Much of the black economy in India is like digging holes and filling them.

One digs a hole during the day and another fills it up at night. The next day, there is zero output but two salaries are paid. Anna Hazare's fast seeking the acceptance of the Jan Lokpal Bill, and the widespread mass protests in urban India that followed his arrest from home, have shaken the government. Political parties have woken up to the depth of feeling against corruption. Two factors have come together the fight for the Jan Lokpal Bill and the violation of the citizen's civil right to protest. The snowballing protests are seen to be against corruption. Obviously, the public are fed up with the day-to-day harassment they face. To put this in perspective, it is important to understand the benefits to society of tackling the huge black economy in India. Some people argue that the black economy also generates jobs and production. For instance, they argue that a lot of goods are bought in the market using black incomes, and that leads to increase in production and employment. They argue that the black economy generates informal sector employment and helps the poor. Some go to the extent of arguing that India escaped the worst effects of the global recession in 2008, and the economy only slowed down, because a large amount of black money was floating around which generated additional demand. Some justify bribes as speed money that enables work to be done faster. There is some truth in all this. Yet, it can be shown that the ill-effects of the black economy far outweigh its beneficial effects. Think of bribe as speed money. In order to extract a bribe, the bureaucracy first slows down work and harasses the public. If work was automatically done, why would anyone pay bribes? Thus, the system has to be made inefficient so that those who can afford to pay can get their work done quickly but the rest continue to suffer. The administration becomes rundown since rather than devising ways to work efficiently, it is busy thinking of ways to make money by setting up roadblocks to efficient functioning. This has spawned a culture of middlemen' and personal approach to officers. Things hardly happen in the routine manner. The corrupt need the middleman to insulate themselves from direct public contact lest someone reports them. The bribe-giver also, not knowing how much to bribe and how to contact the administrator in charge, finds it a convenient arrangement. Much of the black economy in India is like digging holes and filling them. That is, one digs a hole during the day and then another fills it up at night; the next day there is zero output but two salaries are paid. This is activity without productivity. An example is of poorly made roads that get washed away or become pot-holed with every rain and need repeated repairs. Thus, instead of new roads coming up, much of the budget allocation is spent on maintenance. Teachers may not teach properly in class so that students have to go for tuitions. Not only families have to pay extra but the students find learning to be insipid and lose interest. This affects their creativity and future. Consider how millions of litigants, their families/friends, and lawyers arrive daily in the courts. In most instances, the hearing in a particular case lasts just a few minutes. The next date, weeks or months away, is announced, and they go back home. Not only is justice delayed inordinately, but time is lost and expenses are incurred on lawyers' fees, travel, and so on. Cases that could be resolved in a few months go on for years, multiplying costs. The expense of delayed justice is

both direct and indirect. Delay is often a result of the impact of the black economy. Honest people who lose hope start resorting to other means, which dents the notion of social justice and weakens society. This cost cannot be calculated in monetary terms but it is significant. Because of the growing black economy, policies fail both at the macro-level and the micro-level. Planning or monetary policy or fiscal policies do not achieve the desired results because of the existence of a substantial black economy. Targets for education, health, drinking water and so on are not achieved because expenditures do not mean outcomes. The economy does not lack resources but faces resource shortage. Much investment goes into wasteful and unproductive channels, like holding gold or real estate abroad. The flight of capital lowers the employment potential and the level of output in the economy. Capital sent abroad does not generate output in India but does so where it goes. A country that is considered capital-short has been exporting capital. A nation that gives concessions to multinational corporations to bring in capital loses more capital than it gets, and that too at a high cost, from foreign institutional investments or foreign direct investment. India's policies are open to the dictates of international capital because the country's businessmen and politicians have taken capital out in large doses since Independence. The costs are huge. The direct and indirect costs are of policy failures, unproductive investments, slower development, higher inequity, environmental destruction and a lower rate of growth of the economy than would have been possible. India could have been growing faster, by about 5 per cent, since the 1970s if it did not have the black economy. Consequently, India could have been a $8-trillion economy, the second largest in the world. Per capita income could have been seven times larger; India would then have been a middle-income country and not one of the poorest. That has been a huge cost. The black economy also leads to the usual becoming the unusual and the unusual the usual. That which should happen does not, and that which should not keeps happening. We should be getting 220 volts electricity but mostly get 170 volts or 270 volts. Equipment burns out, so all expensive gadgets need voltage stabilizers. This results in higher capital costs; maintenance costs rise. Water in taps should be potable, but it is of uneven quality because the pipes are not properly laid and sewage seeps in. Thus, people carry water bottles, use water-purifiers and boil water at great extra cost. Even then, people fall ill. Some 70 per cent of all disease in India is related to water, so we spend extra on hospitalisation and treatment. Then there is the associated loss of productivity; the poor are particularly the victims. Hospitalisation can be traumatic because of the large-scale callousness there. Public hospitals are crowded and the doctors are overworked. Due to unhygienic conditions, patients can get secondary infection or attendants can fall sick. In private hospitals the patient is not sure whether unnecessary tests are being done and whether visits by consultants coming to see them are needed at all. Even after all this, cure is not assured: the drugs may be spurious, the intravenous fluid contaminated, and so on. The poor suffer from the presence of a large number of quacks in the market who give injections or steroids or an overdose of antibiotics. It is by the sheer strength of the human constitution that in spite of these adversities, many people get cured.

