Governance paralysis adds to Economic woes

When the whole world is fighting abnormal Economic upheaval and finding fast remedies so that it becomes equilibrium. However, in India we are seized of various issues for which undue focus has been forced upon, with the result that there is a leak in our vessel of economic woes. The governance of the country is not with the executive, but with others who see no reason to indulge in removing the litters that the economy has left behind. Alas, we are at discomfort with the reality. Government’s dithering and hesitation to act because of coalition’s compulsions left a void in economic recovery. We are not even at the cross roads. Every planning prophecy made need alteration. Growth has gone dismal. Industrial production has trespassed to negative territory. The Rupee continues its slide with venom. Interest rates remain prohibitive. GDP growth during 11th Five Year Plan was expected to garner an 11% growth. This year’s growth if it achieves 6.5%, it would be remarkable. These show negativism in the Economy. They do not show a positive sentiment for the economic growth. But no alarm bells rung. We should be worried, and alarmed at the state of affairs to declare a financial emergency. But we accept difference in every idea, that in every action all the political parties agree to dissent. True, we should not concern only in growth figures, but look at lackadaisical industrial and economic climate, scams vitiating pro investor policies, focus on corruption, and only on corruption, negative monetary prescriptions like interest rate increase 13 times in 18 months, hikes in petroleum products periodically making planning inconsistent, roll back on FDI on retail sectors which has sent a wrong signal to foreign investors. This has put a halt to FDI and FII and repatriation of investment which has created the dollar crisis. Rupee devaluation has hit the roof with as much as 20% slide against the greenback at a time the Dollar is vacillating. This increases input costs, import cost of capital goods, prices of petroleum products. RBI says the crisis has been caused by Euro crisis, instability of the American dollar, intense buying of dollar within the country, repatriation by FII, FDI, re-payment by Corporates of their External Credit Borrowing, higher import costs of Petroleum products. RBI has been clearly in the wrong with its monetary policy. Raising interest rates caused narrowing in the Spread between the interest on what banks pay to its customers and what interest they get from the corporate debtors. As per RBI, In Table 6.4 of Statistics, in 2011(Nov 14, 2011), the Banks had provided additional advance to 24.11 lakhs accounts (including direct and indirect agricultural advances) @ Rs 42,414 Cr. The total advances to agriculture and indirect agriculture is estimated as 339.32 lakh accounts with a Credit of Rs 4, 14,990 Cr. This poor advance to the agricultural sector has been responsible for agricultural growth failing to achieve a modest 4% growth envisaged under the 11th Plan. The Banks should give a new boast of fuel to that leg of the priority sector. Credit growth, best predictor of financial crisis, said an eminent Economist. Debt inflows could pick up only if differential monetary policy stance is adopted by the Central Banks in developing Economics against advance economics. Our central Bank inaction is the only action taken so far. Coal Sector, Kundankulam Nuclear Power project, crisis at Mullaperiyar, infrastructure deficit, country’s export related problems, including inflated country’s export by $ 9 billion (April-Oct) by DGCI&S, poor investor confidence, policy paralysis, needs exemplary solutions. Fundamentals are strong, says Finance Minister. Where are our fundamentals?

Poverty, double entendre

We always measure certain things, by fixing certain variables. The depth of the ocean, the time taken for the sun’s rays to fall on the earth, etc. What is the total height of the sky from the earth? How many stars are there in the sky? Various mathematical formulas, theories made by scientists, economists are broadly used with mathematical precision and inferences arrived at. How will you measure Poverty? By a measurement scale? The incidence of poverty? There is also a difference between ‘Below Poverty Line and above Poverty line’. A line distinguishes them. If you get 35 marks, you pass, but if you get 34, you fail. What is the difference between Pass and Failure? Poverty is measured in terms of spending of Money. What is money? Money is what money does. That means, if you get something which has a price, you have to pay money having equal value. Money is measured by the value it fetches. The World Bank defines extreme poverty as living on less than US $ 1.25 (Purchasing Power parity) per day. Another report placed ‘moderate poverty less than $ 2 and not more than $ 5 per day’. India’s all powerful Planning Commission which plans for the development of the Country and ear-marks segment wise budgets for Plan schemes, appointed Suresh Tendulkar Commission to redefine Poverty using socio-economic parameters so that a methodology could be devised to assist these people by providing with Food Security. This Commission came out with a Report depicting 40% of India’s population as coming within the clear definition of Poverty. It further found that 3 out of 10 in urban area and 4 out of ten in the rural area were BPL. In order to arrive at the figure, they had worked out a mathematical formula which was based on the spending level. This spending level was used as a measurement to calculate BPL and APL. In one case which was currently on before the Hon’ble Supreme Court of India, the Court asked government to distinguish BPL and APL in clear terms. The Plg Comm. Filed an affidavit in which it categorically stated that if a person spends Rs 32/- per day per person, he was Below the Poverty Line and if he spent Rs33/- he came under APL category. This was considered as a fax paus. Pandemonium greeted this, and in desperation, Government said that it did not subscribe to this arithmetic. The Plg Comm also distanced itself against the numerical it had provided saying that they calculated poverty on the basis of Tendulkar Report. Further, they clarified that Central government scheme did not confine itself to BPL, APL, but had universal applications. The storm in the Tea Cup has not subsided. Poverty is the scale as to one who lacks a certain amount of material possession or money. Absolute Poverty or destitution refers to being unable to afford basic human needs. There is unequal distribution of wealth and welfare. Lacking a usual or socially acceptable level of resources or income as compared with others within society/country is termed as Poverty level. Low incomes and inability to acquire the basic goods and services necessary for survival and dignity is the hall mark of a huge population in a developing country. Life expectancy, decrease in child mortality rate, proportion of per capita food available, disproportionate usage against supply shrinkage causes higher incidence of poverty levels. Poverty line need to find the total cost of all essential resources than an average human adult consumption in a Year. It must be need based, record minimum expenditure needs necessary for survival and dignity. The Poverty threshold or Poverty line is the minimum level of income deemed necessary to achieve an adequate standard. People in different circumstances- with different household size or demographic compositions or living in different places- naturally have different levels of economic welfare at the same level of income. They have different needs. A Poverty line should reflect these differences. There are a number of formulas to arrive at the Poverty line, poverty cycle, and Relative poverty. Poverty statistics is used to measure inequality rather than material deprivation or hardship.