MARCH 31, 2012 Vol XLVII No 13

Econom ic& PoliticalwEEKLY

A SAMEEKSHA TRUST PUBLICATION W W W .e p W .jn

EDITORIALS Extraordinary Judicial Decision

■ A Strike against Pharma MNCs The Supreme Court's ruling that the centre should
■ International Pressure on Sri Lanka execute the interlinking project goes against its own
■ The Koodankulam Conundrum arguments that it cannot make a policy decision on the
COMMENTARY need to construct river linking channels, page 10
■ Judiciary on the River Interlinking Project
■ Funds Crunch and the Railways
■ Entrenching Akali Dominance State Elections
■ Continuing Crisis in Punjab Analyses of the outcomes in Punjab and Goa suggest
■ Tidal Wave in Goa that in retrospect the defeat of the Congress in both
■ Indignity in the Name of Tradition states should have been expected, pages 17,21 and 23
BOOK REVIEWS
■ Accumulation by Dispossession
m The Final Prize: My Life in the Tenacity of Caste
Anti-apartheid Struggle There are signs that caste is losing its importance in
PERSPECTIVES daily life. If it yet shows renewed vigour in public
■ Higher Education Policy in Transition discourse it is because the media gives it so
much importance, page 41
SPECIAL ARTICLES
■ The Peculiar Tenacity of Caste
■ The Commons, Communities
and Climate Change The Danger Mark
■ Fiscal Problem in West Bengal The absolute and relative size of the private sector in
higher education in India is already very high. Do we need
MONEY MARKET REVIEW
further growth of for-profit higher education? page 36
■ Fiscal Consolidation Left Behind

NOTES
■ R&D Strategies of MNCs in India
At Break-even Point
DISCUSSION The boom years brought in traffic like the Indian
■ Macroeconomics Curricula in India and the US
railways had never handled before, but they are now in
CURRENT STATISTICS desperate need of funds. An examination of the budget
■ Transactions in Government Securities proposals which have been partially rolled back, page 13

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 IC R A B u lletin : M o n ey & F in an ce

ICRA

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 MARCH 31, 2012 | vol XLVII NO 13
Economic&PoliticalwEEKLY
Judicial Control: In terlin kin g Rivers ED ITO RIALS

10 Considering the Supeme C ourt’s clear recognition of the reservation of A Strike against Pharma m n c s................................ ..7
the states on interlinking of rivers and th at this is a task best left to International Pressure on Sri Lanka.................... 8
the governm ent or the legislature, w hat brought about the C ourt’s The Koodankulam Conundrum............................9
operative directions?
FROM 5 0 Y E AR S A G O ............................................................... 9
Funds Crunch and th e Railways
COMM ENTARY
13 An outline of why the increases made in the Railways Budget this year were
Judicial Control of Policymaking and
necessary and an in-depth look at w hether they are adequate.
Implementation: Interlinking Rivers
— Videh Upadhyay.................................................10
Entrenching Akali Dominance
Funds Crunch and the Railways
17 The Shiromani Akali Dal-Bharatiya Janata Party alliance in Punjab unites
— S Ananthanarayanan........................................ 13
the dom inant castes among the Sikhs and Hindus into a stable political
Punjab Elections: Entrenching Akali Dominance
alliance and replicates the social structure of the Punjab village in its
—Paramjit Singh Judge........................................ 17
legislative assembly.
A Re-Election in Punjab and the Continuing Crisis
A Re-Election in Punjab and th e Continuing Crisis —Manjit Singh......................................................21
The BJP Tidal Wave in Goa
21 It is worrisome th at the election m anifestos of the major parties in Punjab did
—Frederick Noronha............................................ 23
not address the failing public health and education systems, unemployment
Made Snana: Indignity in the Name of Tradition?
and the unsustainable nature of agriculture.
— GKKaranth.......................................................27
The BJP Tidal Wave in Goa
BOOK REVIEW S
23 W hat will be the impact of Goan-style soft Hindutva on the social debate in
Accumulation by Dispossession:
the state in the wake of the Bharatiya Janata Party’s victory; will it m ean the Transformative Cities in the New Global Order -
progress of conservatism on all fronts? The Neo-liberal City: A Critical Geography
—Judith Whitehead..............................................31
In d ig n ity in th e Nam e o f Tradition?
The Final Prize: My Life in the Anti-apartheid
27 Educating the masses about the practice of made snana in some temples in Struggle - Memoirs of a ‘White Who Crossed
K arnataka is certainly needed, but it has to be preceded by a firm “No” from the Line’
the governm ent to such practices. — MSPrabhakara................................................ 33

Higher Education Policy in India in Transition PE R SPEC TIV ES

36 There has'been an unbridled and erratic grow th of private higher education Higher Education Policy in India in Transition
in India in recent years and the approach paper to the Twelfth Plan shows the —Jandhyala B G Tilak..........................................36
unwillingness of the governm ent to alter this even modestly.
SPECIAL ARTICLES

The Peculiar Tenacity o f Caste The Peculiar Tenacity of Caste

41 Caste is losing its strength in India though not uniformly or dramatically, but —Andre Beteille.....................................................41
w ith the media giving a sensational tu rn to caste in its daily coverage, these The Commons, Communities and Climate Change
long-term changes are being ignored. —Narpat S Jodha, Naveen P Singh,
Cynthia S Bantilan...............................................49
The Commons, Communities and Clim ate Change Fiscal Problem in West Bengal:
Towards an Explanation
49 The possible rem edial approach against the decline of common property
— Subhanil Chowdhury, Zico Dasgupta.............. 57
resources may include building adaptation approaches against climate
change that will simultaneously address the concerns of dry land farming MONEY MARKET REVIEW
as well as dry land c p rs. Fiscal Consolidation Left Behind
—EPW Research Foundation...............................65
Fiscal Problem in West Bengal: Towards an Explanation
57 The debt problem of West Bengal is a reflection of a shortfall in revenue receipts NOTES
and the much higher effective interest rate paid by it as compared to other states. R&D Strategies of MNCs in India:
Isolation or Integration?
MMR: Fiscal Consolidation Left Behind —N Mrinalini, Pradosh Nath, G D Sandhya........73
65 Postponem ent of fiscal consolidation as in Budget 2012 is likely to add
pressure to the external sector and enhance the risk of m anaging the D ISC U SSIO N

trade-off betw een inflation and growth. Macroeconomics Curricula in India

and the United States
R&D Strategies o f MNCs in India —Parag Waknis................................................... 79
73 As a host country, does India gain from the foreign direct investm ent inflow
C U R R E N T STAT IST ICS........................................................... 8 l
into research and development by the m ncs?
L E T T E R S........................................................................................... 4
Macroeconomics Curricula in India and th e United States
79 A response to G Visakh Varma’s “Some Thoughts on the Macroeconomics SU B SC R IPT IO N RATES A N D
Curriculum in India” (epw , 21 January 2012). NOTES FOR C O N T R IB U T O R S............................................... 6

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Economic&PoliticalwEEKLY is s n 0 0 1 2 -9 9 7 6
LETTERS

Ever since the first issue in 1966,

epw has been India’s premier journal for Chatterjee’s Lineages Chatterjee’s conception of a cleavage
comment on current affairs
between civil and political society ne­
and research in the social sciences.
ome comments regarding Rajan gates the concept of the integral state,
It succeeded Economic Weekly (1949-1965),
which was launched and shepherded
by Sachin Chaudhuri,
who was also the founder-editor of epw.
S GurukkaFs review essay on Partha
Chatterjee’s Lineages of Political Societies
where consent and coercion reinforce
each other.
As editor for thirty-five years (1969-2004)
(“A Text Self-Consciously Realist and Joe M S
Krishna Raj
gave epw the reputation it now enjoys. Never Utopian”, epw , 24 March 2012). DUBLIN, IRELAND

When Chatterjee portrays political soci­

EDITOR
C RAM M A NO H A R REDDY ety arising at the disjuncture between Solidarity with
DEPUTY EDITOR
civil and political society it raises some Koodankulam
BER NA R D D ’MELLO concerns, which I will explain in the
light of my reading of Peter D Thomas’ he state government of Tamil Nadu
WEB EDITOR
SUBH ASH RAI

SENIOR ASSISTANT EDITORS

The Gramscian Moment.
How does such an understanding
T has finally succumbed to pressure
by the central government and decided
LINA MATHIAS work within the ambit of the newer to commission the operation of the
A NIKET ALAM
SR IN IV A SAN R AM AN I interpretation of the concept of the two Russian built nuclear reactors in
A SH IM A SOOD “integral state”? Does Chatterjee give Koodankulam. It has carried out a major
BHARATI BHARGAVA
adequate attention to the international crackdown on the mass movement in
COPY EDITORS
PR A BH A PILLAI
character of capital and its unifying and around Koodankulam in southern
JYOTI SHETTY elements? According to his understand­ Tamil Nadu, outrageously slapping sedi­
ASSISTANT EDITOR
ing, does not the non-western colonial tion charges - no less - on several people,
P S LEELA social formation represent a monolithic and arresting close to 200 people in
PRODUCTION cultural essence, unlike capital, which a pre-emptive show of intimidation
U RAG HUNATHAN genuinely has the predominance of such and force.
S LESLINE CORERA
SUN EETH I N AIR an aspect. Over the last six months in what has
CIRCULATION
Thus it seems that Chatterjee pre­ been the latest phase of a more than
GAURAANG PR A D H A N MANAGER supposes an unchangeable cultural decade-long struggle, tens of thousands
B S SHARM A
essence in the non-western countries. of residents in and around Koodankulam
ADVERTISEMENT MANAGER Does this position not constitute a have peacefully and non-violendy demon­
KAMAL G FA NIBANDA
denial of the dialectical interaction strated against the government’s nucle­
GENERAL MANAGER & PUBLISHER
between the particular (national) and ar power plans. They have demanded
K VIJAYAKUM AR
the universal (international), which that their concerns over issues of safety,
EDITORIAL
edit@epw.in was upheld by Gramsci in his polemics environmental hazards and procedural
CIRCULATION with the reductionist nationalism of violations of the Atomic Energy Regula­
circulation@epw.in
Stalin and the romantic permanent tory Board (aerb ) be fully and properly
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revolution of Trotsky? The universal addressed. That their livelihood and
normative standard, discursively set life concerns should have been so
ECONOMIC AND POLITICAL WEEKLY
3 2 0 -321, A TO Z INDUSTRIAL ESTATE
by the west, is rearticulated in Indian casually ignored by a government that
GANPATRAO KADAM MARG, LOWER PAREL concepts by Chatterjee when he delves has even resorted to allegations of
MUMBAI 4 0 0 013 into dharma and niti. This does seem “foreign manipulation” of what is an
phone: (0 2 2 ) 4 0 6 3 8 2 8 2
fa x : (0 2 2 ) 2 4 9 3 4515 to assert the essential universality indigenous mass movement is extre­
of capital. mely disturbing.
EPW RESEARCH FOUNDATION Further, he seems to discard the ag­ We strongly condemn the repres­
Research Foundation, established in 1993, conducts
epw
gressiveness with which the capitalist sion launched against the people of
research on financial and macro-economic issues in India.
state suppresses agrarian and national­ Koodankulam and southern Tamil Nadu
DIRECTOR
K KANAGASABAPATHY ist struggles. Thus it appears that Chat­ and demand that those arrested be
C 212, AKURLI INDUSTRIAL ESTATE terjee’s theory of electoral democracy, immediately released. If a willingness
KANDIVALI (EAST), MUMBAI 4 0 0 101
p h o n e s : (0 2 2 ) 2 8 8 7 3 0 3 8 /4 1
supposedly giving ample space for the to exercise one’s democratic right of
f a x : (0 2 2 ) 2 8 8 7 3 0 3 8 political society for navigation and nego­ protest in peaceful and non-violent ways,
epwrf@vsnl.com
tiation, is one-sided. I would argue that or to criticise the pursuit of nuclear
Printed by K Vijayakumar at Modem Arts and Industries,
151, A-Z Industrial Estate, Ganpatrao Kadam Marg,
the engagement of the State as an internal energy, or even to oppose government
Lower Parel, Mumbai-400 013 and agency to the peasants, providing care plans in this regard is to be deemed
published by him on behalf of Sameeksha Trust
from 320-321, A-Z Industrial Estate,
and food, fits with the notion of the seditious and warrants being arrested,
Ganpatrao Kadam Marg, Lower Parel, Mumbai-400013. passive revolution, rather than entrench­ then we the undersigned also declare
Editor: C Rammanohar Reddy.
ing democracy. Thus it seems that ourselves to be as guilty as our fellow
4 MARCH 31, 2 0 1 2 v o l x l v i i n o 13 E33S3 Economic & Political w e e k ly

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 LETTERS
citizens in Tamil Nadu. We stand in If the government is serious about (9) Provide access to drinking water in
solidarity with them. freeing these two visitors, central and villages in all parts of Odisha, irrigation
Admiral L Ramdas, Admiral Vishnu Bhagwat, state governments should as primary to farmlands, free healthcare in all
Justice Rajender Sachar, S P Shukla, condition stop all repression and combing Panchayats, and free education facilities
Romila Thapar, Aruna Roy, Praful Bidwai, operations in Odisha by 18 March 2012, up to high school.
Jean Dreze, Medha Patkar, Arundhati Roy, and come forward to discuss our demands (10) Stop police repression on all anti­
Ramchandra Guha, Justice P B Sawant,
with us. If this is not done, we cannot displacement mass movements such as
Justice B G Kolse-Patil, Binayak Sen,
Ilina Sen, Lalita Ramdas, take this government into confidence; anti-Posco, anti-Vedanta, and the Kalin-
Shabnam Hashmi, Anuradha Chenoy, and we will not be responsible for the ganagar movements. Release all anti­
Surendra Gadekar, Vasanth Kannabiran, loss of lives of the two visitors, rather the displacement leaders and activists such as
Ritu Menon, Pamela Philipose, government that is unleashing terror Abhay Sahu, Narayan Reddy and others.
Darryl D’Monte, Achin Vanaik without heeding to our demands and (11) Release Gananath Patra, the former
and others
the state machinery that is running an Chairman of Daringbadi and Sonepur
illegal tourism trade will be. Sarpanch Swami, brother of Nachika
Maoist Statement Our demands are: Linga, and the two school students along
(1) The government should clearly an­ with other leaders of mass movements
he government - both at the centre nounce that adivasis are not commodi­ and anti-repression movements. Stop
T and the state (Odisha) - has reduced ties of tourism.
adivasis into mere exhibition items in (2) Stop repression in the name of
slapping cases endlessly against people
associated with Mandrabaju, Neding-
attempts to lure domestic and foreign Operation Green Hunt. Recall all police padar, Gudari, and Narayanpatna land-
tourists. On the other hand, they invite camps from remote areas, except from rights movements. Withdraw all cases
multinational capitalists to plunder natural thanas. Create conducive space for and release those who have been jailed
and mineral resources in the adivasi dialogues with revolutionaries over in similar cases.
heartland and repress voices of resist­ people’s problems. (12) Institute independent enquiries into
ance by unleashing Operation Green (3) Repeal the ban on the cpi(Maoist) state-sponsored dramas of issuing false
Hunt on adivasis and the common mass. and other mass organisations in Odisha. statements under pressure and threaten­
Although the government claims to have (4) Arrest and try for murder the super­ ing during surrenders, and creating a
amended the so-called laws in February intendent of police and other police em­ covert campaign against the Revolution.
2012 to put certain checks on tourists ployees involved in fake encounters and Institute enquiry by independent bodies
visiting adivasi areas, this has turned out custodial deaths of Lalit Dehuri, Junesh and take due action against the Kendu­
to be a blatant lie. The power centres in Badaraita, Pradeep Majhi, and others and jhar police for detaining Sangeet Pradhan
Delhi and Shahid Nagar are sending for rape in the gang rape case of Arati for years after he surrendered and
tourists to adivasi areas to click naked Majhi. Withdraw all charges against Arati suffered a fracture in his hand due to
pictures of the adivasis, and turning them Majhi and release her. police torture.
into tourism-friendly commodities. This (5) Release Ashutosh, Kamalakanta Sethi, (13) Meet all the unfulfilled demands
is an insult to the people. Sujata, Kishor Jena, Pratap, Manjulata, placed during the arrest of the Malkangiri
Because of all these, we have arrested and all those arrested in connection to collector by the Maoists.
two Italian tourists (one of them is the attack on the N ayagarh A rm oury. Sunil
a tourism trader licensed by the state (6) Stop slapping fresh false cases Secretary,
government): against and detaining in jail those who Odisha State Organising Committee,
(1) Bosusco Paolo, B, Pralesio 10, Con- are acquitted by courts. In this context, CPI (Maoist)
dove, Italy. release unconditionally Subhashree Das
(2) Clavdio Colangelo, via Di Frascati, and Lalit from Rayagada along with all EPWIndex
215,00040 Rocca Di Papa, Italy. others rearrested or detained.
An author-title index for EPW has been
By doing so we are exposing the real (7) Release Shatrughna Biswal, Uttam,
prepared for the years from 1968 to 2010. The
face of the government bereft of any Shekhar, Sudarshan Mandal, Ramesh
PDFs of the Index have been uploaded, year-
shred of humanism that has taken adivasi Nayak, Lata, Bijal, Ratna along with all wise, on the EPW web site. Visitors can
areas as some tourism commodity, as other innocent people from Rayagada, download the Index for all the years from the
though these places are habitats of apes Gajapati, Kandhamal, Ganjam, Nayagarh, site. (The Index for a few years is yet to be
and chimpanzees. We are requesting the Sambalpur, Mayurbhanj, Kendujhar, prepared and will be uploaded when ready.)
common mass to raise their voice and other districts who have been put
EPW would like to acknowledge the help
against turning adivasi areas into tour­ behind bars in the name of being Maoists. of the staff of the library of the Indira Gandhi
ism commodities. Having arrested these (8) Do not repeal “adivasi status” for Institute for Development Research, Mumbai,
two Italian culprits, we are also releas­ Jhodia, Kanda Dora, Acha Kui, Gauda in preparing the index under a project
ing two Odia slaves of theirs - Santosh Kui, Kumbhar Kui, Saora, Odia Kandha, supported by the RD Tata Trust.
and Kartik. Khaira and other adivasi communities.
Economic & Political w e e k ly E3 3 Q m a r c h 31, 2012 v o l x l v i i n o 13 5

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 Economic&PoHticalwEEKLY
MARCH 3 1 , 2 0 1 2
A Strike against Pharm a MNCs
The compulsory licence fo r Nexavar is only the beginning of a new battle over drug prices.
he grant of a compulsory licence ( c l) to Natco Pharma, a
T relatively small Indian pharmaceutical company, to
manufacture and sell the cancer drug sorafenib (Nexavar)
has been rightly hailed as a major step forward for public
health and the wider availability of life saving medicines.
The German pharmaceutical company Bayer holds the patent
for Nexavar, which is used in the treatment of liver and kidney
cancer, and the drug is sold in the Indian market at Rs 2.88 lakh
for a month’s supply of 120 tablets. Natco has said that it will
supply the same quantity for Rs 8,880, a reduction of almost
97% in the price. There are said to be close to 1,00,000 patients
in India with liver and kidney cancers who can benefit from this
medicine but few, even among the rich, can possibly afford to
spend Rs 34.5 lakh a year on it.
India’s controller of patents, very rightly, took the stand that
such pricing effectively places the medicine outside the reach
of people arid thus there was a need to allow its manufacture at
relatively lower prices. In his order the controller noted that
Bayer sold $934 million worth of Nexavar in 2010 globally
but hardly any of these were sold in India due to its high price.
He thus ordered the issue of a c l to Natco* after noting, “The
mandate of the law is not just [to] supply the drug in the market,
but to make it available in a manner such that [a] substantial
portion of the public is able to reap the benefits of the invention.
If the terms are unreasonable, such as high cost, availability
is meaningless.” Bayer claimed an unbelievable $1.8 billion as the
research and development cost of Nexavar but could show no
data for this; it is likely that the development of this drug
benefited significantly from public funds in the United States
and Europe.
The im portance o f th is decision ca n n o t b e stressed enough.
P harm aceutical m u ltin atio n al com panies (m ncs) effectively
control a n $ 8 0 0 billion m ark et o f m edicines an d m edical
equipm ent and have b een know n to have significant financial
and political pow er over g overnm ents an d sovereign states to
decide policy. T heir p o w er is ev id en t from th e fact th a t even
relatively influen tial coun tries like S outh A frica have n o t yet
invoked c l s to m an u fa c tu re anti-Hiv/AiDS m edicines despite it
b ein g such a m ajor public h e a lth issue. B razil h as m an ag e d to
invoke only a couple of c ls ; T h ailan d too has issued ju s t a cou­
ple of such licences for m an u factu re of d rugs u n d e r paten t.
Economic & Political w e e k ly EQQ m a r c h 31, 2012 v o l x l v i i n o 13
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This is the first time a c l has been used in India despite a legal
provision being put explicitly on the statuette books in 2005.
Indeed, India had an unwritten right under the 1994 Agree­
ment on Trade-related Aspects of Intellectual Property Rights
to use c l s to counteract unreasonable pricing behaviour of
the patent owner. The non-use of the c l provision all these
decades by a country which until 1993 believed in a flexible
interpretation of patents is therefore surprising.
As doctors, lawyers and public health activists have pointed
out, the Nexavar decision will hopefully lead to more Indian
pharmaceutical companies coming forward to file c l applica­
tions which, in turn, should also compel foreign patent holders
to market their drugs at lower prices. India’s stance, assuming
that this order is upheld by the higher judiciary where Bayer has
decided to appeal, will also have a progressive impact on other
countries in invoking c ls .
However, we need to realise that the grant of this c l is merely
a small first step and much more needs to be done to provide
access to medicines for all those who require it. First of all,
even after this drastic price reduction, Nexavar will remain out
of the reach of most Indians since they can ill afford to pay
even Rs 8,880 for a months supply. While the monopoly power
of the patent holders should be fought and global treaties
should not be treated as sacrosanct, we should not lose sight of
the need to provide medicines and medical care to all, irre­
spective of their ability to pay. Good health is a right, not a
commodity to be bought and sold.
Second, this decision of the controller of patents will be
contested all the way to the Supreme Court. In general,
pharmaceutical m n c s have been extremely proactive in block­
ing any loosening of their patent control in medicines. Any
final ruling in favour of the patent holder, whether through a
review of this order or in the Novartis Gleevac case, will be a
huge reversal.
The third aspect to the issue which we need to take
cognizance of is the slow but steady takeover of Indian
pharmaceutical companies by the m n cs in different forms.
Some of them, like Ranbaxy, have been bought over, but many
Indian companies have entered into cash-rich deals with
pharmaceutical m n c s through which they either manufacture
medicines for them or the latter market their products
7
outside India. Such a trend in the Indian market puts definite
limits on the power of the remaining Indian pharmaceutical
companies to contest the foreign companies in pricing or
International Pressure on Sri Lanka
The Sri Lankan government offers a predictable response to a us-sponsored resolution.
ven three years after the bloody end to the civil war
E between the Sri Lankan government and the Liberation
Tigers of Tamil Eelam ( l t t e ) , international pressure
continues to grow on Colombo to show accountability for
possible war crimes and greater reconciliation with the
war- ravaged Tamil majority areas. The government has turned
such pressure into an attack on its sovereignty and has used it
to further build domestic support by mobilising Sinhala
nationalism. In the international arena it has attempted to
utilise geopolitical contestations to lessen the impact of
global condemnation.
The latest development is a proposed resolution tabled by the
United States on 7 March in the 19th session of the United
Nations Human Rights Council ( u n h r c ) at Geneva. The resolu­
tion, which at the time of writing was scheduled to be voted
between 21 and 23 March, calls for implementation of various
steps related to demilitarisation of the northern Tamil-majority
region, investigation of extrajudicial killings and disappear­
ances, and devolution of power as suggested by the govern­
ment-appointed Lessons Learnt and Reconciliation Commis­
sion ( l l r c ) . It calls on the government to submit an action
plan/taken report on the recommendations of the commission.
The draft resolution also mentions that the l l r c has not
addressed issues such as war crimes purportedly committed
by armed personnel.
The resolution, focusing specifically on reconciliation and
accountability, has naturally led to the Sri Lankan government
accusing the us of hypocrisy, given their actions in Iraq and
Afghanistan. The government has tried to use this argument to
convince other members of the council to vote against the reso­
lution. The Sri Lankan permanent representative to the u n in
fact mentioned in an interview that the resolution pointed to a
distrust of the Sri Lankan government’s intentions on imple­
mentation of the l l r c recommendations and was therefore an
attack on the country’s sovereignty.
While it is indeed true that there is little credibility in the
action of the us, the resolution per se is accurate in its call on
the Sri Lankan government to implement the recommendations
of its own commission, however flawed the recommendations
may be. Colombo has been very insincere so far in its efforts to
bring about reconciliation with the people of the war-torn
north, in putting on trial those involved in war crimes and in
demilitarising the northern province. In the closing stages of
the civil war, the Tamil civilian population was subjected to
horrific bombings, shellings and killings, both by the l t t e and
the Lankan army resulting in massive displacement, loss of
8 m a r c h 31, 2012
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patents. A further weakening of the relative power of the
Indian pharmaceutical companies could undo any progress
from episodic c l s .
lives and disablement of many Tamil civilians. The Lankan
government was able to go ahead with its manoeuvres of de­
feating the l t t e militarily because of the international oppro­
brium towards the l t t e which thrived on using terrorist meth­
ods such as suicide assassinations, bombings, etc. Post the war,
however, as truth began to trickle down from the areas in the
north, the international community has been more vociferous
in demanding accountability for the government’s actions - the
report from u n Secretary General Panel of Experts was a culmi­
nation of this process.
The Government of Sri Lanka has responded to statements of
concern from countries such as India by stating that it is keen on
a solution, even suggesting that it is willing to consider a more
substantive package for the Tamils than that based on the 13th
amendment. Yet, for all the talk, the ground realities suggest
that the government has done little on any front - reconciliation,
accountability or a political solution to the ethnic tensions. This
has only worsened the plight of the minorities for while the
war has ended, displacement, rehabilitation, land disputes, etc,
continue to be matters of concern for the Tamils.
The us-sponsored resolution may at best force the govern­
ment to pay attention to the l l r c ’s recommendations and may
provide limited ballast to groups such as the Tamil National
Alliance ( t n a ) to demand greater accountability from the
government. But unless the t n a and the like build a larger
political constituency cutting across ethnicity, there will be no
end to the discrimination and feeling of alienation among the
Tamils. Besides, the Sri Lankan government’s efforts to portray
the u n resolution as one orchestrated by hypocritical deve­
loped countries against developing countries and woo coun­
tries such as China and Russia to give a geopolitical twist to
the international manoeuvres may well result in the global
pressures getting softened.
Despite pressure from the political parties in Tamil Nadu,
the Government of India has been reticent in giving whole­
hearted support to the u n resolution because the establish­
ment is also bothered about the close political and economic
ties between Sri Lanka and China. But a similar reticence by
India three years ago could not prevent horrific crimes being
committed by both the Lankan army and the l t t e on the Tamil
population during the final stages of the civil war in 2008-09.
Instead of a possible negotiated settlement which could have
spared thousands of lives and would have made a political
solution within the framework of a united Sri Lanka likely,
India’s silence during the war has only encouraged continued
triumphalism by the Rajapaksa regime.
v o l x l v i i n o 13 13252 Economic & Political w e e k ly
 EDITORIALS

The Koodankulam Conundrum

The force used to break up a peaceful struggle will reinforce cynicism about the political system.

f people are increasingly getting disillusioned with the danger living in the vicinity of a nuclear power plant, is bludgeon­

I political system in India you have to look no further than

Koodankulam, Tamil Nadu, to understand why. As long as it
suited Tamil Nadu Chief Minister J Jayalalithaa to support the
people’s struggle against the Russian-designed nuclear power
plant, the protests continued unhindered. As soon as her party,
the All-India Anna Dravida Munnetra Kazhagam (a ia d m k ),
won a crucial by-election in Sankarankovil, the road was clear
for a dramatic about-turn.
Suddenly, the a ia d m k government saw no problem with the
power plant and decided that those protesting peacefully all this
while were obstructing work and hence had to be forcibly evict­
ed. On 19 March, as part of “Operation Koodankulam” over 6,000
police and paramilitary personnel were sent down to break up
the protest. At the time of writing, about 200 activists had been
arrested, some of them charged with sedition. Water, in what is a
water-starved village, and other essential supplies were denied
entry into Idinthakarai, where the protests are located. Power
supply too was cut off. Both were resumed after a day’s break but
the message was loud and clear - protest at your peril. Mean­
while, other groups like the Hindu Munnani, taking the cue from
the government’s flip-flop, decided to take the law into their own
hands by attacking a school run by Meera Udayakumar, wife of
S P Udayakumar who is one of those spearheading the protest.
There are several levels at which these brutal tactics of the
Tamil Nadu government must be condemned. The most obvious
is its disproportionate response to a peaceful anti-nuclear strug­
gle. At no stage have the protestors resorted to any form of vio­
lence. They have not tried to break into the nuclear plant or at­
tack it. They have registered their opposition through hunger
fasts, mass mobilisation and other non-violent methods. The
government can claim that it has a right to continue work on the
plant and make it functional without further delay. But can
intimidation and violence by the police and paramilitary forces,
unjustified arrests and blockading of the entire area be justified
on any ground? If the government does not have the ability to
persuade people that nuclear power is safe and that they face no
ing them into acceptance the only thing it can think of?
At another level is the cynicism that the Tamil Nadu govern­
ment’s action elicits. While it is true that Jayalalithaa never sug­
gested that she or her government were against nuclear power,
surely her tacit support to the movement would have indicated
that she endorsed the peaceful protest. To turn around within a
day of the by-election results and pass a resolution in the assembly,
clearing work on the plant speaks of a level of political oppor­
tunism that is breathtaking even in a country where people are
familiar with such responses. This only reinforces the cynicism
and despair that people feel about the working of a so-called
democratic system in India. In the long run, it is this sense of
rejection by a system that will lay the seeds of violence. And for
this no one else but the state itself will be to blame.
The message from Koodankulam is dear. On the one hand you
have a people’s struggle based on genuine apprehensions about the
impact of the nuclear plant on their lives, livelihoods and future.
On the other you have governments, at the state and the centre,
who choose to dismiss these concerns - conveniently drumming
up images of a “foreign hand” - and justify their actions in the name
of providing much-needed electric power. It is as if there are no
alternatives. It is as if the world over, there has been no introspec­
tion or discussion about the value of using a potentially dangerous
technology in the place of more benign alternatives. It is as if
power can only come out of the fuel rods of a nudear plant and that
history, including recent history such as the Fukushima disaster,
counts for nothing. In the face of this kind of concerted obduracy
on the part of those who speak in the name of people’s welfare, is
there really any hope? The hope lies in the fact that ordinary people
still believe that their protests count for something, that they con­
tinue to hold fast to their beliefs even when state force tries to
provoke them into retaliating, that they uphold their right to be
counted as citizens of this country. It is a slender hope, no doubt.
It represents the real test for governments - challenging how far
they are prepared to accept that the very system that put them in
power also grants people the power to speak.

FROM 50 YEARS AGO a small way: one was a health scheme for the private sectors and the continuation of the

9
©rononiic
Journal of Current economic anb political affair*
VOL XIV, NO 13, MARCH 31, 1962
EDITORIALS
Manufacturing of Drugs
More than a decade ago when the Welfare
State was the dominant idea in Pandit Nehru’s
mind and the economic base of welfare had
not been clearly grasped, not to say of being
formulated in terms of a workable plan, two
measures of public health had been begun in
industrial workers; the other was a project
for the manufacture of penicillin in the
public sector...
Manufacture of drugs, however, has pro­
liferated very considerably...The inordinately
long years taken in finalising the drug manu­
facturing scheme with Soviet assistance and
the very energetic expansion of the manufac­
ture of various drugs in the public sector
might have puzzled the public a little bit
about the seriousness of the Government’s
intentions. Doubts still remain how it will
work out in the long run with so many drug­
manufacturing plants in the public as well as
patent laws which stand in the way of a
rational and economic organisation of pro­
duction in this particular field...
Control over production in the case of
drugs does not rest entirely on whether the
drugs are produced in the public or the private
sector, when the drugs are patented and India
recognises these patents. It is obviously the
policy of the Government to encourage com­
petition in the manufacture of drugs in order
to bring down prices, and bring them within the
reach of the bulk of the people. Will this policy
not be defeated when particular drugs are in­
sulated against competition by patent rights?

Economic & Political weekly rauw m a rc h 31, 2012 v o l x lv ii n o 13 9

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 COMMENTARY
Judicial Control of Policymaking
and Implementation
Interlinking Rivers
VIDEH UPADHYAY
The Supreme Court has handed
down an extraordinary decision
with some extraordinary
arguments directing the central
government to execute the
“river interlinking project”. How
could the Court which says “it
can hardly take unto itself tasks
of making of a policy decision
or planning for the country on
the need for acquisition and
construction of river linking
channels” then go on to actually
take the very same policy decision
and create an implementing
mechanism that cannot open the
policy decision itself? Should not
the judgment be reviewed?
Videh Upadhyay (videhup@gmail.com) is a
lawyer and consultant based in New Delhi.
10
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...by and large, there is unanimity in accept­
ing interlinking of rivers but the reserva­
tions of these States can also not be ignored,
being relatable to their particular economic,
geographical and socio-economic needs.
These are matters which squarely fall within
the domain of general consensus, and thus,
require a framework to be formulated by the
competent Government or the Legislature,
as the case may be, prior to its execution.
-Supreme Court, February 2012.
ake a close look at the aforesaid
T important words of the Supreme
Court from its recent judgment on
27 February 2012.1From these words you
shall find it difficult to understand how
the Court, while inferring that on inter­
linking rivers, the “reservations of the
States cannot be ignored” and acknowl­
edging that “these are matters which
squarely fall within the domain of general
consensus, and thus, require...Govemment
or the Legislature” went on to eventually
direct the “Government of India, to forth­
with constitute a Committee”, that “shall
take firm steps and fix a definite time-
frame to lay down the guidelines for
completion of feasibility reports or other
reports and shall ensure the completion
of projects...” Let us understand this
more and dig a little deeper.
‘By and Large Unanimity9
Given that there was a clear recognition
of reservation of states, the need for gen­
eral consensus, and that this is a task
best left to the government or the legis­
lature, the Supreme Court’s operative
directions are apparently incredible.
How did the Supreme Court manage to
do that? The answer is in the Court’s in­
ference that the stand of the states
before it shows that “by and large, there
is unanimity.. Once this “by and large
unanimity” is seen then the non-execution
m a r c h 31, 2012
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of the project simply becomes a straight­
forward question of governmental leth­
argy. This then allows the Supreme
Court to easily say what it said in its
February judgment:
We see no reason as to why the Governments
should not take appropriate and timely
interest in the execution of this project, par­
ticularly when, in the various affidavits filed
by the Central and the State Governments,
it has been affirmed that the governments
are very keen to implement this project with
great sincerity and effectiveness.
This inference of the unanimity of
states on the project has an interesting
history within the Supreme Court. Recall
that in the early days of the case before
the Court in September 2002, the
Supreme Court issued a notice to the
central government and to all the state
governments on an application (later
converted into a separate writ petition)
relying primarily on some words in
favour of the project that the then presi­
dent, A P J Abdul Kalam, included in his
speech on the eve of Independence Day
in 2002.2
In the initial years of the pendency of
the case only two affidavits were filed
before the Supreme Court, one on behalf
of the central government and other on
behalf of Tamil Nadu. In their affidavit,
the central government explained the
steps taken by the Ministry of Water
Resources with respect to the said project
and also stated that a high-powered
task force will be formed to create con­
sensus among the states. Tamil Nadu in
its affidavit supported the concept of in­
terlinking rivers and stated that this
project had been on the cards of the
central government in the last two
decades, however, no considerable
progress had been made, and, there­
fore, the Supreme Court should imme­
diately issue directions.
These two affidavits became the basis
for the Supreme Court’s order on 31 Octo­
ber 2002 where, while recording the
averments made in the affidavits, the
Court stated:
No other State or Union Territory has filed
any affidavit and the presumption, there­
fore, clearly is that they do not oppose the
prayer made in this writ petition and it
v o l XLVii n o 13 Q3SI Economic & Political w e e k ly

