Thanks to tensions between Saudi Arabia and Iran, major oil producers couldn’t come to an agreement in Doha to freeze their output to January levels to raise oil prices. The current low oil prices have a lot to do with the grim outlook for global economic growth while supply is growing. China, the second largest economy in the world, is slowing down. Not surprisingly, global oil demand is much lower at 94.8 million barrels a day vis-à-vis supply of 96.3 million barrels a day in the first quarter of 2016 according to the International Energy Agency.

N Chandra Mohan

For such reasons, a freeze – even if it did materialise — is unlikely to have made much of an impact in getting prices back up again. The current levels of Brent crude at $40 a barrel reflect excess supply. The global oil market is nervous that Saudi Arabia’s tension with Iran for dominance in West Asia can get out of hand. Geopolitical tensions in Syria, Libya and Iraq are also fast-escalating. Although prices can spike upwards, they are kept low by excess supply as demand is declining due to weaker global growth. But with lower US shale oil production, supply and demand may balance later this year.

Instead of a freeze, an excess supply situation normally ought to signal to dominant producers like Saudi Arabia or the Organisation of Petroleum Exporting Countries (OPEC) to cut production to avoid a build-up of stock and ensure higher prices. But this is exactly what they have chosen not to do for geopolitical reasons. One year ago, Ali Ali-Naimi, Saudi’s oil minister asked “Why should we cut production?” on the sidelights of a climate conference in Lima. The Saudis resistance to lowering oil output is to squeeze out high cost producers and rivals like shale oil producers in the US and Iran.

The House of Saud and allies like Kuwait and the UAE were ready for prices even as low as even $20 a barrel. There is no doubt that low prices adversely affect the economics of oil extraction from shale. The US is now self-sufficient for its energy requirements and has emerged as a major swing producer in the global oil market. But in recent months, there are signs that shale producers in that country are experiencing a boom-bust cycle and the decks are being cleared for a decline in shale oil production. The Saudis expect higher prices to reflect such factors on the ground.

Saudi Arabia’s compulsions of late have changed due to rapidly dwindling coffers and losing out in 9 out of 15 key markets where it sold oil from 2013 to 2015 according to Financial Times. Its share of China’s imports thus has dropped from 19.4 per cent to 15.4 per cent over this period. Today, the Saudis prefer oil prices in the range of $60 to $80 a barrel to encourage demand and discourage supplies from high cost non-OPEC producers. But the contradiction is that they are now stepping up than cutting production to shore up their budgets and contributing to the persistence of global excess supply.

All of this ensures Brent crude prices that are no different from 2015. In any case, a production freeze can only succeed if all the major oil producers, including Iran, agree to do so. Iran, for its part, did not participate in this meeting in Doha. When both oil producers pump up more and more oil, how will prices rise? Saudi Arabia needs oil at $95.8 a barrel for its budget to balance. Iran needs oil at $70.4 a barrel according to the International Monetary Fund. The yawning gap between the current Brent crude and fiscal break-even prices is the difference between reality and unrealistic budgetary hopes.

If global oil prices remain depressed, the Gulf economies need to envision a future beyond oil. as we have written earlier. This is bad news for the millions of expatriate workers from South Asian countries like India, Pakistan, Bangladesh and Nepal who work in these economies. If the oil revenue-financed boom is over, many of them will be forced to return home. Already there are signs that remittances are declining. A world drowning in oil spells the end of the Gulf dream as major economies register slower growth in the rest of this year and beyond.

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For the first time, an all-female flight crew recently operated a Royal Brunei Airlines jet from Brunei to Jeddah in Saudi Arabia. Such a feat certainly appears noteworthy in a country where gender segregation is pervasive. When women are still not permitted to drive a car; where there are separate entrances for men and women in banks, is there a possibility of an all-female crew operating a Saudi Airlines plane from Jeddah to Brunei? Not immediately, as there are disturbing signs that the limited gains on the gender front might face reversals.

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Paradoxically, Saudi women occupy only 13 per cent of job positions in the private and public sector despite accounting for 51 per cent of graduates according to the central department of statistics and information. More and more women are getting educated both at home and abroad but their participation in the labour market is limited. Only 2 per cent of lawyers in the country are women. Women vote and participate in elections. But only 18 per cent of them in the age group 15-59 years are either employed or looking for work. Their rate of joblessness among women is high at 33 per cent.

How does one interpret these dismal numbers? A conservative view is that women are not used to working and have got used to stay at home. Another is that the 33 per cent number reflects a desire on their part to search for work. An unemployed person is not only out of work but is also actively searching for it. The high rate of unemployment thus reflects a situation where job openings are much less than the demand for work. The bogey that they prefer to stay at home is not quite true as more and more women are getting out of the house to take up or seek employment.

According to an article by Elizabeth Dickinson in Foreign Policy, two-income families have become the norm in Saudi Arabia. As many as 1.3 million out of 1.9 million women in the workforce are married. The latest numbers also indicate that the number of female employees rose by 48 per cent since 2010. These trends are very much in line with economic development and urbanisation. The growing number of nuclear families with both the husband and wife working to support a middle-class standard of living has been observed elsewhere in the developing world.

Interestingly, the current juncture of low oil prices offers the best prospect for Saudi Arabia and other oil producing countries in West Asia to reap a gender dividend. Oil prices have fallen off the cliff from over $114 per barrel in June 2014 to $40 per barrel. They are expected to stay low in the near future as well, which seriously strains the finances of the Saudi government. With back-to-back double digit budgetary deficits – the gap between dwindling revenues from selling cheaper and cheaper oil and rising expenditures, the decks are being cleared for swingeing cuts in subsidies and reform.

So long as crude prices remain low, Saudi Arabia’s royal family must look to a future beyond oil. Following Thomas Friedman’s first law of petropolitics, there is an inverse relation between oil prices and economic freedom and reform. Reformists like Muhammad bin Salman, deputy crown prince and defence minister are now talking about diversifying into mining, subsidy reforms, expanding religious tourism, leveraging unutilised assets, among other ideas. Foreign investments are being attracted. The big global banks are opening branches in the royal kingdom.

More jobs in the private sector are bound to be created. Unlike in the past when expatriate labour would take them up, the preference now is for using educated Saudi youth. Employing more Saudi women could be part of this emerging scenario. But this is not a done deal as the Saudi government is desperately trying to control the supply of oil to ensure that prices head up from $40 a barrel to a more comfortable range of $60 to $80 a barrel. Leading oil producers thus are contemplating a freeze in output when meet in Doha on April 17. Rising and high oil prices weaken the hand of reformers.

There are signs that this is already happening with the return of more conservative elements. The limited gains in on the gender front in Saudi Arabia thus are tenuous when compared to the situation in other Gulf economies like Bahrain. Even in Iran, the situation is much better. UAE recently appointed women as state ministers for happiness, and tolerance and a 22 year-old to head youth affairs. In contrast, the only female deputy education minister in the Saudi government lost her job last year. An all-female Saudi fight deck crew might have to wait for some more time!

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The steep fall in global oil prices has hit Gulf economies severely. Saudi Arabia, United Arab Emirates (UAE), Qatar, Bahrain are expected to run huge budget deficits as shrinking revenues from selling cheaper oil cannot fund their mounting expenditures. As they tighten their belts, the brunt of adjustment will be felt by migrants, who constitute the bulk of the labour force. Reforms include cutting fuel, power, water, education subsidies and a value-added tax (VAT). This will affect migrants and reports indicate family members are returning home.

N Chandra Mohan

As oil prices are likely to remain depressed — as global markets “drown in oversupply”, to borrow an expression of the International Energy Agency — the Gulf economies are looking to a future beyond oil. Saudi Arabia, for instance, is looking to diversify into mining and subsidy reforms. In an interview to The Economist, Muhammad bin Salman, Saudi Arabia’s deputy crown prince and defence minister stated “there were unutilised assets: expanding religious tourism, like increasing the numbers of tourists and pilgrims to Mecca and Medina will give more value to state-owned lands in both cities”.

Other Gulf economies are thinking on similar lines. Among other options, UAE is investing big time into the India growth story. The crown prince of Abu Dhabi and deputy supreme commander of the UAE armed forces, Sheikh Zayed Bin Sultan Al Nayan made a three day- visit to India in February and inked many agreements including investing in the country’s infrastructure, energy and aviation. India intends to tap investments of nearly $75 billion from the sovereign wealth fund of this Gulf economy, besides intensifying greater cooperation on the security front.

However, the crash in oil prices is not the only challenge confronting the Gulf. At an IISS Bahrain Bay Forum meeting last November, Bahrain’s minister for industry, commerce and tourism, Zayed Al Zayani stated that economic disorder and lack of opportunity are contributing to instability in the region. He emphasised the need for “unprecedented” economic reform across the Gulf in the wake of the lower oil revenues. These policies include the generation of millions of jobs for the youth in these economies that continue to depend heavily on expatriate labour from India, Pakistan, Bangladesh and Philippines.

