From a breakout Nation to a breakdown Nation

The rupee has collapsed, stock market is falling – has India moved away from a breakout nation to a breakdown nation in just a few months?

A crisis point that Indian Economy is facing is the all-time lowest point that it had had in past. Experts have their own views on this, if it will be a long term or a short term crisis. If this situation is persistent and it continues to be like this, India is likely to be declared junk status. A short term loan of $170 bn  standing to be paid by March 2014 is making the situation worst. Rupee has collapsed and the stock markets are in a free fall.

At the time of independence Indian economy was at par with no foreign debt and economy was in equilibrium. With subsequent requirement for foreign investment the dollar rose. With a GDP growth of 8% in 2008-09 India was experiencing a boom. A slowdown in US economy was a gain for India. A free fall in the rupee in last few months has been erratic for the Indian economy. This has certain internal as well as external factors attached to it. A mismanagement of Economy by UPA-2 government along with certain macroeconomic factors has led to a slowdown of Indian Economy.

Current Account deficit is considered to a major factor behind this slow down and downward movement of rupee against dollar. CAD occurs when total imports are greater than total exports thus making India a debtor to rest of the world. Strengthening of Dollar in the last six months the dollar has strengthened by 3.52 percent with the strengthening of the US economy. The dollar has been rising on signs of growing economic momentum and talk of an early end to the Fed’s stimulus effort.  This is something which is beyond the control of the Indian Government and it is hampering the recovery of the rupee. This is one of the immediate reasons for fall of rupee that the US Economy is doing better. Money is flowing to United States. Insufficient inflow of FDIs and outflow of the foreign investments. The downfall in the Indian economy has worsened the situation and the government is unable to generate heavy capital inflows. Despite all the government effort to allow Foreign Direct Investment (FDI), there hasn’t been significant FDI inflow. The US federation has withdrawn some of its bond buying programmes resulting in a sudden outflow of money that in return has left India far behind in the race .Foreign investors has been pulling out of the Indian economy. The month of May has seen a record outflow of foreign investments of Rs. 44162 crore. With the giants like Posco pulling out of its Rs. 30000 crore steel plant project in Karnataka followed by ArcelorMittal pulling out of its Rs. 50,000 crore project in Odisha due to delays and land acquisition delays.

The rising import bill is one of major concern and is has hindered the government effort to tackle the falling rupee. Oil accounts for 35% of the total imports and gold 11% on India’s current bill. Oil and gold imports account for 35 per cent and 11 per cent of India’s trade bill respectively. There has been an uninterrupted demand for the dollar from the oil importers pushing the rupee lower. Likewise the falling gold prices have made the central bank to reduce imports, which increases CAD and hits the currency directly. Indian economy requires a strong structural reform to maintain a positive balance of payment. According to the latest figures released by the RBI the CAD has fallen down to 1.2% of GDP on the back of turnaround in exports and decline in gold imports.

The Gross Domestic Product (GDP) has hit its lowest patch in the last 10 years. With fall of the GDP to 4.8%, it had significant effect on the stock markets and the falling rupee. The manufacturing, mining and the agricultural sector has faltered and investors have become cautious of investing in India.

The central government has unraveled a multipronged strategy to bring about an increment in the inflow of dollars and limit the outflow to compensate for the sliding value of rupee. A planned increase in import duty has been exercised to shore up the decrement in rupee. Some of the other possible remedies that can be emphasized are:

• The customs duty on several red-hot imports like gold and silver is on the rise as it’s a strategic movement by the central government to ease the gap between dollar and rupee.
• NRI bank deposits can be made more attractive and foreign loan norms eased.
• The government has also decided on three public sector institutions based on finances to raise funds in dollars through bonds.

• Electronic goods top the list when it comes to making big business. In order to stabilize rupee a significant increase in customs duty on Electronic goods needs to be exercised.
• Another point that can be kept on the anvil is that some imports should be denied. The products can include crude palm oil, copper and certain varieties of coal.

The best business prototype anyone can have is to spend in rupees and earn in dollars, which is what the giants of India Inc, including the top IT companies, excel in. Basically the sector which is targeting exports for its industrial operations are the one wins the game.

Dollar appreciation would be positive for sectors such as IT, pharmaceuticals, hotel, textiles and automobiles which have the total foreign exchange earnings of these firms are far greater than their forex spends. As much as the rupee weakens, the foreign exchange earners gain provided the other factors remains constant. A sharply declining rupee triggers inflation, broaden the current account deficit, hits investor sentiment and creates burdens for organization with high exposure to foreign debt. The government and the Reserve Bank of India have taken several reform initiatives to resist the downturn, but their success stories are looking gloomy. As a whole we can say that though weakening rupee is the reason for someone’s smile it is a real threat for the country’s overall fiscal health and increase the current account deficit heavily. But in my opinion this huge downgrade is a temporary phenomenon and the rupee is really oversold. Now the Central bank and Government should work hand in hand and find out the policy measures to stabilize the frightening scenario. I personally hope a further cut in SLR to ease the liquidity to save rupee and also import duty hike in gold and other related materials. RBI can buy bonds to ease liquidity in the market. Finally we can say that the situation is tight and challenging for us, but we can not only hope for the best but also should contribute the most to get back Indian economy in the driving seat.

From a breakout Nation to a breakdown Nation by Luv Sharma

The economy of India is 10th largest in the world by the GDP and the third largest in terms of purchasing power parity(PPP).For much of the past decade, India waa celebrated as one of the emerging nations destined to rise indefinitely.India's dream run continued from 2003 and lasted for five years with economy recording an average annual growth rate of 9% throughout that period i.e. 2003-04 till 2007-08.It was during these times that stories of a breakout nation vis-a-vis India started doing rounds in World market but this raging Indian juggernaut was brought to a deafening halt as recession hit the world in 2008.Though India survived the recession but its after-effects that reverberated throughout the world affected India too.India's economy & its currency has been on a downward spree ever since.