must be regarded that there is a consensus
amongst all of them that there should be
interlinking of rivers in India.
This appeared to be an overhasty con­
clusion at that time. Even assuming that
the Court felt that the non-filing of the
responses could mean that there was no
opposition to the pleas made in the peti­
tion, it is far-fetched to assume that there
was a “consensus” on the issue at that
time.3
That same logic of consensus pre­
sumed then in 2002 has returned firmly
in the recent judgment of the Supreme
Court. To be sure, after the initial two
affidavits, following some “judicial prod­
ding”, there were some other states that
filed their affidavits before the Supreme
Court in later years. The position of the
states in these affidavits is best captured
in the words of the Court itself:
The States of Rajasthan, Gujarat, Tamil Nadu
have fully supported the concept. Madhya
Pradesh has also supported the Scheme, but
believes that it must be implemented by the
Central Government. The States of Karna­
taka, Bihar, Punjab and Sikkim have given
some qualified approvals. Their main con­
cern is, with regard to inter-basin transfer,
which must involve quid pro quo, as with any
other resources interlinking must be from
water surplus to water deficit States and in
regard to environmental and financial im­
plications. Some of the other States are not
connected with these projects as they have
no participation in interlinking of rivers. The
State of Kerala has protested to some extent,
to the long distance inter basin water trans­
fer on the basis that the State needs water to
supply their intricate network of natural and
man-made channels. It is also the case of the
State of Kerala that their rivers are monsoon-
fed and not perennial in nature, therefore,
Kerala experiences severe water scarcity
during summer or off-monsoon months.
Again take a hard look at the position
of the states. Going by the position as
summarised by the Court itself, four
states approve of the project, four other
states have given “qualified approvals” -
but as the Court noted with reservations
that cannot be ignored - and one state
rejected the project. Does this amount to
“by and large unanimity”? Does this sup­
port the Court’s conclusion, in its words,
that “it is clear that primarily there is una­
nimity between all concerned authorities
including the Centre and a majority of
the State Governments, with the exception
of one or two, that implementation of
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river linking will be very beneficial”?
Judges formed one view on the basis of
the position of the states. Can they deny
that, at the very least, another view is
possible on these facts and findings?
Courts’ Role When Another
View Is Possible
Take the case of Kerala. Soon after the
February judgment of the Court, the
chief minister of Kerala said that the
judgment will not apply to Kerala or its
rivers. This begets a question - can the
Supreme Court strike down a policy
decision of the state government merely
because it feels that another policy-
decision would have been fairer, or wiser,
or more scientific or logical? A number of
earlier judgments of the Supreme Court
itself say that the Court can interfere
only if the policy decision is patently ar­
bitrary, discriminatory or mala fide, and
on not on any other ground.4
It is also instructive to take note of the
fact that the Supreme Court has relied
extensively and almost exclusively on a
report of the National Council for Applied
Economic Research ( n c a e r ) that outlines
various benefits of the river interlinking
programme. The Court then delves at
some length on the financial aspect of
the programme, including what it says
“the two concepts of great relevance:
firstly, the investment strain and secondly,
the scope of financial investment and
its recoupment”.
It then lays down some economic data
and figures before concluding the dis­
cussion of the financial aspect saying,
“Since the impact analysis undertaken
by the n c a e r assumes that the Interlink­
ing of Rivers ( i l r ) programme is entirely
financed by the Central Government, a
longer roll-out plan would also help in
reducing the impact on public finances”.
Given these stances of the Court, it will
suffice to take note of unforgettable
words of Justice Frankfurter (and words
that have been adopted and used by the
Supreme Court in many of its decisions
ever since) on how courts need to see
regulatory measures involving economic
dimensions who said:
The Courts have only powers to destroy and
not to reconstruct. When these are added to
the complexity of economic regulation, the
v o l x l v i i n o 13
= = COMMENTARY
uncertainty, the liability of error, the bewil­
dering conflict of experts, and the number of
times judges have been overruled by events,
self-limitation can be seen to be the path to
judicial wisdom and institutional prestige
and stability.5
It is not that the Supreme Court in the
river-linking case has missed the need
for self-limitation. In fact, in the Febru­
ary 27 judgment itself, the Court records
in unmistakable terms that:
...a greater element of mutuality and consen­
sus needs to be built between the States and
the Centre on the one hand, and the States
inter se on the other. It will be very difficult
for the Courts to undertake such an exercise
within the limited scope of its power of judi­
cial review and even on the basis of expand­
ed principles of Public Interest Litigation.
...The Court can hardly take unto itself tasks
of making of a policy decision or planning for
the country or determining economic factors
or other crucial aspects like need for acquisi­
tion and construction of river linking chan­
nels under that programme. The Court is not
equipped to take such expert decisions and
they essentially should be left for the Central
Government and the concerned State. Such
an attempt by the Court may amount to the
Court sitting in judgment over the opinions
of the experts in the respective fields, with­
out any tools and expertise at its disposal.
The requirements in the present case have
different dimensions. The planning, acqui­
sition, financing, pricing, civil construction,
environmental issues involved are policy
decisions affecting the legislative compe­
tence and would squarely fall in the domain
of the Government of States and Centre....
this Court may not be a very appropriate
forum for planning and implementation
of such a programme having wide national
dimensions and ramifications. It will not
only be desirable, but also inevitable that an
appropriate body should be created to plan,
construct and implement this interlinking
of rivers programme for the benefit of the
nation as a whole.
From the above, by extracting all the
words except the very last line it would
seem to suggest that the courts needed
to take its “hand off’ the case and over
the project. But then as the “bottom
line” quoted above shows the Court felt
that while it may not have the authority
or the expertise to take the project, it
needs to create an “appropriate body” to
“plan, construct and implement” the
interlinking of rivers. It then went on to
direct constitution of “Special Commit­
tee for Interlinking of Rivers” forthwith.
11
COMMENTARY
Then a series of operative directions fol­
low from the Court making clear that
the “Special Committee” is only an im­
plementing body for a final and irrevers­
ible policy decision taken judicially.
Thus, the Court says that - “Upon due
analysis of the Reports and expert opin­
ions, the Committee shall prepare its
plans for implementation of the project”;
and adds “we have no hesitation in ob­
serving and directing that time is a very
material factor in the effective execution
of the Interlinking of Rivers project”,
and finally: “It is directed that the Com­
mittee shall take firm steps and fix a
definite time frame to lay down the
guidelines for completion of feasibility
reports or other reports and shall ensure
Funds Crunch and the Railways
S ANANTHANARAYANAN
Beyond the political drama over
the ouster of Dinesh Trivedi
from the Ministry of Railways,
it is clear that the railways are
in desperate need of funds. The
Railways Budget for 2012-13 tried
to address the issue.
S Ananthanarayanan (anarayanan@gmaiLcom)
is a former financial adviser and chief accounts
officer, Western Railways, Mumbai.
12
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the completion of projects so that the
benefits accrue within reasonable time
and cost”.
How could the Court say that “it can
hardly take unto itself tasks of making
of a policy decision or planning for the
country on the need for acquisition and
construction of river linking channels”
and then go on to actually take the very
same policy decision and then create an
implementing mechanism that cannot
open the policy decision itself? There
is lot of talk amongst, experts, non­
governmental organisations (n g o s ),
and even some state governments that
the Supreme Court needs to be ap­
proached again for a review of its deci­
sion. Well, why not?
he Railway Budget this year will be
T remembered for the drama over
the forcing out of Dinesh Trivedi
from his post by Trinamool Congress chief
Mamata Baneijee. By the time this article
appears in print, the United Progressive
Alliance government may have stood its
ground or there may have been a rolling
back of the fare increases. But politics
and diplomacy apart, the features of the
budget presented and the issues involved
merit discussion and assessment - as­
sessment of why the increases were nec­
essary and whether they are adequate.
Railway Budget
The railway budget process is basically
one of planning finances and laying
down a road map of action. Briefly, the
coming year’s revenue and expenditure
are estimated with the help of the previ­
ous year’s figures and the likely increase
in traffic and prices. Surplus revenue, if
any, goes towards funding, first, the re­
placement of worn assets (mainly track
and rolling stock) and then improve­
ments and additions. Creation of new as­
sets is partly from this source and partly
from support, as a “loan in perpetuity”
from the central government.
m a r c h 31, 2012
A ll use subject to https://about.jstor.org/terms
NOTES__________________________________
1 In Re: Networking of Rivers, Writ Petition (Civil)
Nos 512 and 668 of 2002; MANU/SC/0155/2012.
2 This author noted at that time that “In words
that were more a comment on the technical
capacity of the nation to execute the project
rather than its feasibility, or indeed desirability,
the president had observed that Technological
and project management capabilities of our
country can rise to the occasion of making this
river networking a reality with long term plan­
ning and proper investment”. See Videh Upad-
hyay, “River Links and Judicial Chinks” Indian
Express, 26 July 2003.
3 Indeed, soon after the Court presumed the con­
sensus, some chief ministers openly voiced
their criticisms of the project, thus, implicitly
rebutting the Court’s presumption.
4 See for example, separate Supreme Court judg­
ments reported in (1986), 4 SCC 566; (1992),
2SCC, 343; and (1994), 2 SCC 691.
5 Justice Frankfurter in Morey vs Dond (1957) 354
US 457. It has been quoted by the Supreme
Court in its judgments including in R K Grag vs
Union of India & Ors, (1981) 4 SCC 675.
The railways being a state-managed
public service, the tariffs are not fixed to
recover much more than the cost. The
organisation operates, after considering
the need for replacements, very close to
the break-even point. The nature of the
industry is that there are large fixed
costs and the level of traffic at the break­
even point has a huge leverage over the
level of surplus. That is to say, as the
existing level of traffic just balances
both the large fixed cost and the smaller
variable element, any increase in volume
would proportionately affect only the
smaller element of cost but add substan­
tially to the bottom line. Till a few years
ago, there were no large increases in
traffic and rising costs eroded railway
surpluses. Reluctant support from the
central government pushed the railways
to raise loans, which cost more and with
stagnant traffic levels there were fears of
a “debt trap”. There was even an impres­
sion that it was the burden of operating
costs and paying dividends on the cost of
“politically motivated” projects that
were the root of the railways’ ills. And
every year there was an inevitable
increase in tariffs, the passenger being
treated a little more gently.
Crisis
But the boom years of the national
economy at the turn of the century, till
2007-08, changed things and brought
in traffic like the railways had never
v o l x l v i i n o 13 0309 Economic & Political w e e k ly

handled before. The “high leverage” effect
of this “high fixed cost industry” was
switched on and the railways booked
record surpluses. With rising traffic, the
railways presented some sort of a “miracle”
- of expanding services without an in­
crease in rates, particularly passenger
fares. And with a rising surplus, the rail­
ways shifted gears to higher expenditure
levels. The central government also
chipped in to raise costs with the award
of the pay commissions. And in 2008-09,
there was the worldwide slump, which
hit the railways hard. The year 2010-11
spoke loud and clear that there had been
no miracle and the railways had to
re-examine its policies and think of
adjusting passenger fares at any rate to
reflect costs.
During the boom years, with the sup­
port of rising traffic, the railway ministry
seems to have been enthused to do even
more and projected a record-breaking
surplus and thereby proposed giant
investment plans. The boom was over by
2009, but the window dressing continued
and 2010-11 was also presented as a
model year. But halfway through the
year, all the signs were that the level
of estimated traffic would not be
met and that it was time to trim the
spending sails and be realistic about
rates. But despite progress during the
year being slower than expected, the
ministry was perhaps driven to ignore
reality and traffic was projected again
to grow to 993 million tonnes, expendi­
ture estimates were kept low and the
investment programme for the coming
year was sanctioned at Rs 57,630 crore,
which was higher than the previous
year’s level.
2011-12 Developments
It is to the credit of the current team in
the ministry that it has recognised that
there was a crisis and this moved the
government to act in ways that were
feasible. For staying at least respectably
within the revised estimates for 2011-12
it would have been unavoidable to post­
pone all kinds of legitimate expenditure
of the year to the next fiscal. All these
costs being booked by April/May 2011,
the new financial year would have seen
a dangerous erosion within the first
Economic & Political w e e k ly Q3S3 m a r c h 31, 2012
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quarter. While taking measures to
curtail avoidable revenue expenditure,
the Railway Board has trimmed the
works budget too. Early in the year, the
Rs 57,630 crore works budget was reas­
sessed and reduced by Rs 9,179 crore to
Rs 48,551 crore, a figure nearly retained
in the revised estimates. The state of
affairs of balances in revenue-fed funds
was precarious and in the course of the
year, a Rs 3,000 crore loan had to be
taken from the general revenues. The
trend of passenger and goods traffic has
been reviewed and in the 2011-12 re ,
passenger earnings have been reduced by
Rs i,544 crore and the originating goods
traffic was reduced from 993 million
tonnes to 970 million tonnes (but earn­
ings remained unchanged).
Whether these projected levels for
2011-12 are realistic will be known by
May end, when the accounts for the year
are finalised. But the great departure
this time around is that for 2012-13 the
budget proposes an increase in rates which
include passenger fares. The earnings
are projected to increase by Rs 28,600
crore, which is over 25%, with the rise in
expenditure at less than half that figure.
While rates have been increased, load­
ing is taken as 55 million tonnes more,
with a 5.7% growth in passenger traffic.
Both figures are feasible. The provision
for replacements, at Rs 9,500 crore
(which is before the surplus), in any case
would be available. Insofar as an
improvement in finances, yes, this small
step is progress all right, whatever be
the storms that it has produced in the
political arena.
But more important than the numbers
is the fact that the government has
chosen to act, for once rationally and
responsibly. There can be consideration
for the passenger and, yes, politics is a
reality. But to keep passenger fares un­
changed for a decade, while all costs
have multiplied is not just ridiculous, it
is disregard for any obligation of govern­
ance and amounts to a nationwide case
of “cash for votes”. This, of course, is
really no cash at all, because everybody
pays, anyway. One could say that travel
subsidy is an option of the government
and, yes, the government is legally
competent to make rail travel gratis. But
v o l x l v i i n o 13
COMMENTARY
such thinking flies in the face of equity
and all ideas of the railways being part­
ly commercial, to fund at least its bare
functioning. One of the first casualties
of a money crunch is in the large area
of replacements. To allow the railways
to manage with less income is to invite
a fall in standards, particularly of
safety. Having said that, let us take a
look at the actual revisions proposed
(Table 1).
Table 1: Item-wise IncreasefnBudgeted Revenue
Heads 2011-12 2012-13 Increase (in%)
(Estimated) (Projected)
(Rsincrore)
Passenger 28,800 36,073 7,273 25.25
Goods 68,620 89,339 20,719 30.19
Other coaching 2,750 2,994 244 8.87
Sundry 3,700 4,096 396 10.70
Total 1,03,870 1,32,502 28,632 25.34
The Budget Proposals
Although there are protests about the
increases in passenger fares, we can see
that the major increase is actually under
goods earnings. It would be instructive
to see how these increases are distributed
within passenger and goods earnings.
Table 2 (p 14) shows that a whole 50%
of the increase of Rs 20,700 crore under
goods is from coal traffic alone. The rest is
almost equally shared by steel, cement,
foodgrain, fertilisers, petroleum and
container services. Against this levy on
goods traffic is the increase of about a
third, Rs 7,173 crore under passenger
traffic. The bulk, Rs 5,500, or 77% of
the increase is under second class, non­
suburban, which is a little higher, as a
percentage than the weightage of this
portion, which is 71.29% of passenger
traffic. Although the increase in the rate
per kilometre is 6 paise, against an increase
in the upper classes, non-suburban, of
17 paise per kilometre, as a percentage
increase it is 21.62% in the case of second
class, non-suburban (against 15.66% for
the upper classes).
In the case of suburban traffic, the
increase is just 1 paise per kilometre.
This increase, in a segment which is only
6.6% of passenger traffic, accounts for
Rs 255 crore of increased revenue. It is
ironic that under upper class, suburban,
there is actually a reduction of the fare -
a fact that appears to have missed the
attention of many hard critics of the
13
COMMENTARY
budget! Why did the railways ministry
and the government include this minor,
but sensitive, item of increase of Rs 255
crore in the scheme for raising Rs 28,000
crore is certainly a question. The only
answer appears to be that the govern­
ment felt they had to bring the spotlight
on the need to raise fares, and leaving any
sector unscathed would have devalued
the compulsion the government wished
to convey.
The whole exercise was thus meant to
raise Rs 7,173 crore, an increase of 19%,
20% or 21% in the overall, non-suburban
or second class, non-suburban sector,
respectively, after no increase in a decade,
when such increase in a single year has
been commonplace. And with this hesi­
tant increase of passenger fares, the funds
crunch demanded a larger increase under
the freight segment.
The increases under the goods segment,
which is proposed to yield Rs 20,720
crore, result in an overall rise of the per
kilometre rate by 23.13%, with the in­
crease for coal traffic being 28%. Unlike
passenger traffic, goods traffic has not
been protected all these years - there
have been increases in rates and in
recent times, coal traffic has bled with
the increased minimum weight for
charge at eight tonnes above the marked
carrying capacity of wagons. In this con­
text, the increase in rates is serious in­
deed. We can see that the sectors (steel,
cement, foodgrain, fertiliser, pol and
container services) that will bear the
bulk of the burden will affect all market
costs and the rail passenger, who is
sought to be protected, may end up pay­
ing the full fare after all.
Comparative Costs
This brings one to the question of the
subsidy that goods traffic has been pro­
viding to passenger traffic, for years. For
considerations more of politics than
humanity, the rising cost burden of the
railways has been laid every year on the
goods tariff. Over a period of many
years, the cost of travel to passengers
has been about 26 paise per kilometre.
In comparison, the freight cost of one
tonne kilometre has risen from 71 paise
in 1998-99 to 107 paise in 2011-12. The
ratio of the rate per passenger km to that
per tonne km has been falling from
0.30 in 1998-99 to 0.25 in 2011-12. The
world over this ratio is above 0.85 and
in Europe it is as high as 1.30. While
population levels and other reasons like
the quality of passenger service do affect
this kind of a ratio, what an extreme
ratio brings out sharply is the extent of
the cross subsidy in railway traffic. If
there are compulsions to keep passenger
fares low, is it right that the cost be
borne within the railways, which only
incidentally also provides freight service?
Are passenger services not more demand­
ing, in terminal facilities and path for
movement at higher speeds? As high
freight rates affect other industries, is it
fair and equitable? Is there transparency
in such governance?
The freight rates in India, on purchas­
ing power parity, are perhaps the highest
in the world and surely affect the com­
petitiveness of exports. Quite apart
from the need of first aid for the rail­
way’s finances, the rail ministry - once
it had the government listening and
agreeing to act - should have advised
the government of the need to rationalise

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 COMMENTARY

Table2: Item-wiseIncreasein Budgeted Revenue

2011-12 2012-13 Increase in
NoofPassengers Earnings(Rs) NoofPassengers Earnings (Rs) Noof Passengers Earnings (Rs)
Million P/Km Crore P/Km Million P/Km Crore P/Km Million P/Km Crore P/Km(%)
Suburban passenger
Upper class 254 9,180 266 0.29 270 9,818 279 0.28 16 638 13 -1.93
Lower class 4,105 1,34,151 1,719 0.13 5,459 1,43,474 1,974 0.14 1,354 9,323 255 7.37
Total 4,359 1,43,331 1,985 0.14 5,729 1,53,292 2,253 0.15 1,370 9,961 268 6.13
Non-sub passenger
Upper class 91 61,074 6,698 1.10 95 63,880 8,103 1.27 4 2,806 1,405 15.66
Lower class 3,841 8,60,602 20,217 0.23 4,017 9,00,114 25,717 0.29 176 39,512 5,500 21.62
Total 3,932 9,21,676 26,915 0.29 4,112 9,63,994 33,820 0.35 180 42,318 6,905 20.14
Grand total - passenger 8,291 10,65,007 28,900 0.27 8,741 11,17,286 36,073 0.32 450 52,279 7,173 18.98

2011-12 2012-13______________ Increasein

OriginatingTonnes Earnings (Rs) OriginatingTonnes Earnings (Rs) OriginatingTonnes Earnings (Rs)
Million NTKM Crore TKM Million NTKM Crore TKM Million NTKM Crore TKM(%)
Goods
Coal 454 265,965 27,867 1.05 485 284,438 38,168 1.34 31 18,473 10,301 28.07
Raw material for steel plant 15 10,877 1,172 1.08 15 11,361 1,566 1.38 0 484 394 27.93
Steel 34 33,751 3,957 1.17 37 36,050 5,379 1.49 3 2,299 1,422 27.27
Iron Ore 105 40,666 7,375 1.81 104 37,360 7,022 1.88 -1 -3,306 -353 3.64
Cement 109 61,495 6,558 1.07 118 67,496 9,039 1.34 9 6,001 2,481 25.58
Foodgrains 46 55,136 4,515 0.82 50 59,302 6,250 1.05 4 4,166 1,735 28.70
Fertiliser 50 43,818 3,970 0.91 52 45,552 5,198 1.14 2 1,734 1,228 25.95
POL 42 26,483 3,660 1.38 42 26,880 4,741 1.76 0 397 1,081 27.62
Container service 38 44,445 3,357 0.76 42 48,300 3,622 0.75 4 3,855 265 -0.72
Other goods 77 59,290 5,188 0.88 80 62,000 6,854 1.11 3 2,710 1,666 26.34
Misc goods 1,000 1,500 0 500
Total 970 6,41,926 68,619 1.07 1,025 6,78,739 89,339 1.32 55 36,813 20,720 23.13

Table 3: Passenger Freight Ratio

Year 1998-991999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2112-13
Originating loading
(million tonnes) 421 456 473 492 519 557 602 667 728 794 833 888 922 970 1,025
NTKM(millions) 2,81,513 3,05,201 3,12,371 3,33,228 3,53,194 3,81,241 4,07,398 4,39,596 4,80,993 5,21,372 5,51,448 6,00,548 6,25,723 6,41,926 6,78,819
Goods earnings (Rs crore) 19,960 22,061 23,305 24,645 26,505 27,618 30,778 36,287 41,716 47,435 53,433 58,502 62,845 68,620 89,339
Earning per NTKM(Rs) 0.71 0.72 0.75 0.74 0.75 0.72 0.76 0.83 0.87 0.91 0.97 0.97 1.00 1.07 1.32
Originating
passengers (millions) 4,468 4,641 4,840 5,169 5,048 5,203 5,475 5,832 6,334 6,536 7,047 7,383 7,809 8,291 8,741
Passenger KM(millions) 4,04,605 4,31,395 4,57,680 4,94,201 5,15,772 5,42,052 5,75,608 6,16,632 6,95,821 7,71,070 8,39,203 9,04,761 9,80,13110,65,007 11,17,289
Passenger earnings (Rs crore) 8,550 9,581 10,515 11,196 12,575 13,299 14,113 15,126 17,225 19,844 21,931 23,488 25,793 28,800 36,073
Earning per passenger Km (Rs) 0.21 0.22 0.23 0.23 0.24 0.25 0.25 0.25 0.25 0.26 0.26 0.26 0.26 0.27 0.32
Ratio: Earning per Pass KM/
Earning per NTKM 0.30 0.31 0.31 0.31 0.32 0.34 0.32 0.30 0.29 0.28 0.27 0.27 0.26 0.25 0.25

and should have developed a scheme to
improve the passenger km-tonne km
ratio. Instead, Table 3 shows that the
ratio, even in 2012-13, remains 0.25, the
lowest so far.
Safety
Apart from rationalising fares and
freight charges and also covering all
costs, the railways need to provide for
replacements and renewals. The bold
proposal to provide Rs 9,500 crore
under the Development Reserve Fund is
heartening. It would be doubly so if it
were achieved and then if funds to that
extent could be deployed in work. The
Economic & Political w e e k ly BSS3
Sam Pitroda Committee filed its report
that the railways need Rs 1 lakh crore
to catch up with safety-related arrears.
That report requires study and a plan to
squarely address the concerns generat­
ed. The figure itself may be inflated, un­
aided by spot inspection which would
reveal many cases where even old
bridges are in good condition or where
less expensive repairs could assure
safety. The railways have a system of
regular inspection, record keeping and
programmed replacements, but the
difficulty in the area of bridges has been
in carrying out work. If some miracle
were to provide the Rs 1 lakh crore that
m a r c h 31, 2012 v o l x l v i i n o 13
Pitroda has assessed, it may take 50
years to spend it.
Succeeding budgets should build on
the start made by the present team and
play the game straight - services should
be priced at cost and where subsidies are
required, they should be accounted for
and transparently provided. Preventive
maintenance and replacements cannot
be postponed and funding has to be
arranged in time and the tariff should re­
flect the finance cost. The large size of the
undertaking can cover its deficiencies for
a long time, but recovery may be impos­
sible and the implications disastrous, if
the industry is allowed to go sick.
15

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Punjab Elections
Entrenching Akali Dominance
PARAMJIT SINGH JUDGE
The apparently unanticipated
victory of the Shiromani
Akali Dal-Bharatiya Janata Party
alliance in Punjab appears less
surprising if the political and
social trends since the late 1990s
are read carefully. The coming
together of the s a d and the b j p
has united the dominant castes
among the Sikhs and Hindus into
a stable political alliance and
replicates the social structure
of the Punjab village in its
legislative assembly.
Paramjit Singh Judge (paramjit.judge@gmail
com) teaches sociology at Guru Nanak Dev
University, Amritsar.
Economic & Political w e e k ly MARCH 31, 2 0 1 2
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: COMMENTARY
rural areas. It may be observed that owing
to delimitation of assembly constituencies
carried out in 2008, the Malwa region
has gained four seats and the other two
regions have lost two seats each. How­
ever, delimitation has caused some very
significant shifts of villages and urban
localities from one constituency to the
I ven before the people of Punjab other. This shift in areas could, we need
E:
1 — It
voted it was taken for granted by
Ithe political pundits that the Con­
gress would form the next government,
to realise, also lead to some changes in
the election results, depending upon
which party benefited from the delimi­
for, since the formation of Punjabi Suba tation. Interestingly, delimitation as a
in 1966 no party has ruled for two con­ factor was largely ignored by those pre­
secutive terms. An unprecedented high dicting the results.
voter turnout of 79.8% further strength­ There are other interesting features of
ened this belief in the anticipated out­ the election results which suggest that
come, as it is generally assumed that previous results should not be the basis
high turnout of voters indicates change of predicting the future. In eight constitu­
in the government. Therefore, the out­ encies, seven runner-ups were independ­
come of the elections has shocked every­ ents (mostly rebel candidates who were
body. Experts are gasping for adequate denied tickets) and one was the Bahujan
explanations and trying to make sense Samaj Party (b s p ) candidate. In these
of the Shiromani Akali Dal-Bharatiya eight seats three b j p , four s a d and one
Janata Party (henceforth s a d -b j p ) alli­ Congress candidate emerged victorious.
ance’s second consecutive victory. It seems obvious that in seven constitu­
A satisfactory explanation may be dif­ encies the Congress lost to the s a d -b j p
ficult, but it is important to point out combine due to internal conflicts. The
that the assumptions on which the data on constituencies where candidates
victory of the Congress was predicated won by a small margin (Table 2) shows
were logically fallacious. Long ago, in that the Congress lost 14 seats by narrow
the 18th century, Hume had cautioned margins while in four the result could
that the repetition of a phenomenon have gone either way. It is therefore
even a million times is not a sufficient important to understand that despite
basis to predict its recurrence. The second major differences in the number of seats
assumption, that change is imminent won by the two rivals, this election was a
because more than the expected number close call for both the s a d and the Con­
of voters exercised their franchise, too gress. The implications of such a dose
has no logical basis.
Table 1: NumberofVidhan SabhaSeatsaccordingto Partyin 2007
Let us begin by iden­ and2012
tifying and comparing Party Doaba Majha Malwa Total Doaba Majha Malwa Total
2007 2007 2007 2012 2012 2012
party performances bet­
Congress 04 03 37 44 6 8 32 46
ween 2007 and 2012 SAD 13 17 19 49 11 12 33 56
disaggregated along the BJP 07 07 05 19 5 5 2 12
three regions of Punjab Independents 01 - 04 5 1 - 2 3
- Doaba, Majha and Total 25 27 65 117 23 25 69 117
Malwa (Table 1). First, Source: The Tribune, 7 March 2012.
both the s a d and the
Table2: NarrowMargins inthe Victoryand
Congress have improved their tally
of seats, whereas the b j p and the inde­ MarginofVotes LosingParty LosingParty Total
Congress SAD
pendent candidates are losers. As the
1-500 4 - 4
b j p candidates contest elections largely
501-1,000 4 1 5
in urban areas where the Hindus are 1,001-1,500 4 1 5
either in majority or have a substantial 1,501-2,000 2 1 3
presence, it implies that the b j p has lost Total 14 3 17
its Hindu Voters, but SAD has gained in SourcerSameasinTablel.
VOL XLVII NO 13 17
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COMMENTARY
contest are many, particularly when both
these parties have gained in the total
number of seats. The delimitation process
seems to have favoured the sad , for
despite the decline in its percentage vote
share it has won seven more seats. At this
moment it is important to examine various
factors in the state politics of Punjab,
which have worked both extensively and
historically in determining the outcome
of elections. I argue that in order to un­
derstand Punjab politics, there is a need
for political sociological perspective in­
stead of treating politics as an autono­
mous domain of examination.
There are two social axes along which
Punjab’s politics gets shaped: religion
and caste. The latter is generally under­
mined in the analysis of elections and
electoral processes, but it is, as we shall
see, not the case.
Religion and Electoral Politics
As a numerically majority community
(almost 60%), the Sikhs are politically
divided and we find them in all political
parties both as leaders and cadre. They
are also active in the bjp , which suppos­
edly represents Hindu interests. Sikhism,
as the dominant religion, has had an
inclusive approach towards religious
practices, whereas it is divided along
caste and class lines. On the contrary, the
Congress has been claiming to be secular,
though it has invariably meddled with
Sikh religious issues in order to dilute
the political base of the sad . Under­
standing the crucial significance of reli­
gion illustrates certain important para­
digmatic shifts in the electoral history of
Punjab as well as the religious configu­
ration of the state at present. Three dis­
tinct phases can be identified. The first
phase ended in 1966 when the Punjabi
Suba was formed with the Sikhs as ma­
jority population and the second phase
ended in 1997 when the sad participated
in the electoral process, after boycotting
it in 1992, by forging an alliance with
the b jp . It is important to point out that
the phase between 1966 and 1997 was
marked by political turmoil and frequent
interventions by the central government
owing to which governor’s rule was
imposed in the state many times for
extended periods of time.
18
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The Vidhan Sabha elections of 1997
initiated the third phase in Punjab’s
political-electoral history. The sad and
the b jp had forged alliances earlier too
but this one was special, for it happened
after a decade and a half of the violent
movement for Khalistan. The alliance
signified Hindu-Sikh unity thus ending
the divide between these two communi­
ties which had invariably manifested
itself in voting behaviour. Earlier, the
Akalis always maintained that the Hindus
never voted for them, whereas the Hindu
voters were largely confined to the cities
and the rural areas of Hoshiarpur and
Gurdaspur districts. Despite the presence
of various dalit and middle castes, the
political constituency termed “Hindus
of Punjab” largely comprise the upper
castes like the Brahmins, Rajputs, Kha-
tris, Aroras and Baniyas. The Rashtriya
Swayamsevak Sangh (rss) has quite a
stronghold among the urban Hindu
traders, particularly the Punjabi refugee
Khatris who migrated from western
Punjab after Partition. Other Hindus are
politically divided along various politi­
cal lines. The urban Sikhs would not
vote for the b jp candidates considering
them to be the representatives of the
Hindus. The sad -bjp alliance in 1997 was
successful, but the rss was not pleased
with the b jp at both the centre and the
state. In the next elections (2002) the
rss cadres did not vote for the b jp thus
facilitating a Congress victory.
Another feature of the alliance forged
in 1997 was that the sad did not raise
their staple issue of “danger to the Sikh
panth (faith/community)” thus paving
the way for the emergence of issues of
development as the major political dis­
course. Together these make the 1997
elections a watershed and we need to
examine trends from this time onwards
to draw political-electoral inferences
and projections. We need to focus on the
major base of each political party during
the past four Vidhan Sabha elections
(1997,2002,2007 and 2012) to understand
the current political condition in Punjab.
There are 10 constituencies from
where only the sad candidates have
been elected in each of the four elections
since 1997 (the only exception is the
Tarn Taran city constituency from where
m a r c h 31, 2012
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Harmeet Sandhu was elected in 2002
who later joined the sad). On the other
hand, there are three constituencies which
have always elected a Congress candi­
date (but O P Soni was elected in 1997 and
2002 as an independent candidate from
Amritsar west because he was denied
the official ticket, and Jeet Mohinder
Singh was elected as independent from
Talwandi Sabo in 2002 and he joined the
Congress). It is clear that the sad has a
much stronger base in Punjab than the
Congress and this has only grown
stronger with the sad -b jp alliance now
symbolising Hindu-Sikh unity.
Castes and Electoral Politics
Religion has so powerfully clouded our
perception of Punjab politics that the
role of caste has been pushed to the
background. Underestimating the caste
factor has led to some of the fallacies in
predicting these elections. It is important
to note that the Jat Sikhs constitute an
overwhelming majority in Punjab. If we
interpolate the data of the 1931 Census
by assuming that the proportions of
various castes among the Sikhs have
remained largely constant, then the con­
servative estimate would be that the Jat
Sikhs constitute about 40% of the total
population of the state. The next largest
proportion is that of the dalits, that is
about 30%. However, dalits are divided
along caste and religious lines resulting
in an absence of any visible pattern in their
voting behaviour. In terms of numerical
preponderance, the Chamars and the
Bhangi/Choorha castes are important.
Among the Chamars, the Ad-dharmis
and the Ravidasias have traditionally
voted for the Congress and now they are
divided in terms of their votes for the
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v o l x l v i i n o 13 13259 Economic & Political w e e k ly

Congress and the bsp. The Ramdasia
Chamars have been voting for the sad .
Among the Bhangis, the Valmikis voted
for the Congress, the Mazabis for the
sad and the Christian Masihs for the
Congress. Besides these predominant
patterns, there is also some concentra­
tion of the Megh caste in Amritsar and
Jalandhar cities and the villages of
Kapurthala district. They are religiously
divided as Kabir-panthis, Arya Samajis
and Sikhs. Their voting behaviour is also
religiously divided. What is noticeable is
that except among the Ad-dharmis and
the Ravidasias, the dalits do not show any
preference for the bsp .
Even though certain castes, namely,
Rajput, Saini, Mehton, Lobana and Kam-
boh have low numerical strength, but
due to their concentration in certain
pockets, they have become effective
players in electoral politics despite being
politically divided. What is most notable
is that their caste identities override the
religious divisions among them. Caste
consideration in the choice of the candi­
date is an important factor with regard
to the numerical domination of certain
caste communities in particular areas.
Let us look at how various castes have
performed in these elections, beginning
with the dalits (Table 3).
Table 3: Region-wise Performance of
Political Parties among ReservedSeatsfor
ScheduledCastes
Political Party Doaba Majha Malwa Total
Congress 1 2
SAD 5 4
BJP 2 1
Total 8 7
Percentage of the
total seats (117) 34.78 28.00 27.54 29.06
Source: Same as in Table 1.
It is clear from Table 3 that in all the
regions, the sa d has performed better
than the Congress. The percentage of seats
reserved for the scheduled castes in the
Doaba region is the highest. An attempt
was made to know the caste background
of the elected dalits.1 Interestingly, the
Mazabis are the largest in number (18),
followed by eight Chamars/Ramdasias.
If we add two Valmiki candidates, then
the Bhangi caste has emerged as the
most numerous among the newly elect­
ed dalit m l a s . The caste background of
two scheduled candidates could not be
Economic & Political w e e k ly BSW m a r c h 31, 2012
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known, which also included a well-
known Punjabi singer, Mohammad
Sadique, who was till recently a Muslim,
and the second candidate is from Shatrana
reserved constituency. Other dalit win­
ners belong to Batwal, Duman and Megh
castes who have won one seat each.
Among the dalits, the biggest losers are
the Chamars/Ramdasias who, despite
having the second-largest population
among the dalits as well as having better
educational and economic conditions
than the Valmikis/Mazabis, have failed
to win seats in proportion to their
strength. One of the major reasons for
this is the support for the bsp among sec­
tions of them and another reason is their
concentration in certain pockets of Pun­
jab. On the other hand, the Mazabis have
made a tremendous impact on these
elections. The success of the Mazabis is
partly the loss of the Chamars, but at the
same time it is also a result of the way
various constituencies are declared
reserved. This time most of the reserved
constituencies except Doaba have had
Mazabi concentrations.
We may now turn to the middle castes
or the Other Backward Classes (o b c s).
These elections have contributed towards
a large decline in the influence of the o b c s.
Only seven o b c candidates have been
successful. Among the biggest losers was
Upinderjit Kaur, a minister in the previous
ministry, who lost to a Jat Sikh candidate.
Among the o b c s three Lobana, two
7 10
Kamboh and one Gujjar and Bahti candi­
12 21
- 3
date each have been successful. Except
19 34 for the Bahti candidate from Doaba and
one Lobana from Majha all others have
won from the constituencies where voters
of their caste are concentrated. Among
the upper caste candidates elected the
Jats, including one Hindu Jat, are the most
numerous. With 50 members (constitut­
ing 43% of the seats) the Jats constitute
the largest caste group in the newly elect­
ed Vidhan Sabha. Among other candi­
dates eight Khatri/Arora, six Banyas and
five brahmins have emerged successful.
The data on the caste background
clearly indicate that the pattern of domi­
nation has remained unchanged with
the Jats at the top of the table followed
by the Mazabis. It is interesting to note
that the pattern of domination in most of
v o l x l v i i n o 13
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COMMENTARY
the Punjab villages has been characterised
by the close association of the Jat land-
owner and the Mazabi attached labourer
under the traditional Jajmani system
which was dominant till recently. It was a
common saying that no murder in the vil­
lages of Punjab is committed without the
participation of the Mazabi under the
leadership of the Jat! In other words, the
stamp of the caste structure of Punjab’s
villages is clearly visible in the Vidhan
Sabha of 2012. The sad, with its perceived
Jat domination, has found the Mazabi as
its most reliable associate. The failure of
the Chamars/Ramdasias may indicate
the decline of dalit politics and rise of
the sad brand of religious politics in
contradistinction to the Ravidasi-Dera
politics. Electoral marginalisation of
Chamars is likely to push them to the
politics of agitation.
Factions and Personalities
In the end, I wish to argue that in every
election in Punjab the sad -b jp alliance
has a better chance of winning. Some of
the long term, structural reasons have
been discussed above but there are some
proximate reasons for the sad -bjp victory
in this particular election. First of all,
corruption has ceased to be an issue, for
no party is seen to be free during its ten­
ure. Bribes are viewed as “honorarium
for doing the work” and are so much
part of the system that the Anna Hazare
movement did not make any impact on
the election results. Second, even the
high turnover of voters got distributed to
the same old parties, though the pres­
ence of sad rebel Manpreet Badal did
send shivers down the spine to both the
sad and the Congress. Further, it is im­
portant to recognise that the various
schemes (Atta-Dal scheme, free cycle to
girl students in government schools,
Shagan scheme, provision for ambulance
to expecting mothers and in accident
cases, and free power to the farmers/
dalits) introduced by the sad -bjp govern­
ment helped considerably.
A discussion of elections in Punjab
cannot be complete without acknow­
ledging the role of factionalism at the
village level which vertically connects with
the two major political parties through
the local mla to the grass roots. Thus
19
the panchayat elections are contested
with a ferocity which is invariably ab­
sent in Vidhan Sabha elections. Vandita
Mishra (2012) has captured it well thus
Walk deep into Malwa heartland and
‘development’ begins to split into two: Akali
development, Congress development. In the
village, start a conversation on public works
and government schemes that have or have
not been implemented, and two groups are
formed immediately on party lines.
The incidents of violence during pan­
chayat elections in 2008 were quite high
and in most cases it happened because
the sad workers tried to dislodge the
political domination of the Congress. The
sad and the Congress are strong contend­
ers and compete for domination during
elections. The 73rd amendment has fur­
ther contributed to the escalation of con­
flict. In the case of reserved post of Sar-
panch, the dominant landlords put up
their own dalit candidates (Thakur and
Singh 2009), which invariably result
into clashes at many places. The elected
leader’s worth is not examined by his
performance at the state level, but what
he/she has done for his/her constituen­
cy’s stakeholders who are invariably the
village-level faction leaders.
Before making concluding remarks, a
comment on the leader of the Congress
Party is essential. Amrinder Singh joined
the sad in 1984 in reaction to the Blue
Star Operation and was a minister in the
Barnala Ministry of 1985. He contested
as an independent candidate in 1992
after leaving sad over the issue of boy­
cott of elections. He came out of political
wilderness in 2002 and became the chief
minister by marginalising the established
leaders of the Congress in the state. In
the recently-held elections, he remained
inactive till he was not announced as the
chief ministerial candidate, but it was too
late. Politics has become a family enter­
prise in India, but in Punjab the so-called
ruling families symbolise state politics.
Conclusions
Two conclusions may be offered here.
First, after the sad -bjp alliance was
formed the future of Punjab politics
changed radically and put a huge handi­
cap over other political parties. There­
fore, the sad -bjp will continue to domi­
nate the Congress and together these
two poles will lord over the political
landscape of the state. Second, as a
corollary to the above, the outcome of
elections would depend upon the effec­
tiveness with which the local leaders
have been satisfied by their legislative
representatives. The loss of one party
could be determined by the village-level
politics. It is also equally important to
watch what the rss is deciding. More
emphasis on ideological purity by the
rss , more are chances of the Congress
winning the elections, as it happened
in 2002 when the decision by the rss
cadre to not support the bjp contributed
to the alliance’s defeat. Failure to take
into consideration these factors has led
to wrong forecasts of voting patterns
and results.
NOTE1
1 The information regarding the caste background
of the elected candidates has been collected
through personal contacts. It may be informed that
information about six MLAs could not be collected.
REFERENCES_____________________ ___
Mishra, Vandita (2 0 1 2 ): “Mud Flies in Malwa”,
http://www.indianexpress.com/news/mud-flies-
in-malwa/9 0 3 5 9 6 / accessed on 9 March 2 0 1 2 .
Thakur, Bhupinder and Rajwinder Pal Singh (2 0 0 9 ):
“Empowerment or Exclusion: Exploding the
Myth”, Guru Nanak Journal of Sociology,
3 0 (1 & 2 ), pp 4 1 - 6 2 .