All of this is not good news for expatriate workers in the Gulf. The steep increase in fuel and utility charges will hit their living standards. For instance, Qatar doubled these charges in September 2015. Saudi Arabia and Oman cut subsidies in December 2015. Saudi Arabia is thinking of a VAT by end-2016. In Bahrain, the expatriate workers also face the gradual loss of subsidies. These reforms in question also include replacing expatriate with local workers — Saudi Arabia, for instance, might soon start with the 10 million jobs being occupied by non-Saudi employees.

For such reasons, migration to the Gulf is at an inflexion point. In an earlier period, when oil prices were high and rising, these economies had booming revenues to build airports, highways and ports. Since the 1970s, those who constructed such infrastructure are the 16-odd million migrants from South Asian countries like India, Pakistan, Bangladesh, Nepal and Sri Lanka. As this oil-financed construction boom is over, there is less need for unskilled expatriates. As noted earlier, the Gulf economies now have the compulsion to employ their own young and increasingly educated work force.

There is thus a troubling shadow over the sustainability of private transfers or remittances to South Asian economies. In Nepal, remittances from all sources constitute 30 per cent of GDP. The consequence of return migration thus is bound to be serious for the Himalayan kingdom’s external profile. In Sri Lanka and Bangladesh, remittances are equally important amounting to 9.4 per cent of GDP and 8.6 per cent of GDP respectively according to the World Bank. In India, the share is less at 3.4 per cent of GDP but the problem will be serious in states like Kerala that is the ground zero for Gulf emigration.

Research has established that remittances augment savings and investments of recipient households and help in poverty reduction. If such inflows reduce over the near-term, they would worsen these distributional outcomes. While remittances contribute to better economic performance, they are also a source of output shocks when they turn volatile – see a discussion paper on the effect of remittances for 24 Asia/ Pacific economies by Katsushi S Imai, Raghav Gaiha, Abdilahi Ali and Nidhi Kaicker for the Asia-Pacific Division of the International Fund for Agricultural Development.

In this context, Kerala’s experience is relevant since it vitally depends on private transfers, which amount to one-thirds of its net state domestic product. The Thiruvananthapuram-based Centre for Development Studies (CDS) has been doing pioneering work on emigration and the impact of remittances on Kerala’s economy. CDS has, in fact, completed six large-scale surveys on migration — in 1998, 2003, 2007, 2008, 2011 and 2014. These surveys point to a decreasing trend in emigration from Kerala, bulk of which is to the Gulf economies. The era of large scale emigration is over.

If more South Asian expatriates return home, there is bound to be an adverse impact on the labour market. The rate of joblessness would spike upwards. With questions as to how long the good times will last on the remittances front, there is bound to be an adverse impact on South Asian economies. With less remittances inflows, they would register higher current account deficits, which is the broadest measure of the trade imbalance in goods and services with the rest of the world. Lower remittances, in turn, would lower per capita income, all of which contribute to social tensions. The challenge for policy is to cope with such inflows becoming less important in the region.

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South Asian integration remains a distant dream as some member countries like Nepal resent India’s big brotherly dominance in the region. They perceive that they have no stakes in India’s rise as an economic power. Ensuring unrestricted market access perhaps would have made a big difference in this regard. Their resentment has only deepened as this hasn’t happened. Instead they have registered growing trade deficits with India! The on-going travails of the Himalayan kingdom vis-a-vis India exemplify the problematic nature of integration in a region that accounts for 44 per cent of the world’s poor and one-fourth of its’ population.

N Chandra Mohan

This blockade similarly has resulted in a shortage of fuel, food and medicines in the Himalayan Kingdom. Supplies of vaccines and antibiotics in particular are believed to be critically low. UNICEF has warned that this will put more than three million infants at risk of death or disease as winter has set in. More than 200,000 families affected by earthquakes earlier in the year are still living in temporary shelters at higher altitudes. The risks of hypothermia, malnutrition and shortages of medicines will disproportionately affect children. As if all this weren’t bad enough, fuel shortages are resulting in illegal felling of forests.

Nepal’s non-inclusive constitution is the proximate cause of this development disaster-in-the-making. The blockade is being spearheaded by ethnic communities who make up 40 per cent of the population like the Madhesis and Tharus from the southern plains or the Terai These minorities have strong historic links with India and are protesting that the recently promulgated constitution marginalizes them. They have stopped goods from India entering the country by trucks since September. India of course formally denies that it has anything to do with the blockade but it is concerned that the constitution discriminates against these minorities.

As Nepal shares a 1,088 mile open border with it, India is concerned that the violent agitation over the constitution will spill over into its country. The bulk of the Himalayan Kingdom’s trade is with India, including a total dependence on fuel. It is also a beneficiary of special trading trade concessions and Indian aid. Nepali soldiers in the Indian army constitute one of its leading infantry formations — the Gurkha Regiment. Nepali nationals freely cross the border and work in India. Normally, such interdependence should occasion closer bilateral ties and integration. Unfortunately, this hasn’t happened till now.

Nepal’s ballooning bilateral trade deficit is of course one factor behind the lingering resentment of India. Realizing this, India’s PM Narendra Modi assured South Asian leaders during a summit meeting in Kathmandu in November 2014 that this trade surplus was neither right nor sustainable. That India stood ready to reduce deficits which South Asian countries were incurring in exchange of their goods and services. This is as clear as it gets that India might roll out unilateral trade liberalization; take whatever they have to offer to boost trade within South Asia from the lowly five per cent level at present.

India’s compulsions to do so are simple. If the drift in South Asian integration is allowed to continue, it will only be to the advantage of China. The dragon’s shadow is indeed lengthening over the region, as it is rapidly developing port and transport infrastructure in Pakistan and Sri Lanka. It has promised aid to Nepal to develop its northern border districts. Nepal has also opened more border trading points with China. That China has become Bangladesh’s largest trading partner is a painful reminder to India of its failure to deepen economic cooperation in the neighborhood. Clearly, the challenge for India is to defend its turf against China.

It is in Nepal’s interests, too, that it addresses the sources of discontent over the constitution through dialogue to ensure broad-based-ownership and acceptance. Its top leadership has also agreed to amend the constitution within three months. A more harmonious relationship with India, too, is in its interests. For instance, it has not been able to tap its abundant water resources by developing hydroelectricity generation. South Asia’s diverse topography lends itself to greater cross border power trade, but political inhibitions have ensured that progress has been less than the potential. Some power trading is taking place in the region bordering Bhutan and India.

Nepal has of late seized this opportunity but politics can swiftly derail this process. The signing of a much delayed $1.4 billion deal between the Investment Board of Nepal and India’s GMR Group to develop a 900 MW dam and tunnel system on the upper Karnali River is exactly the sort of big ticket project that can transform the economy of this Himalayan kingdom. Another Indian firm, Satluj Jal Vidyut Nigam Limited signed a deal with the Nepal Government to build a 900 MW project known as Arun-3 in east Nepal. These are just two examples of India’s involvement to help Nepal realize its hydro power potential.

Nepal is also part of India’s efforts to secure greater connectivity by road, rail and sea within South Asia with Bangladesh and Bhutan. These countries have signed a motor vehicle agreement for freer movement of passenger, cargo and personnel traffic within these countries. These processes must be allowed to fructify. This is exactly the sort of stake that Nepal needs to develop in an economics and business-driven partnership with India. Allowing the processes of regional integration to drift is another Himalayan blunder that Nepal can do without.

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By N Chandra Mohan
NEW DELHI, Dec 3 2015 (IPS)

The crash in oil prices is not the only challenge confronting the Gulf States in West Asia. Economic disorder and lack of opportunity are contributing to instability in the region, stated Bahrain’s minister for industry, commerce and tourism, Zayed Al Zayani, while kicking off the recent IISS Bahrain Bay Forum. He emphasized the need for “unprecedented” economic reform across the Gulf in the wake of the lower oil revenues. These policies include the generation of millions of jobs for the youth in these economies that continue to depend heavily on expatriate labour from India, Pakistan, Bangladesh and Philippines.

N Chandra Mohan

The Gulf States face the prospect of a demographic dividend of a youth bulge in the population rapidly turning into a curse, thanks to high and rising rates of unemployment for those between 15 to 24 years of age. The highest rates are in Saudi Arabia (28.7 per cent), Bahrain (27.9 per cent), Oman (20.5 per cent) and Kuwait (19.6 per cent). India, too, has double digit rates of joblessness among the young like many of these economies. There was a suggestion at the Bahrain Bay Forum that such high rates of youth unemployment are a proximate factor behind the surge in militant terrorism, exemplified by the rise of the Daesh or ISIS.

