, rozelle, yams, Ipomea fistulosa, and hedge bushes provide alternative hosts for many herbivore insects, thereby reducing pest pressure on rice. They also provide important nutrients for the soil, while the leaves of associate crops like pigeonpea (Cajanus cajan) can suppress growth of certain grasses like Cyperus rotundus.

    Pest insects and mollusks can be effectively controlled, even eliminated, by inviting carnivorous birds and reptiles (unless they have been eliminated from the area by pesticides and industrial toxins). Erecting bamboo “T’s” or placing dead tree branches on the farm encourages a range of carnivorous birds, including the drongo, bee eaters, owls, and nightjars, to perch on them. Leaving small empty patches or puddles of water on the land creates diverse ecosystems and thus enhances biodiversity. The hoopoe, the cattle egret, the myna, and the crow pheasant love to browse for insects in these open spaces.

    Measures to retain soil moisture to prevent nutrients from leaching out are also of crucial importance. The moisturizing effect of mulching triggers certain key genes that synergistically operate to delay crop senescence and reduce disease susceptibility (Kumar et al. 2004). The combined use of green mulch and cover crops nurtures key soil ecosystem components–microbes, earthworms, ants, ground beetles, millipedes, centipedes, pseudoscorpions, glow worms, and thrips — which all contribute to soil nutrient cycling.

    Agricultural sustainability consists of long-term productivity, not short-term increase of yield. Ecological agriculture, which seeks to understand and apply ecological principles to farm ecosystems, is the future of modern agriculture. To correct the mistakes committed in the course of industrial agriculture over the past 50 years, it is imperative that the empirical agricultural knowledge of past centuries and the gigantic achievements of ancient farmer-scientists are examined and employed to reestablish connections to the components of the agroecosystem. The problems of agricultural production that arise from the disintegration of agorecosystem complexity can only be solved by restoring this complexity, not by simplifying it with technological fixes.

    Further Reading and Resources: in situ conservation and agroecology

    References

    Allesina S and Pascual M (2008). Network structure, predator-prey modules, and stability in large food webs. Theoretical Ecology 1(1):55-64.

    Basu, P (2007). Microscopes made from bamboo bring biology into focus. Nature Medicine 13(10): 1128. http://www.nature.com/nm/journal/v13/n10/pdf/nm1007-1128a.pdf.

    Challinor A, Slingo J, Turner A and Wheeler T (2006). Indian Monsoon: Contribution to the Stern Review. University of Reading. www.hm-treasury.gov.uk/d/Challinor_et_al.pdf.

    Chameides B (2009). Monsoon fails, India suffers. The Green Grok. Nicholas School of the Environment at Duke University. www.nicholas.duke.edu/thegreengrok/monsoon_india.

    Cleveland DA, Soleri D and Smith SE (1994). Do folk crop varieties have a role in sustainable agriculture? BioScience 44(11): 740–751.

    Cleveland DA, Soleri D and Smith SE (2000). A biological framework for understanding farmers’ plant breeding. Economic Botany 54(3): 377–394.

    Deb D (2005). Seeds of Tradition, Seeds of Future: Folk Rice Varieties from east India. Research Foundation for Science Technology & Ecology. New Delhi.

    Doebley J (2006). Unfallen grains: how ancient farmers turned weeds into crops. Science 312(5778): 1318–1319.

    FAI (2008). Fertiliser Statistics, Year 2007-2008. Fertilizer Association of India. New Delhi. http://www.faidelhi.org/

    Flinn JC, De Dutta SK and Labadan E (1982). An analysis of long term rice yields in a wetland soil. Field Crops Research 7(3): 201–216.

    Folke C, Carpenter S, Walker B, Scheffer M, Elmqvist T, Gunderson L and Holling CS (2004). Regime shifts, resilience and biodiversity in ecosystem management. Annual Review of Ecology, Evolution and Systematics 35: 557–581.

    Government of India (2007). Report of the Expert Group on Agricultural Indebtedness. Ministry of Agriculture. New Delhi. http://www.igidr.ac.in/pdf/publication/PP-059.pdf

    Harlan JR (1992) Crops and Man (2nd edition). , p. 148. American Society of Agronomy, Inc and Crop Science Society of America, Inc., Madison, WI.

    Kumar V, Mills DJ, Anderson JD and Mattoo AK (2004). An alternative agriculture system is defined by a distinct expression profile of select gene transcripts and proteins. PNAS 101(29): 10535–10540

    Leung H, Zhu Y, Revilla-Molina I, Fan JX, Chen H, Pangga I, Vera Cruz C and Mew TW (2003). Using genetic diversity to achieve sustainable rice disease management. Plant Disease 87(10): 1156–1169.

    Pingali PI (1994). Technological prospects for reversing the declining trend in Asia’s rice productivity. In: Agricultural Technology: Policy Issues for the International Community (Anderson JR, ed), pp. 384–401. CAB International.

    Posani B (2009). Crisis in the Countryside: Farmer suicides and the political economy of agrarian distress in India. DSI Working Paper No. 09-95. Development Studies Institute, London School of Economics and Political Science. London. http://www.lse.ac.uk/collections/DESTIN/pdf/WP95.pdf

    Richharia RH and Govindasamy S (1990). Rices of India. Academy of Development Science. Karjat.

    Note: The only reliable data are given in Richharia and Govindasamy (1990), who estimated that about 200,000 varieties existed in India until the advent of the Green Revolution. Assuming many of these folk varieties were synonymous, an estimated 110,000 varieties were in cultivation. Such astounding figures win credibility from the fact that Dr. Richharia collected 22,000 folk varieties (currently in custody of Raipur University) from Chhattisgarh alone – one of the 28 States of India. The IRRI gene bank preserves 86,330 accessions from India [FAO (2003) Genetic diversity in rice. In: Sustainable rice production for food security. International Rice Commission/ FAO. Rome. (web publication) URL: http://www.fao.org/docrep/006/y4751e/y4751e0b.htm#TopOfPage ]

    Singh RN (1989). Reaction of indigenous rice germplasm to bacterial blight. National Academy of Science Letters 12: 231-232.

    Tilman D, Reich PB and Knops JMH (2006). Biodiversity and ecosystem stability in a decade-long grassland experiment. Nature 441: 629-632.

    Winterer J, Klepetka B, Banks J and Kareiva P (1994). Strategies for minimizing the vulnerability of rice to pest epidemics. In: Rice Pest Science and Management. (Teng PS, Heong KL and Moody K, eds.), pp. 53–70. International Rice Research Institute, Manila.

    Wolfe MS (2000). Crop strength through diversity. Nature 406: 681–682.

    This article was published earlier in Independent Science News and is republished under the Creative Commons Attribution 3.0 License.

    Feature Image Credit: www.thebetterindia.com

  • Entrepot Development and Diversification: A comparative case study of Singapore and Dubai

    Entrepot Development and Diversification: A comparative case study of Singapore and Dubai

    [powerkit_button size=”lg” style=”info” block=”false” url=”https://admin.thepeninsula.org.in/wp-content/uploads/2022/03/Entrepot-Development-and-Diversification_Adithya-Subramoni-converted_compressed-1.pdf” target=”_blank” nofollow=”false”]
    Download
    [/powerkit_button]

    Introduction

    Dubai is a small city-state in the United Arab Emirates (henceforth UAE), which is renowned internationally for being a logistics hub. With hydrocarbon revenues accounting for less than 1% of its GDP, it is the most diversified sheikhdom in the region. Dubai’s development model is considered ideal and is being followed by other Gulf countries in the region. Dubai’s development approach was inspired by the Singaporean development model. Singapore developed by welcoming foreign firms to set up shop for export-oriented manufacturing and thus used its entrepot status to its advantage. The emirate followed a similar approach to development because it was historically an entrepot and housed merchants but not entrepreneurs. Thus, it followed the Singaporean model by opening its borders to foreign firms and sought to diversify its economy by building on its entrepot characteristics. However, the outcome of this approach has been different vis-à-vis Dubai and Singapore in terms of sectoral diversification which is interesting. This paper conducts a qualitative study that reviews literature about their development policies and follows the most similar systems design to explain the outcome in sectoral diversification based on the differences in inputs of their development policies. The study finds that domestic wage policies and initiatives to encourage technologically advanced firms to relocate were key factors that encouraged a service-oriented diversification of Dubai’s economy.

    While the author appreciates that Singapore developed without the support from hydrocarbon revenues that Dubai was privileged with, this study questions why Dubai, an emirate blessed with the resources and capability to direct its development narrative, witnessed a different outcome in its diversification experience. This research provides insight into two cases of late development which is not often discussed by late development theorists. This study has the potential to further encourage economic historians and development practitioners in this region’s context to think about how development approaches are affected by factors like history, geographic location, and political conditions. The paper uses primary data sources such as government publications and newspaper reports, and secondary sources such as scholarly work for this study. Following this, the methodology of the study is addressed, after key factors of Singapore’s development are highlighted, then literature regarding Dubai’s development is reviewed, and then the discussion is presented followed by the conclusion.

    [powerkit_button size=”lg” style=”info” block=”true” url=”https://admin.thepeninsula.org.in/wp-content/uploads/2022/03/Entrepot-Development-and-Diversification_Adithya-Subramoni-converted_compressed-1.pdf” target=”_blank” nofollow=”false”]
    Read the Full Paper
    [/powerkit_button]

  • UAE’s industrialization drive and the potential for Sovereign Wealth Funds to unlock value

    UAE’s industrialization drive and the potential for Sovereign Wealth Funds to unlock value

    The United Arab Emirates has renewed its commitment to the fourth industrial revolution recently with an ambitious target of increasing the industrial sector’s contribution from AED133 billion to AED300 billion (US$ 81.7 billion) by 2031. The main objectives of this ten-year strategy are to leapfrog towards knowledge-intensive industries, apply technology-intensive solutions to retrofit current industries, and push manufacturing in industries like aerospace, pharmaceuticals, medical equipment, etc. However, these objectives are not novel. While the early development plans of the emirates’ primarily focused on diversifying the economy from hydrocarbon revenues, the ultimate objective was to expand towards knowledge-intensive industries. In line with this, economic development plans as early as 1991 record the rulers’ interests in building a manufacturing-oriented economy, but the success is yet to materialize. Even in the case of the most diversified emirate – Dubai, the main drivers of the economy as of 2020 were entrepot activities like trade (26.5%), transportation and storage (12.5%), and financial services (9.7%), while manufacturing contributed to 8.8%. These statistics can be further appreciated by recollecting that from the early 1990s, development plans for Dubai were made under the assumption that the annual real growth rate in its manufacturing sector would meet 7%.[1]  As of 2020, the growth rate in manufacturing is only 0.3%. While manufacturing-oriented industrialization was to play a key role in the economy, there have been considerable challenges in realizing it. This article first briefly recalls the historical development efforts of the emirate, then discusses reasons which could have hindered the country’s trajectory towards knowledge-intensive manufacturing, and highlights a potential development instrument the country can utilize to realize its objectives in the present day.

