Daily Excelsior... Editorial

EDITORIAL

By Ramesh Kanitkar

By S. Sethuraman

A perceptible slowdown in growth in industry and infrastructure in the first four months of fiscal 2008, April-July, taken together brings some worry to economic policy-makers on the outlook for industry which, along with services, have been the drivers of GDP growth at 8.6 per cent average over the four years ..more.

Nuclear deal:
Uncertain course

By Gurmeet Kanwal

EDITORIAL

A language that
guards heritage

There is a language in the State that preserves the country's rare heritage that Sanskrit is not able to do for a variety of factors. In our vicinity it is spoken by a section of population the majority of which lives across the Himalayas in the Ladakh region comprising of Leh and Kargil districts. We popularly call the language as Ladakhi. However, its widely accepted name is Bhoti or Tibetan. It is not an exaggeration to say that it is born of Sanskrit. It is the outcome of the search of a 7th century Tibetan king Tsongtsen Gampo for having a scientific language for strengthening the administration of his vast empire. He picked up his most able and trusted minister Thonmi Sambhota for the assignment. Thonmi Sambhota came to Nalanda, then one of the highest seats of learning, and devised Bhoti script using Panini's Vyakaran of Sanskrit as a model for its grammar. There are no two opinions that Bhoti has returned the gesture by retaining valuable translations from Sanskrit as the originals have been destroyed over the centuries in one invasion after the other. For instance, it has saved the complete works of Nalanda itself. Ninety per cent of these original manuscripts have been lost. Inexplicably some of them are available in the Chinese. Bhoti is thus their sole treasure house in this country. It is to be welcomed that their further translations have already begun in English in India as well as in the United States and Europe. Bhoti thus has a distinguished history of 1300 years. In formative years its focus has been on translating great texts from Sanskrit chiefly related to Buddhism. It has kept in tact complete Buddhist canonical texts and its commentaries by high priest of Nalanda, Vikramshila and Takshila. What is truly impressive is that the practitioners of Bhoti revel in speaking and writing it even today. The present Ladakh is a case in point. English has penetrated deep into the trans-Himalayan territory as it has done elsewhere. But it has not succeeded in overthrowing Bhoti from the hearts of the people. The masses prefer to communicate in their language. They utilise it for writing letters and printing invitations for auspicious occasions. The signboards outside their establishments are also in Bhoti along with a foreign language if not English. It is only too well known that Leh is fast emerging as the No 1 destination of domestic and foreign tourists. Indeed, it is remarkable for local inhabitants to suitably adjust to varying outside influences without allowing any erosion of their basic linguistic and cultural possessions. Whenever the two of them meet they conduct dialogue in their own language which is consequently alive and kicking. They feel encouraged all the more when Dalai Lama, the spiritual and temporal head of Tibet who has stunning appeal particularly in the Buddhist world all over, also addresses them in Bhoti during his trips to Leh. It is estimated that Bhoti has about 40000 topics on different subjects including Buddhist logic, history, astrology, astronomy, ayurveda, arts, poetry and philosophy. More than 20 lakh people speak Bhoti in the country. What is notable is that an overwhelming majority of them inhabit the border region from Leh to Arunachal Pradesh constituting the "defence line" of India. Besides, the language is understood and spoken in Mongolia, Bhutan, Tibet, Nepal and Pakistan-occupied Skardu. Not surprisingly, therefore, many states have granted it formal recognition. They include Jammu and Kashmir, Himachal Pradesh, West Bengal, Sikkim and Arunachal Pradesh. Several universities and education boards teach it as a subject. Himachal Pradesh University (Shimla), Sampurnanad Sanskrit University (Varanasi), Vishwabharati Shantiniketan University (Kolkata), Delhi University (Delhi), Punjab University (Chandigarh), Gorakhpur University (Gorakhpur, Uttar Pradesh), Magadh University (Bodhgaya), Calcutta University (Kolkata), Central Institute of Buddhist Studies (Leh), Central institute of Higher Tibetan Studies (Sarnath), Central School Examination board (Delhi), Sikkim Secondary School Examination Board and J&K Secondary School Examination Board are among them. There are regular newspapers and radio bulletins in Bhoti. In the recent years it has been used in a number of television documentaries and short films too. Bhoti is also spreading in a traditional way. According to Dr Nawang Tsering, Principal of the Central Institute of Buddhist Studies (Leh), there are about 400 major ancient monasteries in the Himalayas where Bhoti is taught as a compulsory subject. As is generally known these are residential establishments. The Union Ministry of Tourism and Culture runs 50 monastic schools in Ladakh. It has moreover set up two organisations to rescue antique text-books lying unattended in monasteries. Dr Tsering has in a paper made a special reference to two encyclopaedic works in Bhoti: Kangyur with 108 volumes and Tangyur with more than 200 volumes found in several editions in hand-block printing. Kangyur contains Buddha's own words and Tangyur has commentaries by Indian Acharyas. Together they deal with Buddhist ethics, meditation and insight knowledge. Buddhism constitutes a strong historic bond between India and Tibet despite the latter's virtual annihilation by China.