The prospect of lower oil revenues certainly will constrain the Gulf States to diversify their economies away from dependence on this commodity. Countries like Bahrain seek to focus on education and training, communications and infrastructure and promoting a start-up ecosystem for fostering entrepreneurship. The level of ambition is also high as they intend to generate high skill jobs and build a knowledge- based economy. The technology sector in the Gulf States is likely expected to grow by 10 per cent per annum over the next five years while the spending on technology in the Middle East as a whole is expected to touch $200 billion.

However, the transition to this brave new world requires bridging the skills gap. The labour market in this region depends heavily on low skilled and low wage earning migrant labour. More than 80 per cent of the workforce in private sector employment in Bahrain is comprised of expatriates. It goes up to 96 per cent and 98 per cent in Kuwait and Qatar respectively. In sharp contrast, the nationals are disproportionately represented in the bloated public sector. So, one form of dualism in the labour market is that the private sector is dominated wholly by expatriates while the public sector is largely for the locals in the Gulf.

Another source of dualism is that women are not adequately represented in the labour market due to pervasive gender discrimination in these conservative economies. Although women’s enrolment in higher educational institutions is rapidly rising of late — a case in point are courses in financial services in Bahrain which attract a lot of women — female labour force participation rates are well below 30 per cent as against the global average of 50 per cent. Jobless among young females is as high as 55 per cent in Saudi Arabia which is three-times higher than that of young males, according to the World Bank’s World Development Indicators.

Gulf’s labour market thus is “locked in a low skills, low wages and low productivity equilibrium” argued Frank Hagemann, deputy regional director of ILO, at one of the sessions at the Bay Forum. This dualism is reflected in a substantial wage gap between the private and public sector. At the lower end, the living and working conditions of migrants is sub-standard and highly exploitative in nature. Dependency-driven employee-employers relations are rife. The big challenge for the Gulf States is to kick-start the transition from this state of affairs to one driven by higher skills, higher wages and productivity.

What is the impact of abundant supplies of low skilled, low productivity expatriate population queried Ausamah Al Absi, chief executive, Labour Market Regulatory Authority in Bahrain? If an entrepreneur were to make an investment in a state-of-the-art printing press in Germany, he has to employ high technology and productivity tools as the cost of manpower is high. But in Bahrain, he can go for lower technology supported by a low skilled workforce. Pursuing a capital-intensive option in a low wage economy is not on. For such demand-side reasons, this entrepreneur will naturally be rendered uncompetitive in this economy, felt Al Absi.

Low oil prices complicate the efforts of the Gulf States to address these distortions without throwing out the baby with the bathwater. If revenues continue to decline, a worry is that it reduces the fiscal space to pay nationals in the public sector. At the same time, there is a compulsion to reduce subsidies on water, electricity and school fees that will disproportionately hit the expatriate workforce. The Gulf economies thus will make it more and more difficult for the expatriates to work in these economies over the near-term Controls on migration appear inevitable, regardless of the heavy dependence on such labour at present.

The transition to a higher skills, wages and productivity equilibrium is far from easy. It entails changes over a generation. For instance, in Saudi Arabia, 40 per cent of the graduates come from humanities or Islamic studies while only 4 per cent are engineers. Stepping up the numbers of engineers takes more time. Yet there is a temptation to look for quick fixes like inviting tech giants in the US to set up cloud computing courses in the Gulf States! At the Bay Forum, Bahrain announced a $100 million venture capital based fund to that will work as the first cloud technology accelerator in the region. Can such moves kick-start hi-tech start-ups? Intermediate steps are perhaps more necessary like vocational and on-the-job training. Only 17 per cent of firms in the Gulf States provide on-the-job training as against the global average of 35 per cent. The best bet for these countries is greater gender empowerment in the labour market than expat-bashing policies to reduce sources of instability.

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By N Chandra Mohan
NEW DELHI, Nov 24 2015 (IPS)

With Goldman Sachs folding up its haemorrhaging BRIC fund, is it curtains for the acronym that defined the investment bankers’ fancy for emerging markets? It certainly appears so after China’s stock market crash and a fast slowing economy triggered fears that the dragon will set off the next global recession.

N Chandra Mohan

Brazil’s economy is experiencing its deepest recession in 25 years. Russia, too, is contracting due to the crash in oil prices and sanctions. India remains a haven of stability. South Africa’s growth is sluggish with very high unemployment. Against this dismal backdrop, what are the prospects of BRICs playing a vital role in the world economy?

Fourteen years ago, BRICs was very much an idea whose time had come. Goldman Sachs projected them as the future growth engines of the world economy. This acronym soon became a self-fulfilling buzz word with a life of its own. A focus on these leading emerging economies, especially since 2006, provided handsome returns that peaked five years ago. Since 2010, however, BRIC Fund assets plunged from $842 million to $98 million in end-September 2015 according to Bloomberg. With no hope for “significant asset growth” in the near future, Goldman Sachs threw in the towel on October 23, the last trading day for this fund.

These financials clearly reflect the fast-deteriorating growth prospects of the BRIC economies. They were expected to overtake the US in size by 2015. But this isn’t likely to happen. A decelerating Chinese economy, in fact, threatens the first global recession in 50 years without help from the US, says a rival investment bank. Russia and Brazil are doing much worse as they are highly dependent on commodity exports to drive their growth. As China is the biggest importer of oil, iron ore and other raw materials, this is bad news for their commodity-driven prospects. Only India’s track record is creditable as the fastest growing economy in the world.

Such concerns can only make this grouping – which globally accounts for one-fifths of GDP, 42 per cent of population, 17.3 per cent of trade, 41 per cent of forex reserves and 45 per cent of agricultural production – less cohesive to have geo-economic significance in the world economy. Analysts consider the BRICs to represent an alliance of middle -sized economies that could lead to a serious attempt to counter-balance the US, the most powerful economy in the world. This is far from obvious except, perhaps for Russia, that has faced the full brunt of US-led sanctions due to its intervention in Ukraine. This is less true of India that is deepening its relations with the US.

But the BRICs are far from happy with the US-led global financial architecture. A striking feature of all the seven statements issued at BRIC summits from 2009 to 2015 is that this grouping aims to promote peace, security, prosperity and development in a multi-polar, equitable and democratic world order. The grouping seeks a greater voice and participation in institutions of global governance like the IMF, World Bank, WTO and UN. The Durban summit in 2013, for instance, indicated that the WTO required a new leader who demonstrated a commitment to multilateralism and that he or she should be a representative of a developing country.

The formation of a New Development Bank (NDB) is in fact a concrete expression of the desire of BRICs to set up its own alternative to the US-led World Bank and IMF. NDB President KV Kamath has indicated that the bank would blaze a different trail than the Bretton Woods twins who impose an unacceptable conditionality on their loan assistance. In sharp contrast, the NDB is expected to place a greater priority on borrowers’ interests instead of the lender’s interests; that it would better reflect the expectations and aspirations of developing countries. BRICs, however, are not keen to position the NDB as a rival to the World Bank or IMF.

At a BRICs meeting ahead of the recent G-20 summit in Turkey, India’s PM Narendra Modi stated that India will guide the NDB to finance inclusive and responsive needs of emerging economies. India will assume the chairmanship of BRICs in February 2016 and the theme of its chairmanship will be Building Responsive, Inclusive and Collective Solutions – the acronym lives on! PM Modi added for good measure that there was a time when the logic of BRICs and its lasting capacity were being questioned. But group members have provided ample proof of its relevance and value through action at a time of huge global challenges.

The good news is that the BRICs are cooperating and competing with one another for a place under the global sun. The seven summits from St Petersburg to Ufa testify to this. BRICs are the new growth drivers for low-income countries, especially in Africa, considering the growing importance of their trade and foreign direct investments in such economies. The BRICs may be passing through troubled times, but they do constitute a major consumer market. Incomes have grown as more and more people have joined the ranks of the middle class, resulting in greater demand for oil, cars and commodities in leading member countries like China and India.

But the grouping must seriously address the serious challenges of kick-starting its pace of expansion to power global growth as before. The BRICs may not be yielding returns to investment banks but they are in no immediate danger of fading into the sunset. Member countries after all take it seriously enough to set up a potential rival to the World Bank and IMF dominated by the US and Europe. Even if its creator has pulled the plug on the BRIC fund, the acronym will remain relevant in the future as well. Its resilience only exemplifies the profound truth of what the famous economist John Maynard Keynes stated long ago that the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else!