The result of all this is that costs everywhere are higher than they need to be raising the rate of inflation. If capital is over-invoiced by businesses to make money, the cost of setting up industry is higher. If poor quality grain is sold in the public distribution system, the price is higher. If children need tuitions because of poor teaching, the family's cost is higher, and so on. At the social level, the cost is a loss of faith in society and its functioning. Hence many now seek individual solutions and discount societal processes. At the political level there is fragmentation, with States demanding their own packages because the belief that the nation as a whole can deliver has been dented. The demand for smaller States is a corollary because the bigger States neglect the less vocal regions. Each caste, community and region now wants to have its own party to represent its narrow interest, leading to the proliferation of smaller parties. Can the cost of this fragmentation and loss of national spirit be calculated? New movements for a strong Lokpal, the right to education, food and information, are likely to recreate a common national ethos that is so necessary, and which may generate the political will to tackle the hugely expensive black economy. The fight for one is the fight for the other also. (The author is with the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.

The dark side of globalisation

Jorge Heine & Ramesh Thakur Share print T+ Although we may not have yet reached the end of history, globalisation has brought us closer to the end of geography as we have known it. The compression of time and space triggered by the Third Industrial Revolution roughly, since 1980 has changed our interactions with the international environment. For many, globalisation the intensified cross-border exchange of goods, services, capital, technology, ideas, information, legal systems, and people is both desirable and irreversible, having underwritten a rising standard of living throughout the world. Others recoil from globalisation as they feel it is the soft underbelly of corporate imperialism that plunders and profiteers on the back of rampant consumerism. Globalisation is not uncontrolled. The movement of people remains tightly restricted. The flow of capital is highly asymmetrical. Over the last two decades, overseas development assistance from the rich to poor countries has totalled $50-80 billion per year. In the same period, every year, $500-800 billion of illegal funds have been sent from the poor to rich countries. That is, for every one dollar of aid money over the table, the West gets back $10 under the table and, for good measure, lectures the rest on corruption. The benefits and costs of linking and delinking are unequally distributed. Industrialised countries are mutually interdependent; developing countries are largely independent in economic relations with one another; and developing countries are highly dependent on industrialised countries. Brazil, China and India are starting to change this equation.

