Tag Archives | Agriculture

Devolution of Power from Centre to State

By Ratish Srivastava (@socilia13)

States in India can play a bigger role in foreign policy formulation with active engagement in pursuing global economic opportunities, resource management, security issues and environmental issues. However, does that mean the centre will lose power to states as they push for greater autonomy?

The devolution of power from the centre to state need not translate to a lesser role for the centre. The centre could use this devolution to their advantage in a number of ways.

The current NDA government created the States Division in 2014 under the Ministry of External Affairs (MEA) for efficient management of centre-state relations. However, this division only provides economic freedom to states by allowing them to engage in global economic opportunities.

The structure proposed by NDA only allows for economic development, investment promotion but not aspects of security. The central government needs to realise the role a state can play in security and improving ties with other nation-states. The best example would be India’s relation with Israel.

India has historically supported the Palestinian stance, and any major diplomatic move with Israel could upset India’s energy ties with Iran and the Gulf states. But, a number of chief ministers of states have gone to Israel, mostly for learning new agricultural practices, as agriculture in Israel is a highly developed industry. Visits from the then CM of Rajasthan Ashok Gehlot in 2013 and Maharashtra CM Devendra Fadnavis in 2015 show that states can help improve ties with other nation-states.

These low-key measures, which go under the radar are extremely important for India to build stronger ties with a nation-state as it allows greater manoeuvrability in formulating foreign policy. India, however, needs to tread carefully as a tilt towards Israel could be counter-productive to its move for a permanent seat on the UN Security Council. India requires strong support from the Arab states that form a large group in the General Assembly. The Modi government must be careful as it looks to preserve its strategic, economic and energy interests in West Asia.

The centre will also become effective in conducting neighbourhood diplomacy if it can coordinate with peripheral states, which share borders with other countries, for example, India’s relation with Bangladesh. The relation between the two countries was weakened over disputes over the Teesta River. The Manmohan Singh-led government in 2011 failed to reach an agreement with Bangladesh, which allowed an equal share of the river. This failure can be attributed to the CM of West Bengal, Mamata Banerjee, who pressured the centre to break the agreement.

The reason for the the move’s opposition lies with the fact that the centre did not involve West Bengal, which would be impacted the most by this deal.

On the other hand, India signed the Land Boundary Agreement (LBA) with Bangladesh in 2015. This agreement will rehabilitate people in their respective enclaves in India and Bangladesh. It will improve the domestic situation in both countries but more importantly, this move showed how involving West Bengal helped smoothen the deal.

The central government assured the government of West Bengal that it will be provided with adequate financial support to help rehabilitate people coming from the former Indian enclaves in Bangladesh. The state government has also taken a set of reasonable relief measures through its Cooch Behar district administration with financial assistance from the centre. The centre and the state in this situation worked together, and it resulted in a historic deal being signed between India and Bangladesh, which has been a concern since 1974.

The current central government has suggested the Centre-State Investment Agreement (CSIA), which could potentially help the central government implement a bilateral investment treaty with any foreign country. CSIA creates a platform for states to engage in the management of foreign direct investment flowing into the country.

In addition, with states focusing on improving their economic performance, it allows the centre to focus on other issues like acting in accordance to international law and set environmental goals while the states can help bring globalisation to India through its trade deals and by attracting FDI.

Ratish is a research intern (@socilia13) at Takshashila Institution

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India-Afghanistan Relations: The Way Forward

The iconic short story “Kabuliwallah” by Tagore and the interpretations on the land beyond mountains and imaginations have shaped the India and Afghanistan relations from the past to the present.  “Bound by thousand ties and million memories”, the relations between the two countries go beyond the traditionally state-to-state relations or government. History, culture, civilization and people to people contact have created commonalities thus making the past history the guide to the future.