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By N Chandra Mohan
NEW DELHI, Nov 11 2015 (IPS)

Times are a-changing for Bihar, a state popularly described as a state of mind. The recent elections have brought back Nitish Kumar as the chief minister for the fifth time. Since his first innings as a developmental CM from 2005, he has transformed Bihar from being an archetype of India’s backwardness to one of its fastest growing states. Besides improving governance, he has also politically empowered women in that benighted state. Not surprisingly, the women’s vote was decisive for his electoral success. He now has the historic opportunity to shift gears towards sustainable gender-based development.

N Chandra Mohan

To encourage more girls to attend school, the state administration provided free bicycles for school-going children. This resulted in an uptrend in female literacy rates, rising over 20 percentage points between the two decennial census years, 2001 and 2011. This was much more than was observed in the case of males in that state or nationally, for that matter. Promoting greater gender parity in school enrolment thus has been a consistent objective of Nitish Kumar’s stints in office as CM. The priority must now include drastically reducing the numbers of girls without access to schooling.

Kumar’s thrust on education must continue with greater vigour as there is a vast unfinished agenda. When his government first took office in 2005, there were 2.4 million children out of school. This has now been halved to 1.2 million in 2014 according to the “National Sample Survey of Estimation of Out-of-School Children in the Age 6-13 in India” done for the Sarva Shiksha Abhiyaan, a flagship government scheme for the universalisation of elementary education. This works out to a higher percentage of 4.9 per cent than the 3 per cent of 204 million school-going children at an all-India level.

The fact that Bihar is still a poor state amidst potential plenty – it has a much higher percentage of its rural population in poverty – cannot be an argument for not pushing the limits of development. Bangladesh is also poor when compared to India, but that hasn’t prevented it from improving the socio-economic conditions of women. According to the Nobel laureate Amartya Sen, due to the official focus on women in Bangladesh, a much higher proportion of workers such as school teachers, family planning workers, health carers, immunization workers and even factory workers are women as are in garments.

Bihar (and even India) of course has a long way to go to catch up with the higher rates of female labour force participation in Bangladesh. This measures the number of women above 15 years of age who are engaged or are willing to be engaged in economic activity as a share of women’s population above 15 years of age. In Bihar, this is a lowly 9 per cent as against 57 per cent in Bangladesh. A factor that makes it easier for Bihar to encourage more women to work is that the CM has already politically empowered them since 2006 to participate in decentralized administration at the panchayat or village level.

Despite the best agro-climatic conditions, this state is the bastion of semi-feudal agriculture and there is a preponderance of marginal holdings with low productivity. The relations of production act as barrier on technological change. While beefing up rural infrastructure is imperative, technological change will not take place unless the relations of production also change. The hope is that with better governance, a difference can be made on the poverty front that is essentially one of low agricultural productivity. To plug gaps in development works, the CM has made a beginning by appointing more teachers, doctors, engineers, policeman and officials. Tapping the latent energies of women can help him realise these objectives more efficaciously.

While Bihar no doubt has the advantage of faster growth to impact rural poverty, Bangladesh has managed to achieve much more on human development despite slower growth than India. In 1990, the life expectancy at birth was higher in India but that position rapidly reversed in the next couple of decades. Between 1990 and 2014, it rose by 12 years from 59 to 71 years in Bangladesh. They thus have a life expectancy that is four years longer than Indians or Biharis, for that matter. The huge gains in health are reflected in the dramatic reduction in infant, child and maternal mortality rates.

These are the prospects ahead of Bihar’s developmental CM. He needs to accelerate the pace of progress on education and health so that the workforce of the state has the best prospect of taking advantage of the so-called demographic dividend of a predominantly young population. All these possibilities have suddenly opened up with his fifth innings as CM. With a mandate for governance and development, he faces the challenge of converting these possibilities into probabilities and transforming lives of 108 million people in Bihar through improvements in gender-sensitive social sector spending.

The last thing the people of Bihar need is another regime that will trigger another caste war and plunge the state into darkness and anarchy as happened in previous decades. However, there is change in the air. There is hope that this state can economically empower its women as it has done politically. That it can also reap the dividends that its eastern neighbouring country has achieved in bringing about a many-sided improvement in human development in the fastest possible time. Bihar must leverage its faster growth to ensure better outcomes in sustainable development.

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By N Chandra Mohan
NEW DELHI, Oct 28 2015 (IPS)

Delhi’s shame is that it’s the rape capital of India. The recent brutal rape of minors only underscores the tragic fact that nothing has changed since December 16, 2012 when a 23-year old physiotherapy student was gang-raped in a moving bus and triggered a nationwide outrage.

N Chandra Mohan

The massive protests that shook the capital and metropolitan India were considered by sociologists as a tipping point as there was pent up anger against the breakdown in law and order and governance. The recent incidents have only thrown up a sordid blame game between Delhi’s government and Centre while rapes in the capital have trebled since 2012.

For all the talk of reforms of the criminal justice system and swifter justice, the appeals of the four accused against the death sentence in the December 16 rape case are still pending in Supreme Court. In the lower courts, the conviction rate in rape cases is a lowly 23 to 27 per cent, which only emboldens rapists that they need not fear the law of the land.

The 77,000 strong Delhi Police, however, claim that in most cases rapists are brought to justice. But they were too busy providing security for the India-Africa Forum summit to escort the rapist in the infamous Uber rape case of December 2014 to the fast track court to decide his quantum of punishment.

Policing is as much the problem as the solution. So is the ruling political class. On national TV channels, they insist that rapists must be hanged. The Madras High Court is sure that castrating the rapists of minors will fetch magical results. But the ruling dispensation is more worried that such crimes take attention away from Delhi’s claims of being a world-class destination for tourism or a diversion from its efforts to sell the India story. “One small incident of rape in Delhi advertised world over is enough to cost us billions of dollars in terms of global tourism,” stated a minister of the NDA government. Although he retracted his statement, the damage was done.

No doubt, these small incidents in Delhi and elsewhere in India have impacted tourist footfalls. More than the loss of a fistful of dollars, however, they point to a pervasive failure of development on the gender front. This is reflected in the imbalanced sex ratio as there is a lesser number of women per 1,000 men. This ratio is one of the lowest in Delhi. Does any of this have a bearing on the higher incidence of sexual offences against women when compared to states where there the gender ratio is more balanced? Interestingly, social scientists have noted a robust inverse relationship between the sex ratio and murders and other violent crimes in India.

In states with an adverse sex ratio, a higher incidence of murders was observed. A better sex ratio was associated with fewer murders. Many years ago, Philip Oldenburgh termed the states in the country with the worst sex ratios ­ mostly in the north and northwest of India­as “the Bermuda Triangle for girls.” In sharp contrast, a more affirmative link between gender relations and crime was observed in the southern state of Kerala which has the highest sex ratio in the country and some of the lowest crime rates, not only of murders but others as well, according to the research of Jean Dreze and Reetika Khera.

Can this reasoning extend to sexual crimes against women, including rapes? Using the latest numbers of the National Crime Research Bureau, Delhi clearly is an outlier as it has one of the lowest sex ratios and the highest incidence of sexual offences in the country by a substantial margin in 2014. The crime rate, defined as the incidence of criminal sexual offences per 100,000 women, is the highest at 86.96 in the national capital. Although this is highly suggestive, the relationship across 35 states and union territories in the country is observed to be only mildly inverse and not significant. In other words, it is only broadly true and doesn’t tell the full story.

Kerala, with the best gender balance, indicates why this is so as it has a crime rate against women that is higher than the national average. In fact, seven out of the top 10 states with the highest sex ratios also had a higher incidence of sexual offences against women than the national average. Research is now re-appraising the so-called Kerala model of development which indicated the possibilities of higher social development at low levels of per capita income. How does one reconcile this model with the growing gender-based violence, mental illness and the rapid incidence of dowry and related crimes in the state? Kerala is no safe haven for women.

According to a fascinating paper by Mridul Eapen and Praveena Kodoth of the Centre for Development Studies in Thiruvananthapuram, “changes in the structure and practices of families in the past century have had wide-ranging implications for gender relations… alterations in marriage, inheritance and succession practices have… weakened women’s access to and control of inherited resources… the persistence of a gendered work structure have limited women’s claims to ‘self-acquired’ or independent sources of wealth.” With their weaker position, can domestic violence, declining property rights and serious mental illnesses be far behind?

What is happening in Delhi is only a concentrated expression of what is occurring in the country. Doing whatever it takes to ensure gender parity, including in the police force, is desirable. Killing the girl child at birth has to stop at all costs. Family and societal values that favour sons over daughters, too, must change. A dark and troubling truth is that women, including minors, are mostly raped by members of the family and known people like neighbours and relatives. There is a need to have child protection services, including provision of crèches for working mothers – especially of the poorer sections of society – so that minors are not left unattended. Ultimately, it is only the vigilance of a gender-sensitised citizenry that will minimize rapes.

