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Sunday, August 21, 2011

Nadia keeps a date with history

TNN | Aug 19, 2011, 02.37AM IST
NADIA: While the entire nation celebrated Independence Day on August 15, one part of India observed the nationalevent on August 17 and 18.

On Thursday morning, Nadia district, about 95 km away from Kolkata, held Independence Day celebrations among much fanfare. Anjan Sukul, secretary of the 18 August, 1947 Committee, said they celebrated I-Day this year on August 18, a practice which was started in 1998. Nadia Zilla Independence Day Celebration Committee too observed August 18 as the Independence Day at Ranaghat.

Besides flag-hoisting, archery and rowing competitions for women were organized on Thursday morning. Sit and draw competitions were held for different age groups which were followed by a cultural programme and quiz. Sources said that appliances for the physically challenged and clothes for the poor would be distributed in the evening.

It might sound strange to many but the reason behind this delayed celebration is because of a cartographic error made 62 years ago.

On August 12, 1947 news on radio stated that India had been granted freedom but unfortunately a part of Nadia district had been awarded to East Pakistan. Pre-independent Nadia had five subdivisions: Krishnagar Sadar, Meherpur, Kusthia, Chuadanga and Ranaghat and all these areas except Nabadwip were given to East Pakistan.

It was not a diplomatic decision. It was a mistake made by Sir Cyril Radcliffe who had drawn an incorrect line on the map.

The news led to a protest in Nadia. Women objected to the decision by not lighting their ovens for two days, while the entire town observed a blackout. Muslim League leaders however hoisted flags of Pakistan near Krishnagar Rajbari and Public Library with their supporters patrolling streets, shouting 'Long Live Pakistan'.

When the word reached outgoing viceroy Lord Mountbatten, he ordered Radcliffe to rectify the mistake. Radcliffe made changes to the map and finally placed Ranaghat, Krishnagar, Shikarpur in Karimpur and Plassey in India. The rectifications, however, took some time and the final announcement was made on the night of August 17. The Pakistani flag at the Krishnagar Public Library ground was then taken off and the Tricolor hoisted a day later on August 18. Since then Nadia has been celebrating Independence Day both on August 17 and 18.

Monday, August 15, 2011

Tryst with Destiny

Tryst with Destiny was a speech made by Jawaharlal Nehru, the first Prime Minister of independent India. The speech was made to the Indian Constituent Assembly, on the eve of India's Independence, towards midnight on 14 August 1947. It focuses on the aspects that transcend India's history. It is considered to be one of the greatest speeches of all time [1] and to be a landmark oration that captures the essence of the triumphant culmination of the hundred-year non-violent Indian freedom struggle against the British Empire in India.The phrase Rendezvous with destiny was used by Franklin D. Roosevelt in his 1936 Democratic National Convention speech [2], inspiring the similar phrase Tryst with destiny by Jawaharlal Nehru.

"Long years ago we made a tryst with destiny, and now the time comes when we shall redeem our pledge, not wholly or in full measure, but very substantially. At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long suppressed, finds utterance. It is fitting that at this solemn moment, we take the pledge of dedication to the service of India and her people and to the still larger cause of humanity. At the dawn of history, India started on her unending quest, and trackless centuries are filled with her striving and grandeur of her success and failures. Through good and ill fortune alike, she has never lost sight of that quest, forgotten the ideals which gave her strength. We end today a period of misfortunes and India discovers herself again. The achievement we celebrate today is but a step, an opening of opportunity to the greater triumphs and achievements that await us. Are we brave enough and wise enough to grasp this opportunity and accept the challenge of the future? Freedom and power bring responsibility. The responsibility rests upon this Assembly, a sovereign body representing the sovereign people of India. Before the birth of freedom, we have endured all the pains of labour and our hearts are heavy with the memory of this sorrow. Some of those pains continue even now. Nevertheless, the past is over and it is the future that beckons us now. That future is not one of ease or resting but of incessant striving so that we may fulfill the pledges we have so often taken and the one we shall take today. The service of India means, the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity. The ambition of the greatest men of our generation has been to wipe every tear from every eye. That may be beyond us, but as long as there are tears and suffering, so long our work will not be over. And so we have to labour and to work, and to work hard, to give reality to our dreams. Those dreams are for India, but they are also for the world, for all the nations and peoples are too closely knit together today for any one of them to imagine that it can live apart. Peace is said to be indivisible, so is freedom, so is prosperity now, and also is disaster in this one world that can no longer be split into isolated fragments. To the people of India, whose representatives we are, we make an appeal to join us with faith and confidence in this great adventure. This is no time for petty and destructive criticism, no time for ill-will or blaming others. We have to build the noble mansion of free India where all her children may dwell.
The appointed day has come -the day appointed by destiny- and India stands forth again, after long slumber and struggle, awake, vital, free and independent. The past clings on to us still in some measure and we have to do much before we redeem the pledges we have so often taken. Yet the turning-point is past, and history begins anew for us, the history which we shall live and act and others will write about. It is a fateful moment for us in India, for all Asia and for the world. A new star rises, the star of freedom in the East, a new hope comes into being, a vision long cherished materializes. May the star never set and that hope never be betrayed! We rejoice in that freedom, even though clouds surround us, and many of our people are sorrow-stricken and difficult problems encompass us. But freedom brings responsibilities and burdens and we have to face them in the spirit of a free and disciplined people. On this day our first thoughts go to the architect of this freedom, the Father of our Nation, who, embodying the old spirit of India, held aloft the torch of freedom and lighted up the darkness that surrounded us. We have often been unworthy followers of his and have strayed from his message, but not only we but succeeding generations will remember this message and bear the imprint in their hearts of this great son of India, magnificent in his faith and strength and courage and humility. We shall never allow that torch of freedom to be blown out, however high the wind or stormy the tempest. Our next thoughts must be of the unknown volunteers and soldiers of freedom who, without praise or reward, have served India even unto death. We think also of our brothers and sisters who have been cut off from us by political boundaries and who unhappily cannot share at present in the freedom that has come. They are of us and will remain of us whatever may happen, and we shall be sharers in their good [or] ill fortune alike. The future beckons to us. Whither do we go and what shall be our endeavour? To bring freedom and opportunity to the common man, to the peasants and workers of India; to fight and end poverty and ignorance and disease; to build up a prosperous, democratic and progressive nation, and to create social, economic and political institutions which will ensure justice and fullness of life to every man and woman. We have hard work ahead. There is no resting for any one of us till we redeem our pledge in full, till we make all the people of India what destiny intended them to be. We are citizens of a great country on the verge of bold advance, and we have to live up to that high standard. All of us, to whatever religion we may belong, are equally the children of India with equal rights, privileges and obligations. We cannot encourage communalism or narrow-mindedness, for no nation can be great whose people are narrow in thought or in action. To the nations and peoples of the world we send greetings and pledge ourselves to cooperate with them in furthering peace, freedom and democracy. And to India, our much-loved motherland, the ancient, the eternal and the ever-new, we pay our reverent homage and we bind ourselves afresh to her service."

