A V Ramanathan Trade Specialist

avramani2002@Hotmail.com

Contents

Sl No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Article name Planning for Squalor Poor Better late than Never Systems in the Colonial past Economy or we Growing? Growth escalated or fudged Shy & Mute Middle Class Peers who lack imagination The petro Price oligopoly Economic temper India, in the growing league Coconut products- Policy impediments or Regulatory Constraints About the author

Pages 3-4 5-6 7-8 9-11 12-17 18-19 20-24 25-27 28-30 31-34 35-41 41

Planning for the squalor Poor

India is a beaming or booming economy, while is trying to become one of the most emerging markets of the third millennium. Do we need to get ecstatic about this development, as we graduate from the colonial territory to a booming economy? Our pragmatic Prime Minister (late Shri Jawaharlal Nehru) believed in Planning as we embraced the USSR model for our development. Never mind, United Soviet Socialistic Republic does not exist but Russia is the super hyperbole of the algebra, geometry, trigonometry of economic thinking or practicable economic theorems of the erstwhile Soviet Union. The 5 Year Plans, a planning model to take India to the envoirons of the developed nations of the world and world markets where we want to make a distinct mark. Let us not worry about where the Plans take us. Not of money is spent on these. It has physical and financial targets. It wants India to be a Country of milk and honey. India is a country of over 1.2 billion people, forget the dinky, and the economic scientists who voice we two which we will never accept, because our Preamble and Directive principle of state Policy does not say so. No problem, if the rich are become richer. We need more wealth. Indian millionaires will have their wealth grow by a whopping 405% over the next decade. India is expected to overtake United States in terms of highest per capita wealth among millionaires with US $ 4.25 million. Indias total millionaire households are expected to be around 0.69 million. When the Banks in India raised the interest rates, at least 12 times in the last 18 months to counter headline inflation which created inflation ballooning, and the ordinary will have to bear the high, higher and highest interest rates, our Corporates can borrow up to $ 30 billion from the External Market, and in the first six months of the current fiscal alone, the drawal was almost $20 billion and this money in valuable Foreign exchange was used to pay Rupee expenditure of these Corporate Companies, call them blue chip, navaratna, or what ever you please. We have already encashed $ 4.12 billion from the US Treasury bonds between April, May and June, 2011 and at the end of Q1, Q2 we have decided to borrow further Rs 52,500 Crs to match our income which got depleted by the small savings, expected to garner Rs 25,000 Cr, saw a withdrawal of Rs 35,000 Cr; we planned a disinvestment of Rs 40,000 Cr. But neither time nor economy is ripe enough for it, so we put the proposal on hold. The weak dollar is firming up against the Rupee, while Rupee rate has been devaluing, comfort Exporters, but weak for the Country, as BoP is rather high. But while every sector is making growth oriented programmes, we had another sensation breaking news. It is not Sachin Tendulkars 100 ton, but the master stroke of our thinking economists who can tinker with economics adroitly. The revelation will undoubtedly surprise the conventional economists and social scientists. India was shining when NDA stepped down and handed over power to UPAI in a golden platter. India is still shinning. The poor in India has come down and expectedly if you are spending Rs 32/- per day per individual, you are Poor. However, if you have the capability to spend Rs 33/per day per individual, you are Above the Poverty Line. Remember, food inflation is hovering around nearly 10%, headline inflation is also inching to the mark, all vegetables, are costly like Onions, carrot, potatoes, cabbage, radish,

tomatoes etc while the prices of egg, fish, meat, etc have gone up astronomically. Do not think, it is diatribe? Two chapattis (rotis) costs Rs 12/and sabhji costs Rs 4/- making it Rs 16/-, one cup of tea costs Rs 5/-; Rice/Roti with little sabhji, Rs 15/- butter milk Rs 5/-, evening tea Rs 5/- night one roti + 1 veg dish Rs 10/- and one banana Rs 3/- ; all come to Rs 59/-. Think it is made in the house. You require choli, wood, kerosene, rice, dhal, vegetables, milk, coffe/tea powder, todar dhal, edible oil, soap for cleaning, dress, etc. We are not talking about aerated beverage, nor are we talking about soup, pickle, lazzi, diary products, LPG, Hamburg, Bread sandwich, puri masala, dosa-idli sambhar which costs near Jantar mandar (New Delhi) instant canteens Rs 25/per plate, or thali which is a minimum Rs 40/- per plate. If cost of living had not gone up, why was Central DAs increased based on Cost of Living Index? While the Planning apparatus has worked out Rs 32/- as BPL, and Rs 33/APL, it condensed the household as Four, which would entail an expenditure for 4, in a urban area, at Rs 32x4=Rs 128/= and expenses in a month of 30 days will be 128x30x12= Rs 46,080/- per annum, and for APL Rs 47,520/-. If limiting the spending of BPL @ Rs 32/- per person, and four to form a family, the calculation looks unrealistic. It is a most unscientific an explanation ever, when the countrys Rupee has lost its purchasing power by 80-85%. National Sample Survey Organization (Base: Mixed Recall period consumption) arrived at the number of BPL between 6.5 Cr and 8.07 Cr, and on socio economic parameters, the figures went up from 62.5 million to 107 million. Four out of ten in the rural areas and 3 out of ten in the urban area fell under the BPL. (Suresh Tendulkar) The figures provided by NCAER/Plg Commission/State Statistics did not match. Sexana Panel suggested a new methodology for arriving at the no of BPL. With Plg Commission determination of rate of spending as criteria for BPL, what is the cost of one square meal, which Food Security Programme is going to offer? Cost to the Government is not the standard but the cost of one square meal/a day is what should be worked out. Will this dole obliterate poverty? The betterment of economy does not mean a higher growth of GDP alone while the majority of the Poor among the weak economic downtrodden does not get a square meal a day, and have to depend upon contaminated water to drink. The squalor of the poor needs a dressing up. Not the figures. -o-o-o-o-o-

Better late than Never Many people believe that their best creative days are behind them -- that they could have accomplished great things if only they had started sooner and that they are "too old" to take on a big, hairy project.

Try to get a whiff of what some extraordinary people accomplished late in life. You may not be a Michelangelo or Stradivarius, but so what? You can still accomplish miracles. All you need to do is begin (and let go of the thought that "it's too late.") Nothing is late to make a new beginning. Michelangelo designed the dome in St Peters basilica when he was 72 years old; Frank Lloyd Wright designed Guggenheim Musuem while he was 91; Gold Meir became Prime Minister of Isreal at 72, Peter Drucker wrote the Management Change for Turbulent Times at 89, Gandhiji won freedom for India when he was 77; Nelson Mandela ascended the President ship of South Africa at 75(Courtesy: The Creative Age by Gane Cohen) My only Love sprung from my only hate! Too early seen, unknown, known too late! Prodigious birth of Love it is to me, that I must love a loathed. (Romeo & Juliet by William Shakespeare). Juliet is saying, My only love springs from my only hate! I saw him too early when I didnt know him, and now I realize who he is too late... We learn about ancient cultures in our History classes. Most of the old civilizations are gone. Some have left little behind except ruins and rubble. What happened? Where are the people, their music and ideas? Why are they nothing more today than a collection of stones visited by tourists, anthropologists and curious historians? The answer, of course, is not the same the world over. But Arnold Toynbee, in his work The Study of History (1987), says that the great lesson of history is this: civilizations that changed when confronted with challenges thrived. Those that did not change died. In other words, when life got hard, it killed off those who didn't make needed changes. The key to survival is often about "change." What about us and the need to change in contemporary ages. What about all of us? It's good to accept ourselves as we are, but when an unhealthy attitude or a destructive behavior gets in the way, when we wish we could change something about ourselves, we had better change. People who embrace change thrive; those who resist it do not shine! If you have been waiting for a propitious time to make that needed change, this may be apt moment to usher in that change. It is never too late to be the person you might have been. It's never too late to be happy. It's never too late to do something different or to do something better. It's never too late to change a habit. It's never too late to do anything that brings a sustainable change.

Begin making that necessary change today. Then tomorrow, and every tomorrow thereafter, can truly be different. All of us feel in one way or the other that if we are given a new life, we could start fresh altogether new. It is Too late now to alter our life Course feel most of us who missed one or the other opportunity. A school drops out rues his decision when in his mid life he does not get good jobs. I wish I could go back to School to study, he laments. But he consoles himself saying, it is too late now. Somebody who had drinking problem wanted to conquer alcoholism and begin again. But, she was affected by an incurable disease and so he felt that it is too late now. When two thick friends break away, both do not take the initiative to hold out an olive branch. Then the rift becomes unrepirable. It is too late to patch up by making amends feel both of them. But this is escapism. It is never too late to begin anything. It has been said that, Nobody can go back and start a new beginning, but anyone can start today and make a new ending." The rest of your life is not yet written - it can be whatever you want it to be! -o-o-o-o-o-

Governments system has not changed from the Colonial Past UPA IIs most talked out mission to provide exclusive and independent Identification to every Indian was as unique as the programme to take computer literacy in every nook and corner of India through a technocrat Sam Patroda envisaged during Rajiv Gandhis prime Ministership. Indias technological face today is Nandan Nilekani, the most well known Indian technocrat who took Indian software to the

world through the firm founded by him along with Shri Narayana Murthy from scratch known as Infosys. Naturally, his enthusiasm to do something for the Country was quiet instantaneous. He was asked to head the Unique Identification Project from inception. A well known face in business circles and elite company, Nilekani must have thought that it was an easy task, already done, if the top layers of the Government like the Prime Minister and others persuaded him to invent a model which would take care of one document that would provide a unique identity card for every Indian. It was a far sighted step. In began Nilekani earnestly, consistently, with a purpose to turn his idea into a Product. Its introduction will have far reaching dimensions. Wide acceptability of the UID would help people to identity themselves instead of having multiple identity cards which may not have all over acceptance. After having done the preliminary, including creating software and putting it on-line with the Computer in Yojaana Bhavan, the team led by Nilekani estimated the cost to the Government at Rs 14,841 Cr and requested for ear-marked outlay from the 12th Five Year Plan slated to commence from the sun rise of April 1, 2012. The Planning Commission who was the mother department of UIDAI was the first to create a turf War; it wanted financial control over the funding of UIDAI, and insisted on placing an Integrated Accounts department which will monitor demands and undertake implementation by routing correspondence with Planning Commission and not directly routing requests, file papers, wants to the Finance Secretary, directly. Any direct action which required speedy execution was put under a column. Home Ministry came into the picture raising objections on the reliability of the Unique Identification Number, and insisted on cross checking for duplication as Security angle was involved. This would result in procrastination. Reserve Bank of Indias last straw that UNIDAI would not suffice as a document to open Bank accounts or verification proof has put a big question mark over the utility of the Project itself. How will the project take off, if the concerned Ministries who cannot devise its own methodology to evolve a fool-proof mechanism where to kill a project which had all the projected queries to the reservations.
It was expected. One under Secretary can torpedo the entire Scheme of the government proposes by putting many questions, or probing questions. With Right to Information Act in place, it is for anybody to get the noting to establish that Government went out of the way to placate somebody or gave extra importance to a Scheme. I was appointed as a Consultant on such terms and conditions with a Job description, and my performance was audited by an autonomous body which was under one of the Ministries at Udyog Bhavan, New Delhi. The Ministry used me at the slightest pretext, made me reply Parliamentary questions, and give inferences and ideas requests made by PMO

