The Euro, its Crisis and Impact on India

On 1 January 1999, the European single currency “Euro” was duly launched by eleven of the then fifteen European Union (EU) members. The creation of a single European currency was an official objective of the EU in 1969. With the Maastricht Treaty in 1993, the member states were legally bound to start the monetary union no later than 1 January 1999. The Euro remained an accounting currency until 1 January 2002, when euro notes and coins were issued and national currencies began to phase out in the Eurozone, which by then consisted of twelve member states.

At present the Euro is the official currency of 17 of the 27 member states of the EU. It is also the currency used by the Institutions of the EU. The Eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The currency is also used in a further five European countries (Montenegro, Andorra, Monaco, San Marino and Vatican City) and the disputed territory of Kosovo. It is consequently used daily by some 332 million Europeans. Additionally, over 175 million people worldwide use currencies which are pegged to the Euro, including more than 150 million people in Africa.

The Euro is the second largest reserve currency and the second most traded currency in the world after the U.S. dollar. As of July 2011, with nearly €890 billion in circulation, the Euro has the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. dollar. Based on IMF estimates of 2008 GDP and purchasing power parity among the various currencies, the Eurozone is the second largest economy in the world.

The name Euro was officially adopted on 16 December 1995. The Euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1. Euro coins and banknotes entered circulation on 1 January 2002. The Euro is designed to help build a single market by, for example: easing travel of citizens and goods, eliminating exchange rate problems, providing price transparency, creating a single financial market, price stability and low interest rates, and providing a currency used internationally and protected against shocks by the large amount of internal trade within the Eurozone. It is also intended as a political symbol of integration and stimulus for more.

The Euro, and the monetary policies of those who have adopted it in agreement with the EU, are under the control of the European Central Bank (ECB). There are eleven other currencies used in the EU.

Administration

The European Central Bank (ECB) in Frankfurt, Germany, is in charge of the Eurozone's monetary policy. The Euro is managed and administered by the ECB and the Eurosystem (composed of the central banks of the Eurozone countries). As an independent central bank, the ECB has sole authority to set monetary policy. The Eurosystem participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the Eurozone payment systems. The 1992 Maastricht Treaty obliges most EU member states to adopt the euro upon meeting certain monetary and budgetary requirements, however, not all states have done so. The United Kingdom and Denmark negotiated exemptions, while Sweden turned down the Euro in a 2003 referendum, and has circumvented the obligation to adopt the Euro by not meeting the monetary and budgetary requirements. All nations that have joined the EU since 1993 have pledged to adopt the Euro in due course.

Payments clearing, electronic funds transfer

All intra-EU transfers in Euro are considered as domestic payments and bear the corresponding domestic transfer costs. This includes all member States of the EU, even those outside the Eurozone providing the transactions are carried out in Euro. Credit/debit card charging and ATM withdrawals within the Eurozone are also charged as domestic, however paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up a clearing system, TARGET, for large Euro transactions.

Eurocurrency

Currency deposited by national governments or corporations in banks outside their home market are called Eurocurrency. This applies to any currency and to banks in any country. For example, South Korean won deposited at a bank in South Africa, is considered Eurocurrency or Euromoney. Having "Euro" does not mean that the transaction has to involve European countries. However, in practice, European countries are often involved.

Eurocurrency Market

Eurocurrency market is the money market in which Eurocurrency, currency held in banks outside of the country where it is legal tender, is borrowed and lent by banks in Europe. Thus, it is a market where financial and banking institutions provide banking services denominated in foreign currencies. The Eurocurrency market allows for more convenient borrowing and lending, which improves the international flow of capital for trade between countries and companies. For example, a Japanese company borrowing U.S. dollars from a bank in France is using the Eurocurrency market. Unlike Eurocredit markets, however, loans in this market are made short-term.

The Euro Crisis and its impact on India

The Euro was a great accomplishment of the EU. But there are further requirements to a Union than a common currency. Nothing was done about the other requirements like a unitary labour market, a common fiscal policy and ultimately a single political structure. And right now the world’s second largest currency is facing severe threat. The value of Euro is depreciating at a faster rate than ever before. This is the first Eurozone crisis since its creation in 1999. The source of the crisis is the sovereign debt crisis in Greece which developed in late 2009. The Greek debt crisis is spilling over to other European nations like Portugal, Spain and Ireland. With a budget deficit of 15.4 per cent of GDP, Greece’s debt amounts to over 340 million Euros and its unemployment rate has touched a historical high. The Greek crisis shows the inherent weakness in the Euro’s structure. While opting for the Euro, Greece had voluntarily surrendered its monetary policy to the European Central Bank. This has curtailed its scope to make changes in its interest and exchange rates as the ‘one size fits all’ rates guide all the Eurozone members. So Greece is willing to quit the Euro. Other Eurozone members are also thinking on similar lines. Though a host of bail-out measures have been carried out, the dangers of a monetary union are obvious to all and it has been suggested that for long term stability what is required is a common fiscal policy.

India exports about a quarter of its merchandise to the EU, amounting to about Rs 8.4 lakh crore. The European debt crisis will reduce India’s exports. With the depreciation of Euro’s value, Indian goods will become relatively costlier in the European market, affecting international competitiveness of Indian goods. Again, the downhill European market will reduce foreign investment in India. The worst prediction is that Greece could soar up crude oil prices even more, which would make inflation in India unmanageable.