    Federal Structure and overcoming the Inequalities

    Being a federation every emirate was offered autonomy which retained the control of resources of the respective emirates’ within respective ruling families. This resulted in vast inequalities amidst emirates with Abu Dhabi and Dubai becoming relatively well off compared to others. The remaining emirates were dependent on the budget provisions from oil-rich Abu Dhabi to maintain the social contract over their respective emirates. This internal dynamic resulted in different approaches being taken for economic development in the country. To briefly summarize some of them – Dubai invested in infrastructure to improve its entrepot facilities and industrialize in sectors associated with hydrocarbon resources, Abu Dhabi began focusing on renewable energy and clean technology from the early 2000s,  Ras al-Khaimah benefitted from its low-cost production environment (up to 25-50% lower than in other emirates) to become the country’s manufacturing base, and Fujairah developed a storage and bunkering expertise due to its geographical location beyond the chokepoint of the Strait of Hormuz.[2] The developmental push from the emirates created a boom mainly in industries associated with hydro-carbon, real-estate, logistics, and finance. Although official data on sector-wise contribution to GDP remain unpublished, World Bank data confirms that as of 2019 about 16% of the UAE’s GDP is accredited to hydrocarbon sources. It also confirms that as of 2019, manufacturing value-added as a percentage of GDP stood at 8.7%.

    In the context of UAE, the viability of proceeding with labour-intensive industries as a starting point was low as the country has a small Emirati population. Second, while most late developing countries have resorted to wage suppression to make production costs competitive, the UAE is restricted from doing so owing to the social contract it shares with its citizens

    Despite the autonomy every emirate has enjoyed, the overarching approach the country has used for economic development is to invite foreign firms to the country by providing business-friendly infrastructure and environment.[3]For the emirate of Dubai, which was most successful in diversification, Singapore’s development model was an inspiration for implementing policies promoting business-friendly infrastructure and environment.[4] Among potential factors that explain the challenge in the uptake of knowledge-intensive manufacturing in the UAE, this article focuses on two – First, the inherent characteristic of firm relocation, and second, the existence of a twin labour market in the country with high wage levels. Helleiner argued that it is easier to scale to knowledge-intensive industries when labour-intensive production processes exist locally, this way, production activities can upgrade vertically. The logic was that direct relocation of knowledge-intensive functions of industries would imply high costs to the firm. His thesis was based on the development of the Asian tigers whose development process benefitted from the vertical up-gradation of industrial activity. In the context of UAE, the viability of proceeding with labour-intensive industries as a starting point was low as the country has a small Emirati population. Second, while most late developing countries have resorted to wage suppression to make production costs competitive, the UAE is restricted from doing so owing to the social contract it shares with its citizens. UAE nationals are instead offered much better employment packages in the public sector which deters their participation in the private sector.[5] As a result, the private sector across all skill levels is significantly dependent on expatriate labour. In addition to this, foreign talents are paid twice as much as their home countries across all skill levels. Tong and Al Awad demonstrate that this is true not only for low-skilled and semi-skilled jobs but also for high-skilled jobs by comparing the average wages of high-skilled expatriates from the US and the UK. They compare their wage levels at home and in Dubai, control for purchasing power parities, and find that the salaries are twice as that in their home countries. Competition for knowledge-intensive industries has predominantly arisen from the global North and as income levels in the UAE are twice as much as that in developed countries, there is an inherent risk on the price competitiveness of products on a global scale.

    Development model, SWF, and Top-down Approach

    A difference in the UAE’s late development model relative to others in the category is that while the latter was challenged in capital accumulation, it was easily accrued for the UAE. The difficulty for the UAE lies in using accumulated capital to break the dependency. Thus, the way forward for the UAE lies in a radical rethinking of its development model. Where vertical integration by first relocating labour-intensive industries demonstrates a bottom-up approach to development, the UAE is better positioned to approach development in a top-down model of vertical integration having accumulated capital. Although public sector investment and involvement in the economy is high, there exists scope to increase the synergies between industry-leading companies and local producers through the public sector. In this case, a policy instrument with the potential to push economic development is the state’s Sovereign Wealth Funds (SWFs).

    The channelling of SWFs as a development policy instrument provides an opportunity for greater collaboration between international industry leaders and local businesses. Investing in the economic diversification of the country has been an important objective for the state’s SWFs. Some noticeable instances where the SWFs have built linkages between international companies and local businesses have been in the aerospace sector.[6] For instance, Mubadala entered into strategic partnerships with Airbus and Boeing in 2008 and 2009 respectively and launched Strata Manufacturing as a wholly-owned subsidiary of Mubadala in 2009. Soon after Strata Manufacturing was launched, the company concluded agreements with both Airbus and Boeing to manufacture aircraft parts at its aerostructures manufacturing facility in Al-Ain. This further continued when Strata Manufacturing received a ten-year contract from Boeing for the manufacture of Boeing 777’s empennage ribs and vertical fin rib for Boeing’s 787 Dreamliner. This development model is novel because it demonstrates how embedded autonomy, a key feature in the East Asian development model, can be replicated while collaborating with established international companies for economic development at home. Sovereign Wealth Funds as an institutional investor demonstrate how the state can be at the forefront of national development efforts from a transnational level.

    This top-down model of economic development through SWFs is a novel use of the investment vehicle as a policy instrument. It allows the state to direct development from a transnational level, which is an important operational condition for developmental states in an era of globalization

    An important lesson from late developers in East Asia and Southeast Asia is that state-directed capitalism is important for economic development. This top-down model of economic development through SWFs is a novel use of the investment vehicle as a policy instrument. It allows the state to direct development from a transnational level, which is an important operational condition for developmental states in an era of globalization. Although the UAE has demonstrated the use of this instrument in some cases, there is great potential to further drive economic development towards the fourth industrial revolution through SWFs. There will likely be more linkages built between local businesses and international companies through SWFs as the UAE moves forward to a knowledge-intensive economy. As the article highlighted above, there will be challenges moving forward in ensuring price competitiveness at a global level when operating in a labour market with price distortions. To this end, the challenge remains in finding innovative financing mechanisms by state investors in the short run and for policymakers to introduce suitable policies for correcting the price distortions in the long run. This ongoing effort in the UAE requires a closer examination from researchers, development practitioners, and policymakers as it is a unique development model and has the potential to deliver promising developmental lessons.

     

    Notes

    [1] Euromoney; London”, Periodical, (1997), World Economic Analysis, United Arab Emirates Document no.:198889294, ProQuest One Business.

    [2] Ulrichsen, Kristian Coates, The United Arab Emirates: Power, Politics And Policy-Making, p.87-129, Routledge, 2017.

    [3] Davidson, Christopher. The United Arab Emirates: A Study In Survival. 1st ed. Lynne Rienner Publishers, 2005.

    [4] Sampler, Jeffrey, and Saeb Eigner. Sand To Silicon. Dubai, UAE: Motivate Publ., 2008.

     

    [5] Davidson, Christopher. The United Arab Emirates: A Study In Survival. 1st ed. Lynne Rienner Publishers, 2005.

     

    [6] Ulrichsen, Kristian Coates, The United Arab Emirates: Power, Politics And Policy-Making, p.103-108, Routledge, 2017.

     

    Feature Image Credit: Asharq AL-awsat

  • Drought or Floods? : Tamil Nadu Needs An Integrated Water Management Policy

    Drought or Floods? : Tamil Nadu Needs An Integrated Water Management Policy

    Tamil Nadu not only requires a more sustainable and scientific approach to water management but an integrated development model that no longer separates the human environment, basic needs, ecological justice and public accountability   

    Every time we are faced with drought or floods, we all complain about the absence of a more sustainable water management policy in the state.  Politicians and the political parties blame each other and present competing narratives of their achievements when people are caught in deep crises of survival either due to bad drought or worse floods.  The bureaucrats, police, public charity and the brave hearts work round the clock while the government monitors the rescue, relief and resettlement of the victims though patterns and intensity of engagements differ between the floods and drought situation.

    We then return to our normal selves when the floods recede and the victims of extreme drought disappear from our sight.  What happened to the excessive water during the floods and the thirsty/hungry people in drought situations who seemed to have gone out of sight? It is important to argue for a more sustainable water management policy and at the same time explore the challenges in developing and executing such a policy. We do not have an open and democratic media/socio-political environment to discuss and debate between the ministers, bureaucrats, experts, non-state actors and creative members of the civil society beyond the blame game. A curious gap is that there are no solutions emerging while causes are either understated or overemphasized by different experts and groups depending on their professional background and personal worldview.

     

    The government appears to be in a catch-22 situation over urbanization, industrialization, population growth, migrations, and the urban slums.  The impact of rural poverty, state of agriculture, unemployment, migrations as well as the level of the rural-urban divide has not been studied adequately even in a developed state like Tamil Nadu.  But there is no escape from the truth that the government is the major violator and path setter for more violations of environmental principles and laws of nature by the greedy builders and corporate interests.

    It may be relevant to recall here the Chennai floods in 2015 and the worse water shortage in less than four years time in 2019.  Besides rapid industrialization and massive urbanization issues, Chennai is also faced with the challenges of climate change which is altering the weather patterns resulting in deadly floods and prolonged droughts.  Given the nature of challenges, there is a need to move beyond developing an appropriate water management policy and strengthening climate change resilience towards addressing core concerns of our democracy such as the absence of public accountability and rights without responsibilities.

     

    Chennai’s water bodies have shrunk at an alarming rate without much public attention. Every lake that has disappeared in Chennai had been part of our ecological system. Pallikaranai marshland has unfortunately been forced to yield land to hospitals, government buildings and educational institutions including (paradoxically) the Indian Institute of Technology – Madras (IIT-M) and National Institute of Ocean Technology.

    Chennai’s water bodies have shrunk at an alarming rate without much public attention. Every lake that has disappeared in Chennai had been part of our ecological system. Pallikaranai marshland has unfortunately been forced to yield land to hospitals, government buildings and educational institutions including (paradoxically) the Indian Institute of Technology – Madras (IIT-M) and National Institute of Ocean Technology. Today, Ennore creek faces a much bigger threat than ever before.  It is time we discuss more openly about our public policy, political culture, and abuse of social power, corruption in public life and the lack of environmental ethics. In intrinsic terms, this reveals about a political society without a conscience for environmental justice which forms the basis of social justice, distributional justice and good governance.