When India got freedom value of Dollar was at par with rupee.To finance welfare and development activities especially after introduction of 5year plan in 1951 ,the government started external borrowings which required the devaluation of Currency.The rupee was pegged at 4.79 against dollar between 1948 & 1966.In 1975 it was 12 against dollar.During 1991 economic crisis ,a period marked by high inflation, low growth & low foriegn reserves forced India to further devaluae rupee to 17.90.The rupee traded in the range of 40-45 between 2000 & 2010 touching a high of 39 in 2007 during economic boom.This boom that India witnessed was the outcome of a surge in bank credit to the private corporate sector boosted by a flood of foreign capital.The loose monetary policy followed by the US to revive the domestic economy after the dot-com bubble burst and Japan's near zero.interest rates around the middle of the first decade of this century led to the resurgence of the capital outflows to the emerging markets , with investors prepared to take greater risks in search of higher returns.FDI inflows also increased during this period as Indian Government relaxed norms to allow Venture funds/Private equity/Hedge funds to enter Indian Market .This was the story till the dream run lasted but as soon as the lehman brothers collapsed foreign portfolio investment ezpectedly fled for the safety of the dollar.

From 2008 till 2013 rupee has drooped to its lowest when it touched a record low of 62.80 against dollar in August .Present case scenario can.be attributed to many factors ,inflation and High Fiscal Deficit being prominent among them.If we take up inflation in India then one achool of thought argues that inflation in India is because of factors like increased payment through MGNREGA, higher minimum support prices for farmers& recently goverment introduced food bill under which it has committed to spend around Rs 1.3Lakh Crore per annum ..Money spent without increase in storage capacity in case of Food Bill & many infrastructure projects not getting under MGNREGA is bound to cause inflation.Questions are further raised about effective usage of Government money on health & education.Critiques also argue that although development indicators have improved ,money is not being spent as well ,as quality of service has not improved.Add corruption to this and one finds a perfect recipe for inflation.Inflation and a rise in Fiscal Deficit is bad news for exchange rate.Jn foreign exchange markets ,expectation plays a major role.High fudcal deficit & higher inflationary expectations make domestix assets less attractive .Currency depreciates & foreigners pull out money from the domestic capital market.

The fall of rupee every other day is a direct consequence of the above fact.The fall in currency has had its adverse impact on India's economy and will further dent it.India's CAD is likely to increase further as oil and precious metals still contribute to the bulk of India's imports.Moreover as government of india imports oil for its energy needs and then sells it at subsidised prices to companies the reultant Oil import subsidy bill will contribute its share to CAD .India buys oil in dollars and sells in rupees so this part of our import package is going cut a gaping hole in our forex reserves..Government takes short-term loans from international organisations that it will have to reimburse at a higher rate because of fall in the value of rupee.Still there are ways government and RBI can seek to fight it out in this tough battle.Govt can take number of steps like creation of environment for long-term capital investment,Improving of trade relations with Iran which will allow India to import oil in rupee so no need of spending precious dollar.Similarly Govt can try to implement government funded schemes better.Reforms such as Direct Benefits Cash Transfer(DBT)Scheme are welcome as they are expected to plug leakages in the system.Further short-term measures include, curbing imports of gold and silver by raising of import duties, raising of additional funds through ECBs by PSUs,liberalised deposit schemes to attract dollar inflow from NRIs,tighteninh of liquidity to reduce rupee availability in the system and lastly reducing amount of dollar resident Indians can take with them.outside.

The irony of the situation is profound.Indian leaders wete quick to credit a boom to the country's natural strengths, rather than easy flow of capital from.outside world but now they are quick to blame their troubles on the receding glolobal tide.This phase too shall pass as government looks to take some strict measures but toexpect a likely turnaround soon would be a farcry.India has always wanted to be 'next china' in economic terms but beating China to next crisis is not whay Indians had in mind.People are still wondering as to how their breakout nation became a breakdown nation seemingly overnight.

Food Paradox of India: Hunger amidst Plenty By Luv Sharma

India is the world's second biggest grower of rice and wheat & may very well produce a record quantity of food in the 2013-14 season as monsoon covered the entire nation early.India has world's highest percentage of arable land area & second largest in total(after US) coupled by the fact that it also ranks first in gross irrigated croplands, an obvious corollary would have been the non-existence of hunger & malnourishment in India but such is the criminal & strange paradox of plenty that in india millions still go without food.Not only this to further substantiate a brilliant example of hunger amidst plenty it was ranked 66th in Global Hunger Index.Even after 45yrs of the Green Revolution India provides a unique spectre of overflowing warehouses & rotting grqins on the one hand while.millions go to bed hungry.

Spurred by the agricultural innovation & generous subsidies, India now grows so much food that it has a bigger grain of stockpile than any country except china & it exports some of it to countries like Saudi Arabia & Australia.Yet 1/5th of its people are malnourished , which is double the rate of other developing countries like Vietnam & China.This glaringly ironical situation has been under constant neglect from the government.