(Written with references from various websites and newspaper articles)

An Overview of the South Asian Efforts for ECONOMIC INTEGRATION through REGIONAL COOPERATION

Introduction

According to the Secretariat of the World Trade Organisation (WTO), there are 88 individual regional trade agreements currently in force. Virtually all members of the WTO participate in at least one agreement to advance regional trade liberalisation in goods and services. World trade growth doubled from 4 per cent per annum between 1980 and 1993 to 8 per cent in 1994-1996, outpacing world output growth by a widening margin. Recent trends in intra-regional and extra-regional trade allow one to tentatively conclude that regional trade rather than global networking was the dominant feature in the world economy during the 1980s and early 1990s.

Involvement of individual states in different regional and sub-regional agreements helps 'construct bridges' between them and form an extensive network of intra-regional agreements and cooperative ties. The trend towards the intensification of cooperation on intra-regional levels has gained momentum in the last two decades all over the world involving economies at all levels of development. The regional agreements vary in coverage, scope and completeness - the ASEAN, the North American Free Trade Agreement (NAFTA), European Union (EU), Eurasian Economic Community (EurAsEC) and proposed for intercontinental (Comprehensive Economic Partnership for East Asia (CEPEA), Transatlantic Free Trade Area (TAFTA) economic blocks are some examples.

Rationale for Regional Cooperation

The formation of organisations as a regional arrangement is initiated by the agreement of the states involved to deepen economic interaction between themselves in certain fields of common interest. The need to develop further economic cooperation in order to make it efficient and profitable for all countries involved act as the main incentive for them to widen and enlarge cooperation in other non-economic fields. The development of such regional organisations is a time- and labour-consuming process of balancing economic interests of participating states. But every step forward in this direction increases the foundations for stable and peaceful relations between the participating states in the long-term perspective.

Economic Integration – a step ahead in the process of Regional Cooperation

Economic integration means trade unification between different states by partial or full abolishing of customs tariffs on trade within the borders of each state. The main goal of economic integration is stimulation (growth) of trade and thereby an increase of welfare. As no customs duties are paid within the integrated area, prices are lower for distributors and consumers. In theory, the best option is free trade, with free competition and no trade barriers whatsoever. Economic integration has been thought of as the "second best" option for global trade where barriers to full free trade exist. Increase of trade between member states of economic unions is meant to lead to the increase of the GDP of its members, and hence, to better welfare - a goal of any state around the world. The other objective for the states pursuing economic integration is to stay/become regionally and globally competitive, as the goods in the states outside economic blocks become more expensive (i.e., less competitive).

Stages of Economic Integration

1. Preferential trading area
2. Free trade area, Monetary union
3. Customs union, Common market
4. Economic union, Customs and monetary union
5. Economic and monetary union – Fiscal union
6. Complete economic integration

A Preferential Trade Area (also Preferential Trade Agreement, PTA) is a trading bloc which gives preferential access to certain products from the participating countries. This is done by reducing tariffs, but not by abolishing them completely. A PTA can be established through a trade pact. It is the first stage of economic integration. The line between a PTA and a Free trade area (FTA) may be blurred, as almost any PTA has a main goal of becoming a FTA in accordance with the General Agreement on Tariffs and Trade. These tariff preferences have created numerous departures from the normal trade relations principal, namely that World Trade Organization (WTO) members should apply the same tariff to imports from other WTO members.

Free trade area (FTA) is a type of trade bloc, a designated group of countries (at least two) that have agreed to partially or fully eliminate custom tariffs, quotas and preferences on most (if not all) goods and services traded between them. It can be considered the second stage of economic integration. Countries choose this kind of economic integration form if their economical structures are complementary. If they are competitive, they will choose customs union. A free trade area is the result of a free trade agreement (trade pact). According to the WTO, there are over 200 FTAs in force. Most FTAs are between two individual countries, but such agreements can be reached between a trade bloc and an individual nation such as the European Union-Chile free trade agreement. The aim of a free trade area is to reduce barriers to easy exchange so that trade can grow as a result of specialization, division of labour and most importantly via comparative advantage. Every customs union, trade common market and economic and monetary union also has a free trade area.

A “customs union” is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas. Common competition policy is also helpful to avoid competition deficiency. Purposes for establishing a customs union normally include increasing economic efficiency and establishing closer political and cultural ties between the member countries. It is the third stage of economic integration. Customs union is established through trade pact to introduce unified tariffs on the exterior borders of the union (CET – common external tariffs).

A "monetary union" introduces a shared currency. A "common market" adds to a FTA the free movement of services, capital and labour. An "economic union" combines customs union with a common market. A "fiscal union" introduces fiscal and budgetary coordination policies. In order to be successful the more advanced integration steps are typically accompanied by unification of economic policies (tax, social welfare benefits, etc.), reductions in the rest of the trade barriers, introduction of supranational bodies, and gradual moves towards the final stage, a "political union".

In the backdrop of the world trend towards regionalization, this paper makes an overview of the efforts of the South Asian countries to for economic integration through the formation of the following regional and sub-regional associations:

(1) The Association of Southeast Asian Nations, commonly abbreviated ASEAN, is a geo-political and economic organization of 10 countries located in Southeast Asia, which was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand when their foreign ministers signed the ASEAN Declaration, more commonly known as the Bangkok Declaration. Since then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam. Its aims include the acceleration of economic growth, social progress, cultural development among its members, the protection of the peace and stability of the region, and to provide opportunities for member countries to discuss differences peacefully.