asking the Ministry to process a request, etc. I was also responsible for preparing a Scheme, presenting it before various Ministries including Planning Commission, answered insipid queries raised by other Ministries, amend the Scheme based on norms specified by other Ministries, attend in person the Expenditure Finance Committee meeting which is exclusive to Secretary, Jt Secretary of the Ministry only, etc to argue about the Scheme authored by me . The Scheme was approved by the Cabinet Committee on Economic Affairs headed by the Prime Minister. I had brought the industry under the various Schemes of the Commerce Ministry, made their projects eligible for Duty Drawback, and got over Rs 1.5 Cr released for organizing a reverse buyer-seller meet which saw participation from 120 business visitors. Now, my job with the different ministries was appreciated and I started getting importance. After 3 years, the Government asked the autonomous body as to under what authority they appointed me, and their Internal Finance department, whose officials I would have met at least 2 dozen times to answer a volley of doubts, concluded that my Contract appointment was unauthorized. Government of India and its officials can do anything under the sun, which cannot be finite and depended upon. They quoted an irrelevant and outdated clause to refuse me fair compensation for the Job I did. When I saw the contradictions surfacing on various issues like the administrative note of Finance Ministry, affidavit of Planning Commission, many other notings by officials on files which are available on the Public domain show that intelligence and sincerity is not a virtue of the various departments of South bloc, North bloc, Krishi bhavan, Nirman Bhavan, Yojana Bhavan, Sanchar Bhavan, or any bhavans in Delhi. A man publicized to the hilt by the media, for the highly pompous schmee to make available a single identity card which would serve all purpose, should have been put to the embarrassment of this nature by the modern day babus who still live in the colonial Past.

-o-o-o-o-o-oEconomy growing, (or) are we growing?

We see the inflation is growing at a geometrical pace, with growth rate plummeting giv9ng rise to the suspicion Indian economy would hit double-dip in a matter of months. The Food price inflation @ 9.13%, fuel price index @ 14.69%, Primary articles index @ 11.43%, with a dozen times alteration of interest rates in 18 months to combat head line inflation which hovered around 9.78%, the highest in the calendar year has turned our 11th Plan projection at the terminal year coming down disastrously to 7.2 to 7.5%. The headline inflation is twice the Central Banks comfort level. RBI has reached the tip end of its tightening cycle. Yet it has not been able to combat inflation. Slow growth continues. Unused capacity is around 50% which may go up. Government inertia in tackling economic issues on a war footing has taken a beat seat with the Government at the receiving end and all the energy is spent on salvaging the lost credibility. Dr Manmohan Singh was an outstanding Finance Minister of India, because he took decisive decision producing crucial results which shut the mouths of his critics. Today, he follows the policy of Narasihma Rao that taking no important decisive action appropriately will solve the problem automatically. 2 G no decision,

CWG delayed action, Cash-for-vote-scam wavering decision, 2G letter of Finance Minister reviewing the process of 2 G licensing, he did not see the letter. To all the naysayer who think the people do not have the power to make the change, I say take a look at history and how humankind has overcome its obstacles to progress with each new step. Mankind is now teetering between the brink and the dawn of a new renaissance. A new renaissance is coming because mankind is about to free itself from the chains of needless debt that are holding humanity back. We have UPA II, a marriage of unwilling parties who have formed a loose coalition with different priorities and disarrayed opinions, different economic pills, contrasting methodologies. Today, the Prime minister is not in command; he is overtaken by Political satraps who wield the power of the Government. Coalition demands portfolios, forget their competence to handle them. Forget the manifesto. Nobody knows what is written there. Flag ship programmes of UPA, I do not think any government officer in India can reveal them forget its proper implementation. A senior officer of the Jt Director rank in an autonomous organization under Govt asked me which the flagship programmes are. In the 2 G issue, every body says revenue is lost, governments notional loss is terrible. What is the Policy of the Government towards the pricing issue? Do they want capital income or recurring income spread over budgets? Do they want to make money at one go with the fiscal deficit in mind? Adjustment to bring down the fiscal deficit. Auctions. Would the Government have got the money specified, if the product had not sold like it did after the Award? 3 G Spectrum got a windfall for the government because of the success of 2 G Spectrum and not because 2 G Spectrum by itself would have marshaled the amount notionally worked out by experts. 2 G is a gold mine if it has a commercial price. When it was given, it looks as though its cost at the market based on value was not scientifically calculated before the Policy was adopted. It would be like V K R V Raos definition for calculating Per capita income, which was a good exercise in his era! You need to be in the Present. Dont take tomorrows prices today. The conditions as obtaining then, the income from taxation of telecom companies who are into 2 G is a continous flow of money into the coffers of the government. Not capital income. It is recurring income. There was a spread of 2 G Spectrum across India. The item being sparse, limited, having greater mobility, its demand even in the remote villages, pushed up its demand and its price. Now, another question that needs answer is, was there a quid pro quo in the sale of 2 G Spectrum? Did the actors get paid back in cash or kind? CBI can easily locate it and name the location. It cannot vanish into thin air. If Raja monetarily benefited, he should be punished. Same with others. Anybody is presumed to be innocent until proved guilty, this is the essence of Indian Crminal Procedure Code. If Chidambaram has realized undue favours, he should be penalized. But he was at best the Finance Minister who should look at the income: expenditure. DoT should have justified its FCFS on the basis of mathematical and economical reasoning. FM and PM should have insisted on that. It is here that they have shrieked their responsibility. It was the NDA who gave life to this Scheme. UPA continued its Policy. In disinvestment, because Hotel Centur was purchased by Tulip at a low price and sold for astronomical price in a matter of months, can you say Arun Shourie made some cheap

bucks? He is respected and no body in the Opposition will also say a word against such a upright minister. 2 G should not be viewed in isolation. Government Policy on Spectrum needs to be highlighted by concrete records or Cabinet notes. Why it was not auctioned? Why was it given as FCFS basis? Are the Ministers involved receive any financial or other benefits as a reward for service rendered? India is dithering. Indias dream growth is a saga of the Past. We are the fastest emerging economy of the World is a myth rather than a reality. Most of the people who follow the economic situation in the Country are very well aware that the Government, due to alarming expenditure and reduced income, may have to resort to borrowing which will result in fiscal deficit going up. This has been voiced by Shri C Rangarajan, PMs Economic advisor. The over-burdened interest rates which have halted manufacturing activity because of high borrowing; its costs both in the government and private sector will go up, banks which are dealing bond portfolios will suffer because of higher yields, and banks will be constrained to release more liquidity into the system which will stoke inflation. Government's disinvestment programme (Rs 40,000 Cr) is blank. Small savings against estimated Rs 24,000 Cr sees dip by Rs 35,000 Cr, and the diff in borrowing estimated at Rs 1.67 lakhs in the budget will go up to Rs 2.2 lakh. In order to placate the Corporate lobby, government has eased the External Commercial Borrowing limits and enhanced it to US $ 30 billion against $ 20 billion, while in the first 6 months, Corporates borrowed $ 20 billion which was pushed into the Indian liquidity for dealing in Rupee transactions. During March 2011 to May 2011, the Government withdrew US $ 4.2 billion which reduced India's exposure in US Treasury bonds to $ 37.8 billion (from $ 41 billion). Where did it go? The fiscal deficit is predicted to be 5.5% by experts, but a conservative estimate puts it at 7-7.2%. In the first five months of the current fiscal, the fiscal deficit has overshot by 66.3% making it vulnerable to cross the budgeted 4.2%. Software industry, whose dependence on the American market is formidable, is in a shock. The promoters of Indias top software company have retired or resigned to move to greener pastures. Why? Only book orders continue to be executed with no firm new orders being registered. The same thing is expected of new economy sectors. The export blitz reported was US $ 252 billion in 2010-11 and the Commerce Ministry is hopeful of touching $ 450 billion by 2013-14 given the grim conditions of world order. The Foreign Exchange Reserves and External debt in Q1 showed 100:79.6 with external debt at 317 billion and FER being $ 312.707 as on Sept 23, 2011. Short term debt, external commercial borrowing and surge in import could expand the short fall unwieldy. There was a North-South divide. As trade flows in the developing countries have emerged to grow at a faster pace, south- south trade equations have undergone vast changes in the external and domestic landscape. According to a transcript, the Indian domestic market has been vastly under the grip of China, as its bi-lateral trade as well as through dumping it has increased its presence considerably in the Indian peninsula. China and India are likely to be economic movers, it has been claimed, but instead it seems BRCC (Brazil, Russia, China and China) instead of the oft-quoted BRIC (Brazil, Russia, India and China). Domestic market is heavily dependent on unscrupulous imports (including in food) and Indian domestic market seems to be driven and covered well by the Chinese Dragon while Indias nimble elephant slowly limbs.