There is a growing divergence in income levels between countries and peoples, with widening inequality among and within nations. Assets and incomes are more concentrated. Wage shares have fallen. Profit shares have risen. Capital mobility alongside labour immobility has reduced the bargaining power of organised labour. The deepening of poverty and inequality prosperity for a few countries and people, marginalisation and exclusion for the many has implications for social and political stability among and within states. The rapid growth of global markets has not seen the parallel development of social and economic institutions to ensure balanced, inclusive and sustainable growth. Labour rights have been less sedulously protected than capital and property rights, and global rules on trade and finance are inequitable. This has asymmetric effects on rich and poor countries. Even before the global financial crisis (GFC), many developing countries were worried that globalisation would impinge adversely on economic sovereignty, cultural integrity and social stability. Interdependence among unequals translates into the dependence of some on international markets that function under the dominance of others. The GFC confirmed that absent effective regulatory institutions, markets, states and civil society can be overwhelmed by rampant transnational forces. Globalisation has also let loose the forces of uncivil society and accelerated the transnational flows of terrorism, human and drug trafficking, organised crime, piracy, and pandemic diseases. This is the subject of our new book, The Dark Side of Globalization (UNU Press, 2011). The growth of these transnational networks threatens state institutions and civil society in many countries. What can developing nations do to manage the challenges of globalisation? The outright rejection of globalisation and a retreat into autarky is neither practical nor desirable: who wants to be the next Myanmar or North Korea? As one wag has put it, opposing globalisation is like opposing the sun coming up every morning, and about as fruitful. Equally, though, who wants to be the next Iceland, Greece or Ireland? The notion that endless liberalisation, deregulation and relaxation of capital and all border controls (except labour) will assure perpetual self-sustaining growth and prosperity has proven to be delusional. The three Baltic nations that embarked on this course (Estonia, Latvia and Lithuania) to which, for good measure, they added the flat tax all had double-digit negative growth in 2009. For developing countries, lowering all barriers to the tides of the global economy may end up drowning much of local production. Raising barriers that are too high may be counterproductive, if not futile. Countries that find the golden middle, like Chile and Singapore, tend to thrive, channelling the enormous opportunities offered by an expanding world economy for the benefit of their citizens. Those that do not, like many in Central and Western Africa, are marginalised and left behind. Finding the right, if difficult, balance between openness and regulation requires keeping a watchful eye on trans-border crimes that thrive in the interstices of the national and the

international. Illicit trade, accounting for 10 per cent of global economic product according to some estimates, could be growing at seven times the rate of growth of legal trade. The growth in transnational flows has not been matched by an equivalent growth in global governance mechanisms to regulate them. And yet the very nature of the structure of globalised networks, which intertwine global actors and interests, ensures that no single power is able to maintain its position within the newly emerging global disorder without making compromises with other global players. In Africa, home to 36 of the world's 50 least developed countries, state weakness often has opened the door to transnational crime and terrorism. Garth le Pere and Brendan Vickers highlight six pathologies that are particularly prevalent across Africa: illegal exploitation of natural resources, terrorism, the drug trade, illegal migration and human trafficking, gun running, and money laundering. According to some, Guinea Bissau has already become the world's first narco-state. One response to global governance gaps that have made these illegal activities possible has been regional governance. The transfer of state functions to supranational forms of regional governance could enhance the capacity of individual states to combat uncivil society. The sharing of expertise, institutions, policy tools, personnel and other resources can go a long way in stemming the tide of unwanted activities. Human trafficking is among the darkest sides of globalisation, turning human beings into commodities bought and sold in the international marketplace. Women and children are among the most exposed to it. NGOs from all continents attempt to cope with this nefarious activity and report on those involved in it. Southern Africa has witnessed the rise of elaborate transnational crime organisations. The illegal trafficking in narcotics, mineral resources, ivory, counterfeit products and stolen property is thriving. International crime syndicates exploit government weaknesses to make huge profits. Illegal migration and money laundering rob the state of valuable human and material resources, in a region that desperately needs them. A different kind of challenge is posed by insurgencies that thrive as a result of the inequalities created by globalisation. The development dichotomy explains why dramatic national-level progress in India has gone hand in hand with an ever greater gap between the prosperity of urban, middle-class Indians and the squalor still seen in many of its 600,000 villages where most Indians live. Uprooted from ancestral lands and unable to adapt to the demands of a modern economy, aboriginal populations (Adivasis) often see revolutionary redemption as the only way out of their predicament. Sri Lanka's Tamil Tigers, on the other hand, might well have been one of the most globalised terrorist movements anywhere. Part of the reason for their considerable, if ultimately transient, success was the effective way they relied on the Sri Lankan Tamil diaspora both to obtain resources and to marshal political support for their cause.