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20 MARCH 31, 2012 v o l x l v i i n o 13 BSB Economic & Political w e e k l y

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A Re-Election in Punjab
and the Continuing Crisis
MANJIT SINGH_____________________
A more thoroughgoing
management of the message
of governance, the media and
electoral strategies helped the
ruling Shiromani Akali Dal-
Bharatiya Janata Party alliance
buck the anti-incumbency trend
in Punjab and win assembly
elections rather emphatically.
The Congress’ failure to connect
to the people through mass
movements and the continuing
decline of the left parties only
helped the ruling alliance even
further. Despite this victory, the
election manifesto of the ruling
alliance suggests that it has few
ideas to tackle the crisis Punjab
faces today.
Manjit Singh (manjits @pu. ac. in) is with the
department of sociology. Panjab University,
Chandigarh.
Economic & Political w e e k ly
ever before in the political his­
N tory of Punjab was the election
process as openly corporatised
as in the recently concluded assembly
elections of 2012. It is clear that in the
age of information and communication
revolution the elections are now fought
from the “war rooms”, employing the
weaponry of money, muscle power, in­
toxicants and the media. The experience
of Punjab elections clearly showed that
the traditional factors such as political
ideologies, promises in the election
manifestoes and democratic structure of
the parties were relegated to the margin
of the electioneering campaign. Social
engineering - what can be described as
correct permutations/combinations of
different social segments of society -
had taken centre stage in the manage­
ment of votes. In no other state elections
was the use of media as vigorously done
as in Punjab. Paid news, bribing report­
ers and media managements alike were
also some of the other instruments
used by the political parties in their elec­
toral war. It is a well-known fact that the
Shiromani Akali Dal (sad) controlled
cable networks and did not allow news
channels to enter Punjab that were criti­
cal of the functioning of its government.
After more than a month-long “gruelling
campaign”, finally votes were polled on
30 January 2012 and the outcome was
announced on 6 March.
Challenge for the Akalis
Certainly, winning state assembly elec­
tions was not a cakewalk for the sad and
Bharatiya Janata Party (bjp ) alliance.
The father-son duo of Chief Minister
Prakash Singh Badal and Sukhbir Badal
had strategised election management
for the past two years - with the latter
focusing on public service in order to ex­
pand the political support base of the
party nurtured over the years by his
father. Sukhbir Badal’s emphasis on highly
Q3S3 m a r c h 31, 2012 VOL XLVII NO 13
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COMMENTARY
subsidised “atta-dal” reaching deserving
people, merit in recruitments for gov­
ernment jobs, and the containment of
harassment faced by the people at the
hands of the bureaucracy worked as an
antidote to his projected image of a
grabber of state resources. Other tactics
related to “social engineering” and ad­
vance “micro planning for each constitu­
ency” also played dividends. Having
said that, the election results were not
insulated from national politics - issues
such as corruption, price rise and foreign
direct investment played an important
role as well. Clearly the electorate voted
for development, improvements in agri­
culture and in hope for a fair deal at the
hands of ruling elites in the state.
Both in Uttar Pradesh and Punjab, the
respective father-son duo of the Yadavs
and Badals worked largely on a similar
pattern leading their parties to win an
absolute majority in the assemblies. The
leadership of the Punjab Pradesh Congress
Committee might still be stunned at the
defeat in the elections but it is time to
make an earnest and dispassionate review
rather than quibble among themselves.
The results show a sharp polarisation
of voters in the assembly featuring 117
constituencies. The sad -b jp alliance se­
cured 68 seats (56 and 12 respectively)
whereas Congress managed to win 46
seats and only three independent candi­
dates could succeed. The newly floated
Sanjha Morcha, constituted by the Peo­
ple’s Party of Punjab (ppp ), Communist
Party of India (cpi) and Communist Par­
ty of India (Marxist) - c pi (m), drew a
blank even though the votes secured by
them was about 6.15%. The Bahujan
Samaj Party (bsp) also could not make
its entry into the state assembly despite
securing 4.30% of the votes. The differ­
ence of votes between the sad -b jp com­
bine and the Congress was only 1.77%.
However this vote difference gave an
edge of 22 legislators to the sad-bjp alli­
ance over the Congress. In fact, in terms of
total vote polled, the loss of Congress votes
over the previous election was only 0.79%,
in contrast to the sad-bjp alliance that lost
3.49%. The micro-management by Sukh­
bir Badal could contribute nine mlas to his
team who won with a margin ofjust about
1,000 votes over their rivals whereas
21
COMMENTARY
Congress won only one seat with such a
narrow margin.
The not so silent cries of a neck-to-
neck fight did not move the Congress
leadership well in time during the cam­
paign. The leadership was busy in
dreaming about ministries rather than
competing well during the elections.
The sad -b jp alliance on the other hand
took the contest as a “fight to the finish”.
The Congress kept on hoping to ride the
anti-incumbency wave that never mate­
rialised. Thoroughly disappointed, the
Punjab Congress is now busy in finding
scapegoats in Sanjha Morcha, accusing
them of being “game spoilers”. The pat­
tern of voting results, however, does not
support this theory emanating from the
Congress Party spokespersons.
It is now dear that the single-most im­
portant tactical mistake from the Congress
leadership that pushed the sad-bjp alli­
ance onto victory was its failure to quell
the revolt from within its own ranks. Con­
gress leader Sonia Gandhi’s half-satirical
remark that the Congress lost not for want
of leaders, but rather due to too many
leaders (sans dedicated followers), was
also far from the mark. The fact is that the
Congress is in serious need of charismatic
leaders who have mass appeal and, at the
same time, are powerful enough to main­
tain order within the party.
The “rem ote control” from Delhi w as
decisive in the selection of candidates,
against the wishes of the state leadership
and was also responsible for their perfor­
mance in the state elections. This does not
mean that the state leadership of Congress
could be exonerated from its own mishan­
dling. Unlike the sad leadership that was
seen to be accessible to the people, the
Congress leadership preferred to work
from within its own comfort zone guarded
within palatial buildings. Their hope that
the people of Punjab would continue to
follow the trend of never returning incum­
bent ruling parties back to power made
the party indifferent to the demands of the
people while sitting in the opposition. The
Punjab Congress has shunned its own his­
tory of struggle against the misdeeds of
the party in power and their fight is now
limited to the floor of the state assembly.
The Congress has also suffered from
misplaced priorities. It had an opportunity
22
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to consolidate its base among the dalits
when in power between 2002 and 2007,
but it wasted in framing cases against the
leaders of the opposition in an open dis­
play of vendetta politics that had nothing
to do with the people at large. The open
display of unsheathed swords and bellig­
erent imagery from public platforms dur­
ing the election campaign by the Con­
gress president also did not find much
favour with the people of the state.
Dalit Politics
Traditionally, dalits in Punjab felt secure
under the aegis of Congress rule. Punjab
is a state with a high dalit representation
in its demography, accounting for close
to 29% of the population. Dalits consti­
tute more than 33% of the rural popula­
tion of the state but they share or own
only 2.34% of the area under operational
(agricultural) holdings. The mech­
anisation of agriculture and the green
revolution have usurped their employ­
ment opportunities in agriculture pushing
them further to the margins. The bsp ’s
Punjab unit somehow failed to consolidate
dalits within its own folds and could se­
cure only 4.30% of the votes even when it
contested in each and every assembly seg­
ment. Among other factors, dalits are frag­
mented along multiple axes, viz, religion,
caste, class, rural-urban divide, and other
subregional identities.
Under the given circumstances, Con­
gress could have made efforts to consoli­
date its social base among the dalits
through the honest implementation of
development schemes pertaining to the
poor. The ameliorative measures of the
Congress Party are largely harnessed by
the top 20% of the dalit population con­
stituted mainly by the Addharmis, a rel­
atively well-off caste among the dalits.
Consequently, within the dalits 80% of
them feel rather neglected and some of
them have now been swayed by the Aka-
lis through the “atta-dal” scheme. The
bottom 20% of the dalit population of
Punjab, on the scale of social disempow-
erment, can be compared with the dalits
of Bihar. There is rampant poverty, illit­
eracy and child labour among them.
One survey of dalits in Punjab has
shown that 58% of them are indebted
and the average amount of debt is
m arc h 31, 2012
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Rs 28,048 per household which comes
out to be Rs 6,165 per head. Are we wait­
ing for them to go the farmers’ way of
committing suicide before any plan is
launched for their development? The
Punjab Congress must learn from its loss
of social base in Uttar Pradesh if not
from the impact of developmental
schemes of the outgoing Punjab govern­
ment. It is time for introspection but
much more than that the Congress, in
opposition, has to come out with a clear
action plan for the people before it is
ready to face another electoral trial.
As far as the leadership qualities of
the elected m la s are concerned there is
no break from the past. In the house of
117 members there are 19% m la s with
criminal charges belonging both to the
ruling alliance as also the Congress Par­
ty in the opposition; it also includes
presidents of s a d and the Pradesh Con­
gress. Only 12% of the elected legislators
were women. Only 45% of the legislators
were educated up to the undergraduate
level. The average value of the assets of
m la s has shot up from Rs 5.73 crore in
2007 to Rs 9.92 crore in 2012. The aver­
age value of the assets of Congress m la s
is far higher - at Rs 13.97 crore - com­
pared to the s a d at Rs 7.93 crore.
Despite the popular praise for the role
of the Election Commission in contain­
ing the free flow of liquor and cash to
bribe the voters, their success was only
partial. There is a demand in Punjab by
various groups to carry out radical elec­
tion reforms, including “right to recall”
of an elected m l a if he/she fails to fulfil
election promises, and the right to reject
all candidates by an electorate.
Decline of the Left
The victory or defeat of the parties apart,
the results of Punjab elections are highly
worrying for the people of Punjab. There
was a strong history of leftist politics in the
state but over the years the left parties are
losing their support among the people. Be­
sides numerous splits within their organi­
sations, the leadership of the left has
grown too “old” and unsuitable for these
modem times where faster means of com­
munication are seen as an imperative. The
left leadership is trying half-heartedly to
mobilise support among the people but
v o l x lv ii n o 13 I33S9 Economic &Political w e e k ly

many of them are as alienated from the
ground reality as are the leadership of any
other parliamentary party. In the face of
ever-dwindling numbers among their
ranks, the leaders of the left parties are of­
ten busy in securing their own leadership
rather than spending time in expanding
their social base. The continuous retreat of
the left leadership has left the political
space open to manipulation by the ruling
parties. The c p i and the c pi(m ) contested
14 and nine seats each in alliance with ppp
led by Manpreet Badal. Though ppp could
not win a single seat, it could still gamer
5.17% of the total votes. These votes large­
ly came from the youth of Punjab that
Manpreet could sway through his power­
ful oratory invoking the imagery of
Shaheed Bhagat Singh.
The cpi(m ) contested nine seats and had
to forfeit security deposits in every single
The BJP Tidal Wave in Goa
FREDERICK NORONHA________________
Careful political management,
built on Congress’ misdeeds,
brought in a Bharatiya Janata
Party tidal wave that more or
less decimated the ruling party
The b j p has managed to woo
the minorities as well, but what
impact w ill soft Hindutva have
on diversity in the state?
Frederick Noronha (fredericknoronhai@gmail
com) is a writer based in Goa.
Economic & Political w e e k ly Q3Q m a r c h 31, 2012
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seat. The c p i, on the other hand, could
muster 1,14,211 votes for the 14 candi­
dates in the fray with an average of 8,158
votes per contestant. Unless the leader­
ship of the left come up with effective
alternative strategies to the “war room”
politics of the ruling parties it would not
be possible for them to win over peoples’
trust. And these parties could very well
start with the restoration of inner party
democracy which, at the moment, seems
to be an anathema. The ruling parties
can afford to centralise decision-making
and moblise people using the charisma
of a single popular leader in their midst
but this cannot be the case for the left
who are no match to the ruling parties in
terms of mobilisation of resources. Alter­
natively, the left leadership in Punjab
could have matched the ruling elites by
accumulating social and political capital.
t came with a suddenness. The wave
I which ousted the ruling Congress
Party in tiny Goa’s 40-seat assembly
took almost everybody by surprise.
But explanations proffered for the deci­
mation of the Congress fail to tell the
whole story. The Congress had domi­
nated Goa politics since the early 1980s,
with only a few interruptions. It has
been attracting some of the more con­
troversial politicians, becoming unre­
sponsive to the voter, and getting re­
peatedly caught up in bouts of bad
publicity. But behind the news, is there
a wider story?
The Bharatiya Janata Party’s (bjp)
impressive and clear majority - in a
40-member house where hung-assem-
blies are often seen to be the most likely
result - was in part gifted to it by the
Congress disdain and contempt for the
voter. The selection of candidates further
complicated issues. Multiple tickets giv­
en to a few influential families worsened
the situation. Making the most of this,
the b jp went on to campaign against
what it called “family raj”. But while a
v o l x l v i i n o 13
COMMENTARY
Conclusion
To sum up, in the absence of a massive
democratic social movement in Punjab,
the political power is going to shuffle be­
tween only two powerful contenders,
namely, the s a d - b j p alliance and the
Congress. The Sanjha Morcha did ignite
a hope, particularly for the youth, but so
far people have not reposed their trust in
it. If the new government does not take
the poll promises seriously, the ever-
weakening social and economic fabric
of Punjab will only continue to wither.
The most worrying part is that election
manifestoes do not address the root
cause of crisis in Punjab, namely, the
failing public health and education sys­
tem, restless unemployed youth, dalits
who continue to be marginalised and
the unsustainable nature of agriculture
as it is today.
couple of political families got decimated
(the Alemaos and the Ravi-Ritesh Naiks),
others (Ranes, Monserrates, the Maha-
rashtrawadi Gomantak Party (m gp)-
linked Dhavalikars) sailed through, and
the Madkaikars were partly successful.
Clearly, three factors made a vital
difference in the margins. First, a whole
lot of independent candidates were
strategically placed to contest the elec­
tions. Second, the media, assiduously
cultivated and reshaped by the b jp in
recent years, played a crucial role in
crafting a certain image of local politics.
Lastly, a whole lot of newly-actiye non­
governmental organisations (n g o s ) also
lobbied apparently on very neutral
issues like corruption, which hit just one
side in a race dominated by two front
runners. Some of these n g o s also took
an active stance in influencing percep­
tions during the run-up to the elections.
Over the past few years, the way in
which politicians have manipulated the
media - which has, in turn, often played
along - raises some serious issues.
Independents9Role
Carefully working out a long-term strat­
egy, the b jp smartly choreographed
its victory in Goa, even as Congress
politicians spent their energies largely
on scheming how to snatch the chief
23
COMMENTARY
ministership or get the maximum
number of “their” factional personal loy­
alists elected as legislators.
In the past, the b jp suffered a handi­
cap because of its Hindutva tag in a state
where nearly one-third of the popula­
tion comprises Christians and Muslims,
apart from there being a lot of other
diversity based on caste, language and
ethnic differences. This time, its strate­
gy consisted of lambasting the Congress
government over the years, carefully
propping up independents in areas it
could not win, and roping in spoilers
who could draw away a significant part
of the vote to enable its party candi­
dates to sail through. Cashing in on a
division of the votes, the b jp was a
major gainer and won - or blocked a
Congress win - in assembly seats such
as Benaulim, Cortalim, Cuncolim, Mor-
mugao, and Sanvordem. This helped it
get a simple majority in the 40-seat
assembly, a rarity since the late 1980s
when local politics was factionalised
sharply. Independents alone got 16.4%
of votes in the recent election.
But in Goa, party labels alone can be
very deceptive. One needs to go beyond
statistics and labels to appreciate the
reality. For instance:
• The Congress’ very stable chief
minister in Goa was an equally success­
ful b j p deputy chief minister during the
2000-05 government.
• Some of the Congress candidates
were b j p legislators till the eve of the
elections; they were lured to change
sides on a strategy promoted by Con­
gress power-broker Vishwajit Rane.
• The m gp was an ally of the b j p for this
election, and also an ally for five years of
power-sharing with the Congress, (m gp
blamed the Congress for corruption just
before the elections.)
Soon after the elections, thanks to the
affidavits contestants need to file, the
nature of the winning candidates sur­
faced. Out of 40 winners, 37 have assets
greater than one crore rupees of which
18 are in the b jp . The outgoing assembly
had 22, according to an analysis by the
Association for Democratic Reforms
( a d r ) and Goa Election Watch. Besides
the controversial Congressmen - who
have been often in the news for this
24
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reason alone - one in three (seven out of prefer to hand over the report to the
21) of the b j p m la s have criminal cases Lokayukta once the office was set up
pending against them. rather than to the state police, which
some environmental activists have
Mining Interests charged could be a time-gaining tactic.
But perhaps deserving more attention is Interior Goa (tucked some distance
the background and occupations of away from the coastal areas that are
some who have made it with the elector­ mostly visited by tourists and visible
ate’s approval. While “illegal” mining more in the media spotlight) has been
was a major issue in the run-up to this suffering from excessive mining for
election prominent candidates of both decades now. Whether this is illegal or
b jp and Congress have links with min­ legal has made little difference to the
ing equipment, mining transport, barges people affected.
or mining operations. In one embarrass­ Politicians of both the Congress and
ing case, two former business partners b j p have colluded with industry and
were slugging it out in the electoral fray, other vested interests to restrict the
one for the b jp and the other for the wider mining debate to merely “illegal”
Congress. The liabilities statement of mining. If it is a question of legality
one showed a debt owed to his “rival” alone, one has to only recall the manner
candidate for business purposes! in which a few crucial words of Goa’s
Given that the b j p has the bulk of the Public Gambling Act were amended to
electorate’s support in the mining belt of convert a law meant to ban gambling
interior Goa, the party will be hard- into one which permits and legalises off­
pressed to show its results on the mining shore casinos, something which has sur­
front. The first test is the Shah Commis­ vived all political changes in Goa.
sion report which has been submitted. Reflecting the conflicting pressures
The new chief minister, Manohar Parrikar, and stands that can be anticipated, Par­
had himself headed a house committee rikar has been quoted saying:
that went into the illegal mining issue, Our stand has been clear. We are in favour
and was abruptly replaced by the Con­ of legal mining and we are in the know of
gress government. He says he would the problems faced by the people who are
yi'ff fa* ■^fafsr
f f l INDIAN COUNCIL FO R CULTURAL RELATIONS
V Azad Bhavan, I.P. Estate, New Delhi-110002
PANEL FOR DEPUTATION OF PROFESSORS ABROAD
ICCR invites scholars and academicians to register for inclusion in a panel to fill
ICCR's India Studies Chairs in universities abroad.
ICCR offers short term (upto six months) or long term (one to three years) tenures
in over 90 chairs across the world covering a range of subjects from Economics,
Political Science, International Relations, Management, Sociology, Indian
History, Literature, Religions, Languages, (Hindi, Sanskrit, Tamil), Tagore
Studies & Cinema Studies. Further details are available on ICCR website
www.iccrindia.net.
Anyone with a doctoral or equivalent qualification and 8 to 10 years teaching/
research experience in a reputable institution of higher learning is eligible.
The terms and conditions of ICCR Chairs include payment of basic pay and grade
pay being received in India, foreign allowance (cost of living allowance),
accommodation, air travel, medical coverage, office space, internet connection
and otherfacilities conducive to teaching and research.
If interested, please send your CV together with a recommendation from
the Head of your institution to Director (Chairs), Indian Council for Cultural
Relations, Azad Bhavan, I.P. Estate, New Delhi- 110 002, e-mail:
sunil.mehdiretta@ iccrindia.net. Applications along with CVs should reach
ICCR latest by April 20th, 2012.
m a rc h 31, 2012 v o l x lv ii n o 13 EEE3 Economic & Political weekly
All use subject to https://about.jstor.org/terms

dependent on illegal mining. Once we are in
power, we will find a solution for those peo­
ple who have invested in the mining sector
and fear losing their livelihood due to closure
of illegal mining.
In 2010, the Congress government
had announced that along with mining
companies, it was planning to construct
a bypass road for ore transportation in
the form of a loop starting from Maina-
Cavrem (Quepem taluka) and ending
at the Capxem jetty in Sanvordem
town. The b jp blamed the Congress for
doing “nothing on the ground”, and
promised to prioritise mining corridors
to avoid unbelievable levels of road con­
gestion due to unending streams of
mining trucks. But the problem is far
deeper, as shown by the links of some
politicians with fleets of mining vehi­
cles and equipment.
The debate works itself out at many
levels. At one level is the fact that the
lifestyles of villagers has been so totally
disrupted in interior Goa by the mining
industry for many decades now, but
more intensely since the recent Chinese
ore-buying boom. At another level, poli­
ticians across the party divide and the
local industry are willing to concede
some problem with illegal mining. Even
more superficially is the argument that
Goa would benefit simply if mining was
better-taxed and faced fewer revenue
leakages. The b jp has also raised the
issue of spending “at least half the
amount” earned from mining for creat­
ing “infrastructure” in the mining belt;
while this is logical, it might be far from
solving the decades-long woes of the
people in the areas.
Another unanticipated factor in the
elections was the new delimitation of
assembly constituencies, done earlier in
the past decade when the b j p was in
power here. The exercise was dubbed as
“match-fixing”, a term widely used here
to indicate how caste-lobbies or busi­
ness interests coordinate to “help” each
other out in the polls. Among those
accused by the media of “match-fixing”
in the run-up to the elections were
Manohar Parrikar and ex-chief minister
Digambar Kamat. Others seen to bene­
fit from weaker b j p candidates were
Babush Monserrate and his wife (the
Economic & Political weekly E3SS3 m a rc h
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former was repeatedly in the news in the
last assembly tenure, for issues ranging
from his son's alleged sexual involvement
with an under-age foreigner to his carry­
ing large sums of currency while passing
through the Mumbai airport).
The b j p ’s other gambit was to field as
many as six Catholic candidates. All six
won, implying a mix of Catholic candi­
dates with the backing of b j p voters,
could create winners in some consti­
tuencies. The problem with this ap­
proach is that even in polarised Goa the
state's major minority feels disempow-
ered over who ends up as its representa­
tives. In the past too, the b j p has built up
Catholic leaders, only to show them later
in a very poor light and expose their
misdeeds if their politics did not suit
the party.
Money, Caste, Class
Some strange developments did help to
speed up the Congress decimation. Tra­
ditionally, it has been the Congress
which is notorious for buying votes. This
time, news reports here spoke of how
one of the b j p ’s winning candidates ac­
tually managed to escape despite being
caught near a ferry jetty with over Rs 3
lakh in cash on the eve of the poll.
Catholic anti-Congressism overflowed
too, with some help from the b jp in
building the ire. Some priests played
their own role. One priest, Fr Bismarque
Dias, made it to the headlines when he
decided to contest the elections, only the
second priest to do so ever in post­
colonial Goa. Income tax raids on the
Catholic parish priest in Velim, in the
crucial minority-dominated Salcete
taluka, helped ensure the Congress loss,
though it is not clear who or what was
behind this.
Much has been made of Goa’s high
82% voting percentage in the 2012
elections. But this needs to be viewed
against the compacting of the electoral
rolls, with deletions from the rolls of
deceased ex-voters, duplicate voters or
those who had changed their residence.
The shrinking in the number of total
voters might possibly explain the high
participation rate, along with the reli­
gious polarisation and anti-corruption
ire in some areas.
31, 2012 v o l x lv ii n o 13
All use subject to https://about.jstor.org/terms
COMMENTARY
The b j p made a pitch to woo all voters
with promises. This is reflected in its
“Vision Document 2012-17”. The promis­
es include immediately reducing petrol
prices by a whopping Rs 11 per litre
(from April 2012), higher monthly
“pensions” for artists and the elderly, a
Rs 1,000 monthly subsidy for house­
wives to beat inflation, and a Rs 1 lakh
deposit for 18-year-old girls to help meet
their marriage expenses!
But middle-class enthusiasm aside,
elections in Goa tend to be fought on
other issues. In the run-up to the polls,
differences within the b j p seemed to
threaten it sharply with an open rift sur­
facing between its top leaders. Long-time
leader and m p Shripad Naik stayed away
from contesting the elections after his
attempts to re-enter Goa politics were
blocked apparently by party rivalry. This
reflects both Parrikar’s dominant style
of do-it-all leadership, as also caste-
based conflict within the party. Parrikar
is from the long-dominant Saraswat
brahmin caste. Naik, like some other
legislators, are part of the numerically
important Bhandari subaltern caste.
The ‘Alternative*
Given the Congress record, voters in Goa
quickly heaved a collective sigh of relief
with the departure of the increasingly
unresponsive party. But the question is
about the nature of the “alternative” 7
will it be markedly better?
The past rule of the b j p in Goa has
been quite a mixed bag. It came to pow­
er - first indirectly, in late 1999, entirely
by encouraging defections from the rul­
ing Congress, and then by ousting its
own ex-Congressman allies in late 2000
- taking advantage of the cover provid­
ed by its party government ruling Delhi.
While Chief Minister Parrikar apolo­
gised for a couple of slights involving the
minorities then, there are wider issues
which get overlooked. In that tenure, his
administration was pro-industry, and
some of his decisions over education,
police recruitment and the bureaucracy
left questions behind.
Parrikar is known for his ability to
work hard and take on responsibilities,
even if he tends to micro-manage. This
determination, backed by widespread
25
COMMENTARY
support from the local press, creates a
larger than life image. Parrikar has
already promised to “weed out corrup­
tion from its roots” and build a
“Golden Goa”.
But there are problems en route to this
paradise. Despite the b jp national lead­
ers’ claims, the Goa vote continues the
dominant post-1963 trend of communal
polarisations, if a bit differently. This
time around though, the elections saw a
consolidation of the “Hindu” vote, while
the Catholic polarisation was deflected
away towards independents who invari­
ably gravitate towards the ruling party.
Parrikar represents one strand of the
same social forces that have taken this
part of polarisation further. And, the b jp
government in Goa could come under all
kinds of pressures from Congressmen
eager to somehow jockey back to power.
Despite his bold statements, some of
Parrikar’s own team come with ques­
tionable backgrounds, including tradi­
tional lobbies that have dominated poli­
tics here: environment destroying
mining in the interior, questionable
tourism on the coast, and the building
boom overall.
Immediately after the new b jp
government took over in Goa, a series
of communally-provocative incidents
occurred, in a few Muslim and Catholic
graveyards. Parrikar blamed it on insti­
gators trying to discredit his govern­
ment, and threatened to use the Nation­
al Security Act against anyone caught.
While the timing did seem uncanny,
over the recent Congress years in pow­
er, a number of attacks were reported
on shrines of both major religions, and
groups ideologically linked to the b jp
made much of this too.
Years of Congress campaigns as well
as Bjp-linked parivar extremism have
made the minorities wary about the
party’s policies. For Goa’s Muslim popu­
lation, neither the Congress nor the b jp
has been able to stand up to local chau­
vinism or cater to local needs such as
long-pending demands for Muslim buri­
al grounds. Communalism is sometimes
allied with regionalism, to suggest that
newer Muslim migrants into Goa are
“extreme”. During Congress rule, anti-
Muslim communal clashes erupted in
26
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2006 in Curchorem-Sanvordem, and credibility by the two major political
justice is still awaited. parties also leaves a lot to be desired.
Despite the result, there is a sense of This could lead to a spiral of conserva­
being sidelined among sections of the tism on all fronts.
Catholic population too. This section is More important is the impact of these
reminded constantly of its minority sta­ politics within the Hindu population.
tus, increasingly rendered invisible in Despite earlier attempts to incorporate
the local bureaucracy, and politically some subaltern ideologies of nearby
powerless apart from a few controversial Maharashtra or Tamil Nadu (a form of
leaders. This, in a region where the com­ “Bahujan Samaj” politics held sway in
munity still has a vibrant cultural pres­ Goa in the 1960s), the tenor of the dis­
ence and was in fact a majority till about cussion here is still largely conservative
a century ago, when outmigration (and and elite-controlled. Goa still awaits its
post-1961 elections) changed the bal­ regional enlightenment despite being
ance of power. the home of a d d and Dharmanand Kos-
On the other hand, the experimenting sambi, or a Tristao Braganza Cunha. So
by the Parrikar-led b jp has managed to far, the small measures of progressive
woo an influential if small section of perspectives have depended on well-
Catholic public opinion. Ironically, this meaning elites, rather than the empow­
has worked best with the Catholics of ering of the large, if invisible, under­
upper-caste origins. In places like Panaji, privileged. But that has its limits. For in­
pockets like the old elite area of Campal stance, one notable trend of the b j p ’s as­
have shown a preference for the politics cent to power here is how a section of
of Parrikar, though not necessarily former student radicals of the 1970s and
for the b j p as a party. For his part, the 1980s has effectively lent support and
b j p chief minister has been willing to credibility to the Parrikar bandwagon.
offer tokens like an elegant spruce-up At the end of the day, this form of
of the locality, if needed with some strategising could have implications for
of the buildings redone in the old colo­ the wider b jp approach towards diversity
nial style, as with the case of the old within the country.
Goa Medical College. Elsewhere, caste Table 1: Final Party Position
lobbying within the Catholic society Number of seats 40
could also be benefiting the b j p ’s at­ BJP 21
tempts at growth. MGP 03
Congress 09
Social Debate Goa Vikas Party 02
One question that comes up is the im­ Independents 05
pact Goan-style soft Hindutva has on the Table2: ShareoftheVote (in %)
social debate here. The religious polari­ BJP 36.0
sation is clearly having an impact on all MGP 6.7
religious communities, giving a setback Congress 29.7
to some attempts in the last five decades NCP 4.1
to liberalise a formerly strongly colonial- Independents 16.4
influenced church. The quality of com­ Goa Vikas Party 3.5
munity-based “leadership” which is given Others 3.6
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Manager
march 31, 2012 vol xlvii no 13 BESS Economic & Political weekly
All use subject to https://about.jstor.org/terms

Made Snatia
Indignity in the Nam e o f Tradition?
G K KARANTH
The practice of made snana in
some temples in Karnataka
during which devotees, mainly
from the lower castes, roll over
the banana leaves from which
brahmins have eaten, has come
in for censure and debate. The
state government withdrew a
ban on the practice recently,
ostensibly because of a
“scientific interpretation” that it
“cures” skin disorders.
Can the invocation to tradition
justify a humiliating and
undignified practice?
G K Karanth (gk.karanth@gmail.coni) of the
Institute for Social and Economic Change,
Bangalore is presently at the department of
sociology, Lund University, Sweden.
Economic & Political weekly D329 march 31, 2012
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The initial expression of defiance is precisely
despair over one’s weakness.
- S0ren Kierkegaard (1989: 97)
t least once or twice a year, a
A number of states in India wit­
ness a social protest over the
political incorrectness of certain rituals
and practices in the name of faith, wor­
ship, custom or tradition. Some inhuman
practices concerning women (e g, nude
worship as in the case of Savadatti temple,
the devadasi system, or the practice of
ajalu - feeding dalits with human hair
and nails) in Karnataka, Maharashtra and
elsewhere have been banned.1 There
have been protests in Karnataka over the
practice by devotees - especially the dalits
among them - of rolling over banana
leaves off which brahmins have eaten
the meals served in the temples at
Subramanya and Udupi. The ritual is a
variant of urulu seve2 and is supposed to
be one associated with the Malekudiya
tribe. This is known as made snana3in Tulu
or enjalu snana in Kannada. Before the
leaves are gathered and disposed devo­
tees roll from one end of the row to the
other. The act is in fulfilment of a vow or
in anticipation of a boon.
The involvement of members of the
Malekudiya scheduled tribe ( s t ) - num­
bering about 2,800 persons in 2007 -
according to one source, attracted the ire
of dalit and other backward caste social
activists and is focused on the temple
in Kukke Subramanya - about 110 km
from the coastal town of Mangalore. A
visit to the temple forms a part of the
itinerary of most pilgrims touring that
part of the western ghats in Karnataka
that includes other important places such
as Dharmasthala, Udupi, and Kollur, if not
Idagunji, Karkala and Moodbidri. The
name of the presiding deity Subramanya
commands awe because of its associa­
tion with fertility, welfare of children
and cure of skin disorders. The belief
behind made snana is that the practice
vol xlvii no 13
All use subject to https://about.jstor.org/terms
COMMENTARY
cures persons suffering from skin disor­
ders. Most Hindus also believe that these
disorders are a result of harming or killing
a snake in this or previous incarnations.
Closely associated with such a religious
fault (dosha) is the killing of a brahmin
(brahma-hatya dosha).
Besides its historic importance, the
temple has also attracted several celebri­
ties in recent years who have performed
pujas there and which have received
wide media coverage. The official web
page of the temple too highlights this by
displaying a series of photographs of the
bigwigs who have visited the temple:
cricketers Sachin Tendulkar, Anil Kumble
and Rahul Dravid and film stars Hema
Malini, Shilpa Shetty, and a host of
political leaders. Yet, it has not deve­
loped as a centre of religious tourism
like other places in the region have in
recent decades: e g, Dharmasthala, and
Shringeri. Indeed for over a decade the
journey to Subramanya has been an
ordeal owing to the poor condition of
the road leading to it. For a brief period
during the 1980s the train connectivity
(Subramanya Road station) had eased
the hardship of travelling to the temple
town and has been resumed recently.
Faith or Humiliation?
Dalit organisations from different parts
of Karnataka have been protesting the
practice of made snana for some years
now. They find it humiliating that the
M alekudiyas take part in this ritual, there­
by perpetuating the denial of human
rights to members of this community.
Made snana was performed by the devo­
tees on 29 and 30 November last year.
Srinivas of the Hindulida Vargadavara
Jagritha Vedike (a forum for the backward
classes) led a protest against it and along
with his supporters was attacked by per­
sons said to be Malekudiyas. The latter
were upset that their traditions and cus­
toms were being opposed by a few. Tra­
ditionally, it has been the responsibility
of the Malekudiyas to rebuild and deco­
rate the wooden chariot used during the
annual procession of the presiding deity.
They consider themselves to be heredi­
tary followers (pkkalu) of Subramanya.
A police complaint has been lodged
against those who attacked the protestors.
27
COMMENTARY
In different parts of the state, and in the
town of Kasargod of the adjoining state
of Kerala, there have been public de­
bates condemning the practice as well as
the violent response to the attempts by
the protestors. The made snana as well as
the attack on the protestors were covered
by television news channels and some of
the Kannada channels conducted debates
on the practice. The protestors were parti­
cularly angry at the haste with which the
district administration went back on the
earlier orders banning the practice. The
withdrawal of the ban orders followed
the meeting with the minister for religious
affairs who is also an elected leader
from the undivided Dakshina Kannada
district, with the temple authorities. The
justification given for the withdrawal of
orders had been that the government
cannot interfere in matters of faith.
Discussions on television and in the
regional and national print media have
been quite heated, often going beyond
the main issues involved. There are
those who firmly believe and argue that
devotees are not coerced into under­
taking the ritual. It was also reported
that the minister concerned had made a
“scientific” interpretation of how the rit­
ual is effective in curing skin disorders.
One of the participants in a television
debate argued that the practice dated
back several centuries and should there­
fore be allowed to continue. Much of the
debates also centred around whether or
not made snana can be compared to the
Chandragutti nude worship by women.
The spokespersons for the state govern­
ment have been trying hard to convince
people that the Chandragutti (nude
worship is also practised in some other
places) incidence of nude worship is not
the same as made snana, and therefore the
withdrawal of the ban orders is justified.
The justification for withdrawing the
ban orders is also made on the grounds
that the ritual is practised not merely by
Malekudiayas and other bahujan devotees
but also by brahmins. There have been
exchanges and discussions by netizens
as well, some owning up to how they too
have voluntarily taken part in the ritual,
while many others have condemned the
practice not merely by invoking the vio­
lation of human rights, human dignity,
28
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or describing it as a barbaric act, etc, but
also by making larger reference to
“blind” beliefs and values.
While the dalits and other progressive
groups identify support emerging from
beyond the region,4 there have also been
attempts by a few religious groups to target
Hinduism as a religion, and the Bharatiya
Janata Party which is the ruling party.
Many have gone on to link the incident
and the police (in-)action to Anna Hazare’s
movement against corruption. A few
others have challenged the religious
leaders, the concerned minister and his
colleagues and the other brahmins who
take part in the rituals to perform the same
ritual themselves but over the plantain
leaves off which the dalits have eaten.
The intellectual lack of maturity and
ignorance of cultural pluralism is in
evidence when attention is drawn to
members of other religious groups eat­
ing from a common plate (as among the
Muslims), or to the Digambar Jains
undertaking pilgrimages in the nude to
their places of worship. Such arguments
imply that social appropriateness is a
relative phenomenon. Should a temple
become a space within which acts that
are not in keeping with contemporary
thinking on what is “right” and “wrong”
may be permitted to be carried out? The
answer to this question has been skirted
in most of the debates on the ritual.
Act of Submission
There are several issues that have
cropped up in the debate over whether
made snana should be banned. First,
that it is a ritual not confined to the
Malekudiyas, or dalits in general. Nor is
it a practice that is observed only during
the annual festival in the temple. In fact
devotees rolling over the floor - urulu seve
- are observed in other major temples
too, as in Tirupathi and Sabarimala.
Second, there is nothing to suggest that
the performance is enforced, or officially
approved. For example, there is a long
list of services and the fees (or monetary
offerings) prescribed for each. The list in
most temples resembles a menu-card in
a restaurant, but does not include either
a made snana or a urulu seve. In Kukke
Subramanya and in other temples dedi­
cated to the deity there is a ritual of the
m a rc h 31, 2012
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first (solid) meal for an infant, or a first
hair cut for a (male) child: these find a
mention in the list of official services and
fee for each just as there are separate
places where they are performed. Third,
the temples dedicated to Subramanya
are very strongly associated with skin
disorders, and the fertility cult, and the
two are in turn also associated with
snake worship. It is not uncommon to
find devotees said to be in “possession”
of a snake-spirit, crawling from the main
entrance to the temple and receiving a
special sprinkle of the sanctified water
(theertha) and flowers in front of the
image. Fourth, it is a common knowledge
that when people have problems related
to birth of children, lack of a male child
or birth under certain star (zodiac) posi­
tions, etc, they often consult astrologers.
There may have been several appeasing
or purificatory services prescribed such as
Ashlesha Bali, Sarpa Samskara, etc. It is
not known whether the performance of
made snana was prescribed by the priests
or by the astrologers. A common way of
submitting to a higher being - human or
divine - is by offering to give away that
which is a matter of pride or its equivalent.
Thus, shaving off the hair on one’s head
is one such act of submission, just as to
approach a person of a higher rank by
crouching or on one’s knees is another
form o f su b m ission . R ollin g on the
ground too is to be seen as a similar
submission, either in anticipation of a
wish being granted or in gratitude.5
Lessons from the Past
Karnataka will be facing an assembly
election shortly. A parliamentary by-
election is due after the present Chief
Minister Sadananda Gowda vacated his
seat, in the same constituency in which the
temple of Kukke Subramanya is located.
There is, therefore, a likelihood of the
matter becoming not only a threat to law
and order, but also being distorted in the
electoral battles. Neither the brahmins
who are currently seen as protagonists of
the ritual nor dalits will gain in the
resulting conflict. It is unlikely that
several other issues that have a bearing
on made snana will now be left alone.
The shifting religious identity of the
Malekudiyas, moral assessment of several
v o l XLVii n o 13 EEE3 Economic & Political weekly
other practices such as temples maintain­
ing separate dining halls for members
of different castes, the practice of the
Digambar Jains who do not cover their
bodies (there are several Jain pilgrim
centres in the vicinity of Subramanya),
comments and suggestions by members of
other caste and religious groups - espe­
cially the heads of their caste or religious
associations - all will need to be addressed.
The region around Subramanya has seen a
lot of social tension arising from disputes
over places of worship (Seetharaman
2011), enrollment of youth and the poor
in violent militant groups, and growing
religious strife. The events in Subramanya
need not add fuel to these. It is in this
context that the cultural governance of a
multi-ethnic society requires a much
broader and accommodative outlook
than abandoning the thorny issue as
matters of faith and voluntary choices on
the grounds of their historicity.
Nearly a decade ago there had been an
attempt to list the various practices that
were inhuman or considered humiliat­
ing to the scheduled castes (scs) and s t s
and to ban them.6 Perhaps it is appro­
priate now to revisit this list, revise it if
necessary with fresh evidence but facili­
tate a healthy environment to develop a
progressive mindset towards different
castes and ethnic groups. The caste “sys­
tem” may have had its death and an obitu­
ary written to it (e g, Srinivas 2003; Shah
2007) but there is yet an urgent need to
give it a proper burial such that its ghost
does not haunt those who survive.
Marshall Berman observed in 1982 that
“to be modern is to live a life of paradox
and contradiction” (p 15). While adhering
to the tradition of made snana many pro­
tagonists have demonstrated the paradox
and contradictions in which they live.
Several of the centuries-old rituals and
practices have been given up - whether
owing to a legislation (sati, child mar­
riage, to name a couple) or public opinion
against it - shaving the head of a young
widow, for example. Giving up many of
these has been considered as progres­
sive steps too. The brahmins themselves
have moved on from insistence on eating
from a plantain leaf squatting on the floor
to now dining on a table and from a re­
usable plate - not merely in their own
Economic&PoliticalwEEKLY DEE9 m a rc h 31, 2012
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private homes but also in public places
such as a restaurants, temples or wedding
halls. The gradual disappearance of the
practice of keeping women in seclusion
for a few days during the monthly men­
strual period too is another progressive
step. When there can be such signs of
modernity, nothing prevents them from
coming out openly against the practice
of people rolling over the leftover food.
Most of the defenders of the practice
belong to the same caste and region,
which, during the 1920s and after, has
contributed to a major source of social
change namely the Udupi restaurants.
Udupi hotels have contributed to the
processes of secularisation and modern­
isation by exposing traditional dietary
practices associated with temple and
village rituals to the combined forces of
the market, state law and politics. There­
by, Udupi hoteliering and catering has
been instrumental in the transformation
of commensal orthodoxies lying at the
very root of Hindu religious identity and
brahmanical tradition (Madsen and
Gardella, forthcoming).
It is only a step further and in the posi­
tive direction, if the restrictions on com-
mensality in temples too are removed,
especially in the coastal and Malnad
belts of Karnataka. This, in turn, will
pave the way for greater inter-caste har­
mony and lessening of prejudices
towards each other. Justifying rituals
and practices such as the made snana,
separate commensal arrangements based
caste differences by brahmins as in this
case can only further strengthen the
othering (Bairy 2009) - targeting that
community for all social evils including
caste and caste-based discrimination.
Educating the masses against such
inhuman practices is certainly a need, as
the government has now announced,
but it has to be preceded by a firm no to
such practices.
n o t e s __________________________________
1 See e g, Epp (1992), Shankar (2004).
2 An act performed by devotees, which involves
their rolling over the floor around the sanctum
sanctorum in temples. Some temples have
made special arrangements - such as building
a foot-over bridge, or provided for separate
timings for devotees offering urulu seve, as in
Sabarimala. However, urulu seve is performed
also as an act of protest, or as a strategy to pres­
surise the government.
v o l x l v i i n o 13
3 The phrase is pronounced maday snana.
4 Some of the groups and organisations that have
opposed the practice of made snana: “Made
Snana Virodhi Horata Samiti; Sahamatha Vedike
and the Dalit Sangharsh Samiti (Ambedkar vada)
and Democratic Youth Federation of India
(DYFI) in Mangalore. Karnataka Komu Souharda
Vedike. Individuals like G K Govind Rao and
state president of the Karnataka Rajya Hindulida
\forgagala Jagruti Vedike K S Shivaramu. Seers of
various maths sought a ban on “made snana”,
such as Veerabhadra Channamalla swami of
Nidumamidi Math, Chidananda Mahaswami
of Hosamath, Shivananda Puri Mahaswami of
Kaginele Mahasansthan Kanaka Gurupeetha,
Natarajaswami of Gurujangama Math, Siddalinga-
shivacharya swami and Jnanaprakash swami.
5 In rural Karnataka, it is a common expression
by a person desperately seeking a favour thus:
“In return, I shall assume to be living ‘in a cor­
ner where you fasten your dogs, ‘leave your
foot wear’, or ‘keep the dust on your toe over
my forehead’. I am aware also of the common
practice of not taking the name of the revered
god in ordinary or everyday conversations in
this region, especially those of Dharmasthala,
Subramanya and many others” (see Frazer
1922, esp Chs 3 and 19 to 21).
6 See Deccan Herald (Bangalore), 22 October 2001
(accessed on 9 September 2009 at http://www.
deccanherald.com/deccanherald/oct23/s7.htm).
REFERENCES____________________________
Bairy, Ramesh T S (2009): “Brahmins in the Mod­
ern World: Association as Enunciation”, Contri­
butions to Indian Sociology, 43(1): 89-120.
Berman, Marshall (1982): All That Is Solid Melts
into Air (London: Verso), New Edition 2010.
Epp, Linda (1992): “Dalit Struggle, Nude Worship,
and the ‘Chandragutti Incident’”, Sociological
Bulletin, 41 (1 and 2): 145-68.
Frazer, Sir James (1922): The Golden Bough: A Study
in Magic and Religion (New York: Macmillan).
Kierkegaard, Soren (1989): The Sickness unto Death
(translated by Alastair Hannay) (London: Pen­
guin Classics).
Madsen, Stig Toft and Geoffrey T Gardella (forth­
coming): “Udupi Hotels: Entrepreneurhsip,
Reform and Revival” in Tulsi Srinivas (ed.),
Globalisation of Food.
Seetharaman, Sudha (2011): Beyond Contestation
and Legitimation: Religion, Religious Identity
and Religiosity at Bababudhan Dargah in South
India (Research Report submitted to the
Indian Council of Social Science Research,
New Delhi) (Manuscript).
Shah, A M (2007): “Caste in the 21st Century: From
System to Elements”, Economic & Political
Weekly, 42(44): 109-16.
Shankar, Jogan (2004): Devadasi Cult: A Socio­
logical Analysis (second revised edition) (New
Delhi: Ashish Publishing House).
Srinivas, M N (2003): “An Obituary on Caste as a
System”, Economic & Political Weekly, 38(5):
455-59-
Economic&PoliticalwEEKLY
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 CENTRE FOR DEVELOPMENT STUDIES
Prasanth Nagar, Ulloor, Thiruvananthapuram 695 011, Kerala, India