The explanation of this anomaly lies in the complex regulations that govern procurement & distribution .One major problem is the storage of the grains.For past 25yrs the storage capacity has not been upgraded at all.Part of the grain is officially stored outside warehouses, where chances of rotting are high.The current storage facilities are quite inadequate.Granaries are filled beyond capacity & many are in deplorable condition.The above problem is further compounded by infrastructural barriers like insufficient road network & transportation.Consider the example of punjab which has been blessed with rich & fertile soil and is popularly called as bread-basket of India.It has been reeling under inadequate incentives and investment for procurement & storage of food grains.Of 14Million ton of wheat to be purchased by State govt's food & civil supplies deptt., Punjab currently has space to store only 6Million ton.This has forced state govt to look for alternative storage spaces in empty mills,abandoned factories ,schools & even graveyards.Meanwhile its open sites are overflowing & slowly spoiling grain from previous years.So the need of the hour is to setup a network.of grain silos & warehouses & godowns across country .This would redice the burden for stock holding of wheat by the producing states and they can also be used for effective distribution among the poor.Another problem is the inefficient & corrupt system used to get the food to those who need it.Just 41.4% of the grain picked by the states from central warehouses reaches Indian homes, according to a worldbank study.Officials all along the chain, from warehouse managers to shopkeepers, steal food and sell it to the traders, pocketing tidy ,illicit profits.Many families have still not got their ration cards and they hesitate in.getting them due to bribery involved.Some States like TamilNadu & Chhatisgarh have made marked improvements by using technology to track food & have made it easier for households to get ration Cards.India should move towards giving poor cash or food stampsas US ,Mexico & other countries have done.That would eliminate mismanagement because govt would.buy and store only enough grain to insure against bad harvests thus solving the twin problem of wastage and of providing maximum outreach.

Recently food security law has been passed by government of India which gurantees 67% population nutritious food at very low prices.This is an another step towards achieving food security.If implemented correctly this law would not only help in exterminating the problem of hunger and malnourishment but also help divert the excess grain procured by the govt thereby eliminating the wastage of grains.

The visuals of food rotting speak volumes of the criminal apathy,neglect & callousness on our part with which we, as a nation have failed to address the shameful scourge of hunger.

India is facing a major food problem ,arising mainly from poor policies,infrastructure & corruption but it can be resolved with sincere efforts on the part of government by strengthening the market support system & establishing a network of storage spaces across the country.

Every piece of grain wasted is a cruel joke and a slap on the faces of millions of children living under poverty and malnourishment.Perhaps if policy makers could realise the gravity of what Gandhiji was trying to say when he said " There are people in this world  so hungry that God cannot appear for them except in the form of bread.

Perhaps its high time that India puts the national Agricultural ox before the cart of being a major global power.

Lopsided Iran Nuke Deal

The step away from the proliferation of Nuke weapons and enrichment of Uranium above 5% is certainly a historic diplomacy move by P5 +1 and Iran. Despite strong protest by Israel and Saudi Arabia the deal took place. It is certainly looking promising but there are always challenges associated with these diplomacy deals. six months probation of this negotiation is going to be tough for sure.



Following were some of the points stressed in the deal (Copy paste from various sites) :

Halting the Progress of Iran’s Program and Rolling Back Key Elements

Iran has committed to halt enrichment above 5%:

Halt all enrichment above 5% and dismantle the technical connections required to enrich above 5%.

Iran has committed to neutralize its stockpile of near-20% uranium:

Dilute below 5% or convert to a form not suitable for further enrichment its entire stockpile of near-20% enriched uranium before the end of the initial phase.

Iran has committed to halt progress on its enrichment capacity:

Not install additional centrifuges of any type.

Not install or use any next-generation centrifuges to enrich uranium.

Leave inoperable roughly half of installed centrifuges at Natanz and three-quarters of installed centrifuges at Fordow, so they cannot be used to enrich uranium.

Limit its centrifuge production to those needed to replace damaged machines, so Iran cannot use the six months to stockpile centrifuges.

Not construct additional enrichment facilities.

Iran has committed to halt progress on the growth of its 3.5% stockpile:

Not increase its stockpile of 3.5% low enriched uranium, so that the amount is not greater at the end of the six months than it is at the beginning, and any newly enriched 3.5% enriched uranium is converted into oxide.

Iran has committed to no further advances of its activities at Arak and to halt progress on its plutonium track.  Iran has committed to:

Not commission the Arak reactor.

Not fuel the Arak reactor.

Halt the production of fuel for the Arak reactor.

No additional testing of fuel for the Arak reactor.

Not install any additional reactor components at Arak.

Not transfer fuel and heavy water to the reactor site.

Not construct a facility capable of reprocessing.  Without reprocessing, Iran cannot separate plutonium from spent fuel.

Unprecedented transparency and intrusive monitoring of Iran’s nuclear program

Iran has committed to:

Provide daily access by IAEA inspectors at Natanz and Fordow.  This daily access will permit inspectors to review surveillance camera footage to ensure comprehensive monitoring.  This access will provide even greater transparency into enrichment at these sites and shorten detection time for any non-compliance.

Provide IAEA access to centrifuge assembly facilities.

Provide IAEA access to centrifuge rotor component production and storage facilities.

Provide IAEA access to uranium mines and mills.

Provide long-sought design information for the Arak reactor.  This will provide critical insight into the reactor that has not previously been available.

Provide more frequent inspector access to the Arak reactor.

Provide certain key data and information called for in the Additional Protocol to Iran’s IAEA Safeguards Agreement and Modified Code 3.1.

Verification Mechanism

The IAEA will be called upon to perform many of these verification steps, consistent with their ongoing inspection role in Iran.  In addition, the P5+1 and Iran have committed to establishing a Joint Commission to work with the IAEA to monitor implementation and address issues that may arise.  The Joint Commission will also work with the IAEA to facilitate resolution of past and present concerns with respect to Iran’s nuclear program, including the possible military dimension of Iran’s nuclear program and Iran’s activities at Parchin.

