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Sunday, September 8, 2013

THE ASSAM TRIBUNE
Guwahati, Sunday, December 20, 2009

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Strikes could hurt India’s investment climate

Devajit Mahanta

Strikes are a strategy used by a group of employees in an attempt to force the employer to meet their demands. But this strategy must be the weapon of last resort because if this right is misused, it will create a problem in the production and financial profit of the industry and ultimately affect the economy of the country.

There are mainly two hypotheses on the effects of strikes on economic growth. First, a negative effect of strikes on economic growth as assumed to be a part of the rent seeking activities of trade unions and political parties and, second, strikes are considered to be the most effective mechanism to curb excessive use of managerial powers and discretion. Very few studies have examined the effects of strikes on economic performance. Now is the time for our academicians and policy makers to think about reconciling both conflicting objectives.

Of all the issues surrounding strikes, the biggest question resolves around the issue of legality of strikes. Much of the debates on the legality of strikes under the Indian Constitution have been on the issue of the right to strike. Constitutionally, strikes may be analyzed through fundamental duties under part IVA of the Constitution. A strike is defined in Employments Rights Acts (ERA) 1996 as, “a concerted refusal, or a refusal under a common understanding of any number of employed persons to continue to work for an employer in consequence of dispute”. Everyone has the right to protest, but when it hampers the growth of the nation and mass people, they need to decide what’s more important.

The history of labour legislation in India is naturally interwoven with the history of British rule, but there is “no right to strike” as such in British rule. In USA, most of the state government employees and medical professionals’ strikes are illegal under the common law. In Marxist-Leninist regimes such as the former USSR or the China, striking is illegal and viewed as counter-revolutionary.

In India, state and company employees strike is already having an impact in several agencies like health, transport, and agriculture. Based on some recent findings, I try to analyze how strikes effect the economic growth. On January 5 when thousands of truckers stayed off the roads after talks broke down with Indian officials to cut taxes and diesel prices ultimately pushed up prices of food and commodities across the country. According to the All India Motors Congress, due to the truckers’ strike, Rs10,000 crores per day loss was incurred by the country’s overall business. To protest against rising prices of essential commodities, the main Opposition National Democratic Alliance (NDA) will form a human chain to observe a countrywide strike. The question arises now whether the BJP-ruled states will also observe the shutdown.

In case of a strike at a healthcare facility, the third party consists of patients who may have neither the ability to switch to another provider nor the power to apply pressure on the employer and employees. Recently, the Jet Airways pilots’ strike was hogging the limelight in most newspapers. Just after 24 hours of the pilots’ strike, both the Left parties and the BJP came out in support of the strike and tried to inject politics. They tried to politicise a purely legal matter relating to the enforcement of contracts.

However, in every civilised society the right to strike is an important element of human rights, but at the same time the objective of economic growth is equally important. Thus, trying to avert costly strikes seems only reasonable. Strike as a weapon has to be used sparingly for redresses of urgent grievances when no other means are available or when available means have failed to resolve it. It is indeed ripe for the Government to enact legislation so that strikes in any sector may be banned, if deemed essential.

(devajitmahanta@gmail.com)


THE ASSAM TRIBUNE

Guwahati, Sunday, December 06, 2009

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India must increase revenue to contain fiscal deficit
DEBAJIT MAHANTA

A stimulus package is an attempt by the government to boost the economic growth. The fiscal and monetary are the two main ways for stimulating the economy.

So far not a single Indian bank or financial institutions have failed and all of them well regulated by the RBI. Rather than come out with a new stimulus plan government should decide on the rollback of stimulus once the economy returns to the path to recovery.

The three stimulus packages implemented between December 2008 and February 2009 to revive the economy has already created fiscal deficits. The government had cut taxes and hiked expenditure to stimulate the economy following the global financial crisis. The fiscal deficit is the difference between the government’s total expenditure and its total receipts (excluding borrowing).

There are two ways government can reduced fiscal deficit, by raising revenues or by reducing expenditure. However keeping in view of the present economic situation the government has not increased revenues. Government expenditure in sectors such as agriculture, education, health and poverty alleviation has been reduced leading to greater hardship for the poor. So, more economic stimulate packages mean increase the fiscal deficit when the economy going through a recession and more importantly the government has not been able to play any role in boosting demand. Government should have ruled out any further special packages to stimulate the economy and should have adopted exit strategy because now the time ripe to end the stimulus.

