The Economic Report on Africa (ERA) 2024 presents the case for investing in a just and sustainable transition (JST) while achieving energy access for all. Using country case studies, macro, sectoral and
The growing relevance of India's newly-minted "trillion-dollar economy' to the changing global economic order was emphasised at a seminar here on Monday in the context of Finance Minister P. Chidambaram's 2008-2009 budget. India's High Commissioner to Singapore S. Jaishankar said China, as "a political aside' in this emerging global story, "has now overtaken the United States as India's largest trading partner.' K. Venugopal, Joint Editor of The Hindu and The Hindu Business Line, traced some "fantastic aspects of India's growth story' but cautioned that the current trends of "a miserable show' in the power sector and project slippages in the overall infrastructure domain could still "stop ... the trillion-dollar economy from cantering' at a comfortable pace. KPMG India Executive Director Girish Vanvari said the Finance Minister had opted for "cautious' projections for the future, keeping in mind the current reality that "the Indian economy is on a roll.' Setting the tone for the seminar, organised by KPMG and the Singapore Indian Chamber of Commerce & Industry in association with The Hindu Business Line, Dr. Jaishankar said: "We are now, probably for the first year, talking about the budget of a trillion-dollar economy. We are talking about a country, where there is a 150 per cent increase in the net FDI flows, where the outward investments have actually also gone up almost seven times over what it used to be in 2003-2004, where the trade-to-GDP ratio has gone up very sharply. The [latest] budget, like any other happening in India, has a certain immediate context and a longer-term context in terms of reform.' Key factors Outlining the budget proposals in the context of what Mr. Chidambaram might have had on his mind, Mr. Venugopal spelt out an array of factors that served as the political and economic background. These were the possibility of general elections within the next 14 months; farm suicides; the drop in public investment in the agricultural sector; some indices of an economic slowdown; the appreciating rupee; the surge in foreign investment inflows; the ebb and flow of the stock market trends which, in the last six months, were "not bad' compared to the U.S. and Chinese markets; "the divergent worms' in regard to trade deficit; and the political sniping at "an economy on the downswing.' He summed up the "budget response' as follows: Rs. 60,000-crore debt waiver for small and marginal farmers; tax breaks for individuals, not companies; and excise duty reduction from 16 per cent Cenvat to 14 per cent, with no sops for exporters. Posing the question whether these proposals would work, Mr. Venugopal said: "Not everyone in the political world congratulates Mr. Chidambaram for the debt waiver. [Some] say he has not done enough. Why is India's agriculture on the rocks? One reason is that irrigation projects have failed to deliver in the last decade or so. The government's Economic Survey conceded as much. The weakening farm pulse [is such that] the only thing that has grown smartly is credit supply.' On income tax, he said the Finance Minister was "like India's spinners: flight the ball more and probably you will get the batsman out.' The growth of the economy "is delivering a lot more as tax revenues for the government.' Citing some "concerns,' including rising food prices, and turning the focus on "some very bright spots' such as the telecom and aviation sectors, Mr. Venugopal said, "The agenda is [still] pretty long' for the future. In addressing it, Mr. Chidambaram might also have to reckon with the "fragility of the coalition that he is part of.' Mr. Girish Vanvari gave an expert overview of the budget matrix of direct and indirect taxes. Vishal Sharma, KPMG Singapore Executive Director, presided.