Tuesday, August 9, 2011

MONTHLY ECONOMIC REPORT -- JUNE 2011: Ministry of Finance

HIGHLIGHTS
 The overall growth of GDP at factor cost at constant prices, as per Revised Estimates, was
8.5 per cent in 2010-11 representing an increase from the revised growth of 8.0 per cent
during 2009-10.
• The cumulative rainfall received for the country as a whole, during the southwest monsoon
season, 2011 (June 1 – September 30), has been one per cent above the normal as on
07.07.2011.
• Food grains (rice and wheat) stocks held by FCI and State agencies were 44.18 million
tonnes as on April 1, 2011.
 Overall growth in the Index of Industrial Production (IIP) was 5.6 per cent during May
2011 as compared to 8.5 per cent in May 2010. During April-May 2011-12, IIP growth was
5.7 per cent as compared to 10.8 per cent during 2010-11.
 Eight core Infrastructure industries grew by 5.3 per cent in May 2011 as compared to the
growth of 7.4 per cent in May 2010. During April-May 2011-12, these sectors grew by 4.9
per cent as compared to 7.9 per cent during April-May 2010-11.
 Broad money (M3) (up to July 1, 2011) increased by 4.8 per cent as compared to 3.8 per
cent during the corresponding period of the last year. The year-on-year growth, as on July
1, 2011 was 17.1 per cent as compared to 16.0 per cent last year.
 Exports, in US dollar terms increased by 56.9 per cent and imports increased by 54.1 per
cent, during May 2011.
 Foreign Currency Assets stood at US$ 283.7 billion at end June 2011 compared to US$
249.9 billion at end June 2010.
 Rupee appreciated against US dollar and Pound Sterling and depreciated against
Japanese Yen and Euro in the month of June 2011 over May 2011.
 Year-on-year inflation in terms of Wholesale Price Index was 9.44 per cent for the month
of June 2011 as compared to 10.25 per cent in the corresponding month last year.
 Tax revenue (net to Centre) during April-May, 2011 recorded a decline of 27.6 per cent
compared with corresponding period of 2010-11. This is mainly due to refunds in
corporation tax which indicates a decline of 130 per cent over corresponding period last
year.
 As a proportion of budget estimate, fiscal deficit during April- May, 2011 was 31.7 per
cent and revenue deficit was 35.8 per cent. Revenue deficit and Fiscal deficit in April-May
2011-12 increased by 35.5 per cent and 29.6 per cent respectively over the same period
last year. This increase is mainly on account of lower GTR and higher Non Plan
expenditure. Increase in Non-Plan expenditure is due to higher interest payment and
increase in defence expenditure and pension outgo.

Sunday, August 7, 2011

The fiscal mess in West Bengal By Manas Chakraborty

(Source: The Mint: Sat, Jul 2 2011. 5:27 PM IST)

Mamata Banerjee’s government inherits a fiscal mess, with little scope for further expenditure unless it is able to woo private investment or unless help is forthcoming from the Centre
Capital Account | Manas Chakravarty
The Left Front government has left West Bengal’s finances in a shambles. Most of the attention has been focused on the state’s debt burden of around Rs2 trillion. But that’s not all. A look at the Reserve Bank of India’s annual studies on state budgets shows that West Bengal is at the bottom of most fiscal indicators.
Here’s what one of the recent RBI reports said: “West Bengal, having a revenue deficit as well as a primary revenue deficit, indicated that the state could not contain its non-interest revenue expenditure and net borrowing has been used to finance current non-interest expenditure, with no potential scope for generating debt-financing income.”
The state’s debt was 42.8% of its gross state domestic product, according to the revised estimates for 2009-10, and it was the second highest among the non-special category states. The highest percentage was Uttar Pradesh’s, at 43.5% for 2009-10. But while Uttar Pradesh’s debt to state GDP ratio declined in 2009-10, it increased for West Bengal.
Why is the state’s debt-to-GDP ratio so high? Simply because West Bengal has a very large fiscal deficit. In 2009-10, the state’s gross fiscal deficit to gross state domestic product was 6.7%, the highest among all the non-special category states except Goa, which too had the same fiscal deficit to state GDP ratio. The high fiscal deficit results in higher borrowing, which in turn has led to the huge debt burden. That’s not all—the state also has the dubious distinction of having the largest revenue deficit among all the non-special category states. In 2009-10, the revised estimates put its revenue deficit at 5.6% of the state’s GDP. This was much more than the other states, the next highest being Punjab, with a revenue deficit to state GDP ratio of 2.2%.
What’s more the ratio has been worsening—during the period 2005-08, West Bengal’s average revenue deficit to state GDP ratio was 3% and it was 4.2% in 2008-09.
Why is the revenue deficit so high? One reason is the state doesn’t tax its people. West Bengal’s Own Tax Revenue (OTR) as a percentage of its state gross domestic product was 4.1%, the lowest among all the non-special category states. Bihar, the second lowest, had an OTR to state GDP ratio of 5.3%. Non-tax revenue were also very low. The upshot is that the state’s revenue receipts as a percentage of state GDP was a mere 9.6% in 2009-10.
With such a low level of revenue receipts, West Bengal’s revenue expenditure was not particularly high. The salient fact here is that, because of its large debt burden, its interest payments as a percentage of state GDP was the highest among all non-special category states. A third of the state’s revenue receipts is used to pay interest.
Starved of resources, the state government could not do much for development, a factor that cost it dearly in the recent assembly elections. West Bengal’s development expenditure as a percentage of gross state domestic product in 2009-10 was 9.2% in 2009-10, the lowest after Kerala and Punjab. Contrast Bihar, with a development expenditure to state GDP ratio of 21.5%, although it’s true that transfers from the Centre contribute a lot of its resources.
Unable to live within its means, West Bengal was the only state that availed of overdrafts from RBI in the last three fiscal years, although it was joined by Punjab in the last two years and by Punjab and Haryana in 2010-11.
The lack of resources also led to a lack of investment by the state government and the West Bengal government’s capital outlay was a mere 1% of state domestic product in 2009-10. Only Kerala, another Left-ruled state, had a lower capital outlay of 0.9% of state domestic product.
But perhaps the West Bengal government, true to its ideology, has been spending a lot on social sectors? Well, it’s not at the bottom of the table, but its social sector expenditure as a percentage of state GDP is lower than that of many states such as Tamil Nadu, Karnataka, Rajasthan and Orissa.
A look at earlier RBI data gives us the state’s fiscal situation in 1980-81, during the very early years of Left rule. The state’s gross fiscal deficit was only 3% of net state domestic product in that year and the revenue deficit was a mere 0.2% of state domestic product.
In short, Mamata Banerjee’s government inherits a fiscal mess, with little scope for further expenditure unless it is able to woo private investment or unless help is forthcoming from the Centre.
Manas Chakravarty looks at trends and issues in the financial markets.