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Has Indias dream growth ended as predicted by noted economist Shri Jha in his column in some newspapers? Question becomes strident as economy is sliding towards its worst curve. Awkward BoP position would deface the effaced growth which from double digits is slipping to 7.5%. The Path drivers and Path finders are at the cross roads leading them to no highway except to the alleys. Long term vision has become bleak while long term drive seems to be unexpectedly slow and off the mark. Reserve Bank of India and the Planning Commission has no clue to rid headline inflation which is about to cross double-digits. Food inflation is on the threshold of double digits. Manufacturing output is very low, as Credit has become costly, inputs unavailable with idle capacity hovering around 55%. Government and the Economic divisions which drive Indian economy seem to be insensitive to peoples problems. Otherwise planning commission would not fix Rs 32/day as bench-mark to determine Poverty. The Opposition parties seem to be more political and instead should concentrate on evolution of an economic alternative that will fix the screws of the Indian economy instead of politicking 100% of their time. The ruling party has become a theorizing party, with the Great past as its halo, instead of cleaning up the mess in the present and planning for the future. The Opposition seems no better. Economic Boom, Zoom and Doom can trigger a Great Depression from which India might not be able to come out and leverage as the other developing countries can strike us hard with our poor population growing menacingly without any contraction. We have to sort out the rudimentary, basic, structural economic issues more prudently. We need to set a target for growth and we need to achieve them. After spending Crores of Rupees, if we devise explanations to justify the shortfalls and pitfalls, India just cannot afford such a situation. India had deep rooted scientific past and sensible economic theories which had made it a most sought out country, going by its trade and economic past. Space-time continuum was enunciated by Albert Einstein in 1905 while some sacred religious texts in Sanskrit talked about the same theory two hundred years ago! We have enough literature on modern Economics given to us by the great sages of India which can be followed instead of abstract copying of Western theories of Economies.

-o-o-o-o-o-o-o

Is our growth rates escalated or fudged?

Where is Indian economy heading? Is it stable? Moving upward or sliding downward? Gross Domestic Product which was to attain double digits by the end of 11th Plan, after many changes, alterations, touched 7.8% as against 8.3% of 2010-11 and 9.6% of 2006-7. The Index of Industrial Production (IIP) had been showing a downhill growth (base 2004-5=100) while the growth percentage in manufacturing has been sliding ever since Dec 2010. To be specific, automobile sector which produced a growth rate of 30% a few years ago posted 4.3% last fiscal. Recently, the Governor of the Reserve Bank of India lamented that policy prescriptions of the apex bank provide ineffective,

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because of the bewildering quality of data) has confounded confusions. Though the mood of the country is optimistic, no body has any clarity on its future. RBI has raised the interest rates (they had been doing this rather ritually) citing a] inflation b] food inflation c] international economic turmoil, but has no prescriptions for controlling the continued inflation rate growing up without respite. The Planning Commission, which pilot schemes to deliver growth through Plans are in a bind because of the blind assumption of theories? Every time, it comes with a growth rate to discard it in every alternate month and announcing a new growth rate which shows a reduced figure. We find that after spending Crores of Rupees, Indian agriculture seems to stand at the cross roads. Its recorded growth rate during one of the years of the 11th Plan was -0.1%. The planned growth rate was 4% against which huge outlay was made. From 2004, the Agriculture Ministry is headed by the same minister who should have taken responsibility. But he blames rains, monsoon, and draught, for deficit agri growth. If the Prime Minister of the day cannot enforce accountability of the Honble Minister of Agriculture due to coalition dharma, could he not exercise the constitutional dharma? The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been responsible for higher food consumption, contends the Government. As poor people are eating more, the prices of food stuffs have gone high and hence food inflation argues Government economists. The Scheme has an allotment of around Rs 40,000 Cr annually, which is split into 60:40 ratio, 60% for food and 40% for materials. Though the laudable objective was to provide employment for 100 days at the least, not more than 40 days of labour, presently, is provided to an individual. Central Statistics Organization estimated that Rs 16.20 lakh Cr for consumption expenditure of food. Even assuming that the beneficiaries used all the Rs 28,000 Cr for food, it works to 1.7%, showing that these people do not cause any upheaval on supply constraints in agriculture. Supply side and cost factors are responsible for high inflation in food. We import around 20% of our pulse requirement and 70% of edible oils which results in international prices going up to cater to Indias supply constraints. Hence imported inflation gets into our system. Further, 40% of the crop is wasted due to absence of logistic support. Coming to the Yojana Bhavan, they ear-mark money without knowing the ground reality. To illustrate a point, after spending Crores of Rupees, distribution of essential commodities at a very low price through PDS, we find the number of BPL Families is increasing YoY. The population of BPL may increase, but to say the number of BPL families is increasing is mysterious. There is something wrong, somewhere? This arithmetic needs to be explained. Economic Development initiatives differ from Economic Growth. Economic Growth is one aspect of economic development. Economic growth is a policy intervention. Economic Development is static theory that documents the state of economy at a certain time. Rising interest rates scenario has seen the money loosing its value. Inflation has reduced real returns, and our economic experts in the North Bloc are wondering how to tame inflation. Prime

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Minister candidly admitted as much. All the reasons why economic growth has gone hay wire is due to negative global cues, debt restructuring by Greece, weak world wide economic data are a few among the number of reasons for putting the experts in a fix(contends the experts of North Bloc). American market is universal. If anything goes wrong there, world economy is in bubbles. Inflation causes uncertainty about future prices, interest rates, exchange rates, promoting risks, discouraging trade. Inflation was around 9% and food inflation was in the neighborhood of double digits expected to escalate to double digits. In spite of repeated interest rate hikes, inflation rates have been consistently going up showing no signs of slowing down. Inflation brings down the Net Asset Value (NAV) of funds like Securities. Consistent high inflation has been impeding growth. Gross Domestic Savings which constituted 10.3% of GDP (1950-55) went up to 36.4% (2006-7) mainly due to active interest rates and anti inflation policies resulting in higher household financial savings which rose from 1.6% of the GDP to 10.6% during this period. Public sector savings declined from 1.7 %( 1950-55) to 0.6 %( 2003-4) which saw Public investment giving way to Private investment in terms of GDP. Foreign and domestic MNCs, FDI, SEZ concept was responsible for rapid capital formation and accumulation. Growth was a casual factor in Indias capital accumulation. Money supply falls as interest rates are high, which discourages savings. Economic growth is reduced because economy needs certain level of Savings to finance investments which boost economic growth. Inflation and high interest rates disrupt the operations of a nations financial institutions and discourage its integration with the rest of the Markets. The growth surge in India has been on a low from 9.5% in 2005-7, 6.7 %( 2008-9). 7.4 %( 2009-10). Was it neo-classical (a la ROBERT M Solow & T W Swan Concept?) which emphasized the role of Savings- translated into investment, in economic growth? B) Was it demand driven (John Maynard Keynes theory) where x amount of expenditure even if not backed by Savings, would lead to a multiple yx of income? C) Was it economic growth and rising incomes that triggered both savings, investment (Arthur W Lewis, Capitalist surplus concept)? D) Or was it technology innovation that shifted up the growth path trajectory and endogenised technical change (Paul Romer hypothesis)? E) Or was it Manmohanmics? No great economy is generated without innovation or invention and embedding them in the growth process. This is Indias missing link (Parthasarathi Shome) In India, presently, standard of growth is measured by the Gross Domestic product . Dr Amrtya Sen, Nobel Prize recipient believed that Human Development is the real measure for progress compared to the material output. Human development Index, according to him, is the composite index of achievements in human development. Shri Mahubul Huq had also pleaded for Human development growth to be considered as a measure for progress and growth of a Country.

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Consumption is proving to be a major force driving Indias GDP growth. Private sector output is measured by the Price, people are prepared to pay. Governments output is measured by its Costs. GDP increase is proportional to its spending-productive/non productive. When VI Pay Commission pay was released, it increased the growth rate, even though it only created higher disposable incomes in the hands of the Government servants who seldom used it towards saving it or in investment. We order Planes. We conceive projects. These costs are factored in the GDP. Most of the budgets of projects get plagued by huge cost overruns which sometimes may lead to its cancellation. These are added to the GDP. Public funding stimulus programme are effective means of raising the percentage of GDP. Their costs are simply added to the output. In order to shelter importers of edible oil whose import landing prices are stimulus imports with tax cuts, which nevertheless increase consumption though the income with profits, is garnered by another Country? This when factored in the GDP allows it to grow in its percentage. Stimulus in this case, has fuelled growth in importing countries rather than the Country of import. Government spending stimulates economic growth. This mathematical engineered economic growth in the GDP, does not translate to Economic welfare, though it enlarges the percentage of GDP growth. Private Sector initiatives would have created wealth at lower cost and generated greater output and provided large scale employment, none of which is provided by the stimulus consumer spending through import with tax cuts. In Economics, most things created are produced for sale, and sold. Therefore, measuring the total expenditure of money used to buy things is a way of measuring production. This is known as the expenditure method of calculating GDP. Note that if you knit yourself a sweater, it is production but does not get counted as GDP because it is never sold. Sweater-knitting is a small part of the economy, but if one counts some major activities such as child-rearing (generally unpaid) as production, GDP ceases to be an accurate indicator of production. Similarly, if there is a long term shift from non-market provision of services (for example cooking, cleaning, child rearing, do-it yourself repairs) to market provision of services, then this trend toward increased market provision of services may mask a dramatic decrease in actual domestic production, resulting in overly optimistic and inflated reported GDP. This is particularly a problem for economies which have shifted from production economies to service economies. Gross Domestic product refers to the market value of all final goods and services produced in a Country in a given period. The GDP can be measured by a) income approach b) Expenditure approach c) Product or output method. India has been adhering to the Expenditure approach for calculating the Gross Domestic Prdouce. GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X M).