Jihadists have excelled at using modern IT and telecom technology to promote their cause and foster their objectives, building on the link between the drug trade and terrorism pioneered by the CIA in Southeast Asia, Central America and Afghanistan. Jihadis have perfected into an art form the international transfer of funds in ways that are essentially untraceable, by relying on ancient mechanisms that replicate the old-fashioned way Osama bin Laden gets his information through pieces of paper brought to him by hand by loyal messengers which is one reason he remains at large. It remains to be seen whether the GFC has brought to an end globalisation as we have known it for three decades. But there is little doubt that the dark side of globalisation is here to stay. (Jorge Heine holds the Chair in Global Governance at the Balsillie School of International Affairs and is a Distinguished Fellow at the Centre for International Governance Innovation (CIGI) in Waterloo, Ontario. Ramesh Thakur is Professor of Political Science at the University of Waterloo. ) The rapid growth of global markets has not seen the parallel development of social and economic institutions to ensure balanced, inclusive and sustainable growth.

Economics focus
Some like it hot

Which emerging economies are at greatest risk of overheating?

Jun 30th 2011 | from the print edition

WHEN the term emerging markets was coined 30 years ago by Antoine van Agtmael, then at the World Bank, these economies accounted for one-third of global GDP (measured at purchasing-power parity). Now they make up more than half. More dramatic still, emerging markets produced more than four-fifths of global real GDP growth over the past five years. Important though these countries are, many commentators still tend to lump them together in a way they never would with developed economies. Headlines about rising inflation, rampant bank lending and a flood of capital inflows might appear to suggest that virtually all emerging economies are overheating. In reality, some are red-hot and others are only lukewarm. An analysis by The Economist tries to identify the hottest spots. The chart shows our ranking of 27 emerging economies according to their risk of overheating. We take each economys temperature using six different indicators. The scores from these indicators are then summed to produce an overall index; 100 means that an economy is red-hot on all six measures. (The rankings for all of the individual indicators can be found here)

In this section

Wanted: a French revolution Wrong number A bank bail-out by another name? Float hopes Not quite settled Acting with reserves Patchwork planet Some like it hot

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Turkey China Hong Kong Brazil Argentina

Start with inflation. This has jumped more sharply in emerging economies than in the developed world, to an estimated average rate of 6.7% in May. But it ranges from a modest 1.7% in Taiwan to 20% or more in Vietnam, Venezuela and Argentina (using private-sector estimates for the latter rather than the governments lower but dubious figure). Most of the pickup in inflation over the past year was due to higher food prices, which have a bigger share of the consumerprice basket than in rich countries. So if food prices stabilise, headline inflation will fall later this year. In China core inflation (excluding food and energy) is only 2.4%, but it is a more worrying 5.5% in Brazil and over 8% in India. Where growth is bumping up against capacity constraints and labour markets are tight, food inflation may spill over into wages and other prices. Spare room Our second indicator tries to gauge spare capacity by comparing a countrys average GDP growth rate since 2007 with its growth rate in the previous ten years. Growth has exceeded its long-term trend in Argentina, Brazil, India and Indonesia, but is well below trend (suggesting ample spare capacity) in Hungary, the Czech Republic, Russia and South Africa. Chinas growth has also been slightly below trend. An economys potential growth rate may have increased over time, thanks to reforms. However, tight labour markets (our third indicator) confirm that several economies have been growing unsustainably fast. In Argentina, Brazil, Indonesia and Hong Kong unemployment is well below its ten-year average. Brazils jobless rate is at a record low and wages are accelerating.

Our interactive index ranks these 27 emerging economies across all six individual indicators