The politics of foodgrain management By Himanshu

(Source: The Mint : Tue, Jul 19 2011. 11:22 PM IST)

An expanded food security law makes not only good politics, but is a recipe for good economics as well

The empowered group of ministers (eGoM) recently decided on two important steps seen crucial for management of foodgrains. The first was the finalization of the National Food Security Act (NFSA) and, secondly, extending the term of the Nandan Nilekani committee to explore the possibility of introducing cash transfers for delivering food subsidy directly to the poor. Another linked decision was to allow exports of wheat and rice to international markets.
The decision making has been disappointing. The eGoM watered down the proposal of the National Advisory Council on the NFSA. The ministers proposed a food law that would cover only 68% of the population, close to 80 million fewer than what the NAC wanted. The excuse? Limited availability of foodgrains. Interestingly, the group agreed to allow exports of foodgrains as the country has a surplus with little storage space. With a record output of 241 million tonnes (mt) this year, we have enough foodgrains not only to feed the domestic population, but also subsidize international consumers through exports. Of course, only one of these can be true. Either we have shortage of foodgrains that justifies pruning down the NAC proposal or we have so much surplus that export is the only way out.
The reality is somewhere between those extremes and unfortunately, as in many other areas of governance, the problem of surplus has been created due to a policy paralysis. This chaos in food management has happened in the last three years despite prudent advice from the government’s advisers. Today, there are 65 mt of foodgrains in government stocks against the buffer and strategic reserve requirement of 32 mt.
How did the stocks build up to this extent and why is the country not able to reduce their level? In the last three years the government’s procurement effort led to an accumulation of 60 mt of grains, close to what the expanded NFSA desires. At the same time, the government was unable to offload stocks. The average off-take was less than 50 mt every year, leading to an addition of almost 10-15 mt every year. Clearly, the problem is neither production nor procurement, but one of management. Essentially the issue is that of distribution. The problem is not new and this has been the situation for almost three years now. But do we know how to get rid of the stocks.
Last year, the chief economic adviser (CEA) of the Union finance ministry, Kaushik Basu, wrote a working paper (later published in Economic and Political Weekly) on how to manage foodgrains. The paper made several important statements based on sound economic reasoning backed by analytical models. First, it argued that the problem was not of storage. Secondly, it argued that the price at which foodgrains are distributed should be lower than the price at which it is procured, the Minimum Support Price. And third, but vitally, the produce should be sold to large number of small traders/consumers in small batches. The last point implies that the best way to achieve the objective of sound management is to enlarge the number of buyers with frequent delivery/sale of foodgrains.
It is not surprising that the only way to enlarge the number of buyers is universalization as that is the way to maximize the possible number of buyers in the economy. Any attempt to reduce the number of buyers will not help in resolving the problem. It also implies that the best way to achieve the stated objectives of foodgrain management is frequent distribution. Nothing could be better than selling it monthly or weekly. In other words, a universal and expanded NFSA makes for not only good politics, but good economics as well.
Unfortunately, Basu seemed less than convinced of his own results and the latter half of the paper argued for a system of cash transfer. It is a different matter that the issue of cash transfers was neither a result that was derived from the analytical exercise outlined in the paper nor is it in any way helpful in ensuring proper foodgrain management. Incidentally, it is also not helpful in ensuring food security for the poor.
But why was the advice of sound economic reasoning crucified at the altar of wrong politics? While there are no plausible explanations, the problem has worsened in the last one year. So much so that today we are in a situation that is reminiscent of the summer of 2001. That was the time when foodgrain stocks were at near sky-high levels. The irony is that the solutions are similar to what was advocated then, with India exporting around 15 mt of foodgrains in the international market after 2001 to get rid of the excess stocks at a time of severe agrarian crisis. Unfortunately, after a decade of activism and monitoring by the Supreme Court, we will be again exporting foodgrains at a price cheaper than domestic prices, effectively subsidizing international consumers. But we refuse to universalize the NFSA, despite strong economic and political arguments for it and foodgrain production increasing by 30-40 mt. Needless to say, history repeats itself, the first time as a tragedy and next time as a farce.

Worrisome trends in food prices By Biswajit Dhar

Source: The Mint, Tue, Jun 21 2011. 1:15 AM IST)

An agreement among countries to establish emergency food reserves is crucial to rein in excessive price volatility

Agriculture ministers from the Group of Twenty (G-20) countries are meeting this week against the backdrop of increasing evidence that the high prices of food witnessed over the past year are here to stay. The Organisation for Economic Co-operation and Development (OECD)- Food and Agricultural Organization(FAO) agricultural outlook for 2011-20 has observed that the average level of prices for the current decade will be at least 20-30% higher than those in the previous decade for cereals and meat. With the past decade registering substantially higher levels of price increases compared with two immediately preceding decades, the OECD-FAO prognosis should be a major source of concern.
Tomohiro Ohsumi/BloombergBut more worrisome are the recent trends in prices. In February this year, the FAO food price index had reached its highest level ever, topping the peak registered in May 2008 when cereal prices reached historical highs. Since then, prices of most food products have been climbing with dairy products and maize recording the steepest increase.
This recent episode of food price rise has already led to a worsening of global poverty and hunger. World Bank estimates have shown that since June 2010, when the food prices started pushing northward, an additional 44 million people have fallen below the poverty line of $1.25 per day. Bank estimates have also shown that a further 10% increase in the food prices could lead to 10 million people falling into poverty, and a 30% increase could increase this number by 34 million. Realization of the poverty reduction targets under the Millennium Development Goals thus seems very distant.
There can hardly be any debate that the present woes in agricultural markets have been caused by a systematic neglect of the sector. The solutions lie in overcoming the supply bottlenecks and to get the agricultural markets to behave in an orderly fashion is quite obvious. What is not quite so obvious is whether the sovereign states, both collectively and individually, have the political will to address the crying needs of the poor.
This lack of political will has been displayed aplenty in the recent past. In the aftermath of the 2007-08 price surges, Group of Eight (G-8) countries had launched the L’Aquila Food Security Initiative (AFSI) in 2009 that pledged to mobilize more than $20 billion over three years, and to address the food insecurity challenge in a sustainable manner. However, a G-8 assessment of the delivery on the pledges made by these countries on food security and health, the Deauville Accountability Report, unveiled on the eve of their recently held summit showed that less than a quarter of the amount pledged had been disbursed even after the conclusion of two-thirds of the commitment period. The report shows that major G-8 countries have shown little interest in supporting the AFSI. While the European Union, Germany and Japan have not even begun implementation of their commitments, France had disbursed 45% of its commitments and the US, a mere 5%.
France has made a strong pitch for addressing the issues of food security and volatility of agricultural commodity prices in the G-20 summit which it will host later this year. The priorities underlined by the French G-20 presidency have two key components. First, they have emphasized the need to promote investment in global agriculture. Secondly, they have argued for the regulation of the agricultural markets to ensure that they behave in a more orderly manner.
In the statements that the French have made to address the problems facing the agricultural sector, one can hear familiar rhetoric: rich countries need to help the poor countries get self-reliant in agriculture by providing official development assistance.
The case for regulation of agricultural markets that the French have made is important, particularly their point about reining in speculators. While opinion has been divided on the influence of commodity speculation on the prices of agricultural commodities, the major economies have already taken steps to introduce appropriate legislation to curb speculative activities. For instance, the commodity futures trading commission of the US is engaged in the task of setting guidelines that would prevent excessive speculation in commodities. Japan has also strengthened its oversight regulatory structure aimed at reining in commodity speculation through amendments to the Financial Instruments and Exchange Act.
While the impact of curbing commodity speculation may not be felt over the next several months, the step that could have a considerable impact on dampening excessive price volatility would be an agreement among countries to establish emergency food reserves. The strong arguments in support of this mechanism made by the French have brought the focus back on the concept of regional food banks. South Asia has been engaged in developing the Saarc Food Bank since 2008, but despite an agreement to increase the size of the food bank, it has not been fully functional. With four least developed countries as its members, South Asian Association for Regional Cooperation (Saarc) needs to take urgent steps to make the food bank functional, a step that would help in mitigating the problem of chronic hunger in the region.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi

China urges US to ‘live within its means’ By Leslie Hook in Beijing

(Source: Financial Times, London, 7 August, 2011)
China’s official news agency has called for “international supervision over the issue of US dollars” and for the US to “live within its means” in the wake of Standard & Poor’s decision to downgrade America’s credit rating.
The remarks underscore the frustration of China, the world’s second-largest economy and biggest holder of US debt, at having the fate of its foreign exchange reserves so intertwined with US fiscal health.
“The days when the debt-ridden Uncle Sam could leisurely squander unlimited overseas borrowing appeared to be numbered,” said a commentary published by the official Xinhua news agency. “To cure its addiction to debts, the United States has to re-establish the common sense principle that one should live within its means.”
But despite the fiery rhetoric, Beijing’s insistence on keeping tight control over the value of its own currency means it will have to continue investing its swelling foreign reserves in US government bonds for the foreseeable future.
China has the largest foreign reserves in the world, with an estimated two-thirds of the $3,197bn total denominated in US dollars. As the biggest foreign creditor to the US, China stands to lose most from any serious fall in the value of the US dollar.
Other Asian countries, including South Korea and Japan, have voiced concern over US debt in the past but refrained from directly criticising the US following the credit downgrade.
On Sunday both countries said they had not changed their view on US Treasuries following the S&P move.
“Japanese authorities think there is no problem regarding the creditworthiness of US Treasuries and US government bonds will continue to be attractive assets,” a Japanese official said.
In contrast Xinhua said China “has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets.”
There has been no official comment from Beijing since the downgrade and Xinhua has routinely played the role of attack dog in its commentary on the US crisis, in contrast to Beijing’s more measured formal position. China’s foreign minister called on Friday for the US to enact “responsible monetary policies to maintain the trend of global economic recovery and ensure stable development of the world economy”. In remarks just before S&P announced the downgrade, he also said that China “hopes the US can adopt measures to ensure that the assets held by other countries in the US are safe”.
The lack of an attractive alternative reserve currency to the dollar and the ongoing debt crisis in Europe means that China will be forced to continue buying dollars in the near term.
But America’s continuing debt woes have prompted more voices within China to call for an end to Beijing’s tight control over the renminbi exchange rate, which adds substantially to the country’s foreign reserves.
China “must stop buying US dollars and allow the Rmb exchange rate to be decided by market forces as soon as possible,” Yu Yongding, a former member of the monetary policy committee of the Chinese central bank, wrote last week in the FT. “It must stop policies that result in further accumulation of foreign exchange reserves.”
There is already some evidence that Beijing has this year stepped up its efforts to diversify its reserves into other currencies, including the euro.
Xinhua also called for the US to make substantial cuts to its “gigantic military expenditure and bloated social welfare costs” and said “a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country.”
Additional reporting Lindsay Whipp in Tokyo and Jamil Anderlini in Beijing

India's exports may falter due to global economic turmoil: FICCI

(Source: Economic Times,7 AUG, 2011, 06.54PM IST, IANS)

NEW DELHI: India's exports may get affected in the wake of a slowdown in major economies across the world led by the US, which saw its economy being downgraded by credit rating agencies, a leading industry forum said Sunday.

A survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) in the aftermath of the US economic downgrade revealed that there would be a slip in the consumption demand overseas.

"A majority of the respondents feel that the current trend of high export growth will not be sustained in the months ahead. There is significant apprehension about the global economic recovery, which in turn is expected to impinge on consumption demand," said a statement from FICCI.

"The sovereign debt crisis in Euro zone, weakness in the US and moderation of economic activity in China may significantly affect the level of external demand. This could be detrimental to the recently gained momentum in India's exports performance as these economies are India's major trading partners," it added.

India has been reporting robust export growth in the current financial year. June figures showed a 46 percent rise in exports at $29 billion. For the quarter ended June 20, exports have risen 45.7 percent to $79 billion.

Therefore, the recent slowdown in key economies which are important export destinations for India, is not good news. Add to that the rising cost of credit because of incessant rate hikes by the Reserve Bank of India.

"The outlook for exports is also tempered on account of factors such as rising interest rates in India, rising raw material prices and rising cost of oil. The closure of the DEPB scheme by end September 2011 has also been cited as one of the factors that would undermine export growth going ahead," said FICCI.

DEPB is an incentive scheme for exporters.

The FICCI survey also projected that the US economy would grow by about 2.5 percent in 2011, which is lower than the IMF prediction of 2.8 percent as demand would remain weak from both consumers and businesses and because of a moderation in government spending.

The survey respondents also felt that the Euro area could grow by about 1.9 percent in 2011, but there would be disparities in the growth rates of individual economies in the Euro zone.

Western Europe is estimated to grow at a modest 1.5 percent in 2011, but with significant variability.

Germany, the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) along with Benelux countries (Belgium, the Netherlands, and Luxembourg) are expected to perform at the higher end - above 2 percent - while the UK and France are likely to see growth in the range of 1.5-2 percent due to budget cuts and less exports.

Most of Southern Europe and Ireland are expected to see growth of less than one percent or may even contract.

The lingering impact of tsunami, earthquake and the nuclear crisis is expected to lead to a contraction in the Japanese economy. Its growth rate is projected to fall to a negative 0.5 per cent in 2011.

With regard to China, the survey respondents opined that growth in 2011 would moderate only slightly to about 9.5 percent as the Chinese economy settles onto a gradually slowing growth trend.

Mideast markets tumble after S&P cuts US credit rating

(Source:Economic Times 7 AUG, 2011, 05.22PM IST, AP )

DUBAI: Stocks tumbled across the Middle East on Sunday as most regional markets opened for their first day of business following a historic downgrade of the United States' credit rating.

Mideast markets mostly operate Sunday to Thursday. That makes them the first to react to credit rating agency Standard & Poor's decision late Friday to cut the U.S. level one notch to AA+ from its top AAA rating. The only exception is OPEC powerhouse Saudi Arabia, which plunged 5.5 percent when it opened Saturday.

The Dubai Financial Market's benchmark index suffered some of the steepest declines, plunging more than 5 percent in early trading before trimming its losses. The index was down 3.8 percent to 1,482 points by early afternoon.