    The percentage culture and corruption prevalent among the politicians cutting across the party and political loyalties and the nexus between the politicians, bureaucrats and the business interests are one of the most unfortunate but successful stories of decentralization of public administration in Tamil Nadu.  If these arguments appear unreasonable, then how do we explain the rise and role of sand mafias, stone quarry contractors, timber lobbies, water industry and corporate bodies engaged in mineral extraction and exploitation?  These are not unspecified and general observations because of the fact that these individuals and the corporates control the lakes, rivers, forests, seashores, land access and ultimately the policy process within the government. Although slum dwellers, settlers along the river banks and seashores as well as forest people appear as main violators of the laws of State, yet the truth is vastly different.  The Palar River in the north, Cauvery River flowing through the west to east and the Tamiraparani River in the south of Tamil Nadu bear testimonies to this brutal reality of sand quarrying and criminal nexus between politicians, bureaucrats, industrialists and the sand mafia in Tamil Nadu.

    We need to question our materialistic approach to progress in the name of growth and development.  It is not adequate to boast about our progress in social justice and the inclusive model of development without environmental justice and responsibility to our future generations.  Tamil Nadu not only requires a more sustainable and scientific approach to water management but an integrated development model that no longer separates the human environment, basic needs, ecological justice and public accountability.

  • Distress Migration: A case study of KBK districts in Odisha

    Distress Migration: A case study of KBK districts in Odisha

    The former districts of Koraput, Balangir and Kalahandi, also known as KBK districts, were reorganised into 8 districts of Koraput, Malkangiri, Nabarangpur, Rayagada, Balangir, Subarnapur, Kalahandi and Nuapada in 1992. These districts form the South-West part of Odisha comprising the great Deccan Plateau and the Eastern Ghats. These highland districts highly rich in mineral resources, flora and fauna remain as one of the most backward regions in Odisha

    Among the different forms of migration, distressed migrants remain the most impoverished and unrecognised. These migrants form the lowest strata of the society; disadvantaged by caste, poverty and structural inequalities. In Odisha, the underdeveloped region of KBK is one among the main sources of distressed migrants. They move to cities in search of employment and better wages, while in cities they are even more disadvantaged due to social, economic and linguistic barriers. Administrative and political apathy over their issues has only enhanced their distress.

    This paper attempts to address three questions:

    1. What are the characteristics of distressed migrants in KBK district, Odisha?
    2. What are the existing policies of the state to curb this form of migration?
    3. What form of government intervention is required to address this distress?

    The analysis is carried out through a review of published articles, government reports, e-books and newspaper reports.

    Defining distress migration

    Migration is a multifaceted concept driven by diverse factors. Migration can be internal or international, voluntary or involuntary, temporary or permanent. Depending on the pattern and choice of migration, each migratory trend could be characterised into different forms. Distress migration is one such form of migration.

    Involuntary migration is often associated with displacement out of conflict, environmental distress, climatic change etc. That is any sudden threat or event forces people to migrate. However, involuntary migration may also arise out of socio-economic factors such as poverty, food insecurity, lack of employment opportunities, unequal distribution of resources etc. This component of involuntary migration is addressed by the concept of distress migration (Avis, 2017).

    To understand distressed rural-urban migration in India, the broad definition used by Mander and Sahgal (2010) in their analysis of rural-urban migration in Delhi can be employed. They have discussed distress migration as:

    “Such movement from one’s usual place of residence which is undertaken in conditions where the individual and/or the family perceive that there are no options open to them to survive with dignity, except to migrate. Such distress is usually associated with extreme paucity of alternate economic options, and natural calamities such as floods and drought. But there may also be acute forms of social distress which also spur migration, such as fear of violence and discrimination which is embedded in patriarchy, caste discrimination, and ethnic and religious communal violence” ( Mander and Sahgal, 2010)

    In brief, the definition states that distress migration is caused by an array of issues. Environmental disasters, economic deprivation, gender or social oppression, lack of alternate employment opportunities and inability to survive with dignity are mentioned as the main drivers of distress migration (Avis, 2017).

    Thus, distress migration is a form of temporary migration driven by environmental and socio-economic factors and not based on an informed or voluntary choice.

    Profile of KBK districts

    The former districts of Koraput, Balangir and Kalahandi, also known as the KBK districts, were reorganised into 8 districts of Koraput, Malkangiri, Nabarangpur, Rayagada, Balangir, Subarnapur, Kalahandi and Nuapada in 1992. These districts form the South-West part of Odisha comprising the great Deccan Plateau and the Eastern Ghats. These highland districts highly rich in mineral resources, flora and fauna remain as one of the most backward regions in Odisha. The region is termed backward on account of rural backwardness, high poverty rates, low literacy rates, underdeveloped agriculture and poor development of infrastructure and transportation (Directorate of Economics and Statistics, 2021).

    The districts are home to primitive tribal communities such as Gonds, Koyas, Kotias etc. dependent on forest produce and subsistence agriculture for a living. KBK region registered a workforce participation rate of 48.06 % in the 2011 census. There was a significant occupation change noticed from the 2011 census.  The region witnessed a fall in cultivators from 33% in 2001 to 26.7% in 2011. However, the fall in cultivators was compensated with an increase in agricultural labourers from 44.24 % in 2001 to 48.87% in 2011. Employment in household industries also witnessed a downfall between the period of 2001 to 2011 (Sethy, 2020).

    The rise in agricultural labourers has a negative impact on the communities. As agriculture is underdeveloped owing to the arid nature of the region, crop failure, extreme calamities, low net irrigated area and falling government expenditure, these workers are pushed into abject poverty. In search of alternate employment options, these workers migrate to other areas of employment in rural or urban pockets. Such a form of seasonal migration during the lean period in agriculture is a predominant phenomenon in these districts. Their dependence on non-timber forest produce is hindered by the rapid deterioration and deforestation of forests for development projects and mining.

    Characteristics of distressed migrants in KBK region

    1. Who Are These Distressed Migrants?

    In the KBK region, distress migration has been a popular coping strategy during lean periods of agriculture. And this strategy is majorly adapted by disadvantaged and marginalised sections of the region. They are disadvantaged by caste, chronic poverty, landlessness, low levels of literacy and skills, increased dependence on forest and agriculture and debt-ridden (Meher, 2017; Mishra D.K., 2011; Tripathy, 2015, 2021).

    1. Why Do They Migrate

    Distressed migration in the region is induced by many interlinked factors. One such factor is that the region is highly under-developed in terms of social and economic infrastructure. Such under-development puts the communities at a disadvantage with low levels of literacy and skills. Their dependence on agriculture and forest produce for livelihood rises. However, agriculture is under-developed and forests are subjected to high levels of deforestation. With low levels of income, crop failure and non-availability of alternate employment opportunities, the communities are subjected to absolute levels of poverty, food and employment insecurities (Kujur, 2019).

    Landlessness is also identified as one significant push factor. As the region is highly dominated by tribal communities, they are more attached to and dependent on the forest cover. Globalisation and industrialisation resulted in deforestation and encroachment of farmlands for industrial and mining purposes. Eventually, a major proportion of land remains with a smaller group of wealthy people (Mishra D.K., 2011).   Relocation and involuntary displacement also result in the loss of their livelihood that is dependent on the local environment (Jaysawal & Saha, 2016).

    With falling income, people approach local moneylenders to meet their basic sustenance needs. With low incomes from agriculture and forest produce, families approach these informal creditors to meet emergency needs like marriage, birth and death rituals or medical treatment as well as to meet basic consumption needs with the expectation of cash flow from labour contractors during the lean season. Moneylenders exploit them by charging higher interest rates. Thus, the non-availability of formal credit facilities pushes them into a debt trap and further to adopt migration (KARMI, 2014; Mishra D.K., 2016).

    The region is also subject to extreme calamities and drought. Small and marginal farmers, poor in income and land, choose to migrate as they are unable to cope with the regular droughts and climate change. A study on historical analysis of the effect of climate on migration in Western Odisha mentions that the migratory trend saw a rise after the mega drought in 1965. Up until then, large-scale migration from the region was not a phenomenon (Panda, 2017).

     

    1. Channel of Migration

    Sardars provide an advance amount and in exchange, the debtor or any family member agrees to work for them for a stipulated period, usually six months. Hence, there exists a form of debt bondage. Large-scale family migration through this system is seen in the KBK region. The major stream of such bonded labour migration is witnessed towards brick kilns in Andhra Pradesh

    In the region, seasonal migration occurs through the channels of agents, locally known as Sardars, on a contractual basis. This form of migration is known as Dadan labour migration. The poor migrant labourers are known as Dadan and they are recruited by Sardars, who are usually local people who are familiar with residents in the region (KARMI, 2014). During the period of Nukhai, they go around the villages and contact prospective labourers. These Sardars are the intermediary between the employer and the migrant labourer. Sardars provide an advance amount and in exchange, the debtor or any family member agrees to work for them for a stipulated period, usually six months. Hence, there exists a form of debt bondage. Large-scale family migration through this system is seen in the KBK region. The major stream of such bonded labour migration is witnessed towards brick kilns in Andhra Pradesh. They are also a major source of labour in the areas of construction, handlooms and other forms of informal sector work across South India (Daniels, 2014). The problems they face in the destination are manifold. They are subjected to poor working conditions, poor housing and sanitation facilities and limited access to education and health facilities. They are recognised as cheap labour with limited bargaining power owing to their social, cultural and linguistic exclusion in the destination state. Upon entering the contract their freedom to move and freedom to express is denied (Acharya, 2020).

    1. Pull Factors to Migrate

    The hope of availability of better job opportunities and wages is the main pull factor. However, upon the analysis of the nature of migration, push factors have a higher weightage in inducing such distress migration. Migration to brick kilns and other informal sectors from the KBK region can be termed as distress migration as in this case, distress is caused mainly by socioeconomic factors. It is not an informed or voluntary choice. Debt migration remains the only coping strategy that they could adopt.

    Government intervention to curb such distress

    1. Policies Addressing Debt-Bondage Migration:

    The first attempt of the state government to address Dadan migration or debt migration is the enactment of the Dadan Labour (Control and Regulation) Act (ORLA) in 1975. The act had provisions for the registration of labourers and agents, ensuring compliance of minimum wages and favourable working conditions and appointing inspection officers and dispute redressal committees (Daniels, 2014).  However, the act remained on paper and no evidence of enactment was published until it was repealed in 1979 upon the enactment of the Interstate Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 (Nanda, 2017).