For a language with such wide reach and repository it is only to be expected that Bhoti is included in the Eighth Schedule of the Indian Constitution. Quite a few members of Parliament keep advocating its case. The thrust of their argument is: "Bhoti language should be given the recognition under the Eighth Schedule because (a) it satisfies all the Constitutional requirements laid for a language for this purpose; (b) it is the language spoken by the entire people of Himalayan region which is strategically important; (c) it has an elaborate and rich literature dating back to the 7th Century; (d) it has a script of its own; (e) it has an elaborate established education system; and (f) it has contributed a lot in the building up of medical sciences, philosophy and religion." What is equally relevant is that the language is in everyday use. As a result it continues to enrich itself with exposure to new trends. That it does not sit on past laurels alone further beefs up its case for entry into the select club of official national languages.

Controlling food prices

By Ramesh Kanitkar

It is said statistics never lie. But statistics released by government of India are full of lies. For example, the Union Finance Ministry has claimed that inflation of food items as on September 14 has come down to 4.23 per cent. This is far from the truth if one were to visit a grocery shop or a vegetable market. Contrary to the government's claims the food price indices released by the Indian Council of Economic Research on September 8 says that prices of food items and vegetables has gone up to 38 per cent over the last two years. Why is the UPA Government trying to manufacture such blatant lies? Our Prime Minister is an economist so is also the Finance Minister. They should know such kind of statistical jugglery is a sin.

Government economists have long taken a rather spiritual view of any rise in food prices, which badly hurts the common man. Central bankers too focused on 'core' inflation, which excludes food and energy prices, on the belief that these two components have little effect on long-term inflationary expectations.

The continuing sharp rise in food price inflation is turning out to be a real problem. Food weighting varies between 10 per cent and 16 per cent compared with 6 per cent to 9 per cent for energy. In emerging markets, food price inflation has an even bigger influence on the broader rate as on average it comprises 30 per cent of consumer price inflation, or CPI.

While commodity prices have been rallying for the past five years, food prices only began their bull run in earnest late 2005 onwards. Over the past two years, soft commodities have risen by 150 per cent, partly catching up with gains of 250 per cent recorded by the wider commodity complex since 2002. The same structural factors that have driven the super-cycle in bulk commodities are cited for the more recent surge in soft commodity prices, from the demand explosion in rapidly expanding emerging markets and the attendant trend towards greater urbanisation to supply-side factors such as decreasing availability of land due to industrial encroachment and poor harvests resulting from soil degradation along with the pollutant side effects of climate change.

Price gains have now reached stage where they are threatening to feed into core price inflation - a relationship that otherwise stood broken since the 1980s. Of late, core price inflation in many developing countries in particular has stopped declining to offset commodity price shocks. The global economy is now operating at much fuller capacity and productivity gains are slowing, as is usually the case in the more mature phase of an economic upswing. As a result, any gains in food price inflation are directly translating into headline inflation.

In India food price inflation has now become the main swing factor in determining inflationary trends. Such surges are triggering growing discontent among Indian consumers.

As a result, policymakers are engaged in a determined effort to raise farm output and curb price gains. They are offering subsidies to encourage meat production and targeting businesses suspects of manipulating prices by taking punitive action against them. To keep inflation from rising more rapidly in the meanwhile, the government has also delayed price increases in several administered good.

In the past, India relied on increased imports of key soft commodities to cool inflation during food price shocks. This though is no longer a viable strategy as prices of wheat, corn and soyabeans are all sharply higher across the world. In a sign of their relative priorities, the country's top leadership is spending much of its time in the hinterland talking with farmers on ways to deal with food shortages.

So far, the RBI has broadly taken the view that food inflation is not a monetary problem instead requires a supply-based solution. But with headline inflation rising beyond the desired level, the pressure for monetary authorities to act more decisively is increasing.

The one piece of good news is that the supply situation in the agricultural sector is beginning to turn for the better globally. This is partly due to better weather conditions over the past few months in Australia, one of the world's largest exporters of farm products. After years of drought in many areas, Australia has recently received some of the highest and most well distributed rainfall in a decade.

The supply-side equation for soft commodities should then improve globally. In addition, there has been a rapid substantial increase in the area planted with wheat and rice. But what is being produced is not enough to feed the teeming millions living the poverty line. Indeed, it is easier to trigger a supply response in many agricultural products compared to oil or industrial commodities where long periods of exploration and mining are involved.