Will the Indian economy be able to manage if stimulus measures are withdrawn to bring down the current level of fiscal and revenues deficits? Before withdraw government needs to focus on rural agricultural policies which can infuse faster economic growth, investment in infrastructure and maintain an appropriate fiscal and monetary policy. Both Government and Reserve Bank of India should working in close cooperation with each other to evolve the appropriate fiscal and monetary policy. Even the global leaders should address the problems faced by the international community due to economic meltdown in the platform like G-20 so that the multilateral negotiations on trade can be successfully concluded.

Markets have begun looking up this quarter and the growth forecast also returned to positive. Some economists pointed should continue another 4-6 months in stead of withdrawing stimulus packages. The turbulent period of the Indian economy is going on right now and initiating any negative step can derail the whole process of recovery. India’s Planning Commission Deputy Chairman Montek Singh Ahluwalia told that Indian economy, which is grow at its slowest pace in six years in the fiscal year ending March, needs stimulus to sustain growth.

India is becoming a global innovator for high-tech products and services. As per the World Bank report two per cent of India’s population, 20 million people, staying abroad earn the equivalent of two-third of India’s GDP. Indian Government should seek policies that stimulate the employment market mostly revolve around measures being implemented at the national and international level to tackle problem of job losses arising out of recession.

The crisis is forcing India around the world to test the limits of fiscal and monetary policies. To navigating these uncertain times a sound and resilient banking sector, well-functioning financial markets and robust liquidity management are the pre-requisites for financial stability. The banking system in India is sound, adequately capitalized, well regulated and capable of withstanding the global shock without any further stimulus packages.


(devajitmahanta@gmail.com)
 


THE ASSAM TRIBUNE<>
Guwahati, Sunday, October 11, 2009
 

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Do skilled workers prefer going abroad for job?
Devojit Mahanta
 Since the economic liberalization in 1991 a lot of Indian people are everywhere around the globe. If going to foreign countries is good then what are the reasons and why? As per the survey report conducted by CNBC the main reason for people leaving India is the lack of sufficient opportunity and lower salaries. The report revealed that the average income of an Indian labour class ranges between Rs 5000 -Rs10000 a month but the same person gets more money abroad because in India labour charges are less.

Another section holds the view that skilled people are migrating from India not for money or career, but a loss of faith in India. India has some big issues like caste-based reservations, rampant corruption, dirty politics, lack of infrastructure and lack of willingness to develop infrastructure eventually which led people to start losing faith in their own country.

India went through phases of emigration under the British rule and during that time several Indians migrated to countries in the East and West Indies, Africa and Australia as indentured labourers and as trading entrepreneurs. Now the information technologies are producing a form of migration that adds a new dimension to what is termed as “the international division of labour”.

The three traditional settlement countries Australia, Canada, and USA, later joined by the Germany attracted the highly skilled workers from India once their highly selective immigration policies were modified. To illustrate the practical consequences, Germany’s new Immigration Act, which has replaced the Green Card scheme is focused on attracting more skilled workers in areas such as natural science, engineering, technology, academicians and scientists by providing granted permanent residence and permission to work from the beginning rather than five-year work permits as was previously the case. The new Act even allows family members of highly skilled workers too to work in Germany.

Even after thousands of job cuts by US companies almost daily over the past few months, the US Congress still allows temporary workers to enter the country annually on H1-B visa upto a limit of 65000. As per the US Government data for 2008 shows that about 5.7 lakh Indians were issued H1-B visas and other non-immigrant visas.

A new destination that has rapidly gained popularity is the Middle-East. The oil-rich countries mainly attracted semi-skilled and unskilled labour on a temporary circulating basis. The semi-skilled and unskilled workers have a high rate of turnover as their contracts are for short period usually not more than two years at a time. This has facilitated the proliferation of recruitment and placement agencies and exploiting job seekers range from withholding of the passports, refusal of promised employment, wages and over-time wages, inadequate medical facility, denial of legal rights for redressal of complaints etc.

Regarding opening of financial sector for foreign players, Commerce and Industry Minister Kamal Nath said that if foreign players open their labour market for us, we will do it for them. Labour markets means more jobs for Indians abroad especially in US. Is this an indication of encouragement for skilled workers to catch the human capital flight? Also the question for our policymakers, should the financial sector be opened up?