MA APPLIED ECONOMICS
(Degree awarded by JNU)

The Centre
The Centre for Development Studies (CDS) was set up at Thiruvananthapuram under the intellectual
leadership of K.N. Raj in 1970 with the mission of promoting research, teaching and training in disciplines
relevant to development. From 1975 onwards the Centre has been conducting an MPhil programme in
Applied Economics and a PhD programme in Economics, both the degrees being awarded by Jawaharlal
Nehru University, New Delhi. CDS is also a recognised centre for the PhD of Kerala University. To
strengthen its contribution to the study of economics, CDS is launching the course MA Applied Economics
from the academic year 2012-13. The degree will be awarded by Jawaharlal Nehru University, New Delhi.

The Programme
This four-semester programme is intended to equip students with a knowledge of the analytical framework
and empirical methodologies required for the study of contemporary issues in Economics, particularly
with respect to development. The wide range of topics and a balance between theory and application
are the hallmarks of the programme. The students will be exposed to a vigorous research community
consisting of faculty, research students and visitors. With training in economic theory, quantitative
methods and exposure to a variety of data sets, graduates of the programme will be well prepared for
careers in academia, government journalism, the corporate sector and consulting.

Course Content
Students are required to complete sixteen courses within the following structure: 9 core courses and 7
optional courses. One of the core courses is a project in which the student shall work on an empirical
issue under faculty supervision. The project may be seen as the culmination of the programme, with
the students being given an opportunity to learn by doing.

CORE COURSES OPTIONAL COURSES (current list)

Mathematics for Economics Public Economics; History of Economic Thought

Statistics: Theory and Application Topics in Applied Econometrics
Microeconomics Economics of Technology and Innovation
Macroeconomics Population and Development; Industrial Organisation
Growth and Development Environmental Economics
Econometrics: Theory and Application Gender and Development
International Economics Labour Economics; Law and Economics
Indian Economic Development; and Issues in Indian Agriculture
Project Issues in Indian Industry; and Economic History

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• Backed by 4 decades of experience in research, teaching and training on issues related to
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with at least 50% marks. Those appearing for the final examination may also apply.

Commencement
The Programme will commence in July 2012. For details visit website: www.cds.edu

m arch 31, 2012 vol x lv ii n o 13 Idavi E co n o m ic & P o litic a l weekly

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The N eo-liberal City
A Critical Geography
JUDITH WHITEHEAD
his edited volume brings the in­
T sights of critical geography to
bear on the study of cities in south
Asia; a few of the essays focus on Europe.
In the past 25 years, critical geographers
have produced cutting-edge analyses of
the effects of neo-liberal policies on
urban regions, in terms of their spatial
transformations, changes in employ­
ment patterns, and the rescaling and re­
shaping of municipal governance.
The editor of this volume, Swapna
Banerjee-Guha, is a prominent member
of the International Critical Geography
Group, and so I picked up this volume
with much anticipation. Banerjee-Guha’s
introduction skilfully summarises the
multi-scalar and multifaceted forces
shaping neo-liberalising cities in south
Asia. These include not only the “incre­
ased commodification of services, a
decrease in formal sector employment, a
retreat of the welfare state, and hyper­
exploitation of workers”, but also “new
forms of governance that promote the
entrepreneurial capacity of individual
cities” (p 1). In this race to the bottom,
municipal governments have been re­
shaped to suit the needs of a market-
driven global economy, resulting in “the
withdrawal of the state from urban
planning, increasing gentrification of
particular neighbourhoods, and public-
private partnerships that provide gene­
rous public subsidies to private develo­
pers” (p 2). In the process, as she notes,
both space and labour become highly
fragmented and dispersed through in­
come polarisation and extreme differen­
tiation in spaces of habitation.
New forms of centrality and margin-
ality emerge within cities, as capital
seeks out the cheapest and most flexible
labour force, and the highest returns on
real estate investment through increas­
ing colonisation and differentiation of
Economic & Political weekly QSQ march 31, 2012
This content downloaded from 192.190.180.53 on Tue, 06 Nov 2018 11:11:09 UTC
BOOK REVIEW
Accumulation by Dispossession: Transformative
Cities in the NewGlobal Order edited by Swapna
Banerjee-Guha (NewDelhi:Sage), 2010;pp256, Rs695.
space. The totality of these combined
processes creates new forms of accumu­
lation by dispossession, a process through
which resources, lands, water, benefits,
rights, or knowledge that had previously
been considered public goods or com­
munity property, become progressively
commodified and privatised. Driven by
the logic of finance capital, one of the
effects of accumulation by dispossession
is increasing income polarisation and
class differentiation through multiple
channels, a process now brilliantly con­
densed in the Occupy Movement’s main
slogan, “We are the 99%”.
Two Classic Essays
The volume opens with two classic,
general essays. The first is David Harvey’s
essay, “Right to the City”, which shows
how investment in the urban-built envi­
ronment has been a major means for
capital to overcome the contradictions of
over-accumulation, while at the same
time engendering dispossession through
creative destruction. Hence, while mas­
sive infrastructural projects and com­
mercial real estate provide a spatial fix
to over-accumulation, they simultane­
ously cause wide-scale displacement.
Drawing from historical examples, he
argues that rights to the city involve
more than rights of habitation; they also
include the political right to shape the
direction of urban development. The
assertion of such rights in the context of
continual spatial fixes means that urban
environments are contested terrains.
Saskia Sassen’s essay focuses on the
processes of dispersal and centralisation
vol xlvii no 13
All use subject to https://about.jstor.org/terms
accompanying globalisation, i e, the dis­
persal of production to places that offer
competitive advantage, and the concen­
tration of managerial and financial pow­
er in networks of global cities. This new
geography of centres and margins pro­
duces the by now famous hierarchy of
global cities and regional or gateway cit­
ies, and less integrated centres. These
patterns are the result of the creation of
nodes and networks of cities that func­
tion as command and control centres at
various scales of the global economy.
The two general essays are followed
by studies of particular cities. Heinz Nis-
sel examines the neo-liberalisation of
planning in Vienna, Austria. Although
often rated as one of the most liveable
cities in the world due to its previous so­
cial democratic urban planning and cul­
tural history, Nissel shows how increased
disparity and income polarisation have
resulted from Vienna being repositioned
as a financial gateway. With the liberali­
sation of east European economies in
the 1990s, Vienna became a major finan­
cial mediator between western Europe
and the east European hinterland, with
its much cheaper labour power. Simulta­
neously, it became a desired location for
east European and Turkish migrants.
Nissel analyses in great detail the chang­
ing spatial patterns of centralisation and
marginalisation. The old city in the inner
districts remains the cultural heart of
the city, the location of the central busi­
ness district, and the favoured locale of
the very rich. Migrants are confined to
privately rented housing in the outer dis­
tricts, where disinvestment has been se­
vere in recent decades. Hence, class and
ethnic divisions have become increasingly
mapped onto spatial divisions between
the inner and outer districts. He con­
cludes by making a plea that social policy
must dominate the urban economy, and
not vice versa.
Nazrul Islam and Salma Shaft detail
changes in Dhaka, Bangladesh as it
became integrated into global networks.
The rise of garment manufacturing for
transnational firms is the chief result
of Dhaka’s integration into the global
economy. Hence, the city has witnessed
31
BOOK REVIEW
the proliferation of export processing
zones and commercial high-end real es­
tate, alongside slums and shanty towns
that house low-wage garment workers
and other city workers.
Solomon Benjamin provides a thick
description of the changes in urban gov­
ernance in Bangalore, India, as a result of
its rescaling into a major global informa­
tion technology (it ) centre. Even soft­
ware production requires large amounts
of land, it seems. The manner in which
Bangalore’s municipal government ac­
quired land for large it corridors, whilst
dispossessing previous inhabitants pro­
vided a governance model for other
Indian cities to follow. Benjamin, in my
view, correctly identifies e-governance,
public-private partnerships, e-titling, bio­
metrics, geographic information system
(g is ) -based planning, and civil society
partnerships as “Trojan Horses” (p 104)
that produced a seamless rhetoric, eas­
ing and erasing the processes of dispos­
session. To give two telling examples,
Benjamin exposes how e-titling and g is
planning in Bangalore simply erased
previous customary users of the land
that was later acquired for private indus­
try. He also shows how public-private
partnerships provided generous incen­
tives for urban developers, and docu­
ments how only elite civil society groups
were included within the newly revam­
ped, networked governance structure of
Bangalore’s municipality.
Umesh Varma Pakalapati, in a clear
and incisive essay, discusses accumula­
tion by dispossession in Hyderabad. He
maps several projects of the Hyderabad
Urban Development Authority that are
pushing the poor out of the city’s centre
and its developmental orbit. He also
documents the process of land acquisition
in which farmers were compensated for
only 10-15% of the market value for their
land. He further documents violations of
the Urban Land Ceiling Act, forced
acquisition of land from slum-dwellers
and the middle class under the Land
Acquisition Act 1884, and the regularisa-
tion of encroachments of the powerful
by municipal and state governments.
Chapter 8 on “Reconfiguring Power
Relationships: Policies towards Urban
Services in Mumbai” examines the
32
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changing forms of urban governance in similarities between the New Economic
Mumbai through the lens of service deli­ Policy, the New Urban Policy, and finally
very, i e, waste management, water and the j n n u r m . With its emphasis on large-
electricity provision. Marie-Helene Zerah scale gentrification and mega-projects, the
documents the increasing commodific­ privatisation of basic services and public
ation of services, which she differentiates funds, and the liberalisation of land and
from the process that others have de­ real estate markets, the exclusionary
scribed as creeping privatisation. She also thrust of the j n n u r m will almost certain­
shows how the subcontracting of munici­ ly overwhelm its social provisions, pro­
pal services appeals to the middle class ducing more dispossession in its wake.
while subverting the claims of the city’s Indeed, the j n n u r m looks remarkably
slum-dwellers to service provisioning. similar to the competitive city model
Darryl D’Monte, in an essay reprinted analysed by Jessop (2002), Kipfer and
from a 2001 seminar, focuses on chang­ Keil (2002), and Brenner (1999), as well
ing transport policies in Mumbai. He as by Banerjee-Guha. This administra­
documents how the Shiv Sena-Bharatiya tive model, or grid, has travelled rela­
Janata Party ( b j p ) municipal government tively seamlessly from Washington and
bypassed the apex planning body, the New York to London through New
Mumbai Metropolitan Region Develop­ Labour’s Third Way, and from thence
ment Authority (m m r d a ), to vest future through multiple international fora and
transport planning in the Maharashtra private consultancies such as McKinsey
State Road Development Corporation and Company, to much of rest of the
(m sr d c ), a purely engineering agency. In world. India’s Planning Commission,
this way, it was able to subvert debates on too, seems to be a fan of this model.
the future of public transport for Mumbai.
Public options included upgrading the Careful Research
existing train and bus systems, or new Overall, this volume provides detailed
alternatives such as underground rail­ and carefully researched articles on the
ways and sea ferries. Instead, the m s r d c , effects of neo-liberalism on urban policy
as a technocratic body, acquiesced in the and changing metropolitan spaces in
planning and development of flyovers, south Asia and elsewhere. The chapters
sea links and freeways. All privilege pri­ by Banerjee-Guha offer insightful and
vate over public transport, while increas­ original theoretical views on how finance
ing traffic congestion and causing envi­ capital is reshaping urban regions. Her
ronmental harm. D’Monte mentions in discussion of “spaces of difference”, of
passing a public hearing on the “future” the reshaping of centre and periphery in
Bandra-Worli Sea Link. Since the sea urban areas, and the hyper-differentia­
link has now been open for a few years, tion of absolute space, not only draws
this statement is dated. A more recent from contemporary critical geography,
discussion of the environmental damage but also extends its insights. In addition,
to the fisheries in Mahim Bay and to the it adapts much of this literature for a
slum-dwellers in Worli would help up­ southern context by introducing imperi­
date this otherwise informative chapter. alism as a category of analysis.
Banerjee-Guha’s final chapter, “Revisi­
ting Accumulation by Dispossession”, We can supply books published
shows how the Jawaharlal Nehru Natio­ by Permanent Black.
nal Urban Renewal Mission (j n n u r m ), Postage free within India.
while aiming to put Indian cities on a Please contact:
fast track to development, does precisely Ram Advani Booksellers
the opposite for large numbers of urban Mayfair Building
Hazratganj
dwellers. This is because despite allocating
GPO Box No. 154
35% of total funds for Basic Services to the Lucknow - 226 001
Urban Poor (b s u p ), the j n n u r m advo­
E-Mail: radvanilko@gmail.com
cates powerful neo-liberal policies that
facilitate accumulation by dispossession. Telephone Nos. 0522-3060990/
0522-2623511
In a very telling graph, she summarises the
march 31, 2012 vol xlvii no 13 D3S9 Economic &Political weekly
All use subject to https://about.jstor.org/terms

My only concern with the volume as a
whole is that there is thematic uneven­
ness across the chapters. Some utilise
“globalisation” as the lens to examine
new urban policy, others take “neo­
liberalism” as their focus, and only one
author besides the editor explicitly dis­
cusses accumulation by dispossession,
the title of the book. This is surprising
given that the editor’s chapters provide a
theoretical arsenal that could be easily
woven into the various case studies.
In addition, the chapters focusing on
governance could have benefited from a
closer reading of existing critical geo­
graphy. For example, Peck and Tickell’s
(2002) famous distinction between
rollback and roll-out neo-liberalism, or
Swyngedouw’s (2005) discussion of the
authoritarian character of “networked
M em oirs of a ‘W hite W ho C rossed
th e Line’
M S PRABHAKARA
enalising legitimate dissent, let
P
alone active political opposition to
an entrenched iniquitous social
and political order, is a near universal
practice. Where such social and political
inequities are institutionalised with all
the coercive authority of the State, one
can only imagine the violence let loose
on democratic opposition. Dissidents
and opponents of the regime are brand­
ed criminals, are routinely imprisoned,
tortured and killed. Yet, no country ever
admits that it does such things, that it
holds political prisoners.
Conquest and Expansion
Apartheid South Africa presented one of
the starkest examples of this phenome­
non in practice. The country, more ex­
actly the land that is now the state of a
democratic South Africa, was colonised
by European settlers in quick stages in
the latter part of the 17th century. In the
mythology of colonialism in this part of
Africa this was done more by accident
than by design when Jan van Riebeeck
Economic & Political w e e k ly 0333 m a r c h 31, 2012
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governance”, or Kipfer and Keil’s (2002)
analysis of the competitive city model,
to cite but three of many examples,
would have clarified some of the denser
empirical descriptions of changing urban
governance in south Asia. While such
works are cited in Banerjee-Guha’s chap­
ters, they find no mention in the other
chapters. And while south Asia undoubt­
edly possesses specific metropolitan
features, the ubiquitous nature of neo­
liberal urban governance deserves theo­
retical recognition and consideration. It
seems to me that this can occur only when
there is a circulation of and commentary
on critical urban geography across national
borders and national scholarship. Despite
these caveats, this is an exciting and
well-researched volume that will be of
interest to planners, activists, and
The Final Prize: My Life in the Anti-apartheid
Struggle by Norman Levy (Cape Town: South African
History Online), 2011; pp 478, Rands 275.
of the Dutch East India Company, foun­
ded two years after the founding of the
East India Company, landed in Table Bay
in what is now Cape Town on 6 April
1652 and established a victualling station
there, without a clear design of occupa­
tion and conquest. However, within a
week of his landing, the Fort of Good
Hope began to be built; and less than a
decade later the Dutch settlers, no more
voyagers in transit, were fighting the
Khoikhoi, the original inhabitants of
the Cape, to occupy their lands and
enslave them.
The history of the land and its people
over the next three centuries was one of
the relentless spread of the colonial
settlement, conquest and expansion,
and violent suppression of native resist­
ance which never died out. Further, the
arrival of settlers and adventurers from
other parts of Europe drawn by the
v o l x l v i i n o 13
BOOKREVIEW
social scientists working on urban issues
in south Asia.
Judith Whitehead (whitjaoi@uleth.cd) is with
the department of anthropology, University of
Lethbridge, Canada.
REFERENCES____________________________
Brenner, Ned (1999): “Globalisation as Reterritoriali-
sation: The Rescaling of Urban Governance in the
European Union”, Urban Studies, 35(3): 431-51.
Jessop, Bob (2002): “Liberalism, Neo-liberalism,
and Urban Governance: A State-Theoretical
Perspective”, Antipode, 34(3): 453-71.
Kipfer, Stefan and Roger Keil (2002): “Toronto Inc?
Planning the Competitive City in the New
Toronton, Antipode, 34(2): 227-64.
Peck, Jamie and Adam Tickell (2002): “Neo-
liberalising Space”, Antipode, 34(3): 380-400.
Swyngedouw, E (2005): “Let the People Govern?
Civil Society, Govemmentality, and Gover­
nance beyond the State”, paper submitted to
Urban Studies, accessed on 29 February 2012,
http://www.ru.nl/socgeo/colloquium/hum-
boldt.pdf
opportunities of the colony, and later by
the discovery of gold and diamond de­
posits, led to rivalries and the inevitable
wars between different streams of the
colonial settlers, extending the conten­
tions of Europe to southern Africa.
Everyone wanted a piece of action, a
piece of territory. Eventually, after the
conclusion of the two Anglo-Boer wars
(or the Anglo-Transvaal War, 1880-81
and the South African War, 1899-1902),
the contending Boer/Afrikaner “nation­
alists” and the English colonialists
joined hands and signed the Treaty of
Vereeniging (31 May 1902), whose objec­
tive was the joint dispossession of the
lands of the overwhelming majority of
the native black people, and the eventual
establishment of the Union of South
Africa eight years later, on 31 May 1910,
as a dominion of the British empire,
analogous to the old dominions like
Australia, Canada, New Zealand, inde­
pendent countries owing loyalty to the
British crown.
Three years later, and causally linked
to the establishment of the Dominion of
South Africa, came the passing, by a so-
called “parliament” where the majority
of the people were not represented, of
the Native Land Act, 1913, effectively
dispossessing millions of Africans of
their lands. The formation of the African
National Congress ( a n c ) in 1912 was
33
BOOK REVIEW
historically a concomitant development.
This was followed in July 1921 by the
founding of the oldest Communist Party
on the continent, the Communist Party
of South Africa (c p sa ).
An Active Partisan
Norman Levy (born on 7 August 1929),
the author of the book under review,
was heir to all these developments, with
the crucial exception that he was not the
heir to the colonial settlement in South
Africa or the legislations of the illegi­
timate parliament; rather, he was an
active partisan in the long struggle of
the majority of the people against these
abominations. Born in Johannesburg, he
was not a migrant, but a child of first and
second generation migrants, part of a
stream of political and economic migrants
from Russia and the Baltic states with their
complex linkages to pre-revolutionary
Russia. Many of them were of working
class origin, Jewish migrants who had
fled from anti-Semitic persecution of
Tsarist Russia, who chose to emigrate to
South Africa seen as, and in many ways
was, a desirable environment to build a
new life. Some of them brought with
them many skills, new radical ideas and
a progressive political culture which
found new avenues for growth and de­
velopment. It is not accidental that many
of these moved towards the c p s a , the
first and, after an initial distortion, the
only non-racial political formation in the
country at that time.
Anti-Apartheid Struggle
Norman Levy belongs to this tradition
represented by a small number of whites
who “crossed the line” and devoted their
lives to the struggle to get rid of the
monstrous system of institutionalised
racism for establishing a democratic
South Africa. The book’s subtitle says it
all: My Life in the Anti-apartheid Struggle.
The centrality of the struggle is evident
in the very opening page where, while
joy-riding his identical twin brother
Leon’s bicycle at the age of 14 in Hill-
brow, Johannesburg, he takes a tumble
and lands where Hilda Watts, later Hilda
Bernstein, c p s a candidate for the Johan­
nesburg municipal council, was addre­
ssing a street corner election meeting.
34
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That literally “accidental” encounter
led to a lifelong engagement with the
Communist Party. The c p s a was then
legal, though harassed. It was, however,
outlawed in 1950, under the shamelessly
self-explanatory Suppression of Com­
munism Act, part of a series of laws
enacted by the National Party govern­
ment following its narrow victory in the
May 1948 elections in which, then as un­
til 1994, the majority of the people never
could vote. Other anti-democratic legis­
lations curtailing freedom of movement,
forcing people to live in ghettoes, com­
pelling Africans to carry passes and
restricting their presence in cities. This
led to the first peaceful mobilisation of
mass resistance to these unjust laws,
the Defiance Campaign of 1952, led by
the a n c and the South African Indian
Congress (s a ic ).
While not totally eschewing impor­
tant events of his personal life, these
memoirs are in essence political mem­
oirs, dealing with the “struggle” aspect
of his life. His engagement with the c p s a
and, after it was outlawed in 1950, of the
South African Communist Party (sa c p )
clandestinely reconstituted three years
later, covered some of the most momen­
tous events in the liberation struggle.
These included the Defiance Campaign
(1952), the adoption of the Freedom
Charter (1955) by the Congress of the
People representing all the people of
South Africa, irrespective of race and
colour, a core document of the liberation
movement, the Treason Trial (1956-61)
that the State launched following the
adoption of the Freedom Charter in which
156 defendants across the race and colour
lines were charged with treason, a capital
offence, with Nelson Mandela as the first
defendant; Norman Levy and his brother
Leon Levy were among the defendants.
All the defendants were acquitted.
The Treason Trial
The Treason Trial, despite the capital
charges the defendants faced and what a
historian describes its “archival malevo­
lence” (“at the very preparatory stage
some 12,000 documents ranging from
the a n c membership card to notes on
the slave trade, the Bavarian succession
and the Polish-Saxon question of 1750,
MARCH 31, 2 0 1 2
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the Vienna Settlement of 1815, the for­
eign policy of Castlereagh were filed by
the prosecution”), was also a bit of an
absurdist carnival, as recollected in the
memoirs of some of the defendants.
Many defendants, who were “banned
persons” and so forbidden to meet or
communicate with each other could now
meet their comrades as they came to­
gether in the “cage” housing them. The
identical Levy twins were often mistak­
en by the security police for “being the
other”. The book’s cover carried in part a
famous photograph of almost all the de­
fendants taken in stages, for there were
so many of them, and put together; the
twins are third and fourth from the
right, second row from the bottom. Even
more interesting is the person sitting on
the ground, extreme right bottom row.
He was Bartholomew Hlapane, who
made the strange journey from being a
Treason Trialist, and later a central com­
mittee member of the Communist Party
to become a police informer and a key
prosecution witness at the trial of Bram
Fischer and 13 others (1964-66), among
whom was Norman Levy. Bram Fischer,
a heroic figure in South African history,
a member of a prominent Afrikaner
family had “crossed over”. The leading
defence lawyer in the Rivonia Trial in
which Nelson Mandela and the rest of
the top leadership of the a n c were
sentenced to life imprisonment, Bram
Fischer was himself arrested soon there­
after, tried on charges of being a com­
munist and promoting communism and
sentenced to life imprisonment. Hlapane
was later killed by cadres of Umkhonto
weSizwe, the armed wing of the a n c , on
16 December 1982.
The Treason Trial marked the end of
the age of relative innocence in South
Africa. Even as the trial was lumbering
to its predictable conclusion, graver
events overtook the trial, with the shoot­
ing down by the police in a matter of less
than two minutes of 69 unarmed Afri­
cans protesting against the Pass Laws on
21 March i960 at Sharpeville, a black
township about 35 miles south of Johan­
nesburg. The protests were organised by
the Pan Africanist Congress (p a c), avow­
edly more Africanist than the a n c
which, according to the p a c , was being
v o l XLVii n o 13 13253 Economic & Political w e e k l y

manipulated by communists, whites and
Indians with their own agendas. While
the a n c had given a call for anti-Pass
Law demonstrations on 31 March, the
foundation day of the “Republic”, the
p a c literally stole a march over its rival
by organising the protests 10 days
ahead. These nuances made no differ­
ence to the regime that banned both the
a n c and the p a c , imposed a state of
emergency and even more repressive
legislations that enabled detention with­
out trial for 12, 90, and 180 days, and
virtually indefinitely.
Fascinating Features
Having realised that its peaceful protests
had led the struggle nowhere except to
further strengthening of its repressive
state machinery, the a n c decided that
the time had come when the only hon­
ourable course open to it was armed
struggle. Announcing on 16 December
1991 (the date, 16 December, has several
resonance in South African history), the
launching of “planned attacks against
government installations particularly
those connected with the policy of
apartheid and race discrimination”, the
Umkhonto weSizwe (m k), the a n c ’s
armed wing, said:
The time comes in the life of any nation
when there remain only two choices: submit
or fight. That time has now come to South
Africa. We shall not submit and we have no
choice but to hit back by all means within
our power in defence of our people, our
future and our freedom.
Though m k was created by the a n c ,
structurally the m k was to be a new,
independent body, formed by Africans
that included in its ranks South Africans
of all races. The distinction is important.
Though the Freedom Charter proclaimed
that “South Africa belongs to all who
live in it, black and white”, and the South
Africa of the future would be a non-
racial state (not multiracial, for in the
context of South Africa the expression
“multiracial” becomes another fancy word
for apartheid), such was the nature of
the beast that even the a n c , the leader of
the liberation movement, had its mem­
bership limited only to black Africans.
The other components of the Congress
alliance that functioned till i960 were
the s a i c comprising the Natal and the
Economic & Political w e e k ly m a r c h 31, 2012
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Transvaal Indian Congress, the (white)
Congress of Democrats, and the South
African Coloured Peoples Organisation
which were joined by the South African
Congress of Trade Union. It was only at
its Morogoro (Tanzania) conference in
April-May 1969 that the a n c admitted
non-Africans to its general membership;
and opened its executive positions to
non-Africans only at its Kabwe (Zambia)
conference (June 1985), when Joe Slovo
was first elected to the a n c National Ex­
ecutive Committee. One of the most fas­
cinating features of the liberation move­
ment is how these complex links were
negotiated during the struggle.
Touching Narration
Norman Levy’s narrative touches on all
these events. He went through all, the
arrests, the 90-day solitary, the brutal inter­
rogation by that archetype of apartheid
sadism and torture, Theunis Swanepoel,
the experience of Pretoria Cenral, the
hanging prison, the tensions and the
camaraderie of prison life, and finally,
the release in March 1968, and the 22-year
long exile thereafter, for as a banned
person, he could not simply lead a normal
life, hold a job, socialise. His marriage
that survived all these collapsed after
his release.
All these are collected, if not in tran­
quillity, but with a certain detachment,
even humour. For me, the most moving
part of the memoirs is his account of
Bram Fischer in prison, physically a little
shrunk but still defiant, unbroken and
uncompromising in his commitment to
his political beliefs. Despite many pleas
from all over the world, and despite the
fact that he was terminally ill, the
apartheid state would not release Bram
Fischer; a life sentence in South Africa
meant exactly what it said, the person
would die in prison. So, in a “humanitar­
ian” gesture, the dying man was “re­
leased” to his brother’s custody, with the
brother’s house being declared a prison;
and when he died the state took the
ashes away for they were the property of
the prison department. One of the very
first things I did when I went to Bloem­
fontein in December 1994 to cover the
a n c ’s 49th national conference was to
visit the Garden of Remembrance and
v o l x l v i i n o 13
BOOKREVIEW
locate the slab bearing the inscription:
A Fischer, followed by a star and the
date, 23 April 1908, the date of his birth;
and below a cross, followed by 8 May
1975, the date of his death. Democratic
South Africa has honoured his memory;
Nelson Mandela delivered the first Bram
Fischer memorial lecture; other institu­
tions too have honoured his memory.
However, such is the fragility and
selectivity of that memory that he lives
more in the memory of ordinary South
Africans who may not have a fine appre­
ciation of the complexity of his achieve­
ment than the more informed. At the
joint sitting of the two houses of South
African Parliament in Cape Town on
8 May 1995, the 50th anniversary of the
end of the second world war, tributes
were rightly paid to those, including
many South Africans, who died in the
fight against fascism and Nazism in
Europe. One, however, noticed that the
none of the speakers that afternoon, not
even known members of the s a c p in par­
liament and other profound admirers of
Bram Fischer’s life and achievement not­
ed that the day was also the 20th anni­
versary of the death of Bram Fischer, a
heroic communist revolutionary who
died in his fight against fascism closer
home, in South Africa.
History has served Norman Levy a
little more fairly. He has had a most pro­
ductive life in post-apartheid South
Africa as an academic, making major
contributions to the restructuring of
administration and governance. Be well,
friend, you and your partner Carole
Silver who, in your words, you and your
family married in February 1991.
M S Prabhakara (kamaroopi@gmail.com) has
been writing on the North-East for more than
three decades.
Economic&PoliticalwEEKLY
available at
Delhi Magazine Distributors
Pvt Ltd
110, Bangla Sahib Marg
New Delhi 110 001
Ph: 41561062/63
35
 PERSPECTIVES
Higher Education Policy
in India in Transition
JANDHYALA B G TILAK
With the government’s attention
being riveted for decades on
elementary or primary education,
higher education was reduced to
the role of playing second fiddle.
This has suddenly changed in
recent years. Alongside,
neo-liberal economic reforms have
seen an expansion in the role of
the private sector in education.
Many of the recent initiatives in
policy reforms mark a transition in
the history of higher education in
independent India - from a system
embedded in welfare statism to a
system partially based on quasi­
market principles and finally to a
system based on a neo-liberal
market philosophy.
This is a revised version of the presidential
address delivered at the annual conference of
the Comparative Education Society of India,
University of Hyderabad, 16-18 November 2011.
Jandhyala B G Tilak (jtilak@nuepa.org) is at
the National University of Educational
Planning and Administration, New Delhi.
36
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hough the contribution of higher
T education to development is quite
significant, India, like many other
developing countries, has not paid ade­
quate attention to it. There has been a
strong tendency in the country to neglect
higher education, focusing rather exclu­
sively on elementary, more particularly,
primary education. While a major posi­
tive outcome of the 1990 Education for
All conference in Jomtien, Thailand, was
that elementary education received the
somewhat serious attention of the national
government, culminating in the passing of
the Right of Children to Free and Com­
pulsory Education Act (2009), it has had
an undesirable effect on other levels of
education, particularly higher education.
It was widely felt that the goals related
to elementary education could be achieved
only if there was a cap on the expansion
of secondary and higher education. As a
result, higher education was either ignored
in p o licy p la n n in g exercises or special
measures were initiated to reduce the
intensity of public efforts in it, or both.
Many public policy and plan docu­
ments, including the Economic Surveys
the finance minister’s annual budget
speeches and debates and discussions on
policy issues in education were confined
to literacy and elementary education,
ignoring higher education. Given the
national, or even international, commit­
ment to elementary education, the govern­
ment felt that there was no way it could
continue to support secondary and higher
education on the same scale it used to
earlier. To justify its stand, it declared in
the 1993-94 Annual Report of the Ministry
of Human Resource Development, “The
higher education system in the country
is now sufficiently developed to meet the
nation’s requirements. The unmet de­
mand for higher education is not consid­
ered economically viable.”
m a r c h 31, 2 0 1 2
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Another very important development
in the early 1990s was the introduction
of neo-liberal economic policies that her­
alded an era of laissez-faireism in higher
education, which facilitated the growth
of the private sector, often at the cost of
public higher education. The absence of
a clear, coherent and explicit long-term
policy perspective on higher education
in India and a vision for its development
have been the hallmark of Indian educa­
tion in the last quarter century. So much
so that having no policy on higher
education has itself been the policy.
The neo-liberal policies that included
stabilisation and structural adjustment
required a drastic cut in public expendi­
ture across the board, including on higher
education. These policies set the tone for
sweeping reforms in higher education in
India in the following years. Higher edu­
cation was defined as a “non-merit good”
that did not deserve to be financed by
the State. On the whole, higher education
has suffered in the last couple of decades,
including in the areas of policymaking
and planning. Given the absence of any
policy statement per se, to draw any kind
of insight into the policy perspective of
the government, one has to rely on the
proposals made in the five-year and an­
nu al plan s, budget sp e e c h e s of th e min­
ister for finance, other statements made
by ministers on various occasions in and
outside Parliament, executive orders,
and plans and schemes introduced or
announced by the government.
Declining Allocations
Allocations for higher education in the
Eighth (1992-97) and the Ninth (1997-
2002) Five-Year Plan periods touched
all-time lows. Hardly 7% to 8% of the
total Plan expenditure on education was
devoted to higher education, compared
to nearly one-fourth in the Fourth Five-
Year Plan (1969-74) period. A drastic
decline in public expenditure per student
in real prices was recorded both in
general higher education and technical
and professional education. There were
steep cuts in budget allocations for libra­
ries, laboratories, faculty improvement
programmes, research, and so on. Faculty
v o l x l v i i n o 13 Q3 S3 Economic & Political w e e k ly