Policymakers are certainly hoping that easier supply condition will make the food price shock fizzle away quickly. Otherwise, in a departure from the past, central bankers will have little choice but to react more aggressively to a continued escalation in food inflation, given the political sensitivity of rising food prices and with the non-food component no longer declining to act as an effective offset. INAV

Slow down in industrial growth

By S. Sethuraman

The upswing in manufactures with robust investment and export demand and sustained domestic consumption had been the bright feature of the economic scene in recent years. This was reflected in the high growth rates in basic, capital and intermediate goods as well as in the demand for consumer durables though lately the consumer goods sector, mainly due mainly to sharp decline in consumer durables, seems to have lost the growth momentum.

Adding to the decline in the index of industrial production in the first four months to 9.6 per cent, falling below double digit after several months, the April-July period also saw six key infrastructural sectors (crude petroleum, POL, coal, cement, steel and electricity generation) slowing down to 6.1 per cent from 8.7 per cent in the corresponding period of 2006-07. Crude output growth was negative while coal, cement and steel performed poorly compared to corresponding months of last year.

The July output data, however, came as a dampener after the first quarter (April-June) increase by 11 per cent with manufacturing posting a 11.9 per cent growth but even within this period, the momentum appeared to weaken from May though the overall GDP growth in the first quarter has been estimated by CSO at 9.3 per cent (manufacturing 11.9 per cent).

In July, the production index showed a 7.1 per cent growth as against 13.2 per cent in July 2006 with manufacturing, which contributes to 80 per cent of industrial production, recording a mere 7.2 per cent (14.3 per cent in July "06).In the first four months, April-July, therefore, the general index of production at 9.6 per cent fell below double- digit after several months.

The question being considered is whether it is a temporary setback before output recovers to more promising growth or it is the beginning of a downtrend from the earlier higher levels of performance in industrial sectors, perhaps in line with most projections of economic growth moderating in 2007-08 from the accelerated pace of the last three years.

While the Finance Minister has been talking of a 9 per cent GDP growth, RBI has been maintaining indicative target at 8.5 per cent while international organizations have also revised their estimates of India's GDP in fiscal 2008 at a lower rate than 2006=07. Though the Prime Minister's Economic Advisory Council projects 9 per cent growth this year, it had in its outlook report in July placed industry's growth at 10.6 per cent slightly less than the 10.9 per cent in 2006-07. It also foresaw growth in the overall non-farm sector performance (industry and services) at 10.4 per cent, less than 11 per cent last year. The offsetting factor is perhaps agricultural growth being better than in 2006-07.

Finance Minister Mr Chidambaram said there would be a detailed look at the "disappointing" data to find out the problems but he felt, with one month turning out to be sour, no conclusions could be drawn at this stage. There is no slowdown in investment and demand would pick up with the onset of festival season, making the outlook positive for the current year, according to him. Other assessments conclude that with credit growth slowing, especially retail credit which is somewhat regulated at present, and price pressures which are not latent, there could be lower growth in domestic consumption while export demand, in the context of the global financial market turmoils, could also weaken, leading to relative industrial slowdown in the coming months.. The contractionary effect of monetary tightening thus far is bound to affect consumer demand, especially in the durables sector.

The Finance Minister recently asked banks to lower deposit rates so that they could maintain credit growth on better terms. Government is also faced with the unrelenting oil prices which hit 80 dollars a barrel on September 13 and with a significant rise in the price of Indian crude basket average, a revision of petroleum product prices cannot be ruled out altogether unless Government makes further tariff adjustments at the cost of revenue to the exchequer. A slowing growth, inflationary expectations, possible spillover over of global financial market instability and other risks looming on the horizon would make macro-economic management in the current year more demanding than in 2006-07..

Export growth had also declined in July but April-July growth was maintained at over 18 per cent but Commerce Minister Kamal Nath is still confident that the 160 billion dollar export target is achievable. He has urged Reserve Bank to ease the flow of credit so as not to impair industrial or economic growth.

According to RBI, the industrial growth at 11.5 per cent in 2006-07 was the highest since l995-96 with strong growth of manufacturing sector at 12.5 per cent. Led by strong investment and consumption demand, the industry had entered the fifth year of expansion. On use-based classification, basic, intermediate, and capital goods sector recorded accelerated growth while there was deceleration in the consumer goods sector. Capital goods at 18.2 per cent displayed continued growth momentum with congenial investment climate and buoyant domestic and external demand.

In 2006-07,machinery and equipment, metal and alloy industries, and chemicals and chemical products g were among the higher growth categories. Electricity also recorded a higher growth at 7.3 per dent on the back of higher hydro-power generation. Mining also recovered to 5.3 per cent growth after three years of decline.