Expressing concern over rising food prices, finance minister P Chidambaram said he had not forgotten the corporate sector and defended the Rs 60,000 crore farm loan waiver on the ground that the money would flow to a distressed segment of the productive sector where the output was either stagnant or falling. "One of the reasons why inflation is still a threat is food prices in India,' Chidambaram said, adding that after a long gap, India has become a marginal importer of foodgrain, which is a dangerous sign. "Because we are dependent on import, we are subject to world prices... No country with as large a population as India can be dependent on imports (of foodgrain),' he said at the postbudget interactive session with industry chambers. Since April 2007, prices of wheat in the global market has risen by 88% and that of rice by 15%, he said. "Taking all this into consideration, we came to the conclusion that farmers' distress called for an unorthodox response... the response was farm loan waiver,' Chidambaram said. The wholesale price-based inflation rose to 4.89% from 4.35% in the previous week. Responding to the issues raised by the corporate sector, he said, "I have not forgotten the corporate sector. Despite the advice given by my chief economic advisor and suggestion from Economic Survey, we accepted your (corporates) demand of retaining peak customs duty rate.' He said excise duty reductions and relief given in personal income tax would help in spurring demand for consumer goods and benefit the industry. Exports grow 20.5% in January India's exports showed a healthy growth of 20.47% in January this fiscal over the same month last year, but expanded by a single digit figure of 7.66% in rupee terms due to pricey domestic currency. Exports increased to $13.14 billion in January 2008 from $10.9 billion a year ago, while imports grew by a huge 63.57% to $22.50 billion, leaving a trade deficit of $9.36 billion. PTI
No one asks the farmerBringing up babus With its Rs 600 billion farm loan waiver in the current budget, the government has applied some band aid to the financial haemorrhaging of India's farmers. It is another matter that the hurt is at some other place. The farmer has difficulty in obtaining cheap and reliable credit; various laws prevent him from selling his produce at the most competitive prices in the open market; there is no reliable advice available to him on how best to tend his fields in an economical manner; existing farming techniques, guided by corporate interests, continue to suck life out of the soil without replenishing it and there is no system of health security in the villages. On all these counts, the government has yet to show even minimal movement. The farm loan waiver gives the impression that farmers do not wish to repay their loans. This is a serious misrepresentation of the ground reality. According to figures from the NABARD, only some 10 per cent of the farmers default on bank loans. And even then, it is rarely that farming assets are taken away by the banks for failure to pay back loans. The problem for farmers lies in the loans taken from informal sources: moneylender and relatives. Often, the moneylender himself is a prosperous neighbourhood farmer. He gives large loans that are beyond the paying capacity of the borrower. These loans come with exorbitant rates of interest and severe penalties for default. The lender here does not falter in taking away farming assets, including land. After all, this could be a strategy for acquiring more land for himself. The advice of the agriculture minister a few days ago at Mumbai that farmers need not pay back loans taken from
The real winner is the small car buyer who will have to pay Rs 5,000 to Rs 20,000 less for his purchase.
BUDGET 2008-09 IMPACT The Rs 60,000 crore loan waiver for farmers announced in this year's Budget is being projected as a major achievement of Agriculture Minister Sharad Pawar in his stronghold and sugar cane country western Maharashtra. The minister has unleashed a blitzkrieg of advertisements of his Nationalist Congress Party, addressing sugar cane farmers there. On the other hand, Congress leaders in the party stronghold of Vidarbha are on the defensive, even as farmer groups are openly saying that Pawar engineered the package to weaken the Congress in Vidarbha. The political sub-plot to the waiver has once again added to the agony of the dryland farmers who were earlier denied a waiver when the prime minister announced a relief package. The waiver benefits sugar cane and horticulture crops vastly, while the benefits for cotton farmers and those doing unirrigated farming are minimal. For, while loan available for dryland farming is Rs 4,000 an acre, it is Rs 50,000 for irrigated farming, which sugar cane farmers do. Hence the waiver will be a lottery for farmers in western Maharashtra and in Pawar's constituency of Baramati. The advertisements seek to drive the point home. The full page advertisements appearing in Marathi newspapers on March 1, with several pictures of Pawar, trumpet home the fact that the waiver is meant to benefit the sugar cane and horticulture farmers of western Maharashtra rather than the cotton farmers of Vidarbha. Pawar's advertisements in newspaper Sakal's Nagpur edition, for instance, talk about how loans for tractors will be waived. The advertisements in Lokmat and Tarun Bharat, which appeared on March 1, also splashed Pawar's picture and highlighted the waiver saying that loans for pipes, wells, tractors and buying of cattle would be waived. The Sakal advertisement, which says