ASEAN spans over an area of 4.46 million kms with a population of approximately 580 million people, 8.7% of the world population. In 2009, its combined nominal GDP had grown to more than USD $1.5 trillion. If ASEAN was a single country, it would rank as the 9th largest economy in the world in terms of nominal GDP. The motivations for the birth of ASEAN were so that its members’ governing elite could concentrate on nation building, the common fear of communism, reduced faith in or mistrust of external powers in the 1960s, as well as a desire for economic development; not to mention Indonesia’s ambition to become a regional hegemony through regional cooperation and the hope on the part of Malaysia and Singapore to constrain Indonesia and bring it into a more cooperative framework. On 15 December 1995, the Southeast Asian Nuclear-Weapon-Free Zone Treaty was signed with the intention of turning Southeast Asia into a Nuclear-Weapon-Free Zone. The treaty became fully effective on 21 June 2001, after the Philippines ratified it, effectively banning all nuclear weapons in the region.

India became a sectoral dialogue partner of ASEAN in 1992. Mutual interest led ASEAN to invite India to become its full dialogue partner during the fifth ASEAN Summit in Bangkok in 1995. India also became a member of the ASEAN Regional Forum (ARF) in 1996. India and ASEAN have been holding summit-level meetings on an annual basis since 2002. In August 2009, India signed a Free Trade Agreement (FTA) with the ASEAN members in Thailand. In January 2010, Singapore, Malaysia and Thailand accepted the FTA on goods. The other seven ASEAN contries are expected to operationalise the FTA by August 2010.

(2) The South Asian Association for Regional Cooperation (SAARC) is an economic and political organization of eight countries in Southern Asia. It was established on December 8, 1985 by Bangladesh, Bhutan, Maldives, Nepal, Pakistan, India and Sri Lanka. In April 2007, Afghanistan became its eighth member at the 14^th SAARC summit. India’s Sheel Kant Sharma is the present Secretary General of SAARC since March 2008.

SAARC’s objectives:

Ø To promote the welfare of the people of South Asia and to improve their quality of life;

Ø To accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potential;

Ø To promote and strengthen collective self-reliance among the countries of South Asia;

Ø To contribute to mutual trust, understanding and appreciation of one another’s problems;

Ø To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields;

Ø To strengthen cooperation with other developing countries;

Ø To strengthen cooperation among themselves in international forums on matters of common interest; and

Ø To cooperate with international and regional organizations with similar aims and purposes.

In 1983 the Foreign Ministers of the concerned countries launched the Integrated Programme of Action (IPA) in nine agreed areas, namely, Agriculture; Rural Development; Telecommunications; Meteorology; Health and Population Activities; Transport; Postal Services; Science and Technology; and Sports, arts and Culture. SAARC has laid more stress on the “core issues” above rather than on political issues like the Kashmir dispute and the Sri Lankan civil war. SAARC has also refrained from interfering in the internal matters of its member states.

SAARC Preferential Trading Arrangement: The Agreement on SAARC Preferential Trading Agreement (SAPTA) was signed on 11 April 1993 and entered into force on 7 December 1995 with the desire of the SAARC members (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions.

(3) In 1993, SAARC nations signed an agreement to gradually lower tariffs within the region in Dhaka. Eleven years later, on 6 January 2004, at the 12^th SAARC Summit at Islamabad, SAARC nations devised the South Asia Free Trade Agreement (SAFTA) which created a framework for the establishment of a free trade area covering 1.4. billion people in India, Pakistan, Nepal, Sri Lanka, Bangaldesh, Bhutan and the Maldives. The seven foreign ministers of the region signed a framework on SAFTA with zero customs duty on the trade of practically all products in the region by the end of 2016.

SAFTA came into being on 1 January 2006 and will be operational following ratification of agreement by the seven governments. SAFTA requires the South Asian developing countries, i.e. India, Pakistan and Sri Lanka, to reduce their duties to 20 per cent in the first phase of the two year period ending in 2007.In the final five year phase ending 2012, the 20 per cent duty will be reduced to zero in a series of annual cuts. The least developed nations in South Asia, i.e. Nepal, Bhutan, Bangladesh and Maldives have an additional three years to reduce tariffs to zero. India and Pakistan have signed but not ratified the treaty. Over the years the SAARC members have expressed their unwillingness on signing a free trade agreement. India has many trade pacts with Maldives, Nepal, Bhutan and Sri Lanka, but similar trade agreements with Pakistan and Bangladesh have been stalled due to political and economic concerns on both sides. In the Dhaka Summit (2009), the nations agreed to organize development funds under a single financial institution with a permanent secretariat that would cover all SAARC programmes ranging from social, to infrastructure, to economic ones.

(4) BCIM forum was floated in 1999 at a conference on regional cooperation which was held at Kunming, the capital of the Yunnan province of the Peoples’ Republic of China. This sub-region comprises a number of geographical units in contiguous eastern South Asia: North-east states of India, Southern provinces of China, Bangladesh and Myanmar. Broadly, it covers the four relevant countries, hence the acronym BCIM. Bangladesh, China, India and Myanmar (BCIM) is a sub-regional zone having varied topograpghy and inconvenient transport and communication system. But the entire zone possesses abundant natural, tourism and hydro-energy resources like the Brahmaputra, Ganges, Irrawati, Jinsha, Mekong and Nujiang rivers. Despite such resoucefulness, the entire zone is under developed.