    The ISMW act has been criticised to be inadequate and failing to regulate and facilitate safe migration. According to the act, only those interstate migrant workmen who are recruited by licensed agents come under the ambit of the act. However, most agents involved in Dadan migration are not licensed and hence, these workers cannot avail of any of the provisions of the act (Singh, 2020). Though registration of labour contractors is mandatory in the origin state, there is no information about the names of these contractors and hence, further monitoring of the migration process is avoided (NCABL, 2016). Lack of adequate enforcement, under-staffing and poor infrastructure are identified as the reasons for poor implementation of the act in the state (Daniels, 2014).

    A positive attempt against distress migration was the Memorandum of Undertaking (MoU) initiated between the labour department of Odisha and Andhra Pradesh to ensure labour welfare measures of migrant workers in Brick Kilns. After the MoU, the state of undivided Andhra Pradesh took up various progressive measures in education, health, housing and PDS for migrant workers in Brick Kilns. ILO necessitated the need for states to enter into inter-state MoUs to effectively address the bonded labour migration. However, no further MoU was signed with other states like Tamil Nadu, Chhattisgarh etc. which are also among the major host states for migrants from the region (NCABL, 2016).

    The Bonded Labour System (Abolition) Act enacted in 1976 governs the provisions for identification, rescue and rehabilitation of bonded labourers across the country. The act has its loopholes in implementation. There is no information on whether vigilance committees have been set up in every district or whether the surveys have been periodically conducted or to what extent the act has been functioning in the state (Post News Network, 2019). The centrally sponsored scheme for Rehabilitation of Bonded Labour also has its setbacks. There have been reported cases of delay and denial of financial aid by district officials ( Mishra .S., 2016). In 2016, with restructuring and revamping of the Rehabilitation scheme, rescued workers could only avail the full amount of financial aid with the prosecution of the accused employers. With no database on the employer, the rates of prosecution have been low and the rescued bonded labour do not receive their funds (NACBL, 2016)

    1.  Ensuring Accessibility of Health Facilities in Destination

    The Rashtriya Swasthya Bima Yojana or RSBY launched by the central government in 2008 provides health insurance to BPL families. The scheme incorporates provisions to split smart cards so those migrant workers could avail health insurance in destination states. After signing of the MoU between Andhra Pradesh and Odisha, the two states took steps to spreading awareness among the migrant workers about how to use the smart cards (Inter-State Migrant Workman Act (ISMW), Labour Directorate, n.d.)

    1. Ensuring Education of Migrant Workers Children

    The state of Odisha has established seasonal hostels to ensure the education of children of migrant workers.  The children are enrolled in seasonal hostels during October-June, that is until their parents return home (Odisha Primary Education Programme Authority, n.d.).  The state has ensured the education of migrant children at their destination state by sending Odiya textbooks and Odiya teachers to residential schools in Andhra Pradesh (Inter-State Migrant Workman Act (ISMW), Labour Directorate, n.d.).

    1. Alternate Employment Opportunities: MGNREGA

    Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was introduced in 2006 to provide guaranteed employment to rural poor with the objective of uplifting them from poverty and restricting distress migration.  A study analysing the performance of MGNREGA through secondary sources of data suggests that based on physical criteria of 100 Days of Wage Employment, Person-days generated, ST and Women person-days and financial performance in terms of total expenditure, total wages, average cost and average wage rate per day person, the performance of MGNREGA in KBK districts is better compared to Non- KBK districts.  But the region is lagging in rural employability criteria based on average days of employment provided per household and job cards issued (Sahoo et al., 2018).  Labour in the region is not interested to work under MGNREGA due to its dismal implementation in the state. Workers complain about the delay in receiving payments and instances of the creation of non-existent workers’ names among MGNREGA’s beneficiaries (KARMI, 2014).  Uncertain and low wages make these labourers favour migration to Brick Kilns in hope of better wages (Deep, 2018).

    1. Development Policies in KBK Region

    The KBK region has a high incidence of poverty owing to regional disparities in development and social exclusion based on caste. The main initiatives implemented by the state government for the upliftment of the KBK region are the Special Area Development Programme, Revised Long Term Action Plan (RLTAP), Biju KBK Plan, Backward Regions Grants Fund, Gopabandhu Gramin Yojana (GGY), Special Central Assistance (SCA) for tribal sub-plan (TSP) areas, Western Odisha Development Council (WODC) and Grants under Article 275(1) of the Constitution. Development projects to reduce poverty and regional disparities are obstructed by economic, social and institutional factors (Mishra, 2020).

     

    The state of Odisha has done positive interventions in the education of migrant children and health facilities of the migrant population. However, the distress migration is still prevalent owing to the social and economic exclusion and debt bondage situations in the region. Land grabbing in the name of development left the tribal communities poor and in distress. Structural inequalities induced by caste discrimination are enhanced with such landlessness.

     

     

     

    Policy Recommendations

    The state of Odisha has done positive interventions in the education of migrant children and health facilities of the migrant population. However, the distress migration is still prevalent owing to the social and economic exclusion and debt bondage situations in the region. Several initiatives and schemes have been enacted to address distress migration; however, their failure in reducing distress can be linked to dismal governance, poor implementation and misappropriation of schemes.

    The state must ensure migration to be safe and a viable coping strategy. From this study it is suggested the state of Odisha follow a multipronged approach to address the distress.

    Origin state (Odisha) interventions

    •         Short Term Interventions:
    1. The system of debt bondage should be completely abolished by the proper implementation of legislation. Different loopholes in implementation such as the delay in the release of funds, prosecution of accused and identification and registration of middlemen should be addressed. Apart from the financial aid, the state should intervene in providing a comprehensive livelihood plan for the rescued labourers. Abolishing the bonded labour system is essential to reduce distress and make migration safe.
    2. Informal sources of credit should be eliminated and formal credit and microfinance facilities should be made available. Such facilities would reduce the exploitation and prevent the creation of absurd debt. Formal credit provides opportunities for small and marginal farmers to indulge in productive investments. This enables them to cope with extreme climatic changes.
    3. Land grabbing in the name of development left the tribal communities poor and in distress. Structural inequalities induced by caste discrimination are enhanced with such landlessness. The provision of land ownership enables the communities to enjoy land-based benefits which further supports them to sustain their livelihood. Ownership of land also provides the indigenous community with a sense of social and economic significance.
    •         Long term interventions
    1. The state should engage in enhancing the skills of the people in the region. Vocational skill training and development schemes can be introduced. This could expand the opportunities available for employment and distribute labour across all the economic sectors.
    2. Rural development should be given higher priority. The state of Odisha has already initiated many schemes for the development of the KBK region. However, the state should study the economic and social factors that stagnate the process of development in the region. Chronic poverty, poor infrastructural and rural connectivity and dismal education and health facilities are some of the important areas that require attention.

    Host state intervention

    1.   The host state needs to create a database of migrants entering their state. A statistically significant database on migrants solves a huge array of issues faced by the migrant in the destination state. A comprehensive database helps in identifying and recognising migrants. It also allows for understanding the different characteristics of migrants and the sectors in which they are employed. This would be beneficial for monitoring and ensuring safe and favourable working conditions. A database also helps in ensuring the availability and accessibility of social security and entitlements in host states.

     

    1.   Migrant labour is as important to the destination state as it is to the origin state. Both origin and host state should cooperate towards making migration a viable livelihood strategy.

    Another important area where both the origin and host state should intervene together is creating awareness among workers about the existing provisions and rights available to them. Access to the same should be made easy.

    Conclusion

    The highly backward districts of the KBK region remain a major source of distressed migrants. Years of state initiative in reducing distress have had negligible impact. The area remains underdeveloped and migration is the only viable choice of employment. Migration can only be a viable coping strategy for seasonal migrants when the channel of migration is made legal and safe. The major drawback in any initiative attempted to resolve distress is the poor implementation. Administrative apathy, corruption and misappropriation of schemes have stagnated the progress of every initiative.

     

    References

    1. Acharya, A. K. (2020). Caste-based migration and exposure to abuse and exploitation: Dadan labour migration in India. Contemporary Social Science, 1-13.
    2. Avis, W. R. (2017). Scoping study on defining and measuring distress migration.
    3. Bhatta Mishra, R. (2020). Distress migration and employment in indigenous Odisha, India: Evidence from migrant-sending households. World Development, 136, 105047.
    4. Daniels, U. (2014). Analytical review of the market, state and civil society response to seasonal migration from Odisha. Studies, stories and a canvas seasonal labour migration and migrant workers from Odisha, 106-115.
    5. Deep, S. S. Seasonal Migration and Exclusion: Educational Experiences of children in Brick Kilns. Ideas, Peoples and Inclusive Education in India. National Coalition for Education, India. 2018.
    6. Directorate of Economics and Statistics (2021). Odisha Economic Survey 2020-21. Planning and Convergence Department. Government of Odisha. http://www.desOdisha.nic.in/pdf/Odisha%20Economic%20Survey%202020-21-1.pdf
    7. Giri, J. (2009). Migration in Koraput: “In Search of a Less Grim Set of Possibilities” A Study in Four Blocks of tribal-dominated Koraput District, Odisha. Society for Promoting Rural Education and Development, Odisha, 1.
    8. Inter-State Migrant Workman Act (ISMW) | Labour Directorate. (n.d.). Labour Directorate, Government of Odisha. Retrieved August 10, 2021, from https://labdirodisha.gov.in/?q=node/63%27%3B.
    9. Jaysawal, N., & Saha, S. (2018). Impact of displacement on livelihood: a case study of Odisha. Community Development Journal, 53(1), 136-154.j
    10. Jena, M. (2018, July 21). Distress migration: land ownership can put a break. The Pioneer. https://www.dailypioneer.com/2018/state-editions/distress-migration-land-ownership-can-put-a-break.html
    11. KARMI. (2014). Migration Study Report of Golamunda Block of Kalahandi District of Odisha. Pp.13. Kalahandi Organisation of AgKriculture and Rural Marketing Initiative (KARMI), Kalahandi Odisha.
    12. Kujur, R. (2019). Underdevelopment and patterns of labour migration: a reflection from Bolangir district, Odisha. research journal of social sciences, 10(1).
    13. Mahapatra, S. K., & Patra, C. (2020). Effect of migration on agricultural growth & development of KBK District of Odisha: A statistical assessment. Journal of Pharmacognosy and Phytochemistry, Sp, 9(2), 162-167.
    14. Mander, H., & Sahgal, G. (2010). Internal migration in India: distress and opportunities, a study of internal migrants to vulnerable occupations in Delhi.
    15. Meher, S. K. (2017). Distress seasonal migration in rural Odisha A case study of Nuapada District.
    16. Mishra, D. K. (2011, April). Behind dispossession: State, land grabbing and agrarian change in rural Odisha. In International conference on global land grabbing(Vol. 6, No. 8).
    17. Mishra, D. K. (2016). Seasonal migration from Odisha: a view from the field. Internal migration in contemporary India, 263-290.
    18. Mishra, S. (2016, January 13). Rescued migrant workers get raw deal from Govt. The Pioneer. https://www.dailypioneer.com/2016/state-editions/rescued-migrant-workers-get-raw-deal-from-govt.html
    19. Mishra, S. (2020). Regional Disparities in Odisha–A Study of the Undivided “Kbk” Districts. Research Journal of Humanities and Social Sciences, 11(4), 261-266.
    20. Nanda, S. K. (2017). Labour scenario in Odisha. Odisha Review, 73(10), 20-25.
    21. NCABL. (2016). Joint Stakeholders’ Report on Situation of Bonded Labour in India for Submission to United Nations Universal Periodic Review III. NATIONAL COALITION FOR ABOLITION OF BONDED LABOUR (NCABL), Bhubaneswar Odisha.
    22. Panda, A. (2017). Climate change, drought and vulnerability: A historical narrative approach to migration from Western Odisha, India. In Climate Change, Vulnerability and Migration(pp. 193-211). Routledge India.
    23. Post News Network. (2019, April 30). Elimination of bonded labour calls for cohesive action plan. Odisha News, Odisha Latest News, Odisha Daily – OdishaPOST. https://www.Odishapost.com/elimination-of-bonded-labour-calls-for-cohesive-action-plan/
    24. Sahoo, M., Pradhan, L., & Mishra, S. (2018). MGNREGA and Labour Employability-A Comparative Analysis of KBK and Non-KBK Regions of Odisha, India. Indian Journal of Economics and Development, 6(9), 1-8.
    25. Sethy, P. (2020). Changing Occupational Structure of Workers in KBK Districts of Odisha. Center for Development Economic, 6(06), 17-28.
    26. Singh, V. K. (2020, April 22). Opinion | The ‘nowhere people’ of COVID-19 need better legal safeguards. The Hindu. https://www.thehindu.com/news/national/other-states/the-nowhere-people-of-covid-19-need-better-legal-safeguards/article31400344.ece
    27. Tripathy, S. N. (2015). Evaluating the role of micro-finance in mitigating the problems of distress out-migrants: A study in KBK districts of Odisha. The Micro Finance Review, Journal of the Centre for Micro Finance Research.
    28. Tripathy, S. N. (2021). Distress Migration Among Ultra-poor Households in Western Odisha. Journal of Land and Rural Studies, 23210249211001975.