The fourth symptom of overheating, and one of the most important, is excessive credit expansion, which can lead to asset bubbles as well as inflation. The best measure of excess credit is the difference between the growth rate in bank credit and nominal GDP. It is normal for bank lending to grow a bit faster than GDP in an emerging economy as the financial sector develops, but credit is outpacing GDP by an alarming margin in Argentina, Brazil, Hong Kong and Turkey. Lending to the private sector has increased by around 20% more than nominal GDP over the past year in both Turkey and Hong Kong. But not all emerging economies are awash with liquidity. In ten of the 27 countries, including Russia, South Africa, Egypt and Chile, credit is growing more slowly than GDP. The growth rate in Chinas bank lending has halved over the past year or so, and is now broadly in line with GDP growth. Our fifth indicator is the real rate of interest, which is negative in over half of the economies. That may be appropriate where demand is weak but in rapidly growing economies, such as Argentina, India, Vietnam and Hong Kong, negative real rates are fuelling faster credit growth and inflation. At the other extreme, Brazils real interest rate of almost 6% is among the highest in the world. Chinas benchmark lending rate is slightly positive but this understates the extent of its recent monetary tightening: the central bank has also sharply raised banks reserve requirements and capped credit growth. Mercury rising Our final temperature gauge is the external balance. A widening current-account deficit can be a classic sign of overheating, as domestic demand outpaces supply. Turkey looks particularly worrying, with its deficit expected to jump to 8% of GDP this year, up from 2% in 2009. Rising current-account deficits in Brazil and India also suggest domestic demand is growing too fast. Adding up the six scores reveals seven hotspots where most of the indicators are flashing red: Argentina, Brazil, Hong Kong, India, Indonesia, Turkey and Vietnam. Argentina is the only economy where all six indicators are on red, but Brazil and India are not far behind. China, often the focus of concerns about overheating, is well down the rankings in the amber zone, partly thanks to more aggressive monetary tightening. Russia, Mexico and South Africa are in the green zone, suggesting little risk of overheating. Red-hot economies with negative real interest rates need to raise them. Fiscal policy is also too loose in many places. Budget deficits have been reduced slightly since 2009 but this is largely

because strong growth has boosted tax revenues. On a general-government definition, six of the seven are still running quite large deficits (8% of GDP in India, for example); only Hong Kongs government is in surplus. Given that their economies are booming, all of them should arguably be running a surplus. Drivers who ignore red warning lights on the dashboard risk a serious breakdown. India, with vast coastal border of 7516 kms. covering 9 coastal States and 4 Union Territories, poses serious security issues and challenges. After the Mumbai terror attacks of 26/11, the entire coastal security scenario of the country has been thoroughly reviewed by the Government at various levels. The National Committee on Strengthening Maritime and Coastal Security (NCSMCS) against threats for the coastal security has been constituted under the chairmanship of the Cabinet Secretary. It has held detailed deliberations on issues related to coastal security. All the 9 coastal States and 4 Union Territories are regular participants in its meetings. Many important decisions have been taken by the various Ministries which are under implementation for further strengthening of coastal security in the country. For securing our coastline, police of all coastal States/UTs, State administrations, Indian Navy MHA and other Central Ministries are working in coordination. Nevertheless the task of securing Indias vast coastline is immense. Coastal Security Scheme (Phase- I) The Coastal Security Scheme, formulated on the recommendations of the Group of Ministers on Reforming the National Security System, was approved by the Cabinet Committee on Security (CCS) in January 2005 for implementation over five years starting from 2005-06. The scheme provides assistance to 9 coastal States and 4 Union Territories for setting up of 73 coastal police stations, 97 check posts, 58 outposts and 30 barracks, equipped with 204 boats, 153 jeeps and 312 motorcycles. Under the scheme, manpower is provided by the States and UTs. Initially, the Scheme had an outlay of Rs. 400 crore for non-recurring expenditure and Rs. 151 crore for recurring expenditure on fuel, repairs and maintenance of the boats and training of marine police personnel. The scheme has since been extended by one year i.e. uptoMarch 31, 2011 with an additional provision of Rs.95 crore towards the non-recurring expenditure. Out of the approved 73 coastal police stations, 71 have been operationalised and 48 of these are functioning from their new buildings. Besides, construction of 75 check posts, 54 outposts and 22 barracks has also been completed. Out of the approved 204 boats, 195 were delivered to the coastal States/UTs till 31.12.2010. The 10 Rigid Inflatable Boats (RIBs) for Goa have also been procured. All the vehicles (153 jeeps and 312 motorcycles) have been procured by States and UTs. So far, about 2000 personnel have been trained by the Coast Guard.
Registration of Boats

