| NEWS Bulletin from Indian Society For Sustainable Agriculture And Rural Development --------------------------------- 1. INDIA : Nation remembers Indira Gandhi - 'India is not a soft state' - Bank nationalisation turned out to be prophetic and visionary 2. Impact of Global Financial Crisis may continue - Reserve Bank of India cautions about price inflationary pressures - Enough have been doled out to revive economy 3. Global financial crisis and drought cast its dark shadow - Indian PM's think tank cautions about price inflationary pressures - No good outlook for 2009-10 fiscal year 4. India: Drought and flood take a toll on crops - Black Divali likely for Indian Farmers - Rising commodity prices not benefiting growers ------------------------------------- INDIA : Nation remembers Indira Gandhi 'India is not a soft state' Bank nationalisation turned out to be prophetic and visionary By: ASHOK B SHARMA* on: Sat 31 of Oct., 2009 13:52 UTC New Delhi, Oct 31 : Nation today remembers the former Prime Minister of India, Indira Gandhi on the day of her martyrdom on October 31, 1984. The determined lady who was once considered as one of the world's powerful leader was the only prime minister of the country who proved that India was not a soft state through her actions In the war with Pakistan in 1971 leading to the creation of Bangladesh, annexation of Sikkim in 1975 and suppression of separatist movement in the country.
Another most important reason for which Indira Gandhi needs to be remembered is her bold decision to nationalize leading banks in the country about 40 years ago on July 14, 1969. This proved to be wise and visionary, particularly, today as it insulated the country's banking sector from the direct impact of global financial crisis. These nationalised worked under robust oversight and regulations while deepening financial access and markets. After nationalisation of banks a number of unemployed youth received loans for entrepreneurship.
It is hard to believe today after 25 years of her death that India could once rebuff political pressure and military threat from the world's most powerful country – the United States of America. The then US President, Richard Nixon disliked Indira Gandhi and referred to her as a "witch" and a "clever fox" in his private conversation with the Secretary of State, Henry Kissinger, which was later made public. In 1971 the Pakistani army heavily cracked down on the civilian population of erstwhile East Pakistan and as a result over 10 million refugees fled to India. The Pakistan military action was in disregard to the election verdict which caused the emergence of Awami League as the single largest party.
The Pakistan military dictatorship under Agha Muhammad Yahya Khan and the then political leaders of West Pakistan apprehended the shifting of political capital from Islamabad to Dhaka or separation of its eastern wing, despite assurances the Bangabandhu Sheikh Mujibur Rahman to resolve the issue within the framework of Pakistan. The military repression in erstwhile East Pakistan and the flight of refugees brought India into a war with Pakistan. The US mooted a resolution in the United Nations Security Council warning India going to war with Pakistan. Indira Gandhi signed a treaty of friendship and cooperation with the Soviet Union in August 1971 and the Soviet Union vetoed US proposal in the UN.
Indira Gandhi also took measures to build up diplomatic pressures across the world drawing attention to genocide and rape by Pakistan forces in its eastern wing and the plight of refugees. She explained to the world leaders that they were unnecessarily "defending the prestige of one man in Pakistan who is not an elected representative and who is a military dictator." The US sent its Seventh Fleet in the Indian Ocean during the India-Pakistan? war of 1971 as a warning to India. But undauntedly Indian army fought and on December 16, 1971 Pakistani army surrendered before Indian forces and Mukti Bahini of Bangladesh at Race Course in Dhaka. Thus was the birth of Bangladesh. Bangabandhu at a reception hailed Indira Gandhi saying "you are not only the leader of Bangladesh alone, you are the leader of all mankind."