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Y = C + I + G + (X M) Here is a description of each GDP component: C (consumption) is normally the largest GDP component in the economy, consisting of private (household final consumption expenditure) in the economy. These personal expenditures fall under one of the following categories: durable goods, non-durable goods, and services. Examples include food, rent, jewelry, gasoline, and medical expenses but do not include the purchase of new housing. I (investment) include business investment in equipments for example and do not include exchanges of existing assets. Examples include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial products. Buying financial products is classed as 'saving', as opposed to investment. This avoids double-counting: if one buys shares in a company, and the company uses the money received to buy plant, equipment, etc., the amount will be counted toward GDP when the company spends the money on those things; to also count it when one gives it to the company would be to count two times an amount that only corresponds to one group of products. Buying bonds or stocks is a swapping of deeds, a transfer of claims on future production, not directly an expenditure on products. G (government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits. X (exports) represents gross exports. GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added. M (imports) represents gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic. Fully equivalent definition is that GDP (Y) is the sum of final consumption expenditure (FCE), gross capital formation (GCF), and net exports (X M). Y = FCE + GCF+ (X M) FCE can then be further broken down by three sectors (households, governments and non-profit institutions serving households) and GCF by five sectors (non-financial corporations, financial corporations, households, governments and non-profit institutions serving households). The advantage of this second definition is that expenditure is

15

systematically broken down, firstly, by type of final use (final consumption or capital formation) and, secondly, by sectors making the expenditure, whereas the first definition partly follows a mixed delimitation concept by type of final use and sector. Note that C, G, and I are expenditures on final goods and services; expenditures on intermediate goods and services do not count. (Intermediate goods and Services are those used by businesses to produce other goods and services within the accounting year.) In exports, transaction costs are about 40-45%, with inefficient turnaround time which upsets the delivery schedule. Unorganized sector output which has is regionalized and geographically centric does not fully figure in the GDP. Keynesian theory which got reflected during World War II got America out of depression which suggests that bigger the stimulus, greater is the percentage of GDP growth, which solves economic problems. Keynes preferred to split the general consumption to two parts, private sector consumption and public sector (government) spending. Government consumption can be treated as exogenous so that different government spending can be brought within a meaningful macro economic framework. Persistent inflation is regarded as a Post -World War II phenomenon, which suggests a positive co-relation between inflation and growth. Under the Aggregate Supply- Aggregate Demand framework, there is positive relationship between Inflation and Growth. As growth increased, so did inflation. AS curve is upward sloping rather than vertical which is a critical feature? If AS curve is vertical, changes in the demand side of the economy affects only prices. There is positive co-relation between personal savings and rate of increase of inflation. Inflation co-relates to a rise in prices as measured by Consumer Price Index. A rise in price means inflation is on the run. Price rise because consumers have a higher income and more money is in circulation. If the money supply extends too quickly, prices escalate and peoples savings worth comes down. Economists like Paul Krugman, has articulated the position of Keynes on GDP based on government sending. When expanded as a lousy growth, slower than population growth, then the growth rate achieved is negligible. Gross private Product (GPP) which involves the total output of the private sector which has been investing overtaking the Public investment in cardinal sectors of the economy thanks to its release from government monopoly and Governments spending on schemes which have utility and populist value, cannot determine the growth rate of the Country. However, measuring Private enterprise output in terms of its price and governments spending becomes the criteria to measure growth rate in GDP, would it indicate the correct measurement of growth? Keynes formulated his thesis in the context of a closed economy. Neither massive stimuli nor austerity budget is likely to produce much needed growth. A lower export to GDP ratio would indicate that exports contribute to a lesser amount to the GDP and greater portion of economic growth will be internationally driven

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instead of internally driven or consumer driven. Without growth, debt/GDP ratio will keep worsening. Conclusion: There are many Economists who share the view that Expenditure approach is not the realistic way to calculate GDP. It is not an accurate measure to establish the growth rate in an economy. The present system needs review.

The shy and the mute middle-class

The middle class is any class of people in the middle of a societal hierarchy. In Weberian socio-economic terms, the middle class is the broad group of people in contemporary society who fall socio-economically between the working class and upper class. Could the Great Indian Middle Class be the Great Indian Mythical Class? A persistent source of confusion surrounding the term "middle class" derives predominantly from there being no set criteria for such a definition. From an economic perspective, for example, members of the middle class do not necessarily fall in the middle of a society's income distribution. Instead, middle class salaries tend to be determined by middle class occupations, which in turn are attained by means of middle class values. Thus, individuals who might fall in the middle ground on a societal hierarchy as defined by sociologists do not necessarily fall into a middle ground on an economic hierarchy as defined by economists. As a result, intuitive colloquial and journalistic usage of the term casts a wide net and does not necessarily coincide with an academic sociological or economic definition. National Council of Applied Economic Research (NCAER) has held that a family with an annual income between Rs 3.4 lakhs and Rs 17 lakhs (at 200910 price levels) falls in the middle-class category. Applying this arithmetic, NCAER hold that the middle-class households would be 53.3 million (267

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million people). This unwieldy definition base puts the statistics to ridicule. The same way, Planning Commission calculated poverty as per day spending equivalent to Rs 32/- in urban and Rs 26/- in rural area. The absurd methodology adopted by these bodies to calculate the basic statistics is to arrive at a high figure in the case of middle-class and a lower figure at the Poor category of the Population. Growth rate has never been able to reduce the unemployment rate which stood at 9.4%(2009-10) while average quarterly growth rate has been averaging around 7.45 % between 2000-11, even though in Q3 of 2003, the growth was 11.8%, Q3 of 2002 was 1.6%. Rob Peter to pay Paul. This seems to be the economic philosophy of the Government. In spite of persistent, consistent, aimless designed social security programmes with outlay of Rs 1 lakh Crores have been ear-marked end up neither incomplete with neither neither the physical nor the monetary targets accomplished. The Policy editors have narcissist temperament, deceptive assumptions and outrageous greed. Against laudable objectives with which the Scheme was ambitionally lodged the Result is dismal emptiness, creating an un-necessary class war. The Poor continues to be poor, and the generation gap sees another poor taking over from his ancestor (Munishi Premchands famous story), when our well worked Planning Economics take us half way to zero, mathematics no longer work as predicted by our Vice Chairman of the Planning Commission. Horizontal organizing, democratic decision making challenges, technocratic governance driven by credentialed experts, takes Indian economy to the dark jungle economy of wealth for all! The term middle-class is a classical example of a semantic plot! It is a widely misused term. People of the cattle class, legacy of the Victorian era, is it not linguistic outrage? The rich are busy counting their cashes. The Poor, darling of the political class, social scientists and so called intelligentsia, while, the middle-class forlorn and uncared is without a Patron or a God-father but increasingly, the Finance Minister wants him to buckle his shoes by making him pay dear. His salary is cut in the mode of Tax deducted at source, service tax clamped while he is lax in collecting taxes from his favourite Corporates who enjoy plethora of tax concessions and benefits and in case of trouble can approach the settlement commission The income earned by the Cricket Board which vulgarly displays wealth is exempt from taxes. What public purpose they serve, only the North Block die herds know. Tap funds from these people who figure in Forbes list, increase the tax slab for the high rich, those who build houses worth Rs 250 Cr or something less. Float high interest Government bonds and compulsorily make these corporate houses to purchase them, so that the additional income earned can be used for reducing fiscal

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deficit. World Bank has pointed out that Indian Government is very liberal with lo only some w taxation base at the higher income slab- only some 15-16% of the GDP is collected as direct taxes, mostly they are the middle class who can be meddled in any way to shell out, as compared to 25-40% in developed countries, enough taxes from the taxable lot. But the Corporate rich, who play the victim card, say that the jealous Indian Middle mentality in them feel that they want to take somebody elses Cadillac for nothing! In India, the middle class is a neglected constituency. Hike, hike, hike in the domestic interest rate on a regular level, while allowing the Corporates the luxury of availing Credit from External markets at low rates, increasing the prices of petrol incessantly, not because of high crude world prices but for making the Public sector navaratna bulge their profits, tinkering with indirect taxes, and reducing the taxable portion of income from the Corporates while hiking the rate for the middle-class. The population share of the rich is shrinking, the Poor is shrinking but the middle-class is growing. This augurs well for the prophets of high, higher, highest growth in the Indian Economy.

-o-o-o-o-o-o-o-o-o-o The knowledgeable peers who lack Imagination - Planning Commission

We have noblesse oblige stalwarts in the Planning Commission who can veer out theories that will astonish conventional Economic doctrines. They dont draw distinction between Schemes and Reforms, yet give all sorts of percentages based on weak computational econometrics about growth figures. They had a decisive growth figure of Indias economy at the end of the 11th Five Year Plan with over accomplishment of 11%. They revised the figures more than once, and eventually, it may post 6.8% if nothing untoward happens between now and March 2012. They made a sure forecast that headline inflation would ease to around 6% by Dec 2010. Reserve Bank of India further stipulated that headline inflation would fall to 5.5%by end-March 2011. Now they have committed a Himalayan monumental blunder. According to these wise men in theYojana Bhavan, a person earning Rs 33/- per day would be above the Poverty line, while they benchmarked Rs 32/- as the receipt for fixing BPL. The great Scientist who taught us the Theory of Relativity (Dr Albert Einstein) and whose theory is being put to doubt by the Scientists discovering that matter travels faster than light said, Imagination is more important than knowledge; perhaps our great planners should be imaginative. It is not enough, if computational econometrics and planning matrices like Average Directional Index (ADX) are applied using an indicator in technical analysis that shows the strength of a trend. If the indicator is wrong, the trend goes awry.

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All Plans that are scheduled are meant for the well being of the people. There must be no discrimination between the haves and have-nots. One half of our society guzzles aerated beverages while the other has to do with playful of muddled Water. The Government must provide safe pedestrian crossings to the real am admi with the over used financial inclusion, if the Country has to really progress. Rs 32 or Rs 33 spend per day will differentiate the Below poverty Line Card holder or APL, the latter being made ineligible for BPL Card which lets the poor to avail services like medical care for free. Plg Commission has filed an affidavit in the Supreme Court that Rs 965 per capita in urban area and Rs 781 per capita pm in the rural area, is the maximum limit for a person to be declared as BPL. Rs 32/- per day is less than a Dollar, and for spending for vegetables, milk, fruits. Cooking fuel, ration rice, conveyance, education, footwear, this would be grossly inadequate. Then there is the problem of Housing. Any decent accommodation in an urban area, semi plastered walls, tile roofs would further escalate his spending, which is not accounted for in the definition as benchmark for poverty. But the Planning Commission has worked out the economic parameters of four in a family, as the minimum standard and all of them are required to spent Rs 32/- each per day[ A monthly income for 4, would thus be Rs 4,824 per month in urban centres while for the rural maximum monthly spending should not exceed Rs 3,905 /-]. Per capita income at current prices is arrived at as Rs 44,345 (Rs 40,141 at factor cost), and if this combined value is taken, it is seen in an urban area, the per capita spending per family would be Rs 57,888/- and Rs 46,860/- in the rural area. However, limiting the spending to Rs 32/- per person, and assuming that all the four people supposed to form the definition of a family are earning looks unrealistic. If 1 person per family is taken as the standard, the calculation is absurd, and if the household level is defined as (minimum) 4 people, each spending Rs 32/- per day, looks unrealistic. Even if we opt for Rs 32x4= 128 per household as daily expenditure per household which consist of 1 father, mother, and 2 children, where is the income going to come in the rural area? In the urban area? BPL is defined by the maximum spending that a household incurs. How many poor people have an income of Rs 4,500/- per month? Assuming that a person spends for 30 days, his earning would be a monthly income, only if he is an organized set up. Most of the poor people earn daily wages, some have seasonal employment, and others depend upon temporary employment. But the analysis that has gone into the working depends on various assumptions and presumptions, which for a poor country like India cannot be taken as constant. There is heavy variation. It is a badly worked out exercise, which looks unscientific, without justification. Multi Dimensional Poverty Index (MPI) organized by Oxford Poverty & Human Development, UNDP initiative found 421 million MPI poor in Bihar, Chattisgarh, Jharkhand, MP, Orissa, Rajasthan, UP, W Bengal (in India) against 410 million in 26 poorest African countries put together [MPI assess poverty on deprivation of a host of key factors such as Education, health, nutrition, dwelling, at the household level which tend to reflect in assets and services]