All fishing/non-fishing boats plying in Indian waters need to get registered under a uniform system. The Ministry of Shipping issued two notifications in June 2009, one for amending the Merchant Shipping (Registration of Fishing Vessels) rules alongwith revised format for registration and another for notifying the list of registrars. States/UTs are taking follow-up action

in this regard. The National Informatics Centre (NIC) has developed an online uniform registration system in the country. An amount of Rs.120 lakh has been released to NIC and Rs.581.86 lakh to the Coastal States and UTs for implementation of the programme. Trial run of the application and training is being done and online registration has started. Issuance Of ID Cards To Fishermen A Central Sector Scheme on Issuance of Biometric Identity cards to coastal fishermen has been launched at a total cost of Rs.72 crore. This project is being funded by the Registrar General of India (RGI). A consortium of three PSUs led by Bharat Electronics Limited has been identified for the work of digitization of data, card production and issuance. Out of 15,59,640 coastal fishermen identified for issuance of biometric ID card, data collection in respect of 8,29,254 (53.17%) and digitization of data in respect of 3,76,828 (45.44%) fishermen has been completed. RGI is in the process of issuing Multipurpose National Identity Cards (MNICs) to the population in the coastal villages as part of its project of creation of the National Population Register (NPR) in the coastal States/UTs ahead of the Census 2011 with suitable linkage to the existing smart cards. New cards are to be issued by the Department of AHD & Fisheries. In the first phase, 3331 villages on the coastline are being covered. The delivery of identity cards started in December, 2010. Data on more than 120 lakh persons and biometric details for more than 69 lakh persons has been collected so far. Printing of Local Register of Usual Residents (LRUR) has been completed in coastal villages in Gujarat, Goa, Karnataka, Kerala, Tamil Nadu, Orissa, Daman & Diu, Lakshadweep and Puducherry. Port Security The security of ports, particularly of the non-major ports, has always been a matter of great concern. There are 12 major ports and around 200 minor ports in the country. The security of the major ports is being looked after by the CISF while that of all the minor/non-major ports is being taken care of by the State Maritime Boards/State Governments. The 12 major ports are International Ship and Port Facility Security (ISPS) compliant and are subject to security audit once in two years. However, there is no such mechanism of security audit for the non-major ports. Apart from 12 major ports, 53 minor/non-major ports and 5 shipyards in the country are ISPS compliant. Reassessment of ISPS compliance status of these ports and shipyards has been carried out by the Indian Register of Shipping (IRS). Customs Department in liaison with Ministry of Shipping involving the State Government machineries/State Maritime Boards is taking up necessary action for the non-major ports beyond the aforementioned list of 65 major and nonmajor ports requiring ISPS compliance. Operation Swan Under the scheme of Strengthening of Joint Coastal Patrolling off Gujarat and Maharashtra Coast under Operation SWAN, assistance is being provided to the Coast Guard to procure 15 Interceptor Boats and set up 3 Coast Guard Stations in Dhanu and Murud Janjira in Maharashtra

and Veraval in Gujarat at an estimated cost of Rs. 342.56 crore. So far, Rs. 69.11 crore has been released by MHA towards cost of land and boats under the scheme. Decisions Implemented Undernoted decisions for overall strengthening of Maritime and coastal security have already been implemented like Enhancement of Patrolling and Surveillance in coastal areas; designating the Indian Navy as the authority responsible for overall maritime security which includes coastal security and offshore security; designating the Coast Guard as the authority responsible for coastal security in territorial waters including areas to be patrolled by Coastal Police; designating DG (Coast Guard) as Commander, Coastal Command responsible for overall coordination between Central and State agencies in all matters relating to coastal security; setting up of four Joint Operations Centres (JOCs) at Mumbai, Visakhapatnam, Kochi and Port Blair; and finalisation and issuance of Standard operating Procedures (SOP) of all the coastal States/UTs by the Coast Guard. Security Scheme (Phase- II) Finalised The proposal of the Coastal Security Scheme (Phase-II), formulated on the basis of vulnerability/gap analysis carried out by the coastal States and UTs in consultation with the Coast Guard was approved by the Government on 24.9.2010 for implementation from 01.4.2011 for period of 5 years. The Scheme is expected to provide support to coastal States/Union Territories to upgrade their coastal security apparatus. The financial outlay of the scheme is Rs.115491.20 lakh for non-recurring component and Rs.42500.00 lakh for recurring expenditure. The salient features in the proposal include setting up of new 131 coastal police stations equipped with 180 boats, 60 jetties, 35 rigid inflatable boats(12 for Lakshadweep and 23 for A&N islands only), 10 large vessels (for A&N Islands only), 131 four wheelers and 242 motorcycles. A lump sum assistance provision of Rs.15 lakh per police station has been made for surveillance equipment, night vision equipment, computer systems and furniture, POL expenses (for first year after supply of 180 boats). The provision of the Annual Maintenance Contract for the boats and training for marine police personnel has also been made. A special provision of 60 jetties with up-gradation of the existing ones has been made in the new Coastal Security Scheme (Phase-II). (PIB Features) *Director (M & C), Press Information Bureau, New Delhi