If the BCIM countries are to grow faster by taking advantage of the globalization era, they must expand trade and investment among themselves. This can be achieved only through mutual cooperation by forming a trading bloc among themselves in which no trade and investment barriers should exist. The BCIM concept draws its inspiration from the concept of Growth Zones. The idea of growth zones involves cooperation between three or more countries for the development of a geographically contiguous region consisting of a part or the whole of each of the participating countries. Growth zones bring together resources of the neighbouring countries to foster economic development of the member countries. They provide a unique opportunity to blend cooperation in trade, investment, transport and communication in a comprehensive manner, in a planned way. In the developing world East and South-East Asia are regions where most of the growth zones have been established.

The idea of developing sub-regional cooperation originated, to a large extent, in the lack of progress stimulating investment and implementing development projects under the ambit of SAARC. Development of the Ganges–Meghna-Brahmaputra basin for efficient water management and extracting the potential benefits of hydroelectric power for the constituent countries were underlying factors that informed this idea. The targeted sectors identified were multimodal transportation and communication, energy, trade and investment facilitation and promotion, tourism, optimal utilization of natural resource endowments and environment.

North East India: Gains from South Asian Cooperation

North East India consisting of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura share international borders with China (1175 km), Bhutan (800 km), Myanmar (1640 km) and Bangladesh (1596 km). On the other hand, the North-eastern Region is connected with the mainland India through the ‘chicken neck’ in West Bengal having an approximate width of only 22 km. due to this restriction, all the North Eastern States could not prosper despite being endowed with vast natural resources. Given this peculiar geo-political location, cross border trade links are likely to be more cost-effective for North East India. With these developments, the North East India with its geo-strategic locational advantage, could emerge as a business transit centre for BCIM, SAARC and ASEAN group of nations. Unless exportable surpluses are produced within it, North eastern Region will not be able to derive full benefits of all these developments simply by acting as a corridor of exports of other nations. North Eastern States have to identify a few well defined thrust areas having comparative advantage and specialize in those areas.

Conclusion

The economic benefits of regional cooperation and integration would definitely outweigh the costs in the form of importation of vices, imaginary or real. To achieve such regional cooperation through trade and investment, the physical linkages among the integrating partners in the form of Trans National roadways, railways, waterways and airways (wherever possible) are essential. A huge amount of capital expenditure would be necessary to build such infrastructural facilities. This is possible only through financial cooperation among all the partners and international financial institutions.

(Acknowledgement: Various Websites)

WTO and Indian Agriculture

The Uruguay Round of negotiations led to the birth of the WTO in January 1995. Under the Uruguay Round, all member nations of GATT participating in negotiations committed themselves to a widespread reduction in tariffs, removal of quantitative restrictions and opening up their economies to international competition in most fields of economic activity. Thus the new international economic order that is taking shape under the aegis of WTO is likely to pull down drastically the levels of domestic protection in all areas of economic activity. As far as agriculture is concerned, the Agreement on Agriculture (AoA) provides framework for the long-term reform of agricultural trade and domestic policies over the years to come, with the objective of introducing increased market orientation in agricultural trade. AoA deals specifically with: (1) providing market access, (2) regulating domestic support, and (3) containing export subsidies.

Market Access. AoA required that the prevailing trade-distorting non-tariff barriers in agriculture were to be abolished and converted into tariffs so as to provide the same level of protection and subsequently the tariffs were to be progressively reduced by a simple average of 36 per cent by the developed countries over 6 years (year ending 2000) and by 24 per cent by the developing countries over 10 years (year ending 2004).

Domestic Support. AoA divides domestic support into two groups – (1) trade distorting and (2) non-trade distorting or minimal trade distorting. All trade distorting domestic support is placed in ‘Amber Box’. This has to be quantified in accordance with the Aggregate Measure Support (AMS) and removed. Non-trade distorting domestic support measures have been divided into (1) Green Box, (2) Blue Box and (3) Special and Differential (S & D) Box. The Green Box measures include assistance given through environmental assistance programmes, services such as research training and extension, marketing information, certain types of rural infrastructure etc. The support under Green Box is excluded from any reduction commitments and is not subject to any upper limit. Subsidies under Blue Box include direct payments given to farmers in the form of deficiency payment (i.e., the difference in the government’s minimum support price and market price is paid directly to the farmers, as in USA), direct payments to farmers under production limiting programmes, as in European Union etc. Support under Blue Box is also exempted from any reduction commitments, but it has an upper limit. The S & D Box includes measures taken by developing countries, otherwise subject to reductions, such as investment subsidies and various agricultural input subsidies generally available to low income and resource poor producers in a developing country.

Export Subsidies. The developed countries were required to reduce the volume of subsidized exports by 21 per cent over 6 years and the budgetary outlays for export subsidies by 36 per cent with respect to the base period 1986-90. Developing countries were required to reduce the volume by 10 per cent and budgetary outlays by 24 per cent over 10 years.