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The Planning Commission had made it known that headline inflation would ease around to 6% by Dec 2010. RBI went one step further, and declared that headline inflation would shrink to 5.5% by end march 2011. They were off the market by 4% which indicated their error was around 80%. If this is the forecast estimation that is done by an expert body like the Planning Commission which revises the growth rates of GDP atleast 4/5 times, what could be said of the Planning projections and arithmetic which goes on to prepare a Plan. Interest rates is increased every month, a dozen since last March, the Petrol prices are also increased atleast 8/9 times during the last fiscal, causing an upward curve in the inflation growth. The aftershocks are more terrible as inflation rates have never come own. MNREGA, a job generation plans of the Government offers Rs 100/- per day per person for a minimum of 150 days. If Planning Commission is correct in its assessment, Rs 100/- can be split into 3 persons creating more man days thereby increasing the lofty goals of the Scheme. We see more and more creation of wealth among the wealthy. Indian millionaires will have their wealth grow by a whopping 405% over the next decade. India is expected to overtake United States in terms of highest per capita wealth among millionaires with US $ 4.25 million. Indias total millionaire households are expected to be around 0.69 million. National Sample Survey Organization (Base: Mixed Recall period consumption) arrived at the number of BPL between 6.5 Cr and 8.07 Cr, and on socio economic parameters, the figures went up from 62.5 million to 107 million. Four out of ten in the rural areas and 3 out of ten in the urban area fell under the BPL. (Suresh Tendulkar) The figures provided by NCAER/Plg Commission/State Statistics did not match. Sexana Panel suggested a new methodology for arriving at the number of BPLs. Why did Government raise the External Credit borrowing from US$ 20 billion in a year by US $ 10 billion to increase it to $ 30 billion per year? Is it not a fact that since Jan 2011 and July 2011, $ 19.3 billion was raised from the external market by Corporates? As part of the Foreign Exchange Reserves which is presently (Sept 16, 2011) is$ 316.76 billion, the Indian Government withdrew US $ 4.20 billion in 3 months by liquidating the US treasury Bonds to that extent which today stand at $ 37.9 billion? In a tight BoP position, ECB + imports which constitute 75% of crude oil imports when Rs 50= $ 1, what is going to be excess of amount that is payable on account of exchange risk? Is it not to help the Corporates which saw these big Chambers of Commerce saying no word on the monthly tinkering of the REPO, and revised REPO rates from 3.5 percentage points to 8.5 percentage points? Gold prices which were $ 1000 (2009) have crossed $ 1900 levels. From where is the money going to come from? With Plg Commission determination of rate of spending as criteria for BPL, what is the cost of one square meal, which Food Security Programme is going to offer? Cost to the Government is what Planning Commission should inform. One square meal per day, will it obliterate poverty?

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There is an Economic Advisory Council headed by Dr Rangarajan to advise the prime minister. It suggested re-orientation of the Finance Ministry and Planning Commission which is mandated to remain as an advisory body. Plg Commission would look after making an outlay for sectors, programmes for a 5-Year period taking the inputs and resources from the Finance Ministry which would be responsible for annual revenue allocation. Is Rangarajan panel finding less utility for the Planning Commission in an era where free market and free trade should drive the economic growth? The woof and warp of Indian economy would include taking the poor, deprived am admi to a higher standard of earning wages and living, so that India will grow to an economic super power with the BPL graduating to APL in real terms. If India has to grow, the poor in the village will have to attain higher standard of living. That is what the Preamble of the Constitution says of its People, who had unto themselves given this Constitution. It is a constitutional right of sustained living enshrined in the Indias Constitution, and people have a right to ask for it. We have today in India, doomsday Economic rule by the theory lurk Economists who are far out of reality. India has unique features, more, geographic and economic frames than that is visible on the surface. When the gong is good, every body tributes, when the going is to backwards, we move to the bullock cart age. The Planning Commission, emerged as a most powerful body, but little can be said about its performance, way ward laid back attitude, insipid outlook on an Economy which was forecast to be the most emerging economy of the third millennia. India is on the verge of a crucial fall, and the fall out will be a limping India, which may not regain momentum and equilibrium in the fast moving world economy. We have a weak PMO, which do not have inter-personnel and task master qualities. Most of the problems have been energized, and ha its beginning here. The administration disarray can have its origin in the corridors of South block Let us look at some of the incidents to get a feel of the governments (dis)unity. March 25, 2011 consolidated note cataloging the chronicle of events and the inference that Chidambaram could have done more is based on the hypothesis of the various elaborations of events and conclusions, which are interpretations and conclusions. This resulted in the sparring match between the governments top two ministers who were the eyes of the Government and uproar asking for the head of the Minister. The genesis to the whole cause of discomfort is the CAG Report which fixed the loss of CAG Scam at Rs 1.76 lakh Cr. The Opposition made it an issue, the media made it a greater issue, and the highest Court made it an issue. It set in motion proceedings which have rocked the government. In the case of this sort, loss is presumptive, imaginary or unreal. First and foremost was, 2 G spectrum was not known in India that widely. Market perception was there was a possible market but whether it would result in landslide sale could not have been anticipated. Secondly, the entire market was the rural centric. Now to jell the figures on an offer of S Tel who asked for a pan India license of Rs 13,752 Cr, and the price fetched by 3 G auction in May 2010 (2 G offering were made on January 10, 2008) amounting

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to Rs 1,02,497 Cr, the price of additional load of equity, mind you, not offloading the existing equity of Swam and Unitech (2008-9) fetched around Rs 9,000 Cr(USP was Spectrum as the mover of the share sale), cannot pre-fix the imaginary sale price of 2 G Spectrum. A realization of a Post event, cannot be equated with a back dated event, and economics does not run that way. Yet Audit fixed the loss at Rs 2,645 Cr while CAG Final report quantified the loss at Rs 1.76 lakh Cr. Was it deliberate, or did it have mathematical assumptions, or dissentions, should be first probed. Both the ruling party as well as the opposition should weigh the scales and do a independent honest exercise. Planning Commission seems to be creating definitions out of the sky. One Tendulkar Committee appointed by it set poverty cut off at Rs 20 per capita in urban area and Rs 12 per capita in rural area. The Commission, the Commission used to define poverty using minimum food intake criteria of 2,400 calories (rural) and 2,100 calories (urban). In 2004, 24% of the population was BPL according to this formula. Tendulkar definition which prescribed expenditure on food, education and housing, which was accepted by the Plg Commission, saw the figure of Below Poverty population to increase by 10% to make it 37%. The affidavit filed by the Plg Comm on 20-9-2011 says expenditure of Rs 965/pm (urban) and Rs 761/pm(rural) cannot be deemed Poor hence security schemes should not be provided to them. The rest, 32% of the population is targeted as Poor, whose annual income is Rs 4800 per month (urban), and Rs 4,000 (rural) with 5 in a family as unit. A Chawl costs Rs 1000/pm (Mumbai), subsidized monthly pass for BPL(at Bangalore) costs Rs 700/-, factoring this, the available balance with the BPL family in a urban area is Rs 3,000 pm. Government is presuming Education and Healthcare to be Free. Medicine costs, school books, have to borne by the families themselves. Poor households are on the rise. World Bank puts Poverty line as income of US $ 1.25. If this analogy was accepted, 41% of Indian families are in the Poverty line, while the Comm pegs it at 32%. It is for the wise in the ruling party and Opposition to demand the working from the Planning Commission Today crisis stem out from the fact that the political party which is governing the nation does not have second rung leadership. Prime minister being a non political person does not have the Political will. Opportunistic ministers are on one up-manship to show their rudder. Planning Commission is doing little planning these days and is more interested in creating problems than solutions. PMO also has people who do not do proper homework and do not vibe with the people to understand matters at grass root level. The States are on the reckoning as power bases, does everything to confront the Centre for the least small thing. This is not good. When re-organization of states on Nov 1, 1956, a written commitment was given by all the leaders of Andhra that a unified Andhra be created, even though Andhra state came into being in 1952 with Kurnol as headquarters, how could political parties go against a written promise? Bifurcation and Trifurcation of States will increase administrative expenditure, and you cannot split riverines, resources, cities. Prime Minister of India should wake to the dark reality. India cannot pay a price of drifting, when all the others are concentrating on creating a strong

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economy. A prosperous India has been the dream of our national leaders. Cheap politics have no place.