Limited, Temporary, Reversible Relief

In return for these steps, the P5+1 is to provide limited, temporary, targeted, and reversible relief while maintaining the vast bulk of our sanctions, including the oil, finance, and banking sanctions architecture.  If Iran fails to meet its commitments, we will revoke the relief.  Specifically the P5+1 has committed to:

Not impose new nuclear-related sanctions for six months, if Iran abides by its commitments under this deal, to the extent permissible within their political systems.

Suspend certain sanctions on gold and precious metals, Iran’s auto sector, and Iran’s petrochemical exports, potentially providing Iran approximately $1.5 billion in revenue.

License safety-related repairs and inspections inside Iran for certain Iranian airlines.

Allow purchases of Iranian oil to remain at their currently significantly reduced levels – levels that are 60% less than two years ago.  $4.2 billion from these sales will be allowed to be transferred in installments if, and as, Iran fulfills its commitments.

Allow $400 million in governmental tuition assistance to be transferred from restricted Iranian funds directly to recognized educational institutions in third countries to defray the tuition costs of Iranian students.

Humanitarian Transaction

Facilitate humanitarian transactions that are already allowed by U.S. law.  Humanitarian transactions have been explicitly exempted from sanctions by Congress so this channel will not provide Iran access to any new source of funds.  Humanitarian transactions are those related to Iran’s purchase of food, agricultural commodities, medicine, medical devices; we would also facilitate transactions for medical expenses incurred abroad.  We will establish this channel for the benefit of the Iranian people.

Putting Limited Relief in Perspective

In total, the approximately $7 billion in relief is a fraction of the costs that Iran will continue to incur during this first phase under the sanctions that will remain in place.  The vast majority of Iran’s approximately $100 billion in foreign exchange holdings are inaccessible or restricted by sanctions.

In the next six months, Iran’s crude oil sales cannot increase.  Oil sanctions alone will result in approximately $30 billion in lost revenues to Iran – or roughly $5 billion per month – compared to what Iran earned in a six month period in 2011, before these sanctions took effect.  While Iran will be allowed access to $4.2 billion of its oil sales, nearly $15 billion of its revenues during this period will go into restricted overseas accounts.  In summary, we expect the balance of Iran’s money in restricted accounts overseas will actually increase, not decrease, under the terms of this deal.

Maintaining Economic Pressure on Iran and Preserving Our Sanctions Architecture

During the first phase, we will continue to vigorously enforce our sanctions against Iran, including by taking action against those who seek to evade or circumvent our sanctions.

 Sanctions affecting crude oil sales will continue to impose pressure on Iran’s government.  Working with our international partners, we have cut Iran’s oil sales from 2.5 million barrels per day (bpd) in early 2012 to 1 million bpd today, denying Iran the ability to sell almost 1.5 million bpd.  That’s a loss of more than $80 billion since the beginning of 2012 that Iran will never be able to recoup.  Under this first step, the EU crude oil ban will remain in effect and Iran will be held to approximately 1 million bpd in sales, resulting in continuing lost sales worth an additional $4 billion per month, every month, going forward.

Sanctions affecting petroleum product exports to Iran, which result in billions of dollars of lost revenue, will remain in effect.

The vast majority of Iran’s approximately $100 billion in foreign exchange holdings remain inaccessible or restricted by our sanctions.

Other significant parts of our sanctions regime remain intact, including:

Sanctions against the Central Bank of Iran and approximately two dozen other major Iranian banks and financial actors;

Secondary sanctions, pursuant to the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) as amended and other laws, on banks that do business with U.S.-designated individuals and entities;

Sanctions on those who provide a broad range of other financial services to Iran, such as many types of insurance; and,

Restricted access to the U.S. financial system.

All sanctions on over 600 individuals and entities targeted for supporting Iran’s nuclear or ballistic missile program remain in effect.

Sanctions on several sectors of Iran’s economy, including shipping and shipbuilding, remain in effect.

Sanctions on long-term investment in and provision of technical services to Iran’s energy sector remain in effect.

Sanctions on Iran’s military program remain in effect.

Broad U.S. restrictions on trade with Iran remain in effect, depriving Iran of access to virtually all dealings with the world’s biggest economy

All UN Security Council sanctions remain in effect.

All of our targeted sanctions related to Iran’s state sponsorship of terrorism, its destabilizing role in the Syrian conflict, and its abysmal human rights record, among other concerns, remain in effect.

My Take on this!! 

The deal does look promising but will it really work between P5 +1 and Iran. Six months’ probation period of the negotiations will prove to the important phase of this deal. Constant pressure that Iran faces from the neighboring West Asian Countries will definitely have some amount of effect on it too.

From the Indian perspective I believe that Indian should try to intervene and try to make sure that this deal goes through fine. As India sets to gain a lot due to its dependence on Crude oil, pulses and oilseeds imports. Trade being a major gainer in this for India, should be considered and worked with attention and great care. India is expected to have a better situation when it comes to crude oil trade and this might even boost its foreign exchange market.

China being a big customer of Iran's crude oil is definitely in favour of the deal. China's relationship with Iran had been fine but after there joining of US Coup the relations definitely did strained. But after the deal the things are looking good in this zone too. West Asia would benefit with from this deal and this will prove a major gainer for West in terms of security and East in terms of trade. 

But when it comes to the close neighbours of Iran, Israel has some apprehensions with the deal. 

Obama also has to persuade its ally Israel, whose Prime Minister Benjamin Netanyahu denounced the deal as a "historic mistake," that the accord will reduce and not increase the threat from its arch foe Iran. And he has to sell the accord to skeptics in Congress, including some in his own Democratic Party, who have been pressing for more sanctions on Iran.