Other Agreements Related to Agriculture

There are some other WTO agreements that have a clear bearing on agriculture: (1) Agreement on Sanitary and Phyto-Sanitary (SPS) measures, which sets international standards for protection of human, animal or plant life or health. (2) Agreement on Technical Barriers to Trade (TBT) aims to encourage use of international standards and calls for national testing and certifying bodies to avoid discrimination against imports. and (3) Agreement on Trade Related Intellectual Property Rights (TRIPs) covers seven types of intellectual property for protection, namely, patents, copyrights, trademarks, industrial designs, geographical indications, design layouts of integrated circuits and undisclosed information. As far as agriculture is concerned, article 27.3 (b) of the agreement requires members to provide for protection of plant varieties either by patent or by an effective sui generis system or by any combination thereof.

India had expected that with the dismantling of domestic support in developed countries and widespread reduction in export subsidies by these countries, as part of their commitments under WTO, market access for Indian agricultural products in developed countries would expand. But the developed countries have played their cards cleverly and have taken effective steps to block agricultural exports from developing countries including India behind various loopholes in AoA and allies agreements. On the other hand, India has provided increased market access to other countries by effectively dismantling quantitative restrictions during the last few years. To protect Indian agriculture and farmers from foreign competition, it is imperative for the government to lay down priorities for action.

Rubber Cultivation in India’s North Eastern Region

Arunachal Pradesh, Assam, Manipur, Meghalaya, Nagaland, Tripura and Sikkim comprise India’s North Eastern Region (NER), which has a geographical area of 2,55,083 sq. kms and a population of 3,84,95,089 (2001 Census). Thus the NER constitutes nearly 7.76 per cent of the total land area of India and houses roughly 3.75 per cent of India ’s total population. About 70 per cent of the region is hilly. NER is connected with the rest of India through a narrow corridor in North Bengal , having an approximate width of 32 kms on the eastern side and 21 kms on the western side. This corridor is popularly known as “Siliguri Neck” or the “Chicken Neck”. NER shares only 2 per cent of its border with the mainland of the country and the rest 98 per cent forms India ’s international border. This is of strategic importance for India .

The NER has vast resources, numerous and varied flora and fauna, but does not have the right environment for utilization of its resources and potential. Apart from geographical isolation, it is deficient in economic infrastructure of roads, railways, power supply, irrigation and communication. The recurring socio-political unrests have further hampered the climate for developmental activities.

Efficient utilisation of resource endowments, particularly commercial crops, holds out promise for transforming the NER.

Rubber Cultivation

Being one of the fastest growing consumer markets for natural rubber, India will end up being a major importer of the commodity if domestic production of rubber is not increased. At present, rubber imports is around 45,000 tonnes per annum and with the kind of explosion in the automobile industry that is occurring in India , the country's import dependence on rubber would soon escalate.

With limits to the growth of rubber in traditional areas in the hinterlands of the south-west coast comprising Kerala and the adjoining Kanyakumari district of Tamil Nadu, the Rubber Board should actively take up the cultivation of the commercial crop on a larger scale in non-traditional areas. Non-traditional areas so far identified as almost fully or marginally suitable for rubber cultivation are Arunachal Pradesh , Assam , Manipur, lower reaches of hills of Meghalaya, Mizoram, Nagaland and Tripura.

Rubber trees require deep & well drained soil of lateritic type. It also requires humid, equable climate (21 to 35°C) and fairly well distributed annual rainfall of 200 cm for optimum growth. Although the North Eastern Region lies far outside the traditional rubber growing zone, the agro-climatic conditions obtained here are unique in as much as near tropical features are experienced in most parts owing to low elevations, exposure to monsoons and other moderating influences.

In its effort to find suitable perennial cash crops of non-perishable nature for growing on the hill slopes which are unsuitable for permanent agricultural use, but too good to be put under forest, the Soil Conservation Department tried rubber cultivation in the late 50s. Due to the positive results obtained from trial plantations undertaken in early 1960s in the then undivided Assam (in some selected centres in Mikir and Garo Hills) and Tripura, commercial scale plantations were raised by Government Forest and Soil Conservation Departments. Public Sector Corporations set up later joined rubber planting endeavours on extensive scales. Thus while in Assam and Tripura, Public Sector Corporations are leading in the rubber plantation sector, in Meghalaya, Manipur, Mizoram and Arunachal Pradesh the role has been played by the State Forest and Soil Conservation Departments. Individual growers are also contributing to fast growth of rubber cultivation in this region.

Rubber has been identified as one of the thrust areas in Tripura, in view of its suitability to the terrain and the acceptability amongst the people. Studies have shown that about 100,000 hectares of area in the state can be brought under rubber plantation. The area under rubber cultivation at present is estimated to be about 26,500 hectares, which is the second largest, after Kerala. The yield per hectare and the quality of rubber are also comparable to Kerala's plantations. In fact, Tripura is now considered the "Second Rubber Capital of India" by the Rubber Board.

Nine per cent of the country's rubber production comes from the North-East India and above 82 per cent from Kerala, where the limits of area expansion have been reached and further expansion has to come from productivity enhancement.

Benefits: Rubber has huge potential to transform the region economically by generating employment and earning revenue. The availability of good quantity of high quality rubber offers ample scope for setting up of rubber-based industries. Moreover, rubber cultivation, which has already attracted large-scale participation of tribal population, is proving to be an effective means of weaning away the ‘jhum’ cultivation. The abandoned jhum/degraded land can be put to productive use. Rubber plantation is also environment-friendly.