Pakistan joined by US and China tried to prevail upon the world leaders in not recognising Bangladesh. But this did not last long. Series of recognition began with Myanmar being the first country to establish diplomatic relations with its immediate neighbour. However, the Shimla Agreement between Indian Prime Minister, Indira Gandhi and the Pakistan President Zulfiq Ali Bhutto of July 2, 1972 saw a little softening of India's position. Some criticised the agreement for not making the Line of Control in Kashmir as a permanent border between the two countries as an attempt to resolve the issue once and for all. Others criticised the failure to pressurise Pakistan in handing over its occupied part of Jammu & Kashmir in exchange for 93,000 prisoners of war. India's victory in 1971 war with Pakistan brought back Indira Gandhi's party, Indian National Congress to power in West Bengal defeating the Left-dominated United Front led by the former chief minister, Ajoy Mukherjee. Sidhartha Shankar Ray became the Congress chief minister of the state in March 19, 1972. Indira Gandhi not only created a new history with the creation of Bangladesh and annexation of Sikkim but also new political geography.
After India's Independence in August 1947, a popular vote in Sikkim rejected the proposal of its joining the Indian Union, and Prime Minister Jawaharlal Nehru agreed to a special protectorate status for Sikkim. Sikkim came under the suzerainty of India, which controlled its external affairs, defence, diplomacy and communications, but Sikkim otherwise retained autonomy. A state council was established in 1955 to allow for constitutional government under the Chogyal. The monarch became unpopular with the people and in 1975, the Kazi (Prime Minister) appealed to the Indian Parliament for a change in Sikkim's status so that it could become a state of India. In April, the Indian Army took over the city of Gangtok and disarmed the Palace Guards. A referendum was held in which 97.5% of the voting people (59% of the people entitled to vote) voted to join the Indian Union. A few weeks later, on May 16, 1975, Sikkim officially became the 22nd state of the Indian Union and the monarchy was abolished.
China which is still unhappy with Sikkim's annexation to India could not dare to interfere in the regime of Indira Gandhi.
A national nuclear programme was initiated by Indira Gandhi in 1967 in response to the nuclear threat from China India successfully conducted an underground nuclear test – "Smiling Buddha- in Pokhran in Rajasthan. Indira Gandhi was also the initiator of India's IT Revolution. A Cabinet note was prepared to this effected just before her assasination. Her successor Rajiv Gandhi thereafter took up the initiative.The Green Revolution initiated in 1960s saw bearing its fruit in Indira Gandhi's regime. However, there is a black spot in Indira Gandhi's political career. She was responsible for sabotaging democracy the State of Emergency in the country in 1975-77. She reaped the consequences of emergency in her electoral defeat in 1977 which brought the first non-Congress government headed headed by Morarji Deasiof Janata Party to power. Her forced sterilisation programme also ran into controversy. She is also accused of fostering Sikh extremism in the initial phase and ultimately being harsh in dealing with them in the later phase. This led to her assassination by her Sikh bodyguards – Satwant Singh and Beant Singh – in October 31, 1984.#
(•The author was a volunteer in the refugee camp along India-Bangladesh border and also covered the war as a journalist.)