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By N Chandra Mohan
Oct 22 2015 (IPS)

Reflecting President Barack Obama’s pivot to Asia, the US, Japan and 10 other Pacific Rim nations have inked a Trans-Pacific Partnership (TPP) agreement. This is the largest mega free trade agreement (FTA) in two decades and represents 40 per cent of the global economy.

N Chandra Mohan

This pact puts tremendous pressure on the European Union to conclude its Transatlantic Trade and Investment Partnership with the US. China, too, will seek to hasten the Regional Comprehensive Economic Partnership. With the Wold Trade Organization (WTO) unable to conclude the Doha Round, India’s policy makers feel that it is in the country’s interest to be part of at least one of these mega FTAs that reflect the new global architecture for trade.

What are India’s gains if it joins the TPP? According to economic theory, the trade creation after joining this grouping will benefit India as its exports go up manifold. Cheaper imports, in turn, lower inflation. There will also be much greater Indian participation in US and Japanese supply chains in the Indo-Pacific region. Larger export markets would bring economies of scale to textile and other manufacturing firms. But there will be an adverse impact on the demand for its products if it does not join. Vietnam thus will gain at India’s expense in garment exports as it enjoys duty free access to the US while India faces duties of 14-30 per cent.

But TPP is less about trade and more to do with stricter intellectual property rights (IPRs), labour, environment standards and investor-state dispute settlement. Its IPR regime is Big Pharma-driven with provisions that adversely affect the availability of affordable medicines in the developing world. In fact, it would be disastrous for public health in India. The proviso to grant patents to “new uses of a known product” is fraught with grave implications as it may lead to ever-greening of patents. Similarly, the special treatment extended to pharmaceutical patents, placing them in a preferred category compared to other technologies, by patent term adjustment for regulatory delays, also will lead to a longer term for patents, argued TC James, consultant with the think-tank RIS at a recent panel discussion on TPP.

This trade pact thus will bring in new handicaps for India’s pharmaceutical industry, which are mostly generics, from getting marketing approvals. A case in point is the data exclusivity provisions for test data of biologics – which are grown from live cells – for five to eight years. These constitute a major barrier for the entry of cheaper generic versions, or biosimilars, in which India has a proven world-class capability. US law protects data collected during the development of biologics for 12 years. Pressure from Australia and others ensured that this was brought down to five years but this could go up to eight years.

In the fine-print of Article QQ.E.20, Big Pharma ensured that market exclusivity for biologics is provided either through at least eight years of data protection, or at least five years of data protection with other measures to “deliver a comparable outcome in the market,” As the latter option is problematical, market exclusivity will inevitably extend further by another three years. This means a longer period when monopoly pricing can be exercised by Big Pharma that will raise the price of drugs and take them out of reach for many people in India and even in the 12-menber grouping, for that matter.

India will thus seriously compromise its public health objectives if it chooses to join TPP. It has a well-established legal framework for IPRs and its courts have been active in enforcing this regime, exemplified by the denial of a patent for an anti-cancer drug to a foreign drug major in 2013 as it did not meet the criteria of inventiveness in India’s Patent Act. Such judicial activism has also been manifested in the award of a compulsory licence for the local manufacture of an anti-cancer drug due to the unaffordable prices charged by the global pharma giant that held the patent.

Not surprisingly, Big Pharma has for long been up in arms against India’s IPRs and has sought to pressurize the country to dilute some of the rigours of its legislation for drug patents. The United States Trade Representative has listed India under the Priority Watch list for the enforcement of its patent legislation, especially for drugs even though it is Agreement on Trade Related Aspects of Intellectual Property Right-compliant. What better opportunity to make amends under the guise of joining TPP. Compulsory licensing thus is a no-no. So is Section 3(d) of India’s Patent Act, which raises the bar for what is inventive to be granted a patent. These flexibilities provided by WTO’s TRIPS agreement are bound to clash with TPP that has low inventiveness thresholds to be granted patent protection.

India must not buckle under such pressures to weaken its IPR legislation. According to its national policy on IPRs, the right to health is an integral part of the right to life enshrined in the Constitution of India. India is committed to providing its citizens access to affordable medicines, quality healthcare and innovative products and services. The Patents Act as amended in 2005 protects innovation in pharmaceuticals and provides for measures to safeguard public health. India should continue to use the flexibilities available under TRIPS agreement and not compromise on the patent linkage and patent term extensions sought by TPP.

Nonetheless, India shouldn’t desist from efforts to engage with Big Pharma if it entails win-win outcomes that ensure affordable drugs to its people. The US drug major Gilead Sciences Inc introduced tiered pricing, whereby it charges lower prices in India compared to prices in the US. Gilead and nine Indian companies entered into a partnership based on effective IPR protection and licensing to produce an affordable version of a drug for Hepatitis C. India thus has access to patented products at affordable prices while ensuring a decent return for the innovating company. Can’t other US drug majors be persuaded to follow Gilead’s example? India does not need to join the 12-member grouping for such outcomes that further its public health objectives.

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By N Chandra Mohan
NEW DELHI, Oct 13 2015 (IPS)

The third India-Africa Forum Summit to be held in New Delhi later this month – in which 54 African countries will participaate – is expected to result in a deeper engagement between India and Africa. This summit takes place at a time when both need each other more than ever before. Both remain bright spots in a bleak and blighted growth landscape. Out of 189 countries, only 63 are expected to grow by 4 per cent and more this year, 36 of which are in Africa. But many countries there are adversely impacted by China’s diminishing appetite for commodities and shrinking trade. India is currently one of the fastest growing economies in the world.

N Chandra Mohan

India wants to create a new architecture for its closer ties with Africa. What could be its important elements? There is no doubt that economic relations in terms of bilateral trade and investment are expected to improve manifold. Foreign Office mandarins bristle at the suggestion that this summit represents an effort at catching up with the much bigger Africa summits that China organized since 2006. They probably also demur at the suggestion that India has, in a “too little, too late” fashion, discovered Africa and is making amends through the promise of capacity-building, more aid and duty free access to its market.

Energy security is an important area that has seen Beijing and New Delhi scramble for sources of oil supply in Africa to fuel their rapidly growing economies. But this is an area where India has lost out heavily to Chinese oil giants.Given this track record, there is a warrant for going beyond a “China catch-up” The perception that India’s interests in Africa are identical — notably, to only secure acccess to its vast raw materials and resources — needs to be dispelleed. India has one major advantage over China in this region, notably, the dynamism of its fast-globalising private sector, represented by the likes of Tata Motors, Godrej and Bharti Group.

This is the trump card that India must play to forge a new partnership with the continent. Its investments must propel African trade into cutting-edge global networks that alter the international division of labour, as argued by Harry Broadman in his book Africa’s Silk Road: China and India’s New Economic Frontier. Indo-African trade has grown exponentially to US$93 billion in 2013. India has signed bilateral trade agreements with more than 20 African countries. India’s private investments in the continent have also surged over a period of time in diverse sectors like telecommunications, information technology, energy and automobiles.

Another major advantage is the Indian Diaspora, especially in south and east Africa. For instance, India’s linkages with South Africa go back in time – the 1.15 million strong people of India origin arrived between 1860 and 1911 as indentured labour to work as field hands and mill hands in sugar and other plantations and stayed on. In east Africa, the Diaspora’s contribution has been significant in India’s trade as they own distribution channels, manufacturing facilities and even mines. Unfortunately, this potential has not been adequately tapped. India’s growing partnership with Africa must harness the strengths of the Diaspora.

India Inc has committed US$10 billion to infrastructure and other projects since 2008. For instance, the Bharti Group has undertaken 11 green-field investments projects in Nigeria and Uganda in 2014, adding to its existing investments in 13 other African countries like Burkina Faso, Chad, Democratic Republic of Congo, Ghana, Kenya, Madagascar, Malawi, The Republic of Congo, Seychelles, Sierra Leone, Tanzania, Zambia and Uganda. The Tatas have invested in Algeria. India’s green-field investments in Africa amounted to US$1.1 billion as against US$6 billion of China in 2014, according to UNCTAD’s World Investment Report for 2015.

The other important element is building on the longstanding history of friendship and cooperation in development. Indo-African relations quintessentially define the modern concept of development compact that is based on shared responsibility and helping one another meet their developmental goals. This compact is more South-South than North-South as it entails mutual gain, non-interference, collective growth opportunities and indeed an absence of loan conditionalities. All of this strengthens the partnership in capacity-building, education, agriculture, food security, climate change, energy security and so on in a concerted manner.

Since the second summit in 2011, India has given 25,000 scholarships to African countries. A number of capacity-building institutions are in various stages of implementation. Three vocational centres have been set up in Ethiopia, Burundi and Rwanda. “India never says that we are setting up this institute, in this African country; here is the money, here is the institute, run it. This is what distinguishes us from the others,” stated the Secretary (West) in the Ministry of External Affairs at a consultation organized by the think-tank RIS ahead of the summit, adding that African countries felt “a vested interest” in such institutions and a sense of ownership.

