Vijay Kumar Gaba

Tuesday, July 4, 2017

Give them a dignified life; and death

Thought for the day

"Keep your face to the sunshine and you cannot see a shadow."

—Helen Keller (American, 1880-1968)

Word for the day

Smorgasbord (n)

A buffet meal of various hot and cold hors d'oeuvres, salads, casserole dishes, meats, cheeses, etc.

Malice towards none

What is real problem for those who are opposing GST?

(a) They might have to pay income tax due on their full income.

(b) Higher GST rates may impact demand for their product.

(c) GST compliance is very expensive.

First random thought this morning

To promote cashless payments, the government should introduce a card that can be charged maximum of Rs2500 per day. The card could be a debit card, credit card or prepaid card. The PoS for this card should work on show card basis (no swipe, no PIN). For fixed charges like Toll, Parking Fee, Entrance Fee, Platform Ticket, Filing Fee etc., PoS could be pre-programmed so that on showing the card it charges the fixed amount to the card. For variable charges, the PoS operator may be required to punch in the amount to be charged. Toll booth may work on Red/Green light basis rather than barrier basis which is energy intensive and causes delays at Toll Booths.

This can make the transactions really fast and hassle free. A low per day limit, will minimize the chances of misuse of card through theft etc.

Give them a dignified life; and death

As I highlighted in one of my earlier post (see here) the notion of "farm loan" is materially different from "farmers' debt" in today's context.

The rise in aspirational consumption; distortion of social customs (especially marriage, death, birth) for the sake of vanity, ignorance, and misguidance; rise in crime and litigation expenses; rise in cases of chronic diseases and hence prohibitive healthcare expenses form an overwhelming part of "farmers' debt". This debt usually has nothing to do with farming activity.

This is in fact may true for a large majority of urban poor and lower middle class people also.

To solve this conundrum, it is important that economic reforms are implemented with social reforms.

The social initiatives like focus on cleanliness, cooking gas connection to BPL families are commendable. But what we need is a social renaissance. Small correction and incremental improvement might not be enough given the serious nature of the problem, in my view.

I am not a social scientist. I may therefore not be an appropriate person to suggest the steps that could be taken within the Indian sociological framework. But this does leaves me at freedom to throw some thoughts that may not belong to the box. For example, consider the following:

(a) The government should take strong affirmative steps to eradicate social distortions that have crept in over a period time in our social, religious and cultural events.

To begin with the government should totally nationalize the religious part of the birth, death and marriage ceremonies.

The government should appoint qualified religious persons (QRP) who can perform these ceremonies at the designated venues established by government in every Block of the country . All the expenses like salary of QRP, cost of performing the rituals, food offered to QRP, cost of feeding upto 25 close relatives of the person performing for whom the rituals being done, etc. should be borne by the government.

The designated officer at Block level may be appointed to supervise all such ceremonies and issue certificate (Birth, Death, Marriage) on the spot.

The government should actively discourage profligate spending on the social part of these events.

All expenses on marriage & birth related parties and social functions relating to death, shall be taxed @100%. Meaning, if anyone wanting to spend Rs10,00,000 on marriage party of his/her child, shall be required to pay an equivalent amount as tax. This money may be used exclusively for performing the religious ceremonies stated above.

(b) A dignified birth and death shall be made fundamental right of every citizen.

In case of birth, the government should assume responsibility of the child from the conception stage, for upto two children for each parent. This includes good diet for mother, medical tests, medicine, delivery expenses and immunization of the child. This should be done on a global standard basis not the way typical government medical facility is run by the government.

In case of death, the final rights of the deceased should be performed in a dignified manner, as per his/her religious traditions.

This should apply to all unclaimed and unidentified bodies also.

The insurance companies may be directed to make the claim payments on the spot when the final rituals are done on 13th, 17th or 40th day as the case may be, in cases where the deceased's life was insured, either individually or under some government group scheme.

The corporates may be required to fund this initiative under their CSR obligation.