After the world economic crisis on the last quarter of 2008, there has been a steady rise in the number of Indians migrating to other countries for employment purposes. The number of emigration clearances by the Indian Government was 4.75 lakh during the period January to May 2009. India is slowly moving from a protective framework to a regulator of migration. Can our Government do anything to use their skill domestically? This situation can be avoided by the Government by making some policies and identifying the skills.

Finally to assess whether migration has changed society in India, and whether it has adequately benefited social and economic development in India the greater co-operation between sending and receiving countries is needed to ensure a fair distribution of benefits.


THE ASSAM TRIBUNE<>
Guwahati, Sunday, September 13, 2009
 

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Is speculative trading responsible for commodity price hike?

Devajit Mahanta

As lot of reasons have been cited for the steep hike of essential commodities during the past few months. Depreciating Indian money against the dollar, and vagaries of weather, besides stubborn and greedy oil companies. But recently, the reason cited is ‘commodity market speculator’.

Addressing the energy ministers’ meeting in London, India’s Petroleum and Natural Gas Minister Murli Deora said the current pandemonium in oil prices lay in speculative trading in the futures market. There is a need for the oil industry to re-assert its leadership in price formation and not remain passive speculators. But we should not forget that a small proportion of oil production is traded in the futures market. Global oil sales at current price levels amount to about $4.3 trillion. The futures market accounts for only $260 billion.

The Standing Committee on Food, Consumer Affairs and Public Distribution (Government of India, 2006-07) seeking amendments to the Forward Contract (Regulation) Act had stated that since small farmers do not participate in commodity trading, there is no need for these markets. World over, commodity futures market are used by large farmers, traders, banks and insurance companies. They are allowed to participate in futures markets, as they can hedge their exposure to farmers and give better terms to them. The fundamental inadequacies in the system cannot be covered by banning futures which seeks to protect consumer at the expense of the farmer.

The Government of India in 2007 and 2008 imposed a temporary ban on futures trading of tur, urad, channa, soy oil, potato, rubber, wheat and rice citing futures trading as a source of inflationary pressure on spot prices. As per the 2006-07 Economic Survey report, the average daily turnover of India’s 25 commodity exchanges put together barely crosses Rs. 8000-9000 crore.

Of this, the share of fine cereal grains (wheat and rice) is insignificant, ranging below Rs.30 crore per day, while tur, urad, channa, soy oil, and potato accounted for the share below 15 percent. Also in the case of urad, urad futures have been lower than the spot prices for over five months just before the ban. If the logic that futures prices or speculative trading affects spot prices is true, then spot prices should have come down, which did not happen as supplies are weak. India produces 70 million tonnes of wheat per year and only 20,000 tonnes are traded in the commodity exchange.

Hence it is highly improbable that speculative trading in the commodity exchange could have any significant impact on price of wheat. We observed that of the four banned commodities like channa, soy oil, potato and rubber in 2008, only the price of potato declined after the ban due to the bumper crop. Given the insignificant volume of trading in commodity futures of all the recently banned commodities, it is rationale to assume that futures trading cannot and do not have any direct contribution to their price rise of such commodities. The bulk of inflation which is substantially caused by commodities, specially fruits and vegetables, are not traded on our commodity exchanges. Thus futures trading cannot be held responsible for inflation.

One of the main reasons that speculators are playing in the commodity futures market is that equity and other investment markets became too risky after US sub-prime crisis where already a large Pension and Hedge fund have stockpiled. Several studies have revealed the scope for considerable improvement in the regulation of the commodity trading market to curb excessive speculative activity. There is a definite need to distinguish between hedgers and speculators, and treat them differently in terms of various requirements.

To understand the fact, it is necessary to examine the forces behind the price rise for different commodities. In the case of food products, this essentially requires a more determined effort to increase the viability of food cultivation, expand and strengthen the public system of procurement and distribution. Even for other commodities, public intervention and regulation of market is essential.

(e-mail: devajitmahanta@gmail.com)


THE ASSAM TRIBUNE<>
Guwahati, Sunday, August 30, 2009
 

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Indian economy hit by vagaries of weather
DEVAJIT MAHANTA
 Vagaries of weather in place of regular monsoon rains, which otherwise sustains India’s economy, has pushed India to the brink of drought, putting pressure on food prices, energy supplies and finally affecting economic growth.