India offered US$7.4 billion in the form of lines of credit (LoC) or soft loans since the summits began in 2008 of which $7 billion has been approved. There are 140 projects currently happening over 41 countries with such concessional aid. Even earlier, India provided a major LoC for Ethiopia in 2006 which in a way changed the dynamics of cooperation. The (US$640 million LoC for the development of its sugar industry across the value chain was a landmark development. In the case of Mozambique, financing a solar panel production unit represented a departure from the way India previously supported projects in the realm of advanced technologies.

The architecture of India’s engagement thus reflects its desire to provide comprehensive support for Africa’s development. India Inc is the spearhead for closer ties in trade and investment with the fast-growing economies of the continent. It is also a source for reliable and quality medicines and vaccines at affordable rates for large parts of Africa, especially in the battle against AIDS. The cooperation in the field of healthcare has contributed significantly towards Africa’s efforts to achieve MDGs. Post-2015, this partnership will also extend to achieving SDGs.

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By N Chandra Mohan
NEW DELHI, Oct 8 2015 (IPS)

India’s stance on sustainable development goals is evolving as there are differing voices on what should be done. Over the next 15 years, the global development agenda will be preoccupied with the ambitious challenge of achieving 17 SDGs and 169 targets. The SDGs follow the Millennium Development Goals which were conceptualized as a set of eight goals on diverse development dimensions including poverty alleviation, gender equality, health and environmental sustainability. The buzz in the development community is that as the relative success of MDGs is a result of China’s super-rapid growth, the relative success of the SDGs will be because of India.

N Chandra Mohan

The National Democratic Alliance (NDA) government, for its part, appears confident in meeting these development goals. Prime Minister Modi told the UN General Assembly that many of the SDGs – which form the core of the 2030 Agenda for Sustainable Development – are already being implemented through flagship programmes of the government such as Swachh Bharat Abhiyaan (for better sanitation), Make in India, Digital India, Skill India, Smart Cities and Jan Dhan Yojana (banking the unbanked). He even mentioned his focus on the Blue Revolution, which includes the prosperity and sustainable use of marine wealth and blue skies. India’s development agenda thus is mirrored in the SDGs.

However, Mrs Sindhushree Khullar, CEO of NITI Aayog, a successor to the Planning Commission that has been tasked with the implementation of SDGs, candidly indicated some challenges facing the country in this regard. She argued that while they are indeed formidable in achieving 169 targets, in the 12th five-year plan (2012-17) there were only 25 indicators, many of which could not be updated due to data problems. At a consultation with stakeholders on SDGs, organised by the Research and Information System for Developing Countries (RIS) in New Delhi, she wondered whether the country could do all 169.

Between now and 2030, at the mid-point of 2022, India would be celebrating 75 years of independence when the objective of providing health, nutrition, housing, education and drinking water for all, along with road and digital connectivity, would hopefully be fulfilled. The sceptical voice of NITI Aayog’s CEO ought to be heeded as it is well recognized that the country has had a mixed track-record in implementing MDGs or even hitting the modest domestic socio-economic targets set in the 12th five-year plan. Mrs Khullar knows what she talking about as NITI Aayog has already undertaken the mid-term appraisal of this plan.

In sharp contrast, a growth-can-fix-SDGs stand was outlined by the vice-chairman of NITI Aayog, Dr Arvind Panagariya. Speaking at an event organised by RIS and Permanent Mission of India in New York ahead of the special session of UN General Assembly, he argued that “We simply cannot overstate the importance of robust economic growth, which in turn depends on well-functioning infrastructure and policies that enhance productivity. Without it, none of our objectives, be it eradication of poverty, empowerment of women, provision of basic services or even protection of environment and reversing climate change, would be possible by 2030.”

India’s success in sustaining high growth and therefore poverty alleviation will contribute in substantial measure to the success of the SDGs, added Dr Panagariya. Improving the lives of 1.4 billion Indians would make a major dent in the goal of improving the lives of all humanity. Besides the example of fast-growing China in reducing poverty and achieving MDGs, other erstwhile developing countries like South Korea, Taiwan and Singapore also relied on faster growth to eliminate poverty within a single generation. Social programs and social spending in these countries came later in terms of sequencing of development strategy.

If achieving SDGs through growth is India’s policy stance, it appears to be on fragile foundations. The latest IMF data show the country overtaking China with 7.5 per cent growth in 2016-17. The big assumption is of a Modi-dividend on growth. In other words, the formation of a majority government in India in May 2014 is expected to result in crucial policy reforms that can revive investor sentiment and boost growth. But this reforms-driven spurt in growth hasn’t materialised until now and there is little or no basis to infer that India will continue to grow by 7.5 per cent indefinitely. Extrapolating from the past to the future is only the stuff of statistical dreams.

India experienced 8 per cent growth over a full decade but that did not help in achieving MDGs. The country is on track for meeting the target of poverty reduction, reducing the spread of HIV/AIDS and reducing gender disparity in primary education, but lags behind on reduction in hunger, universal primary education, reduction in under-5 mortality rates, reduction in maternal mortality rates, reduction in the spread of malaria and other diseases and basic provision of safe water and sanitation, according to India Country Report 2015 on MDGs brought out by the Ministry of Statistics and Policy Implementation.

Robust economic growth will not help in hitting the SDGs either. For all the talk of flagship programmes doing the needful, the NDA government has savagely cut back on social sector spending in its latest union budget for 2015-16. Public spending on health is only 1 per cent of GDP. The provision of accessible, affordable and effective health services to all is difficult to deliver under these circumstances. The swingeing spending cuts affect universal primary education, especially schooling the girl child in various states of the country. Despite slower economic growth, Bangladesh has done a lot more in this regard.

A conscious policy focus on women will help India realise the first seven SDGs that complete the unfinished agenda on MDGs. More than growth per se a focus on redistribution will ensure meeting other goals such as 8, 9 and 10 that cover aspects such as inclusiveness and jobs, infrastructure and industrialization and distribution. The final seven goals lay down the framework for sustainability spanning urbanization, consumption and production, climate change, resources and environment, peace and justice and means of implementation and global partnership for it. Growth is not the magic bullet for achieving these goals either.

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By N Chandra Mohan
NEW DELHI, Oct 2 2015 (IPS)

India faces a serious challenge of dealing with joblessness despite statistically being the world’s fastest growing economy. The spread, depth and intensity of the problem, especially among the educated youth, is not reflected the latest unemployment number of 4.9 per cent in 2013-14. This estimate captures the chronically unemployed – those who sought or were available for work for the major part of the year – but it rarely figures in public discourse as the rate is relatively low and stable over time. Another reason is that the economy continues to generate employment opportunities even if they are largely casual or temporary in the informal sector.

N Chandra Mohan

An important characteristic of the chronically unemployed – highlighted in all the five-yearly surveys of the National Sample Survey Organisation (NSSO) – is the concentration among the educated youth. Three-quarters of those without work on a long-term basis were observed to be fresh entrants to the labour force who are 15-29 years of age. Nothing much has changed over the years in this regard. If anything, this trend has worsened. In NSSO’s survey for 2011-12, four-fifths of those chronically employed were fresh entrants. The applicants for the posts of peons are from the ranks of educated youth.

Why are the long-term unemployed concentrated in this segment? Educated youth prefer to wait for better opportunities, unlike the poor who take up whatever is available. Supply-side factors like population and labour force growth also ensure that the share of the youth cohort is bound to be high among the fresh entrants. With rising enrolment in institutions of higher education, most of the new entrants are also educated. Attendance in institutions of higher education, corresponding to graduation and above among [DSJ1] those 20-24 years of age recorded the highest rates of growth according to the NSSO. Higher unemployment among the youth and among the educated thus are two sides of the same coin.

A growing reserve army of unemployed youth portends serious strains on the country’s social fabric. As the electorate that swept the Narendra Modi-led Bharatiya Janata Party (BJP) into power in May 2014 is predominantly young ­ from villages and small towns ­ the government must expeditiously address the challenge of jobless growth. This threatens to turn India’s demographic dividend of having a young population into a curse. Such voters are likely to expect employment opportunities to be generated immediately. Currently, there are only two million jobs being created annually, which are inadequate to absorb the 12 million young people who seek work every year.

Tackling jobless growth cannot be done through quick fixes. It is not only about labour reform. It is not possible to address the problem without developing skills that industry wants. India presents a paradox of skill shortages despite a situation of labour surplus. Around 15 percent of India’s trucks are idle due to a shortage of drivers. The steel industry is short of metallurgists. The healthcare sector is short of paramedics and technicians. The booming construction sector has a shortage of civil engineers. These skill mismatches must be met by stepping up enrolment in industrial training, vocational institutes and public-funded institutions of higher learning.