-o-o-o-o-o

The Petrol price Oligopoly?

see a whipsaw market performance, huge runaway inflation including core and food inflation, banks already high interest increased 13 times in the last 18 months, poor contribution of government sector banks in nation building, unfair credit/colossus saving rate policy which is not conducive to Saving, freezing of administered prices of petrol in June 2010 has seen greedy and competitative Oil companies raising petrol prices at least half a dozen times- these are myxovirus that hurt Indias economic mobility to the top as an emerging market. We also see a government which is insensitive to Public reaction .The salaried class is epitome of woes of escalating prices. Governments obsession with Growth rate, and reduction of fiscal deficit, as the main formula of public Policy, and privatization of all administered price regimes so as to reduce governments subsidy allocation, is a retrograde step contemplated by the Planning Commission to change the edifice of economic policy followed by the architects of Indian economic growth. Momentum of growth depend upon the increased output of manufactured companies who should be given a level playing field with the foreign investors, the high growth in exports (US $ 275 billion) added the Foreign Exchange Reserves, but the industrys perseverance to grow is cut in the bud by the insensitive support given by the Government with its oscillating Foreign policy which is self defeating. Gross Domestic Product is calculated on the Expenditure method, and thanks to the social sector schemes with huge outlays, excessive liquidity in the system creates inflation. Another factor that adds fuel to the price is born again retail Trading houses which were mega Wholesale super markets, withdraw some of the daily use item causing artificial scarcity, causing too much money chasing two few goods. Prices soar. When domestic banks raised interest rates, Government allowed the Corporates to raise funds from foreign debt markets at low LIBOR

We

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rates as the limit of borrowing was increased from $ 20 billion to $ 30 billion per year. But the exchange parity rate did them in, as Rupee depreciated to Rs 50 against a Dollar, making the loan costly. Corporates deserted the external markets. The cost of 1 barrel of oil is $ 110 in the international market. 1 barrel is approximately about 160 liters. The cost of Refining 1 litre of Crude oil costs around Rs 34.09. There is Central Excise levy, Customs duty which is around Rs 5.148 per litre. There is an addition of State levies, and the states have been opting for nil additional duty. One Crore litres of Crude is refined every month. This huge refinement of oil would bring down the per capita cost to negligible percentage. According to the statement of the Finance Minister in the floor of Parliament, more than Rs 8,000 Cr is given as subsidy to IOC, Rs 2,000 Cr to Bharat petroleum, and Rs 1500 cr to Hindustan petroleum. Last year, according to the balance sheet published by Indian Oil Corporation, the net profit after tax was Rs 10,000 Cr! The CEO of IOC went on record two days ago, and made a comment that under recoveries came to Rs 2500 Cr. What has necessitated an increase of Rs 1.80 per litre according to these oil Cos? One, cost of under recoveries need to be embedded in the sale price. Second, the appreciation of the Rupee (Rs 50 = $1) need to be compensated. Just like private exporters, the exchange fluctuation is a market phenomenon, and the Oil companies cannot ask the public to compensate it for the fluctuation. When all along it was the other way around, what concession you have provided, the oil companies must answer. PSUs should cut the cloth according to the cloth and not resort to Arab Spring tactic to raise prices at will. Reliance and other private sector companies also cannot make market phenomenon responsible for enhancing market prices indiscriminately. If you are in the market economy, you should try to adumbrate market perfections. When the profit of PSU is given back to the Government, it goes as Governments receipts. Why dont the government reduce Customs duty just as they have done for private players who are getting edible oil from certain countries at nil customs duty? If they can favour private cos, why not the PSUs who are essentially government run companies? When the administered price mechanism was dismantled, the Oil Companies should obey the tenants of the market. Since these PSU hold monopoly, they cannot form a cartel and rob the public in the name of factoring in imaginary losses as they may appear from time to time. The problem with the oil Companies is that their expenditure is beyond comprehension. Their operative expenses should be reduced. The quantity of import and the quantum of sale, there should be a match. What is the carry over stock? If an audit is conducted, many Skeltons may fall. 25

Government should always opt for hard options and not easy options. All Companies should have due diligence on expenditure. It would also include the maximum percentile return of refined from the Refineries. What is the cost to the company to work out the sale price? Follow expenditure per customer centric mode and not per employee centric. Even after giving Rs 80,000 pm plus perks to the Government Secretaries, the output of Government babus have not under gone even 1% higher productivity. Higher economic growth would mean je ne sais quoi, unless they reflect in the poor graduating to the next higher class by begetting higher income. It must not be an empty rhetoric and lot of economic jargon explanations. The administered pricing of Petrol must be reinstated, as Companies are going haywire without accountability. They are not mature to handle pricing on their own. Market prices must be determined by competitative pricing and not monopoly pricing. The gap of 30% between Budget Estimates and Revised Estimates should be introspected; government expenditure must be reduced. Let us not be a Jeremiah, predicting discontent! -o-o-o-o-o-

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Pre-historic engineering and Scientific Temper

is more or less bunk, felt Henry Ford. Those who cannot remember the Past are condemned to repeat it, prophesized George Santayana. We cannot retreat from the search for knowledge or new explanation- either in this world or beyond. As a species, we are approaching, maturity. Are we? People are unwilling to confront mysteries which cannot be eventually explained or incapable of theoretical explanation in terms that they can understand. Its more spiritually comforting to be able to recognize what we may face on the perimeter of the physical World than to face an unknown threat. If the Phenomenon cannot be explained, the best response is to ignore it- a more reassuring course of action, and, in a way, more innocent. The only explanation we believe is no explanation! Ancient records, there is reference to the reign of Gods, before the First dynast, a time of superior civilization and miraculous powers shared in memory and records of the most ancient World Cultures, considerably antedating Greece and Rome, possessed Knowledge of astronomy, advanced Mathematics, the calculation of time and the measurements of the Earth and Solar System, thousands of Years before these same facts were described or re-established in modern History. To have come by this information, the ancient Culture or Cultures would have to have had telescopes, other sophisticated instruments sufficiently precise as to make the extant calculations.

History

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The cyclic theory of Civilization, prevalent in the ancient World and still, to a certain extent in Asia, is in marked contrast a Progress Theory of our own Culture, with its pre-occupation with the passage and pressure of time, and the constly forward march of Civilization and Scientific development. As our own knowledge increases, however, we may find that what was suspected by observers in antiquity will be shown to have eventually transpired. World catastrophes and destruction of entire Civilizations may have previously resulted from a variety of causes, several of which face us today, however, resolutely we may refuse to contemplate them. Outstanding among these is the question of Overpopulation, atomic tests, nuclear waste, environmental pollution of air, water, imbalances of ecology, etc. Effect of a maninspired melting of the Polar ice together with tidal waves and flooding of sea-coasts throughout the World is reminiscent of what we now consider to be the far from legendry Flood of pre-history which covered surface lands. Spillage of Oil would cause large-scale melting of Polar ice. Extinction of so many species of animal life will predate the human species elimination in its totality! We find mention in the records of antiquity in Mahabharata that the sub continent suffered from strangling overpopulation. Ancient religious legends of India betel nine crisis of the modern World. The earth is strewn with works of pre-historic engineering connected with the use of Polar magnetism. Within the ruins of an ancient structure whose vast size has hitherto rendered it invisible- linking together the great stone remains of pre-history still standing on the Plains, mountain deserts, in the jungles and under the Seas of the World. That defies the Laws of Science- we do not understand today- the stresses and pulls that represent the hidden forces of the Earth, Planets, Sun, Moon and the Stars! That a knowledge of spherical trigonometry and the use of geodetic instruments of excellent precision, and the possibility that they were originally plotted during a period approximately 8,000 to 10,000 years ago , many centuries before our own recorded History, show that they knew all that we are presently inventing and discovering! Einsteins space-time continuum, Newtons theory of Gravity and Laws of Motion were known to them. Subjects discovered in Mahabharata, Ramayana, Samaraganasutradhara, Vaisesika School of Science Philosophers of anicient India, and other well-known Indian Philosophical books contain unexpected reference descriptions in complete detail on atomic warfare. These precious works which escaped 28

destruction and burning covered subjects such as relativity of time and space, cosmic rays, the law of gravity, radiation, the kinetic nature of energy, atomic theory, etc. These scientists knew that earth was spinning on its own axis. They not only knew the shape of the earth, but its rotation itself. These Scientists have also recorded that atoms were in incessant motion. They subdivided the measure of time into a series of incredible fractions of seconds, the most infinitesimal being considered as the period taken by an atom to traverse its own unit of Space. Their knowledge of airships, enemy aircraft, tow-storey sky chariots, modern weaponry, artillery, rockets, agneyastras (cylindrical cannons) depicted that they were well versed in the modern type of war fare. They also knew how to release fog dart dense camouflage, use of different kinds of artillery, bullets of iron, lead shots, explosives of saltpeter, Sulphur, Charcoal, rocket bombs, etc. Ramayana describes travel by Vimanas describing the aerial view, which are precise and balancing view of part of Srilanka and Indian Coast. There were cresting and vanishing waves of Civilizations. Scientifically advanced civilizations have vanished leaving no trace except in legend. It may presently be a preserved memory but references of the Past describe a Pre-historic scientifically advanced civilization which brought about their own downfall! -o-o-o-o-o-o-

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India in the growing league?

India is a growing economy, set to join a League of Nations (BRIC)

to emerge as one of the emerging economies by the middle of the third millennium. It had an impressive growth rate, upward of 9%, its Foreign Exchange reserves enlarged more than 7 times of the figure in 2003-4, its trade grew to beyond three century mark, its poor slowly were growing and had better living conditions, the purchasing power of the middle class grew, and consumption began to drive the economy. Inflation was at its lowest, in contrast to the high growth returns. India was on the red carpet growth to prosperity. India slowly emerged as a economic powerhouse with investments from abroad soaring in making it the favourable foreign investment destination. Ever since March, 2008 there has been a constant increase in the rate of inflation. In Nov 2008, it touched 10.45%, in Dec 2009 it was 14.97%, in January 2010 it went up to 16.22% and in September 2011 it posted 9.72%. The Government, made a monetary Policy amendment by increasing the low Bank interest rates, which has seen revision more than 13 times since the last 18 months. Relentlessly, the Banks went on expanding the interest rates with the hope that they would be able to slide down the inflationary impact on the economy. More they tried, more difficult it became. Indias war against inflation resulted in sacrificing its growth which came down to 7.5% and may slip to 7.2%. The Government gave the Magna Carta to the Oil companies to decide the petrol prices. The Petrol prices have been increased repeatedly, so that it increased the percentage of inflation. It has become very difficult to tame inflation as it has gone beyond a point.

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Our India like American economy.

markets have seen a lull. Foreign investors do not beseech before. There has been a fall in percentile of investment. economy is creating a Permbra situation in the Indian When markets are lull, it passes on the feel to the Economy.