recruitment in universities and colleges
came to a halt for more than a decade.
Further, during this period, quality and,
more importantly, equity were traded off.
Scholarships in higher education have
the potential for promoting equity as well
as excellence because a large proportion
of merit-cum-means scholarships go to
meritorious students among the weaker
sections. But there was a sharp fall in the
budgets for scholarships in higher edu­
cation alongside those for research. The
neglect of doctoral research for a long time
resulted in a severe shortage of faculty,
which India continues to experience now.
Cost-recovery measures have been not
only seen as a solution to the problem of
inadequate public finances, but also as a
sound and desirable method of financing
higher education. Student fees have been
continuously increased and student loans
have replaced scholarships in policy dis­
courses. Many other methods of augment­
ing non-governmental resources are be­
ing experimented with. The whole ap­
proach has been to reduce public fund­
ing for higher education. As a result,
even when the economy was growing at
more than 7% to 8% per annum, there
was no significant increase in the alloca­
tion of public resources to higher educa­
tion. The higher education system has
suffered a great deal from these myopic
policies and faulty approaches.
While primary education provides the
three ‘R’s, it rarely imparts the skills and
knowledge necessary for employment in a
job that ensures decent wages and living
conditions. So, elementary education is
not a terminal level of education. Most
of the literacy and primary/elementary
education programmes in the country
do not impart literacy that is sustaina­
ble, which means that they do not guar­
antee that children do not relapse into
illiteracy. Further, even if elementary
education imparts some valuable at­
tributes in terms of attitudes and skills
and is able to take people from below
the poverty line to above it, the level of
ascent is often not very high. The danger
of their falling below the poverty line at
any time remains high.
On the other hand, it is higher education
that consolidates the gains received from
elementary and secondary education and
Economic & Political w e e k ly Q39 m a r c h 31, 2012
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provides skills that could be useful in the
labour market, while helping in innovat­
ing technology and sustaining growth. It
is higher education that keeps people
above the poverty line without the dan­
ger of their falling back into the poverty
trap, whether it be educational poverty
or income poverty. Higher education
takes people much beyond the poverty
line by improving the social, occupation­
al and economic mobility of households.
Somewhat robust research evidence exists
to show that higher education contri­
butes to development and has a poverty-
alleviating effect. It enhances the earn­
ings of individuals and thereby contri­
butes to economic development. It thus
makes a significant contribution to reduc­
ing absolute as well as relative poverty. It
also contributes to improvement in human
development indicators such as infant
mortality and life expectancy. In all, higher
education is a very important “human
capability” and a “human freedom” of the
sort that Amartya Sen champions, a free­
dom that helps in attaining other
freedoms, though Sen does not explicitly
refer to higher education in this context.
Sudden and Significant Change
There has been a sudden and significant
change in the approach to higher educa­
tion in recent years. It has probably been
realised that a government that aims to
transform India into an east Asian tiger
or a developed country can ill-afford to
ignore higher education. Economic mir­
acles cannot be created without higher
education. A “knowledge society” cannot
be built without it and a revolution in
information technology ( i t) cannot be
sustained without strengthening institu­
tions of higher learning. Poor-quality edu­
cation and inadequate higher education
systems are features of impoverished,
developing countries. Perhaps it is also
realised that sustaining the recently re­
alised high rates of economic growth in
a globalised world requires a strong and
well-distributed higher education system.
It was acknowledged that the enrol­
ment ratio in higher education had to be
raised to at least 15% by 2012 from
around 10% in the middle of the last
decade to realise the objective of inclu­
sive growth. In addition, this had to be
v o l x l v i i n o 13
PERSPECTIVES
pushed up to about 30% in the decade
after that. The gross enrolment ratio
reached 15% by 2009-10, according to
the Ministry of Human Resource Devel­
opment’s Statistics on Higher and Techni­
cal Education (2009-10). International
evidence shows that economically ad­
vanced countries with universalised
secondary education that provide a fair
degree of access to higher education
have a gross enrolment ratio ranging from
40% to 90%. The converse is also true.
No country with a low enrolment ratio
of 10% to 15% can become an advanced
country - economically, politically or
socially. A 30% to 40% enrolment ratio
in higher education seems to be the criti­
cal threshold level for a country such as
India to become an advanced nation.
Accordingly, in the Eleventh Five-Year
Plan (2007-12), which was described as
an Educational Plan, allocation to higher
education was scaled up and major
expansion was planned. As many as
30 new central universities were to be
set up, of which 15 have been opened
in the last two to three years. At the
commencement of the Eleventh Plan,
only 20 such universities existed. Plans
for expansion also included setting up
six new Indian Institutes of Manage­
ment, seven Indian Institutes of Techno­
logy, 20 National Institutes of Techno­
logy, four Indian Institutes of Inform­
ation Technology, nearly 2,000 colleges
of engineering and technology, 1,300
polytechnics, 4 0 0 undergraduate colleges
and many other institutions. Recruit­
ment of faculty, which had lagged for
nearly a decade and a half in several
states, began to take place again. The
University Grants Commission ( u g c )
formulated new scholarship schemes to
promote research and to improve the
access of the weaker sections to it. The
student loan scheme, which was restruc­
tured in the early 1990s, was further
reformed with liberalised conditions
and a subsidy on interest for students
belonging to lower social strata. The
u g c also initiated measures to provide
special funds to second-tier and third-
tier institutions to improve their infra­
structure. In addition, the government
began considering setting up 14 world-
class or “innovation” universities.
37
New Legislative Measures
Quite a few reforms are being attempted
through introducing new legislative meas­
ures for improved governance of the higher
education system by setting up a National
Commission on Higher Education and Re­
search in place of the ugc, All-India Coun­
cil for Technical Education and All-India
Council for Teacher Education, for improv­
ing accreditation mechanisms, checking
unfair and corrupt practices in technical
education and setting up grievance and
redressal mechanisms. A bill for allowing
the entry of foreign universities to India has
also been introduced in Parliament. The
government wants to not only expand the
higher education system by allowing the
entry of foreign universities, but also make
economic gains with the export and import
of higher education in the framework of
the General Agreement on Trade in Ser­
vices (gats). Some of the government’s
recent initiatives seem to help in smooth­
ing the process of it making a commitment
to higher education under the provisions
of the World Trade Organisation (wto)
and the gats. While these developments
have been welcomed by many, several oth­
ers have rightly questioned them. Some go
so far as to point out that many of these
measures meant for reforming higher edu­
cation are actually deforming it.
Quite interestingly, the government
aims to realise the promised expansion
of higher education with the active
involvement of the private sector and
through various modes of public-private
partnership (ppp). For instance, according
to the Planning Commission’s estimates,
88% of the funds required for the approved
expansion of higher education in the
Eleventh Plan were to be generated
through different modes of ppp. The Plan­
ning Commission’s allocation would meet
only 12% of the estimated requirements.
The mid-year review (2010-11) of the an­
nual plan made it clear that “necessary
legislation measures to facilitate private
participation must be initiated and viable
models of ppp in education need to be
worked out as early as possible”. The im­
portance of the private sector in education
and the need to enhance its role is one of
the few issues on which the government
seems to be very clear and unambiguous.
Approach Paper Policy Statements
Loud policy statements on this have been
made in the approach paper to the Twelfth
Five-Year Plan (2012-17). The very first
chapter states,
Private initiatives in higher education, in­
cluding viable and innovative p p p models,
will therefore be actively promoted. The
current ‘not-for-profit’ prescription in the edu­
cation sector should be re-exam ined in a
pragmatic manner.
In a brief, 10-page chapter on education,
the role of the private sector and the ne­
cessity of encouraging it figure repeatedly,
prominently and very clearly.
Even in elementary education, which
is now enshrined in the Constitution as a
fundamental right, the approach paper
highlights the importance of private sector.
It recommends exploring the possibilities
of involving the private sector in expand­
ing its reach and improving its quality. It
further states that “barriers to private
entry are high, which need to be re­
examined”. Surprisingly, it even favours
private participation in enlarging the cov­
erage of the mid-day meal scheme, which
is now fully funded by the union govern­
ment. In secondary education, it is already
known that a major part of the expansion
of the Rashtriya Madhyamik Shiksha
Abhiyan scheme has to take place through
private participation and ppp . The gov­
ernment feels “it is imperative that the
private sector capabilities are fruitfully
tapped” and argues that “ppp in second­
ary education be vigorously explored”.
Vocational education, skill development
and training have not been planned as a
part of secondary or higher education,

C ouncil fo r S ocial D ev e lo p m en t - H yd erabad

(An ICSSR Research Institute)
Announcem ent of Admissions to
Direct Phd Program mes In Social Sciences And Women's Studies

CSD-Hyderabad announces the direct PhD Programme in Social Im portant Dates:

Sciences and in Women's Studies for the Academic Year 2012-2013
and invites applications from candidates with M.Phil in any of the social Last date of submission of Application Form
sciences wishing to pursue doctoral research. April 8, 2012
Admission is open to candidates with an M.Phil degree in any of the Shortlisted candidates list on the
social sciences. W e especially encourage applications from students TISS and CSD website April 20, 2012
interested in working on issues at the intersection of Social Sciences
and Law. Other areas of expertise in CSD are dalit and adivasi studies, W ritten Test and Personal interview
women's studies, gender studies, environment, intellectual property, May 1 - 4 , 2 0 1 2
labour studies, rural development, disability studies, sociology and
For more information please email the Doctoral
development economics.
Students Officer
The CSD faculty are recognized guides of the Tata Institute of at dso@tiss.edu or Call on 25525268 or 25525223;
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38 march 31, 2012 v o l x lv ii n o 13 QSE3 Economic & Political we ekl y

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but as another tier in the education
system that can facilitate segregation of
students into streams for vocational and
higher learning. The approach paper says,
“Public-Private Partnerships in financ­
ing, service delivery, and provision of
workspaces and training of trainers
should be promoted”.
The approach is equally, if not more un­
equivocally, articulate on higher education,
repeatedly stating its resolve to promote
the role of the private sector in it. It says,
“Private initiatives in higher education,
including viable and innovative ppp mod­
els, will therefore be actively promoted”.
Besides observing that resources need to
be mobilised from the government and
also from private sources, it makes six
statements in unambiguous terms.
One, it says, “Private sector growth in
higher education (including technical)
should be facilitated”. How is this to be
done? The paper stresses “the need for
removal of entry-barriers to private par­
ticipation” in not only higher education,
but also all levels of education.
Two, the paper argues that “innova­
tive Public-Private Partnerships (ppp)
should be explored and developed”.
Three, it states, “The ‘not-for-profit’
tag in higher education sector should,
perhaps, be re-examined in a more prag­
matic manner”.
Four, it favours providing “deserving”
private institutions with “access to pub­
lic funds in the form of loans, financial
aid for students and competitive funding
for research”.
Five, it states that institutions of higher
education “should be encouraged to
raise their own funds through various
legitimate means”.
Six, it recommends considering the idea
of creating large education hubs at four
or five locations in the country, anchored
by large public sector enterprises, possi­
bly with the participation of the private
sector and using funds from their alloca­
tions for corporate social responsibility.
Problematic Proposals
I find every one of these proposals highly
problematic. There is now no effective
regulatory framework binding on private
institutions and the union and state
governments have been very liberal in
Economic & Political weekly Q3 S3 march 31, 2012
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allowing them to come up. The growth
in the number of private institutions tes­
tifies to the non-existence or existence of
only a weak set of barriers to their entry,
operation and exit. Yet, the government
proposes to further facilitate easy entry
and the growth of private sector with more
liberal provisions. Second, it is widely
recognised that ppps, which begin as
formal contracts, often end up as busi­
ness deals where the costs and risks are
shared by the public and the profits by
the private partners. But the government
intends to go in for more and more ppps,
not only in commercial sectors, but also in
education. Third, in the last two decades,
public institutions have been encouraged,
or even required, to generate more re­
sources and they have been doing this
mostly through erratic and steep increases
in student fees and other charges. Asking
universities to generate more funds could
even prove to be counterproductive -
students may prefer going abroad to
paying very high fees within the country.
Fourth, the creation of education hubs,
probably on the lines of special econom­
ic zones, is expected to be accomplished
by relying on corporate social responsi­
bility - an untenable idea to begin with.
Even more serious are the proposals
related to re-examination of the not-for
profit tag and providing financial assist­
ance to private institutions. The first
proposal was made in the context of the
education sector as a whole, implying
that it is an issue to be considered in case
of elementary and secondary education
as well. Education, which by definition
and nature has been de jure a not-for-
profit sector until now, is likely to be
converted de jure into a for-profit sector.
It is widely felt that private educational
institutions in India, though described de
jure as charitable or not-for-profit institu­
tions, are de facto profit-making institu­
tions, which have their own rules and
regulations and are least regulated by
and least accountable to the government.
These institutions have already contri­
buted to vulgar forms of commercialisa­
tion in education. To now formally allow
them to make profits with no limits will
result in further commercialisation of
our education system. Instead of checking
the tendency to commercialise education
vol xlvii no 13
A ll use subject to https://about.jstor.org/terms
PERSPECTIVES
and make profits, the government seems
eager to formally legalise the unfair
practices of private institutions. Moving
from an educational system character­
ised by partial application of quasi-mar­
ket principles to one fully governed by
market principles, many of which are
hazardous to its strength and equity, will
be injurious to all but a privileged few.
Excellence in Public Institutions
In this context, it is important to note
that the best institutions of higher edu­
cation in the world in terms of quality
and standards are public institutions
or private institutions that are guided
by the principles of philanthropy. They
are certainly not for-profit institutions.
Besides, for-profit institutions are hardly
inclusive in providing access to higher
education. As a matter of fact, they are
clearly exclusionary in nature. But the
government proposes to provide liberal
funds to these institutions. As many know,
the government already extends strong
financial support to such institutions.
Private universities and other institutions
of higher education are indirectly but
heavily subsidised in the form of land at
concessional rates or even throwaway
prices, tax concessions in the purchase of
different kinds of material and tax exemp­
tions for all kinds of monetary resources
that flow in. They are also directly sub­
sidised in the form of public funds for
research and attending/organising con­
ferences and seminars, and other develop­
ment grants under various schemes of
the u g c , other bodies such as the Indian
Council of Social Science Research
( i c s s r ) , the Council of Scientific and
Industrial Research ( c s i r ) and the Depart­
ment of Science and Technology ( d s t ) ,
and of the union and state governments.
Besides, huge financial assistance is pro­
vided to so-called self-financing institu­
tions under “fee-reimbursement” schemes
in technical (and also general) higher
education (and even in school education)
in some of the states. The u g c in its 472nd
meeting in September 2010 made a deci­
sion to provide grants to private self­
financing universities - deemed and state
private universities. These institutions
will be accorded 12(B) status and will
have access to grants, probably even for
39
PERSPECTIVES
salaries and maintenance. It has already
begun funding these institutions. The
u g c has made huge grants to private
deemed universities, some of which have
been recommended for derecognition by
the P N Tandon Committee appointed
by the Ministry of Human Resource
Development. Students in private institu­
tions also have easy access to student
loans and this has further facilitated the
fast growth of private education. The
government provides guarantees to
banks for student loans so that private
education expands further.
Push for Private Sector
Now, according to the approach paper, it
appears that the government is deter­
mined to help the private sector grow
further and even flourish. In sum, the
approach paper favours further provision
of access to public funds to these institu­
tions, probably even at the cost of public
institutions, which can be described as a
policy of “private enrichment and public
pauperisation”. Interestingly, the govern­
ment is not completely unaware of the
problems being created by private insti­
tutions of higher education. This was
very clear when it recently introduced
bills in Parliament for the prohibition of
unfair practices in technical educational
institutions and for setting up educa­
tional tribunals to prevent such practic­
es in private institutions and properly
regulate them. At the same time, some­
what paradoxically, the government still
favours large-scale expansion of private
higher education in the country.
Today, according to the Annual Report
of the Ministry of Human Resource
Development (2010-11), there are nearly
600 universities, including a few univer­
sity-level institutions, and 32,000 col­
leges in the country compared to about
250 universities and 10,000 colleges in
2000. Students number nearly 17 million,
excluding 3 million additional students
enrolled in open education system. Much
of the expansion that has taken place in
the education sector after the introduc­
tion of neo-liberal economic policies in
the 1990s has been in the private sector.
Interestingly, the approach paper recog­
nises the huge share of the private sector
in higher education. There are today 73
40
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private universities and nearly 100 private
institutions deemed to be universities,
compared to almost nil about a decade
ago. More than half the colleges are in
the private sector. As the approach paper
notes, private higher education accounts
for about four-fifths of enrolment in pro­
fessional education and one-third overall.
These proportions are quite high com­
pared to figures in advanced countries.
If enrolments in self-financing courses in
public higher education institutions are
also added, these proportions would be
much higher. In contrast, in the us, hardly
one-fourth of the students in higher edu­
cation are enrolled in private institutions.
Without realising that the absolute and
relative size of the private sector in higher
education in India is alarmingly high
compared to the so-called privatised
higher education systems around the
world, and that we have crossed all de­
cently defined tolerable limits of privati­
sation, the approach paper argues for fur­
ther growth in private higher education,
including for-profit higher education.
This will definitely not help in building a
strong, vibrant and sustainable higher
education system. The excessively priva­
tised higher education system, which is
also fraud prone, has already raised
grave concerns about the quality of edu­
cation provided by it and the degree of
equitable access to it. Issues to do w ith
corruption, ethics and even the very
nature of higher education have also fig­
ured in discussions on it. The way things
are going, the higher education system is
drastically being transformed into a
commercial business activity.
Privatisation Mantra
Many rightly note that the last couple of
decades have seen the unbridled and
erratic growth of private higher educa­
tion in India and that this trend is un­
likely to change in the near future. What
is very clear from the approach paper to
the Twelfth Plan is not so much the un­
likeliness as the unwillingness of the
government to alter this even modestly.
Surprisingly, there is no clear reference
in the approach paper to some of the ma­
jor policy goals of the government. For ex­
ample, there is no promise to realise the
long-standing goal of allocating 6% of
march 31, 2012
A ll use subject to https://about.jstor.org/terms
gross domestic product (g d p ) to educa­
tion. Neither is there any clear resolve of
making secondary education universal
nor is there any reference to the goal of a
30% enrolment ratio in higher education.
On the whole, the approach paper does not
spell out what the government wants to
do to improve the public education sys­
tem, but what it intends to do to facili­
tate the growth of the private sector. Pri­
vatisation seems to be the only mantra
for development of education in the
Twelfth Plan.
The approach paper of the Eleventh
Five-Year Plan was titled “Towards
Inclusive Growth”. It appears that growth
has taken place in the last five years, but
many note that it has not been inclusive
with widening inequalities between the
rich and the poor. In the case of higher
education, inequalities have increased and
the absolute numbers of those attaining
higher education in the bottom income
groups have fallen in the last decade, ac­
cording to National Sample Survey data.
Now the draft approach paper to the
Twelfth Five-Year Plan is titled “Faster,
Sustainable and More Inclusive Growth”.
One may believe that growth, even fast­
er growth, may take place, but it may
not be necessarily inclusive. Oddly, very
few appear to have found serious contra­
dictions in the approach of the Eleventh
Plan, w h ich aimed at inclusive growth
but through an enhanced role for private
sector. The Twelfth Plan aims to do exactly
the same - inclusive growth to be realised
through incompatible strategies that pro­
mote privatisation. The approach paper,
however, states in what looks more like a
rhetorical statement that “a holistic and
balanced expansion approach is needed
to target under-represented sections of
society” and that “the central principle
should be that no student who is eligible
to be admitted should be deprived of
higher education for financial reasons”.
Many of the recent initiatives in policy
reforms mark a transition in the history
of higher education in independent India
- from a system embedded in welfare
statism to a system partially based on
quasi-market principles and finally to a
system based on a neo-liberal market
philosophy. Sadly, the transition seems to
be complete and dangerously irreversible.
vol xlvii no 13 13353 Economic & Political weekly
SPECIAL ARTICLE
The Peculiar Tenacity of Caste
ANDRE BETEILLE_____________________________________________
It was not until the 1950s that academics in India began
to acknowledge the role o f caste in Indian life. W ithin
tw o decades caste had come to stay in public discourse.
The Emergency o f 1975-77 and its aftermath were
turning points in the public acknowledgement o f the
continuing significance o f caste. It began to be argued
that far from being antithetical to democracy, caste had
an essential part to play in the advancement o f
democracy in India. In course o f tim e the media took up
the argument for the salience of caste in Indian society
and this has now become almost a part o f the
conventional wisdom. However, there is evidence to
show that caste is in fact losing its strength in India,
though not uniformly or dramatically. W ith the media
giving a sensational turn to caste in its daily coverage,
the long-term changes in caste are being ignored.
This is a revised version of the Pramatha Nath Chatterjee Memorial
Lecture delivered at the University of Calcutta on 29 February 2012. 1 am
grateful to the authorities of the university and in particular Suranjan
Das for inviting me to deliver the lecture. The lecture was chaired by
my former colleague Tapan Raychaudhuri whose presence made the
occasion particularly memorable for me.
Andre Beteille («andrebeteille@yahooxo.in) is National Research
Professor and Professor Emeritus of Sociology, University of Delhi.
Economic & Political weekly Q 2Q m a rc h 31, 2012 v o l x lv ii n o 13
This content downloaded from 192.190.180.53 onTue,06 Nov 2018 11:11:15 UTC
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erceptions about the nature and significance of caste
P have changed in the last 60 years. When M N Srinivas
drew attention in 1957 to the continuing hold of caste.
Times of India commented editorially that he was “exaggerat­
ing the role of caste in Indian public life and politics” (Srinivas
1962: 2). That would have been the general response of most
English language newspapers at least outside peninsular India.
Today, on the other hand, television channels vie with each
other in bringing to light the importance of the “caste factor”
in social and political life.
I can say from personal recollection that the reception of
Srinivas’ address when it was delivered was at best lukewarm.
I was present on the occasion, in my last year of studies in the
department of anthropology at the University of Calcutta where
the paper by Srinivas was presented as the presidential address
to the section on archaeology and anthropology of the Indian
Science Congress. Several of those present wondered if Srinivas
had chosen the right subject for the occasion. The focus among
anthropologists at that time was on tribe rather than caste,
and those who had a wider interest in public affairs were inter­
ested not in caste but in class. In all likelihood the address
would have evoked a different response had it been presented in
Madras or Mysore, but this is not the place to speculate on that.
Recognition of Caste
Srinivas had thrown a stone into the placid waters of anthro­
pology and that stone was to create ripples in the course of time.
Srinivas’ argument began to find favour with anthropologists
engaged in the study of India, starting with those who came
from overseas. Indian anthropologists gradually turned their
attention from tribal studies to village studies. Intensive field­
work in the Indian village led them to recognise the continu­
ing presence of caste. These new field studies turned the atten­
tion of Indian anthropologists from varna to jati and to the
active and dynamic relations between caste and politics.
Political scientists like Rajni Kothari began to take a closer look
at the part played by caste in the operation of politics at the local
and the regional levels. Kothari put together a collection of
papers, mainly by political scientists on the interface between
caste and politics (Kothari 1975). Some political scientists went
so far as to suggest that the effective operation of democracy
in India required the use of caste in the political process for, in
their view, caste brought democracy to the doorsteps of the
ordinary Indian (Kothari 1975; Rudolph and Rudolph 1967).
The preoccupation with caste received a boost with the arrival
in the country shortly after Independence of a large number of
anthropologists from overseas, particularly the us, to undertake
41
SPECIALARTICLE
studies of society and politics in India. They focused on the
study of caste for obvious reasons. First, caste was undoubt­
edly both an important and a conspicuous feature of Indian
society. But to anthropologists from overseas, it had the added
attraction of novelty. Had they wished to study class they could
have done so in their own society. While focusing on caste on
account of its peculiarity, they were also inclined to exagger­
ate its tenacity. Anthropologists working in distant places tend
to yield to the temptation of what the Swedish author Stefan
Molund (1991:43) has called “the maximisation of differences”.
Not everyone was prepared to concede as much to caste at
that time. The economists, who dominated the social science
profession till the mid-1970s, took a very different view of the
matter. They were convinced that caste belonged to India’s
past and not its future. Their main focus of attention was the
economic development of India, and they were convinced that
caste was an obstacle to economic development and, more­
over, an obstacle which could be removed through the formu­
lation and application of intelligent policy. They believed that
the attention given to caste by the anthropologists and socio­
logists contributed neither to better understanding nor to bet­
ter policy. They certainly did not believe that caste had any­
thing to contribute to the advance of democracy.
The development economists had their own views about the
roots of inequality and conflict in Indian society. They believed
that those roots lay in class as defined by the distribution of
material resources and that the preoccupation with caste
diverted attention away from the real problems facing the
nation. K N Raj told me repeatedly that I should stop paying so
much attention to caste and focus instead on class. Much as I
admired Raj then, I now realise that his understanding of class
lacked the richness and depth of Srinivas’understanding of caste.
By the end of the 1970s, three decades after the attainment
of Independence th e view th a t caste w as here to stay came to
be widely acknowledged. The Emergency of 1975-77 and its
aftermath were turning points in the public acknowledgement
of the continuing significance of caste. It began to be argued
that far from being antithetical to democracy, caste had an es­
sential part to play in its advancement in India. In the course of
time the media took up the argument for the salience of caste
in Indian society and this has now become almost a part of the
conventional wisdom. I have to note that although Srinivas
was the first Indian social scientist since Independence to draw
attention to the continuing hold of caste, he did not go so far as
to argue that the revival of caste would be good for democracy.
***
I would now like to return to the argument commonly heard
in discussions among economists, historians and others in the
decades immediately following Independence that caste was
becoming weaker and not stronger in India. That was the prev­
alent view in the University of Delhi outside the department of
sociology. It was also the view in the University of Calcutta
where I had been a student and in the Indian Statistical Insti­
tute where I worked briefly before moving to Delhi in 1959.
Social scientists in Calcutta showed little interest in caste
and were preoccupied to a much greater extent with class.
42
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N K Bose, who was a close observer of Indian society, had a
view of caste that differed from that of Srinivas as well as of
the Marxists. He believed that caste had been the organising
principle of Indian society in the past and, as such, still deserved
serious attention. He was certainly not the person to dismiss
studies of the caste system, or even of individual castes, as ret­
rograde or reactionary. But he also believed that the time when
caste provided the basic framework of Indian society was over
and that society would come to be organised differently in the
future (Bose 1975). He thought that Srinivas exaggerated the
continuing hold of caste but at the same time he had little sym­
pathy for the Marxian theory of class and class conflict.
The educated Indians among whom I moved in Calcutta and
Delhi made their judgments about caste on the basis of their
own experiences and aspirations rather than on any system­
atic field investigation or any careful study of the ethnographic
literature. Not many of them were sociologists of whom there
were only a few at that time. Change was in the air, and they
were naturally more inclined to pick out such evidence as indi­
cated that the old order was being replaced by a new one. It is
true that they did not sift all the available evidence carefully
and systematically, but it would be wrong to say that there was
no evidence at all for the judgments they made. If one looked
carefully and dispassionately, one would find a great deal of
evidence for change.
Three Areas
There were three major areas of social life in which the evi­
dence suggested that caste was declining and not advancing.
First, the observance of the rules relating to purity and pollu­
tion were becoming weaker. Second, the regulation of marriage
according to the rules of caste was becoming less stringent. And
third, the relation between caste and occupation was becoming
more flexible. If one kept one’s eyes on these three aspects of
caste, one would have reason to believe that caste was on the
whole becoming weaker. N K Bose, who knew the Indian coun­
tryside as well as any other anthropologist, and much better
than most economists used precisely this kind of evidence in
making his assessment of the future prospects of caste.
My views of the subject have been influenced by those of
N K Bose and M N Srinivas, both of whom I knew closely and
well. They were close and acute observers of Indian society,
but their perspectives were different, partly because their
experiences of Indian society were different. Srinivas was a
south Indian brahmin who had been exposed early in his life
to the non-brahmin movement of peninsular India, and his
main fieldwork was in Karnataka. N K Bose lived for the better
part in the city of Calcutta which he knew closely and well.
Although he travelled throughout the country, he always came
back to Calcutta.
Bose acknowledged that Srinivas had made a good point,
but thought that his claims about the durability of caste were
exaggerated. Srinivas, in his turn, thought that Bose was
carried away by his hope that India would become a casteless
society. As for myself, I still find it difficult to make a clear
choice between their somewhat different perspectives.
march 31, 2012 vol xlvii no 13 13359 Economic &Political weeklv

There are several reasons why the evidence about caste is so
diverse and so difficult to interpret. There is, first of all, the
large size of the country and the great diversity of its popula­
tion. Apart from the regional differences already referred to,
there are rural-urban differences and differences due to
religion, caste and community. No less important are the dif­
ferences based on wealth, occupation and education. Some of
these differences and their long-term implications will be
discussed later.
Also important is the fact that India has changed substan­
tially in the last 60 years, and this change has not all flowed in
the same direction. We cannot ignore the impact on the social
order of the demographic, technological and economic changes
that have taken place in the period since Independence. For
several decades after Independence the rate of economic growth
remained low. But things took a different course in the closing
decade of the last century, and it is difficult to believe that sus­
tained economic growth will leave the social order unaltered.
There have also been important changes in the working of the
political order. We have moved from a form of democracy
which I have called “constitutional democracy” to one which is
better described as “populist democracy” (Beteille 2008). The
demands of populist democracy often act at cross purposes
with the demands of economic growth and development.
* * *
I will begin by considering the rules of purity and pollution.
To the majority of Indians who were moving into the new eco­
nomic order based on the office and the factory, the decline in
the force of ritual seemed not only obvious but also inevitable.
Many of them had witnessed the operation of those rules in
their homes, among their parents and elders. Some continued
to observe them out of inertia while others derided their
excesses openly. The inertia of custom has ensured the sur­
vival of many old ritual practices, particularly on ceremonial
occasions, but they no longer permeate everyday life to the
extent they did in the past.
The a tte n u a tio n of ritu a l o b se rv a n c e s in ev ery d ay life h a s
b e e n attributed to what has b e e n broadly described as “secu­
larisation”. After describing the various factors contributing
to secularisation, Srinivas observed, “...the concepts of pol­
lution and purity which are central as well as pervasive in
Hinduism were greatly weakened as a result of the operation
of a variety of factors already mentioned” (Srinivas 1995:
126). While drawing attention to the course of secularisation,
he was careful to point out that it might be accompanied by a
strengthening and not a weakening of what he called San-
skritisation. Sanskritisation enlarged the scope of ritual in
ceremonial life even while the force of purity and pollution
was being reduced in everyday life, in the school, the office
and the marketplace.
Rules of Commensality
The ethnography of the pre-Independence period is replete
with discussions of the rules of purity and pollution and their
use in maintaining social distance between castes. Most con­
spicuous among these rules were the rules of commensality.
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J H Hutton (1961: 71) wrote, “Now the taboo on food and wa­
ter as between caste and caste is subject to many gradations
and variations. It is often stated that the test of a ‘clean caste’,
that is to say, a caste of respectable and non-polluting status,
lies in whether or not a Brahman can accept drinking water at
its hands”. In Bengal, the distinction between castes from
which water was acceptable and those from which it was not
provided a rough-and-ready marker of the hierarchy of caste.
But there were great regional variations in the lengths to
which those distinctions were carried. In the Tanjore district
of Tamil Nadu, orthodox Shri Vaishnava brahmins did not
accept water from the hands of their Smartha counterparts as
recently as 40 or 50 years ago.
Not all the rules of commensality had a direct bearing on
the relations between castes, but many of them did. The use of
food transactions as a basis for the social ranking of castes was
examined in some detail by the American anthropologist
McKim Marriott (1968). His evidence was somewhat mixed,
and it did not lead to any clear conclusion. He favoured an
“interactional” as against an “attributional” approach to caste
ranking based on observations of the actual interaction be­
tween members of different castes. His observations seemed
to indicate that food transactions had become more flexible.
Srinivas was no doubt right in pointing out that in modern
India secularisation and Sanskritisation were advancing to­
gether. Sanskritisation enlarged the scope of ritual, particu­
larly on ceremonial occasions which began to be organised on
a larger scale than before and with enormous expenditure. But
the scope of ritual might increase on ceremonial occasions
while at the same time declining on everyday occasions. The
huge expenditure on ritual in the public sphere might in fact
be a compensation for its attenuation in domestic life.
Even where ritual observances are given a new lease of life
by the enlargement of ceremonial, the rules of ritual do not
perform the same function as before. Their role in maintain­
ing and reinforcing social exclusion has been weakened. The
lin k b e tw e e n caste a n d ritu a l h as w eak e n e d p recisely in m at­
ters relating to commensality. When food is served on festive
occasions, members of different castes are no longer served
food according to the rules of caste. To require people to sit for
a meal according to their caste on a public occasion would
cause a scandal today.
When I say that social exclusion based on the ritual
attributes of caste is in decline, I do not mean that all forms of
discrimination and exclusion have disappeared or are about to
disappear. Distinctions of status are observed in every society
and old rules of exclusion are often replaced by more subtle
and flexible codes whose social effects are similar.
Nowhere in the world do people freely inter-dine with
each other without any consideration of rank or status. The
criteria of rank and status are changing in ways which affect
commensal practices as well as the operation of caste. The
old ritual criteria have not disappeared, but they have to
compete increasingly with new secular criteria. Salient
among the latter are education and occupation. Wealth
always mattered, but education and occupation have gained
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ground increasingly as markers of status in contemporary
India and they determine to some extent who eats with
whom on social occasions.
The compulsions of secular education and professional em­
ployment make inter-dining among members of different
castes almost inevitable. In the college canteen or the office
lunch room, segregation according to caste is now almost im­
possible. No matter what one’s private sentiments may be, to
insist on segregation at meals in such a context would invite
ridicule today although it might have seemed the most obvious
thing to do a 100 years ago. Yet, separation, if not segregation
during meals has not ceased to exist. An officer will not sit and
eat with his peon even if the two are of the same caste whereas
he might eat in the company of another officer of similar rank
but of a different caste.
Higher education and professional employment have not
done all that the proponents of development and modernisa­
tion expected them to do. Perhaps they were too sanguine in
their expectations. Old practices, habits and attitudes have
shown greater resilience than was expected. India is a very
large country where few things disappear altogether. But it
will be a travesty to argue that nothing changes in India.
The winds of change have not left even rural India
untouched. Ethnographic studies of villages from all parts of
the country indicate a general relaxation of the restrictions on
inter-dining. One of the best among these is the study of a vil­
lage in central India by Adrian C Mayer which he kept under
observation through repeated visits between 1954 and 1992.
Mayer noted that while the old rules of commensality still
remained, their observance by men as well as women had be­
come more relaxed. He assigned some significance to increased
travel outside the village and to the emergence of eating places
along the roadside outside the village (Mayer 1996).
Mayer found that there was both continuity and change,
and explained why it was so difficult to strike an exact balance
between the two. But even though there might be disagree­
ment over the pace and extent of change, few would disagree
about its general direction. No ethnographer to my knowl­
edge has argued that the ritual rules governing inter-caste
relations are becoming more stringent whether in the cities or
in the villages.
Not all those who wrote about caste in the period before
Independence assigned primacy to its ritual basis. H H Risley
(1915) who had preceded Hutton as the commissioner of cen­
sus, would give primacy to the rules for the regulation of mar­
riage. There is, in any case a close relationship between inter­
dining and intermarriage within the caste system. It is undeni­
able that there is something distinctive if not unique about the
rules of marriage whose importance has been underlined in
the classical texts as well as the modern ethnographic litera­
ture (Dumont 1983).
There are rules for the regulation of marriage in all socie­
ties: it is said that the difference between animals and humans
is that animals have mating and we have marriage. Nowhere
have the rules of marriage been as elaborate, as intricate and
as stringent as in India. In India there are rules of endogamy,
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exogamy, hypergamy and preferential kin marriage of various
kinds. In the past all those rules were upheld by the force of
law. The law was changed soon after Independence, but
custom did not change to the same extent. The law no longer
prohibits inter-caste marriage, but custom still stands in the
way of such marriage to a large extent. The question is not
whether custom has changed to the extent permitted by the
law, but whether it has changed at all.
My view is that custom has been changing though not very
rapidly or very extensively and not to the same extent in all
classes and communities. The interesting point is that the upper
castes, which were the most stringent about safeguarding
the traditional rules of marriage have now become the most
lenient towards departures from those rules. This change has
come about in a matter of three or four generations, not a
very long span in the life of an ancient society.
Rule of Endogamy
The rule of marriage that is linked most directly and obviously
to the perpetuation of caste is the rule of endogamy. It is that
rule which confines the ties of kinship and marriage within a
small and defined group and thereby enables it to maintain
clear social boundaries with other groups of the same kind. If
the boundaries between social classes are more vague and
fluid than those between castes, it is largely because marriage
rules in societies divided by class are less well-defined and
more flexible than those in societies based on caste. In the kind
of local communities in which the majority of the population
lived in the past, marriage within the caste or the sub-caste
was as much the responsibility of the local kin group as of the
parties directly concerned. With the increased movement of
population, local groups have become more dispersed and less
close-knit.
In the past, the weight of local opinion ensured that the
marriage partners were properly matched not only according
to caste but also according to subcaste or even sub-subcaste. A
marriage between a Smartha and a Shri Vaishnava brahmin,
or between a Rarhi and a Barendra brahmin would be viewed
as an inter-caste marriage. That might no longer be the per­
ception today. Redefining the boundaries of caste expands the
range of choices available even in arranged marriages and it
helps to accommodate factors other than caste in the choice of
marriage partners.
One important indicator of the kind of change I am speak­
ing about is the obsolescence of the rule of hypergamy or
anuloma. That rule was extensively discussed in the classical
literature on marriage and widely acknowledged in the past
although not universally observed. It was practised in Bengal
among brahmins of both the Rarhi and the Barendra segments
where it was associated with the ill-fated Kulin system
(Bhattacharya 1896). According to the anuloma system men of
a superior caste or sub-caste might marry women of inferior
sub-castes but not the other way around. The opposite kind of
match, between a man of inferior caste and a woman of a
superior one, known as pratiloma was not only disallowed but
severely condemned. The custom of anuloma allowed Kulin
m a r c h 31, 2 0 1 2 v o l x l v i i n o 13 0059 Economic &Political w e e k ly