Rubber is a major thrust area for the geographical belt in the 11th Plan (2007-12). With immense possibilities to increase the area under rubber in Tripura and Assam , the States could also benefit greatly from setting up downstream (processing) industries.

Extent of Rubber Cultivation & Production of Raw or Crude Rubber in the North East (1996-1997):

State Extent under Rubber (Ha) Production (in ’000 kgs)

1. Arunachal Pradesh 101.00 18.000

2. Assam 10,179.00 507.000

3. Manipur 1,400.00 112.000

4. Meghalaya 4,105.00 106.000

5. Mizoram 913.00 18.000

6. Nagaland 1,523.00 17.000

7. Tripura 20,761.00 3,350.000

Total 38,982.00 4,128.000

Source: Rubber Board, Guwahati

Potential: The Minister of State for Commerce, Mr Jairam Ramesh said a study by the Rubber Research Institute of India (RRII) citing an earlier study by the Rubber Board put the total potential area available for rubber cultivation in the North East at about 5,00,000 hectares including 50,000 ha in northern West Bengal. This is a considerably large area, given the fact that at present the total area under rubber in the country is only a little less than 600,000 ha. Out of the five lakh ha of potential area as rubber-worthy in the North-East, only one lakh ha is in Tripura and based on the latest statistics, 31.2 per cent of the potential area available in Tripura had already been brought under rubber cultivation. In the rest of North-East, only six per cent of the potential area has been cultivated so far. In Assam , where 200,000 ha is rubber worthy, just 7 per cent of the potential area has been brought under cultivation.

Mr Ramesh said the presence of suitable land in such large tracts and other natural factors such as good rainfall and abundant sunlight and manpower at an affordable cost meant that these favourable factors would hold the potential to put rubber cultivation in the North -East at a definite competitive cost advantage.

Problems:The RRII study said non-availability of agricultural chemicals and fertilisers remain a major problem in this part and lack of availability of skilled tapers and periodic monitoring of quality of tapping are the constraints. Besides, marketing of rubber is also a tough task in the North-East. Hence organising rubber growers into local self-help groups such as rubber producers' societies and empowering them with knowledge and technical and material support would help in tackling the constraints.

Officials in the Ministry as also in the Board said close to 32 to 60 per cent of the entire new rubber planting that has been taking place in the country between 2002-05 was exclusively in the North-East. They said the Board implemented a project for accelerated development of rubber plantation between 1984-85 and 1989-90 and against the target for planting of 24,000 ha, as much as 23,155 ha was actually achieved. This was followed by a comprehensive scheme for rubber plantation development in the North East with a total financial outlay of Rs 84 crore for the Tenth Plan (2002-07). Under this project, new planting and replanting, integrated village level rubber development, quality upgradation and demonstration of agro-management practices were undertaken.

There are six rubber nurseries in the North Eastern Region (1997): three in Assam (Cachar, Goalpara and Karbi Anglong), two in Meghalaya (East Garo Hills and West Garo Hills) and one in West Tripura . Regional Research Stations of Rubber Board have been set up in Agartala (Tripura) in 1979, Guwahati ( Assam ) in 1985, Tura ( West Garo hills of Meghalaya) in 1985 and Kolasib (Mizoram) in 1985.

Since rubber is a relatively new crop in the region, strong extension support is required by the farmers to help them adopt scientific agro-management practices. The Rubber Board has been providing training to farmers, distributing estate inputs and cover crops, giving financial assistance for boundary protection, establishing group processing centers, supplying rubber rollers, rubber sheeting rollers free of cost, etc.

Coffee plantation in India's North Eastern Region

Traditionally coffee was confined to Karnataka, Kerala and Tamil Nadu, but gradually spread to Andhra and Orissa. Envisaging coffee demand to reach around 2 lakh tonnes by 2000 AD, the National Commission on Agriculture (NCA) pointed out the need to expand coffee to non-traditional areas through public sector undertakings. It was suggested that for achieving the target, an additional area of about 72,000 ha would have to be brought under coffee cultivation in non-traditional areas in Andhra Pradesh, Orissa , Assam , Tripura etc.

Following these recommendations the Coffee Board, in collaboration with the National Council of Applied Economic Research, New Delhi , prepared a document entitled “The prospective plan for Coffee Development 2000 AD”. The plan envisaged the need to increase production to 2 lakh tonnes by that time to meet external and internal demand by (a) increasing productivity of small grower sectors and low yielding pockets in large grower sectors and (b) by expansion of coffee in non-traditional as well as in traditional states.

Coffee was reported to have been introduced in Cachar district of Assam during 1853. It was known to have been cultivated in parts of Mizoram and Cherapunjee area of Meghalaya in 1870. Hundred tonnes of coffee were marketed in the late 19th and early 20th century in Shillong. But after 1930, except for small kitchen garden type plantation in the tea-estates, the cultivation gradually died down. Coffee gardens were successfully established by Soil Conservation departments of Meghalaya at Umling (Ri-Bhoi District), Lumshnung (Jaintia Hills District) and Tura (West Garo Hills District) and in Assam at Haflong (N.C.Hills District) and in some pockets of Nagaland as early as 1954 on pilot cum trial basis as a measure to prevent ‘jhuming’ and consequent soil erosion. These trial plantations in this region, were laid out in different elevations from 100 meters to 1000 meters, temperature variations from 12° C in winter to 33° C in summer, soil from deep red forest to sandy clayey loam and rainfall from 1900 mm to 4000 mm with dry period between November to March.

