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INDUSTRIAL ECONOMIST
Cover Story

Investments on infrastructure through the remaining 40 months of the current Plan would shrink substantially. Total spend might come down to around $300 billion.
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Inklings

There was a recent report on Tamil Nadu turning down the proposal of the Indian Railways to build new rail lines after these have been mooted and analysed for their importance quite some years ago.
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Editor's Notes

When large contrac-tors shy away …
In our previous issue, I had written of an innovative scheme to transform sprawling slums into livable, multi-storied habitats by the involve-ment of the government and large property developers of Mumbai.
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Commentary

The (G-20) Summit in Washington on 15 November was a landmark event inasmuch as, for the first time, leading emerging economies came into their own as equal partners in shaping global economy and in reframing rules for the international financial markets.
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Macro Economics

Extreme illiquidity characterises the market for financial instruments such as bonds, both government and non-government.
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 l macroeconomicsII
 l  macroeconomcisIII

Banking

Only 24.5 per cent of the rural households in Puducherry had availed banking services. In the case of urban households it was 35.5 per cent. 33.6 per cent of the rural households do not own any assets...
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Nuclear Power

Robust planning is required in legislation, regulatory control, safety, safeguards... to support a large nuclear power programme for the public and private sectors.
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US Elections

India continues to witness domination of political families and is not throwing up charismatic young leaders who would command attention at the national level. Can we ever see the emergence of an Obama?
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US Economy

With the protracted downturn in the US economy, it is only a question of time before the bail-outs are extended to autos, airlines, retailers...
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International Diary

The stock market globally is more elastic than people ever think. Just when you think things can't get any worse, prices can go lower and moods can be much darker.
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Insurance

What has been the progress of the insurance sector since it was opened up for private competition some eight years ago?
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Space Research

India told the world that it was not just a nuclear power but also a cosmic power. The ISRO asserted on 14 Novem-ber, 2008 that it was no less capable than NASA and the ESA.
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Agriculture

Transformation of rocky, barren terrain into productive forms
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Analysis

On 17 September, Reliance Industries created history when it pumped oil from India's first deep-sea oilfield. Initially oil flowed at 5500 barrels per day;
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commentary- Pricing

Finance minister P Chidambaram made the eminently sensible suggestion to captains of industry to reduce consumer prices that will stimulate demand; help work to fuller capacity and steer through the current slowdown.
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Analysis - Exports

The global economic crisis has hit India where it hurts the most with over a dozen job-oriented export sectors slipping into disarray.
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Capital Notes

The global economic crisis triggered by the sub prime mortgage crisis (housing loan crisis) in the U.S. could stifle the growth of infrastructure in India.
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Analysis - coal supply

Union ministries of coal and power are at loggerheads over the fuel supply pact, with the latter insisting on an assured 90 per cent coal supply under the commitment made by state-run Coal India Ltd.
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Right and Left


Let Lalu and Mulayam take to business

Draw a line between Chandigarh and Chennai. Seven out of the eight IPL cricket teams are on the line or to the 'right' of this line. The only team that is to the 'left' of this line, expectedly, is the Kolkata team. And when the IPL will be expanded in the following seasons, one can readily think of teams from Ahmadabad, Nagpur, Goa, Kochi or perhaps Vadodara - all to the 'Right' of my imaginary line. But to conceive of an IPL team from say Lucknow, Patna or Bhubaneswar - all to the 'left' of my line even after ten years from now is as remote as snow in Chennai.

The reference to IPL teams, at the outset, is to merely sensitise the reader to the issue on hand - growing regional (economic) disparity and its impact on national politics. After all, sport is an index of prosperity, isn't it?

While India had grown for the past three decades at approximately six per cent per annum, states like Gujarat, Tamil Nadu and Maharashtra which are to the 'Right' of this line grew at a much faster rate than the national average. In contrast, states like Bihar, UP and West Bengal - those on the 'Left' of this line grew lower than the national average. In the process, they did pull down the national average substantially.

What is interesting to note here is that in contrast to the 'North - South' divide as propounded by Raj Thacakery and his brand of politics, this is an ‘East-West’ problem or better still a 'Right - Left' problem.

Economists point out that this regional disparity has reached a stage where the per capita income of Punjab is five times that of say Bihar. No wonder , out of the 150 Naxal-hit districts of the country, constituting about 25 per cent of all districts in the country, virtually each one of them are to the 'Left' of my imaginary line.

This is not limited to income alone. On social indices like health, education and infant mortality, a state like Gujarat, which seems to have caught up at least with developed South East Asia, is no match for a state like West Bengal or Orissa.

Growing regional disparity

The lower growth rate in 'Left' India, the relatively poorer quality of governance, the appalling state of infrastructure, social indices that match sub-Saharan Africa, growing Naxal menace leading to severe law and order problems have led to the inevitable and consequential migration of people from these places to the other parts of the country.

