A Tumultuous September!

September 2012 has been quite an eventful month for India. In the past two weeks there have been tremendous amount of discussions and debates on the recent reform process that the current government UPA-II had proposed and is now implementing. There have been a lot of speculations and conflicting opinions on what the outcome of these policies will be.

Basically there are two things that the government decided to alter this month- FDI in retail and fuel price hike. There have been other reforms as well like allowing foreign investments in the aviation sector (which is very much needed), but retail revolution and the diesel price hike are the two policy changes that are in the limelight due to their pervasive effects for both the economic and political sphere and the population as a whole.

It all started with the Diesel price hike by Rs. 5 on 14th September 2012 along with a subsidy cap on LPG cylinders. It is has been seen that international oil prices have been pretty high the past few years with the entire world economy struggling with the gloomy conditions. While in other countries like the US, fuel prices fluctuate daily corresponding to the world prices- it is not the same in India. The Indian government has always protected the people by providing huge subsidies to prevent prices from escalating. But since world prices have been rising (ranging from around $80 per barrel to $170 per barrel) and since India imports over 80% of the fuel consumed, the subsidy gap has been becoming increasingly onerous for the government.
To protect the common from the high prices and to prevent the cascading effect a hike in Diesel prices will lead to- the government refrained from increasing the price for as long as it could. In return, the oil subsidy expenditure for year 2011-12 alone was about one lakh forty thousand crores which would have reached two lakh crores if the prices wouldn’t have been hiked. Even with the five rupee hike, the government will incur a subsidy expenditure of around one lakh sixty thousand crores for 2012-13.

A country, when it starts to develop, provides subsidies to give an incentive to the industrial sector to develop and for consumers to consume and induce growth. But gradually, as growth takes place, it is economically sensible for these subsidies to be withdrawn as these subsidies are a massive expenditure for the government. But the same hasn’t been the case in India. Withdrawing subsidies will lead to strong political implications which is why all political parties refrain from doing so; they rather provide more subsidies to strengthen their vote bank.
It has been noted that countries like India, China and Indonesia provide massive subsidies on oil to keep their domestic prices low. Consequentially, the world demand for oil isn’t falling and henceforth world prices are not falling either. Countries like US and UK, which have no subsidies, have seen their demand for oil fall as the prices have risen. That’s how it is supposed to work- Efficient Market Mechanisms.

On the other hand comes the major policy change that has been undertaken- Foreign Direct Investment in Retail.  Two years ago, Congress had put forward the proposal for allowing foreign direct investment in the retail sector. In colloquial terms, that means letting Walmart and the likes to set up in India. But if was rejected in the Parliament as it was felt that it would be a very anti populist decision. Where India as a democracy won then, the people as a whole lost out on something very essential.

Once again this has been put forward by the government. While the government is going forward with this decision (which seems to have been taken quite positively by both the Sensex and the CII), it has faced strong opposition from various political parties.

What does allowing FDI in Retail basically mean?
It means that foreign companies will be allowed to set multi brand retail stores in India provided they partner with an Indian company and that they can hold a share of 51%. Also, the cabinet has given an OK to 100% FDI in single brand retail. They can directly procure goods from the farmers (the primary producer) and the system of intermediaries and middlemen can be abolished that drive up the prices.

What are the concerns?
Very briefly, there are three major concerns:
- One of the concerns is that it will lead unemployment as small stores and middlemen will not be able to sustain themselves.
- Secondly, it is also felt that prevailing supply chains will break down and the farmers will be exploited by these foreign companies as they will be dependent on them, especially for technology improvements.
- Thirdly, Indian retail sector will face international competition and the international prices will drive up the domestic prices. And we can't afford that as inflation is already a long prevailing, important concern.
Therefore, it is felt that opening up this sector to foreign investment can have catastrophic effects for the people.

As always, there is flip side to these concerns.

It is expected that employment will not fall; rather it is expected to create over 1.5 million jobs in the next five years. The average size of a Walmart store is about 85,000 sq. ft and the average turnover per store is about US$ 51 million. It has been growing annually at an average rate of 12%. In contrast, in India, only 4% of total retailers have above 500 sq. ft. and the average turnover of a retailer is approximately Rs. 186,075. Clearly, with such a high growth rate and turnover, foreign investment in retail will create jobs.

Also, India's infrastructure is severely lacking. That is fact that we have to accept. We complain about food prices rising when there are tonnes of food crops and vegetables that rot as we do not have the necessary storage capacity and the desired level of transportation system. Tonnes of perishable goods, well, perish due to the lack timely transport. To counter this, it has been said that all foreign multinationals that invest in India in retail will have to investment 30% of the revenue in building infrastructure. This is a very significant condition.