Growth remained broadbased and high investment had resulted in capacity expansion in industrial sector, RBI said. The 11.5 per cent growth in industry was contributed by manufacturing (91 per cent) electricity 5.5 per cent and mining 3 per cent. Basic goods contributed 27.2 per cent, capital goods 17.6 and intermediate goods 27 per cent or over 72 per cent to the industrial growth. (IPA Service)

Nuclear deal: Uncertain course

By Gurmeet Kanwal

By succumbing to the pressure tactics of the opposition, the Indian Government is charting an uncertain course on the Indo-US nuclear deal. While it has negotiated an exceptionally good 123 Agreement, political opposition is undermining its success and delaying further progress on an issue that is arguably the most critical national security and foreign policy issue for India in decades. Among the members of India's strategic, foreign policy and energy security communities there is an overwhelming consensus that this deal will open up new avenues for economic development and defence cooperation and technology transfers that will lead to self-reliance.

Ideological grandstanding apart, the Left Parties no longer oppose the nuclear deal on substantive grounds as all their apprehensions have been addressed in the 123 Agreement. Even the nuclear scientists are now completely on board and are critical of the stand of the Left Parties. Their opposition stems mainly from a pathological distrust of the US worldview and their fear that India is going to align its foreign policy in line with that of the US and help to further what they call, US imperialism'. The Left Parties claim that they are extremely serious about their opposition to the deal and that if the Government goes ahead with "operationalisation" of the deal by the negotiating with the IAEA and the NSG, they will not hesitate to withdraw support and that they are "not scared" of elections. However, recent opinion polls show the Left Parties losing up to 50 percent of their present seats in Parliament if a mid-term poll is held now. The BJP is riven by internal dissensions and does not have a coherent stand on the deal as yet L.K.Advani first came out to support the deal and is now ambivalent about it.

Prakash Karat Sitaram Yechury's words are brave, but is obvious that the Left Parties are looking for a face saving formula and graceful exit strategy as they have realised that there is overwhelming support for the deal among the urban intelligentsia and that de-stabilising the Government on this count will hamper their poll prospects. However, they will extract their pound of flesh by way of a further slowdown in the economic liberalisation process and the privatisation and sale of PSUs. Within the Government the thinking appears to be that the Left Parties will continue to employ pressure tactics and public posturing but will stop short of pulling the rug from under Government. The BJP will ultimately water down its opposition to the deal and is unlikely to destabilise the Government on this issue or join hands with the Left Parties to defeat the Government in the Lok Sabha.

Shyam Saran, the PM's point man for negotiations with the NSG and IAEA, is confident of obtaining a consensus in the NSG to give a waiver to India. There has been good progress in multilateral as well as bilateral negotiations with NSG member states and some of them like some Nordic countries have come around and are now better able to understand India's point of view. However, in terms of the Indo-US nuclear deal, it is also the responsibility of the US to obtain a consensus in the NSG. Negotiations with the IAEA for an additional protocol for India-specific safeguards have begun. This was before the publicly expressed opposition of the Left Parties. However, the sense in official circles even now is that while the Government has agreed to appoint a committee to address the concern of the Left Parties, it has not agreed to stop negotiating with the IAEA and the NSG member states.

China opposes the nuclear deal on the grounds that it will undermine the nuclear non-proliferation regime towards a similar deal for its "all-weather" friend Pakistan. The Foreign Ministry is concerned that China is the only major power that opposes India's access to the international nuclear energy market and is attempting to perpetuate nuclear party between India and Pakistan at a moment when the US is trying to de-hyphenate its relations with the Sub-continent's nuclear rivals. Though China's opposition appears serious, it is largely rhetorical and China will ultimately prefer to oppose a waiver for India through a proxy rather than directly. The Government is wary of the political storm that threatens to hijack the nuclear deal. However, it appears to be deeply committed to the deal and while there will certainly be some delay in taking the next steps with the IAEA and the NSG, it is to be hoped that the Government will eventually tide over the present difficulties as it has very strong public support.

The ultimate impact will be on nuclear energy. According to Dr. M.R. Srinivasan, former Chairman of AEC and former Secretary DAE, the share of nuclear energy in India's energy basket is expected to go from 4 Giga Watts (GW) at present to 275 to 300 GW by 2050, out of the total India power generation capacity of 1,350 GW. This view is shared by Dr. Placid Rodrigues, another eminent nuclear scientists and may, therefore be the considered view of the AEC. These projections includes new reactors (and fuel) to be sourced from France, Japan (GE), Russia and the US consequent to the NSG waiver and the successful conclusion of India's three-stage thorium-based programme.

The projections are far too rosy and are not justified by past performance. Achieving these projections will entail building three to four 2,000 MW nuclear reactor every month (almost one every week) for 40 years. The scientists do not appear to have taken into account the massive capital outlays that will be necessary, the fuel requirements-India is still at least two decades away from mastering the three-stage thorium cycle, the availability of technical expertise and the environmental issue. About half the projected capacity would be closer to what may be more realistically achievable. —PTI Feature