Creating more productive jobs over the near term thus is a big policy challenge for the National Democratic Alliance (NDA) government. As expectations are high, it must deliver soon on its promises, especially to the youth that has voted it to power with such a commanding majority. Consider the consequences if the shift of population away from agriculture gathers momentum and the trend of jobless growth persists in India’s manufacturing sector. If fewer jobs are created outside agriculture, more will be forced to stay in this sector, increasing the pressure on land and lowering incomes. Income inequalities will worsen while the growing ranks of jobless youth will turn restive.

The growing frustration has already spilled out onto the streets of Gujarat with the relatively well-off Patel community demanding backward caste reservation for education and jobs. The fresh entrants to the towns and cities who are looking for work are unlikely to be satisfied with the quality of employment that is on offer in urban India. Most of the jobs being generated are in the construction sector outside the purview of labour legislation or trade unionism. Employment in large factories, where work conditions are better protected, is sluggish. Equally unacceptable are temporary or causal odd-jobbing in the informal sector. In this dismal milieu, the lowly job of a peon has had many takers.

But the vast majority of the chronically unemployed are unlikely to be satisfied with such job openings. The NDA government must deliver on its flagship programmes like Make in India to generate meaningful employment opportunities. The absolute number of the educated unemployed will only keep rising due to the growth of the youth cohort among the fresh entrants to the labour force. To absorb them gainfully, labour-intensive manufacturing like textiles has to be re-vitalised. Greenfield investments to set up factories in other industries like automobiles also must be incentivised.

Lowering the official 4.9 percent rate of chronic unemployment may not seem like an urgent matter. After all, if you look at such figures the problem appears much worse elsewhere in the world, especially in Spain and Greece. Further, Brazil and Russia are deep in recession and unemployment has hit 7.5 per cent and 5.3 per cent respectively. In South Africa, joblessness is as high as 25 per cent. By contrast, the rate of unemployment in India may appear manageable. But to really think so would be a terrible mistake as the spectre of jobless growth haunts India.
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By N Chandra Mohan
NEW DELHI, Sep 28 2015 (IPS)

Women account for less than half of India’s population but their participation in the workforce is way below that of men. They account for 27 per cent of the workforce. If – and it is a big if – their number were to increase to the same level as men in the workforce, the country’s output of good and services would expand by 27 per cent, argues Christine Lagarde, managing director of the Internatgional Monetary Fund.

N Chandra Mohan

Empowering women certainly boosts economic growth.The sad reality, however, is that progress towards gender parity in the workforce has stalled, if it has not been thrown into reverse gear. Instead of steadily rising, the share of female workers in population is trending down.

The men-women gap in workforce participation rates widened to 32 percentage points in 2011-12 from 25 percentage points in 1977-78, according to the five-yearly surveys of the National Sample Survey Organisation. Gender parity entails 195 million more women joining the workforce and is indeed a daunting objective to secure a gross domestic product (GDP) GDP expansion of 27 per cent. Reducing the gap by 25 per cent by 2025 – a G-20 pledge – translates into 5 million more women joining the workforce every year for the next 10 years. However desirable that may seem, the reality is that only 2 million jobs are being generated annually in the Indian economy.

Women’s workforce participation that dropped to 21.9 percent in 2011-12 from 29.7 per cent in 1977-78 at the national level has an important bearing on the observed narrowing of male-female differentials in the rates of unemployment. The rates of unemployment for women typically are higher than for men. Their rate of unemployment registered a high of 3.2 per cent against 2.1 per cent among males in 1977-78, after which the differential vis-à-vis males narrowed down by 2011-12, according to the National Sample Survey Organisation (NSSO) measure of chronic unemployment. These narrower differentials are due to a decline in rates of joblessness among women as male rates are stable.

Changes in the nature of employment, especially in rural India, are the proximate factor responsible for the falling rates of female workforce participation. In terms of absolute numbers, female employment shrank by 2.7 million jobs in just two years from 2009-10 to 2011-12. Women are increasingly taking up short-term marginal work as work opportunities on the farms are shrinking. Roughly two-thirds of women workers were self-employed on family farms in 1972-73 and this has declined with sharp swings along the way to 59 per cent in 2011-12. Casual work opportunities have grown somewhat irregularly in relative importance over time.This is a reflection of the fact that women are no longer getting longer term and better paying jobs, and so are forced to take up short term transient work.

The picture is even more dismal in vanguard states of social and gender advancement, such as Kerala. As traditional agro-processing activities like the coir and cashew industries that employed women in large numbers have shrunk, female workforce participation has declined to even less than the national average. The battle for gender equality in the workplace in India will not go forward unless states like Kerala lead the charge. Grounds for hope, however, are that women are unionizing and pressing for bettering their working conditions according to the Indian Express. Thanks to low participation rates, there has been no boost to the state’s GDP.

This sharp drop in employment, especially in rural India, discourages women from looking for work, contributing to lower rates of unemployment. In other words, the declining rate of joblessness probably reflects the discouraged worker effects of a severe employment crunch for women workers. However, to substantiate this factor that pulls women out of the labour force is far from easy. The NSSO’s surveys include those who are neither working nor available for work as not being in the labour force. This includes those who attended educational institutions and those who performed domestic duties, among others. Doing domestic duties has become important since 2009-10.

Researchers have also suggested that, due to rising household incomes, women are withdrawing from the labour force to concentrate more on their studies. Supply-side changes in this regard are important. The recent decades have witnessed an increase in female enrolment in colleges and other institutions of higher education, and a noticeable reduction in disparity in access to education. This factor certainly impacts the participation of women in economic activity and the search for work. The declining female-male unemployment rate differentials thus also reflect income effects that have led to a steady fall in workforce participation of women.

The difficulty with the above argument is that it does not necessarily hold for urban

India. Incomes have been rising in the towns and cities as well. Female enrolment in school and colleges, too, has been on an uptrend in recent decades. Even so, female worker-population ratios in urban areas have not followed the downtrend in rural India. Roughly, 14 to 15 per cent of women were working in urban areas in 1983 and this proportion broadly held in 2011-12.

In contrast to rural India, the urban story is different as more employment opportunities are being generated for women: around 4.5 million women found work between 2009-10 and 2010-11.

The divergent rural-urban trends in female workforce participation rates possibly reflect different positions on the well-established U-shaped curve of female labour force participation. When incomes are low, female participation is high. As incomes rise in the course of development, the latter tends to fall. The cause could be an income effect or a decrease in demand for female labour in agriculture. Women’s rural workforce participation appears to be on this declining slope while the urban is on the upward slope as female education is improving and they are joining the workforce in larger numbers than before.

Clearly, the downtrend in women workforce participation reflects far-reaching changes taking place in the Indian economy, especially in rural India. The worst part is that all of this is happening despite GDP growth accelerating in recent years. This should temper expectations that reducing the differentials in male-female workforce participation by 25 per cent is feasible by 2025. However, none of this should deter policymakers from improving gender equity and improving wages and conditions of women’s employment, especially in the informal sector.
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By N Chandra Mohan
NEW DELHI, Sep 18 2015 (IPS)

Prime Minister Narendra Modi had a meeting with India Inc. to discuss the global economic crisis and how the country can seize the emerging opportunities. The National Democratic Alliance (NDA) government does believe this crisis is indeed an opportunity as the economy’s fundamentals remain strong.

India is also considered the best performing economy globally. However, instead of providing suggestions, industrialists outlined their worries, ranging from higher taxes to protecting domestic industries like steel from dumping. One consequence of this meeting was a defensive response by India in slapping a safeguards duty on specific steel imports from China, among other countries.

The government, for its part, does not have any ideas either beyond basking in the glow of self-satisfaction that India has overtaken China in growth.

With a new base year and methodology for computing the gross domestic product, the economy has the stride of an Asian tiger than a sluggish elephant! Growth in the current financial year is 7 per cent, a pace that is a tad higher than that of the Chinese economy. Instead of engaging with the dragon and creating interdependencies that is a win-win situation for ‘Chindia’, the fact of being ahead in the growth sweepstakes is the all-important issue that has occasioned a sense of triumphalism.

India now has the opportunity to “take the baton of global growth” from China, stated the minister of state for finance. “The world needs other engines to carry the growth process” added finance minister, Arun Jaitley.

What these ministers conveniently overlook is that a slowdown in China has greater global consequences than a statistical uptick in India’s pace of expansion. The prospects of the world economy would deteriorate dramatically if the deceleration in China’s growth gathers momentum. If a country that accounted for 40 percent of global growth last year cannot expand as fast as it did in earlier decades, it can trigger a global recession by itself.