---------------------------------- Impact of Global Financial Crisis may continue Reserve Bank of India cautions about price inflationary pressures Enough have been doled out to revive economy New Delhi, Oct 27 : Growing price inflationary pressure is the major concern for Indian economy. Added to this impact of global financial crisis and accompanying recession. The pace and the shape of recovery from the global financial crisis remain uncertain. Keeping in view the present situation the Reserve Bank of India (RBI) played safe in effecting no change in the repo rates, bank rate and cash reserve ratio (CRR). It restored the statutory liquidity ratio (SLR) to 25% to their net demand and timelines (NDTL) with effect from November 7, 2009. This would not warrant a significant change in the situation as on an aggregate level the commercial banks are maintaining SLR at 27.6%. According to the RBI Governor Dr D Subbarao has been reverted to its normal position, while the other liberal monetary policies would continue to help the ailing economy. The bank rate has been retained at 6%, repo rate under liquidity adjustment facility (LAF) has been retained at 4.75%, reverse repo rate under LAF has been retained at 3.25% and CRR has been retained at 5% of their net demand and timelines (NDTL). Keeping in view the global trend in commodity prices and the domestic demand-supply balance, the RBI has projected that the price inflation based on the movement of wholesale price index (WPI) at 6.5% by end-March, 2010. This is higher than the 5% WPI inflation projected by the RBI in its first quarter review in July 2009 as the upside risks have materialized. The RBI second quarter reviews of 2009-10 - one on macroeconomics and monetary development released on Monday and the other on monetary policy released on Tuesday blamed the rising food prices as primary cause for inflation, particularly that of milk and milk products, oil cakes, sugar and vegetables. The situation of rising food prices is due the supply side constraints, partly caused by drought and the expected decline in farm production and not due to demand constraints. Though anchoring price inflation expectations is the core responsibility of the country's central banking system, Subbaro washes off his hands and says : "monetary policy is not an effective instrument to manage food prices." Retail prices of commodities are at present ruling high. When the price inflation measured by WPI was hovering around zero per cent in this fiscal year, that measured by the four consumer price indices (CPIs) were at double-digit percentage points. However, Subbarao expects a seasonal decline in food prices in the period November, 2009 to January 2010 with good prospects of North-East? Monsoon over parts of South India. The southern part of the country has recently suffered heavy loss of crops and property due to floods in the South-West Monsoon. Growth in broad money supply (M3), which is partly responsible for rising prices, has increased from 18.6% in end-March, 2009 to 18.9% in October 9, 2009, surpassing the indicative trajectory level of 18% stipulated by the RBI in its annual policy statement of April 2009. A major source of M3 expansion this year has been the banking system's financing of the large market borrowing of the government, including purchases through open market operation (OMO) by the RBI. Over 80% of the market borrowing programme for 2009-10 is over and up to October 9, 2009, credit has expanded by Rs 1,14,800 crore. Thus to attain the projected growth of 20% , banks will need to expand credit by Rs 4,40,000 crore in the remaining part of the year, which will be difficult unless demand for retail credit accelerates. Also, access of corporates to non-bank sources of financing, both domestic and international, has eased, which could lead to substitution of bank credit. While credit demand is expected to pick up in the second half of 2009-10, attaining the projected growth of 20% is unlikely, according to the RBI's mid-year review. The RBI has done its best to dole out as much as possible to bail out the Indian economy from the impact of global financial crisis. Also the government has come out with a stimulus package. Similar is the case world over. Subbarao says that he, during his tenure, has already presented five quarterly reviews of RBI. There is not much elbow space left to maneuver a new strategy in the given situation. The RBI mid-year entertains a ray of hope and says "the global economy has begun to recover from the deep recession set off by financial crisis. This recovery is underpinned by output expansion in emerging market economies (EMEs), particularly those in Asia." The major emerging economies of Asia are India and China which are partly insulated from the impact of global financial crisis as they have not yet fully opened up their banking and financial sectors. In many other ways both these countries have not yet opened up some crucial sectors. This is one of the main reasons for being partly insulted from the adverse impact. Exports and imports have been affected due to recession. The output expansion in EMEs cannot be to an unlimited extent. It has to be in tune with the demand expansion, which is severely constrained by the global recession. However, the RBI mid-year review admits that the pace and the shape of recovery from the global financial crisis remain uncertain. This suggests that the world leaders need to work on an viable alternative global financial and economic order, instead of pinning hopes on revival of an ailing system.