brahmin men to accumulate many wives since other brahmins
were eager to marry their daughters to Kulins.
It may be argued that the rule of hypergamy provides a bet­
ter insight into the nature of caste than the rule of endogamy.
The rule of endogamy tells us only about the separation
between castes whereas the rule of hypergamy tells us about
both separation and hierarchy. It expresses the principle that
bride-takers are superior to bride-givers. A family which
gives its daughters to another family without expecting to
receive any daughters in return tacitly acknowledges its own
inferior status.
In my experience the rule of hypergamy has become obso­
lete among the upper castes in Bengal. Even the terms anu-
loma and pratiloma are not always recognised by educated
Bengalis of the younger generation including the brahmins
among whom it was prevalent in the past. It is true that inter­
caste marriages are still somewhat infrequent, but when such
a marriage does take place, the principle of hypergamy is
hardly a consideration.
The obsolescence of hypergamy indicates a weakening not
only of the separation between castes but also of their hierarchy.
This of course does not mean that considerations of rank and
status are no longer present in the arrangement of marriages.
But now, education and occupation are increasingly taken into
account in addition to caste. Today where a good match is
available in terms of education and occupation, a marriage
may be arranged even when the castes do not match perfectly.
Traditional marriage practices were based on the joint
operation of the hierarchy of castes and the subordination of
women. Among the upper castes in particular, girls were
married very young, ideally before they attained puberty.
There was hardly any scope for the exercise of choice by the
girl being offered in marriage. This is changing, though not
very rapidly or to the same extent in all sections of society.
There is now greater scope for individual choice although how
far that choice is actually exercised in order to marry in a dif­
feren t caste is difficult to d eterm in e.
Significant changes are taking place in the position of
women in Indian society. They are now joining the ranks of
the middle class in their own right, as doctors, lawyers, profes­
sors, bankers, and consultants, and not just as daughters or
wives of members of that class. As young adults, they are
better able to exercise or at least indicate their marriage pref­
erences than adolescents or children which is what most
brides were when they were married off in the past. It does
not follow from this that many women do in fact exercise
their choice in favour of marriage outside the caste. At the
same time, the marriage of adults, no matter how compliant,
is more difficult to regulate according to the rules of caste
than child marriage.
Rise in Age at Marriage
The secular trend of increase in the age at marriage for women
is one of the most significant features of contemporary Indian
society. It is important in itself and has far-reaching conse­
quences for the structure of society. It will be reasonable to
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SPECIALARTICLE
maintain that there is no going back to the days of child
marriage. This does not mean that there will be no more
arranged marriages, but even in such marriages the distinc­
tions of sub-caste and sometimes also the distinctions of caste
might be ignored.
The developments I have been speaking of began in the edu­
cated urban middle class and are even now most conspicuous
in that class. This is inevitable given the significance in it of
education and employment, particularly for women. For good
or for ill, the middle class has played a crucial part in the
making of modern India and its open and secular institutions.
It has grown enormously in size in the 60 odd years since
Independence. It is now significant not only culturally and
politically but also demographically. Although still a minority
in the population of the country, its numbers already run into a
couple of hundred million, and the number is increasing by the
year. It will impose its values and aspirations on the rest of
society by the sheer weight of its numbers.
It is true that the middle class has had to make many com­
promises with caste. But caste too has had to adjust itself to the
demands of an expanding middle class. The middle class has
grown not only in size but also in diversity. It has become
increasingly diverse, not only in terms of caste and community
but also in terms of education, occupation and income. It
includes clerks and schoolteachers at one end and surgeons,
solicitors and senior managers at the other. These distinctions
count increasingly in the selection of marriage partners and
not simply the differences of caste. There is no reason to expect
a perfect correspondence between the layers in the middle
class and the gradations of caste.
***
My comments on the middle class lead directly to a discus­
sion of the association between caste and occupation. For cen­
turies in the past, caste had provided the social basis for the
division of labour in an economy of land and grain. There were
two distinctive, if not unique, features of the traditional divi­
sion of labour. The first was the extreme specialisation of
crafts and services that grew within it; and the second was the
close association between each specialised occupation and a
designated community in which membership was by birth.
Every village boasted a number of crafts and services,
each associated with a particular caste. In principle each
village was expected to be self-sufficient and hence to have
the full complement of crafts and services required by its
members, although there might be many gaps in practice.
The division and subdivision of crafts and services in terms
of the techniques used and the corresponding division of a
caste into sub-castes was explained by Bose with the example
of the oil pressers in eastern India: “We have to note how,
among oilpressers, differences of technology and craft
practices on the one hand and of social and commensal prac­
tices on the other have led to the emergence of subcastes”
(Bose 1975: 80).
This extreme specialisation and the transmission of tech­
niques from generation to generation within an extended kin
group had its own advantages. But what was an advantage
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when technology changed very slowly, if at all, became a dis­
advantage under conditions of rapid technological change.
British rule created the conditions for such change, and the
inevitable outcome was the loosening of the association be­
tween caste and occupation. The pace of technological change
increased after Independence, and Nehru’s vision of advanc­
ing through technological innovation prevailed over Gandhi’s
vision of a nation based on the village community sustained by
its traditional crafts.
However, the association between caste and occupation
only loosened; it did not break down altogether. Even in
the past it was not as rigid as some were led to believe. No
handicraft could sustain the entire population of the caste
which was associated with it, particularly when the popula­
tion was rising and where opportunities for migration were
limited. The surplus population from a particular caste or
sub-caste could always move into agriculture or some other
gainful activity not associated with any particular caste.
What was not easy was the movement from one to another
specialised craft or service already assigned to an existing
caste or sub-caste.
Apart from the decline of traditional crafts and services, a
significant development was the emergence of a new kind of
occupational system based in the office and the factory. As I
have already indicated, the new occupational system intro­
duced its own social gradations which began to cut across the
gradations of caste. This development started in the second
half of the 19th century, and it began to gain ground after In­
dependence, and especially after the economic reforms of the
1990s. In the early decades of Independence it was the public
sector that took the lead in it, but now the private sector has
become the driving force behind technological innovation
and change.
T hese developm ents are creatin g a c h u rn in g process in
which old occupations based on caste are being displaced by
new “caste-free” occupations. Where the choice of occupation
is strictly regulated by caste, the scope for individual mobility
is restricted. Everywhere in the world the middle class is
animated by the desire for individual mobility. The inability of
individuals to move freely across the occupational space acts
as a drag on economic development. The growing pressure for
individual mobility is bound to weaken the association
between caste and occupation.
Individual Mobility
The extent and rate of individual mobility vary greatly from
one society to another. Economic development does not create
the same opportunities everywhere, and it leads not only to
upward but also to downward mobility. Those who have al­
ready secured a foothold in the middle class now have better
opportunities for upward mobility. But we must not lose sight
of the vast unorganised sector within which individuals have
low wages and little security of employment and have to live
from hand to mouth. Members of the lowest castes are highly
concentrated here just as members of the higher castes are
conspicuous at the upper levels of the middle class.
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It is obvious that there are many constraints on the move­
ment of individuals into the middle class and from one to
another level of it. What is not obvious and very difficult to
establish is the extent to which those constraints are due to
caste alone and to what extent they are due to material factors
that operate independently of caste. Such factors as poverty,
hunger, malnutrition, ill health and illiteracy act as constraints
against upward mobility in all societies, including advanced
industrial societies that have little to do with caste.
It is in any case not my argument that the association
between caste and occupation has disappeared or is about to
disappear. That association is there for everyone to see. My
argument is simply that it has not become stronger. The evi­
dence shows that the association has become increasingly
more complex and in that process has, if anything, grown a lit­
tle weaker. The disproportionate attention paid to caste has
diverted attention away from other major sources of inequality
and conflict, most notably those of class.
***
I have in the preceding sections examined evidence to
determine if caste has been getting stronger since Independ­
ence. The evidence I have brought to light indicates that
caste is in fact losing its strength, though not uniformly or
dramatically. At the same time, it will be rash to conclude
that all those from M N Srinivas onwards who have argued
for the continuing if not increasing strength of caste have
been deluded. We will have to turn to a different sphere of
activity to understand the peculiar tenacity of caste, and that
is the sphere of politics.
Caste had entered the political arena before the independ­
ence of India. The British had encouraged the use of caste and
community in the formation of political groups as a way of
keeping the movement for national unity under control. They
found it more convenient to deal with such groups than with a
political party such as the Indian National Congress. The non­
brahmin movement of peninsular India became a kind of
counterpart to the assertion of political identity among reli­
gious minorities in the north. The leaders of the Congress
Party who made their case against the British on the platform
of national unity sought to play down these movements and
hoped that they would lose their momentum once national in­
dependence had been secured. Strange as it may sound today,
many of the leaders of the nationalist movement believed that
democracy would put an end to caste. It is this belief that Srin­
ivas attacked as being unfounded and naive.
As N K Bose had pointed out in a book first published in
Bengali at the time of India’s Independence, associations had
begun to be formed among various castes from the end of the
19th century. They were formed with various objectives, the
most important among them initially being social reform. He
examined in some detail the association formed by the lowly
Jogi or weaver caste in Bengal.
A newspaper called Jogisakha was started in 1905. “The
purpose of Jogisakha was to establish unity among the Jogis
by dissolving the distinctions of subcaste among them, to raise
the social status of the caste, and to help in the spread of
march 31, 2012 vol xlvii no 13 12359 Economic & Political weekly

education, agriculture, trade and scientific training” (Bose
1975- 154)- Similar associations were started among various
castes in various parts of the country, such as the Izhavas in
Kerala and the Nadars in Tamil Nadu (Rudolph and Rudolph
1967; Hardgrave 1968).
Attention soon shifted from matrimonial and dietary prac­
tices to opportunities for education and employment. This
may be viewed as modernisation of a sort, but that is not how
things were viewed by those who had focused their minds on
the economic development of a nation long mired by poverty
and stagnation.
As the focus of attention shifted from matters of esteem and
prestige to matters of political advantage, or from status to
power, several consequences followed. Rivalries between castes
became more open; the sense of deprivation became more
widespread among socially disadvantaged castes; and the
colonial government began to be approached for redressing
the balance in favour of the disadvantaged. The lower castes
did not expect fair treatment at the hands of the upper, and felt
that only the British could give them what they most needed.
The upper castes whose members dominated the Congress Party
naturally felt resentful. Resentment between the upper and the
lower castes became built into the politics of backwardness.
After Independence the political conflicts among castes
became more widespread and more intense. New rivalries and
new alliances between castes, sub-castes and groups of castes
began to arise. There were enormous regional differences at
the time of Independence, the most notable being the differ­
ence, already noted at more than one point, between peninsu­
lar India and the rest of the country. These differences have
become ironed out to some extent as a result of the greater in­
volvement of caste in the political process in most if not all
parts of the country.
I have already referred to the address given by Srinivas in
1957 on caste in modern India as some kind of turning point.
What in the long run had even greater influence on viewing
caste as a matter mainly of politics rather than religion was the
concept of dominant caste first formulated by Srinivas in 1955
and later elaborated by him in a paper devoted specifically to
the subject (Srinivas 1987: 96-115). Louis Dumont whose view
of caste gave primacy to religion and kinship treated the con­
cept sceptically if not dismissively (Dumont and Pocock 1957).
In the end it was Srinivas’view that prevailed over Dumont’s.
The concept of dominant caste has acquired wide currency
to the extent that it has become a part of the common sense of
public intellectuals in India. It is unlikely that Srinivas himself
foresaw all the uses to which his concept would be put in later
years. One may wonder if he ever turned his back fully on the
perception of caste articulated by his mentor at Oxford
A R Radcliffe-Brown who wrote in his foreword to Srinivas’
seminal work on the Coorgs: “A caste is in its essence a
religious group membership of which entails certain ritual
observances. The rules of caste behaviour are rules of religion”
(Srinivas 2003: x). The difficulty of deciding once and for all
whether caste is in its essence a religious or a political group
contributes something to its peculiar tenacity.
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The adoption of adult franchise after Independence altered
the scope of caste politics and created new openings for its
operation. Going to the colonial authorities for redressing the
imbalances between castes is one thing, and going to the peo­
ple for that purpose is another. The colonial authorities acted
with caution and moderation, and they were inclined to treat
the demands made by castes and communities as matters of
policy rather than of right. With the adoption of adult fran­
chise the countryside began to experience the pulls and pres­
sures, and also the thrills of electioneering on an unprece­
dented scale. Loyalty to caste provided an easy basis for mobi­
lising electoral support. Where caste consciousness was dying
down, it was brought back to life by the massive campaigns
that became a part of every election.
Once again, the difference between peninsular India and the
rest of the country stands out. In the old Madras Presidency
and in the old Mysore state the non-brahmin movement had
kept caste in the public consciousness ever since the formation
of the Justice Party. After Independence, it did not take much
effort there to adapt the consciousness of caste, lying just
beneath the surface, to the new kind of electoral politics. In
the north, in states such as Bihar and Uttar Pradesh, it took a
little more time to reach the same outcome.
At first the use of caste for mobilising electoral support was
defended on pragmatic grounds. Now it has come to be
defended on grounds of social justice. The reason given by
each political party in the early years of Independence was
that in a world where every political party was using caste, it
would be imprudent to risk the loss of electoral support by
ignoring caste. The Left parties and their intellectual advo­
cates were particularly censorious about fostering caste sen­
timents through the electoral process. Their attitude to caste
politics then was radically different from their attitude to
class politics.
Watershed of 1975-77 Emergency
Things began to change in the aftermath of the Emergency of
1975-77* The report of the Mandal Commission of 1980 and the
agitation for the implementation of its recommendations in
1990 turned the tide in favour of caste politics. Increasingly,
social justice came to be seen as a matter of caste rather than
class. The Left parties acquiesced in this change of orientation
and even sought to justify it in the name of Marxism; the au­
thor of the three volumes of Das Kapital must have turned in
his grave.
In a democracy, political programmes that are advocated on
ideological grounds often have purely pragmatic grounds for
their adoption. What are the pragmatic considerations that
favour caste over class as a basis for mobilising electoral sup­
port? To put it in a nutshell, the identities of caste are much
more clear-cut and fixed than those of class. Everybody, or al­
most everybody can say what his caste is, and he will give the
same answer from one election to the next. Very few can tell
what their class is, and the answer could change over time.
The founders of the theory of class and class conflict believed
in the 19th century that the principal classes in capitalist society
47
SPECIALARTICLE
would come to be defined more and more clearly and sharply
and that each class would become progressively more aware of
its own identity and its own material interests. That did not
happen in the advanced industrial societies, and is not likely
to happen either there or in India. Increased opportunities for
individual mobility have weakened the identities of class but
have done little to affect the identities of caste. If I were a
politician intent only on mobilising support for the next elec­
tion, I would much rather bet on caste than on class.
The consciousness of caste is heightened periodically by
campaigns for electoral office which have become more spec­
tacular, more extravagant and more costly from one campaign
to another. In the intervals between elections the same con­
sciousness is kept alive by the interest displayed by the media
in caste and its role in public life. In most parts of the country
outside peninsular India caste was largely ignored by the me­
dia. I do not remember much interest being shown in caste by
the newspapers in Calcutta or Delhi until 1977. Madras and
Mysore may have been different, but in most metropolitan cit­
ies the attitude was similar to the one adopted by the Times of
India in 1957 that M N Srinivas had greatly exaggerated the
role of caste in public life.
There has been a sea-change in the approach of the media to
caste matters. Newspapers in India’s capital city now give much
more space to caste than they did before. Newspapers all over the
world report on day-to-day events rather than long-term trends
of change, and they tend to give precedence to the political
over other matters. There may be nothing to report on inter­
dining or intermarriage for one full year, but there is always
something to report on politics every day. However, the main
responsibility for giving a sensational turn to caste lies with the
electronic media. Private television channels organise discussions
for which they secure the assistance of experts of various kinds
who speak endlessly and tirelessly about the “caste factor” or the
“caste equation” at work behind every kind of electoral alliance
and rivalry. They have found this to be an easy and effective way
of maintaining viewer interest. In this process the long-term
changes in other aspects of caste get easily lost to sight. The
social and political scientists who are lured by these television
channels come to believe in their own formulas, and propagate
them through scholarly and semi-scholarly publications. It has
now become a part of the conventional wisdom that caste is here
to stay just as it was a part of the conventional wisdom among
the makers of modern India that caste was bound to disappear.

REFERENCES____________________________
B6teille, Andr£ (2008): “Constitutional Morality”,
Economic & Political Weekly, 4 October,
PP 35 -4 2 .
Bose, N K (1975): The Structure of Hindu Society
(Delhi: Orient Longman).
Dumont, Louis (1983): Affinity as a Value (Chicago:
University of Chicago Press).
Dumont, Louis and D F Pocock (1957): “Village
Studies”, Contributions to Indian Sociology, I,
pp 23 -41.
Hardgrave, Robert L (1968): The Nadars of Tamil
Nadu (Berkeley: University of California
Press).
Hutton, J H (1961): Caste in India (Delhi: Oxford
University Press).
Kothari, Rajni ed (1975): Caste in Indian Politics
(Delhi: Orient Longman).
Marriott, McKim (1968): “Caste Ranking and Food
Transactions: AMatrix Analysis” in Milton Singer
and Bernard S Cohn (ed.), Structure and Change
in Indian Society (Chicago: Aldine), pp 133-72.
Mayer, Acrian C (1996): “Caste in an Indian
Village: Change and Continuity” in C J Fuller
(ed.), Caste Today (Delhi: Oxford University
Press), pp 32-64.
Molund, Stefan (1991): “Sociology as Critical Under­
standing”, Antropologiska Studier, No 48, pp 31-47.
Risley, H H (1915): The People of India (London:
Thacker & Co).
Rudolph, Lloyd I and Suzanne H Rudolph (1967):
The Modernity of Tradition (Chicago: University
of Chicago Press).
Srinivas, M N (1962): Caste in Modern India
and Other Essays (Bombay: Asia Publishing
House).
- (1987): The Dominant Caste and Other Essays
(Delhi: Oxford University Press).
- (1995): Social Change in Modern India (Delhi:
Orient Longman).
- (2003): Religion and Society among the Coorgs
of South India (Delhi: Oxford University Press).

Economic&PoliticalwEEKLY
RELIGION AND CITIZENSHIP
January 7,2012
Plural Societies and Imperatives of Change: Interrogating Religion and Development in South Asia - Surinder S Jodhka

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Religious Transnationalism and Development Initiatives: The Dera Sachkhand Ballan - Gurharpal Singh

Social Constructions of Religiosity and Corruption - Vinod Pavarala, Kanchan K M alik

Buddhist Engagements with Social Justice: A Comparison between Tibetan Exiled

Buddhists in Dharamsala and Dalit Buddhists of Pune - Zara Bhatewara, Tamsin Bradley
In the Name of Development: Mapping Taith-Based Organisations' in Maharashtra - Surinder S Jodhka, Pradyumna Bora

Welfare Work and Politics of Jama'at-i-lslami in Pakistan and Bangladesh - Masooda Bano

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SPECIAL ARTICLE
The Commons, Communities and Climate Change
NARPAT S JODHA, NAVEEN P SINGH, CYNTHIA S BANTILAN_______
Rural common property resources represent the
historically evolved institutional arrangements made by
communities in dry regions (in the present case) to
guard against the vulnerabilities and risks created by the
biophysical and environmental circumstances
characteristic o f these areas. Despite their valuable
contributions, c p r s are faced w ith decline in terms o f both
extent as well as contribution to the people, and
therefore consequent neglect by the communities. This
paper looks into the process of this negative change, and
attributes the same to public policies, market forces and
population grow th (accentuating land hunger) along
w ith the disintegration o f traditional collective
approaches o f communities to maintain c pr s as
com m unity assets.
Narpat S Jodha (njodha@icimod.org) is policy analyst at the
International Centre for Integrated Mountain Development in
Kathmandu, Nepal. Naveen P Singh (np.singh@cgiar.org) and Cynthia S
Bantilan (c.bantilan@cgiar.org) are at ICRISAT, Hyderabad.
Economic & Political weekly tadfiSI march 31, 2012 vol xlvii no 13
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1 Introduction
he rural commons or common property resources
T
(c p rs ) essentially are communities, institutional
arrangements to collectively manage and harness their
natural resources to complement the gains from individually
owned or used natural resources. Furthermore, many of these
commons, due to their specific features such as fragility, mar-
ginality, poor accessibility, limited divisibility for efficient
high-intensity usage, etc, are unsuitable for individually man­
aged agricultural enterprises.
However, to ensure gains from commons, including collec­
tive risk sharing, a variety of physical products and ecological
services (besides many economic benefits), the communities
have evolved and enforced a number of norms and practices
about usage and protection of commons. Disregard of enforce­
ment implies decline and depletion of commons, as indicated
by field experience and research. In fact, in recent decades, the
rural commons are declining rapidly in different parts of
developing countries including India. The important driving
factors behind this change process are:
(i) Weakening of communities’ collective concerns and actions
to protect and conserve c p r s , resulting from a gradual decline
of traditional social cohesion. The latter is reflected by increas­
ing priority to private gains (overexploiting commons and
encroachment into c p rs ), directly or indirectly encouraged by
public interventions and market forces as well as the land hunger
induced by population growth.
(ii) Public policies and programmes including those induced by
economic globalisation, etc, such as converting c p r spaces into
mining areas, protected areas and parks for a variety of economic
and environmental concerns, and transfer of management
responsibility of such areas to formal public agencies with very
little involvement of primary stakeholders, that is, rural com­
munities. The above anthropogenic interventions are increas­
ingly complimented by accelerating climate variability.
This article focuses largely on the above aspect of the
change with specific reference to arid and semi-arid tropical
areas of India. It also looks at the dynamics of change resulting
from the interactions between man-made and nature-driven
processes affecting c p r s .
2 The Approach and Information Base
This paper is based on various studies that directly focus on
c p r s , as also those that deal with agriculture and the relevant
aspects of its transformation processes in India’s dry regions
since the 1950s. In particular, the studies include (i) a compre­
hensive study during 1982-86, covering multiple aspects of
49
SPECIAL ARTICLE

c p r s and spread across 90 villages from 23 districts belonging
to arid and semi-arid parts of seven states of India (Jodha 1986);
(ii) revisits to some of the villages covered by the 1982-86 study
plus some additional villages in the same areas with greater
focus on issue-based qualitative information, including verifica­
tion visits to the fields and plots of farmers during different years
over the period 1995-2010; (iii) longitudinal village-level studies
(v ls) carried out by the International Crops Research Institute
Figure 1:CircumstancesHistoricallyAssociatedwith CPRsIn DryRegions*
Natural Resource Base and Agro-Ecological Features*
(Low and variable precipitation; heterogeneous including submarginal
fragile land resources unsuited to intensive use, nature's low regeneration
capacities; limited and high-risk production options; etc)
¥
Implications and imperatives at
Regional Level CommunityLevel FarmHousehold Level

for the Semi-Arid Tropics ( i c r i s a t ) in different phases from the a Low population pressure; a Heterogeneity; a Narrow, unstable
market isolation; fragility of resource production base,
mid-1970s onwards, and more recent studies and operational limited technological base; inadequacy of diversified,
programmes by i c r i s a t and partner institutions like the Central and institutional private risk strategies biomass centred
Research Institute for Dryland Agriculture ( c r i d a ) on climate interventions land extensive
farming systems
change and farmers’ adaptations to climate change (Banerjee
b Limited incentives and b Balancing extensive b Reliance on
et al 2011; i c r i s a t 2010; Jodha et al 2010). compulsions for intensive land uses. collective
The discussions in this paper are organised in terms of privatisation of CPRs and focus on measures against
collective risk sharing seasonality and
(a) centrality of c p r s in farmers’ strategies to manage natural risk
resources and risks in the highly unstable and low productive c Overall circumstances (a). c Community response c Induced by (a).
biophysical and agro-climatic environments in the dry regions (b) favourable to CPRs to (a), (b); CPRs (b), stronger
(protection focus on comple­
of India; (b) weakening of traditionally evolved cpR-centred access, usage, etc) mentary CPR-
community strategies in the context of a changing institutional PPR-based
activities
and economic situation and the driving forces behind the
(*) The above discussion and data largely taken from Jodha (1995), based on a
same, as well as some local-level initiatives of communities to comprehensive study of CPRs during 1982-86 (Jodha 1986,1992).
adapt to the negative changes; (c) changing magnitude and Source: Adapted from Jodha (1995).
complexity of the above driving forces in recent years ad­ At village community levels, the heterogeneity, fragility and
versely affecting c p r s and marginalising the local communi­ marginality of land resources, along with the paucity and
ties as well as some renewed adaptation measures against the variability of rains, made it difficult to fully harness the poten­
negative changes; (d) the role of climate change in accentuat­ tial of land resources through arable farming and adequately
ing the process of decline of c p r s ; and (e) conclusions indicat­ meet dry land risks through private resource-based crops farm­
ing some future prospects of cpRs-based on all of these. ing alone. Balancing intensive (by cropping) and extensive land
usage systems (through provisions of pastures and community
3 Centrality of Commons in Dry Land Context forests, etc), as required by the natural resource features, be­
Rural commons or c p r s are institutional arrangements evolved came a part of collective strategies for risk management and
by communities to collectively manage and use their natural production enhancement to sustain livelihoods (Jodha 2008b).
resources. They also formed the component of rural people’s At the farm household levels, despite practising crop-live­
strategies for adjusting to harsh and stressful environmental stock-based mixed farming, diversified cropping and other com­
conditions (Berkes 1989; Bromley and Cernea 1989). The c p r s ponents of extensive farming systems, the narrow farm produc­
in dry and other regions of India broadly include: community tion base (including rainwater harvesting and water ponds)
pastures, community forests, village wastelands, watershed could not ensure full protection against risks due to temporal
drainages, ponds, rivers/rivulets, their banks and beds, etc. and spatial variability of rainfall in the dry areas. Hence, de­
They serve as sources of important farm products and serv­ pendence on collective risk sharing and complementarity of pri­
ices, complementing the private resource-based farm enter­ vate property resource (p p r ) and cpR-based activities became
prises (Ghate et al 2008). Production environments of dry necessary. This again favoured the provision of c p r s .
lands, characterised by low and variable rainfall, frequency of The features of an agro-climatic environment and related
droughts, erodible and low fertility land, nature’s low regen­ adaptive measures described above can be observed in most
erative capacities and limited as well as high-risk production arid and semi-arid areas. However, once aggregated at the
options have several implications at regional, village/commu- macro level (for example, district or block level) the picture de­
nity and farm household levels, which favour the provision of tailing agro-climatic environmental conditions determining the
c p r s in arid and semi-arid regions of India. space for c p r s gets blurred. To clarify, one can compare the situ­
For instance (Figure 1), at the regional level, the aforemen­ ation in two sets of villages - one with high environmental stress
tioned low and unstable production possibilities restricted and the other with lower environmental stress (Table 1, p 51).
population growth, encouraged market-wise disregard and Here, first the cPR-promoting variables (low rainfall and its vari­
isolation of villages, and did not attract technological and ability, length of crop growing season, frequency of droughts,
institutional interventions from outside. All these circum­ extent of submarginal lands, extent of unirrigated lands, etc) are
stances offered limited incentives for privatisation of vast fragile presented. Information on adaptation measures against these
and marginal land area for cultivation and thus helped in features follow. This not only covers the extent of c p r s in the
retaining them as c p r s . villages but also shows the extent of cpR-favouring measures
50 MARCH 31, 2012 v o l x lv ii n o 13 ODES Economic & Political weekly

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 SPECIALARTICLE
and practices such as population density, extent of collective The rapid decline of c p r area and productivity is well recog­
risks sharing practices, extent of dependence on c p r s , etc. nised. Factors that contribute to this are documented at both
The relevance and role of c p r s is greater in areas where micro and macro levels (Arnold and Stewart 1991; Ghate et al
biophysical and agro-climatic conditions are more risky, less 2008; Jodha 1992). Figure 2 (p 54) indicates this process of
conducive to normal crop farming and call for collective meas­ change and the cPR-discouraging components. The state’s role
ures to complement the individually focused practices for is complemented by market forces and new technologies, etc,
enhancing production prospects and reducing uncertainties at regional levels. At community levels, the same forces (in­
and risks (Table 1). cluding side-effects of development interventions) encouraged
enhanced community differentiation and consequent decline
4 Weakening of CPRs of traditional collective resource management systems. Re­
In this section we focus on the changing status and space for placement of community mandates by state rules, and acquisi­
c p r s and the role of man-made circumstances therein. An im­ tion of local commons for various public projects, further al­
portant inference from the preceding discussion (including ienated communities from c p r s . At the level of households,
Table 1) is that as long as the environmental conditions calling reduced area, low productivity and the hopeless situation of
for collective measures against agro-climatic risks and inade­ c p r s made them unattractive thereby accentuating people’s
quacies of individually-focused production strategies prevail, the indifference towards c p r s . This also encouraged community
role and relevance of c p r s as a resource management strategy members to grab c p r s as a private resource rather than manage
will remain undiminished. them collectively. Jodha (1992) reports quantitative details on
However, in India’s dry lands, despite the persistence of bio­ these and related negative changes. However, some of the details
physical environmental stresses, c p r s are rapidly marginalised. relevant to the present discussion are summarised in Table 2
The basic cause is the decline of community concerns and col­ (p 52). The changed situation is broadly depicted by Figure 2.
lective action to protect and sustain c p r s as community assets. Despite all the details, the above information is quite dated
The interlinked key driving forces behind this change are state (that is, collected nearly 25 years ago) and serves a largely
policies (interventions), market forces and the rural communi­ illustrative purpose of changes in c p r s two decades ago. To
ties themselves. To compound matters, climate change or vari­ update the same findings from the revisits made to some of the
ability adds to the impact on c p r s by influencing community villages, long-term data from i c r i s a t ’s v l s is presented below.
decisions and actions.
One simple and logical approach to reflect on the aforemen­ 5 Results of'Revisits'
tioned factors and processes marginalising c p r s , as well as their The results from the revisits are summarised by Jodha (2008a,
ecological and socio-economic contributions, is to look at the 2008b, 2010). They reflect both the positive and negative
reversal of historically evolved understanding and strategies aspects of the changing c p r situation. They were more focused
favouring c p rs , represented through Figure 1. To facilitate this, the on emerging issues, especially qualitative dimensions. The
contexts of the same are presented in reverse form, and thereby information was of change, gathered through focused discus­
reflect on the emerging ground realities disfavouring c p r s . sion groups in the villages, supplemented by verification
Table1: Extent ofCPRsandOtherCollective Risk-SharingStrategiesinVillageswith Highand LowLevelsof Environmental Stress*
DetailsofStressand Strategies Situation (RangeofValuesofthe Variables) intheVillages
HighEnvironmental Stress (Villages28) LowEnvironmental Stress (Villages22)
A Indicators of Stress
• Annual average rainfall (mm) 300-700 800-1,150
• Rainfall variability (coefficient of variation %)a 33-39 18-21
• Length of crop growing seasons (days) 65-90 85-220
• Events of drought/crop failure in five years (no) 2-3 0-1
• Area of submarginal lands in village areas5 (%) 69-82 8-13
• Extent of irrigated crop lands (%) 0-6 10-33
B Adaptation Measures
• Households with dominance of livestock in mixed farming 68-84 4-9
• Households with natural vegetation as principal source of (fodder) biomass (%) 38-52 5-7
• Proportion of areas under crops with high stalk-grain ratio (%) 71-93 27-38
• Extent of collective sharing practices in the village0(no) 9-13 3-5
• Households using more than four CPR products as input in private farming (%) 76-84 13-27
• Share of CPRs in village areas 1950-52 (%) 39-58 15-23
• Population density 1951 (no/km2) 37-49 105-182
* = The distribution o ftw o sets o f v illa g e s -w ith higher or lower degrees o f biophysical stress-is as follows: Andhra Pradesh (3,4), Gujarat (4,5), Karnataka (4,3) Madhya Pradesh (4,2)
Maharashtra (4,3), Rajasthan (6,2), Tamil Nadu (3,3).
a = Coefficient o f variation o f rainfall based on rainfall records at district/taluka headquarters.
b = Submarginal land includes areas w ith sandy and unfertile soils, high extent o f salinity, rocky and undulating topography, w aterlogged areas, perennial w eeds, shrubs, etc, not suitable
for cultivation.
c = Collective sharing activities include collective upkeep and protection o f CPRs. Common use o f private land during non-crop season, seed sharing, desilting o f village ponds,
maintenance o f catchments o f percolation tanks, jo in t field operation during crops season, fodder stocking for charity, m aintenance o f village bulls, contributory fund for comm on facilities
(including jo int litigation for village interests), etc.
Source: Table adapted from Jodha (1995). Data collected for th e study o f CPRs from 93 villages from six states in dry tropical regions o f India from Jodha (1986).

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SPECIALARTICLE
Table2: Quantified DetailsonChangesAdverselyAffecting Extent and StatusCPRsin StudyVillages of Pry Regions3 Development ( if a d ) , United
Details of Change Range of Values Reflecting Change overtime Nations Environment Pro­
1950-52 1982-84
gramme (u n e p ) and ICRISAT,
A General
Population density (no/km2) 37-49 69-98 etc (ibid).
Distance from nearest market centre (km) 18-26 7-21 To summarise, we first put
Cropped area cultivated by tractor (%) 0-1 18-69 together some indicators of
Cropped area irrigated (%) 0-6 3-18 emerging changes in c p r man­
Cost of dry lands at 1980 prices (Rs/ha)a 450-700 1,500-2,500 agement and then list some in­
Extent of CPR areas privatised (%)b 0-0 30-63 dicative issues (lead lines) for
B Incidents of CPR privatisation researchers, field agencies and
a Land distribution camps by the government (no) 0-0 8-12
policymakers to explore new
b Illegal land grabbing cases regularised (no)b 0-0 18-26
possibilities to help rehabili­
C Community-level activities by:
a Villagers' group action (no)c 9-13 3-5 tate CPRS.
b Government agencies (no) 0-3 6-8
D During drought/scarcity households mainly depending on (A) Emerging Changes
a Public relief (no) 5-9 73-82 (a) Villagers under the chan­
b CPR products, collective supplies groups action (no) 63-80 15-17
ged circumstances focus on
E CPRextent and products
a Households using (>4) CPR products and farm input (no) 76-84 18-22 specific c p r units (based on
b Proportion of CPR areas in village land of the village (%) 39-58 16-28 their potential and productiv­
(a) is based on lim ited num ber o f land transactions in different villages. ity) to suit current situations
(b) indicates the cumulative situation since the land reforms o f 1950-52. rather than feel concerned
c = Information that relates to the early 1960s and late 1970s for over 15 villages of Rajasthan, Gujarat and Maharashtra for which studies on
the im pact and adjustm ent to drought were conducted. about the overall magnitude
Source: Adapted from Jodha (1995). The data relates to 28 villages w ith high degree of biophysical stresses (Table 1). of total c p r s . Thus, productiv­
need-based farm and c p r plot visits covering specific aspects ity promotion is one of the lead lines to help rehabilitate and
of c p r management, seen most through c p r units rather than promote c p r s . This calls for a disaggregated approach to c p r
overall c p r areas including depleted, unusable parts. Some management (that is, a focus on specific c p r units rather than
relevant details are as follows: total c p r areas).
(1) Area protection of units - not only decline of area - was o% (b) Increased emphasis on economic concerns and shifting
but area recovered from past encroachment was 3%. priorities for c p r products and their usage. This has guided
(2) Extent of physical protection/rehabilitation by fencing/ communities’ approach to allow individuals or groups to
trenching/ridging was 31%. develop and commercially use c p r s with some sharing ar­
(3) Introduction of high value plant species was 32%. rangement with village institutions, infrastructural develop­
(4) Focus on high value marketable products was 42%. ment activities, etc.
(5) R educed em phasis on low -cost biom ass p rim a rily for T he p o te n tia l co m p lem en tarities visible b e tw e e n specific
self-provisioning was 60%. c p r s and sectoral public programmes (for example, on soil
(6) New c p r - p p r links through plant choices was 36%. conservation, reforestation, water harvesting, watershed de­
(7) Focus on manageable scale factor (for example, sub­ velopment, etc), should be identified and used as a driving fac­
grouping of c p r users, selected c p r units, etc) was 90%. tor for rehabilitation of c p r s . Similarly, the possibility of using
(8) Changing rich-poor alliances reflected through joint field-level sectoral project officials as change agents clearly
management of c p r units was 28%. visible in many areas should be harnessed.
(9) Short-term visibility of gains of new unit-based changes (c) Area-specific grazing pressure reduction approaches (for
was 45%. example, grazing supplemented by stall feeding of animals for
(10) Collective response to increased scarcity-vulnerability modern dairying, stall-fed small ruminants, etc) have good
was 33%; positive side effects of political factionalism was 15%. scope for popularisation.
Besides the above, the limited reorientation of public pro­ Increased extent of c p r - p p r complementarities, especially
grammes reflected through changed approach and attitude of in the areas focused by agricultural r & d initiatives, is another
government officials (in association with concerned n g o s ) area for specific focus.
also helped c p r s . This was seen in programmes dealing with
natural resource rehabilitation/development, drought relief (B) Potential Lead Lines for Future
policies and activities, local infrastructure development, Explorations and Action
changing thrust of agricultural and natural resource focused (a) Due to a number of spatial differences in c p r situations
research and development (r& d ), etc (Jodha 2008a). (even within a village), in place of a uniform approach to all
It may be reiterated here that the revisits to different areas situations, remedial approaches should have need-based
during different years were informal side activities, conducted diversity. Hence there is a practical need for a disaggregated
while visiting the same areas for projects of different organisa­ approach to c p r investigations by focusing on c p r units to
tions like the World Bank, International Fund for Agricultural complement the conventional aggregated approaches. The
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same approach can be extended to other community-centred
programmes such as joint forest management (jfm ), water­
shed development, wasteland development, etc, Syamsundar
(2008), using multi-country analysis of evidence, calls for a
similar approach to give hitherto largely missing attention to
diversity and scale issues in public interventions that are
focused on community-centred, natural resource development,
(b) To address the problems associated with socio-economic
differentiation and consequent decline of a community's col­
lective stake in c p r s , promotion of specific cpR-unit focused
user-group formation can be helpful. Just as treating aggre­
gates of c p r s seldom work effectively in changed contexts, so
is the case with mobilising the entire village community as
against the formation and mobilisation of cpR-unit focused
user groups to rehabilitate c p r s .
To enhance communities' effective involvement in c p r
management, the “revisit” experience suggests that the high
value products, including their yields, markets, etc, get
higher priority over bulky biomass for self-provisioning pur­
poses. The c p r - p p r complementarities are now based on
marketing and income generation rather than just on bio­
mass in a largely subsistence-oriented context of c p r usage.
Accordingly, strategies and incentive systems for rehabilita­
tion and promotion of c p r s need to be more sensitive to the
commercial dimension of c p r use. However, to guard against
the rural poor being bypassed in this process and commer­
cial agencies cornering the new opportunities for themselves,
sufficient precautions and measures (that is, through ac­
countability and participatory actions) will be necessary to
promote the above approach.
For the c p r change programme and its implementation,
closer collaboration in terms of regular task-centred inter­
actions between field-level departmental workers (for exam­
ple, from forestry, rangelands, soil conservation, and water­
shed development, etc) on the one hand and cpR-user groups
on the other is essential. Identification and engagement of new
change agents and mobilisers (such as ex-servicemen, school­
teachers, field-level n g o s and r & d workers, etc) can be helpful
as the “revisits” to some villages indicated.
(C) Some Macro-Level Developments That Affect CPRs
The results of the “revisits”, as well as some evidence from the
situations in other regions ( f e s 2010; i a s c 2011), raise hopes
about the future of c p r s at micro-village levels. Given some
incentives, appropriate opportunities and support, c p r s can be
rehabilitated and promoted to help rural communities and others.
But in the macro context, the emerging scenarios do not
look so favourable to c p r s . The reason for this is the earlier
mentioned key driving forces (particularly the state and pri­
vate corporations) with their expanded mandates and capaci­
ties that tend to directly or indirectly contribute to the decline
of c p r s . Their new steps towards exploiting natural resources
often go against the community-owned, managed and utilised
c p r s . The key factors of the change process are:
(i) Induced by provisions, pressures and incentives provided
by the agencies promoting rapid economic globalisation; the
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SPECIALARTICLE
state (often in collaboration with private sector corporations)
has planned and implemented several schemes and activities
(for example, mining, industrial activities and related infra­
structure and special economic zones (se zs), etc) which also
tend to control natural land resources and products available
through c p r s to the rural communities.
(ii) Induced or compelled by rising concerns and pressures
of environmentalists, the state often extends its control over
community natural resources such as forests, rangelands,
water bodies and different unique landscapes hitherto man­
aged and used by communities. Promotion of protected areas,
environmental/public parks, and biodiversity reserves, etc,
are some examples. To this, one can add some other public
utilities and their supporting infrastructures, such as new ur­
ban colonisation, schools, offices of local administrative and
development agencies, etc, which curtail the areas of c p r s .
All the above and associated activities (displacing tradi­
tional c p r s ) are often justified in the interest of economic de­
velopment and welfare activities for the national public at
large. Besides, most of the proposed initiatives/activities are in
keeping with the shifting long-term national priorities of the
government.
Without questioning the adverse effect of this reasoning on
c p r s , the policymakers' attention can also be drawn to the
following issues.
(i) While discarding c p r s , has any thought (matched with
practical action) been given to low-cost alternatives to help the
traditional c p r users (mostly poor people)? How about the
involved sacrifice of larger gains from c p r s in terms of ecolo­
gical and environmental services?
(ii) In many cases the above services and efficiency/equity
concerns are served better by community-managed c p r s com­
pared to government or private sector managed natural re­
sources, as most of such agencies are rarely known for their
micro-level, place-based understanding of the realities and are
usually governed by remote considerations.
However, our concern in this discussion is about how people
( c p r users) would adjust to the loss of c p r s initiated by macro­
level decisions and actions, especially when c p r users are un­
able to mobilise themselves at macro levels to negotiate their
livelihood issues with policymakers. This problem is further
accentuated by demographic trends visible in many areas,
where the capable young generation, with limited interest and
earning opportunities in rural areas, is increasingly turning to
migration to urban areas rather than engage in agriculture
and c p r management (Jodha 2 0 1 0 ).
6 CPRs: Impact of Climate Change
Besides man-made circumstances, particularly at macro levels
in recent years, climate change or variability has created
greater risk for survival and usability of c p r s .
It may sound ironic that c p r s , which historically evolved as
a part of rural communities' strategies against agro-climatic-
environmental risks, are now getting discarded in the face of
problems associated with climate change or variability. The
recent positive changes in c p r management practices, as
53
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Figure2: CircumstancesAdverselyaffecting the Extentand StatusofCPRs To elaborate on the above aspects it helps to juxtapose, on
in DryRegion the one hand, the relevant attributes and functions of the dif­
Recent economic, institutional and technological changes ferent categories of c p r s and, on the other, the different varia­
influencing the patterns of resource use (1950s to 1980s)
(increased physical and market integration; increased extent and bles constituting the climatic situation, particularly rainfall
changed nature of public interventions; increased and moisture availability and, to an extent, temperature-
demographic pressure, etc; shaping the pace related phenomena. At micro-village levels, precise systematic
and pattern of rural development)
meteorological information may not be available, but the
broad weather-related information plus experience-based
Implications and imperatives at:
Regional Level Community Farm Household
farmers' perception of weather variability and its conse­
Level Level quences can help in assessing the impact of climatic variables
A Population growth a Development-led a Reduced areas and on c p r s and agriculture in general (Jodha et al 2010).
accentuating differentiation productivity of CPRs
land hunger of rural community Marginalising their The first climatic variable which we refer to is rainfall and
and decline of contribution to diversi­ its variability. It directly affects surface and groundwater
collelctive strategies fied and biomass- availability. Harnessed and utilised through tanks/ponds, of­
for resource manage- centred production
ment, risk sharing, etc. strategies.__________
ten as village commons, water harvesting and moisture con­
B Public policies en­ Disruption of commu­ b Individualisation of servation measures, besides facilitating groundwater recharge,
hancing legal/ nities' mandates/initi- adjustment measures also help in retention of soil moisture for biomass growth in
illegal opportunities atives by the state against risks, enhanced uncultivable “waste lands”, pastures and forests, etc, as rural
for privatisation or through legal, admin- risks, enhanced depen­
or state control of legal administrative dence on public relief,etc.
commons. Such biomass through accumulation of their litter
control of CPRS and fiscal means. and root systems, help in promoting what is termed “sponge”,
C Technologies and c Emphasis on acquiring c Reliance on private soaking up water during rainy spells and releasing it evenly
market forces activat­ CPRs as private property resources, market links, during dry spells. Overall, extent as well as temporal and spa­
ing the land market, ratherthanforuse non-biomass-oriented
extending to fragile collectively._________ technologies, etc. tial variability of rainfall affects the contribution and produc­
DOverall circumstances d Due to (a), (b)and (c), Due to (a), (b),and (c), tivity of the aforementioned c p r s . This is also influenced by
(a), (b) and (c) unfav­ rapid erosion of comm­ reduced reliance on temperature and wind variations, often in localised situations.
ourable to CPRs unity concerns and complementarilyof
However, for illustrative purposes, we focus on rainfall, in­
group action for CPRs. CPRs-CPR activities/
products. cluding extreme events such as droughts as climatic events.
Source: Adapted from Jodha (1995). Depending on the type of products or services from specific