(c) A separate assembly of religious leaders, holy men for each religion may formed. This assembly may be given the task to reevaluate all holy scripture, and find if there is any need to reinterpreted the scriptures in the light of modern day circumstances and realities. The religious leaders should be requested to weed out the redundancies and misinterpretations, so that no one manipulate the religious sentiments of the people in the name of scriptures and divine mandate.

The assembly should also frame a code of conduct for all people responsible for helping people with their religious ceremonies and duties.

For example, the Hindu assembly may want to ban flowing the last remains of dead people in holy rivers to save them from dying. The ashes may be used for making bricks that can be used to build places of worships and houses for the poor.

It may also encourage people to use electronic or gas based cremation, instead of wood pyres. Alternatively, each family member of the deceased may be required to plant two trees each and take care of it till it grows to become self-sufficient.

(d) Distinguish between "education" and "learning". Nationalize and standardize all education. Learning may be imparted by private citizens volunteering in nation building. (Will write in detail on this in a later post)

These steps if taken, may make the life of poor (both rural and urban) materially comfortable and substantially increase the happiness quotient of the country.

Friday, June 30, 2017

Farm sector reforms - 2

Thought for the day

"The best revenge is to be unlike him who performed the injury."

—Marcus Aurelius (Roman, 121-180)

Word for the day

Interditate (v)

To interlock, as or like the fingers of both hands.

Malice towards none

What kind of government do we have?

(a) Capitalist

(b) Socialist

(c) Communist

(d) Opportunist

(e) None of the above

(f) Mix of all of the above

First random thought this morning

In past three years, many sections of the Indian society have seen rise in agitation. Youth, farmers, religious minorities, religious majority, armed forces, media, traders, industrialists, bankers - all have been quite restive.

The factors could have been varied. For example, poor monsoon for two years, abolition of large currency notes, stricter compliance norms, demand slowdown, GST implementation, rise in cross border threats, authoritarian disposition of the leadership, rise in assertiveness of fringe elements within religious communities, and fear of marginalization amongst regional parties, etc. But the fact is that an average Indian is far more agitated today, that he/she was three years ago.

The moot point is whether this agitation will give rise to a new vibrant India or dissipate India's energy and push us back by couple of decades!

Farm sector reforms - 2

There was this feudal lord, who had enslaved a number of peasants on different pretexts. He would make them toil hard the whole day and give two inadequate meals to survive.

Occasionally, on festivals, birthdays of his children, his marriage anniversary, and death anniversary of his parents, he would treat them with a good meal and sweets. Once in 3-4yrs, during winters, he would give them new blankets so that they do not die of cold. In return, the bonded peasants were expected to hail him as protector and great benefactor of the poor.

No one ever dare ask for freedom from bondage. No one ever considered freeing these poor enslaved peasants.

The condition of Indian farmers is no better than those bonded labors in the story stated above. Various governments have been exploiting them, giving occasional doles and expecting favors in the form of votes.

No one has considered making these farmers self-dependent and economically viable. Unfortunately, the farmers have also been quite satisfied with occasional doles and have not been seeking redemption from slavery.

The recent episode of loan waiver is nothing but the new blanket given to farmers so that they survive the chilly winter and vote for the incumbent governments. Anyone assuming it to be anything more than that is seriously mistaken, in my view.

I believe that this is the primary reason for Indian economy not being able to grow faster on sustainable basis. Unless, two third of the population earns enough so that it can adequately consume, save and invest - it may be actually foolish to believe that a inwardly oriented economy like India can consistently grow faster.

As suggested yesterday, a sustainable improvement in Indian farmers' conditions is possible only under a comprehensive rural development mission. I presented my suggestions for one aspect of this mission yesterday (see here). Today I am presenting my thoughts on the reforms needed on the Policy level.

Since independence the government has focused on development of industrial infrastructure in the country. It has actively participated in the endeavor through a large number of public sector enterprise; besides offering a myriad tax and other concessions to the private entrepreneurs.