-------------------------------------------- Global financial crisis and drought cast its dark shadow Indian PM's think tank cautions about price inflationary pressures No good outlook for 2009-10 fiscal year By: ASHOK B SHARMA on: Wed 21 of Oct., 2009 13:10 UTC New Delhi, Oct 21 : The Indian Prime Minister's think tank has cautioned that managing price inflationary risks, particularly that of food prices in the days to come is the biggest challenge before the government. Besides the impact of global financial crisis and the current drought situation would continue to cast its dark shadow on the economy in 2009-10, which may pull down GDP growth rate to a level not lower than 6.25%. The inflation rate measured by the movement of wholesale price index (WPI) would be around 6% in March, 2010. Initial signals of price inflation problem have been noticed with 13% annualized increase in overall WPI index, 33% increase in primary food index in the first half of 2009-10 fiscal year. Retail prices of commodities are ruling high and they were also so when the overall price inflation rate measured by WPI was hovering around zero. Sharper rise in all the four consumer price indices (CPIs) also confirm such an apprehension Global price inflationary pressures will be high, particularly with rising fossil oil and commodity prices. The Economic Advisory Council to the Prime Minister consisting of DR Rangarajan, Suman K Berry, Dr Saumitra Chaudhari, Dr M Govinda Rao, Dr VS Vyas, Jayant Dasgupta, Padma Iyer Kaul and Ms Seema noted global recession which has caused higher household savings and demand contraction in developed economies is adverse for export growth. Though there are encouraging signs of revival of capital flows, a further negative shock to the global financial system and the global price inflationary trend could threaten the growth in Indian economy. According to the think tank growth rate in agriculture would turn negative (-2.0%) in 2009-10 as compared with 1.6% in 2008-09. The growth rate in industry including construction industry would be 8.2% as compared to 3.9% in 2008-09. The manufacturing sector would post a growth of 7.7%. Services sector would witness a growth of 8.2% as compared to 9.7% in 2008-09. Investment rate would remain unchanged at 36.5% and is likely to pick up with improvement in domestic conditions, while savings rate would increase to 34.5% in 2009-10 as compared to 33.9% in 2008-09. Rainfall deficiency of 22.7% in the South-West Monsoon season leading to drought in different parts of the country led to a decline (about 5 million hectare) in acreage under kharif (summer) foodgrain crops, particularly rice. Hope hinges on farm production in rabi (winter season), particularly that of wheat and rice. The projected foodgrain production in 2009-10 would be 223 million tonne as against 234 million tonne in 2008-09. The think tank, however did not account the largescale damage to property, livestock and crops due to recent floods in South India. For the fiscal year 2009-10, with exports projected at $188.9 billion, imports projected at $306 billion, merchandise trade deficit projected at $117 billion or 9.4% of GDP, net invisibles projected at $92.2 billion and with hopes of services exports and remittances reviving, the current account deficit in 2009-10 would remain negative ie -2.0% of GDP as compared to -2.6% of GDP in 2008-09. With capital inflows of $57.3 billion likely in 2009-10 as compared to $9.1 billion in 2008-09, the net accretion to reserves would be $31.6 billion in 2009-10 as compared to -$20.1 billion in 2008-09. According to the think tank bank credit remained sluggish till September 2009 but corporate sector raised large amount from domestic capital market through debt and equity issuance. The Reserve Bank of India helped through its "highly accommodative" monetary policy. Calibration of monetary measures will depend on growth and price inflationary pressures. Recovery in international loan and equity markets with lower LIBOR/CDS spreads also lend for improvement in domestic financial system. The think tank also says about the possibility of strengthening of Indian rupee. The consolidated fiscal deficit of the government is likely to be 10.09% in 2009-10 as compared to 8.6% in 2008-09. Higher revenue and primary deficit would persist. The debt of the Union and state governments as a ratio of the GDP is projected to increase to over 77% in 2009-10. In this situation, the think tank suggest the need to return to fiscal discipline. As a short-term measure, the think tank suggests the need to protect and enhance rabi (winter) crop production and strengthening of the public distribution system (PDS) to reach foodgrains to different domestic markets and locations and facilitate import of rice with to deal with food price inflationary trends. For a medium-term strategy, the think tank suggests improving farm productivity and energy security.# -------------------------------------------- India: Drought and flood take a toll on crops Black Divali likely for Indian Farmers Rising commodity prices not benefiting growers By: ASHOK B SHARMA on: Fri 16 of Oct., 2009 09:06 UTC New Delhi, Oct 16 : The upcoming Divali is likely to be a Black Divali for farmers who are feeling the burnt of drought and floods. (Divali is a major festive occasion in India being celebrated on October 17, 2009)