 

India-Afghanistan

Afghan President Ashraf Ghani paid rich tribute to Indian democracy. India has been admired as the largest pluralistic society in which diverse ethnic, linguistic, religious and sectarian groups coexist and cohabit together. India being the largest secular democracy is in a position to share its know-how and practice with Afghanistan. The nascent egalitarianism society of Afghanistan in all its earnestness looks forward to India for assurance and support in its quest for democracy.

There is a strong economic, politico-strategic and security component in the India-Afghanistan relations. India’s economic assistance and support to democracy is a step to reduce Afghanistan’s dependency on Pakistan and helps India to establish links with energy rich Central Asia. For India a friendly and pro-active democratic regimes in Afghanistan would act as a balancer in the region. The stability of the region can be assured only if we have a stable Afghanistan which would counter the Taliban forces and India has extended its all out support in this endeavour.

Encountered with deep recession, Afghanistan embarked on several austerity programmes and launched stimulus packages that would help the economy move out of a dependent entity to a self-reliance system.  From Afghan’s standpoint, India’s investments and partnership would be a great value addition in the re-building process of the countries economy and infrastructure. The strategic and security system of Afghanistan is fragile and weak and India’s support and strategic partnership is worthy of mention and a step forward in stabilizing the region. Powers like United States welcomes India as a key player in the stabilization process that agonizes Pakistan, who has adopted a zero-sum approach in the region creating a security dilemma.

Geo-economically Afghanistan is very important for India, the foreign trade policy of India and the International North-South Transport Corridor (INSTC), hosts a tremendous promise that could help the country develop economic and strategic importance in Eurasia and Central Asia. The INSTC has particular economic and strategic relevance to India given the increasing regional ambitions of China through its one belt one road initiative. Several MOUs have been signed between India and Afghanistan. Indian investors are interested in the “virgin markets” of Afghanistan. Indian private sectors are seen as a driver towards prosperity in Afghanistan. The other important project is the building of Sister-City relations between major Indian cities and Afghan counterparts. The Sister-City relations will be connected through tourism, faculty exchange programs as well as through private sector investment. Several invitations have been extended to India to invest in Afghanistan.  India has been invited by Afghanistan to join Pakistan, Afghanistan, Tajikistan Trade and Transit Agreement a very significant link wherein Afghanistan would act as a land bridge connecting South Asia and central Asia

Termed as one of continuity and engagement, India-Afghanistan relations is built on mutual trust and cooperation. With the exception of the Taliban rule, India’s relations with Afghanistan remain strong. Indian support continues in the reconstruction, rebuilding and stabilization process of Afghanistan.  As the fourth largest donor, Indian contribution to the rebuilding process has been to the effect of US $ 2.2Bn and generous assistance has been provided in the formation of human capital with approximately 13000 Afghan students studying in Indian Universities. India’s signature project and commitment to democracy and institutional support can be seen in the completion of the Afghan Parliament. The Salma dam in Herat is yet another initiative in terms of infrastructure development is nearing completion which would generate 42 MW of much needed power for the electrification of rural and urban Herat and also help in irrigating 80000 hectares of agricultural land. The Trade and transit between India and Afghanistan, is gaining momentum and the movement of trucks across the Attari-Wagha border would spur regional trade and enhance economic engagement in South Asia. There is a ray of positive hope that Pakistan would allow the India-Afghan trade movement, which would boost Afghan economy. Afghanistan is also keen on India’s involvement in the India-Iran Chabhar Port project. The project would create an international transit corridor. The Chabhar Port Project is of enormous significance both to India and Afghanistan. For Afghanistan it would boost the regional trade and for India it would provide a sea-land access to Afghanistan bypassing Pakistan.

India is an all weather friend of Afghanistan and continues to play a significant role in tackling terrorism in the region. India has expressed keen intent to strengthen Afghanistan’s defense capabilities for safeguarding its security and combatting all forms of terrorism.  India is supplying helicopters to Afghan government in its effort to combat the growing menace from Taliban. India and Afghanistan have discussed several ways and means to enhance cooperation to combat terrorism. India has spearheaded capacity building prgrammes and training to Afghan soldiers in their effort to tackle terrorism. Several terror network outfits operate from Afghanistan and have expressed this menace as a global phenomenon threatening international peace and stability.