     

    Feature Image: Tata Trusts

  • 2021-22 Q1 GDP Data Overestimates: Economic Shocks Question Methodology

    2021-22 Q1 GDP Data Overestimates: Economic Shocks Question Methodology

    2021-22 Q1 GDP Data Overestimates: Economic Shocks Question Methodology: The demonetisation shock impacted the unorganised sector far more adversely than it did the organised sector

    There are methodological errors in estimating annual and quarterly GDP data, especially when there is a shock to the economy, by using projections from the previous year, dividing the annual estimates into the four quarters and using production targets as if they have been achieved, explains Professor Arun Kumar

     

    The Reserve Bank of India (RBI) has maintained its growth projection for 2021-22 at 9.5% while the World Bank has retained it at 8.3%. These are based on the union government’s growth estimate of 20.1% for first quarter of 2021-22—an unprecedented growth rate based on the low base in the same quarter of 2020-21, which witnessed a massive decline of 24.1%.

    A sharp rise in growth after a steep fall in the preceding year is not a new phenomenon for the economy. Prior to 1999, only annual, not quarterly, data was available. Official data shows that the economy has risen sharply several times since independence: 1953-54 (6.2%), 1958-59 (7.3%), 1967-68 (7.7%), 1975-76 (9.2%) 1980-81 (6.8%), 1988-89 (9.4%) and 2010-11 (9.8%). The data after 2011-12 base revision was controversial. For instance, the new series shows a high growth rate of 8.3% for 2016-17 though it is well known that demonetisation devastated the economy

    Methodological Issues

    If the new series, using 2011-12 as the base year, shows a high growth rate for 2016-17, the methodology is not right. This has been extensively discussed since 2015, when the series was announced. A major change has been the use of the data provided by the union ministry of corporate affairs, called the MCA-21 database, since 2015. But it has been pointed out that many of the companies in this database are shell firms and the government shut down several of them in 2018. Further, many companies were found to be missing.

    Another problem pointed out, starting the year of demonetisation, is that the measurement of the contribution of the unorganised sector—which constitutes 45% of the GDP—is not based on independent data.

    The data for the non-agriculture sector is collected during surveys every five years. In between these years, the organised sector is largely used as a proxy and projections are made from the past. Both these features of estimation pose a problem when there is a shock to the economy.

    The demonetisation shock impacted the unorganised sector far more adversely than it did the organised sector. Hence, after demonetisation, the organised sector data should not have been used as a proxy to measure the contribution of the unorganised sector. Further, due to the shock, projections from the past will not be a valid procedure. This problem was accentuated by the implementation of the Goods and Services Tax (GST), which again impacted the unorganised sector more adversely

    Demand started to shift from the unorganised sector to the organized, making the situation even more adverse. For instance, e-commerce has severely impacted the neighbourhood stores and taxi aggregators have displaced the local taxi stands.

    Due to the shocks, the earlier procedure of calculating GDP becomes invalid and should have been changed. Since this has not been done, in effect, the GDP data is measuring the organised sector and agriculture.

    Thus, 31% of the economy is not being measured, and by all accounts, this part is declining, not growing. Therefore, GDP growth is far lower than what has been officially projected since 2016-17.

    The pandemic and the lockdown have administered the biggest shock to the economy. But the organised sector was hit far less than the unorganised sector. The split between the two sectors has been far greater than due to demonetisation or GST. Therefore, there is an urgent need to revise the method of calculating GDP—also, projections from the past do not make sense.

    Quarterly Data Issues

     The problem is even greater when projecting quarterly GDP growth. The data used is sketchier than the annual data. Not only most of the data for the unorganised sector is unavailable (except for agriculture), even the organised sector data is partial. For instance, the data for businesses is based on companies that declare their results in that quarter. Only a few hundred companies out of the thousands might be declaring such data.

    Worse, the estimation is based on a) projections for the same quarter in the preceding year same quarter, b) in many cases, the projection is not just for the quarter but for the year as a whole and then it is divided into four to get the data for one quarter and c) cases where targets, not actual production data. are used to estimate the contribution to GDP.

    Worse, the estimation is based on a) projections for the same quarter in the preceding year same quarter, b) in many cases, the projection is not just for the quarter but for the year as a whole and then it is divided into four to get the data for one quarter and c) cases where targets, not actual production data. are used to estimate the contribution to GDP.

    Fishing and aquaculture, mining and quarrying, and quasi-corporate and the unorganised sector are a few sectors which belong to the first group. Some sectors belonging to the second category are other crops, major livestock products, other livestock products and forestry and logging. Livestock belongs to the third category, where annual targets/projections are used.

    This procedure is clearly inadequate but maybe acceptable in a normal year. But when there is a shock to the economy, does it make sense? If there is a projection from the previous year, it is likely to give an upward bias since the economy was performing better in the preceding year. Further, projections have to be based on some indicators and the data on these indicators were only partially available due to the lockdown.

    Finally, how can the annual projection be made and then divided into four to obtain the quarterly estimate when the economy is highly variable from quarter to quarter. In 2020, each quarter was very different from the previous one.

    Next, if the data for 2020-21 is erroneous, when there was a massive slump in the economy, the shock continues into 2021-22. How can projections be made from the 2020-21 to 2021-22? Thus, there would be large errors in the quarterly data for the current year. This will then be fed into the data for 2022-23. Therefore, the shock to the economy will play itself out for several years.

    Impact on other Macro Variables

    Quarterly data are also published for other macro variables like consumption, and investment by public and private sectors. The government-related data is available in the Budget documents, but the private sector data poses a huge challenge. These estimates are, again, based on projections from the previous year, and in some cases, annual estimates are divided between quarters. Production data is also used to project consumption and investment by the private sector. So, if the former is incorrect, as pointed out above, then the estimates for the latter will also be erroneous.

    The RBI’s survey of the organised sector showed that capacity utilisation was down to 63% in January 2021, but the official quarterly data was showing a growth of 1.3% rather than a decline of 10%. Thus, the quarterly data was not representative of even the organised sector.

    Similarly, consumer sentiment was down to 55.5 compared to 105 a year back, implying that even the organised sector consumption had not recovered to the pre-pandemic levels. Both these variables were further dented in the second wave of COVID-19 in Q1 of 2021-22. The implication is that the data on these variables is also not reliable.

    If the production data is an overestimate due to the use of projections from the last year, the consumption and investment data would also be over projections. The further implication is that if the data for 2020-21 is not right, the quarterly data for 2021-22, projected from the previous year, will also be erroneous and overestimate.

    Analysis of Macro Variables for Q1 of 2021-22

    For the moment, let us analyse the Q1 data leaving aside the errors pointed out above. When the economy was in decline in the preceding year, comparing rates of growth makes less sense than comparing the level of GDP.

    On a low base of 2020-21 (-24.4%), the rate of growth for 2021-22 looks impressive (+20.1%). But it is 9.2% less than the pre-pandemic Q1 of 2019-20—i.e., the economy has not recovered to the pre-pandemic level.

    Further, if the economy was growing at the pre-pandemic rate, the economy would have expanded another 7.5% in two years. Thus, compared to the possible level of GDP in 2021-22, it is down by about 16%.

    Except for agriculture and the utilities sectors, data shows that none of the other sectors have recovered to the levels in 2019-20. Private final consumption expenditure is down by 11.9% and gross fixed capital formation by 17.1%. Government consumption expenditure and exports have increased compared to their levels in 2019-20. The former does give a boost to the economy by increasing demand but the latter does not since imports remain much higher than exports.

    Therefore, out of the four sources of demand, only government expenditure has increased—but this is not enough to compensate for the decline in the other three and that is why the economy is still down compared to 2019-20.

    It may be argued that over time, data undergoes revision as more data becomes available. But the situation now is unusual due to the pandemic. This necessitated a major revision in the methodology itself due to lack of data and consequent non-comparability across quarters and years.

     The views expressed are those of the author.

    This article was published earlier in NEWSCLICK.

    Image Credit: The Federal

     

  • Climate Change: A Review of the Rural Electrification Policies and Barriers to adopting Renewable Energy in Rural India

    Climate Change: A Review of the Rural Electrification Policies and Barriers to adopting Renewable Energy in Rural India

    Energy is crucial for a country’s growth and sustainable development. But over one-third of the world’s population, mostly consisting of people in rural areas of developing countries, do not have access to clean, affordable energy.