Table3:AnIndicative Picture ofthe Impact ofClimateChangeon Rural CPRs

Relevant climatic variables: Extent and variability of rainfall (including extreme events such as droughts/floods); changes in duration and timings of rainy season
vis-d-vis cropping season, rainfall intensities/irregularities, etc, complemented by fluctuations in heat and wind patterns affecting soil moisture situation and plant
growth affecting CPRtypes (A) and (B) and their contributions and finally weakening the collective concern/action for them.
CPRs Impacts Final Consequence

A Directly water focused CPRs

• Rain-fed irrigation tanks
• Village ponds
• Rivers/rivulets, their banks and beds
• Groundwater used through wells,tube wells
(for collective/indivldual use)
• Overall soil moisture retaining, flow
regulating landscapes illustrated
by (B) below
B Land-vegetation focused CPRs
• Community forestry
• Village pastures/range lands
• Uncultivable lands
• Protected vegetation areas
Source: Based onfield observation and information (Banerjee etal 2011; ICRISAT 2010; Jodha 2008a) and m ore recent field visits to rain-fed agricultural regions in India.
Shrinkage or decline of tank area, water availability,
reduced cropping possibilities, and productivity
• Water shortage for humans and animals
• Drinking water shortage; no fish, no short-term
high value crops; reduced grazing possibilities
• Drying of wells, tube wells; decline of irrigation
facility and cropping choices
• Failure of growth and supplies of biomass, etc,
due to scarcity of available soil moisture
• Increased aridity and reduced productivity of CPR lands
For want of sufficient moisture and its stability -
natural and introduced plant species dry up or produced
insufficient biomass and other products to sustain
animals and fulfil other human needs.
Increased collective indifference towards CPR
Privatisation process through people digging
wells in the land occupied by tanks
Increased collective indifference towards maintenance
. Shrinking livelihood options and opportunities
neglected and further dedine,and gradual conversion
of irrigated land to less productive dry lands
Increased indifference of community
• Reduced productivity and supplies/services by CPRs,
create people's collective indifference to these
resources
• "Over use/extraction", further deplete CPRs
• Grabbing parts of CPRs as private lands

shown by the discussion to rehabilitate c p r s , may also be ren­
dered ineffective by the impact of climate change. In the fol­
lowing discussion we elaborate on these aspects, with a focus
on the negative changes in the contribution of c p r s and their
consequences in terms of increased collective indifference to­
wards them as community assets (Table 3).
54
c p rs, rainfall affects the role and contribution of c p r s , which
in turn affect the communities' concerns for and management
of c p r s and ultimately their changing status as the final im­
pact of climatic phenomena on c p r s . We elaborate on this
change process using some village-based illustrations from
different arid and semi-arid areas of the country.
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(a) Water-Linked CPRs
Before elaborating on the impact of climate change on c p r s
and the implications for c p r users, we can briefly digress into
villagers” perceptions and understanding of climate change.
Based on group discussions at the village level involving c p r
users and elderly people covered by i c r i s a t ’s v l s and “revisit
exercise” covering some of the villages studied during 1982-86,
the phenomenon of climate change was recorded as per the
farmers’ experience-based perceptions. Accordingly, in almost
all the studied villages, the process of climate change involved
increased variability in rainfall during the recent 15-30 years.
The changes are reported in terms of below normal rainfall,
changes at the start and end of rainy seasons, frequent occur­
rence of mid-season shortfall or irregularities in the old pat­
tern of annual rainfall and increased extent or frequency of
periodical droughts. In some cases the same was verified
through meteorological records and data ( i c r i s a t 2010).
At a primary level, the most significant impact of the above
change has been the paucity of moisture for plant growth and
undependability of water from irrigation tanks, dug wells and
tube wells. This has resulted in shrinkage of tanks’ command
area, privatisation of uncared for parts as well as tanks’
catchment space by creating dug wells (Banerjee et al 2011;
Ghate et al 2008; i c r i s a t 2010). The major reason for the
shrinkage of tanks in recent years is the reduction of run-off
water entering the tanks as a result of obstructions in the catch­
ment area due to development. Similarly, overexploitation of
groundwater through borewells has resulted in the drying up of
open wells in many villages.
At the secondary stage, the consequences include decline of
particular crops such as rice, sugar cane, etc, and decline in
non-crop products such as fish, waterborne seasonal fruits and
flowers in impounded water in field border trenches and ponds
(used for self-consumption as well as marketing). Finally, this
led to reduced incomes for c p r (tank) users, and people’s
increasing indifference towards a collective stake in these
resources ( i c r i c a t 2010).
Broadly similar is the story of wells and tube wells, fed
through groundwater recharge, facilitated by vegetated c p r
lands including pastures, community forestry and other un­
cultivated spaces, which when better vegetated act as a sponge
to help in soil moisture stability and movement. In many vil­
lages, not only have water tables reduced (causing tube well
failures, etc) but the groundwater has become saline.
The village water facilities - for example, ponds and tanks
used for drinking water for people and animals - rarely fill
up enough or dry much before the next rains. This is another
example of the impact of climatic variability on community
commons. Many villages in Rajasthan, Gujarat, Maharashtra
and Andhra Pradesh have resorted to private watering
options, for example, buying water through mobile tankers
from distant places.
Related to the above are watershed depressions, rivers, rivu­
lets, their banks, etc, which people use for lifting water for
minor crops, high value products (for example, seeds, vegeta­
bles, fish, etc). Shrinking and drying of these resources has a
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SPECIALARTICLE
severe impact on the livelihoods of the poor, as the supply of
self-provisioning products such as fish and waterborne fruits
and flowers is affected in particular.
(b) Biomass Producing CPRs
Next to water-linked c p r s , the important land resources rep­
resenting c p r s include village pastures, rangeland, commu­
nity forestry, watershed borders, wastelands, etc, which pro­
vide not only grazing space but a number of fuel, fodder and
food items, particularly during the good rain years. They
also have small watering points supporting vegetative
growth within c p r s . Despite the hardy nature of most of the
plant species in the c p r s , the shortfall and seasonal varia­
tions in rainfall adversely affect the biomass and other prod­
ucts. Prolonged and frequent dry spells (apart from severe
droughts) reduce their production flows and lead to over
extraction (including unseasonal chopping of trees and
shrubs) and over grazing.
The prolonged and frequent happenings indicated above
eventually lead to severe degradation of c p r s and enhanced
indifference among c p r users towards their protection and re­
generation. This finally leads to gradual grabbing of these land
resources as private resources. This process has actually hap­
pened in most of the villages studied.
Farmers’ traditional adaptation measures against climatic
risks complemented by new measures based on modern sci:
ence and technology as well as improved resource manage­
ment systems may help in arresting and reverting the above
cpR-degradation process. The new adjustment step against
climate change should jointly and simultaneously address
the emerging climate-led problem for private resource-based
farming as well as c p r s . However, to make this a reality, de­
velopment interventions will have to be made “climate
sensitive”. Despite loud discourse and some small-scale initi­
atives, this process is yet to take place. The results of “revis­
its” to c p r s , reported earlier, can offer some lead lines for
this purpose.
Table 4 (p 56) provides some quantitative details of c p r s as
affected by rainfall variability in some of the “revisited” villages.
Based on villagers’ recall on rainfall situations, pardy confirmed
by block-level offices, 40 villages were targeted. They included,
under category a , 20 villages where during the last 10 years
rainfall had been only 50% or less compared to the earlier pe­
riod, and where four or more drought years were experienced
during the previous 10 years. Another set of 20 villages under
category b included the ones where, as per villagers’ experience,
rainfall decline was around 25% compared to the earlier period,
with low or less years of significant drought.
The situation of the two sets of villages indicates the broad
differences in rainfall situation and the subsequent impact
of this on different c p r s , and consequent responses of the
village communities. Table 4 also deals with the secondary
impact on related cpR-dependent production and consump­
tion activities as well as the extent of community concerns
and management of specific c p r s reflected by presence or
absence of management activities and decisions. As rows
55
SPECIALARTICLE - — —; --= ■
— ■—~ ~ .. = ~ -~
Table4: Impactof Rainfall VariabilityonCPRsin SelectedVillagesin DryRegionsof India
CPRSituational EventsResultingfromRainfall VariabilityduringLast 10Years VillageswithAnnual Rainfall Deficitduring Last 10Years
VillageswithRainfall Declineof50%andFour Villages with Rainfall Declineof25%or
______ orMore Drought Years(20)_________LessandTwoorLess DroughtYears (20)
1 No of wells abandoned or very rarely used for want of enough water 17 4
2 No ofyears when community tanks were full 2 7
3 No ofyears when drinking waters in ponds lasted for four months or less 6 2
4 No of cases where tank beds converted into private farmland after digging wells in them 15 -

5 No of villages where collective fodder stocking/distribution stopped 20 7

6 No of occasions when village livestock migration was for six or more months in a year 9 2
7 No of cases when CPR rule violation related penalties were imposed 2 11
8 No of cases of rehabilitation of CPR lands by ridging, trenching, reseeding, etc - 6
9 No of times CPR-related village meetings took place in 10 years 2 12
Source: Based on information collected during "revisits" o f CPR study villages (Jodha 2008a).

seven to nine in Table 4 show, the extent of c p r concerns and
management practices are much higher in villages with
smaller rainfall decline compared to the other set of villages
with higher decline of annual rainfall.
7 Conclusions
This paper concludes by integrating the key inferences from
different aspects of the changes affecting c p r s and their
implications for the future of c p r s as community assets in dry
regions of India.
First, c p r s represent an important institutional arrange­
ment evolved by communities to face environmental risks as
well as low and unstable production possibilities in arid and
semi-arid areas of India. However, despite their relevance and
utility, c p r s are faced with their reduced extent and upkeep in
recent decades, particularly since the 1950s, the era of post-
Independence land reforms.
Reduced collective concerns of communities for c p r s ,
accentuated by population growth-led land hunger comple­
mented by various public interventions and market-led pro­
cesses, explain this process of negative change. This is sup­
ported by the comprehensive multi-district, multi-state study of
c p r s covering over 90 villages during 1982-86. However, revis­
its to some of the earlier studied villages showed some positive
changes reinforcing communities' collective stakes in c p r s . The
big change facilitating this shift is villagers' focus on individual
c p r units rather than aggregate areas of c p r s for management
and high pay off productive use. This has several implications
for research policy and action for rehabilitation of c p r s .
But in contrast to the above emerging micro-level scenarios,
the macro-level processes governed by state policies and mar­
ket forces about changing usage of natural resources (for min­
ing, s e z s , infrastructural development, new townships as well
as focus on national environmental assets through a variety of
parks and protected areas, etc) displacing the c p r s in many
areas do not indicate a bright future for c p r s , unless some in­
stitutional safeguards for c p r s are evolved. Besides the above,
an additional threat to c p r s is posed by enhanced and more
intensive level of climatic variability, which tends to reduce
productivity and dependability of c p r outputs and services for
rural communities. This further adds to the communities' in­
difference towards c p r s . The possible remedial approach
against this problem may include building adaptation ap­
proaches against climate change that will simultaneously ad­
dress the concern of dry land farming as well as dry land c p r s .
Such measures can be built by integrated use of farmers’ tradi­
tional adaptations to climatic variability and inputs from mod­
ern scientific innovations (Jodha et al 2010).
Thus, this paper presents a mix of the hope and dismay sur­
rounding the future of c p r s in the dry regions of India.

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SPECIAL ARTICLE
Fiscal Problem in West Bengal
Towards an Explanation
SUBHANIL CHOWDHURY, Z1CO DASGUPTA_________________
The fiscal picture in West Bengal is characterised by a
high debt-gross state domestic product ratio (the
second highest in the country among the non-special
category states) and a low own tax revenue-GSDP ratio
(the lowest in the country). This paper attempts to
understand the reasons for these twin features which
underlie the fiscal stress in the state.
Non-incriminating thanks are due to C P Chandrasekhar, who gave
valuable comments on an earlier draft of this paper.
Subhanil Chowdhury (subhanilc@gmail.com) is w ith the Institute of
Development Studies, Kolkata. Zico Dasgupta (zico.dasgupta@gmail.com)
is a research scholar at the Centre for Economic Studies and Planning,
Jawaharlal Nehru University, New Delhi.
E co n o m ic & P o litic a l w eek ly E33 Q march 31, 2012
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he fiscal situation o f W est Bengal (wb) is characterised by
T th e fact th a t it h as a debt-gross state d o m estic p ro d u ct
(gsdp) ratio o f 42.5% (2008-09), w h ich is th e second
highest am ongst th e non-special category states an d a n ow n tax
revenue (otr)-gsd p ratio o f 4.1%, w hich is th e low est w ithin the
non-special category states in 2008-09. The high debt-GSDP ratio
along w ith a low otr-gsdp ratio in wb, com pared to other states,
is a cause o f concern for th e state. W h at explains such high
debt-GSDP ratio and low otr-gsdp ratio of wb? This p aper seeks
a n an sw e r to th is question. T he p a p e r is divided into tw o m ain
sections, th e first deals w ith th e p roblem o f th e h ig h debt-GSDP
ratio a n d th e second w ith th e low o tr-g sd p ratio in th e state.
1 The Problem of a High Debt-GSDP Ratio in WB
The debt-GSDP ratio for wb and all states is shown in Figure 1.
Three issues become immediately evident from Figure 1. First,
the debt-GSDP ratio for all the states as well as wb started to
increase from 1997-98. Second, the debt-GSDP ratio for all
the states started to decrease from 2003-04, while that of
wb started to decrease from 2005-06. Third, the debt-GSDP
ratio of wb is higher than that of all the states taken together
and increased at a much faster rate than the states between
Figure 1: Debt-GSDP Ratio for WBand All States (in %)
D eb t R atio
Source: S ta te F inances: A Study o f Budgets, Reserve Bank o f India (RBI), various issues.
1997-98 and 2005-06. The literature has mainly focused on
the last point while discussing the problem of the debt burden
of wb. But it should be noted that the debt burden of all the
states in India increased since the late 1990s and only started
to fall from 2004. The explanation for the high debt-GSDP ratio
for wb has to be located in the context of the movement of the
ratio for all the states. Therefore, we first try and locate the
reasons for the increase in the debt-GSDP ratio for all the states.
Explanation for Increase in Debt-GSDP Ratio for All States
In o rd er to u n d e rsta n d th e m ovem ent o f th e debt-GSDP ratio for
all th e states, w e first n eed to u n d e rsta n d som e o f th e featu res
of state g o v ern m en t finances in India. O ne of th e key featu res
VOL x lv ii no 13 57
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of the federal structure of the Indian economy has been that
resources are mainly concentrated in the hands of the centre,
with the states having limited powers to collect taxes and
mobilise resources, while undertaking the bulk of the develop­
ment expenditure in the country. This asymmetry in centre-
state relations leads to the dependence of the state govern­
ments on the transfer of adequate resources from the centre in
order to carry out their expenditure responsibilities. Against
this backdrop, the following features of state government
finances can be ascertained:
(1) P a rtia l E xo g en eity o f R evenue Receipts: The revenue receipts
of the states, as we know, consist of not only its own revenue
receipts, but also revenue transfer from the centre in the form of
grants and shares in the central taxes. Since the level of revenue
transfers remains outside the purview of the states’ own eco­
nomic policies, the determination of total revenue receipts also
becomes partially exogenous to the state government policies.
(2) E xogenously D eterm in ed In te re st R ate: The interest rate of
an economy is determined by the actions of its central bank
depending on the monetary policy of the government. In
India, it is determined by the Reseve Bank of India’s (rbi)
credit and monetary policy. For the states in particular, the
centre has the constitutional power to determine both the extent
and the terms of borrowing by the states from all sources.
Thus, the interest rate is assumed to be determined exogenous
to state government’s policymaking.
Given the fact that revenue receipts and the rate of interest
are exogenous (partly exogenous in case of revenue receipt) for
the states, let us now analyse the impact of economic liberali­
sation and other exogenous shocks on these variables. One of the
characteristic features of the neo-liberal regime has been the
objective of reducing the fiscal deficit of the central government
and pursuing a policy of “sound finance”. This was required, in
the neo-liberal perception, in order to maintain “macroeconomic
stability”. This proposition was based on a theoretical framework
which has been argued to be logically flawed (Chandrasekhar
and Ghosh 2002; Patnaik 2003; Das 2004 and Rakshit 2005).
However, one of the raison d’etres of such a policy came from
the advent of financial liberalisation and the inflow of interna­
tional finance capital. In order to maintain the inflow of finance
capital or even to avoid its outflow, a financially liberalised
economy needs to abide by the preferences of finance. And
finance capital prefers the pursuit of a policy of “sound
finance”, entailing the curtailment of the fiscal deficit as a pro­
portion of the gross domestic product (gdp) (Patnaik 2006).
This curtailment of the fiscal deficit of the centre has conse­
quences for state finances in the following manner. First, with
liberalisation there was also a rise in interest payments and a
fall in the tax revenues of the centre till the early years of 2000s.
While on the one hand, the fall in the tax-GDP ratio of the centre
till the early years of the last decade was entailed by a fall in the
tariff rate and excise duties as a logical corollary of trade liberali­
sation, on the other hand, the rise in the interest rate (leading to a
rise in the interest payment of the centre) was primarily on
account of financial liberalisation (Chandrasekhar and Ghosh
2002). This inherent contradiction between the objective of
58
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ensuring “fiscal balance”, and, ceteris paribus, the tendency of
the fiscal deficit to rise (through a rise in the interest rate and
interest payments), was “resolved” partially by the centre by cut­
ting back its development and capital expenditures (ibid). In ad­
dition, the centre resorted to another mechanism: namely, that of
reducing transfers to the states in order to manage its own budget.
The necessity to reduce transfers to the states in the relevant
time period, however, did arise not only from the requirement
of the centre to manage its own budget for pursuing a “sound
finance” policy; it was also an attempt to push the states
towards a financial crunch and subsequently, impose a neo­
liberal agenda on the latter. It is particularly in this context,
that state government finances need to be analysed. Let us first
examine the issue of an increase in interest rates in the post­
liberalisation period on state finances.
Interest Payments: It has already been stated that with the
policies of liberalisation the rate of interest in the country has a
tendency to rise. Moreover, as is evident from Figure 2, the rate of
interest paid by the state governments is higher than that paid by
the central government. It is also the case that the rate of interest
charged by the centre from the states on central loans and the
National Small Savings Fund (nssf) loans is much higher than the
average rate of interest paid by the centre and state governments.
Figure 2: Effective Interest Rate of the Centre and State Governments
and the Rate of Interest Charged on Central Government and NSSF Loans
from the States (in percentage)
Source: Handbook o f Statistics o f Indian Economy, various issues, RBI.
A condition for the debt-GDP ratio to rise is that the rate of
interest should be greater than the growth rate of gdp. With the
rate of interest for the states rising, it became greater than the
growth rate of gsdp of the states, from the late 1990s to the ini­
tial years of the 2000s, leading to a rise in the overall debt-GSDP
ratio. Additionally, the implementation of the recommendations
of the Fifth Pay Commission, which was de facto an exogenous
shock to the state government finances (ibid 2002) increased the
debt burden of the states. Keeping the interest rate over and above
the growth rate of the gsdp was particularly the centre’s policy,
which was ensured by keeping the interest rate on n ssf and cen­
tral loans sufficiendy high. In a situation where the states were
already stressed with a debt burden, the Twelfth Finance Com­
mission (tfc ) emerged by linking debt-relief with the condition­
ality of implementing the Fiscal Responsibility and Budget Man­
agement (frbm) Act, and hence, imposing a neo-liberal agenda
of “sound finance” on the states. Thus, the rise in the debt-GSDP
ratio of the states in the relevant time period was an exogenous
shock to state finances, brought about by the centre’s policy.
MARCH 31, 2012 v o l x lv i i n o 13 QEC3 Economic & Political w eek ly
 The subsequent d ecline in th e in te re st rate an d debt-GSDP
ratio w as m ade possible as th e states w ere de facto forced to
accept th e conditio n al d eb t sw ap schem e of th e tfc by im ple­
m en tin g th e frbm Act. Such a decline in b o th th e in te re st rate
a n d debt-GDP ratio in th e re c e n t p erio d , in tu rn , led to th e
decline in th e in tere st p ay m en ts of th e states as a p ro p o rtio n of
gdp. Thus, b o th th e rise a n d th e fall in th e in te re st paym ents
w ere led by th e cen tre’s policies, a n d hence, re m ain ed outside
th e pu rv iew o f th e state g o v ern m en t policym aking.
Let us now see the impact of central government policies on
the revenue receipts of the states.
Revenue Receipts: While the devolution of grants comes under
the expenditure side of the centre’s budget, the share in central
tax involves parting with a portion of the tax revenues. Thus,
while any reduction in the devolution of grants would reduce
the centre’s expenditures, any decline in the states’ share in
central tax revenue would raise, ceteris paribus, the net revenue
receipts retained by the centre.1As is evident from Figure 3, the
fall in the revenue receipts of the states from 1992 to 1999 was
led primarily by the fall in revenue transfers from the centre
(as percentages of gdp).
Figure 3: Revenue Transfers, OTRand Revenue Receipts of the States as a
Percentage of GDP( 1982- 2009 )
1980-81 1984-85 1988-89 1992-93 1996-97
Total Revenue Receipts o f the states as % of GDP is plotted along the secondary axis.
Source: Same as Figure 1.
Figure 4: Gross Tax-GDPRatio of Centre and Revenue Transfer to States as a
1980-81 1984-85 1988-89 1992-93 1996-97
The revenue transfer to state-GDP ratio is plotted in the secondary axis.
Source: Same as Figure 1.
Such a decline was particularly led by the centre’s attempt
to m an ag e its own budget against the backdrop of its falling
tax-GDP ratio in th e relevant time period. The later rise in the
revenue receipts of the states was due to the rise in both the
revenue transfers and the o t r of the states. The rise in the
form er, particularly after 1999, was possible as the revenue
receipts of the centre increased during this time period. This
E co n o m ic & P o litic a l w eekly I33 Q m a r c h 3 1, 2 0 1 2
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congruent movement of the centre’s tax-GDP ratio and the rev­
enue transfer to states are shown in Figure 4.
While the decline in the revenue transfers has adversely
affected the revenue receipts in the relevant time period, the
very nature of revenue transfers (in terms of proliferation of
central sector schemes) and the retreat of the central govern­
ment from undertaking capital projects have adversely affected
otr of the states. In the neo-liberal era the proliferation of css
comes with conditions, where the states are asked to reduce
some of their resource mobilisation instruments in the name of
parity across states and creating an investor-friendly climate.
This has an adverse effect on the revenue receipts of the states
through a reduction in the otr . With the withdrawal of the
centre from undertaking investment in the states, they are
asked to invite private capital from the market. Private capital
in search of higher returns demands more and more tax con­
cessions from the various state governments. The cut-throat
competition that emerges among the states to entice private
capital by providing ever-increasing tax concessions negatively
affects the revenue receipts of the states.
However, in spite of such adverse effect of centre’s policies
on otr of the states, the latter has actually increased over the
years (Issac and Ramakumar 2006). Thus, if anything has led
to the deterioration of the revenue receipts of the states in the
relevant time period, it was primarily the decline in the reve­
nue transfers from the centre. With the revenue receipts of the
states falling from the late 1990s and the exogenous expendi­
ture shock of the Fifth Pay Commission, the states had to bor­
row from the market, which was reflected in a higher debt-
gsdp ratio. With an increase in the revenue transfers such bor­
rowing was reduced, thereby reducing the debt-GSDP ratio.
From th e above discussion it is obvious th a t th e problem of
d eb t of th e states has b een influenced to a significant ex ten t by
th e policies a d o p ted by th e cen tral governm ent. H owever, it is
2000-01 2004-05 2008-09
also a fact th a t th e debt-GSDP ratio of wb has b e e n significantly
h ig h er th a n all th e states tak e n together. We now tu rn to th e
issue of th e h igh debt-GSDP ratio of wb in p articu lar.
Explaining the High Debt-GSDP Ratio in WB
While the debt ratio has increased more or less for the states
(including wb) from 1998-99 onwards, the rate of increase in
debt ratio has been much sharper for wb than the states as a
whole. This, however, leads one to address the following ques­
tions: first, why did the debt ratio increase for wb from the late
1990s till the early years of the 2000s, and, second, why has
the rate of increase been much higher in the case of wb than
2000-01 2004-05 2008-09 that for all the states as a whole?
Condition of Debt-Sustainability
The D om ar co ndition for d eb t-su stain ab ility req u ires th a t the
debt-GDP ratio of th e go v ern m en t does n o t rise over tim e.2 This
can be w ritte n as
0 < g, where 0 and
AY
v o l x lv ii n o 13 59
where D=debt stock and Y=gdp
Now, by definition,
F = AD and P = F - i.D, where F=Fiscal Deficit, P=Primary
Deficit and i=rate of interest
P = F - i.D = AD - i.D => P = (0 - i) D ...(i)
From (i) it implies that if 0 < g then
In other words, the debt-sustainability condition implies that
the primary defidt-GDP ratio must be less than the product of the
difference between the growth rate and rate of interest and the
debt-GDP ratio. We plot the - and (g -i). - for wb in Figure 5.
Figure 5: Debt-Sustainability Condition for WB
0.06
Source: Same as Figure 1.
From Figure 5 it is clear that the primary deficit ratio of wb
increased between 1993-94 and 1999-2000 and was consist­
ently higher than (g - i) ~ till 2005-06. Therefore, according to
the debt-sustainability condition the debt-GSDP ratio of wb
increased consistently till 2005-06 and has started to decline
subsequently. But the question is what explains the higher
primary deficit ratio and the lower (g - i)A for wb.
The primary deficit-GSDP ratio for wb increased sharply
upto 1999-2000 as a result of an increase in the primary ex­
penditure and a reduction in the revenue receipts during this
period. Subsequently, the primary deficit-GSDP ratio declined
both as a result of a rise in revenue receipts and a fall in the
primary expenditure (Figure 6).
Figure 6: Share of Primary Deficit (PD), Primary Expenditure (PX) and
Revenue Receipt (RR) in GSDP (in %)
16------------------------------------- --------------------------------------------
This rise in the primary expenditure gsdp ratio up to 2000
is a result of not only an increase in expenditure as a result
of the implementation of the Fifth Pay Commission report
(like other states), but also a result of an increase in develop­
ment expenditure. Subsequently, however, the development
expenditure-GSDP ratio of wb declined (Figure 7).
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Figure7: Primaryand Development Expenditures as Proportions of GSDP
(in %)
16 -----------------------------------------------------------------------------------------------------
1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04 2005-06 2007- 2008-
08 09
Source: Same as Figure 1.
If we look at the revenue receipts of wb , then it is clear that
the decline in revenue receipts from 1993-94 to 1999-2000
was led by a decline in the otr as well as revenue transfer
from the centre (like other states). But after 1999-2000, the
rise in the revenue receipts was a result of both a rise in otr
and revenue transfer from the centre, with the latter clearly
rising more (Figure 8).
Figure 8: Revenue Receipt (RR), OTRand Revenue Transfers (RT) as
Proportions of GSDP(in%)
08 09
RT is measured in the secondary axis.
Source: Same as Figure 1.
From the above discussion it is clear that the rise in the debt-
gsdp ratio for wb is because of a higher primary deficit result­
ing from lower revenue receipts which is again primarily a
result of low o t r , which will be discussed in details in the
next section.
While the phenomenon of rise in debt-GSDP ratio of wb
is explained by a mechanism stated above, the question
remains, why has wb witnessed a much sharper rise in the
debt-GSDP ratio than that for the states as a whole. In order to
understand this problem let us go back to the debt sustaina­
bility condition where
To understand why the debt-GSDP ratio of wb is higher than
all states taken together, we compare ^ and (g-i) for wb and
all states. To assess the differences of wb with the states in the
above-mentioned parameters we plot the following figures.
Figure 9 (p 61) shows the difference in the primary deficit
between states and wb . It is seen that the primary deficit of wb is
much higher than the states. This is again mainly because of the
revenue receipts of wb are less compared to the states. It is also
interesting to note that the primary expenditure of wb was
MARCH 3 1, 2 0 1 2 VOL XLVII NO 13 0353 E co n o m ic & P o litic a l w eekly

higher than the states only between 1999-2000 and 2001-02,
the period when the Fifth Pay Commission was implemented.
For the rest of the period, the primary expenditure-gsdp ratio
remained below that of the states taken together. In other
words, the debt problem of wb was not due to higher expendi­
ture, as compared to other states.
Figure 9: Difference in the Share of Primary Deficit (PD), Primary
Expenditures (PX) and Revenue Receipts (RR) in GSDPbetween WBand
Other States (in %)
4 ---------------------------------------------------------------------------------------------------------------
Figures 10 and 11 show the difference in growth rates and
effective interest rates between wb and all states taken
together. It is seen from Figure 10, that the growth rate of wb
has been lower than that of the states in most of the year in the
relevant time period, while Figure 11 shows that the effective
rate of interest for wb has been higher than that of the states.
From Figure 11, a question immediately arises as to why the
effective rate of interest for wb is higher than that of the states.
This is mainly because of the fact that the share of nssf loans
in total liabilities is the highest in wb and much higher than
the states taken together (Figure 12). It is also true that the
interest rate charged from nssf and central loans is higher
than the other rates of interest (Figure 4). As a result, wb is
having a higher share of nssf loans and has a higher effective
rate of interest.
Figure 10: Difference in Growth Rate (in %)
9 w h ich th e debt-GSDP ratio of wb d id n o t d eclin e as m uch as all
Source: Same as Figure 1.
Figure 11: Difference in Interest Rate (in %)
25 ----------------------------------------------------------------------
Source: Same as Figure 1.
E co n o m ic & P o litica l w eek ly m a n m a r c h
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SPECIAL ARTICLE
Figure 12: Composition of Liabilities of WBand States (2008-09, in %)
50 --------------------------------------------------------------------
West Bengal
SDL NSSF Centre's Loan Others
Source: Same as Figure 1.
From th e above discussion it is clear th a t wb h as a debt-GSDP
ratio higher th a n th e states is mainly because of th e fact th a t
th e revenue receipts of wb is lower than the o th e r states and
th e effective rate o f in te re st is higher for wb co m p ared to o th er
states. The effective rate o f interest for wb is h ig h er m ainly
because of th e com position of liabilities o f wb h av in g a h ig h er
sh are of nssf loans. States have to compulsorily b o rro w a fixed
p o rtio n of nssf fu n d s th a t th e y collect. Since wb has a m uch
h ig h er p ro p o rtio n o f nssf loans, it has to b o rro w m ore from
th is pool. The h ig h er in te re st rate on th ese loans in tu rn
increases th e in te re st b u rd e n of w b .
It should also be noted that the tfc , in the face of the
mounting debt problem of the states, proposed debt relief
measures. However, these debt relief measures were attached
to strict conditionalities, whereby the states had to enact the
frbm Act, the total salary bill net of interest payments should
not be more than 35% of revenue expenditures and closing of
all loss-making public sector units (psus) to be eligible for
debt relief.3 Given the federal set-up of India, where the state
g o v ern m en ts a re free to choose their own policies within
th e ir d o m ain s, such conditions laid down by the tfc were
hig h ly objectionable. The wb government decided not to
e n a c t th e frbm a n d n o t to follow o th e r m e a su re s o f “fiscal
p ru d e n c e ” as p ro p o sed by the tfc . T his disq u alified wb from
av ailin g th e d e b t a n d in te re st reliefs fro m th e ce n tre due to
states p u t to g e th e r.4
Notwithstanding the rigid conditions imposed by the tfc
and its non-compliance by the wb government, the issue of
low revenue receipts of wb remains unresolved. We now turn
to this problem in details.
2 The Problem of Low OTR-GSDP Ratio in WB
We have already seen that the revenue receipts of wb as a pro­
portion of gsdp is less than all states taken together. The two
major components of revenue receipts are the otr and reve­
nue transfers from the centre (which consists of the share of
tax and grants from centre). The revenue transfer from centre
as a share of gsdp for wb is less than all states taken together
(Figure 13, p 62) except in 2000-01, 2001-02 and 2005-06.
However, it is also seen from Figure 13 that the gap between
the revenue transfer of wb and all states has not been very
significant. Therefore, this shortfall in wb ’s revenue transfer
from the centre as compared with all the states cannot fully
account for the revenue receipts share of gsdp falling behind
that of all the states taken together.
31, 2 0 1 2 v o l x lv ii n o 13 61
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SPECIAL ARTICLE

Figure 13: WB's Revenue Transfers as a Share of GSDPand States' Revenue basically thought to be a variety of an expenditure tax. If one is
Transfers as Share of GDP(in %) buying a product in the market, then only that tax accrues to
8 -------------------------------------------------------------------
the coffers of the state government, since the tax collected at
the site of production is collected by the central government in
States RT
the form of central excise duties. Now, these expenditures are
incurred in various sectors of the economy and the different
WBRT taxes have different sectors as their bases. Therefore, in order
I r— i----------r — i------- 1 r- ~r~ -r- to understand the movement of the otr in wb we need to un­
1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04 2005-06 2007- 2008-
OS 09 derstand the structural change in the wb economy.
Source: Same as Figure 1. The structural change Figure 15: Sectoral Composition of WBGSDP
The other major component of revenue receipts, the otr, is of the wb economy has 0 10 20 30

significantly less than all the states taken together (share been such that the most Agrand allied

of GSDP). prominent increase has

Mining
Figure 14: WB's Tax-GSDPRatio and States' Tax-GDPRatio (in %) been in the share of real 200 8-0 9
8 ------------------------------------------------------------------ estate and construction in Manufacturing

gsdp. The share of agri­

Construction |
culture and manufactur­
ing has decreased sub­ Electricity, gas I

stantially while that of

Transport, etc I
banking and insurance
has increased (Figure 15). Trade, etc I
2 t— r -r r r »— »— «— »— r—i— r —i— »— r —•»— r i > >— »— «— i i i— !— i— m
1980-81 1983-84 1986-87 1989-90 1992-93 1995-96 1998-99 2001-02 2 004-05 2007-2008- As is evident from the
Banking, etc I
08 09
S o u rce : S a m e a s F ig u re 1.
above chart, the weight
of the real estate and Real estate, etc I