While the S&P downgrade weighed on the market, it was also dragged lower by a lower than expected quarterly profit from Arabtec Holding, the Emirati construction giant that helped build the world's tallest tower in Dubai. Arabtec shares fell 4.9 percent to trade at 1.4 dirhams (38 cents).

Egypt's benchmark EGX30 index fell over 4 percent by midday local time, bringing its year-to-date losses to more than 32 percent.

S&P's cut could shake investor confidence in the world's largest economy and send tremors coursing through global markets. Traders worldwide are eagerly watching to see how far larger and more liquid markets in Asia and Europe react to the downgrade when they begin opening Monday.

Financial ministers from the Group of Seven leading economies were preparing to hold a teleconference likely before Asian exchanges open to discuss efforts to stabilize world markets.

Other Gulf markets also opened sharply lower. The Abu Dhabi index slumped 2.5 percent, while Qatar's market shed 3 percent.

Farouk Miah, an analyst at NCB Capital in the Saudi capital Riyadh, said Mideast traders are concerned that debt problems in the U.S. and Europe could drag on oil-dependent economies in the region.

``A lot of people were expecting a downgrade. I think the bigger concern is the oil price falling'' because of slumping demand in the West, he said.

Saudi Arabia's stock market was the only one in the region to open Saturday. The Tadawul's main index edged slightly higher Sunday, creeping up a tenth of a point following the previous day's rout.

Miah attributed the uptick to day traders looking to make a quick profit, not a sign of renewed confidence. He expects Mideast markets to slump further if other global markets tumble on the U.S. debt downgrade.

In Israel, the Tel Aviv Stock Exchange delayed the start of the week's first session after pre-market trade showed the benchmark index dropping more than 6 percent because of concerns over the U.S. debt rating cut.

Exchange spokeswoman Idit Yaaron said the start was pushed back by 45 minutes ``so market players will have time to react logically and not under pressure.'' It tumbled 5.7 percent amid heavy trading to trade at 1089 points by late morning.

US credit ratings downgrade will lead to volatile Indian stock markets

(Source: Economic Times,7 AUG, 2011, 04.56PM IST, PTI)

NEW DELHI: The downgrade of US credit ratings by Standard & Poor's is likely to trigger a fresh round of turmoil in global stock markets this week, leading to high volatility in Indian equities that were battered last week on worries over slowing growth worldwide.

S&P downgraded the US government's 'AAA' sovereign credit rating to AA+ yesterday, a move likely to shake investor confidence in the world's largest economy, triggering a fresh round of shockwaves globally, experts said.

"When the market opens on Monday, it is likely to see heavy bouts of volatility as sentiments are weak at the moment due to uncertain global cues," said Dharmesh Pancholi, Senior Manager-Advisory (Equity), Sharekhan.

On Friday, the Bombay Stock Exchange 30-share index, Sensex, plunged over 702 points intra-day. However, it managed to make partial recovery and closed at 17,305.87 - down 387.31 points or 2.19 per cent. For the entire week, the Sensex recorded a loss of 900 points.

The downslide was on a host of local as well as global concerns. Prime Minister's economic panel lowered GDP growth projection for FY'12 to 8.2 per cent from 9 per cent earlier in the face of high inflation, rising interest rates to tame it and lacklustre first quarter results posted by India Inc.

Globally, debt crisis in the US -- which eventually led to the downgrade despite its resolution by the government last week -- as well as in the euro zone dampened sentiment.

"Overall, risk assets, specially emerging market equities will continue to face painful bouts of volatility owing to the debt impasse in Europe and US. This will, in all probability, affect market sentiments in India as well," Edelweiss Securities said in a research note.

It added, however, "The silver lining is the attendant fall in commodity prices (particularly crude), which would be positive especially for resource dependent countries like India, as it would help rein in inflation."

Echoing the sentiment, IIFL's Head of Research Amar Ambani said that amid the worldwide bloodbath, there is hope -- steep fall in crude oil prices is good for India.

Some analysts were of the view that Indian stock markets will make a comeback on Monday. They said the situation might turn out to be a boon in the long-term as India has strong fundamentals among its peers and attracts more international inward financial flows.

Besides, they added that strengthening of the Indian currency against the US dollar will help act as a trigger.

"We expect the market to bounce back after such a sharp fall last week. Moreover, crude oil has declined which is a positive news for India," said Parag Doctor, Associate VP at Motilal Oswal Securities.

Finance Minister Pranab Mukherjee had described the downgrading of the US government by credit rating agency as a "grave situation" and said it has to be analysed.