Interest hike has seen the Non performing asset of Banks increase by 20% in the period, June-Sept 2011 (Rs 16,132 Cr). All the Public sector restructured their loans and 17% of all the advances show that it had turned bad. Many Small Medium Enterprise are turning red or closing shop as they are not able to get proper and timely Credit. A propped up credit at 14% makes availing loans unviable for units. Big Corporate companies can opt for External borrowings, but with the Indian Rupee turning meek against the dull Dollar has made foreign loans costlier than before (Rs 49.70= 1 $)(from Rs 40 = 1 $). They are indeed, waiting for some threshold. The aviation industry is in the dole drums because of this. The Exporters are also facing brunt on this front. Their dollar worth of goods account for more rupees while the expenses in the domestic market has gone sky high. The cost of credit through Foreign Exchange for Packaging Credit is not sustainable. Conflict over Policy objective higher level of well-being, that is means of achieving it- by higher growth or by lower inflation, trade-off is necessitated; both cannot be achieved simultaneously. Government intervention in financial and goods markets, due to macroeconomic rigidities has caused market failure and microeconomic instability. Inflation is harmful rather than helpful to growth. Policy implications will see inflation- growth nexus. Negative co-relation between inflation and growth in the long run would result in the influence of the former on reducing investment, productivity and growth. We are in the thick of core inflation, inflation on the basis of CPI, food inflation, low asset creation, declining value of parity (Rupee- Dollar parity), monetary inflation, and price inflation. There was a semblance of over heat in the economic growth and its irrational exuberance has seen the trajectory of growth going hay-wire. More than the fiat currency (paper currency), over supply of bank notes has resulted in depreciation of their value (Classical Economists David Hume & Ricardo). This may perhaps be one reason that the Draft which had a life of 6 months was traded in the market between persons. (This was treated like commodity money). Money is what money does. Money is transferable. It is constantly exchangeable. So long as money is in circulation, money gives equal value of other goods and services.

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Somebody may invest money to make some product. He employs workers and other managerial persons who look after his unit. They buy the raw materials out of the funds from their working capital and manufacture end product for sale to some wholesaler or retailer, on receipt of which he pays the money towards the cost of the goods which are demanded on the basis of Invoice. He pays the money and takes the consignment and sells the same and makes money. Again, he places the order. These steps are repeated. The money received is put in the Bank account. Salaries are paid to workmen, other staff on duty. Bills of Raw material supplier, embellishment supplier, packaging supplier, transporter, telephone bill, electricity bill, other temporary staff bill, other bills towards purchase of merchandise, etc are all paid, and they in turn pay for goods and services. There is circulation of money. Bank charges interest rates. The owner takes the Profit. Money capital is recycled again and again, and another session he will restart the cycle of reproduction with the aim of accumulating more capital and its disbursal. Suppose, the businessman feels that he does not want to continue his industry, so he sells his company to somebody and puts the entire corpus in the Bank. Instead of putting his money-capital back into commodities, he invests it in the bank. He now holds in his hands a claim to capital, perhaps in the form of a bank-account, or a bond, shares or whatever, rather than capital as such. Now his money lies idle in the bank vault. But his claim to the money is secure. However neither his claim nor the money itself are capital as such and can earn no interest, because the money is not in circulation. By its being in the self, it is not expected to produce more money. The Bank, need to loan this money to somebody. May be one person. Or many persons. The persons who have availed the loan should use it productively to earn a return by which he can circulate the money, pay interest, instalments due to the Bank out of his profit. The Bank should pay interest to the depositor as well. It should also make profit to be in business of banking. However, as the class of speculators, bankers, brokers, financiers, and so on, grows, as is inevitably the case wherever the mass of capital in a country reaches a sufficient scale, what happens is, for example, the bank finds that it is able to loan out far more than it has deposited in its vaults; speculators can sell products that they do not possess, the right kind of person is good for credit even when they have nothing, .etc., etc. Thus one and the same unit of productive capital may have to support not just the one retired industrialist who deposited his savings with the bank, but multiple claims on one and the same capital. 32

If the bank accepts one million as Savings, but loans out ten millions, each of those ten millions has equal claim to that same value. This is how fictitious capital comes about. Fictitious Capital is value, in the form of credit, shares, debt, speculation and various forms of paper money, above and beyond what can be realized in the form of commodities. The ability of the bank to make unsecured loans is dependent on confidence, and at times of expansion and boom, the mass of fictitious capital grows rapidly. Then, when the period of contraction arrives, and the workers can no longer feed the voracious appetites of all these capitals, the bank finds itself under pressure and calls in its loans, defaults occur, bankruptcies, closures, share prices fall, and things fall back to reality fictitious value is wiped out.
In times of recession, even good, useful commodities cannot be sold because money and credit has become scarce, and the commodities prove to be valueless. Fictitious capital is that proportion of capital which cannot be simultaneously converted into existing use-values. It is an invention which is absolutely necessary for the growth of real capital, it constitutes the symbol of confidence in the future. It is a necessary but costly fiction, and sooner or later it crashes to earth.

Roughly every ten years, the mass of fictitious capital grows while trade is good, and then, as the capacity of the workers to sustain the mass of hangers on reaches its limits, the downturn gathers momentum and fictitious capital is wiped out, and the cycle begins again. The scale of these crises grew continuously until the Wall Street Crash of 1929, and the Great Depression of the 1930s. The Depression and the War which followed wiped out all the accumulated mass of capital so that a new cycle of reconstruction could begin again in 1945. The New Deal in the US, Keynesian economic policies and particularly the international monetary arrangements set up at the Bretton Woods Conference of July 1944, created conditions for an exceptionally long period of growth after the War. The particular mechanism for the creation of an unprecedented mass of fictitious value in this period was the role assigned to the US dollar as the medium of international exchange in lieu of gold. Under the Mashall Plan, Europe was rebuilt and the US capitalist class further enriched by the labour of all those workers who did the rebuilding. But capital could not organise that reconstruction other than by creating a new mass of fictitious capital, in the form of inconvertible dollars.

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Today, we are seeing the declining value of the Dollar. There is currency depreciation. By the mid-1960s this mass of fictitious capital began to collapse and world entered a prolonged period of crisis. The mass of fictitious capital circulating in the money markets, futures exchanges and so on today is, however, far greater than ever before. 98% of the value of monetary transactions in the world is speculative, only 2% involve actual use-values. Capital continues to exist by means of the delicate balancing act performed by all the governments and banks of the major capitalist countries, staving off the collapse of this gigantic and parasitic fantasy. The collapse of Banks due to mortgage crisis can be attributed to this fictitious capital. The Banks could not recover the debt as the value of property had shrunk. Money is substitute to Capital (Tobin effect). Money, according to Stockman, is complimentary to Capital. -o-o-o-o-oIndias Coconut & Coconut products exports: Policy impediments & Regulatory Constraints
Government intervention needs to balance the interests of different stakeholders in the oilseed complex. Protecting the oilseed growers could make oil and meal products internationally uncompetitive. Low priced imported oils benefit the consumers but tend to reduce the margins on domestic oils affecting processors and oilseed farmers adversely. Thus, with trade liberalization several issues arise, including the choice between protecting the seed sector as opposed to the processing sector. Both consumption patterns and cropping patterns are likely to be influenced by the choice of customs duties and the price differences maintained among various oils. Imported oils account for close to fifty percent of the total edible oil consumption.. Refined Palm oil is also competitive due to its low price, and meager customs levy. .. The impact of such changes can have varying effects on consumers from different regions with varying tastes. The low and fluctuating yields are primarily due to a large part of the cultivation being on marginal lands lacking irrigation and with low levels of input usage. Three oilseeds: groundnut, soybean and rapeseed/mustard, together account for over 80 per cent of aggregate cultivated oilseeds output. The processing technology is a mix of the traditional and modern ranging from household crushing to expander/extruder technology in medium-scale factories. Oilseed cultivation is becoming increasingly unattractive due to low and unstable yields. The technology mission on oilseeds had only limited success.

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Decreasing price of edible oils due to trade liberalization may result in low prices for oilseeds resulting in poor supply response The edible oil processing sector in India is characterized by large unutilized capacities. Capacity utilization is higher in the refining sector mainly due to import of oil in crude form. Inefficiencies in the processing sector are mainly due to highly fragmented nature of the industry. Duty difference was also made between crude and refined imported oils. This policy helped value addition within the country and also prompted modernization and capacity addition in the processing industry. Although the government has allowed the import of oilseeds, there has been no import of oilseeds due to quarantine and other safety measures imposed by the government. Consumption of edible oils is characterized by strong regional preferences for "first press" oils with natural flavor (e.g. mustard, groundnut and coconut oils). However, the rising dependence on imported oils to meet the demand-supply gap has led to a gradual acceptance of other oils (refined, blended) by the consumers. Per capita demand for edible oils has begun to rise gradually due to income growth and so has the diversity in consumption of edible oils. There is also a wide regional variation in the cultivation of oilseeds across the country. As trade liberalization influences prices of various oilseeds differently, the regional impact can be varying, affecting the producers in these regions differently. In a situation where imports of oilseeds are attractive, import tariffs can be varied (a variable levy system), based on the domestic output scenario and the level of international prices so that imported oilseeds are not priced lower than the MSP. Alternatively, in a situation where international prices are such that neither imports nor exports are attractive, price support can be provided through government storage. If the volume of edible oils imported by India is a substantial proportion of world trade then world prices would respond to the magnitude of imports by India and cannot be taken as given. As import tariffs on oils are reduced, there is a reduction in output of many of the oilseed growers for want of price for their produce. Three alternative ways of support to oilseed farmers prices are considered in the model simulations. Price received by the farmers can be increased either through import tariff on edible oils or more directly tariff on import of oilseeds themselves (if oilseeds are imported) or alternatively through government cash subsidy program. The impact of the first alternative is obtained by comparing equilibrium oilseed prices in scenarios with and without oil tariffs. For meaningful comparison prices of oilseeds, in the other two alternatives, have to be supported at the same levels as those obtained in the case of tariffs on oil imports. That is, in the second alternative, the model would determine import tariffs on oilseeds endogenously so that prices are supported at these levels. This of course is possible only if the oilseeds are all imported. In the third alternative the government fixes Minimum Support Prices (MSP) at levels corresponding to the prices obtained in scenario with oil tariffs.

