Asian doubles
China's slowing economic miracle offers India the opportunity to catch up
The OECD has observed that China's economic growth is slowing down. There is reason to believe that this could be a long-term structural trend, and the double-digit growth that has characterised the Chinese economic juggernaut is becoming a thing of the past. If that's the case, it has momentous implications for China, the world and India.
Wages are rising rapidly in China, which indicates that its vast army of surplus rural labour, waiting to man its expanding factories, is no longer a resource that China can rely on. This trend is exacerbated by China's one-child policy, which has led wags to opine that China might grow old before it grows rich. The relative underdevelopment of China's financial sector means there are not too many instruments for the Chinese to keep their money, with the result that enormous funds are washing around in the real estate sector. This is going to lead to a property bubble that will burst sooner or later, slowing down growth. China's very economic success may have landed it in a middle-income trap, whereby it becomes much harder to grow quickly on a high base than on a low one.
In India, China evokes fear, inspired by China's rapid modernisation, memories of the 1962 war, Chinese territorial claims on Arunachal Pradesh and aid to Pakistan's nuclear forces. But fear is compounded by envy and admiration as well. India's political class has ideological inhibitions about drawing on western models, as exemplified in JD(U) chief Sharad Yadav's latest warnings about the now-defunct East India Company. In that context China stands out like a beacon. If China can have its economic miracle, surely India can too.
Unfortunately the same OECD report says that Indian growth is slowing too. And that is even before India has had its economic miracle. With reforms given short shrift the economy has generally been subject to left-hand drive, despite both Indians and Chinese being enterprising people (why does the political class not realise that left-wing thought, too, is of western origin?). Before we can speak of transcending the need for growth, India needs to emulate China's spectacular successes in reducing poverty. Opponents of growth should note that since India is growing from a lower base - its per capita income is one-fourth China's - it ought to have an easier job of it but is still floundering. China inspired us (hopefully) to overcome India's inferiority complex vis-a-vis the West. But thanks to policymakers who do everything but make policy, are we now doomed to a permanent inferiority complex with respect to China?
Cry me a river
Sobbing storms the world of tennis
PDAs, give way to the new vogue. It's PDW - or public display of weeping - as evidenced at the Wimbledon men's final. The stakes were clearly high for Britain's Andy Murray, as he faced up to Swiss tennis maestro Roger Federer. As the first Briton in 74 years to make it to the grand stage, alas the fairytale wasn't meant to be for him as Fedex prevailed in the end.
The famed British stiff upper lip more than quivered as Murray wept and walked off the court. In an increasingly androgynous world sport was supposed to be the last bastion of machismo, where real men gird their loins to do battle. Not anymore. Murray's water-works bear testimony to the fact that athletes are no longer shy of getting in touch with their tender side - even if it made some fans cringe with embarrassment.
Gone are the days when champions like Bjorn Borg wore an ice-cold expression in both misery and elation. For today, a stiff upper lip is bound to result in a dip in an athlete's popularity. No stranger to crying on court, Federer himself is believed to be an avid advocate of PDW. In fact, the Swiss avers that crying actually helps a player connect with his fans and shows that he really cares about winning and losing.
Where does that leave our own desi tennis aces, we wonder. Having actively taken part in an ugly Olympics selection controversy, we are yet to see a few snivels. But whatever be your grown-men-crying threshold, one thing's for sure - bawling is in. Move aside ladies, let the real men do all the crying.
Slippery road ahead
The government must buffer us against the likelihood of a poor monsoon this year
The monsoon is catching up, says the Indian Meteorological Department (IMD), and the July-August rains will cover up June's deficit. IMD still hopes for normal rainfall this year. One hopes IMD is proved right, but several international weather stations - the Japanese, the Australians and now even the Americans - are cautioning about El Nino sometime in August, and its probability is increasing by the week.
This is cause for concern, more so when we look at IMD's past record of forecasting weather. In 2002, IMD had forecast normal weather (101% of Long Period Average (LPA)), but the reality turned out to be only 81%, leading to a severe drought. And in 2009, against a forecast of 93% of LPA, the actual rainfall was only 78% of LPA, the worst in decades. This only shows that weather forecasting can be a very humbling exercise for scientists, even with their best efforts and intentions.
While we hope for the best, wisdom lies in preparing for the worst. In that preparation, one needs to know whether it is likely to be a repeat of 2002 or 2009, and what the damage to agriculture and thereby the impact on food prices is likely to be. In a country where almost half the expenditure of an average household is on food, this is critical for any contingency planning.
The impact of a freakish monsoon on agriculture depends upon the monthly and spatial spread of rains during the critical four months of June to September. In 2002, June rains were above normal by 9%, while July was deficient by 54%, August by 2% and September by 13%. But in 2009, June rains had a deficit of 47% while July was down only by 4%, August by 26% and September by 20%.
Spatially, in 2002 the maximum deficit in those four months was in the southern peninsula (-32%) followed by northwest India (-26%), while in 2009, the maximum deficit was in northwest India (-35%) followed by the northeast (-23%) and central India (-20%). As a result of this varied pattern of rains, foodgrain production in 2002-03 was down by 38 million tonnes, while in 2009-10 it was down only by 16 million tonnes des-pite the overall deficit of rains being higher than in 2002.
The million-dollar question is: What will 2012-13 look like agriculturally? It is a gamble to forecast at this stage with July and August rains yet to come, but given the information so far, it wouldn't be a surprise if Indian agriculture lands up in a situation like that of 2009-10. Foodgrain production may take a hit of 10-15 million tonnes, if not more. But given that the country has ample grain stocks (more than 82 million tonnes in June), it should be easy to rein in cereal prices despite hardening of international prices of wheat and corn since June 15 (up by 20-25%).
The real fear is about pulses, especially tur and moong. Both have less than 5% irrigation cover. Maharashtra produces almost 35% of the country's tur and Rajasthan about 45% of the country's moong - and both have seen scanty rains during June. Other important states growing pulses are Karnataka, Madhya Pradesh, Gujarat and Uttar Pradesh, all facing rain deficit ranging from 30% to 70%. If things don't improve significantly, their production can suffer, and given the very thin global market for these pulses, their prices can shoot up. Remem-ber 2009 when tur prices shot through the roof and brought tears to households and policymakers alike? We need to learn from our past mistakes and do some advance planning through imports or encouraging production on irrigated tracts.
Oilseeds can also get affected adversely, especially soyabean and groundnuts. But given that the global market for edible oils is large, one can tide over this, albeit with a higher import bill of palm and soya oils. The rupee's falling value can put some pressure on the prices of imported oils. Our edible oil bill is already touching Rs 40,000 crore (almost half of our consumption) and may go up further.
Given that rains in Maharashtra, Gujarat, Rajasthan and western Madhya Pradesh have remained deficient, cotton could also be a casualty. And given that cotton stocks at home are not very comforting, cotton prices too can come under pressure.
What are the takeaway points for policymakers? Contingency planning in Karnataka, Maharashtra, Gujarat, Rajasthan and Uttar Pradesh needs to focus on pulses, oilseeds and cotton. Cereal production is likely to see a drop, but we have ample stocks to rein in prices of staples. On edible oils, we need a long-term vision and strategy to promote oil palm aggressively in Andhra Pradesh and the northeas-tern states. An investment of Rs 10,000 crore (over a five-year period) can help trim more than Rs 6 lakh crore over the next 27 years from the edible oil import bill, according to a Commission for Agricultural Costs and Prices report. But above all, we need to give a much higher priority to investment in irrigation and better use of water.
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