The Indian economy also cannot keep expanding at the current rate indefinitely. A burst of acceleration is often followed by an equally sharp deceleration. India has experienced 17 years of accelerated expansion from 1993 to 2010. China’s example is a singular one as it has expanded at a super-rapid rate for more than three decades.

The big question is not if, but when the slowdown kicks in. Having enjoyed robust expansion, the law of averages is bound to assert itself. There is thus a strong probability that India’s growth also will brake sharply like China’s according to US economists Lant Pritchett and Lawrence Summers.

For such reasons, there are mutual advantages if India gets closer to China. India Inc. must take a long-term view of the engagement. Former Prime Minister Manmohan Singh firmly believed that this process of coming together of the two countries represented an ‘international public good’ when the spectre of recession haunts the global economy. “It is a historic necessity for the two great neighbours to work together. There will be areas of competition, and there will be areas for cooperation. There is enough space in the world for both countries to continue to grow and address the developmental aspirations of their peoples,” argued Singh way back in 2008.

China’s problems can, in fact, be a huge gain for India’s Make in India programme as it has a lot of investible resources while we have the requirement. The big problem is that India Inc. is very hesitant about Chinese investments. The dragon has run out of surplus labour and wages are fast rising. Some of its labour-intensive industries like textiles have begun to shift out to lower wage economies like Vietnam and Bangladesh. This is a huge opportunity that can be leveraged by India. The PM’s India Inc. meeting only threw up a suggestion that China extends six-month credit to companies, whereas in India companies struggle even for 15-day credit.

India Inc. harbours a defensive mindset about China. Although it is India’s most important trading partner — bilateral trade volumes have risen to 70.6 billion dollars — there is unease over China’s trade surpluses that have ballooned to 37.8 billion dollars in 2014.

Industry’s concern is that the surge in Chinese exports affects Indian manufacturing; that it cannot compete as the latter’s pricing mechanism is opaque with massive subsidies. The yuan is also devalued, sending ripple effects across all emerging countries, including India. This translates into a targeted flood of Chinese goods into India, resulting in huge surpluses year after year.

There are no prizes for guessing that India’s huge trade imbalance deters a closer truck with China. India’s position appears more akin to a Third World country that exports raw materials like iron ore and cotton while importing manufactured goods. While mining, textiles and clothing make up a large chunk of our exports, China exports a range of electrical and other types of machinery to India like automatic data processing machines and transmission apparatus for radio and telephony. India must diversify its exports as intermediates, parts and components for regional and global supply chains are becoming more and more important in China’s imports.

Despite the problems they face in India, Chinese investments have been rising since January 2015 when equity inflows were up to 159 million dollars. They rose to 275 million dollars in February and 203 million dollarsin May. Some of these are by Alibaba and Huawei in the technology space.

The Dalian Wanda Group plans huge investments in retail properties and industrial townships. Two Chinese industrial parks are coming up in Maharashtra and Gujarat. This flurry of interest has been especially marked after India launched its flagship programme to encourage domestic manufacturing last year.

Attracting more such investments to help build India’s industrial sector is the best way to take advantage of the current world-wide crisis, regardless of its spread, depth and severity. The Chinese (including the Japanese and South Koreans) can help modernize our railways, build power facilities, highways and dedicated freight corridors. The wrong way is to get defensive by protecting Indian industry against Chinese goods through safeguard duties.

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service.

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N Chandra Mohan

By N Chandra Mohan
New Delhi, Sep 12 2015 (IPS)

Prime Minister Narendra Modi’s ‘Make in India’ programme is inspired by the East Asian manufacturing export success story of development. Earlier, when he was chief minister of the state of Gujarat, he expressed an ambition of modeling the state on South Korea.

Whether he succeeded in doing so is far from obvious. Now, as Prime Minister of India from May 2014, whether he can replicate the success story of South Korea and China at the national level, is equally far from obvious. East Asian countries succeeded when global trade was booming. Can a similar outward-oriented strategy get going now when global trade winds are adverse as they were in the 1930s?

The world economy is likely to grow by 3.3 percent this year, not far from the rough rule of thumb indicating a recession. Only 63-odd countries are set to grow by four percent or more ! Half of these are in Africa and close to a third are in Asia.

The advanced countries are afflicted by secular stagnation. This is an extremely uncertain environment to launch an export drive. As the world economy cannot accommodate another export-led China, India’s central bank governor Raghuram Rajan suggested ‘Make in India’ ought to be re-oriented to ‘Make for India’, that is more dependent on the vast domestic market than relying on incentivized exports alone!

The Prime Minister flagged off ‘Make in India’ in his extempore Independence Day address from the ramparts of the Red Fort on August 15, 2014. He openly welcomed foreign investors to come and set up facilities in this country and talked of encouraging export-oriented manufacturing.

The National Democratic Alliance (NDA) government, in its maiden budget, also indicated a desire to attract big-ticket foreign direct investment in infrastructure like railways, power and highways. Modi has expressed a vsion of building a diamond quadrilateral of bullet trains connecting major metropolises on the Tokaido Shinkansen model and dedicated industrial corridors.

Does this add up to an East Asian model? Not quite.

The South Korea miracle did not happen democratically, but under strong-arm dictators. And the State played a huge role in providing cheap credit to South Korean big business.

More importantly, there are preconditions at the level of human development that do not obtain in India. Forget the poor track-record on Millennium Development Goals (MDGs).

Before take-off, South Korea saw huge investments in education that improved literacy and schooling. Land reforms were in place to ensure unlimited labour to work in the export units.

As the bulk of India’s workforce has low levels of education or none at all, can it attempt this trajectory?

Modi, for his part, wants to boost the manufacturing sector in a big way and make India a global hub. The previous United Progressive Alliance (UPA) government also sought to improve the competitiveness of manufacturing, but was a miserable failure.

The share of manufacturing in the nation’s output of goods and services has stagnated at 15-16 percent. The ground for serious concern is that this sector is not absorbing the millions who stream out from the farms and head to towns and cities for work. Neither can the services sector, for that matter. There is no alternative to taking up casual and temporary jobs in the vast low-paying informal sector.

What has been the response to ‘Make in India’? In the nine months since it was formally launched, the ones most enthusiastic about it are investors from East Asian countries like Japan, South Korea and China! Japan’s Softbank, India’s Bharti Enterprises and Taiwan-based Foxconn announced a joint venture to invest 20 billion dollars in renewal energy projects.

Foxconn, the world’s largest contract manufacturer, is also scouting locales to set up 10-12 facilities in India by 2020 according to its chairmanTerry Gou and has announced plans to invest five billion dollars in Maharashtra. China’s smartphone giant Xiaomi has launched its made-in-India handset.

The foreign investor response is most discernible in automobiles. South Korea’s auto giant Hyundai Motor Co. is considering a third auto plant after Modi’s visit to that country to pitch for foreign direct investment to boost local production.

Mercedes Benz is doubling its assembly capacity to 20,000 units. Ford is planning to ship its India-made EcoSport to the US in October 2017. The leader, Maruti Suzuki India Ltd, is building its third factory in Gujarat. Addressing auto component suppliers, Suzuki’s chairman, Osamu Suzuki, suggested that Make in India should really be a Quality in India programme! Honda Motor Co, too, is expanding one of its plants.

Auto India has acquired critical size with the presence of most global auto giants and strong domestic players. This has, in turn, catalysed a thriving auto component industry. Domestic players, including component manufacturers, have forayed abroad and acquire prestigious brands like Jaguar Land Rover and Ssangyong. While the market for small cars is booming, it is interesting that even Audi and Daimler Benz are witnessing bullish sales. India is already a base for the global plans of Japanese motorcycle manufacturers.

However, foreign direct investment alone cannot make this flagship programme work as it constitutes only a miniscule 3.9 percent of fixed investments in plant and equipment. It needs the full-fledged participation of India Inc, leading segments of which prefer to invest more outside than domestically. The 16 billion dollars auto giant Mahindra prefers to incubate its latest offering, the GenZe electric scooter, entirely in the US!

The warrant for an all-American product is that “we really felt that India didn’t have the start-up atmosphere…” stated Anand Mahindra, chairman, in a candidd interview to the Financial Times.

Mahindra’s move forcefully underscores the challenges prime minister Modi faces in pushing for ‘Make in India’. There must be broader agreement on what it means. Is ‘Make in India’ compatible with design, manufacturing and assembly being done elsewhere in the world in a supply chain-driven globalized economy?

To incentivize India Inc, the NDA government also must cut red tape and radically improve the conditions for doing business. Above all, raising the threshold levels of human development is imperative to kick-start manufacturing in the country. This path need not be an East Asian one but one Made in India.
(END)

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