Sources : The Hindu, The White House, The Diplomat

Food Paradox of India: Hunger amidst Plenty

 Food Paradox of India: Hunger amidst Plenty

 We need sufficient level of energy and nutrition for our survival or to stay alive. This energy is in turn required for doing physical or mental work at home and workplaces. This energy comes from food, and keeps our body charged.

We can say food is the most important need of human beings which energises human body when consumed and keeps it fit and healthy. For any country, quantum of healthy citizen denotes its economic condition. As food is the basic and most important need of human being and comes directly from agricultural activities, we can say agriculture is the backbone of food sector.

Human body feels discomfort and De- energised in lack of food.  This stage is called Hunger. Hunger describes the feeling of discomfort that Is, the body’s signal that it is in need of more food. All people experience this feeling at times but, for most people, particularly in the developed world, this phenomenon is a fleeting event that is alleviated once the next meal is taken, causing no deep or permanent damage. When hunger or lack of food persists, however, the consequences can be devastating.

Position of India in Agriculture and Food Security:

Although India is an agricultural country and its 70 % population primarily depends on agriculture sector, still policymakers had not taken it as prime moving force(PMF) due to varied reasons. They preferred Industry as PMF keeping aside the agriculture. At that time Indian agriculture was dominated by feudal landlords and absentee landlordism. A large spread area of land was in control of only few hands and majority of people i.e. agricultural labourers, transport workers and other casual labourers were working as farmers under the control of landlords. Autocracy and partial treatment by rich landlords forced those farmers to live in scarcity of food and basic needs. That caused widespread unemployment, poverty and hunger. Thus Govt of India took a step in form of Agricultural reforms keeping a view to distribute excess land from landlords to landless labours for their livelihood and for employment. Still government failed to provide food at every level due to two severe droughts of 1965 and 1966 and wars with Pakistan and China. This forced India to imports for its food grain requirement for its citizen. Meanwhile Govt decided to reform its existing agricultural policy and go for a self-sufficient nation. Indian policy makers understood that increasing agricultural production would only help enhancing the food security of India along with achieving self-sufficiency. Green Revolution was one of the steps taken by government. During mid-1960 India adopted the green revolution with the introduction of High Yield Variety of Mexican dwarf wheat and miracle rice IR8, which lead to a remarkable growth in agricultural production. Green Revolution was adopted as a tool to reduce hunger and food shortage in India. 

Govt Initiatives for food security to minimise hunger:

Food security is ensured in a country only if,

(1) enough food is available for all the citizen

(2) all persons have the capacity to buy food of acceptable quality and

(3) there is no barrier on access to food.

Above depicts that for the success of food security in India, three terms i.e. availability, affordability & accessibility are the main concern. Indian Govt is trying to fulfill all needs as per these key factors.

Availability : We see above that in spite of agricultural background of our country, we were not able to produce ample quantity of food grains. The produce was not meeting with our consumption rate. Thus Government assisted producers of food grains financially and technically and taken the initiative for improved agriculture on scientific basis and to collect excess food grains at minimum support prise from the agricultural food grain producers. In this way government made available sufficient food grains for entire population of India along with without any loss to food grain producers by ensuring MSP for their produce.

Affordability: What is the mean of availability of food grains if they are not cheap or not suits the pocket of common people? Thus Government has made available these food grains at highly subsidized rates with different slabs according to purchasing power of the people i.e below poverty line & above poverty line in both rural as well as urban areas. This ensures affordability of food by weaker section of society.

Accessibility:

Now If food is available, it is affordable too, does it mean all people of Indian society are getting this? Perhaps not! India is a country of varied physical & economic features. Some of its parts are highly productive and some are not. Agricultural crops distribution is also vary according to soil, climate and relief features. Thus some states are producing high quantum of food grains and some have nil or minimum production. Government has taken the initiative to collect excess food grains from one state and its distribution to the areas of scarcity. Food Corporation of India is doing this job of collection and distribution of food grains for entire India. Central govt with the help of state govt has opened small shops in villages, towns, cities. These shops are called Ration Shop, where subsidized food grains are available for people of BPL, APL and others at differential rates. This work of collection, storage and distribution is done by FCI and entire network is known as PDS i.e Public Distribution System.  

With this instrument, Govt has ensured accessibility of food grains at every level of Indian society. It in turns has helped in minimising hunger and poverty in India.

Critical Analysis:

Although Indian government has done a commendable job in Green revolution, agricultural reforms, fixation of MSP & providing robust structure of PDS, there are still starvation deaths reported every year.  Despite high growth and self-sufficiency in food production over the years, a significant portion of our population still lacks food security and causing Hunger. This is due to:

(1) Over storage of food grains and their buffer stock maintained by FCI. This causes rotten food grains over a period of time. Food is also got wasted during distribution to PDS shops.

(2) Penetration of PDS is not proper. All sections of the society is not getting benefit of subsidised food grains due to corruption and maladministration

(3) Dependence on Monsoon or traditional harvesting factors.

(4) Identification of the section of BPL mere with wage calculations does not reveal the truth

Some Hunger Facts

1. Hunger remains the No.1 cause of death in the world. Aids, Cancer etc. follow.

2. There are 820 million chronically hungry people in the world.

3. 1/3rd of the world’s hungry live in India.

4. 836 million Indians survive on less than Rs. 20 (less than half-a-dollar) a day.

5. Over 20 crore Indians will sleep hungry tonight.

6. 10 million people die every year of chronic hunger and hunger-related diseases. Only eight percent are the victims of hunger caused by high-profile earthquakes, floods, droughts and wars.

