energy times vol 2
TRANSCRIPT
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Mythili Bhusnurmath
Consulting EditorEconomic Times
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Welcome to India! Namaste!
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Political dynamics
A union of 28 states & 7 UTs
Government democratically elected at
state and centre on basis of universal adult
franchise
Present union government a coalition of 3
main allies & a no. of smaller parties
Previous NDA government had 24 allies
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Social dynamics
Population 1.21 billion (2011 census)
Multi-cultural, multi-religious, multi-
lingual, multi-ethnic..
Hindus 80.5%, Muslims 13.4% others
Christians, Sikhs, Parsis, Buddhists
2 official languages: English & Hindi No national language; 22 scheduled
languages & > 100 non-scheduled
languages
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Status of Women
Wide disparities in status
Literacy rate (2004) : women 47.8% men 73.4 %
High MMR; sex ratio adverse & declining 914:
1000 in 2011 census (927 in 2001)Surfeit of laws to
protect women India a
signatory to The
Covenant onElimination of
Discrimination Against
Women, CEDAW
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A country of contrasts
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More billionaires than
Japan & China
40% of population below
poverty line of $1.25 a day
Woman president,
Woman head of rulingpolitical party, 2 women
chief ministers
Women most disadvantaged
section of society, decliningsex ratio, female infanticide
Indra Nooyi, Pepsi CEO
is an Indian, a woman
heads second largest
bank
Young girls are killed by
their own parents and family
members for daring to
choose their own husbands
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So how many Indias are there?
Has just been elected a
non-permanent member
of UN Sec Council
80% of women without
access to toilets, falling
sex ratio
Has capability of
launching commercial
Satellite ..plans to put
man on the moon
Not able to provide
basic infrastructure
electricity, water ,
health, educationWins 2nd-highest
medals at
Commonwealth games
Has highest no. of
malnourished children in
commonwealth7
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Contrasts never seem to end
Ambani builds 26 storey house in Mumbai,
but millions homeless
More people have cell phones than toilets
Produces some of thebest and brightest
doctors/engineers but
unable to provide 100%
primary education
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Highs and lows:
Living cheek by jowl
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But theres place for everyone!
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Economics vs Politics
Great Theory says each one acting in his/her own interest
maximizes welfare for all
Textbook economics talks of theinvisible hand of the market, of
demand & supply equilibrium
Not from the benevolence of thebutcher, the brewer or the baker that
we expect our dinner but from their
regard to their interest Adam Smith
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Economics vs Politics
Presumes perfect knowledge, also invisiblehand of market is present and is unfettered
Assumes there is no need for interference
from government
True?Not quite.
For markets to function you need perfectknowledge, also we need the very visiblehand of the state to supplement the market crisis in Europe is an outstanding example
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Economics vs Politics
Thus there is no question of free
markets existing in a vacuum minus the
state anywhere in the world
Economics without politics is likereligion without sin it does not exist
So what happens when economic
dictates collide with political interests ina country like India?
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Economics vs Politics
Economics without Politics is a neat world
But it is a world that does not exist
In the real world, invisible hand of marketmust be backed by visible hand of government
to enforce property rights, contracts, promote
competition, redistribute income, protect
sovereign interests
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State vs Market
Issue really is how much market, how
much state
Pendulum has swung from one extremeto another
Whether in US, Europe or INDIA
The difference is the debate in India pre-dates the crisis
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A peep into therealIndia
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State vs market not new in India
Why has the state vs market debate
been part of Indias socio-political
firmament even before the crisis?
Reason is simple we are home to a
third or more of the worlds poor
We are also a democracy whichmeans you cannot ignore the poor
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What does that mean?
Very simply: a Tiananmen Square is un-
thinkable
Sadly, so is a Three Gorges Dam
Means unlike in China the government
cannot ignore the voices of the poor
Means growth alone will not suffice
Means equity distribution of the fruits of
growth is as important else growth will not
be sustained
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In search of the Goldilocks answer
For almost 4 decades after independence
we had too much state
Result? We grew at the Hindu rate of 3-4% Beginning late 1980s we began to shift to a
market-oriented economy
Growth trajectory changed: between 2003-4 to 2008-09 India grew at close to 9%
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India at the time of independence
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India: phase 1 : 1950- 90
1947: independence fairly industrialized,
poor
Key strategy accelerate growth rate to
reduce poverty focus was on job creationbut not content with the trickle-down
strategy so went in for pull-up strategy, a
conscious policy to see that growth wasmore equitable hence central planning,
growth rate of 3-4% Hindu rate of growth
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India: Phase II reforms of 1991
Position at start of 1990s
Still desperately poor, inefficient industry,
licence-control raj
Trigger for reform: huge current a/c
imbalance
Forex reserves down to < $ 1 billioni.e., less than for 2 weeks imports
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1991 - Economic Reforms
Political situation : Minority governmentled by Narasimha Rao
Government went ahead with path-breaking reforms 360 degree turn
not only survived the immediate crisis,
but also completed its term
However, once immediate crisis was over,
reforms slowed down
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Economics vs Politics : India
Thus most reforms took place in the first
two years of Rao government,
Is this a contradiction ? Not in India!