It is not surprising that questions of food security and the right to food have become such urgent political issues in India today. Rapid aggregate income growth over the past two decades has not addressed the basic issue of ensuring the food security of the population. Instead, nutrition indicators have stagnated and per capita calorie consumption has actually declined, suggesting that the problem of hunger may have got worse rather than better. Consider the evidence on nutritional outcomes from the most recent National Family Health Survey (NFHS) conducted in 2005-06. According to this, 46 per cent of children below 3 years are underweight; 33 per cent of

women and 28 per cent of men have Body Mass Index (BMI) below normal; 79 per cent of children aged 6-35 months have anaemia, as do 56 per cent of ever married women aged 15-49 years and 24 per cent of similar men; 58 per cent of pregnant women have anaemia. The national averages mask locational differences: all these indicators are much worse in rural India. Further, these indicators have scarcely changed, or have changed very little, since the previous NFHS in 1998-99. In terms of calorie consumption the picture is even worse. According to the National Sample Survey Organisation (NSSO) large survey of 2004-05, the average daily intake of calories of the rural population has dropped by 106 Kcal (4.9 per cent) from 2153 Kcal to 2047 Kcal from 1993-94 to 2004-05 and by 51 Kcal (2.5 per cent) from 2071 to 2020 Kcal in urban areas. The average daily intake of protein by the Indian population decreased from 60.2 to 57 grams in rural India between 1993-94 and 2004-05 and remained stable at around 57 grams in the urban areas during the same period. The all India averages do not capture the wide variation across states and even within states. For example the India State Hunger Index 2008 (brought out by the International Food Policy Research Institute) shows very large differences across 17 major states, ranging from 13.6 for Punjab to 30.9 for Madhya Pradesh. If these states could be compared to countries ranked in the Global Hunger Index, Punjab would rank 34th and Madhya Pradesh would rank 82nd. However, few Indian states perform well in relation to the global index. Even the best-performing Indian state, Punjab, lies below 33 other developing countries ranked by the Global Hunger Index. The worst-performing states in India have index scores that would be at the bottom of the global rankings: Bihar and Jharkhand rank lower than Zimbabwe and Haiti, and Madhya Pradesh falls between Ethiopia and Chad. What is especially significant in the IFPRI index is that the indicators of hunger do not always correspond to poverty ratios. For example, the lower incidence of income poverty in Gujarat and Karnataka is associated with worse performance in terms of hunger and this is confirmed by calorie consumption data. The recent rise in food prices in India is likely to have made matters much worse, and the effects of the global crisis on employment and livelihoods within the country are likely to cause further deterioration in peoples access to food. Clearly, therefore, food security is currently one of the most important policy areas, and demands stressing a rights-based approach to public food strategy have gained ground. This is what underlies the current discussion around the legislation on the right to food, which has been put in the 100-day agenda of this UPA government. The most loose definition of food security is one in which the population does not live in hunger or fear of starvation. But recent definitions have been more stringent. According to the Food and Agriculture Organisation (FAO), food security in a particular society exists when all people, at all times, have access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. Such a definition appears to be simple, but is actually quite complex and begs many questions. What is sufficient? How is access to be determined and provided? To what extent must food