Wednesday, August 3, 2011

Public Health System in India

The Ministry of Health and Family Welfare oversees the implementation of policies and programmes for health care around the country, within the framework set by the National Health Policy of 2002 and the priorities set in successive Five Year Plans. While the responsibility for the delivery of health care rests largely with the State Governments, the Government of India plays a role in setting policy and providing resources for the implementation of National Programmes.
The country has a well structured multi-tiered public health infrastructure, comprising District Hospitals, Community Health Centres, Primary Health Centres and Sub-Centres spread across rural and semi-urban areas and tertiary medical care providing multi-Speciality hospitals and medical colleges. Improvements in health indicators can be attributed, in part to this network of health infrastructure. However, the progress has been quite uneven across the regions with large scale inter-State variations. Despite the consistent effort in scaling up infrastructure and manpower, the rural and remote areas continue to be deficit in health facility and manpower. Conscious and vigorous efforts continue to be made during the current year to step up funding in the health sector and to increase spending in the public domain, at least to raise it to the level of 3 per cent of the GDP by 2012.
Despite substantial progress made on many fronts there are still areas of concern. Maternal and Infant Mortality are still unacceptably high in several areas, infectious disease continues to remain a threat to public health. Non-Communicable Diseases including cancers, cardiovascular disease, diabetes and mental illnesses affect sizeable numbers of our population. India does not as yet have an adequate number of all categories of health professionals, whether of doctors, specialist doctors, nurses, nurse practitioners, para-medics and health workers.
The National Health Policy (NHP) was formulated in 2002 to provide prophylactic (preventive) and curative health care services towards building a healthy nation. The NHP- 2002 aims to achieve an acceptable standard of good health amongst the general population of the country. This is sought to be done by increasing access to the decentralized public health system by establishing new infrastructure in deficient areas, and by upgrading the infrastructure in the existing areas and institutions. The challenge has been to provide the country more equitable access to health services across the social and geographical expanse of the country. Thus, keeping in line with this broad objective, several health programmes/ schemes have been launched from time to time. There has been a steady increase in the aggregate public health investment, in the country. The contribution of Central Government towards public investment for provision of health care services has also been enhanced over the years. Expenditure in Health Sector on Public Health is about 1% of the GDP.
National Rural Health Mission (NRHM)
The major thrust in the National Rural Health Mission (NRHM) has been towards achieving qualitative improvements in standards of public health and health care in the rural areas through strengthening of institutions, community participation, decentralization and creating a workforce of health workers viz. ASHAs. While the Mission was formally launched in 2005 and has taken a while to effectively find a firm footing, early indications reflect its positive impact. Reliable estimate based on surveys show an appreciable decline in infant mortality (50 per 1000 live births in 2009 as against 60 in 2003), decline in total Fertility Rate (from 3.0 children per women in 2003 to 2.6 in 2008) and improvement in the percentage of safe deliveries etc. (from 48.0 in 2004 to 52.7 in 2007-08).
A new initiative under NRHM has been taken to identify backward districts for ensuring differential financing. Based on health indicators 264 backward districts across the country have been identified for providing focused attention.
The Reproductive and Child Health (RCH) Programme is a key element of National Rural Health Mission(NRHM). The system strengthening being undertaken under the Mission has lent support to the Programme towards reducing MMR, IMR and TFR. Janani Suraksha Yojana (JSY) has resulted in a steep rise in demand for services in public health institutions with the institutional deliveries registering a substantial increase. The number of JSY beneficiaries has risen from 7.3 lakhs in 2005-06 to about 1 crore in 2009-10.
The National Rural Health Mission (NRHM) launched by the Prime Minister on 12th April 2005 throughout the country with special focus on 18 states, including eight Empowered Action Group (EAG) states, the North-Eastern states, Jammu & Kashmir and Himachal Pradesh seeks to provide accessible, affordable and quality health care services to rural population, especially the vulnerable sections. The NRHM operates as an omnibus broadband programme by integrating all vertical health programmes of the Departments of Health and Family Welfare including Reproductive & Child Health Programme and various diseases control Programmes.
The NRHM has emerged as a major financing and health sector reform strategy to strengthen States Health systems. The NRHM has been successful in putting in place largely voluntary community health workers in the programme, which has contributed in a major way to improved utilisation of health facilities and increased health awareness. NRHM has also contributed by increasing the human resources in the public health sector, by up-gradation of health facilities and their flexible financing, and by professionalization of health management. The current policy shift is towards addressing inequities, though a special focus on inaccessible and difficult areas and poor performing districts. This requires also improving the Health Management Information System, an expansion of NGO participation, a greater engagement with the private sector to harness their resources for public health goals, and a greater emphasis on the role of the public sector in the social protection for the poor.
The Reproductive and Child Health Programme (RCH), under the umbrella of NRHM, addresses the issue of reduction of Infant Mortality Rate, Maternal Mortality Ratio and Total Fertility Rate through a range of initiatives. The most important of these is the Janani Suraksha Yojana, which has led to a huge increase in institutional deliveries within just four years, the number of beneficiaries rising from 7.39 lakhs per year in 2005-06 to about 1 crore in 2009-10.
Massive training of ANMs (Auxiliary Nurse Midwife) and nurses for safe delivery and management of sick children have also helped in a major way. In parallel to these efforts the up gradation of health facilities to provide emergency obstetric care and to improve access to skilled birth attendants made a significant difference to health outcomes. It is proposed to further accelerate achievement of RCH goals by giving focus to 235 poor performing districts, differential financing based on the performance, and a thrust to improve quality of care through external certification of facilities for quality of care provided. In child health, the major strategies proposed are inter-sectoral interventions against child malnutrition, providing community level care for new born and sick children and strengthening facilities to provide institutional care for sick children. Emphasis on access to safe drinking water, sanitation and nutrition is also being underscored.
Disease Control Programmes have also shown considerable improvements. Polio is near elimination and diseases like Tuberculosis, Neonatal Tetanus, Measles and even HIV have shown decreasing trends. However, Malaria continues to be a challenge. A number of newly emerging diseases like H1N1 have made it essential for us to strengthen surveillance and epidemic response capacities. The crisis in unavailability of skilled human resources for the health sector has been addressed through the rapid expansion of medical education in the country. Under NRHM, the center has financed the addition of over one lakh skilled health care providers to the public health work force. But still much more needs to be done in this direction. In addition, we need to consider a model of Primary Health Care where many of the health services would be provided by the locally selected and adequately trained health care providers with medical doctors contributing largely to more specialised care. Likewise human resources are being augmented by relaxing several norms which were restricting the supply side. However, much more need to be done in addressing the issues related to availability and quality of human resources. Government is also considering the introduction of an undergraduate programme, to be taught in district hospitals, in Rural Health Care, to produce trained medical personnel for posting at Sub-centres, the lowest tier in the health delivery system.
It is proposed to set-up a National Council for Human Resources in Health, as an overarching regulatory body. The Task-force set up for this purpose has submitted its report which is being examined in consultation with the State Governments. The Union Health Budget has increased from Rs. 8000 crore in 2004-05 to over Rs. 21000 crore now. State Health expenditures have also shown higher growth rates in the NRHM period as compared to pre-NRHM period. The challenge now is to increase absorption of funds made available, improve efficiency in the use of these funds, while simultaneously securing greater allocation of funds to the health sector both at the Central and State level.