It is worth mentioning that most of the additional coffee plantation area in non-traditional areas was estimated in the North Eastern Region. Encouraged by the success of pilot studies, Coffee Board proposed a perspective plan for North East during 1970’s in association with National Council for Agricultural and Economic Research (NCEAR) and assisted by North Eastern Council (NEC), surveyed the areas and identified 44,000 ha as potential areas for coffee cultivaton, comprising 16,000 ha in Assam, 8,000 ha in Meghalaya and 4,000 ha each in Manipur, Mizoram, Nagaland and Tripura. These 44,000 ha areas are spread over in 322 Villages in 39 Districts of this region. All the agro-climatic conditions prevailing in the North East are suitable for commercial cultivation of coffee. Only about 5,000-10,000 tonnes of coffee are produced in the North-East, largely in Mizoram and Nagaland.

Coffee is a new enterprise in these areas and therefore adequate technical support is needed to make the venture successful. To meet challenges in this regard, the Coffee Board has set up its regional office in Guwahati and many extension centres manned by trained officers in all the important coffee growing areas of the North Eastern Region. A training programme for field level workers was undertaken in Haflong, apart from the training of officers at the Central Coffee Research Institute to undertake managerial responsibilities. The Coffee Board, apart from other activities, has started Coffee Demonstration Farms in Assam , Arunachal Pradesh, Nagaland and Manipur. The North Eastern Council provides ‘balancing facilities’ such as raising of coffee and shade tree nurseries in all the states, surveys land suitable for coffee cultivation in North Eastern Region.

Coffee is a labour-intensive crop, requiring 2.5 person per hectare for its maintenance. Cultivation of coffee is all the more attractive since it is one of the horticultural crops where the produce does not perish and on-farm processing is easy. Moreover, it is a low input, high return per unit area crop, providing an economic viability to jhumias who are so far used to only subsistence level of livelihood. Cultivation of coffee in the hill areas of the region should help tribal people inhabiting the areas in getting gainful employment; to certain extent, prevent soil erosion and bring about afforestation, thus improving the ecology of the North Eastern Region and the socio-economic condition of the people.


Other Crops

Spices hold immense potential, particularly organic ginger, chilly and black pepper, both for expansion of production and marketing.

Sikkim , Nagaland and Meghalaya have the potential for undertaking cultivation, processing and marketing of cardamom, naga chillies, ginger and turmeric.

In the export of tea, the share of the North-East is lower, as South India accounts for over 50 per cent of Indian tea, though the former accounts for 55 per cent of the country's tea production. In 2006, there was a breakthrough in that over 2 million kg of tea from Assam was exported to Pakistan .

The four Agri Export Zones in the North-East, prioritised on the basis of their potential and stage of implementation, include pineapples (Tripura), ginger ( Sikkim ), orchids and cherry pepper ( Sikkim ) and fresh and processed ginger ( Assam ).

Cash crops means cash income. As a viable alternative to shifting cultivation, cash crops can help in weaning away jhumming and settling down the jhummias to a profit-yielding production in the hills where they belong. These plantations can provide various subsidiary employment opportunities. Moreover, by siphoning off workers disguisedly employed in the agricultural sector to these plantations and allied ventures, there will be gainful employment. Plantations improve ecology and prevent soil erosion as well.

Tit-Bits

TRIPS issues

The UNDP Human Development Report has signaled repeated warnings against the negative consequences of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), particularly on food security, indigenous knowledge, bio-safety and access to vital medicines and health care. The wave of economic and corporate restructurings undertaken in response to an increasingly competitive global market, the widespread dismantling of social security systems and decline of standards in social services all have resulted in unemployment, work insecurity, evictions and homelessness, landlessness, lost livelihoods, harm to health and worsening labor conditions. These conditions lead to violations of core economic and social rights obligations of State for which our policy makers bear civil responsibility.

http://www.hicnet.org/articles.php?pid=1905

IMF QUOTA and Developing Nations

As acknowledged in the recent G-20 Summit at Pittsburgh, it had been the emerging economies which had been instrumental in lifting the developed nations from the abyss of depression. Also acknowledged in the Summit had been the reality that the changed situation requires a global economic restructuring which, in the light of the strong growth in dynamic emerging markets, will correct imbalances that now prevail in favour of developed nations.

The immediate outcome had been the landmark decision at the G-20 Summit to increase the share of IMF quotas of developing countries by five per cent. India, China and Brazil had wanted a seven per cent increase so that developing nations would have wielded control over that body through having 51 per cent of quotas, but vehement opposition by European nations such as Belgium and Holland had resulted in a compromise. Yet the increase in every way reflects the relative weights of IMF members in the world economy, which have changed substantially in view of the growth in emerging markets. India played a leading role in wresting the concessions from the affluent countries. This indicates her growing confidence as an international player.

The Assam Tribune 30 Sep 2009, Editorial.

EDUCATION, INEQUALITY AND POVERTY

"Education is not a way to escape poverty — it is a way of fighting it.''