Deep engagement drives India-Afghan relations. There is committed partnership and enduring interest between the world’s largest and fledgling democracy. A pluralistic society with rich tradition and civilization that was undermined by the Taliban forces today is committed to restoring peace and stability in the region. Deeply embedded in democratic principles and values, India’s support in this endeavor of reconstruction of Afghanistan is most sought after. There are set agendas and shared objectives in India-Afghanistan relations. India is keen to assist and build a robust economy and stable political institution in Afghanistan.  An earnest effort in the reconstruction process that is vital for India, as it anchors regional peace and stability.

 

Priya Suresh is a Research Scholar at the Takshashila Institute. She tweets @priyamanassa.

 

 

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Why is the economic power still with the west?

Economic activity has certainly shifted from the west to the east. However, it is a long road ahead before the economic power so to say shifts.

The West is rich; the East remains comparatively poor, in spite of all the great recent economic achievements”. Asia has gained significant importance in the wider world economy today. Enormous growth of two major Asian economies – China and India in the past decade coupled with the slowdown of a number of advanced economies in the west only hints towards economic power shifting from the west to east. However, it is a long road ahead before the global economic order faces such a radical change. This is simply because developed countries have accumulated immense wealth and socio-economic infrastructure over the centuries which continue to give them an advantage in capacity as well as influence over the east.

The downward spiral of the west started with the global financial crisis of 2008. This was followed by notable failures of the European Union. Crisis in independent debt management, fragility in financial sector and problems due to weaknesses in their institutional design were the main characteristics of the advanced economies of the west. The downturn of United States coupled with the crisis in the European Union only acted as catalysts in the decline of the west.

At the same time, the east emerged in a number of areas. This emergence is attributed mainly to the demographics, rapid urbanisation, growing middle class and potential for increasing productivity. 60 percent of the world lives in emerging markets of Asia, however, only 20 percent fall under the consumption bracket. When this consumption increases, these emerging markets are going to become mega markets of the world. Growing trade among developing countries is regarded as one of the major driving force of these markets in Asia. Another interesting aspect to note is that for the first time, Asian economies are investing across the globe. This is in stark contrast to the fact that Asia has been the hub for global investment for many decades now. It is encouraging and worthy to observe the change in this trend.

Government, financial institutions and households are robust, healthy and growing in the emerging economies of Asia. However, they seem to have weakened greatly in the West. Asia has experienced commendable and significant structural changes in the past few years which have contributed towards the rapid growth of this region. It has grown faster than any other region around the world. This phenomenal growth has been termed as a super-cycle which is characterized by rising trade, high rates of investment, rapid urbanisation and technological innovation.

Among the emerging economies of Asia, China and India are regarded as the front runners that are experiencing massive expansion. While China had been the center of global manufacturing, India has become the international hub for global services industry. 60 percent of the GDP of Asia comes from just these two economies. The economic resurgence of the two economies has also made way for the emergence of a number of other Asian economies such as Thailand, Indonesia, Pakistan and Vietnam.

However, on the flipside, this excessive growth and improved structural transformation has been very uneven. A number of economies still need to come a long way to reach the standards of the front runners. Several countries have moved out of agricultural sector to industrial and service sector. Despite this, agriculture continues to employ a large portion of the workforce in Asia. There has been a shift from agriculture to low productive sub service sector. The exports basket has also become more diversified and refined, but only in the advanced economies of Asia.

Asian economies need to engage in inclusive growth and oppose all forms of trade protectionism to fuel economic growth. They must come together collectively and work towards policies which will further boost economic activity within Asia. Increasing importance is given to emerging economies by global organizations in order to consider their requirements towards integrating the global economy.