Now, the country has a reasonably strong industrial base. Many of our industries are globally competitive. We have a strong set of entrepreneurs and risk takers.

It is therefore high time when the government should reset its priorities and turn its primary focus on agriculture.

To begin with, as a matter of policy, the government should exit all industrial and banking activities.

Instead of sitting in Krishi Bhawan and making plans, the agriculture minister of the country should step out, take all state agriculture minister along and toil on the fields.

Firstly, the government should actively take agricultural activities - develop barren lands; develop water bodies and irrigation facilities; develop and use technology for enhancing productivity; give employment to landless farmers; take risk with new technologies & crops; partner with marginal farmers in consolidating their land and do farming on that land - just the way it undertook industrial activities immediately after independence. The minister should be made accountable for making the endeavor remunerative.

It has taken seven decades for Indian industries to reach a stage where the government can consider fully exiting the industrial activities. It may take 2-3 decades for Indian agriculture to reach a stage where the government will be able to exit farming activities completely, in my view.

Please note that at this point in time, I am not interested in engaging in debate whether the government's industrial policy was appropriate in the first place. I am also not suggesting nationalization of agriculture sector. I am just saying that the government should undertake the activity on commercial basis to provide the sector with much needed escape velocity in terms of capital, technology, and risk taking capability.

Secondly, the government should undertake on mission basis the task to reskill of underemployed farmers and farm labor. The farmers and their family members may be trained as dairy workers, domestic help, nurses, tourist guides, artisans, etc. Expecting construction sector to absorb all surplus farm labor is a bad idea, in my view.

Thirdly, the government should consider developing at least 5 very large special agri export zones in rocky and desert areas of central and western India and undertake export of farm produce as a commercial activity. These zones may be developed in private or joint sector.

Fourthly, the government may consider acquiring farm assets, especially rice farms, overseas to reduce water intensity of Indian agriculture.

Fifth, various states of the Union may be allowed to make bilateral or multilateral agreements for procurement, processing and trading of farm produce, movement of labor

Last, but not the least, nationalized all rivers, set up a national water regulator (commission) who shall work out water sharing formula for all states and union territories every three year and maintain adequate provisions for managing droughts.

...to continue next week

Thursday, June 29, 2017

Farm sector reforms - 1

Thought for the day

"Each day provides its own gifts."

—Marcus Aurelius (Roman, 121-180)

Word for the day

Parallax (n)

The apparent displacement of an observed object due to a change in the position of the observer.

Malice towards none

Can Maharashtra government impose anti dumping duty on import of onions from Madhya Pradesh?

First random thought this morning

No matter what we claim as our foreign policy, our relations with neighboring states have never been great in past five decades. The pace of deterioration has accelerated in past two decades. If the Army and RAW officers who like to spend their evenings with news channels are to be believed, we are facing unprecedented security risk from our neighbors, much more than 1960s when we actually fought two wars.

Many businessmen also tell me that despite great images of friendship between our leadership with foreign leaders, the terms of economic cooperation with many developed countries have also not improved materially in recent times.

Do we need to stop for a while and review our foreign & trade policies?

Farm sector reforms - 1

To bring any meaningful improvement in the dismal condition of India's farming community, a comprehensive rural development effort is needed. Any piecemeal solution like occasional loan waiver shall have almost no sustainable impact.

The traditional farmer welfare measures like periodic hikes in support prices for certain crops, farm input subsidies, interest rate subvention have not yielded the desired results. The impact of cash subsidy schemes in the garb of wages (first Jawahar Rozgar Yozna and later MNREGA) has also remained questionable.

In my view, a sustainable improvement in Indian farmers' conditions is possible only under a comprehensive rural development mission. The mission should address the problem with structural reforms at three levels, viz., 1. Farm Level; 2. Policy Level and 3. Social Level.

All reforms need to be pursued urgently, vigorously, simultaneously and in a fully integrated fashion, for having a meaningfully sustainable impact.