Bringing these two major decisions together, the fact is that the government expenditure far exceeds its revenue. India’s fiscal deficit stands at 5.7% of the GDP. Its current account deficit had hit a record of 4.1% of the GDP for 2011-12 and increased to 4.5% of GDP for the period January to March 2012. This data is quite alarming, and quite like what the situation was in 1991. But the present solution is not to curb imports and subsidise exports because our focus is also to bring back India’s growth to 8-9% from the 5.5% level.
To curb its expenditures is the main reason for the government to raise diesel prices and put a cap on LPG subsidy. Where Mamata Banerjee’s claims of increasing the LPG subsidy cap to 12 to 24 cylinders per year may appeal to the population on the whole; the claim is economically disastrous. About 50% of the population still survives with less than 6 cylinders a year. Therefore, this subsidy cap should not really hit the poor.

As Swaminathan Aiyar says, “the idea that the government can make the common man or the middle class happy by providing an additional subsidy is the most bankrupt politics.” Growth provides incomes, growth provides employment, and that is what people need. Not subsidies. Reviving back growth will generate incomes and create jobs. Economy has to grow faster to absorb the new labor force. Hence, that should be the focus.
And to revive back this growth it is extremely essential to bring down the CAD. To do this, government expenditure needs to be curtailed i.e. subsidies need to be done away with, well, at least reduced. Secondly, growth will take place when we are able to increase foreign reserves without cutting down on imports and subsidising exports. And to do this, foreign direct investment is being opened up in sectors like that of retail. When foreign multinationals invest in India, they bring with them jobs, new value chains and processes, and most importantly information and technology that they have spent years in developing and patenting them. A technology transfer takes places in India.

Why now and why not in 1991? This is because India today has the consuming power to take advantage of it which probably it didn’t have ten years ago. There are economies of scale. Agricultural productivity will improve, transportation will improve, and finally the consumer will also benefit.

When a policy change happens, it happens across all sections of the economy. It is not that these policies will benefit only some sections of the economy. Economic growth affects each section.

Strong opposition, organising protests and 'Bharat Bandh' is no solution. According to the Confederation of Indian Industry, the bharat bandh or the strike on 20th September 2012 opposing FDI in Retail and Diesel price hike let to a loss of Rs.12,500 crore to the Indian economy in terms of trade; ;et alone other damages!

To conclude, I would say that in my opinion these two changes have been very much needed. While on the above a hike in diesel price is not favourable, things can get much worse if it isn’t done. Goods will get expensive, but we probably live in difficult times. And protecting consumers by subsidies is only temporary protection for the people. When policy changes took place in 1991, the Narsimha Rao government also faced strong opposition. But the fact is when other parties took over the country; none of them reversed these policy changes. And that is something that needs to be thought about.
Economics always gets diluted by politics. But every time, everything should not be politicized. Subsidies and protection from foreign companies does not guarantee election and votes. Growth of the economy as a whole does, or should!

Finally, We Begin To See.

Satyamev Jayate- I don’t think there is anyone who isn’t aware of this term today. In literal terms, it means- the truth is victorious. Sticking to its meaning, Aamir Khan has brought this show to unmask the issues that have been plaguing our society. The show started addressing issues like female foeticide and dowry deaths. As it progressed- it came to issues like the malpractices in agriculture surfeit of chemical pesticides. And then it shifted to broader issues where it addressed the mindset of people towards the physically challenged. But for me, what made this show completely emerge from the hackneyed TV shows at war for better ratings was its subject ALCOHOL ABUSE, today.

Substance abuse, a wider term which includes alcoholism, is something that our society refuses to recognize even in this modern age. Since times immemorial, it has been a considered a taboo- whether we accept it or not. It is human tendency to vilify anything that doesn’t conform to one’s own ideal of right or wrong. And we Indians are very vocal in doing so.

What this show did today is recognize Alcohol Abuse as a disease just like diabetes or something. The key word here is DISEASE. It is very rare that people call this a disease.  Ranging from the most erudite psychiatrists to the general population- the popular belief is that addiction or alcoholism is the lack of will power in a person. The person is hooked to alcohol and is too weak, lacks the will power to quit the habit.

I remember for my 12th board, I had made a research project on the very same subject and had done case studies with two people- one from Narcotics Anonymous and one from Alcohol Anonymous. Apart from that I had circulated some questionnaires amidst my friends and teachers. When it came to my viva, the examiner told me my study was wrong because I had addressed Substance Abuse as a disease. I was told that this is completely false because terming it as a disease implicitly states that addict is a victim or a patient of what he/she cannot control. Somehow, that examiner couldn’t accept this. Because alike million others she couldn’t empathise with this. Demeaning the addict/alcoholic and thinking them to be mentally weak probably seemed like a more comfortable thought. My case studies, while made her think, weren’t enough to convince her to open her mind from the fixed notions she had. She isn’t the only one. Billions accompany her with this outlook.

A similar thing happened with me a while ago. One of my acquaintance’s aunt was psychiatrist practicing stuff like hypnosis and all to cure mental diseases. Once again, she believed, that the only way to cure substance abuse is to build a person’s will power through past life therapy and the likes. Once again, it was about will power. And once again, she isn’t the only one. Today there are organizations that preach that this isn’t a big problem. They believe things like yoga, pranayama, sudarshan kriya, can cure this problem.