Drought has occurred in 299 districts of 12 states in the country and farmers have suffered heavy losses due to failure of monsoon in major parts of the country. In Punjab and in other places farmers resorted to excess withdrawal of groundwater to feed the standing crops and this has resulted increased cost of production. While drought affected north and parts of central India, floods created havoc in South India and damaged the standing crops, property and took a toll on human life and livestock. In north India the sowing of crops was delayed due to erratic rainfall and delayed arrival of the monsoon and subsequently later the crops suffered the impact of drought. In south India, the crops were comparatively in a better position due to satisfactory rainfall, till they were washed away by floods in some parts of Andhra Pradesh, Karnataka According to the latest information available with the National Disaster Management Division estimated loss to crops and property in various parts of the country is Rs 140004.4 lakh Production of major kharif crops like paddy and groundnut are likely to decline. So far the government has done little to bail out the farmers from the impact of drought and floods. Before the failure of the monsoon the government, following the recommendations of the Commission for Agricultural Costs and Prices (CACP) had increased the minimum support prices for both common and grade A varieties of paddy to Rs 100 per quintal. But this is not enough a relief for drought stricken farmers. Paddy is a water intensive crop and the cost of production has increased due to drought. Therefore there is a need to announce bonus price on the declared MSPs for paddy and other crops. Apart from drought and floods, increased joblessness and wage deflation caused due to the adverse impact of global financial crisis has pushed the farmers to a point of acute crisis. The rising prices of domestic commodities has made the situation worse.
Past experiences show that the farmers do not usually benefit in this situation. When the farm produces arrive at mandis the prices decline and after the procurement is over at mandis prices subsequently rise on hoarding by traders and market manipulators. This year price rise after procurement is over is almost certain as market manipulators may try encash on the situation of lower production due to drought and floods.
The situation of rising domestic prices is made worst by wage deflation caused due to the impact of global financial crisis. The purchasing power of the people is gradually on the decline with increased joblessness, retrenchment and drastic cut in wages and salaries Rural people who wish to migrate to nearby cities are unable to find better prospects due to shrinkage in activities of the construction industry and other areas which absorbs large force of casual labour
Farmers are also consumers of many essential commodities and services, including some agricultural commodities which they do not grow. The rising prices of any group of commodities have cascading effects on other goods and services for which farmers are consumers. Retail prices of food and agricultural commodities are ruling high. Retail price of sugar has touched a peak of Rs 34 per kg and this situation is particularly due to low sugarcane production in the previous year and subsequent fall in sugar production. In Delhi retail price of different varieties of common rice is ranging between Rs 24 to Rs 30 a kg and that of wheat flour (atta) is Rs 15 a kg. Retail prices of different varieties of pulses (dal) are ranging between Rs 40 to Rs 84 a kg – chana at Rs 40 a kg, urad at Rs 72 a kg and moong at Rs 84 a kg. Vegetable prices have skyrocketed – potato price is Rs 24 a kg, tomato price is Rs 15 a kg, onion prices are ranging between Rs 18 to Rs 20 a kg, brinjal prices are ranging between Rs 20 to Rs 22 a kg, lemon prices have shot up in the range of Rs 100 to Rs 120 a kg, dhaniya prices are around Rs 80 a kg, price of ginger is Rs 60 a kg, green pea (mattar) prices are ranging between Rs 80 to Rs 90 a kg and prices of cauliflower and cabbage are ruling above Rs 50 a kg. This situation has not benefitted the farmers who had earlier sold their produces to traders at much lower prices. The drought situation is unlikely to improve in nort and parts of central India in the immediate future as the monsoon has begun its withdrawal course from September 25. The groundwater levels have deteriorated in many parts of these regions and water storage in many surface reservoirs is low. Only hope for north Indian farmers hinges on a winter rains to boost the prospects of rabi crops The government should therefore initiate immediate contingency measures to bail out farmers from this current crisis
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