— Julius Nyerere, former President of the United Republic of Tanzania

—

Education and Inequality

Education has emerged as an important factor underlying inequality. It is true that highly educated workers earn more than persons with basic education and the difference has grown particularly over the 1980s. There are both economic and social advantages to achieving higher levels of education, both for individuals and society. But the growth of inequality cannot be reduced to this sole factor, i.e. education. The argument that employers’ demands for skills were bidding up the wage rate to those with more education was arguably true (other factors were involved here) over the 1980s and 1990s, but not after 2000.

While increased skill (education) demands were certainly one force in play, other factors were also driving up the wage gap:

1. The real value of minimum wages fell steeply over the 1980s and less educated workers are more likely to earn the minimum wage.
2. Growing trade deficits and globalization also led to the loss of high-quality jobs for non-college-educated workers, putting downward pressure on wages among similarly skilled workers.
3. Union representation has been declining, which is another important reason for greater inequality.
4. Finally, unemployment was high, on average, over the years when the wage rate for skilled workers grew most quickly. When unemployment fell sharply in the latter 1990s, the growth of the wage gap slowed, suggesting that the absence of full employment, and the diminished bargaining power associated with slack labour markets, is another factor that must not be overlooked.

In other words, wage inequality is driven by a number of factors, of which differences in education is but one. More recently, in the 2000s, there is no evidence of increasing skill demands, or at least no evidence that these demands are not being met by enough skilled workers. Instead, in recent years, it appears the inequality has largely been driven by increased concentration of income and wealth at the very top of the scale.

In fact, research shows that half of the growth in wage inequality over the 1980s, and most of the growth in the 2000s, occurred within education groups, meaning that growth of inequality is currently being driven by the gains of some educated workers relative to others with the same education credentials.

Policy makers and analysts must avoid reducing the inequality debate to a sole explanation regarding education. Education is an obvious and important area but it is not solely responsible for the growth of inequality, not over the longer term, and especially not in recent years. Thus, other policies like minimum wages, a level playing field for union organizing, health care and pension provision, work supports for low-income workers, full employment, and responding to the downsides of globalization also need to be pursued.

Education and Poverty

Poverty is much more complex than simply lack of income. Poverty entails–

 Lack of empowerment

 Lack of knowledge

 Lack of opportunity

 Lack of income and capital

Despite increased access to education in recent times, the poor (among them the poor women disproportionately being high), socially disadvantageous groups, the physically disabled, persons in remote regions - are often deprived of a basic education. And when basic education is available, the poorest are unable to avail of it because the direct and opportunity costs attached to it are quite high for them.

Poverty is thus both a cause and an effect of insufficient access to or completion of quality education.

Children of poor families are less likely to enroll in and complete schooling because of the associated costs of attending school even when it is provided "free''. The cost of uniforms, supplies and transportation are well beyond the means of a poor family, especially when the family has several children of school age. This means that choices have to be made, and the choice is often to drop out of school or, worse yet, to deny schooling to girls while enrolling the boys thereby contributing directly to maintaining the inferior status of women. And as poor children who are enrolled grow older, the opportunity cost (their lost labour and the forgone income it may entail) becomes greater, thus increasing the likelihood of abandoning school.

Furthermore, dropping out of school because of poverty virtually guarantees perpetuation of the poverty cycle since the income-earning potential of the child is reduced, not to mention overall productivity, receptivity to change, and capacity to improve quality of life. Lack of education perpetuates poverty, and poverty constrains access to schooling.

The relationship between education and poverty reduction is thus quite straight and linear as education is empowering; it enables the person to participate in the development process; it inculcates the knowledge and skills needed to improve the income earning potential and in turn the quality of life. Moreover, education of girls and women helps in improving the number of other indicators of human development.

Eliminating poverty requires providing access to quality education. Education thus helps to lay the foundation for the following pillars of poverty reduction: empowerment, human development, social development and good governance.

Education transforms the vicious cycle of high birth rates, high maternal and infant mortality and endemic poverty into a virtuous circle through investment in human capital-enhancing labour productivity, reducing fertility and mortality, raising economic growth and thus securing domestic resources for further investments in people.

Education is a powerful tool for introducing members of a society to the system of government and the concept of governance. Educated persons are more likely to vote and participate in local and national government. They are more likely to demand better and more accountable government, thus creating demand for improved governance. Education is linked to empowerment, and a major manifestation of empowerment is the demand for better governance.

The continuing challenge for education is to ensure that all people have the knowledge and skills necessary for continuing human and economic development and for breaking the poverty cycle. The linear relationship between education, poverty and empowerment is, however, governed by the circumstances of a country and within a country in a particular region. Education, thus, influences and is influenced by the context in which it is developed. This synergistic relationship implies that education must be in a constant state of change as it responds to changing social and economic needs and that education in itself is a force for social and economic change as people become more empowered and more productive.

Education might be furthering inequalities and hence poverty if equitable distribution of the benefits of economic growth among people is not achieved. This requires pro-people policies, especially in a region where the benefits are limited to a small minority of educated urban populations. As Amartya Sen says in an essay titled ‘How Does Basic Education Influence Human Security', "When people are illiterate, their ability to understand and invoke their legal rights can be very limited. This can be a very significant barrier to make use even of the rather limited rights that they do actually have."

Acknowledgment: K. VENKATASUBRAMANIAN, Member, Planning Commission, The Hindu, December 04, 2001

www.infochangeindia.org

http://www.undp-povertycentre.org/pub/IPCPovertyInFocus11.pdf

http://www.whitehouse.gov/news/releases/2007/01/20070131-1.htm