The emerging economies of Asia must take this to their advantage and ensure maximum assistance is received from global institutions.

Innovation is one major area where the west still dominates and the east has to catch up. They must also focus on structural transformation and direct labor towards highly productive sectors. Agriculture needs to be developed specifically in the low income economies by making modern and sophisticated methods available and implementing policies to increase productivity of this sector. These are some of the key areas that will drive employment and thereby contribute towards increasing wages in the sector which will thereby lead to increase in investments.

Emerging Asia has immense competitive advantage in manufacturing and service sector. Hence, looking forward, Asia most definitely appears to be better placed than the rest of the Global Economy. They must, however, work towards ensuring continuous innovations and build deep intellectual and institutional capital to have an edge over the already established west.

The Director General of World Trade Organization (WTO), Pascal Lamy, in September 2012, said “The rise of emerging economies was set in motion by the changes in technology, transportation costs and regulatory environment”. This swing in economic power has profound geopolitical consequences that will hardly be reversed in the foreseeable future.

However, while new economic and political trends have emerged, the rules and institutions governing multilateral cooperation have not kept pace with these changes. The difficulty in finding a new balance between advanced and emerging economies in a muted context has certainly played an important role in holding back meaningful progress.”

Asia has weathered the Global Financial crisis better than any other region. It has not only shown resilience and prompt recovery, but has also contributed largely towards the global economic recovery. However, despite the fact that the rapid economic growth of the developing countries has led to a more balanced distribution of economic power, they do not have much say in the global political and economic affairs. Many emerging countries are still way behind the developed countries in overall capacity, international outreach, institutional building and economic and social growth.

Economic activity has certainly shifted from the west to the east. However, it is a long road ahead before the economic power so to say shifts.

Varsha Ramachadran is a Research Associate at the Takshashila Institution.

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Farmers as businessmen

My association with the Takshashila Institution took me on a field trip today to trace the story of the not-so-humble potato. The journey actually started last night, as we checked out potato prices at retail stores near our respective homes. And we continued the journey this morning, in reverse order as we went first to the APMC Mandi in Bangalore and then to the potato growing areas near Arkalgud, in Hassan district. As an aside, today was the first time I visited (or rather passed through) my mother’s native place Holenarasipura (the H in her initials stood for that).

When we build narratives about farmers in India, we talk about the “humble farmer”, the “poor farmer”, the “farmer dying in Vidarbha”, the farmer exploited by zamindars, and of India itself as a “nation of farmers”. The one part of a farmer’s job that never makes it to the popular narratives is his role as a businessman and entrepreneur. A farmer we met at the APMC yard at Bangalore this morning had delayed his journey from Bettadapura by four days, only to realize a lower price than what he would have got on Tuesday. Another near Arkalgud had grown tobacco late in the season, not knowing the complications that could arise due to rainfall patterns.

Back in school when I studied Hindi, I read a story by Munshi Premchand about a young man who moves to a village because he wants to be a farmer. That story ends with him returning disgruntled to the city, claiming there is more to be done by the farmer in the city than just doing his job as a farmer. That story, which I remember as being beautifully written (though I don’t remember its name), is a good primer into how much of a business farming really is.

Consider the decisions that a farmer has to make, and decide if this is closer to being a businessman or being a tiller. First he has to decide what crop to plant. Next, he has to decide what exact variety to sow, and what variety of seeds to procure. Then comes the rather big decision about the timing of the sowing of the crop, comes as it does with dicey predictions and forecasts of rain which even the Met department can’t get right. That done, the farmer has to decide on the labour he needs to employ for the sowing season, and whether he needs to hire a tractor. Then towards the end of the season, there are decisions about hiring of labour with respect to harvest, decisions on where to sell and most importantly, timing the market right in order to realize the best possible price for his crop. And the farmer is his own salesman also, having to negotiate the price at which he sells.