Rainfed agriculture is risky and vulnerable, but it plays an important role in our national economy because it contributes 60 percent of the cropped areas and 45 percent of the total agricultural output. Though the rains have picked up since July, still it is 19 percent below normal for the nation as a whole. Deficit rainfall is an increasing threat because more than 50 percent of India's population rely on farming for their livelihood and only 40 percent of farmlands are irrigated.

Bad monsoon impact consumers in a big way because it exacerbates food prices coupled with rising global oil prices. India is one of the world’s largest exporters of rice and sugar. The notable fall in output due to below average rains is putting upward pressures on both domestic and global prices. Insufficient crops could add to inflation pressure.

RBI sources claim that food price inflation has been persistently high at 8.9 percent as on July-’09. Falling water reservoir levels coupled with poor monsoon not only for GDP and inflation, also affects the UPA government’s proposed Food Securities Act for providing guarantee food securities to poor families, i.e., providing 25 kg of wheat or rice per month at Rs 3 to every family below the poverty line.

Deficit rainfall has slowed the refilling of India’s main water reservoirs, and threatened supply of hydropower. Central Electricity Authority Chairman Rakesh Nath said that hydropower generation in India has fallen 20 percent. In India, monsoons directly impact agriculture and hence the economy, since the agricultural sector contributes approximately 24 percent of the GDP. India’s four month rainy season starts in early June and runs through September which is known as South-West monsoon. It affects production of rice, millet, sugarcane, oilseeds and cotton. As per the Met report, the June-09 rainfall was 46 percent below normal, it’s lowest since 1926.

The recent drought condition has created a question in the financial market. “Is there a monsoon effect in the stock market?” For the Sensex, it has six times out of ten lost value during this period. Most of the analysts say that stock markets have a tendency to rule weak between June and September. Several companies, especially in the FMCG, automobiles, fertilizer and construction segment keep their fingers crossed because of demand close to saturation point in urban areas.

However, if the government increases rural spending and supports programmes, then this problem will be negated. The government can take some important measures to mitigate the economic, agricultural and social affects of a poor monsoon.

It can implement a scheme to allow duty free import of raw sugar, rice and essential commodities as India did when the inflation rate reached double digit.

The Central and state governments should activate the public distribution system to keep down prices of essential commodities.

The Government should increase grain stocks for distribution in drought-affected regions.The Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia has claimed that India has enough food stocks to counter inflationary pressures.

The Government should distribute seeds among farmers for a second attempt at planting, besides subsidized diesel to farmers to operate irrigation pumps in drought-hit areas.

Modernized Met department is the need of the hour to stave off uncertainties of weather. For more accurate prediction, the government should provide state-of-the-art equipment to the Met department.

However, the Indian monsoon remains an elusive phenomena despite all the advances in modern technology.

(Readers can send their feedback at devajitmahanta@gmail.com)


THE ASSAM TRIBUNE<>
Guwahati, Sunday, July 12, 2009


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Is the fuel price hike justified?
By Devajit Mahanta
 Just two days before the Budget session, the UPA government hiked petrol price by Rs 4.00 and diesel price by Rs 2.00.

Any increase in price affects the general people. Doubts arise as to whether the increase is justified? Increase in petrol and diesel prices become emotive and political issues because both the petro products are consumed by the disadvantaged section – in the agricultural sector, road transport division and railways. And importantly, it upsets the common man’s family budget. In the face of these facts, it is difficult to defend any price increase despite sound reasons.

Petrol and diesel price hike is an inter-ministerial Cabinet issue. But interestingly, there was no Cabinet decision made before the price increase was announced by Petroleum Minister Murli Deora this time. This is the second consecutive time that the Manmohan Singh government has increased petrol and diesel prices without Cabinet decision. The previous hike in prices had taken place in June 2008, when the retail prices were raised by Rs 5.00 for petrol and Rs 3.00 for diesel.

The Budget session of Lok Sabha started on a stormy note on July 2, with the Opposition and UPA allies, namely DMK and Trinamool Congress protesting the hike in petrol and diesel prices and demanding a rollback which was rejected by the Petroleum Minister. He said the Government had no choice but to raise prices after the continuous increase in global prices. The Petroleum Minister also assured the Lok Sabha that if there is a fall in international crude prices, the Government will again roll back petroleum prices.