preferences be taken into account? All these questions become even more important when food security is sought to be converted into a legally justiciable right. It is evident that genuine food security among a population requires a wide range of features, all or many of which are associated with the need for some public intervention. Ensuring adequate supplies of food requires increases in agricultural productivity, possibly changes in cropping patterns, and certainly the sustained viability of cultivation, all of would be necessary at both local and national levels. Making sure that food can be accessed by all the people requires that they have the purchasing power to buy the necessary food, which in turn means that employment, remuneration and livelihood issues are important. Social discrimination and exclusion still play unfortunately large roles in determining both livelihood and access to food by different social categories, and this too needs to be reckoned with. Malnourishment is closely linked to poor sanitation and other unhealthy practices, so that the provision of clean drinking water, sanitation and access to other basic amenities, as well as knowledge about correct or desirable eating habits, are all necessary. Child malnutrition in India tends to be the worst at the age of 5 to 11 months, which suggests that breast-feeding and weaning behaviour matters and this emphasises the need for society to educate mothers and to enable them to continue breast-feeding and shift to appropriate solids when required. All of these issues must be addressed if the rampant problem of undernutrition has to be dealt with. But obviously most of these cannot easily be translated into legal provisions and so it is clear that a law, however well-intentioned and carefully phrased, can only address some of the complex factors that determine food insecurity. It is important for the government to be aware of the need for a multi-pronged approach to the problem that has to extend beyond a legal promise if it is to be successful. This does not mean that a food security law would be meaningless: far from it. In fact, by focussing on universal food access and assigning responsibility and culpability, it would force the government at both central and state levels to take up the entire gamut of issues, which relate not just to actual food distribution but also to its production and patterns of consumption, so as to eventually ensure genuine food security. The key point here is that such a law must guarantee universal access. The dominant failing of drafts of the proposed legislation that have been circulating in various quarters, is that they do not promise or even try to aim at universal food access. Instead, they tend to be obsessed with targeting food security to the Below Poverty Line (BPL) population and some defined vulnerable groups. Some drafts have gone even further, by suggesting that the non-BPL population be excluded entirely from any public distribution. There is no question that poor and vulnerable groups have to be the focus of all public action to ensure food security. But making this a legal provision is likely to have exactly the opposite effect from what is intended, by actually reducing the access of such groups. There are many reasons why these targeted schemes, and this one in particular, are unlikely to work. Most significant of all, there are the well known errors inherent in targeting, of unjustified

exclusion of the genuinely poor and unwarranted inclusion of the non-poor. These are not simply mistakes that can occur in any administrative scheme, they are inbuilt into systems that try to provide scarce goods to one section of any population. In hierarchical and discriminatory societies like India, where social and economic power is unequally distributed, it requires no imagination to realise that making a scarce good (cheap food) supposedly available only to the poor is one of the easiest ways to reduce their access. The second problem relates to the distinction between food insecurity and poverty as currently defined. It is evident from NSSO and NFHS surveys that the proportion of the population that is nutritionally deprived is significantly larger than the poor population, and in many states they are not completely overlapping categories either. To deal with food insecurity in an effective manner, it is counterproductive to base public food provision on a predefined group of the poor, which would deprive a large number of others who are also food-insecure. Part of the reason for this relates to the third problem, the absence of any notion of dynamics in a rigid law that defines poor and vulnerable households in a static sense and changes the group only at infrequent intervals. Households and people within them can fall in or out of poverty, however defined, because of changing material circumstances. Similarly they can also go from being food-secure to food-insecure in a short time. The reasons can vary: crop failures, sharp rises in the price of food, employment collapses, health issues that divert household spending, the accumulation of debt, and so on. Monitoring each and every household on a regular basis to check whether any of these or other features has caused it to become food-insecure is not just administratively difficult, it is actually impossible. This is why all successful programmes of public food distribution, across societies, have been those that have gone in for universal or near universal access. This provides economies of scale; it reduces the transaction costs and administrative hassles involved in ascertaining the target group and making sure it reaches them; it allows for better public provision because even the better off groups with more political voice have a stake in making sure it works well; it generates greater stability in government plans for ensuring food production and procurement. Even among the states of India, those states that have a better record of public food distribution are those that have gone in for near-universal access. Kerala, Tamil Nadu and Andhra Pradesh all have defined BPL in such an inclusive way that the vast majority of the population is included, which makes their schemes close to universal. So an effective food security law must be universal and not targeted, and it must provide for enough food to meet nutrition requirements (both cereals and pulses) for every citizen. This also means that the entitlement must not be household based but individual based. Without these features, the law will not be able even to lay the grounds for genuine food security in the country