Commenting on the pittance that the farmer stands to make (in terms of a profit) on what he grows, one of my colleagues on today’s field trip said it was a  no-brainer – in the long line of businessmen who stand between a crop and the customer, he said, the farmer is the worst businessman, so it is no surprise that he is the one who gets squeezed the worst.

From a “corporate strategy” standpoint, the amount of management required in the farming profession suggests that it makes eminent sense to separate the roles of the farm manager (who plans inputs , labour hire, sales, crop mix, etc.) and the farmer (who does the day to day job of tending to the farm and looking after the crops). Unfortunately, the fragmented nature of land holdings in India doesn’t allow us this luxury. In fact, there is evidence to suggest that back in the days of unequal (and supposedly unfair) land-holdings, this was perhaps actually the case, with farm managers (zamindars) taking the risk and making the big decisions, while leaving the actual farming job to the specialist farmers. Unfortunately, supposedly pro-farmer initiatives such as the Land Reforms Acts and the “land to the tiller” movement served to defeat this separation of responsibilities.

The other big problem with farming is the amount of risk in the business. At one of the farms, we saw heaps of potatoes which had been cast aside because of blight (wasn’t that the same culprit that caused the Irish potato famine back in the 1800s?). In another farm, lack of timely rain had meant that potatoes hadn’t grown to the size to which they had been expected to grow, thus resulting in much lower realizations in terms of output. Even with the best possible management, exposure to the elements means there is always a significant amount of risk in farming. Current land holdings, though, don’t allow a farmer to diversify his risk by planting more than one crop.

Fragmented land holdings creates a further problem – the produce from one farm is usually way too small to make it viable to take it to the market 200 km away in Bangalore, where an auction at the “mandi” can help the farmer realize the best possible price (more on this auction in another post). Instead, the farmer is forced to sell to local aggregators and simply accept the price the latter is willing to offer (in small centers such as Arkalgud, there isn’t much choice the farmer has in who he sells to). We met a local farmer there with considerably bigger holdings than others in his area, and he told us that he had enough to make a trip to Bangalore viable, and there was no reason he would sell locally.

From a purely business perspective, the logical way forward for farming in India would be consolidation. Consolidation of land holdings would solve several of the problems that I’ve mentioned above, and also make it viable for the farms to appoint specialist managers. One possible way forward I see would be for a bunch of farmers with contiguous farms to get together and form a private limited company (with their respective shares being proportional to their land holdings). The farmers can continue managing their own pieces of farmland, while they appoint a professional manager to do business for them (think of it as being similar to geeks Sergey Brin and Larry Page bringing in professional CEO Eric Schmidt to run Google).

Yes, that paragraph might sound too grand and fantastical, but I don’t see any other way out for Indian farmers to do better. It is time that policymakers recognize the amount of management that goes into farming, and understand that keeping farm sizes small does no good for the lot of the farmer. A comparable example would be the Indian textile industry, where labour laws have served to keep manufacturers tiny, and has resulted in them losing out to larger competitors from the Far East (who have no such constraints, and are thus able to do better business).

So what policy interventions do we need to enable better management of Indian farming? Undoubtedly, the one decision that can potentially go the farthest in this direction is to make purchase and sale of farmland easier. So far, laws that have been designed to keep “evil capitalists” out of the noble farming profession have sought to make farm-holdings illiquid, and hard to purchase or sell (making farm land sales more liquid will also ease land acquisitions for industrial purposes and infrastructure projects). However, the fact of the matter is that there is a significant amount of management skills required to successfully run a farm, and the best way to achieve that would be to be inclusive of “evil capitalists”.

The narrative about the Indian farmer needs to change, and change in a way that recognizes him as being a businessman. The sooner our policymakers recognize the business aspect of farming, the easier it would be in making farming a viable profession in India.

Karthik Shashidhar is a faculty at the Takshashila Institution and blogs at Pertinent Observations.

 

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