Petro-products price increase has a spiral impact on the prices of other commodities. In most cases the prices of other commodities which are increased are not in proportion to the price increase of petrol, but much higher. Some economists pointed out that due to huge taxes charged by the Government, petrol and diesel prices are so high. If the Government reduced the tax rates, oil companies can sell all their petro-products in much lower price. But if taxes on petro-products are slashed, the immediate effect will come in the form of dearth of funding for government schemes, will hit the common man much more than the price hike.

India is the fourth largest oil consumer in the Asia-Pacific region after Japan, China and South Korea, and bears an unmanageable oil pool deficit of almost Rs 24,000 crore, up from the April figure of Rs 9,000 crore due to the recent upward trend of international crude price. The Government without any futuristic plan has in the last few years changed petro-product prices several times to protect the oil company’s interests and reduce the burden of oil pool deficit, rather than keep the interest of the common man in mind.

To minimise dependence on the international market, the Indian Government should try to put into place a mechanism to meet the crisis caused by oil price hikes. This can be achieved in two ways. First, by boosting domestic production of crude oil and natural gas, and second, by working out bilateral deals with oil producing countries like Iraq, Iran etc which will enable reduction of vulnerability of the international market.

Instead of wasting more time on the present crisis, the Union Petroleum and Power Minister has to come up with a long-term strategy to provide the common people with cheaper fuel.

Readers can send their feedback at devajitmahanta@gmail.com


THE ASSAM TRIBUNE<>
Guwahati, Sunday, June 21, 2009


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Sualkuchi needs to go for product diversification
By Devajit Mahanta
 ON JANUARY 9, 1946 Mahatma Gandhi went to Sualkuchi to ask people to weave their clothes instead of buying but when he saw that every family had a loom he said, “Women of Assam can weave dream on their looms.”

Sualkuchi, about 35 kms from Guwahati, is the largest village in Assam and also known as ‘Manchester of the East’.

Sualkuchi silk comprises three major types – golden muga, white pat and warm eri silk. The handloom heritage village of Sualkuchi is a labour-intensive industry.

Considering the potential of the industry, the Kamrup District Administration in association with the North Eastern Council and National Institute of Fashion Technology, Kolkata has set up the Sualkuchi Institute of Fashion Technology (SIFT) in 2008 under the aegis of the Ministry of Textiles to impart fashion-related education and to create professionals to meet the varied manpower needs of the industry there so that international challenges could be met.

To generate self-employment in weaving through self-help groups and to facilitate the gainful utilization of muga and eri yarn products in Sualkuchi through the yarn bank, the North Eastern Council approved the ‘Project Sualkuchi’ in 1987 towards implementation of the schemes ‘Integrated Product Policy’ (IPP).

Government subsidies for the silk project and marketing schemes (like IPP and SIFT) to develop the silk industry there has hardly influenced the weavers to give up the traditional methods of weaving.

The existence of mahajans at Sualkuchi has made it a difficult task for the weavers to establish self-help groups. These mahajans own a large number of looms and provide employment to the weavers. Apart from that they lend money to weavers to operate the looms. Thus weavers have no control over their cash inflow. To keeping away the middlemen and mahajans from the entire cycle, the yarn bank and auction market should be further developed for the benefit of the weavers.

Also the industry is facing a big challenge from the China which is dumping their silk products to India at rates much below their production cost. So there is urgent need to modernize the industry by inducting more efficient machines and power looms if it is to compete with the silk produced in China.

After the fighting for a foothold in the international markets by fending off the Chinese companies, the global economic meltdown now seems to be playing spoilsport as the exports have gone down considerably.

Lack of consistency in production, neglect of marketing linkages, low end technology use and reluctance to use costlier technologies due to fears that there might not be corresponding improvement in price realisations are the reasons causing imbalance between the demand and supply position in the domestic silk market.

Silk, the queen of all fabrics, is historically one of India’s most important industries which employs over 700,000 families and is mostly concentrated in Assam, Karnataka, Tamil Nadu, Andhra Pradesh and West Bengal. After China, India is the second largest producer of silk, contributing 18 percent to the world production. Apart from employment, the silk industry is also a good foreign exchange earner. India exports silk goods worth over Rs 2,100 crore mostly to the Unites States and the European Union.

The artisans of Sualkuchi should now try to increase their value added handicrafts product range and establish links with reputed international design and research institutions

To enhance the livelihood of a sizeable population and also to create a new brand for Sualkuchi silk, the government should initiate intensive training programme on research and development for product diversification and design innovation.

Readers can send their feedback at devajitmahanta@gmail.com