7. India has 212 million undernourished people– only marginally below the 215 million estimated for 1990–92.

8. 99% of the 1000 Adivasi households from 40 villages in the two states, who comprised the total sample, experienced chronic hunger (unable to get two square meals, or at least one square meal and one poor/partial meal, on even one day in the week prior to the survey). Almost as many (24.1 per cent) had lived in conditions of semi-starvation during the previous month.

9. Over 7000 Indians die of hunger every day.

10. Over 25 lakh Indians die of hunger every year.

11. Despite substantial improvement in health since independence and a growth rate of 8 percent in recent years, under-nutrition remains a silent emergency in India, with almost 50 percent of Indian children underweight and more than 70 percent of the women and children with serious nutritional deficiencies as anemia.

12. The 1998– 99 Indian survey shows 57 percent of the children aged 0– 3 years to be either severely or moderately stunted and/or underweight.

13. During 2006– 2007, malnutrition contributed to seven million Indian children dying, nearly two million before the age of one.

14. 30% of new born are of low birth weight, 56% of married women are anaemic and 79% of children age 6-35 months are anaemic.

15. The number of hungry people in India is always more than the number of people below official poverty line (while around 37% of rural households were below the poverty line in 1993-94, 80% of households suffered under nutrition).

A Healthy population is a fundamental ingredient of Inclusive Development

Universal access to quality health care is not just a social imperative; it is a necessary condition for economic progress and prosperity. For any country to develop it is necessary for the population of the country to be healthy so that they work towards the growth and inclusive development of  the country. With a population of just over 1 billion, of which about 300 million live below the poverty line, India is the largest democracy in the world and one of the most important countries in terms of meeting global development goals. India’s GDP had a steady and consistent growth since independence. The various infrastructural sectors have had a tremendous growth.

But even after 60 long decades of independence we have not been able to achieve a significant level of nutrition and health amongst the population. Inequity and poverty are the root causes of ill health. Access to quality health services on an affordable and equitable basis in many parts of the country remains an unfulfilled aspiration. Disparity in health care is interpreted as compromise in 'Right to Life.' It is imperative to define 'essential health care,' which should be made available to all citizens to facilitate inclusivity in health care. The suggested methods for this include optimal utilization of public resources and increasing public spending on health care. Capacity building through training, especially training of paramedical personnel, is proposed as an essential ingredient, to reduce cost, especially in tertiary care. Another aspect which is considered very important is improvement in delivery system of health care. Increasing the role of 'family physician' in health care delivery system will improve preventive care and reduce cost of tertiary care. These observations underlie the relevance and role of Primary health care as a key to deliver inclusive health care. The advantages of a primary health care model for health service delivery are greater access to needed services; better quality of care; a greater focus on prevention; early management of health problems; and cumulative improvements in health and lower morbidity as a result of primary health care delivery.

Though India has obtained self-sufficiency in food grain production and a major success in PDS and AAY schemes but still we have a major war to fight when nutritional needs are concerned. According to some figures, around 40 per cent of children under the age of five years are malnourished and nearly half of all pregnant women aged between 15 and 49 years suffer from anemia. Nutrition is crucial for fulfillment of basic human rights and forms the foundation for meaningful human existence with decreased susceptibility to infection, related morbidity, disability and mortality, better learning capacities and adult productivity. Poor learning outcomes in our schools are also partly because of the low level of nutrition. To improve the situation Government has initiated several schemes for school going children like Midday meal and also providing iron folic supplements to children.

Again I would stress the importance of improving purchasing power for the economically weaker sections so that the cover of PDS and several other food security schemes is much larger than what we have today. Innovations in the sectors of Food and supplies are the need of the hour. PPP might give a breakthrough in this field as it will boost the level of service and also will reduce the overrun time of schemes. 