It is the failure of policy framers to address the regional disparity that is providing fuel to the politics of Raj Thackeray and his ilk. Thackeray is clearly wrong in his choice of words, expressions and actions. Similarly, by mixing culture perhaps he is missing the woods for the trees.

But surely, he is not wrong with his larger demand: sooner or later the nation needs to answer the questions raised by Thackeray - for how long can we permit one way migration from a set of states to others in search of jobs?

The ‘right’ is a difficult terrain - most of this area is parched or semi-arid and makes agriculture difficult. Similarly, this area does not boast of any substantial mineral wealth.

Similarly, this area is suited neither for setting up industries nor for agriculture, except in patches. People of this area have really discarded theory and have gone on to write their own grammar of economic success.

In contrast, it may be noticed that most of the perennial rivers flow through the left of this line. Naturally, the Gangetic plain is one of the most fertile places for agriculture in India. Further blessed by copious rains year after year, theoretically this region can become the granary for entire Asia.

Further, most of India's mineral wealth is located to the left of this line.

All these factors combine to make this area an ideal place for business, trade or agriculture in India. Like their counterparts in the other side of the line, people here too have rejected all these theories. No wonder, extortion is one of the biggest industries in Bihar!

In effect, India to the 'right' of my imaginary line is comparatively (and that is the operative word here) more industrialised, far better governed and enjoys a higher level of human development indices than India to the 'Left' of this line. That explains in a way the shift of Nano factory of Tata Motors from West Bengal to Gujarat.

Caste in economics, caste in politics

The answer to this contrasting development, achieved by people who are blessed in every possible way and those who are not, is indeed fascinating. How is it possible that in two distinct areas within the same country, governed by the same set of laws, rules and regulations, one is more prosperous than the other, especially given the fact that one has more natural resources?

The answer to this conundrum is perhaps as intriguing as the conundrum itself. It may not be out of place to mention that the linkages between caste and economics (as they are with politics) are one of the most neglected aspects of economic and sociological studies in India.

The reason for the same is fairly obvious. Most economic theories in India are rooted in the economic theories of the West. Since there is no caste in the west, western economists have the luxury of ignoring the impact of caste in their studies. But how can one in India ignore caste, be it economic or political?

Caste has been an important instrument of change in modern India. People to the 'Left' of this line - say in Bihar or UP-have naturally associated caste with politics with an obvious belief that capturing political power through caste equations would deliver and emancipate them.

Naturally, politicians from these areas believe in portfolios like railways, fertilizers or for that matter coal and mines that would facilitate them to deliver largesse to their own constituency through governmental interventions.

In a way caste in politics becomes important here. Political and state power is sadly seen as an end in itself. This meant that private initiative was exterminated over the years in these states making virtually everyone dependent on the government for employment

Leverage caste to strengthen economics

In contrast, people to the 'Right' of this line have traditionally leveraged their caste affiliations, not just for capturing state power, but also for strengthening their economics. Naturally, for these people caste is important for furthering their economic interests, while capturing state power through caste is incidental.

Bihar, UP or for that matter West Bengal, cannot be exceptions to the global order of governments being incapable of delivering on growth and development. And having to this day believed that it is the government that would fully deliver on their growth and development, people to the 'Left' of this line are now caught in a bind.

Liberalised India, which unlike socialist India, offers limited scope for the government itself. Naturally that translates into limited job opportunities. As opportunities shrink, naturally their tone gets shriller. That would explain the fixation with railway recruitment, which provides for opportunities not only within their state but in others too.

It is this excessive reliance on the power of the government to deliver ignoring the natural resources and ability, that has been at the root of the current problem of 'Left' India. Naturally, fifty per cent of our population living in this area have a choice to turn in Naxalites or to become immigrants within the country. Either way it is not a happy situation as it puts extraordinary pressure on the rest of the country.

In effect, caste with politics in the absence of economics has been a wholesome disaster for some of these states while caste in economics with marginal assistance from politics has been a wholesome success. In effect, the present imbroglio is an issue between castes who have taken to politics and those who have taken to economics.
The way out is a rapid build-up of confidence of business and businessmen in Bihar and UP and to ensure indigenous businesses in Bihar. Economic prosperity in these places must be ensured by local businesses, not by outsiders or their governments.
Since it is a superhuman effort and cannot be done by ordinary mortals, will Lalu and Mulayam - the two caste leaders of these two states and considered supermen by their respective followers - give up politics and take to business? In the process they could do a world of good to Indian economics and to Indian politics.

PS: While the law of the land could well punish Raj, who will punish these politicians who have kept 'Left' India poor and created the problem in the first place?


 
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