MAJOR ACHIEVEMENTS:
NATIONAL RURAL HEALTH MISSION
 Large number of medical and paramedical staff has been taken on contract to augment the human resources. During the year 2009-10, about 2475 MBBS doctors, 160 specialists, 7136 ANMs, 2847 staff nurses, 2368 AYUSH doctors and 2184 AYUSH paramedics were appointed.
 Mobile Medical Units increased to 363 districts in 2009-10 from 310 in 2008-09 to provide diagnostic and outpatient care closer to hamlets and villages in remote areas.
 About 50,000 Village Health and Sanitation Committees (VHSCs) set up.
 Under National Programme for Control of Blindness, number of cataract operation performed have registered a significant increase from about 22 lakh operations in 2007-08 to 59 Lakh cataract operations in 2009-10.
The Reproductive and Child Health Programme and National Disease Control Programmes are components of NRHM and their achievement is as under:
REPRODUCTIVE AND CHILD HEALTH
 Under Navjaat Shishu Suraksha Karyakram (NSSK-New born care programme) launched on 15th of September 2009, district level trainers have been developed for all the erstwhile EAG States and Jammu & Kashmir, while State level trainers have been developed in Non EAG States. 1400 trainers have already been trained.
 Under Janani Suraksha Yojana (JSY), a safe motherhood intervention for promoting institutional delivery, the number of beneficiaries increased from 7.39 lakh in 2005-06 to about 1 crore in 2009-10, registering an increase of 10 lakh during 2009-10.
 For the first time, Bivalent Polio Vaccine for 2 wild polio virus (P1 and P3) has been introduced in the immunisation programme in January 2010.
 To obtain accurate data from across the country, a system for name based tracking of pregnant women and children for Ante-Natal Care and immunisation is being put in place. The tracking system will also capture the contact numbers of the beneficiaries and the health providers. This will help national monitoring of the health status of each pregnant women and infants / children across the country. A help desk/call-centre is also being established to randomly cross-check the health services delivered to these mothers and children.
 For the first time, an Annual Health Survey has been launched to provide data on key health indicators like the Total Fertility Rate (TFR), Crude Birth and Death Rates, Infant Mortality Rate (IMR), etc. at the district level and Maternal Mortality Rate (MMR) at the regional level. The survey is being conducted in collaboration with the Registrar General of India and has been launched in the 284 districts of 9 States, namely, Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Uttar Pradesh, Uttarakhand, Orissa, Rajasthan and Assam. A proposal for estimation of anaemia, malnutrition, hypertension, diabetes, testing of iodine in salt used by households has also been approved.
COMMUNICABLE DISEASE CONTROL AND PREVENTION
 For the first time, under the National Vector Borne Disease Control Programme (NVBDCP), 2.23 million Long Lasting Insecticidal Nets (LLINs) distributed in 2009-10 in highly endemic malaria states, Orissa, Assam, West Bengal and Chhattisgarh.
 For the first time in the country, National Sample Survey to estimate burden of Leprosy is being taken up.
 DOTS-Plus programme for management of Multi Drug Resistant (MDR)-Tuberculosis (TB) was initiated in 4 more states bringing up the total to 10 States.
 Global Fund (GFATM) has granted an amount of US $ 100 million (approx.) for malaria control and an amount of US $ 200 million (approx.) for TB control.
 Up gradation of National Centre for Disease Control (NCDC) as Centre of Excellence of Public Health has been taken up During the year 2009-10, under the National Aids Control Programme, an additional 4 district level blood banks and 28 blood component separation units have been established and over 60,000 blood donation camps organised. The free Anti Retroviral Treatment (ART) programme scaled up to 269 centres, and 315,640 patients were receiving free ART as of March, 2010. Second line ART initiated in Centres of Excellence and more than 1100 patients enrolled.
 State of art Blood Banks are being set up in four Metropolitan cities of New Delhi, Kolkata, Mumbai and Chennai at an estimated cost of Rs. 468 crore.
 State of art Plasma Fractionation centre is being set up in Chennai at a cost of Rs. 250 crore to produce blood components currently being imported.
 To create awareness about AIDS, second phase of specifically designed exhibition train, red ribbon express was launched on 1st Dec. 2009 to cover 152 stations in 22 states during its 1 year journey.
Revival of vaccine manufacturing units in public sector:
Suspension of licences of the three public sector vaccine manufacturing units viz. Central Research Institute (CRI), Kasauli, Pasteur Institute of India, Coonoor and BCG Vaccine Laboratory, Guindy was revoked on 26.02.2010 enabling them to resume production in the larger public interest of vaccine security in the country. CRI, Kasauli has already started production of Diphtheria, Pertusis and Tetanus Toxide (DPT) vaccine from April 2010.
Controlling the H1N1 pandemic
 Over one crore passengers were screened at entry points at 22 international airports and sea ports.
 Facility for laboratory testing of clinical samples for H1N1 and other Influenza increased from 2 to 45.
 40 million capsules of Oseltamivir (anti viral drug) stockpiled of which 21 million have been given to the States/UTs both for preventive chemoprophylaxis and treatment of H1N1 cases. 1.5 million doses of vaccine have been imported and health care workers are being vaccinated across the country.
 Dedicated website: http://mohfw-h1n1.nic.in set up to keep entire information in the public domain for transparency.
NON-COMMUNICABLE DISEASE CONTROL AND PREVENTION
 To increase the availability of trained personnel required for mental health care, 7 regional institutes have been funded against the 11 to be undertaken during 11th Plan for production of clinical psychologists, psychiatrists, psychiatric nursing and psychiatric social workers.
 Further, support has been provided to 9 institutes for 19 PG departments during the year 2009-10 for manpower development. Under the Programme, an amount of Rs. 408 crore has been approved for manpower development and another Rs. 150 crore is under approval for the revised district mental health programme in the states.
 National Policies for Geriatric Care, cardio vascular & diabetes and cancer finalised for a total outlay of about Rs. 1519 crore.
MEDICAL EDUCATION
 To increase the number of doctors across the country and for opening more medical colleges, norms relating to requirement and land and infrastructure have been rationalised in order to attract more entrepreneurs, particularly in under-served and difficult areas.
 The norm of 25 acres of land for setting up a medical college has been relaxed to 20 acres throughout the country. Further relaxation has been granted to hilly areas, notified tribal areas, North Eastern States and some Union Territories where 20 acres of land can be in two pieces within a distance of 10 kms keeping in mind the terrain and non-availability of land in these areas. In major cities, the norm has been further relaxed to 10 acres.
 Infrastructure requirements for setting up new medical colleges have been rationalized and requirement of bed strength and patient occupancy has been relaxed.
 Companies registered in India have been permitted, for the first time, to set up medical colleges.
 To increase availability of doctors, ceiling for MBBS admissions has been raised in Government colleges from 150 to 250 depending on bed strength.
 To encourage Government medical officers and fresh MBBS graduates to serve in remote, difficult and inaccessible areas of the country, two major steps have been taken: (a) 50% of seats in postgraduate diploma courses reserved for government medical officers who have served in these areas for 3 consecutive years. (b) For fresh MBBS graduates wishing to be selected through the national entrance examinations for post-graduate courses, a weightage of 10% is given for each year of rural service, whether appointed on permanent, adhoc or contractual basis, subject to a ceiling of 30%.
 To overcome the acute shortage of faculty in medical colleges and specialists and super specialists in hospitals, Teacher-Student ratio has been relaxed from 1:1 to 1:2. As a result of this, 4000 additional Post Graduate seats have been created this year alone in Government Medical Colleges.
 To overcome shortage of faculty in medical Colleges at different levels, i.e., Assistant Professor, Associate Professor and Professor level, the requirement of number of years of service stipulated in the Medical Council of India (MCI) regulations in each of the three grades has been reduced by one year, i.e., from 4 years to 3 years.
 Similarly, in Central educational institutions like All India Institute of Medical Sciences (AIIMS), New Delhi, Post Graduate Institute of Medical Education and Research (PGI), Chandigarh, Jawaharlal Institute of Post-Graduate Medical Education & Research (JIPMER), Puducherry, National Institute of Mental Health and Neuro Sciences (NIMHANS), Bangalore etc, to impart parity with Indian Institutes of Technology (IITs) in promotions, the Assessment Promotion Scheme has been suitably amended. Earlier, it took 15 years for an Assistant Professor to become Professor and as per the revised scheme, it would require only 10 years.
 To overcome the acute shortage of nurses and ANMs in states with poor health indicators, that have no ANM or GNM school, the Ministry of Health and Family Welfare is focusing on districts, for the first time, to provide training assistance to open 269 GNM and ANM colleges which will increase capacity by an additional 20,000 persons each year.
 Setting up of one national institute and 8 regional institutes of paramedical sciences across the country is under approval for an estimated cost of Rs. 1000 crore.
 To encourage entrepreneurs establish more AYUSH institutions the requirement of land, infrastructure and faculty for the establishment of AYUSH colleges and hospitals have been further rationalised, including reduction in land requirement from 10 acres to 5 acres.
PRADHAN MANTRI SWASTHYA SURAKSHA YOJANA
• For setting up of AIIMS like institutions, environmental clearance was obtained for hospitals and medical colleges to be set up at Bhubaneswar, Patna, Jodhpur, Rishikesh, Raipur and Bhopal sites in 2009. Hostel construction in all the places is at advance stage of completion.
• Works for Medical College Complex for all six sites have been awarded. Award of work for construction of hospital complex is under finalization and work likely to start by June, 2010 to be completed in two years.
• For completion of construction of college and hospital before the prescribed time, an incentive up to Rs. 12.5 Crore shall be payable to contractor. However, for delay beyond the prescribed time of up to 6 months, penalty up to Rs. 25 Crore shall be levied and for delay beyond six months, contractor shall be liable to be blacklisted for a specified period.
MEDICAL HEALTH RESEARCH
 For the first time, Influenza A Vaccine is being developed in the country.
 Seed Virus was obtained from WHO to take up indigenous manufacturing. Three indigenous manufacturers are being supported by the Ministry of Health and Family Welfare to manufacture pandemic H1N1 vaccine by providing Rs 10.00 crores to each as advance market commitment. The research has reached the last and final stage of human trials.
 For 2 patent items, (a) reagent for testing H1N1 influenza virus and (b) strip used in Glucometer for testing diabetes, the Department of Health Research is working on developing indigenous techniques.
 To strengthen public health measures, the Department of Health Research identified 53 technologies (Diagnostic, Management, Prevention and Public Health System) for evaluation for introducing them in the National Public Health Programmers.
 Diabetes prevalence and management survey approved in 8 states of North East and is being launched from June 2010.
 A Centre for Research in Indian Systems of Medicine (CRISM) has been set up at the University of Mississippi (USA) to facilitate scientific validation and dissemination of information on Ayurveda, Siddha and Unani Medicine through collaborative research and advocacy.
HOSPITALS
 Comprehensive Health Check up card was introduced in current session of Parliament for Members of Parliament to help creating a data base of health indicators and detecting the various silent diseases like diabetes and hypertension.
 A state of art Sports Injury Centre is nearing completion at Safdarjung Hospital, New Delhi at an estimated cost of Rs. 75.00 crores. The centre would be commissioned before the Commonwealth Games in October 2010.
 New Emergency Care centre of 290 bed capacity in Ram Manohar Lohia (RML) Hospital is under construction.
LEGISLATION
 The Clinical Establishments (Registration & Regulation) Bill 2010 to provide for the regulation of clinical establishments through compliance with minimum standards of service delivery, etc. was passed by the Lok Sabha on 3rd May 2010.
 A Bill to recognize the Sowa Rigpa (Amchi) system of medicine has been introduced in the Rajya Sabha on 06.05.2010.
 Transplant of Human Organs (THOA) amendment bill was introduced in the Lok Sabha last December and presented to the Parliamentary Standing Committee on 17 February 2010. The THOA amendments would help address the huge gap in demand and supply of organs.