The Food Paradox of India : Hunger a midst plenty

The Food Paradox of India : Hunger a midst plenty

Lack of sufficient food have many implication on a country from jeopardising sovereignty to death due to hunger. When we got independence, we were left with lack of sufficient food to feed our population. Our founding fathers understood the miserable situation and took necessary measure to increase food production. We attained self-sufficiency in food production in 70s with the help of green revolution. Since then we are producing food at a rate more than the population growth but despite the achievement of consistent high production millions of people remained hunger. This is our failure of transforming macro-level food security into household level. We stand at 63 in global hunger index, even behind from our neighbour countries Pakistan and Bangladesh. Food insecurity leads to the malnutrition as well as hunger. Worst affected segment from food insecurity is poor and marginalized people, who have not enough purchasing power to buy adequate amount of food. Lack of adequate food also affect the growth and development of children undermining the development of country. Major achievement of India since independence is the prevention of famine but on other hand failed to eliminate hunger and malnutrition. Various governmental schemes helped in reducing the hunger but complete elimination of hunger seems a distant dreams due to which we are lagging behind in realising millennium developmental goal.
                                                                                                    India has second largest population in the world among which more than half of population below poverty line, who have not sufficient purchasing power to take optimum amount of food so it become the responsibility of government to provide food to these marginalised and poor people at subsidised price. In a ruling supreme court has declared subsidised food to poor people as a legal entitlement. Government is trying very hard to eliminate hunger completely through various schemes like public distribution schemes, antyodaya ann yojana, annpurna yojana, food for work programme in specified areas etc. Despite these efforts, results are not significant. It is due to the failure of government to address various drawback and loop holes in social schemes, notably PDS which is the key component for distribution of food grains at subsidised price. Some are the most important drawback in PDS and food policy are
1. Faulty mechanism for identification of beneficiaries.
2. Failure of government to prevent diversion of food from fair price shop to open market.
3. Continuous increase in MSP price despite CACP recommendation to reduce it which ultimately pushing the issue price, making food grains costlier.
4. Unable to generate adequate number of employment for increasing the purchasing power.
5.  High level of intervention and regulation of agriculture commodity market.
6. Procurement of food grain more than requirement resulting into increase in stock while at the same time creating scarcity in open market.
7. Lack credit availability to the small farmer, marginal workers.
Reforms initiated to increase food production for securing food security will not be successful until it reaches to poor and marginal people. Regional disparity in food production and various intermediaries creating the problem of price rise in food production and their movement to the deficit regions.
                           To address the problem of hunger we need a holistic approach which should include consistent increase in food production along with distribution. Food security bill is a good approach but it alone cannot address the root cause of hunger. Main reason of hunger and malnutrition is the lack of adequate purchasing power until we increase the purchasing power and make people empower any effort will go into vain. Government need to fill the loopholes in various scheme by making them transparent, identifying the real beneficiaries, generating employment etc. employment generation in rural areas attached with protection of ecosystem or restoration will serve many purpose besides generating enough purchasing power for poor people. Financial support to small farmers for adopting new technology along with awareness will not only contribute in production but also provide employment. Spread of information technology by establishing KIOSK in villages will help in spread of education about nutrition, new schemes, technology and realization of goal of e-governance. Use of information technology will help in reducing the leakage of food grain. Government should also reduce the procurement of food grain so that more food grain would be available in open market to check the inflation in food prices. Decentralization of PDS is a good idea but it needs the support of central government in the form of financial help along with transfer of some FCI godowns to state government. Increasing the food stock will not serve any purpose rather than it will increase the already ballooning fiscal deficit. Prevalence of hunger in india is not due to the lack of food but efficient distribution. Providing food grain over the buffer stock at subsidised price is better than selling it in international market at nominal price or leaving it in open for rotting.

            Every individual have some basic requirement to live life with dignity and security, among all the basic requirement sufficient food is most important. Lack of adequate food is not good for integrity of any country as History taught us that People became hostile to government when it failed to provide sufficient food. Considering the size of population it is difficult for a government to feed whole population. A targeted approach with exclusion of those who are to purchase their food with close monitoring will serve the purpose of eliminating hunger. Sufficient number of employment generation will attract the people from over saturated agriculture sector. It will ultimately result into increase into purchasing power without any negative effect on production. We have large demographic dividend which will accelerate the growth of country in near future if we take care of hunger timely. Widespread hunger across the country negatively affect our image internationally undermining the soft power. We have sufficient food to eliminate hunger, what we actually need is the political will and honest officer. Close monitoring with the help of modern information technology will not only fill the various loopholes in government schemes but also made it more efficient. 

Aggregate Demand and Aggregate Supply

These are very important concepts for understanding the Macro economics.

Aggregate demand and aggregate supply Aggregate demand and aggregate supply. Keynesian thinking. Demand-pull and cost-push inflation. Fiscal and monetary policy.

Please got through the whole course in the link above so that the concepts are crystal clear.

The Aggregate Supply Curve
The aggregate supply curve shows the relationship between a nation's overall price level, and the quantity of goods and services produces by that nation's suppliers. The curve is upward sloping in the short run and vertical, or close to vertical, in the long run.

Net investment, technology changes that yield productivity improvements, and positive institutional changes can increase both short-run and long-run aggregate supply. Institutional changes, such as the provision of public goods at low cost, increase economic efficiency and cause aggregate supply curves to shift to the right.

Some changes can alter short-run aggregate supply (SAS), while long-run aggregate supply (LAS) remains the same. Examples include:

• Supply Shocks - Supply shocks are sudden surprise events that increase or decrease output on a temporary basis. Examples include unusually bad or good weather or the impact from surprise military actions.
• Resource Price Changes - These, too, can alter SAS. Unless the price changes reflect differences in long-term supply, the LAS is not affected.
• Changes in Expectations for Inflation - If suppliers expect goods to sell at much higher prices in the future, their willingness to sell in the current time period will be reduced and the SAS will shift to the left.

The Aggregate Demand Curve
The aggregate demand curve shows, at various price levels, the quantity of goods and services produced domestically that consumers, businesses, governments and foreigners (net exports) are willing to purchase during the period of concern. The curve slopes downward to the right, indicating that as price levels decrease (increase), more (less) goods and services are demanded.

Factors that can shift an aggregate demand curve include:

• Real Interest Rate Changes - Such changes will impact capital goods decisions made by individual consumers and by businesses. Lower real interest rates will lower the costs of major products such as cars, large appliances and houses; they will increase business capital project spending because long-term costs of investment projects are reduced. The aggregate demand curve will shift down and to the right. Higher real interest rates will make capital goods relatively more expensive and cause the aggregate demand curve to shift up and to the left.
• Changes in Expectations - If businesses and households are more optimistic about the future of the economy, they are more likely to buy large items and make new investments; this will increase aggregate demand.
• The Wealth Effect - If real household wealth increases (decreases), then aggregate demand will increase (decrease)
• Changes in Income of Foreigners - If the income of foreigners increases (decreases), then aggregate demand for domestically-produced goods and services should increase (decrease).
• Changes in Currency Exchange Rates - From the viewpoint of the U.S., if the value of the U.S. dollar falls (rises), foreign goods will become more (less) expensive, while goods produced in the U.S. will become cheaper (more expensive) to foreigners. The net result will be an increase (decrease) in aggregate demand.
• Inflation Expectation Changes - If consumers expect inflation to go up in the future, they will tend to buy now causing aggregate demand to increase. If consumers' expectations shift so that they expect prices to decline in the future, t aggregate demand will decline and the aggregate demand curve will shift up and to the left.