A few years ago, while delivering the Palkhivala Memorial Lecture in Mumbai on the then Finance Minister Jaswant Singh's Budget, P Chidambaram made the perceptive comment that it was the most unfunded budget in the country's history. There was no provision in the Annual Financial Statement on many new items of expenditure. Now, ironically, it is the turn of Yashwant Sinha to point out how Chidambaram's budget is silent on expenditure on such proposals as debt waiver! Any issue of bonds to banks by way of compensation for debt waiver and relief, especially when staggered over three years, will put them in the same predicament as the oil marketing companies burdened with similar IOUs. The bonds are not likely to qualify for investments to meet the Statutory Liquidity Ratio. In case of depreciation in their values, the banks will face the same problems they experienced a few years ago in adhering to prudential norms. The difficulties are cropping up at a time when the system is in transition to Basel-II norms. There is an ominous suggestion in some official quarters that banks that have already made provisions for the overdues of farm loans may not be given the compensation. It will be unfair to them. The overdue loans will still remain part of the gross non-performing assets of the institutions, reflecting on their soundness. The loan waiver does not solve the problem of farmer distress. The inequity in the definition of marginal or small farmers based only on cultivated holding is obvious. According to the budget document, a marginal farmer is one with a holding up to one hectare and a small farmer is one with holdings between one and two hectares. A farmer with, say, five hectares of rain-fed land in Pali Marwar in Rajasthan is economically in no better condition than one with two hectares with assured irrigation families in Ludhiana in the Punjab. But the former will not be eligible for the waiver. The need for adopting an income criterion for defining the size of farms was discussed in detail in the Reserve Bank of India's Report on the Seventh Follow-Up Rural Credit Survey entitled "The Small Farmers
MOUNDHALA (BULDANA): His clothes remind me of him,' wails Leelabai, clutching a bundle of clothes in front of the dilapidated structure she calls home, as younger sister Kalabai wipes away her tears
As the Union Government works out the exact details of the farm loan waiver announced in the Budget, the first concern has been raised by Punjab, which incidentally contributes 50 per cent of the tota
Even as there were no easy ways of balancing high economic growth with low inflation, Finance Minister P. Chidambaram on Tuesday said the Government would strive to peg the overall growth rate at near nine per cent while containing the inflation rate at close to four per cent. In his post-Budget interaction with the Confederation of Indian Industry (CII) here, Mr. Chidambaram said: "The goal is to have a growth close to nine [per cent] and inflation close to four [per cent]. That is why we assume 13 per cent [nominal] GDP growth.' Pointing out that in this exercise, while the Government sometimes succeeded and also missed the target at other times, he said: "In a country where economy is growing close by over eight per cent, close to nine per cent, there is bound to be some inflation.' Inflation in India, he said, was caused by supply-demand mismatch between food items and the oligopolistic tendencies in some industries. Besides, the growth in money supply was yet another reason which, in a sense, was a reflection of the high growth the country was experiencing. However, to keep the India growth story intact, Mr. Chidambaram pointed to the numerous measures announced in the budget for 2008-09. "I think we have announced a number of measures that are intended to ensure that the growth story is intact... I am betting on your [corporates] growth. I am bullish on your growth. I hope you are as bullish as I am about the growth story,' he said. Projecting that India Inc. would provide Rs. 5,50,000 crore next year by way of taxes, excluding personal income-tax, Mr. Chidambaram noted that while steps had been taken to provide more money to the consumer for spending, the fiscal stimulus to the economy would come from the cuts in excise and customs duties and the Central Sales Tax. "Unless my friend Shubhashis Gangopadhyay [Adviser to Finance Minister] and other economists are hopelessly wrong about their economics, all these make up for the text-book prescription for higher growth,' he said. These measures together, including the across-the-board excise cut from 16 per cent to 14 per cent, were a powerful combination to keep the growth story intact. "I have taken the first step to signal the whole country, especially States, that I prepare to look forward in order to accommodate my financial interests with the final number [for goods and services tax], and you can prepare to accommodate your financial interests with the final number,' Mr Chidambaram said.
Prior to announcing the Rs 60,000-crore farm loan waiver package, the finance ministry had toyed with the idea of setting up an Agriculture Credit Guarantee Corporation with a corpus of around Rs 5,000 crore to deal with bad loans. The entity would have insured lenders against borrower defaults with banks making less provisioning for such loans and continuing to offer farm loans. However, the plan was dropped after the amount of the waiver and relief package rose to a massive Rs 60,000 crore. "We then thought of giving direct subsidies to farmers as there will be no leakage in this scheme and the benefits will go directly to farmers,' said a government official. Cooperative banks account for Rs 37,000 crore or about 61 per cent of the Rs 60,000-crore package announced in the Budget. Regional rural banks and scheduled commercial banks account for Rs 12,000 crore and Rs 11,000 crore, respectively. The details of the farm package are likely to be finalised by March 25. As the government will implement this package over a period of three financial years, it may make a provision of up to Rs 25,000 crore in 2008-09. Part of the financial assistance due for restructuring of cooperatives according to the recommendations of the Vaidyanathan Committee is also likely to be part of the package, officials say. Cooperatives and banks may also have to share a little burden in case of default loan accounts, which have been written off for prudential accounting norms.