    The climate crisis is a battle that countries have been fighting for decades now. The policies and strategies developed by different countries have helped in small ways in achieving their energy and climate goals. One strategy among all countries is the development and improvement in the use of renewables. Various studies, across different fields, have shown us the need for countries to shift to this alternative set of energy sources that will sustain life in the long run. The use of renewable energy in both urban and rural areas should be monitored and developed to achieve the sustainable development goals that countries have vowed to achieve.

    Energy is crucial for a country’s growth and sustainable development. But over one-third of the world’s population, mostly consisting of people in rural areas of developing countries, do not have access to clean, affordable energy. This is an important factor contributing to the low standards of living in rural areas of developing countries.

    In India, more than two-thirds of the population live in rural areas whose primary source of income is agricultural activities. But a large proportion of the rural population does not have consistent access to energy. To this population, new alternative sources of energy remain unaffordable and inaccessible due to poverty and lack of adequate infrastructure, respectively. Hence, we find that the rural populations continue to use traditional sources of energy such as coal, fuelwood, agricultural waste, animal dung, etc. Not only do these cause pollution and quick erosion of natural resources, but they impact negatively on people’s health. The need for transitioning to the use of renewable energy, especially in the country’s rural areas is of prime importance. But, to achieve this, the government must bring out policies that will guide this transition. Moreover, it is important that the government positively supports companies – both private and public – that generate the required technology and research that transforms the available renewable energy sources into energy that the public can consume.

    Rural Electrification in India

    The Electricity Act of 2003 enabled the building of electricity infrastructure across the rural and remote regions of the country and thus, easy access to electricity for most of the people. The Indian Government launched the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) in 2005, to extend electricity to all unelectrified villages. The programme focused largely on developing electrification infrastructure across villages in India and providing free connections to all rural households living below the poverty line. Further, state governments received a 90% grant from the central government which aided in extending electrification infrastructure to over one lakh villages during the period 2005–2013. Moreover, the central government worked towards increasing implementation efficiencies by engaging central PSUs in some states.

    In 2015, the NDA Government launched the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) under which, the villages that remained un-electrified under the RGGVY, were electrified. The scheme has also been significant in supporting distribution networks in rural areas, largely concerning metering distribution transformers, feeders, and consumers in rural areas (Gill, Gupta, and Palit 2019).

    The central government further introduced standalone mini-grids programs, under the DDUGJY in 2016. Guided by the National mini-grid policy, State governments also contributed through various mini-grid policies to promote decentralised renewable energy solutions. Further, the Unnat Jyothi Affordable LEDs for All was introduced to encourage the efficient use of energy and under this scheme, LED bulbs were distributed to all households with a metered connection at subsidised rates. The Ujwal DISCOM Assurance Yojana was also introduced under the DDUGJY to allow a financial turnaround and operational improvement of Discoms. According to the UDAY scheme, discoms were expected to improve operational efficiency and bring AT&C losses down to 15%.

    While the schemes were successfully implemented then, the rate of rural household electrification was still slow. Evaluations of the schemes found various limitations, such as high upfront connection costs, poor quality of supply, poor maintenance services, to name a few. Additionally, some states had also started initiating their electricity-access programmes to accelerate the electrification process, such as the West Bengal Rural Electrification Programme, the Har Ghar Bijli scheme in Bihar, the Bijuli Bati mobile-based app to enable last-mile connectivity and household connections in Odisha (Gill, Gupta, and Palit 2019). To address this issue, the central government then launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (PM Saubhagya) in September 2017, with the ambitious target of providing electricity connections to all un-electrified rural households by March 2019. Under this scheme, the government has electrified all of 597,464 census villages in the country (Bhaskar 2019).

     Barriers to adopting Renewable Energy in Rural Areas

    This section focuses on the issues that restrict the efficient adaptation of renewable energy in rural areas. As the government continues to promote renewable energy in rural communities, it should keep in mind these following limitations and develop mechanisms to overcome them as and when they arise. While employing renewables to supply electricity, the problem of grid integration arises. Most electricity grids and the technology used, are designed and placed around fossil fuels. However, when they transition now to more non-conventional forms of energy such as wind and solar, the designs and placements of power generation systems have to change rapidly. Thus, heavy emphasis should be placed on improving the research and infrastructure required to make this transition as smooth as possible. That is, the government should research the most optimal locations for wind turbines and solar panels, as not all lands in rural areas can be employed for this purpose. Otherwise, it may negatively impact the quality of agricultural lands. Upon conducting the required research, the infrastructure to connect all areas to the electricity grids must be developed and well-financed by the government to satisfy the energy demands of the rural population. For instance, in Germany, while the wind power potential is in the northern regions, major demand for it is in the southern region. Thus, the country’s energy transition process emphasizes upgrading the electricity grid infrastructure that would make it possible for power to flow from north to south (UNCTAD 2019). Further, the planning should also focus on balancing the energy mix in the power grid. The transition to renewables will not be a quick one, which implies that for the short term the power grid will be a mix of different sources of energy. Thus, the plans should design the grids in such a way that the proportion of each energy source balances one another so that there is no leakage or wastage in the system, especially given the fact that energy storage technology is still underdeveloped in the country.

    For many years now, there has been an emphasis on the potential of decentralised electricity comprising off-grid or mini-grid systems to help with rural electrification. The government introduced a national mini-grid policy in 2016 to promote decentralised renewable energy. With the increase in the use of solar energy, solar-powered mini-grid systems were found to be more economical and accessible to rural households (Comello et al. 2016). These systems could substantially improve the people’s standard of living and eliminate the use of harmful fuels such as kerosene oil for simple household appliances such as lamps and cooking stoves. However, an IEA report found evidence that this potential is limited, and would not be beneficial for large, productive, income-generating activities. Thus, mini-grids are often considered a temporary solution, until grid connectivity is achieved (IEA 2017).

    Whether a grid system or an off-grid system is implemented, high connection charges will automatically limit the rural population’s ability to connect to the grid.

    A major challenge that the government must keep in mind is affordability. Whether a grid system or an off-grid system is implemented, high connection charges will automatically limit the rural population’s ability to connect to the grid. On the one hand, better access to electricity will increase productivity and lead to the growth and development in the region but on the other hand, most of the rural communities live below the poverty line and will not be able to afford the connection, even if they have access to it. While decentralised energy sounds economical and sounds like an obvious solution, it is also limited in capacity.

    Another factor that the government must keep in mind for the adaptation of renewable energy in rural areas is the situation of state and private distribution companies (discoms) in India that play a pivotal role in the rural electrification process. While the government set the goals and adopted a strategy to electrify all rural households under the Saubhagya scheme, it was the discoms’ responsibility to implement these strategies and achieve the goals. A TERI report found that the discoms had difficulty carrying out the electrification process because the strategy adopted by the government had not considered the difference in demographics in the rural areas (Gill, Gupta, and Palit 2019). That is, each area differs in population size, density, and topography and the discoms found it hard to implement a similar strategy to all places alike. Moreover, the financial status of many state-run discoms has been stressed over the past year due to increasing losses and lack of adequate support from the respective State governments. Over the past year, dues to power generators have increased to Rs 1.27 trillion (Economic Times 2021). The annual 2021 budget’s outlay of over Rs 3 trillion, to be spent over five years, to improve the viability of state-run discoms, is a step in the right direction. The TERI report also found that discoms face institutional burdens in the electrification process (Gill, Gupta, and Palit 2019). The companies are most often strapped for time and must deal with huge amounts of paperwork. Simultaneously, they have to be physically present to install the necessary infrastructure and manage the labour employed in different states. In the end, it remains to be seen how the discoms will manage to monitor and review the electricity infrastructure in the rural areas, especially given the huge amounts of debt that they are trapped in.

    The government must also work towards increasing and incentivising private sector participation. While the private companies were interested in taking up tenders for the production of electricity through renewable energy sources in the past, the recent withdrawal of benefits such as accelerated depreciation has been a cause for concern. Companies like Suzlon Energy Ltd. face lower returns on their investment, thus deterring them from investing in future projects. Removal of benefits also discourages smaller companies that are looking to invest in this sector as it increases not only the cost but uncertainty about the government’s policies. Companies will refrain from investing if they do not anticipate a high return in the future. For grid connection systems to be successful and efficient in the long term, the government must ensure a strong governance structure, and a stable and enabling policy environment that constantly encourages fresh private sector participation. Concerning the rural electrification process, the government must encourage private sector participation because it would complement the public sector companies thus sharing the burden of production, installations, and technology as well as the process of maintenance and regular checks once the grid connection is complete.

    A shift to renewable energy in rural areas will no doubt have a positive impact on the health and well-being of the population. It will also improve the standard of living and in most cases, the productivity of the people. But the change has to be a gradual process. Even if renewable energy and electricity are affordable and accessible to the people, alternative cooking fuels and technology will take time to be accepted in practice as they may not have the same performance quality as traditional stoves and appliances that the people are used to. To overcome this hurdle, the government must ensure that the policies formed will guide the adjustment to renewables for many years to come. Moreover, the government must spread knowledge and awareness about the benefits of shifting to appliances that are sourced through renewable sources of energy. Besides, some rural households collect firewood for not just individual consumption but also to sell it (IEA 2017). This is a source of income for these households hence, the government should tread carefully when they implement programs that seek to reduce the collection and use of firewood. For years now, the government has promoted and subsidised the use of LPG within rural communities, as an alternative for other harmful sources of energy. While it has helped improve people’s health to some extent, it would be beneficial for the government to gradually nudge the decrease in the use of LPG and increase the use of renewable alternatives. Apart from the definite benefits to the environment, such a change would serve to reduce the rural-urban energy gap in India.

    The shift to renewable energy sources holds huge amounts of risks and uncertainty. But, despite this, there is a need to make long-term, accurate forecasts of energy demand and develop drafts of policies beforehand that would guide the process of supplying energy to satisfy the demand. Energy supply projects necessitate this because they have long gestation and implementation periods. With the climate crisis advancing rapidly, it would serve the government well to be prepared.

    International Collaboration

     International cooperation can play a crucial role in expanding the distribution of renewables. It can help countries benefit from shared infrastructure, technology, and lessons. The challenge thus lies in designing policies that will facilitate this technology and infrastructure transfer, especially in countries where the renewable energy sector is emerging. International organizations such as the Commission on Science and Technology for Development can play an important role in supporting such collaborations. Policies should also facilitate mechanisms that will help improve the current capabilities in developing countries.