MACRO ECONOMICS - Some basic terms!!

Dear All!!

This is an introduction to some of the basic concepts of Macro Economics.

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At a very fundamental level, the macroeconomy (it refers to the economy that we study in macroeconomics) can be seen as working in a circular way. The firms employ inputs supplied by households and produce goods and services to be sold to households. Households get the remuneration from the firms for the services

rendered by them and buy goods and services produced by the firms. So we can calculate the aggregate value of goods and services produced in the economy by any of the three methods (a) measuring the aggregate value of factor payments (income method) (b) measuring the aggregate value of goods and services produced by the firms (product method) (c) measuring the aggregate value of spending received

by the firms (expenditure method). In the product method, to avoid double counting, we need to deduct the value of intermediate goods and take into account only the aggregate value of final goods and services.

Key concepts :

1. National Income - A term used in economics to refer to the bookkeeping system that a national government uses to measure the level of the country's economic activity in a given time period. National income accounting records the level of activity in accounts such as total revenues earned by domestic corporations, wages paid to foreign and domestic workers, and the amount spent on sales and income taxes by corporations and individuals residing in the country.
   
   
2. Intermediate Goods - An intermediate good is a good or service that is used in the eventual production of a final good, or finished product. These goods are sold by industries to one another for the purpose of resale or producing other goods. An example of an intermediate good would be sugar, which is directly consumed but is also used to manufacture food products.
   
   
3. Value Added - The enhancement a company gives its product or service before offering the product to customers. Value added is used to describe instances where a firm takes a product that may be considered a homogeneous product, with few differences (if any) from that of a competitor, and provides potential customers with a feature or add-on that gives it a greater sense of value.
   
   
4. Gross Domestic Product (GDP) - The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
   
   
   This can also be called GDP at MP (Market Price)
   
   GDP = C + G + I + NX
   
   where:
   
   "C" is equal to all private consumption, or consumer spending, in a nation's economy
   "G" is the sum of government spending
   "I" is the sum of all the country's businesses spending on capital
   "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)
   Investopedia Video - What is GDP
   
   Calculating the rest of the values - GDPmp + Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy
   
   Hence, GDPmp + Net Factor Income From Abroad (NFIA) = GNP at MP
   
   GNPmp - Depriciation = NNP at MP
   
   NNPmp - Net Indirect Taxes = NNP at Factor Cost or National Income
5. Personal Income - Total compensation received by an individual. Personal income includes compensation from a number of sources - salaries, wages and bonuses received from employment or self-employment; dividends and distributions received from investments; rental receipts from real estate investments; profit-sharing from a business and so on. In most jurisdictions, personal income above a certain exemption threshold is subject to taxation. Personal income is generally computed on a pre-tax basis. 
   
   Also referred to as "gross income."
   
   
   Exchange of commodities without the mediation of money is called Barter Exchange.  It suffers from lack of double coincidence of wants. Money facilitates exchanges by acting as a commonly acceptable medium of exchange. In a modern economy, people hold money broadly from two motives – transaction motive and speculative motive. Supply of money, on the other hand, consists of currency notes and coins, demand
   and time deposits held by commercial banks, etc. It is classified as narrow and broad money according to the decreasing order of liquidity. In India, the supply of money is regulated by the Reserve Bank of India (RBI) which acts as the monetary authority of the country. Various actions of the public, the commercial banks of the country and RBI are responsible for changes in the supply of money in the economy.
   RBI regulates money supply by controlling the stock of high powered money, the bank rate and reserve requirements of the commercial banks. It also sterilises the money supply in the economy against external shocks.
6. Credit Reserve Ratio - The portion (expressed as a percent) of depositors' balances banks must have on hand as cash. This is a requirement determined by the country's central bank, which in the Reserve Bank of India. The reserve ratio affects the money supply in a country. Current CRR Value as on 29/01/2013 is 4%
7. Bank Rate -  The interest rate at which a nation's central bank lends money to domestic banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Lower bank rates can help to expand the economy, when unemployment is high, by lowering the cost of funds for borrowers. Conversely, higher bank rates help to reign in the economy, when inflation is higher than desired. 
   
   The bank rate can also refer to the interest rate which banks charge customers on loans.  The current Bank Rate in India is 8.75% since 29/01/2013.
   
   
8. Statutory Liquidity Ratio - Statutory liquidity ratio refers amount that the commercial banks require to maintain in the form of gold or govt. approved securities before providing credit to the customers. Here by approved securities we mean, bond and shares of different companies. Statutory Liquidity Ratio is determined and maintained by the Reserve Bank of India in order to control the expansion of bank credit. It is determined as percentage of total demand and time liabilities. Time Liabilities refer to the liabilities, which the commercial banks are liable to pay to the customers after a certain period mutually agreed upon and demand liabilities are such deposits of the customers which are payable on demand.
   The Current SLR in India is 23%
9. Repo Rate - The discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash). To contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate. Repo is short for repossession.
10. Aggregate Supply - The aggregate supply curve shows the relationship between a nation's overall price level, and the quantity of goods and services produces by that nation's suppliers. The curve is upward sloping in the short run and vertical, or close to vertical, in the long run.
11. Aggregate Demand - The aggregate demand curve shows, at various price levels, the quantity of goods and services produced domestically that consumers, businesses, governments and foreigners (net exports) are willing to purchase during the period of concern.
    
    
    
    

These we some of the key concepts that will be beneficial for understanding the current and static part of the syllabus. For a detailed list please the below link for the same.

Glossary

Please put your queries and any further addition to the list below on the comments.!!

All the best