Farm level reforms

At farm level farmers are struggling with a multitude of problems. The most prominent being:

(a) Uneconomical land holdings (fragmented holdings, unclear land titles)

(b) Low productivity

(d) Poor price realization

(e) Poor market access

The measures initiated so far, e.g., higher support prices, cheaper credit, crop insurance, improved irrigation, cash fertilizer subsidy, better market access (eNAM, roads etc.) have positive impact on the state of agriculture in the country. But this may not be sufficient, as it will have only some incremental impact on the sector. What we need is a set of radical reforms that would break the linearity and provide much greater impetus to growth.

For example, the following steps may be taken at the farm level:

· Enforce land consolidation by linking subsidies and facilities to a minimum farm size. Village or Block level farm cooperatives should be encouraged.

· Digitize all land titles within 2years. Enforce time bound Panchayat level resolution of all title disputes.

· Change government procurement system. Government should provide all inputs and technical guidance to the participating cooperatives, and take 50% of the crop in lieu of this. The balance crop should pay for the labor cost and profit. This will ensure three things: (1) Guaranteed timely supply of quality inputs; (2) No debt burden on farmer in case of crop failure. The government can take adequate insurance for recovery of its costs; and (3) Adequate profit to the farmers.

· The landowners who have never engaged in farming activity in past two decades should be forced to give away their landholdings to cooperatives at 50% discount. Anyways these landowners let out their land on crop sharing basis or nominal lease rental.

· Make sure not a single drop of river water flows into the ocean from India. Develop river linking and water distribution on the models of roads.

· Allow corporates to develop waste and barren land for farming purposes. For example, many corporates from India and Arab world may be interested in developing Rajasthan and Gujarat desert and barren lands for growing dates, palm, aloe etc.

· Set up a price equalization mechanism through participation of private corporate sector. Encourage building large scale storage capacities for farm produce. Assure a regulated return of 10% premium on bench-mark yields, and allow bonds issued by warehouses as SLR securities PSL assets.

· Take factories to farms. Encourage industry to partner with farm cooperatives to set up food processing units at the farms. The farmers' cooperative allots land and provides farm produce, whereas the entrepreneurs contribute capital and undertake marketing and sales responsibilities. Both share the profit in pre-agreed ratio. This should maximize profit of both the industrial enterprise as well farmers, in my view.

...to continue tomorrow

Wednesday, June 28, 2017

Time to do it is Now

Thought for the day

"Nothing happens to any person but what was in his power to go through with."

—Marcus Aurelius (Roman, 121-180)

Word for the day

Beatinest (adj)

Most remarkable or unusual.

Malice towards none

My friend came! He charmed everyone! I sold him drones!

First random thought this morning

While the people remain busy with movies and cricket, the country is silently becoming a relevant global force in space technology, automobile, tennis (doubles) and badminton.

Wrestling, archery, shooting etc. are much talked about, but results have not been any spectacular.

Which category you want me to put political ?

Time to do it is Now

Prime Minister Modi has proudly promised Indian Diaspora in US that his government will strive to make India a developed country like US. In past also many political leaders have aspired to make India like China. One former chief minister of Maharashtra promised to make Mumbai like Shanghai. Congress party leader Rahul Gandhi wanted to emulate the manufacturing model of China and manufacture toys and watches in India.

If we eliminate the political rhetoric out of these assertions made in the heat of the moment, what we get is a constricted vision of the future of India. Regardless of the posturing, our political establishment appears mostly lacking in innovation, self-belief, and faith in rich cultural & economic legacy.

The right wing politicians claim to have pride in India's glorious past. Their sole ambition is to restore India's stature as world leader (Vishwa Guru). However, when it comes to implementation, they suffer from cognitive dissonance.

They seem unable to think beyond highly exploitive and authoritarian Chinese model of development. The tragedy is that they want India to become like US by following Chinese model and enforcing parochial social agenda that has no Vedic sanctity!

There is no meaningful left party in the country. The left wing politics is now limited to violent and exploits of handful Naxals and Maoist.

The academics and elite that subscribe to left ideologies appear mostly too pliable and dependent on state favors to make any difference.