Subsequent governments: Politics has
gained upper hand; pace of reforms has
slowed down though direction unchanged
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The Wonder years
2003-04 2008-09 were
the wonder years for
Indian economy
Suddenly India was theflavour of the season,
globally
BRICS report: Dreaming
with the BRICS: visions
of overtaking China
Rainbow coloured vision:
India Shining?
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India: Phase III : Crisis and beyond
What is the position today?
After strong growth in the 5 year periodtill 2008-09 and slight slowdown aftergrowth has slowed to a markedly lower6.5% (2011-12)
Set to slow down even further last
quarter of 2011-12 ( Jan- March 2012GDP growth down to 5.3%, the lowest inpast 32 quarters)
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Low hanging fruit has been plucked
We need to get on with more difficult reforms
But when economies pass through difficult
times, the state vs market debate always tilts
in favour of the state Hollandes win inFrance, Greek elections
India is no different. Except our state is more
venal issues of corruption, collapse of
governance & most important, grinding poverty
are unique to India
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Tough Reforms needed
Labour Restrictive labour laws eg
Industrial Disputes Act
Judicial Reform
Infrastructure development physical
& social
Raising the ceiling on foreigninvestment
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Does government have the political will
Yes ? No?
Yes, if you consider our track recordwe
act only when we have our back against
the wall
Yes, because you cant fool all the people
all the time, even if they are poor &
illiterate
No, because the present government has
lost moral authority
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Yet, my bet is on India. Why?
Strengths and Opportunities
Demographic dividend
Large domestic market
Services Outsourcing/IT
Democracy plus and
minus
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India: Threats
Changing structure of economy at odds withpopulation distribution agricultures share in
GDP 19% but pop dependant on it 60%,
Geo-political situation in region/terrorism/domestic unrest communal, political
Collapse ofgovernance /
corruption but
civil society
finds its voice
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Growth not inclusive,
women left behind
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Infrastructure bottleneck
Physical
infrastructure is
receiving attention,
not so social
infrastructure viz
health and education
Expenditure on
education about 3% ofGDP as against target
of 6% - Right to
education a
fundamental right
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India
vsChina
Is Chinas faster rate of growth due to its political
system ie is India paying the price for its
democracy?
Contrast Three Gorges Dam, China& Sardar Sarovar, Gujarat; Beijing Olympics &
Commonwealth Games
Metro line held up by 1 man who went to court
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India vs China - Unendingdebate
Three Gorges Dam
1 million people dislocated, consumed 19
counties, 153 towns and 4,500 villages
18,000 mega watts of power, irrigated
thousands of acres
Sardar Sarovar
0.2 m people, 200 villages partlyaffected, 1,500 mw of power
irrigate hundreds of acres, provide
drinking water
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India vs China
No famines in democracies Amartya Sen
Case of SARS epidemic impossible to even
think of such a thing in India
Coastal areas and interiors disparity in
China. In India governments get voted out
Beijing Olympics/Tibet? Indian problems outin the open role of civil society
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Recent political eco tussles in
India
Land Acquisition for industry
Tussle over Lokpal Bill to tackle
corruption Silver lining? Civil Society is
finding its voice; forcing
government to change stanceeg anti-corruption legislation
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Noisy democracy or chaotic democracy?
Lok Sabha/ lower house of Parliament:
Total Seats 545, 27 parties
Party Position
UPA (United Progressive Alliance) 262 (Congress206)
NDA (National Democratic Allliance) 157 (BJP 116)
Non- Congress, Non-BJP 72
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Democracy & Eco Progress?
Is the price too high?
Economic reality?
Political freedom?
Face off with civil societyon corruption
What is the trade off?
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So is everything hunky-dory?
Not at all !
But as long as democracy is firmly entrenched andcivil society plays its role, India will be able to
overcome the huge odds it faces today.
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Two views on India: Negative
(When the British leave) India willfall back quite rapidly through the
centuries into the barbarism andprivations of the Middle Ages
is a geographical term. It isno more a united nation than the
Equator. Winston Churchill
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The other view:
If there is one place on the face ofearth where all the dreams of livingmen have found a home from theearliest days when man began thedream of existence, it is India. RomainRolland
So far as I am able to judge, nothinghas been left undone, either by man or
nature, to make India the mostextraordinary country that the sunvisits on his rounds. Nothing seems tohave been forgotten, nothingoverlooked. Mark Twain
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So which is the real India? And why
is there hope?
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Because
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Democracy
Free Press Civil Society
Demographic
dividend
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Thank You Danke
Merci
Gracias
Grazie