Inflation is the most likely way out of rising OECD debt problem

By SWAMINATHAN S ANKLESARIA AIYAR,ET BUREAU
2 AUG, 2011,

The world economy is reeling under the burden of rising government debt in OECD countries. I predict that the main way out will eventually be inflation. Huge monetary stimuli in many countries have already created the potential for inflation. And, given the political difficulties politicians face in either raising taxes or cutting spending, the most likely way to tame rising debt/GDP ratios seems to be inflation.

Inflation erodes the real value of outstanding debt. It is a tax by another name that helps governments balance budgets. It is unpopular, but right now spending cuts and tax increases look even more unpopular. In cases of political gridlock, inflation can be an unwitting solution because it can happen without explicit government action.

Doubts are growing about the debt sustainability of ever more economies in Europe. Rising interest rates for gilts in Spain and Italy now threaten their long-term fiscal sustainability. Germany is soaring, but cannot compensate for all European laggards. Greece, Portugal and Ireland are small peripheral economies. But Spain is a large economy and Italy is a G-7 member, no less. Any default by Spain or Italy will cause a huge financial crisis.

Despite monetary and fiscal stimuli since 2007, the US economy is still struggling. GDP growth was just 0.4% and 1.3% respectively in the first two quarters of 2011. So, revenues are sluggish and the fiscal deficit remains high. The US debt/GDP ratio looks certain to cross 100% soon. Economists Reinhart and Rogoff have shown that recovery from a recession caused by a financial crisis can be very slow.

Neither massive stimuli (as in the US) nor austerity budgets (as in the UK, Greece, Portugal, Ireland and Spain) look like producing much-needed growth. Without growth, the debt/GDP ratios of these countries will keep worsening.

The limits of Keynesian economics have been exposed cruelly. Big stimuli can get you out of a recession, but cannot guarantee that growth will be fast enough to automatically tame burgeoning debt. Keynes formulated his theories in the context of a closed economy. But today OECD economies are open, so fiscal and monetary stimuli can leak out.

If you stimulate consumer spending through tax cuts, you may simply stimulate imports rather than domestic production. A monetary stimulus may mean that cheap money is used to invest in other countries, not your own. This partly explains why huge stimuli in OECD countries have fuelled growth in emerging markets and commodity producers rather than in the OECD.

Inflation will enable the OECD to strike back. It will erode the real value of huge foreign exchange reserves - and private holdings of OECD gilts and corporate bonds - held by developing countries, and thus amount to a massive write-down of OECD debt. Developing countries will want to diversify out of OECD gilts, but there are no comparable alternatives. A partial hedge is available in gold or other commodities, whose prices have therefore been rising. This commodity boom may seem paradoxical at a time when global growth prospects are worsening, but it reflects inflation fears.


OECD countries dread returning to the stagflation of the 1970s, after which many central banks set inflation targets of 2% per year. Central banks are keen on establishing their credibility by sticking to the 2% norm, even though some have been obliged to depart from it temporarily. Yet, there are sound reasons for arguing that this is much too low a target.

Olivier Blanchard, chief economist of the IMF, once made a case for doubling the inflation target from 2% to 4%, raising long-term interest rates by a similar amount. He said that a 2% interest rate meant that, in a crisis, central banks could cut interest rates by no more than 2%, greatly limiting the power of monetary policy. If, however, the inflation norm were raised to 4%, central banks would have twice as much scope for cutting interest rates in a crisis.

Moreover, trade unions are typically willing to have a wage freeze but not wage cuts in a crisis. If the inflation norm rises from 2% to 4%, a wage freeze will mean a bigger cut in real wages, improving the speed of adjustment. The Sukhamoy Chakravarty Committee in India made the same point way back in 1986.

Seen in this light, higher inflation is not only the most likely solution to the OECD debt problem, it is also desirable as a central bank target. Politically, it means reneging on promises to keep inflation at 2%. But some reneging seems inescapable, whether on tax rates or social spending. Reneging on interest rates is altogether a better alternative.

Remember, the UK tried hard to keep within Europe's exchange rate mechanism (ERM) in the early 1990s, but speculation against the pound (by George Soros and others) ultimately obliged it to leave the ERM and devalue. This turned out to be a blessing in disguise - after initial despair, the British economy boomed. Many other countries also left the ERM.

We may see something similar on inflation targeting. Maybe, one country will go for 4% rather than 2%, amidst cries of despair. Then it may do so well that others follow suit, and 4% becomes the new norm. This seems very improbable today, but no more so than the collapse of the ERM once did.

Monday, August 1, 2011