The traditionally strong center and left of center parties have mostly degenerated to become feudal lordships. Their vision of India appears to begin and end with their vested political and economic interests.

The tokens like secularism, socialism, equality and justice are blatantly used to camouflage the vicissitude of their ideologies.

Under these circumstances, finding a sustainable solution for farmers' plight seems like a impossibility.

Given that over two third of the population is directly or indirectly dependent on the farming and allied activities, their political importance can hardly be overemphasized. It is not surprising that the structure of policy framework is such that farming should continue to remain an unviable activity, so that the farmers always remain dependent on political establishment and submit to their exploits in lieu of petty concessions.

In my view, imagining India as a developed (or even a middle income) country is meaningless unless some radical structural reforms are implemented in the rural sector. The incremental changes would never be sufficient to cure the deformities developed over past two centuries in the sector.

The recent farmers' agitations across many states are a reminder that things needs to be done immediately, before it is too late. In next couple of days, I would be sharing my somewhat utopian (but not impossible) solutions for initiating a wider discussion on the topic.

Friday, June 23, 2017

Silent truth

Thought for the day

"A man should be upright, not be kept upright."

—Marcus Aurelius (Roman, 121-180)

Word for the day

Estival (adj)

Pertaining or appropriate to summer.

Malice towards none

After western music, Korean Pop Bands are becoming increasingly popular with Indian youth and children.

This is one Make in India battle we are certainly losing.

First random thought this morning

In this post truth world dominated by social media, Google and Wikipedia, politicians should be extra careful while making claims and hurling accusations, especially when they rely on these very tools to say what they are saying.

The effort should be minimize one's digital footprints; cross verify whatever sensational material is available online; and learn to distinguish between "truth" and "post truth".

Silent truth

"The water in a vessel is sparkling; the water in the sea is dark. The small truth has words which are clear; the great truth has great silence."
—Rabindranath Tagore

To understand the politics of farm loan waiver, it is important to first understand the economics of farming in India.

(a) As per 2013 NSSO survey about 83% (80% in 2003) of the total farming households in India are either landless or marginal (holding less than 1 hectare or 2.47 acres cultivable land).

The total cultivable land in India shrank to 92mn hectare in 2013 (average 0.6hectare per farmer household) from 107mn hectare in 2003 (0.72hectare per farmer household).

In 2013 the landless and marginal farmers owned 30% of the total cultivable land in the country up from 23% in 2003. This is due to further fragmentation of the land, or lower conversion of their land holdings.

(b) On the contrary, percentage of medium and large farmer household (owning more than 4 hectares) shrank from 3.5% in 2003 to 2.17% in 2003. The cultivable land owned by these medium and large farmer households shrank from ~35% in 2003 to 24% 2013. Many of these farmers actually do not cultivate land themselves. They lease the land to landless or small farmers.

(c) From political perspective, 130mn farming households are marginal or landless against just 3mn farmer households are medium to large land owners.

(d) The average cultivable land price in 50-100km radius of a city or large industrial project is about Rs5lac/acre, It may though vary between Rs. 1 lac to Rs. 5crore/acre depending upon the location.

The crop on the land yields less than Rs75000/year for a medium and large farmer. Assuming minimum 2 crops every year, for a small and marginal farmer the yield is Rs25000 to Rs50000 per acre/year, excluding the cost of self labor.

Pertinent to note here is that a typical landless, marginal or small farmer household deploys 3-4 adults for 6 months in the farm. At ~Rs7000/month minimum wage rate the cost of self labor itself comes over Rs1,50,000.

If we adjust the yield for one crop loss every three year, lease rent and 18-24% interest that small and marginal farmer pays, agriculture is mostly an unviable business.

If we factor in rising labor cost, lower subsidy in input prices (fertilizer, electricity, diesel and water) and slower rise in MSP, the viability gap will likely only increase going forward.

(e) A large majority of farmer households in India are landless or marginal. Many of these farmers take land on lease. The rent varies from Rs5000/acre to 50% of produce. A lost crop puts such farmers in a debt trap that may take minimum 3years to get out.