Let alone the general population. Rehabs that specialise in this also fail to see it as a disease. They believe in locking up a person for a few hours or days. That’s there definition of cure. After that, the person is set free. And majority of the times the alcoholic/addict goes back to his/her old ways because it is believed that s/he was “too weak to stay away”.

The need of the hour is to recognize this as a disease- a step towards which the show Satyamev Jayate took. A cause for this disease is yet to be found. Sometimes it can be genetic. There is no proof. ‘I’m a social drinker’ is no excuse. Everybody starts as a social drinker and before you know it, your body starts craving for it. Same is this case for other drugs. You’re at a party, all your friends are doing it, and so you smoke up a joint with it. ‘One joint, what’s the big deal? Everyone is doing it.’ One joint turns to two, two to four, and gradually you are unable to keep away from it.

It doesn’t happen with everyone. Doctors haven’t been able to find out why one sibling gets hooked on to it while the other repels it. But how do you know you aren’t that person who will get hooked on to it? Everyone thinks they won’t. Even an alcoholic doesn’t realise till later that s/he can’t survive without that bottle. Is it worth the risk?

We need to remove the stigma associated with substance abuse. Stop looking down on people suffering with this disease. They are patients just like any other say, cancer patient. And if you think this isn’t a cause urgent enough for attention- think again! Drunk driving accidents, people as young as teenagers dying from overdose, liver failures, the list goes on.

To conclude, I’ll highlight the same again- It’s a disease! Recognize the same and help to treat it. Let the diseased not feel ashamed to come out and admit to his/her problem. Remove the stigma!

I Believe In The Rain

The sky was so vivid and dynamic today. The fragrance of the wet soil- nothing can be so pure, so divine. What an evening, I would say. A raging dust storm- so rigorous- that it seemed the nature was full of wrath today. Acting on it impulse, it made the whole city standstill. But after the storm came rain. Thundering and lightening at first and then transformed from a heavy downpour to a soft drizzle.

I’m sitting here looking up at the sky and it’s inspiring to say the least. It changes colours – sometimes its dark and ferocious and sometimes a pale blue plus orange.

I think this is the kind of weather that would inspire poets to pen the vivid imagery displayed to us. And for most romantics- this is just the weather that makes them want to fall into love.

But I notice, we humans are so similar to the nature. We have outbursts where all the suppressed anger and frustrations come out. So much like the dust storm, it makes people stop and hear you. Some provide resistance but there is one point where your anger is all that there is; sometimes destructive, sometimes freeing. When the turmoil from inside lashes out, after a while, we breakdown. It breaks down the resistances and the does away with the constraints we build for ourselves. Like the heavy rain, it all comes out. And then slowly it begins to subside. Just like the soft drizzle, the emotions begin to calm.

After this outburst we tend to become a little stoic, a little calm. Just the like outside there is only a soft breeze and silence. Solitude becomes the perfect company.

And then, the clouds give way to the sun. After the dark, the morning comes. Bright and enthusiastic. Like we begin a new day after it all – energized and brimming with hope – the Sun glimmers and brings life into every little thing.

This reminds me of a song by The Dewarists through which I will conclude this post:
                         
                             “I believe in the sun, even though it's slow in rising
                              I believe in you, even without realizing
                              I believe in the rain, though I see no cloud in the sky
                              I believe in truth, even though everybody lie
                              I believe in Love
                              Even though people live hatred
                              I believe we have the power to forgive”

Childhood Is The Kingdom Where Nobody Leaves.

And one fine day, the child grows up.

I look back at the years that have gone by. We always think that life was so much more simpler then. We were at ease, and not strained by the petty ordeals that life brings with it. At every stage, when I grumbled about something being hard; I was always told this is easy relative to what lays ahead. School is easy, college is hard. Collegy is easy, Working is hard. Working is easy, life is hard. So in all brevity, being an adult is hard. 


Why? I think in our formative years we don’t really circumscribe ourselves to a comfort zone. We don’t have fixed notions because every day is new – a discovery. It’s still too early for us then to grasp the world, and be fixed in our mundane lives. Since we aren’t what we call to day ‘worldy wise’ or ‘experienced’, we lack all inhibitions and absorb things with an open mind. Why they call a child’s mind innocent is because it still hasn’t been preconditioned to speculate, and doubt everything. The world isn’t all black and white then. Rather it’s full of colors. Painted a very pretty picture, haven’t I?


When we grow up, at some point or the other, we have to leave. Leave what  or who or where we belonged to. It could be separating from the ideals we believed in or from the home we lived in. And when it seems difficult to do so, we’re told that its a natural process that everyone faces. Just like life and death. 
Life is transient. Yet, we realize it or not, change is hard to deal with. It is so because it asks to break from that comfort zone. It asks to go fly and conquer  the world and yet retain your grounding. It asks from us to break free from inhibitions. And probably most importantly, leave home and build your own life.


Edna St. Vincent Millay said, “Childhood is not from birth to a certain age and at certain age the child is grown, and puts away childish things. Childhood is the kingdom where nobody dies.”


Yet for me, I would say that Childhood is the kingdom where nobody leaves.