    For instance, the Indo-German Energy Programme – Access to Energy in Rural Areas was signed to create a favourable environment for rural renewable energy enterprises so that they can provide easily accessible energy services to the rural population.

    The bilateral collaboration brought in local and international professional expertise to support private sector development, to identify and improve viable sources of finance, and to help design government schemes to achieve sustainable energy security and provide clean cooking energy solutions to the rural population. The GIZ – the German Corporation for International Cooperation – worked closely with India’s Ministry of New and Renewable Energy (MNRE) to successfully implement the program. The program succeeded in training more than 10,000 professionals to qualify as energy auditors. It has also helped increase private sector investment and develop a calculation to determine the CO2 emissions for the Indian electricity supply grid.

    Way Forward

     Research and innovation are essential to improve renewable options for producing clean cooking fuel. There is also a need for location-based research to produce appropriate workable technologies. Long-term policies and outcomes are important to consider. So, conducting significant research will not only help understand the present conditions but will also help policymakers make informed decisions in the future. It is also important to educate and communicate to the rural population about the relative advantages of using modern energy sources over traditional sources. For instance, consumers may be unaware of the health impacts of using traditional sources of energy for cooking. Moreover, they may distrust conventional alternatives due to their unfamiliarity with them. Thus, the responsibility falls on the government to properly inform them of the need for the shift to renewables and curb the spread of misinformation.

    Further, alternative solutions will only succeed if they are established in cooperation with the local users. “The women in rural areas play an important role when it comes to energy transition” (IEA 2017). Several initiatives such as the Global Alliance for Clean Cookstoves, SEforALL, and ECOWAS address the joint issues of gender empowerment, energy poverty, health, and climate (IEA 2017). Training and capacity building are key to the shift to renewable sources of power. And in rural energy applications, this can be improved by taking into account the gender issues that plague society. There is a high possibility that rural engineers, once trained, might migrate to urban areas in search of more lucrative work. In response to this, the Barefoot College International Solar Training Programme takes a different approach to capacity-building in rural areas and trains the grandmothers in villages who are more certain to stay and help develop the community.

    a shift to clean energy in rural areas that houses the section of the population that lives below the poverty line will be more successful if it is seen as a strategy to broaden community development.

    Thus, a shift to clean energy in rural areas that houses the section of the population that lives below the poverty line will be more successful if it is seen as a strategy to broaden community development. This includes higher employment, better infrastructure, roads, and telecommunications.  This process requires careful design of policies and the establishment of a supportive environment that includes not just innovative business models but also maintenance systems that will sustain the development in the long run.

    Conclusion

     To summarize, rural electrification and the transition to renewable energy in rural areas have been a part of the government’s agenda for many years now, irrespective of the ruling party at the centre. Necessary policies have been introduced to guide the process. While it is great that the government recently achieved universal electrification, it remains to be seen whether the quality of power provided to these villages meets the needs of the population. Further, in this process, state-owned discoms have taken a serious financial hit and it is a tough road to recovery from here. Adding on, the COVID pandemic has slowed down the development and recovery of these discoms. The government should first increase budget outlays in the following years and create a system to monitor the use of these finances. Second, it could turn to privatisation. Privatising discoms on a larger scale would reduce the financial and risk burden on the government and ensure efficient functioning of the companies. Additionally, it is important that while policies are being designed, the deciding parties have a complete understanding of the socio-economic situation of the communities within which they will make changes. To do this, experts who have studied the layout of these rural areas extensively should be involved in the process, along with leaders from the respective districts who are bound to be more aware of the situation and the problems in their areas. More importantly, the government should keep the process of the transition to alternative energy sources transparent and keep an open line of communication with the rural population to earn their trust before they make significant changes. Finally, India is one of the largest consumers of different renewable sources of energy. While it is important to make changes to the policies in this sector, it is also imperative that the government tries to maintain stability in policies that support the companies which help satisfy the growing energy demand in the country.

     

    References

    1. Bhaskar, Utpal. 2019. “All villages electrified, but last-mile supply a challenge.” mint, December 29, 2019. https://www.livemint.com/industry/energy/all-villages-electrified-but-last-mile-supply-a-challenge-11577642738875.html.
    2. Comello, Stephen D., Stefan J. Reichelstein, Anshuman Sahoo, and Tobias S. Schmidt. 2016. “Enabling Mini-grid Development in Rural India.” Stanford University. https://law.stanford.edu/wp-content/uploads/2016/04/IndiaMinigrid_Working_Paper2.pdf
    3. Economic Times. 2021. “Discom debt at Rs 6 trillion; negative outlook on power distribution: ICRA.” The Economic Times. https://economictimes.indiatimes.com/industry/energy/power/discom-debt-at-rs-6-trillion-negative-outlook-on-power-distribution-icra/articleshow/81431574.cms?from=mdr.
    4. Gill, Bigsna, Astha Gupta, and Debajit Palit. 2019. “Rural Electrification: Impact on Distribution Companies in India.” The Energy and Resources Institute. https://www.teriin.org/sites/default/files/2019-02/DUF%20Report.pdf.
    5. IEA. 2017. “Energy Access Outlook: From Poverty to Prosperity.” International Energy Agency. https://www.iea.org/reports/energy-access-outlook-2017.
    6. UNCTAD. 2019. “The Role of Science, Technology and Innovation in Promoting Renewable Energy by 2030.” United Nations Conference on Trade and Development. https://unctad.org/system/files/official-document/dtlstict2019d2_en.pdf.

    Feature Image: The Better India 

    Image 1: www.alliancemagazine.org

    Image 2: indiaclimatedialogue.net

  • The Economics of Clean Energy: Transitioning to Renewables in a Post-COVID Era

    The Economics of Clean Energy: Transitioning to Renewables in a Post-COVID Era

    “the climate emergency is a race we are losing, but it is a race we can win” – Antonio Guterres, UN Secretary General

    Even without a global health pandemic, our world is still facing a crisis of staggering proportions.  In the 21st century the threat of climate change has outweighed almost all the other threats put together. Such is the pressing nature of the issue that it has even prompted re-branding of nomenclature from ‘climate change’ to ‘climate crisis’ – because that is what it is, a crisis. But as the UN secretary general António Guterres points out, “the climate emergency is a race we are losing, but it is a race we can win”.

    In this light, it is high time a discourse on transition to clean energy systems takes centre stage. With climate change progressing at an alarming rate, the need for clean energy has only been compounded.  At a time of great disruption for the world owing to an unprecedented health crisis with severe economic and social ramifications, a transition to renewables could be the way forward. As governments around the world lead COVID-19 recovery efforts, the verdict is clear that we cannot go back to our old systems – a transition to clean energy must be on the forefront of national agendas.  While the road to recovery is long and might take years, it is also the perfect opportunity for governments to accelerate clean energy adoption by putting this transition at the heart of post-COVID-19 social and economic recovery plans.

    While COVID-19 has certainly slowed down this transition by disrupting and delaying several renewable energy expansion and installation projects, the outlook on clean energy still looks very promising. In Q1 2020, global use of renewable energy in all sectors increased by about 1.5% relative to Q1 2019, while the overall share of renewables in global electricity generation jumped to nearly 28% from 26% in Q1 2019. While this does not reflect the impact of COVID-19 on capacity expansion, as the increase in use is largely due to expansion efforts in the preceding years, it is still a positive sign.

    Solar PV has had the most remarkable fall during this period, with the levelized cost of electricity (LCOE) falling almost 82% over the last decade. Closely following are CSP and On-shore Wind, both of which have fallen 47% and 38% respectively

    Even without factoring in the current global scenario, the rationale for transition has never been more compelling. Over the past decade, the cost of renewables has fallen to record lows (as shown in Figure 1), making it more attractive than ever before to invest in clean energy. Solar PV has had the most remarkable fall during this period, with the levelized cost of electricity (LCOE) falling almost 82% over the last decade. Closely following are CSP and On-shore Wind, both of which have fallen 47% and 38% respectively. Batteries, which have been appraised as one of the key enabling technologies in accelerating the shift to clean energy, have also recorded significantly lower costs in the past couple of years. Battery technologies such as Lithium-ion and Vanadium-flow have long been considered the missing link in ensuring continuity of supply for Wind and Solar generated power, which often depend on the vagaries of the weather. The LCOE for Lithium-Ion batteries has fallen by 35% since 2018, owing to advancements in technology. The only increases in cost have been recorded by Geothermal and Hydropower.

    With the cost of renewables falling, fossil fuel options are looking more and more expensive. According to IRENA (International Renewable Energy Agency), by 2020 Solar PV and onshore wind will be less expensive than the cheapest fossil fuel alternative. In the past, one of the key reasons why fossil fuels such as oil and gas were considered attractive options was because they were highly subsidized and incentivized. The true cost of these non-renewable sources minus the subsidies may well be much higher. The conventional cost of fossil fuels also does not factor in the environmental costs associated with carbon emissions. The extraction and use of these resources are often accompanied by several negative externalities associated with environmental degradation, pollution and global warming. This failure to account for the emissions and their impact has been termed by many as one of the greatest market failures the world has seen.

    Thus, falling costs of renewables coupled with the growing pressure on fossil fuels has presented the world with a unique opportunity to accelerate the adoption of clean energy. As governments pump more money into economies as part of COVID recovery efforts, the same level of investments can now yield greater returns owing to falling costs. Globally, investments in renewable capacity and technology have been on the rise and have shown remarkable growth, especially for Solar and Wind. Investments in Solar PV (Utility) in particular have shown astounding growth, increasing over 200% since 2010 to reach $69.4 billion in 2019. Total investments across renewables stands at $253.6 billion, having grown 21% in the last decade.

    While renewable capacity and investments have been growing, so has the demand for electricity. This growth in demand has somewhat offset the impact of transition to renewables. While mainstream adoption of clean energy is still progressing in the right direction, policy makers are worried that the pace of transition is not fast enough to offset growing demands. Unless renewable technology can scale up quickly and bridge the demand-supply gap, this excess demand will inevitably have to be met by fossil fuels.

    The IRENA estimates that investments in clean energy could boost global GDP by close to $98 trillion by 2050

    Despite several roadblocks still existing for large-scale adoption of clean energy to be made feasible, governments and institutions are putting climate action at the forefront now more than ever before. Post COVID-19, as economic recovery consolidates, we cannot afford to put clean energy on the back burner. Across the world, clean energy technologies such as electric vehicles, solar and wind energy are becoming increasingly mainstream. According to a UN report, global investment in renewables is set to triple in the next 10 years. If governments continue to sustain this momentum, the benefits are manifold. The IRENA estimates that investments in clean energy could boost global GDP by close to $98 trillion by 2050. Thus, the rationale is clear and more compelling than ever for a shift to clean energy. The robustness and resilience of economies to future global shocks will be determined by how quickly and effectively they transition to renewables and reduce dependence on fossil fuels.