Many of these farmers do agriculture for sustenance. They grow wheat or rice for self consumption only.

Remember, the Gen X of these farmers is no longer enamored by the feeling of Dharti Meri Mata Hai (my land is my mother). The next generation of landless, marginal and small farmers is therefore least likely to prefer agriculture over construction or industrial labor. (Availability of agriculture labor is likely to shrink even further from the current alarming levels).

(f) Given the low returns, the current generation of medium and large farmers is also not much interested in taking up farming as occupation. Many would want to sell the land if they get right price.

The problem however is that an overwhelming proportion of land holdings have unclear or disputed titles. Besides, finding a buyer for fragmented and scattered land parcels is tough. To make the matter worst, in many areas the revenue rate (circle rate or ready reckner rate) of land is much higher than the actual market price, making it really tough to sell the land.

Thursday, June 22, 2017

Farm loan vs. farmers' debt

Thought for the day

"Forward, as occasion offers. Never look round to see whether any shall note it."

—Marcus Aurelius (Roman, 121-180)

Word for the day

Confusticate (v)

To confuse or perplex; bewilder.

Malice towards none

At the end of the day, both Kumble and Kohli seem to have moved to a little lower pedestal.

First random thought this morning

A few months back, BJP MP from Mumbai had criticized the cryptocurrency Bitcoin a Ponzi scheme.

Notwithstanding, the ill-informed but aggressively judgmental views of some of its own MPs, the government reportedly has decided to regularize the trading in Bitcoin.

It is commendable. As per some estimates, the Indian Bitcoin exchange market is responsible for processing around 11% of Bitcoin-to-USD trades. It will be not long when Bitcoin will give serious competition to gold, at least in Indian urban markets.

Farm loan vs. farmers' debt

Farm loan waiver has been a contentious issues in India's socio-economic milieu for past many decades. It would not be entirely wrong to say that most governments and political parties have used this as a tool to exploit voters' sentiments rather than solving the problem of farmers' stress or structural inadequacies in the Indian agriculture sector. Consequently, every episode of loan waiver has yielded almost nothing more than a temporary relief for the farmers.

My colleagues visited Madhya Pradesh and Maharashtra to assess the ground level situation in the wake of recent violence involving farmers'.

In our assessment, the recent episode of loan waiver, which started with the newly elected BJP government in the state of Uttar Pradesh waiving farm loans to fulfill its election promise, seems materially different from the earlier episodes. This episode manifests some seriously disturbing trends emerging in Indian socio-economic sphere.

First of all, we found that the farmers are demanding loan waiver as matter of "Right" and not as a matter of "Relief", as used to be the case in earlier episodes of loan waivers. This change in attitude can potentially alter the dynamics of state-farmer relationship in future.

Secondly, for the first time we realized the change in the ethos of the farming community. Traditionally, Indian farmers considered defaulting on loans and other financial and social obligations an unpardonable sin. The popular belief was that if you fail to discharge your debt in this life, you will have to take another birth to discharge such obligations. This seems the case no longer. A significant number of young farmers are more than willing to default on their loans. With morality out of financial dealings, this can potentially change the whole paradigm of non-corporate lending in the country.

Third, in past many episodes of farm loan waiver were preceded by protests, blockades and some spontaneous violence. But this time the violence appeared more organized. There is nothing to suggest that this will end with one time waiver of loans. This appears to be a natural corollary of the first point. Not waiving loan would be considered violation of a legitimate "Right" and hence violent protests would be considered "in order".

Forth, the construct of "farm loans" is diverging wide from "farmers' debt".

Moreover, "farm loans" are also becoming riskier as the cost of input (seeds, agro chemical, equipment rental, wages etc.) is rising along with the output prices. However, in case of crop failure the quantum of loss is much higher as compared to, let's say, 10years ago.

In my view, farm loan waiver is just like first aid. It cures no problem.

...to continue tomorrow