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It provides a cash subsidy to the farmer equal to the difference between the equilibrium market price and MSP whenever the former goes below the latter. That is, while buyers face the market equilibrium prices of seeds, farmers receive the higher of MSP and market equilibrium price. The effective price that enters the oilseed supply response function is therefore the greater of the two: MSP and the equilibrium price. Government subsidy in this case is computed as the product of oilseed output and the difference between the effective price and market equilibrium price. Comparison of welfare impacts indicates that government cash subsidy is the most efficient alternative of protecting oilseed producers. We discuss the results for the case where domestic output of oilseeds is high and international prices of oilseeds at their normal levels. The results are similar for the other case where domestic output is normal but international prices are low. It is seen that import tariffs on edible oils increase the prices of all the edible oils and prices of all oilseeds with the exception of rapeseed. [Impact of Trade Liberalization on Indias Oilseed and Edible oils sector by P.V. Srinivasan; Indira Gandhi Institute of Development Research (IGIDR)]

Level playing field: There is a huge potential both for raw coconut and coconut byproducts. The government should make all possible efforts to provide the farmers with high-yielding varieties and hybrids, manures, fertilizers, pest management intercultivation facilities and adequate irrigation. It should also focus on product diversification and market expansion. Area expansion as well as rehabilitation of existing plantations will have to go together to increase the production and productivity of coconut. Problems like low farm yields, unresolved disease conditions and inefficient marketing system need to be addressed on priority basis. The foundation of the coconut industry needs to be strengthened. The farmers and landowners will stay in coconut farming only if they find the enterprise truly profitable. It is high time for the government to act and support the perishing coconut industry by coming out with a clear vision. The vision should aim at making coconut farming productive, remunerative and reliable supplier of raw materials to the processing sector. With the government providing the lead and direction, all major stakeholders should act in concert to revitalise the coconut industry. [The coconut revival by G. Palaniappan & S. Subramaniam, Anbu Arts and Science College, Komarapalayam, Namakkal District, Tamilnadu] Import duties: The industry has claimed that for export industries to come back to normalcy, import duty on edible oils should be scientifically imposed. It needs to bring about a workable balance for the export industry, consumers, local coconut oil industry and growers. Another demand of the industry is for predictability of the import regime. The industry complains that there has been

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excess import compared to the demand of edible oils. The point made is that such ad hoc changes make it very difficult to continue to be competitive in the export market with exporters from other countries enjoying lower and stable prices for raw materials. Formulating an import tax schedule linked to world palm oil prices with tariff levels adequate for safeguarding coconut growers; ii) preventing exploitation of tariff adjustments by palm oil importers by regulating import volumes (to prevent stockpiles); iii) monitoring palm oil inventory held by traders in the country with a view to regulate quantities held in stock; iv) equitably disbursing of the Cess fund collected for the development of the coconut industry; v) instituting measures which will reduce the high margins retained by middlemen on retail sales in times of scarcity; and vi) directly channelling nut production from state-owned estates to city centre in time of scarcity. Ad hoc changes in trade policy, notably import tariffs; and ii) the level of the tariff itself. Both are related. In large part, the difficulty arises because a single instrument (tariff rate) is used to address the interests of at least three stakeholders along a value chain - farmers, agro-industry and consumers. For some products, two prices are fixed along the value chain, the farm price and maximum retail price. Even if a balance is maintained at a given point in time, this is easily destabilized by exogenous shocks, and there are several of these high price volatility in the world markets, exchange rate changes, production shocks and change in governments. For some products, there are strong crosscommodity linkages, e.g. poultry and maize, and palm oil and coconut oil. Faced with the shocks, policy makers find themselves in a situation where they frequently change and adjust instruments (type of tariff, quota) as well as the level of the intervention (tariff rate). This creates an environment of uncertainty and confusion for the private sector and in the process also hurts the export sector. Despite the complexity of the policy problematic and intense media attention, it is striking that no serious analyses were found on the issues. Marketing: Strategic marketing requires strengthening several areas e.g., sourcing for export and distant markets; contract farming may ensure both supply and better quality produce to maintain supply chain, modernizing markets through central auction, reducing multiple handling and price setting mechanism. Direct involvement of growers cooperatives, greater participation of stakeholders, retaining regulatory powers of the government may greatly help in re-organising the system. Market information database, market intelligence marketing system and use of information technology, are essential components for modernizing horticultural produce marketing in the country. Transaction Costs: Indian exports especially Coconut and Coconut product exports have to bear excessive transaction costs. Compared to low value high volume, it takes

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17 days to export a Container from India and costs US $ 945/per container compared to US $ 450 and $ 500 from Malaysia and China respectively. Denmark, Brazil, Mexico, China take 5 days, 12 days, 14 days and 21 days respectively to export a container from their country. The magnitude of transaction costs is upward of US $ 15 billion (Strategy Paper released by Ministry of Commerce, Govt of India). Transaction costs are the biggest driver of cost and time overruns.

Corporate Farming: India has Land Ceiling Act that does not allow corporate farming in India. The Coconut plantations have disintegrated to farm stud to home stud crops making maintenance costs high while viability of costs does not favour their maintenance. The cost factors have made Coconut manufacturing industry to stay close to existing customers, a myopic focus on short term businesses and an inability to adopt to business models which are innovative though may not be time tested. Quality Checks: Food exports undergo rigorous quarantine, phyto sanitary tests in the Port of Call. There are many Ports which do not offload cargo carrying various types of agricultural products if the agency designated by them has not issued appropriate phyto sanitary certification. Port of Petersburg in Russia requires certification from certain agencies notified by them and not approved by the Government of India and notified in the Foreign Trade Policy. In agricultural products, moisture is a constant problem because cargo is subject to condensation even in the hold of a ship equipped with air conditioning and a dehumidifier. The Cargo may be unloaded in the rain and some foreign Ports may not have covered storage facilities. Exporters who are making part shipment, especially a few cartons, face the problem of any breakage and cut of their cargo due to other heavy packaged materials. Policy initiatives: Under Serial No 67 A of Chapter 15 of Sch I of the ITC (HS) Book, (HBP Vol III) all edible oils were prohibited for export. By Notification PN 7 dated 309-2010, the ban has been extended from 1-10-2010 to 30-9-2011. However, exemption/relaxation has been granted to export of Coconut Oil through Kochi Port (PN 33 dtd 19 Aug 2008, PN 60 dtd 20-11-2008 r/w PN 18 dtd 2-122009].Coconut Oil exports can be made only through Kochi Port. By PN 3 dated 11 April 2008, Para 1.1 of PN 85 dated 17-3-2008(ban of all Coconut Oils appearing in Chapter 15 of Sch 1 of the ITC HS Book) inserted vide PN 92 dated 1-4-2008. DGFT further liberalized 10,000 tons of branded edible oils up to 5 Kg through 13 EDI Ports in India. From time to time, the quantity and tenure were extended. Now, again with effect from 1-11-2010, another 10,000 tons of

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branded edible oil up to 5 Kg packings have been circulated. APEDA has been authorized to monitor exports of up to 10,000 tonnes of organic edible oil. For availing Duty Free import Authorization for sourcing inputs, and eligible export firms who are otherwise entitled to advance authorization, have to import goods through STE (Para 4.1.11) of FTP through Advance Release Order or invalidation letter(4.1.13,FTP) or Back to Back Inland letter of Credit as specified in Para 4.15 HBP, Vol I. They are not entitled to import capital goods under Agri Infra Incentive Scrip (Para 3.13.4 of FTP) or Status Holders incentive scrip even though they may be status holders, as products in Para 12, and Para 15 are canalized and prohibited for export. However, as per Appendix 30 A of HBP, Vol I, any such import has to be re-exported within 90 days. Coconut Oil and Copra (in ITC Chapters 15 and 12) are not eligible to avail the Vishesh krishi Gram Udyog Yojana even though Coconut Copra oil is eligible for VKGUY under No 13 of TABLE 1 B of Appendix 37 A of HBP, Vow I. As only Coconut Oil is covered under the Input-Output norms, adhoc norms cannot be obtained for Copra as they fall with the prohibition clause as any import can be undertaken only through canalization and Chapter 12 items are debarred for availing temporary privilege of getting adhoc norms on a case to case basis. New generation Coconut based products: Coconut manufacturing industry does not attract Foreign Direct Investment nor has JV with foreign companies who do undertake buy back arrangements. Philippines and other Coconut growing countries have working arrangements with formidable international companies to cater to the foreign markets through selling and delivery systems, and route and distribution capacity of the overseas partner. Virgin Coconut Oil has a huge market but since there exist no independent ITC HS Code for this item, the export of Virgin Coconut Oil is undertaken under 1513, which is the Code for Coconut Copra Oil. Compared to the market demand, there are very few manufacturers who are manufacturing Virgin Coconut Oil, as a result, against muted supply there is uncovered demand, which other Coconut producing countries are exploiting to their advantage. Virgin Coconut Oil is for the niche market especially the overseas Gulf, Germany and American market. Coconut charcoal from Coconut shell is exported to countries like Sri Lanka, which converts it into activated Carbon. They get Charcoal at very low prices, and through value addition, get a higher foreign exchange. Expoxy Polymer, expoxy Resin and expoxy polymer Composite huge high end demand in aerospace, automotive, sailboats, high performance radio controlled vehicles and aircraft, structural applications, etc. Coconut shell is natural filler as its fibre can be extensively used for development of new composites because of their tenstile strength and modern properties. Composition of high strength coconut filler can be used in broad range of applications as building materials, marine cordages, furnitures and in epoxy composites to strengthen their

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tenstile and flexurial properties. The demand for epoxy polymer is around US $ 15 billion with a CAGR at 30%. China Contributes around $ 5 billion towards exports of epoxy polymer using Coconut shell filler.

Conclusion: Coconut industry has huge workforce, high employment elasticity in this sector, the upside for creating more and more jobs is tremendous. Exports also can be used for balanced regional development. Coconut Exports can act as a catalyst to usher social change -o-o-o-o-oAbout the Author [A V Ramanathn, is a Post Graduate in Economics, and holds the Post graduate diploma in Foreign Trade. He has served several chambers of Commerce which include CII, Indo-American, Tirupur Exporters Association, Cochin Chamber, and was Advisor for many firms and companies in the sugar, hotel, software, and rubber industrial segments. He was also Consultant to Coir Board (Ministry of MSME, GoI), Coconut Development Board (Ministry of Agriculture,GoI), Kerala state government, senior Consultant at Institute of Small Enterprises & Development, Advisor, Price waterhouse Coopers, etc. He has penned three books, Vestige of a Grand Past, Saga of Cochin, Karwar: Yesterday & Today. He had made immense contribution to the Viswa Vijnana Kosh, Malayalam Encyclopedia published by NBS, Kottayam in 1970. His budget reviews are widely respected and published in the Business Line. He has been responsible for writing the Scheme, Rejuvenation, Modernization and Technology Up-gradation of the Coir Industry (Rs 243 Cr) approved by Government of India in the 11th Plan, Singampunari Coir Cluster (MSE-CDP Cluster with an outlay of Rs 7.83 Cr), Greater Karwar Development Authority Project, Karwar, etc. He has published Coir Export Manual, Coconut Export Manual, Indo-US Trade Directory (2 volumes).]

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