     

    References

    [1] The Climate Crisis – A Race We Can Win. (2020). United Nations.

    https://www.un.org/en/un75/climate-crisis-race-we-can-win

    [2] Renewables 2019 – Global Status Report. Ren 21. Retrieved from: https://www.ren21.net/wp-content/uploads/2019/05/gsr_2019_full_report_en.pdf

    [3] Global Energy Review 2020. (2020, April). IEA.

    https://www.iea.org/reports/global-energy-review-2020/renewables

    [4] Renewable Power Generation Costs Report 2019. (2020, June). IRENA. https://www.irena.org/publications/2020/Jun/Renewable-Power-Costs-in-2019

    [5] Henze, V. (2019, March 26). Battery Power’s Latest Plunge in Costs Threatens Coal, Gas. Bloomberg NEF. 

    Battery Power’s Latest Plunge in Costs Threatens Coal, Gas | BloombergNEF (bnef.com)

    [6] Sinha, S. (2020, September 23). How renewable energy can drive a post-COVID recovery. World Economic Forum.

    https://www.weforum.org/agenda/2020/09/renewable-energy-drive-post-covid-recovery/

     

    Image Credit: AZoCleantech.com

  • Contract Farming in India: A long-pending Reform but not a Panacea for all Agri-issues

    Contract Farming in India: A long-pending Reform but not a Panacea for all Agri-issues

    India’s agricultural sector has for long been mired in issues of low productivity, land fragmentation, poor infrastructure, and inadequate delivery mechanisms among others that have often rendered farmers, victims of a system, without proper regulatory mechanisms. The requirement for better infrastructure, technology, and quality-produce has been at the forefront while pushing for more private investment into the sector. However, real gains in agriculture can only be seen when all farmers gain equal access to this investment and receive fair benefits.

    Around 126 million farmers in the country, as of today, are small and marginal farmers with an average holding size of 0.6 hectares.  It means they cannot produce a surplus and can barely sustain their families, a leading factor in the agrarian crisis that has befallen India.

    India’s agrarian crisis: A quick snapshot

    In India, small and marginal farmers makeup 86.2% of all farmers in India but own only 47.3% of crop area. Around 126 million farmers in the country, as of today, are small and marginal farmers with an average holding size of 0.6 hectares.  It means they cannot produce a surplus and can barely sustain their families, a leading factor in the agrarian crisis that has befallen India. Fragmentation of holdings also hinders access to government-offered new technology and farm support schemes fundamental to making the sector profitable. Experts believe that the only way out is to provide farmers with access to better technology and markets and to make small farms more economically viable through diversification into high-value crops and massive capital investments in value chains.

    To address these issues, the government recently passed three agricultural reform bills–The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020; The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020; and The Essential Commodities (Amendment) Bill, 2020. Essentially, the bills break the monopolistic powers of the Agriculture Produce Management Committee (APMC) markets, allow contract farming, and remove stocking limits on traders for many commodities, with some caveats still in place.

    Among the concerns raised, many believe that enabling contract farming will leave small farmers vulnerable and at the mercy of private players, leaving them worse off than before.

    The bills, in the views of many, are inherently anti-farmer in nature, triggering farmer protests across the country and the Union Minister for Food Processing Harsimrat Kaur Badal resigning in protest. Among the concerns raised, many believe that enabling contract farming will leave small farmers vulnerable and at the mercy of private players, leaving them worse off than before.

    Reforms and changes to liberalize the Indian Agri-market was long due, with bills of similar nature pursued both at the Union and State level.

    Liberalization of Indian agriculture through the years

    In fact, the first attempt at the reforms in agricultural markets was made by the union government in 2003 with the model Agricultural Produce Marketing Committee (APMC) Act,  which made new market channels, such as direct purchase, private wholesale markets, and contract farming (CF), legal for farmers and buyers alike. Set against the backdrop of poorly functioning APMC markets (regulated and unregulated), that even today cannot deliver MSPs to the farmers, the bill pushed States to amend their own APMC Acts.  Today, in all major agricultural States, there are many cases of contract farming and direct purchase by various groups of traders dealing with farm produce. Yet contract farming faced setbacks, as it was still within the APMC domain and hence saw a conflict of interest with even traders and commission agents strongly opposing it.

    In order to resolve this deadlock, a new and improvised Agricultural Produce, and Livestock Marketing (Promotion and Facilitation) Act, 2017 (APLMA, 2017) was passed by the government in order to take contract farming out of the APMC domain. This led to the birth of a separate model act on Agricultural Produce and Livestock Contract Farming and Services 2018 (Promotion and Facilitation – APLCFS2018). Among other major provisions, the act mandated the removal of market fees and commission charges to buyers resulting in a saving of 5%–10% of transaction cost, thus making the market more conducive to private players. However, all said and done, contrary to popular belief, the Indian experience with contract farming (CF) is not new.

    The first widely acknowledged incident of contract farming in the Indian context was the entrance of Pepsi Foods Ltd. into Punjab in 1989. The company intended to specifically focus on exports of value-added processed foods. This led to the birth of PepsiCo’s backward linkage with farmers of Punjab. The PepsiCo model of contract farming opened up new options for farmers, led to productivity increase, and introduced modern technology for the tomato crop. Following the Pepsico example, local firms such as Nijjar in Punjab and Bhilai Engineering in Madhya Pradesh also took up a tomato contract cultivation.

    The Indian experience with Contract Farming: Are farmers really benefitting?

    Studies of the CF system in India have tried to establish whether crops under the contract system have better outcomes than those under non-contracts/traditional systems. Findings show that contract production gave much higher gross and net returns compared with that from the traditional crops of wheat, paddy, and potato, those under non-contract situations. This was because of the higher yield and assured price under contracts and better-quality inputs.

    The Punjab and Haryana CF experience has been far from satisfactory with studies revealing that contract growers faced many problems like the undue quality cut on produce by firms, delayed deliveries at the factory, delayed payments, low price, and pest attack on the contract crop which raised the cost of production. The firms also manipulated provisions of the contracts in practice and also delayed payments up to 60 days. But it locked growers into these contracts because of the firm-specific fixed investments they had made.

    It is clear then that CF often protected company interest at the expense of the farmer and did not cover farmer’s production risk e.g. crop failure, and kept the right of the company to change price, and offered prices based on open market prices.

    It is clear then that CF often protected company interest at the expense of the farmer and did not cover farmer’s production risk e.g. crop failure, and kept the right of the company to change price, and offered prices based on open market prices. This is a serious issue as market prices are volatile and even premiums may not help a farmer if market prices go down significantly, which is not uncommon in India. (MSPs which benefit only 6% of Indian farmers have also been historically low in recent times)

    Contract farming in India was also mainly carried out with only large and medium farmers.  This bias in favour of large/medium farmers perpetuated the practice of reverse tenancy in regions like Punjab where contract farmers leased inland from marginal and small farmers for contract production, creating even larger issues of land control versus ownership.

    Given the big farmer preference and the pernicious harms that CF brings with it, the heralding of a new era of Agri reforms thus rightfully raises the question of what the road ahead looks like for small farmers in India.

    The road ahead: Viable modes of contract farming for Indian farmers

    The only way that small farmers can realistically realize returns and stand their ground is through organizing themselves in the form of Farmer- producer organizations, bargaining cooperatives, and group contracts. Producer organizations are beneficial as they amplify the political voice of smallholder producers, create opportunities for producers to get more involved in value-adding activities such as input supply, credit, processing, marketing, and distribution. They also lower the transaction costs for the processing/marketing agencies working with growers and negotiate fair contracts for buyers and growers.  The legal system in India has made available the organizational option of the Producer Companies (co-operative companies) under the Companies Act, in which farmers in many states have gone ahead with various existing and new projects.

    Another form of organization that can be explored is that of New Generation Co-operatives (NGCs) which are voluntary, more market-oriented, member responsive, self-governed, and avoid free-riding and horizon problems as they have contractual equity-based transactions with grower members and limited membership.

    Collective action through cooperatives or associations is important not only to reduce the information asymmetry between the growers and the firm, but also to help small farmers adapt to new patterns and greater levels of competition.

    Collective action through cooperatives or associations is important not only to reduce the information asymmetry between the growers and the firm, but also to help small farmers adapt to new patterns and greater levels of competition. Thus, there is a need to promote/encourage farmer groups for CF as in Thailand where besides contract grower groups, the potato growers co-operative also dealt with a multinational contracting company on behalf of its members.

    On legal grounds, there needs to be a serious consideration of protection accorded to contract growers as a group. In Japan, subcontracting agencies have seen legal protection given to them in their relations with large firms. These laws specify the duties and forbidden acts for the large parent firm such as defaulting on payments and are monitored and kept in check by the Fair Trade Commission. Necessary safeguards and flexible systems need to come in the legal sphere to protect small farmer interests. The new 2020 Agri bills largely leave regulation out of the purview of government responsibility and have no mention of how contracts are to be regulated.

    State support to CF arrangements needs to account for the size of holdings else it will not be beneficial to small farmers at all.  In Thailand, the state not only provided coordination and support of local authorities but also initially provided interest compensation to farmers to encourage participation and lower costs. Subsequently, the practice was replaced by low-interest loans. They gave training in CF to farmers and state intervention helped the farm sector by promoting competition.

    Policy design should focus on small farmers

    The glaring problem that burdens small farmers is that they are simply not assured of a strong support mechanism from private players to protect their interests in aspects like delayed payments and deliveries, contract cancellation damages, inducement/force/intimidation to enter a contract, disclosure of material risks, competitive performance-based payments, and sharing of production risks. Only when they can be guaranteed that they will not be exploited on such grounds can the benefits of CF arrangements materialize.

    Thus policies concerning the design of contract agreements need to be fair and should ensure clauses on increased competition for procurement instead of monopsony, a guaranteed market for farmer produce, effective repayment mechanism, market information for farmers to effectively bargain with companies, a commitment to fair sharing of risk and innovating pricing mechanisms( bonus, fixed price, share in equity, and quality-based pricing).

    The 2020 Agri bills may have been too ambitious in opening up markets to private players without locking-in adequate safeguards for farmers.

    Contract farming is not a panacea to the issues that plague the agricultural sector in India. It is not an end but a welcome step towards agricultural development. The 2020 Agri bills may have been too ambitious in opening up markets to private players without locking-in adequate safeguards for farmers. If contract farming needs to see returns in the Indian context, it cannot do so until it recognizes that the twin planks of efficiency and inclusivity need to go hand in hand.

    Image: Rice fields by Nandlal Sarkar from Pixabay