Figure 14 shows that the otr-gsdp ratio of wb almost construction sectors has
Public administration |
moved hand in hand with the otr-gdp for all states taken to­ increased significantly in
gether till 1996-97. After this point, the otr-gdp ratio of all the gsdp of w b . The pkt Other services |

the states increased, but that of wb continued to decline till
1999-2000. After 1999-2000 the otr- gsdp of wb also rose
but the states’ otr- gdp ratio rose much more sharply. As a
result, the otr-gsdp ratio of wb has been significantly below
that of all states taken together. In fact, wb has the lowest
otr- gsdp ratio in India.
Explaining the Low OTR-GSDP Ratio in WB
The composition of the otr in wb shows that the two biggest
components of the total otr of the state are commodity and
services tax (cst) accounting for 78% of the total tax
revenue in 2008-09 and the property and capital Transaction
Tax (pkt) accounting for Table: Composition of Own Tax
19.9% of the total tax reve- Revenuefor WB(in%)
In c o m e T a x P r o p e r ty a n d C o m m o d ity
nue in 2008-09 (Table). (IT) C a p ita l
Therefore, in order to under­ T ra n s a c tio n
basically consists of stamp Source: Economic Review, Bureau of Applied
duties and registration Economics and Statistics, G overnment of w b ,
various years.
fees and land revenue,
which is dependent on the performance of the real estate and
construction sector.
PKT PKT RE
Y = RE ’ Y
where, Y= gsdp and RE= gsdp of real estate and construction.
Here, the term p k t / r e , denotes the effective tax rate from the
real estate sector. From the above equation it is clear that the
movement of the pkt- gsdp ratio is dependent on the share of
real estate and construction sector in gsdp and the effective
tax rate from the real estate sector. Now we know that the
a n d S ervices Figure 16: PKTas a Percentage of Construction and Real Estate, etc (in %)
Tax (CST)

Tax (PKT)
stand the movement of the
1 9 9 3 -9 4 3 .6 2 1 3 .9 5 8 2 .4 3
otr-gsdp ratio in the state,
2 0 0 8 -0 9 2 .0 7 1 9 .8 9 7 8 .0 4
it is sufficient to under­
Source: Same as Figure 1.
stand the movement of the
pkt and cst. Additionally, 77.4% of cst is accounted for by
sales tax only in 2008-09.5 Therefore, for our analysis we
mainly concentrate on pkt and sales tax to understand the 08 09
Source: Same as Figure 1.
movement of otr in w b .
According to the Indian system of fiscal federalism, the direct second term in the above equation is increasing. Therefore,
taxes in the form of income tax and corporation tax are mainly whether the pkt-gsdp ratio increases or not depends on the
collected by the central government. Whatever taxes the state p k t - r e ratio or the effective tax rate, which is shown in Figure 16.
governments collect are mainly in the nature of indirect taxes. From Figure 16, it is clear that the pkt-re ratio is falling.
Moreover, the taxes collected by the state governments can be This fall in the effective tax rate is a reflection of two phenomena,
62 M ARCH 31, 2 0 1 2 VOL XLVII N O 13 E co n o m ic & P o litic a l w eek ly

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not necessarily mutually exclusive. First, tax concession is being
given to the real estate sector. Second, there exist revenue leak­
ages in the system, perhaps due to inefficiencies in the tax col­
lecting administrative apparatus. The policy implication imme­
diately follows from this analysis, that the tax concessions given
to the real estate sector should be withdrawn and the adminis­
trative apparatus for collecting taxes should be improved. With
the growth of the share of real estate and construction in gsdp,
if the tax rate is increased in this sector, it will definitely signifi­
cantly help in increasing the overall tax-GSDP ratio of wb.
The other major revenue source for wb is the sales tax (st).
Now, within the three major sectors of the economy, viz, agri­
culture, industry and services, the agriculture sector is basi­
cally negligibly taxed. A large part of the service sector simi­
larly falls outside the scope of taxation. Therefore, s t is mainly
collected from the industry and manufacturing sector. It is,
therefore, generally believed that there exists a strong correla­
tion between the manufacture-GSDP ratio and the sales tax-
gsdp ratio for the states.
Let us assume that sales tax is collected at the rate ‘t’ from
the manufacturing sector. This implies that
S = t.M => — = t. —
Y Y
where, S= State sales tax
M= Manufacturing output,
Y= GSDP
Now from the above equation it can be written that
AS AY _ At . AM AY
S Y t M Y wb being worse than most other states with regard to the
From the above we can derive two conditions:
(1) If ^ falls, then y can increase if y >0 and sufficiently high
Figure 17: Share of Manufacturing and Sales Tax GSDPRatio in WB
Sales tax is measured in the secondary axis.
Source: Economic Review, Government of West Bengal, various issues and State Finances:
A Study o f Budgets, RBI, various issues.
(2) If y > 0 and i f i ^ - " y - < 0 = > y decreased, then^ will also fall
It is evident from Figure 17 that the share of sales tax in gsdp
increased till 1992-93 in spite of a decline in share of manufac­
turing in gsdp. It is clear from condition 1 above that this can
only be possible if growth rate of effective tax rate is suffi­
ciently high. However, with the introduction of neo-liberal
policies, the states cannot go for higher taxes from the private
sector and have to provide tax concessions to them. This is
true for all the states. But the problem with wb is that the share
of manufacturing in gsdp also witnessed a continuous fall.
With the share of manufacturing in gsdp falling and no change
in the tax rate, the st-gsdp ratio had to fall, according to con­
dition 2 above. The recovery of the share of sales tax from the
late 1990s was only possible with the recovery of the share of
manufacturing sector in gsdp.
It is therefore seen that the reasons for the performance of
otr- gsdp ratio are twofold. First, the manufacturing sector
of the state has performed consistently worse than the other

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states in India, with the share of manufacturing in gsdp de­
clining sharply for wb compared to other states. Second, the
tax concessions and revenue leakages that exist in the state
have also resulted in a poor otr-gsdp ratio compared to other
states.
C o n c lu s io n s
The debt problem of wb is a reflection of two independent
factors. First, there is a shortfall in revenue receipts of wb
compared to other states. This shortfall in revenue receipts is
again because of a low otr- gsdp ratio in wb compared to
other states. The low otr- gsdp ratio in wb is a result of a low
manufacturing base and tax concessions provided to the pri­
vate sector. Second, the effective interest rate paid by wb is
much higher than the other states. This is because the interest
rate charged by the centre on nssf loans is higher than other
loans and the share of nssf loans in total loans is much higher
in wb than in other states.

n o t e s ______________ REFERENCES_________________________ and Restructuring of State Government Debt:

1 One of the primary features of the Terms of
Reference of various finance commissions in
the post-liberalisation period has been the
requirement to allocate the resources to the
States keeping in view the centre’s requirement
to finance its committed expenditures including
interest payments. In the context of rising interest-
payment, falling tax revenues and the objec­
tive of ensuring “fiscal balance” in the post-lib­
eralisation period, thus, implied that the great­
er the interest payment of the centre relative to
its revenue receipts, the lower would be the
revenue transfers from the centre to the States.
2 The following condition of debt sustainability
is derived from Pasinetti (1 9 9 8 ).
3 For more details see Ghosh (2 0 0 5 ).
4 These conditions laid down by the TFC, however,
raise bigger questions of fiscal federalism in India,
which is currendy outside the scope of this paper.
5 State Finances: A Study of Budgets, RBI.
Chandrasekhar and Ghosh (2 0 0 2 ): The Market that
Failed (New Delhi: Leftword).
- (2 0 0 5 a): “The Crisis of State Government
Debt”, viewed on 2 0 May 201 1 , http://www.
macr0 scan.0 rg/fet/may 0 5 /fet 2 5 0 5 0 5 State_
Government_Debt.htm
Das, S (2 0 0 4 ): “Effect of Fiscal Deficit on Real In­
terest Rate”, Economic & Political Weekly,
3 9 (12): 1 2 9 9 -1 3 1 0 .
Dasgupta, A (2 0 0 8 ): “Centre-State Relations: Need
for a Change”, paper presented in National
Seminar on Centre-State Relation in the Con­
text of 13 th Finance Commission, Trivandram,
Kerala, 6 - 7 May, mimeo.
Datta, D (2 0 1 0 ): “West Bengal Government Finances:
A Critical Look”, Economic & Political Weekly,
4 5 ( 4 4 ) : 9 9 - 105 -
Ghosh, J (2 0 0 5 ): “Twelfth Finance Commission
A Note”, Economic & Political Weekly, 4 0 ( 3 1 ) :
3435 - 3 9 -
Issac, T M T and R Ramakumar (2 0 0 6 ): “Why Do
the States not Spend? An Exploration of the
Phenomenon of Cash Surpluses and the FRBM
Legislation”, Economic & Political Weekly, 41 (4 8 ):
4 9 6 5 -7 6 .
Pasinetti, L (1 9 9 8 ): “The Myth (or Folly) of the 3 %
Deficit/GDP Maastricht ‘Parameter’”, Cam­
bridge Journal of Economics, 2 2 (1): 1 0 3 -116 .
Patnaik, P (2 0 0 3 ): The Retreat to Unfreedom: Essays
on the Emerging World Order (New Delhi:
Tulika).
- (2 0 0 6 ): “What Is Wrong with ‘Sound Finance’”,
Economic & Political Weekly, 4 1 (4 4 ): 4 5 6 0 -6 4 .
Rakshit, M (2 0 0 5 ): “Budget Deficit: Sustainability,
Solvency and Optimality” in Bagchi (ed.),
Readings in Public Finance (Oxford: Oxford
University Press).

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MONEY MARKET REVIEW

Fiscal Consolidation Left Behind of treasury bills (tb s ) is likely to keep

short-term rates high, and the yield curve
inverted for some more time to come
with resultant implications for growth.
EPW RESEARCH FOUNDATION The Reserve Bank of India (rb i) with­
held policy rate easing, though it announ­
The postponement of fiscal 1 Introduction ced a pause to its tightening stance, pre­
consolidation, as is evident from t was widely expected before the sumably on the ground that the govern­
the Union Budget, 2012-13, is
likely to add pressure to the
external sector balance and
I presentation of the Union Budget,
2012-13 that the central government
would come out with a credible fiscal
consolidation path so as to return to the
ment might resume its fiscal consolida­
tion path, to some extent relieving it
from the burden of managing a bur­
geoning borrowing programme. While
enhance the risk of managing the fiscal rules under the Fiscal Responsibility commenting on the borrowing pro­
and Budget Management (frb m ) Act, gramme of the government for the ensu­
trade-off between inflation and
2003. This confidence was belied. Since ing year, r b i Deputy Governor H R Khan
growth. This note addresses some further amendments are proposed to the lamented that it is of a tall order and it is
of these and related issues. f r b m Act to suit the new fiscal para­ a challenge to manage. Under this cir­
digm, for all practical purposes, the cen­ cumstance, easing of the policy rate is
tral government seems to have given an likely to be delayed and the pace of
indefinite holiday to sustained effort in easing may also prove to be slower than
consolidating its fiscal position. Doubts during earlier policy cycles.
have already been raised about even the The postponement of fiscal consolida­
marginal reduction in the fiscal deficit tion at this juncture is also likely to add
number for 2012-13. Therefore, the loud pressure to the external sector balance
signal that comes out of the current and add to the risk of managing the
budget is that the fiscal deficit is likely to trade-off between inflation and growth.
be sustained at a higher level in the This note addresses some of these and
immediate future. related issues.
There are indeed other signs of fiscal
distress. The higher fiscal deficit has 1.1 Trends in Fiscal
consequently increased the risk of a bal­ and Revenue Deficits
looning of government borrowing. Added The central government’s fiscal deficit
to this is the evidence that the maturity touched a low of Rs 1.27 lakh crore and
structure of the government debt has as a share of gross domestic product
been shortening significantly thereby (g d p ) touched a dream number of 2.5%
increasing the rollover risk of public in 2007-08. This size got multiplied by a
debt. Furthermore, the higher short­ factor of more than four since then to
term debt in the form of large issuance touch a high of Rs 5.22 lakh crore in
Table 1: Trends in Fiscal and Revenue Deficits (Rs crore)
Year Central Government State Governments Combined
Fiscal Deficit Revenue Deficit Fiscal Deficit Revenue Deficit Fiscal Deficit Revenue Deficit
2000-01 1,18,816 (5.5) 85,234 (3.9) 87,922 (4.1) 55,316 (2.6) 1,99,852 (9.2) 1,38,803 (6.4)
2001-02 1,40,955 (6.0) 100,162 (4.3) 94,261 (4.0) 60,398 (2.6) 2,26,425 (9.6) 1,59,350 (6.8)
2002-03 1,45,072 (5.7) 1,07,879 (4.3) 99,727 (3.9) 57,179 (2.3) 2,34,987 (9.3) 1,62,990 (6.4)
2003-04 1,23,273 (4.3) 98,261 (3.5) 1,20,631 (4.3) 63,407 (2.2) 2,34,501 (8.3) 1,59,408 (5.6)
2004-05 1,25,794 (3.9) 78,338 (2.4) 1,07,774 (3.3) 39,158 (1.2) 2,34,721 (7.2) 1,14,761 (3.5)
2005-06 1,46,435 (4.0) 92,299 (2.5) 90,084 (2.4) 7,013 (0.2) 2,39,560(6.5) 99,312 (2.7)
2006-07 1,42,573 (3.3) 80,222 (1.9) 77,509 (1.8) -24,857 -(0.6) 2,30,432 (5.4) 55,366 (1.3)
2007-08 1,26,912 (2.5) 52,569 (1.1) 75,455 (1.5) -42,943 -(0.9) 2,03,922 (4.1) 9,626 (0.2)
2008-09 3,36,992 (6.0) 2,53,539 (4.5) 1,34,589 (2.4) -12,672 -(0.2) 4,72,807 (8.4) 2,40,864 (4.3)
2009-10 4,18,482 (6.5) 3,38,998 (5.2) 1,88,820 (2.9) 31,018 (0.5) 6,25,009 (9.7) 3,75,724 (5.8)
2010-11 3,73,591 (4.9) 2,52,252 (3.3) 2,07,857(2.7) 22,916 (0.3) 5,76,583 (7.5) 3,00,881 (3.9)
The EPWRF team is led by K Kanagasabapathy 2011-12 RE 5,21,980 (5.9) 3,94,951 (4.4) 1,99,427 (2.2) -16,580-(0.2)
and supported by Anita B Shetty, 2012-13 BE 5,13,590 (5.1) 3,50,424 (3.4)
Vishakha G Tilak, V P Prasanth, RE - Revised Estimates, BE-Budget Estimates.
Shruti J Pandey and Sharan P Shetty. Figures in brackets are percentage to GDP.
Source: www.indiabudget.nic.in, RBI.

Economic & Political weekly Q 3S1 m a rc h 31, 2012 v o l x lv ii n o 13 65

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MONEY MARKET REVIEW

2011-12 and is expected to remain almost increased from Rs 2.13 Graph A1: Fiscal, Revenue and Combined Deficits (Rs crore)
flat in 2012-13. The revenue deficit, after lakh crore in 2009-10 to 650000 ---------------------------------------------------
touching a low of 1.1% in 2007-08, Rs 2.76 lakh crore in
moved up to a range of 3.3% to 5.2% in 2011- 12 and are further
later years. estimated to increase to
A positive signal comes from the state Rs 3.20 lakh crore in
governments which reduced their fiscal 2012- 13.
deficit from 2.9% in 2009-10 to 2.2% in The borrowing pro­
2011-12 and eliminated the revenue defi­ gramme of the govern­
cit, earning an estimated surplus of ment is likely to be over­
Rs 16,580 crore in 2011-12 (Table 1, p 65 burdened also because
and Graph A). of lower small savings
With the central government giving a collections. The net small
holiday to fiscal rules, it may be difficult savings collections dur­
to anticipate that the state governments ing 2011-12 was negative
would adhere to the fiscal rules for long. to the extent of about
There is an inevitable risk of perverse (-)Rs 10,000 crore and
competition and the combined deficit of the budget estimate for
both central and state governments the year 2012-13 at
going awry in the coming years. (+)Rs 1,198 crore seems
unrealistic. The govern­
1.2 Ballooning Borrowing ment has further anno­
Programme unced a large issuance
The trend in the borrowing programme of tax-free bonds which
of the central government and the aver­ will attract funds from
age cost of borrowing, as reflected in small savers. This is on
weighted average yields in auctions, top of other debt instru­ — Central Govt -FD — Central Govt -RD — • — State Govt - FD

show a more alarming picture. The gross ments offering attractive — — State Govt -RD ••••••••• Combined - FD — — Combined - RD

borrowing programme of Rs 5.70 lakh returns. There is also the

crore and the net borrowing of Rs 4.79 fear that small savings withdrawals may is observed that the maturity pattern of
lakh crore in 2012-13 represent a signifi­ come under the tax net. central government debt has tilted sig­
cant jump on top of Rs 4.99 lakh crore nificantly in favour of short tenures in
and Rs 4.36 lakh crore respectively of 1.3 Maturity Distribution the recent past. The share of debt in the
2011-12 (Table 2 and Graph B, p 67). of Central Government Debt maturity range of above 10 years had
The weighted average yields in auctions While state governments conventionally fallen over the years from 44.6% in
increased from 7.23% in 2009-10 to 8.45% borrow at a uniform maturity of 10 2003-04 to 29.1% in 2010-11, though it is
in 2011-12, which may contribute to fur­ years, the central government issues expected to show a marginal increase to
ther ballooning of borrowing to meet securities in a diversified maturity, 31.8% in 2011-12. The share of maturities
interest payments. Interest payments besides borrowing short-term in the t b s in the range of five to 10 years also fell in
Table 2: Central Government Borrowings_____ market. Considering dated securities, it recent years from 34.2% in 2009-10 to
Year Market Borrowings Weighted Average Yields
(Rs crore) of Central Government Table 3: Maturity Pattern of Government of Indian Rupee Loans (Rs crore)
Borrowings
Year Up to % to Total One to Four % to Total Between % to Total Over 10 Years % to Total Total
Gross Net (Dated Securities) (%) 0neYear@ Years 5 and 10 Years Amount
2000-01 1,15,183 73,787 10.95 20 0 0 -0 1 22,978 4.8 1,58,832 33.3 1,78,072 37.4 1,16,764 24.5 4,76,646
2001-02 1,33,801 92,302 9.44 2001 -02 26,676 4.7 1,64,169 29.2 1,90,788 33.9 1,81,367 32.2 5,63,000
2002-03 1,51,126 1,04,118 7.34 2002 -03 40,279 5.6 1,77,900 24.9 2,33,691 32.7 2,62,612 36.8 7,14,482
2 0 0 3 -0 4 1,47,636 88,816 5.71 2 0 0 3 -0 4 37,984 4.4 1,84,810 21.4 2,55,157 29.6 3,84,645 44 .6 8,62,596
20 0 4 -0 5 1,06,501 46,050 6.11 2 0 0 4 -0 5 90,874 8.9 2,21,228 21.7 2,83,839 27.8 4,24,545 41.6 10,20,486
2 0 0 5 -0 6 1,60,018 98,237 7.34 2 0 0 5 -0 6 1,10,224 9.6 2,45,501 21.5 3,07,269 26.9 4,79,527 42.0 11,42,521
20 0 6 -0 7 1,79,373 1,11,275 7.89 2 0 0 6 -0 7 1,62,051 12.4 2,75,158 21.0 3,46,920 26.5 5,25,341 40.1 13,09,470
20 07 -08 1,88,205 1,09,504 8.12 20 0 7 -0 8 1,91,116 12.1 4,16,978 26.5 4,13,475 26.3 5,53,311 35.1 15,74,880
2 0 0 8 -0 9 3,18,550 2,42,317 7.69 2 0 0 8 -0 9 2,64,784 14.5 4,03,178 22.1 5,37,175 29.5 6,16,538 33.8 18,21,675
Oo

4,92,497
oo

2009-10 7.23 20 09 -10 2,50,743 11.5 4,59,159 21.0 . 7,46,644 34.2 7,25,060 33.2 21,81,606
2010-11 4,37,000 3,25,414 7.48 2010-11 2,52,769 12.1 5,30,553 25.4 6,96,625 33.4 6,07,060 29.1 20,87,007
2011-12 RE 4,99,000 4,36,414 8.45 2 0 1 1 -1 2 * 3,52,090 14.0 6,24,473 24.9 7,35,382 29.3 7,97,060 31.8 25,09,005
2012-13 BE 5,69,616 4,79,000 * - Does not take into account the additional net borrowings announced in the later part of the year.
RE - Revised Estimates, BE - Budget Estimates. @- Outstanding stock of all tresaury bills including 14-day TBs.
Source: RBI. Source: RBI, Compiled from EPWRF database.

6 6 m a r c h 3 1, 2 0 1 2 v o l x lv ii n o 13 13259 E co n o m ic & P o litic a l w eek ly

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 MONEY MARKET REVIEW

Graph B: Central Government Borrowings (Rs crore) primary market jump­ Overall, given all the attendant risks,
6,40,000.................................................................... ........... ............
ing from a range of 3.5% significant monetary easing at this stage
5,40,000 - to 4.5% in 2009-10 to may not be desirable. The second-round
6.0% to 6.6% in 2010-11, impact of cash reserve ratio ( c r r ) cuts is
4,40,000
to a high of 8.4% in yet to be felt in the system. It would be
3,40,000
2011-12. The notified appropriate for the r b i to keep the policy
2,40,000 amounts of 182-day rate at the existing level over the next
and 364-day t b s dur­ (about) six months, watching, in partic­
1,40,000
ing 2011-12 nearly dou­ ular, developments in the fiscal situa­
40,000 r
bled and that of 91-day tion, the currency market, trade and bal­
2000-01 2006-07 2010-11 2012-13
t b s was raised by about ance of payments.
29.3% in 2011-12. The share of maturity 50% to a whopping Rs 3.01 lakh crore in
in one to four years jumped to about 2011-12 (Table 4). With 10-year yields 2 Money, Forex and Debt Markets
25% in the last two years compared with hovering at times lower than the t b s Financial market activity recouped dur­
about 21% in 2009-10. The shortening of rate, the yield curve remained inverted ing February on the back of optimistic
maturity of government debt increases in the recent past. global developments like recovery in the
the rollover risk of debt stock and makes United States (us) economy and firmness
the job of debt management on the part 1.4 Other Implications in resolution over the euro debt crisis.
of r b i significantly difficult. The current account balance is adverse, However, a gloomy domestic g d p growth
The rollover risk gets exacerbated ruling above the comfortable threshold projection for 2011-12 and an inevitable
when we look at the short-term borrow­ level of around 3.0% as per the Tarapore fiscal slippage hampered domestic mar­
ings of the central government through Committee’s guidance. The inflation ket confidence to a great extent despite
t b s . The net increase in outstanding t b s rate is yet to be tamed to a comfort zone corporates showing better performances
of all maturities was phenomenally high of below 5.0%. A higher fiscal deficit and for the third quarter. The easing of infla­
at nearly Rs 1 lakh crore during 2011-12, absence of commitment to fiscal consoli­ tion and encouraging industrial produc­
taking the total to Rs 3.52 lakh crore dation is already a dampener to the r b i tion numbers for January raised hopes
in turning the mone­ for a reduction in the key policy rate, but
Year 91-day 182-day 364-day tary policy stance in spiking crude oil prices overseas damp­
Notified Cut-off Notified Cut-off Notified Cut-off
Amount Yield Amount Yield Amount Yield
favour of supporting ened such expectation In general,
(Rs crore) (%) (Rs crore) (%) (Rs crore) (%) growth. High fiscal and market participants remained cautious
20 00 -01 5,200 8.97 2,600 9.43 15,000 9.71 current account deficits ahead of the policy review and the union
2001 -02 12,100 6.88 300 8.44 19,500 7.30
together with uncom­ budget scheduled for March. Foreign
2 0 02 -03 21,000 5.71 - - 26 ,00 0 5.93
2 0 0 3 -0 4 34,500 4.62 - - 27,000 4.66 fortable inflation levels investors nevertheless sustained confi­
2 0 0 4 -0 5 9 8 ,00 0 4.90 - - 49 ,00 0 5.17 are a devilish combina­ dence in the Indian markets.
2 0 0 5 -0 6 80 ,0 0 0 5.43 27,500 5.40 42 ,00 0 5.87 tion and a recipe for Despite a 50 basis points (bps) cut in
2 0 0 6 -0 7 98 ,00 0 6.70 37,000 6.93 50 ,00 0 7.06 inviting a crisis situa­ the crr in the January 2012 policy
20 0 7 -0 8 1,24,500 7.12 45 ,00 0 7.43 55,000 7.51 tion. This dilemma is a review and the release of more than
2 0 0 8 -0 9 2,09,000 6.73 4 0 ,0 0 0 7.29 50 ,00 0 7.17
challenge to both the
2 0 09 -10 2,96,500 3.54 42,500 4.00 41,000 4.53 Table 6: RBI's Market Operations (Rs crore)
r b i and the government.
2010-11 2,19,000 6.04 43 ,00 0 6.48 42 ,00 0 6.64 Month/Year 0M0 LAF Net (Average Daily
2011-12 * 3,01,000 8.39 82 ,00 0 8.44 82 ,00 0 8.38 The silver lining is (Net Purchase(+)/Sale(-)) Injection (+)/Absorption(-))

* - During 2011-12, Government of India issued Cash Mangement bills worth Rs 97,000 crore that foreign inflows are Sep-2011 5 52,194
in aggregate up to November 2011 for maturities ranging from 42 to 77 days at cut-off yield at Oct-2011 6 50,708
a weighted average yield of 8.1%. -: not available strong and the equity
Source: RBI.
Nov-2011 9,446 91,719
market is poised for a
Dec-2011 33,687 1,12,599
from the level of around Rs 2.5 lakh crore turn around. Food inflation is on a Jan-2012 34,772 1,28,471
to Rs 2.6 lakh crore in the previous three- downward path and the prospects for Feb-2012 20,590 1,33,547
year period. The net accretion through revival of economic activity are good. Source: RBI's WeeklyStatistical Supplement.

short-term borrowings for the year 2012-

Table 5: Money Market Activity (Volume and Rates)
13 is pitched at a low of just Rs 9,000 crore Instruments February 2012 January 2012
against the revised estimate of Rs 1.16 Daily Average Monthly Range of Daily Average Monthly Range of
Volume Weighted Weighted Average Volume Weighted Average Weighted Average
lakh crore in 2011-12. The budget esti­ (Rs Crore) Average Rate (%) Daily Rate (%) (Rs Crore) Rate(%) Daily Rate (%)
mate is a serious suspect and even if this Call M oney 10,321 8.90 8.45-9.15 14,049 8.89 8.37-9.28
is to happen, there is likely to be a spill Notice M oney 3,121 8.79 7.50-9.20 3,856 8.96 7.60-9.48
over into medium to long-term borrow­ Term M oney@ 289 - 8.00-10.75 381 - 7.70-10.80
CBLO 32,392 8.41 7.09-8 .69 29,588 8.55 7.56-8 .90
ings (Table 3, p 66 and Graph C, p 68).
M arket Repo 11,698 8.56 8.31-8.65 9,639 8.66 8 .3 0 -8 .8 7
The increase in gross issuance of auction Range of rates during the month. -: not available.
of t b s has resulted in the t b rates in the Source: www.rbi.org.in.andwww.ccilindia.com

Economic & Political w e e k l y MARCH 31, 20 1 2 V O L X L V I I N O 13 67

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MONEY MARKET REVIEW

Graph C: Maturity Pattern of Central Government Securities
Rs 100 billion in the (omo) window start­
ing November 2011, the liquidity situa­
tion in the system worsened further in
February ahead of advance tax outflows
scheduled for mid-March. This prompted
the r b i to once again reduce the reserve
requirements of banks by 75 bps effec­
tive 10 March 2012. In the aggregate the
cuts in c r r released primary liquidity of
the order of Rs 80,000 crore. The tight­
ened liquidity conditions in the system
were partly attributed to heavy market
eased by 17 bps over fortnight, cp s issued by corporates
the month and the amounted to Rs 27,470 crore for the fort­
rates in collateralised night ending 15 January 2012 and the
instruments like col­ outstanding amount also declined by
lateralised borrowing more than Rs 18,600 crore to Rs 1,52,830
and lending obliga­ crore for the same fortnight. The dis­
tions (cblo) and mar­ count rates for c d s ranged between
ket repo also moved 9.25% and 10.10%, while for cps, the
downwards during the rates ruled between 8.38% and 14.00%
same period. for the same review period.
The daily trading According to the trading platform -
activity in the overnight segment fell by Fixed Income Money Market and Deriva­
26% compared to the previous month. tives Association (fim m d a ) - both c d s
The daily traded turnover in the notice and cps recorded a 22% and 20% jump
and term money segment declined by in their daily trading activity during
19% and 24%, respectively during Feb­ February over January. However, the
ruary over January. However, the c d s volume might thin out in the coming
weighted average rates ruling around months as s e b i recently reduced the
the key policy repo rate of 8.50% threshold for mark-to-market requirement
prompted heightened trading volume in on debt and money market securities of
the cblo and market repo segments dur­ mutual funds from 91 days to 60 days.
ing the month with both Table 7: Foreign Exchange Market: Select Indicators
the products depicting M o n th Rs/$ R e ference A p p re c ia tio n ( + ) / Fll F low s BSESensex US D o lla r In d e x

Rate (L a st F rid a y D e p re c ia tio n (-) ( E q u ity + D e b t) ( M o n th -e n d ( M o n th - e n d

borrowings by the government. The respectively 10% and o f th e M o n th ) o f Rs/$ (in %) (in $ m illio n ) C lo sin g ) C lo s in g )#

budget for the year 2012-13 has pitched 21% more daily turnover S e p - 2 0 1 1 4 8 .9 3 -5 .8 7 -1 ,8 6 6 1 6 ,4 5 4 7 2 .8 1

the net market borrowing further higher (Table 5, p 67). O c t-2 0 1 1 4 8 .8 2 0 .2 1 634 1 7 ,7 0 5 7 0 .5 2

by around Rs 4.8 lakh crore. High gov­ As per the latest avail­ N o v - 2 0 1 1 5 2 .1 7 -6 .4 1 -5 8 6 1 6 ,1 2 3 7 2 .3 7

D e c -2 0 1 1 5 3 .2 6 -2 .0 5 4 ,1 9 5 1 5 ,4 5 5 7 3 .3 3
ernment borrowing in the coming finan­ able data from the rbi,
J a n -2 0 1 2 4 9 .6 8 7 .2 0 5 ,0 8 7 1 7 ,1 9 4 7 2 .6 0
cial year has been rightly commented the issuance of certifi­
F e b -2 0 1 2 4 9 .0 7 1 .2 6 7 ,1 6 4 1 7 ,7 5 3 7 2 .1 4
upon by the r b i as of a tall order and a cates of deposit (cds) by *: D ata rela tes to last d a y o f th e m o n th . #: N o m in a l M a jo r C urren c ies D o lla r In d e x .
challenge to manage. scheduled commercial Source: w w w .r b i.o r g .in ,w w w .b s e in d ia .c o m ,w w w .s e b i.g o v .in ,w w w .fe d e r a lr e s e r v e .g o v .
banks fell notably during Table 8: Average DailyTurnover inthe Foreign Exchange Market* ($ billion)
2.1 Money Market the fortnight ending 13 M o n th M e rc h a n t In te rb a n k Spot F o rw a rd T o ta l

Aug-2011 17.0 (21.6) 46 .6 (3.3) 30.3 (6.2) 33.3 (9.0) 63.5 (7.7)
Rampant liquidity shortage in the system January 2012 and amo­
Sep-2011 15.1 -(11.2) 44.8 -(3.8) 29.6 -(2.3) 30.3 -(9.0) 59.8 -(5.8)
and unpredictable monetary actions con­ unted to Rs 11,240 crore. Oct-2011 12.6-(1 6.7 ) 40.0 -(10.6) 26.7 -(9.8) 25 .9 -(1 4 .4 ) 52.6 -(12.1)
fused short-term money market activity The outstanding amount Nov-2011 12.3 -(2.2) 41.0 (2.5) 26.6 -(0.3) 26.7 (3.1) 53.3 (1.4)
in February. A severe cash crunch resulted reached Rs 3,74,890 crore Dec-2011 11.2 -(8.4) 35.6 -(13-2) 2 2 .8 -(1 4 .2 ) 2 4 .0 -0 0 .0 ) 46 .8 -(12.1)
in a sharp rise in overnight money market during the same period Jan-2012 9.9 -(11.9) 38.7 (8.6) 22.8 -(0.3) 25.8 (7.4) 48 .6 (3.7)
rates from the beginning of the month showing a Rs 28,000 *:Figures In c lu d e s tra d in g in FC Y /IN R a n d FC Y/FC Y.
in b ra c ke ts are p e rc e n ta g e c h a n g e o v e r th e p re v io u s m o n th .
and weighted average one-day rates ruled crore decline over the Source: RBI's Weekly Statistical Supplem ent, v a rio u s issues.
above the 9% mark for a couple of days. Table 9: Details of Central Government Market Borrowings (Amount in Rs crore)
However, call rates eased significantly D a te o f A u c tio n N o m e n c la tu re o f Loan N o tifie d A m o u n t B id -C o v e r R a tio D e v o lv e m e n t o n Y T M a t C u t- o ff C u t t - o f f P rice
P rim a ry D e a le rs P rice ( in % ) (Rs)
from the second week of February on the 3 -F e b -1 2 7 .8 3 % 2 0 1 8 R 3 ,0 0 0 2 .0 8 N il 8 .1 8 9 8 .2 9

back of relatively comfortable liquidity 8 .7 9 % 2021 R 7 ,0 0 0 1 .5 4 N il 8 .1 5 1 0 4 .2 0

in the system. Thereafter the movements 8 .8 3 % 2 0 4 1 R 3 ,0 0 0 2 .0 4 N il 8 .5 5 1 0 3 .0 0

in rates remained very wobbly with the 1 0 -F e b -1 2 8 .1 9 % 2 0 2 0 R 3 ,0 0 0 1 .9 6 N il 8 .2 8 9 9 .4 7

system experiencing the worst ever funds 9 .1 5 % 2 0 2 4 R 6 ,0 0 0 2 .2 9 N il 8 .3 2 1 0 6 .4 1

8 .9 7 % 2030 R 3 ,0 0 0 1 .9 8 N il 8 .6 2 1 0 3 .2 2
shortage. Still, the rates eased notably
1 7 -F e b -1 2 8 .2 4 % 2 0 1 8 R 3 ,0 0 0 2 .3 2 N il 8 .3 1 9 9 .6 5
towards the end of the month on the
8 .7 9 % 2021 R 6 ,0 0 0 2 .2 5 N il 8 .2 0 1 0 3 .8 5
back of a notable fall in January infla­ 8 .8 3 % 2041 R 3 ,0 0 0 2 .5 5 N il 8 .6 0 1 0 2 .4 4
tion figures. Overall, in a period of one 2 4 -F e b -1 2 8 .1 9 % 2 0 2 0 R 3 ,0 0 0 1 .8 4 N il 8 .3 0 9 9 .3 7

month, the call money rates hardened a 9 .1 5 % 2 0 2 4 R 6 ,0 0 0 1 .9 8 N il 8 .3 1 1 0 6 .5 2

bit and averaged 8.90% for February. 8 .9 7 % 2 0 3 0 R 3 ,0 0 0 2 .5 4 N il 8 .5 9 1 0 3 .5 1

Mixed signs of monetary easing kept T o ta l f o r F e b r u a r y 2 0 1 2 4 9 ,0 0 0 2 .0 8 N il 8 .3 3 1 0 3 .2 0

T o ta l f o r J a n u a r y 2 0 1 2 5 5 ,0 0 0 2 .2 7 N il 8 .3 7 -
the remaining short-term money market
R: R e-issue. @ C o u p o n d e c id e d in th e a u c tio n a t th e c u t-o ff y ie ld .
rates more volatile. Notice money rates Source: RBI press releases.

68 MARCH 31, 2 0 1 2 v o l x lv ii n o 13 GEES E co n o m ic & P o litic a l w eek ly

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 MONEY MARKET REVIEW

Mutual funds are the major investors in not take recourse to the marginal stand­ Japanese yen has weakened sharply
these instruments and the new norms ing facility (m sf) during February. The against the greenback by more than 5%
may prevent them from participating in cash crunch is expected to aggravate in February owing to monetary easing in
these markets. further in March owing to advance tax Japan. Strong investor risk appetite for
Core liquidity significantly remained payments by corporates for the last emerging market assets supported Asian
under deficit mode, evident from the quarter and the fiscal year end resource currencies too; a sharp increase in crude
huge injection of funds by the r b i in its needs of banks (Table 6, p 67). oil prices in the world market however
liquidity adjustment facility ( l a f ) repo restricted them from appreciating further.
window during February. The borrowed 2.2 Forex Market The broad recovery of Asian currencies
amount by banks remained above Rs 1.25 Rising hopes of global economic recovery was reflected in the J P Morgan Asian
lakh crore in the first week. However, the and positive developments in the euro dollar index (is a spot index of emerging
situation got somewhat eased during the area kept the forex market sentiment Asia’s most actively traded currency
second week, but immediately turned to positive. The investor appetite for riskier pairs valued against the dollar) rising by
the earlier mode. In the second report­ assets sustained conversely diminishing 50 bps over the month and ending at
ing fortnight, the situation got aggrava­ safe haven demand for the dollar. How­ 117.65 points as on 29 February.
ted and bank borrowing averaged to ever, the bullish us jobs data supported Propelled by a strengthening euro
Rs 1.4 lakh crore. Towards the end of the the greenback. Overall weakness in the and other Asian currencies, the Indian
month, the liquidity situation of banks greenback against major global curren­ rupee also advanced during the month.
further worsened with r b i infusing more cies was reflected in a 46 bps fall in the Portfolio capital inflow, which reached
than Rs 1.8 lakh crore on a daily average dollar index [Nominal Major Currencies its highest monthly peak of this fiscal to
basis. Besides, the central bank released Dollar Index (March 1973=100)] during a massive $7.16 billion in February, also
funds worth Rs 20,590 crore through the a period of one month to 72.14 points as buoyed markets. Still, subdued stock
o m o window during the month. Despite on 29 February. market activities and spiking crude oil
r b i ’s intense efforts like cut in c r r and The euro recuperated against most of prices limited rupee gains to some extent.
release of funds through o m o , pressure the major currencies with easing wor­ The rupee began the month on a very
on the liquidity front remained through­ ries over Greece after the approval of promising note and appreciated by more
out the month. Borrowers, however, did bailout funds. On the other hand, the than 2% against the greenback in four
Table 10: Secondary Market Outright Trades in Government Papers - NPS and NPS-OM Peals (Amount in Rs crore)
Descriptions February 2012 Previous Month Three Months Ago SixMonths Ago
Last Week (24) First Week (3) Total for the Month (January 2012) (November 2011) (August 2011)
AMT YTM AMT YTM AMT YTM AMT YTM AMT YTM AMT YTM
1 Treasury Bills 5,343 2,826 17,780 27,473 13,548 15,476
A 91-Day Bills 3,644 8.94 1,621 8.69 9,462 8.84 10,206 8.50 5,258 8.69 10,429 8.17
B 182-Day Bills 140 8.93 280 8.61 763 8.81 5,962 8.49 3,680 8.80 2,514 8.32
C 364-Day Bills 1,559 8.43 924 8.48 7,555 8.53 11,305 8.12 4,610 8.72 2,533 8.28
2 GOI Dated Securities 42,145 8.26 1,21,726 8.26 3,08,879 8.26 4,54,527 8.33 1,88,411 8.92 2,87,935 8.31
Year o f (N o o f
Maturity Securities)
2012 (2) 105 8.90 588 8.71 965 8.77 1,146 8.48 1516 8.76 783 8.58
2013 (1) 520 8.16 520 8.16 730 7.89 25 8.59 490 8.27
2014 (4) 1 8.21 105 8.06 186 8.10 230 8.66 212 8.23
2015 (2) 39 8.17 210 8.10 486 8.13 1,566 8.10 337 8.65 456 8.15
2016 (3) 245 8.26 416 8.20 1460 8.24 1,743 8.24 421 8.84 3,623 8.22
2017 (3) 75 8.32 405 8.20 687 8.23 3,626 8.28 2,202 8.87 2,535 8.25
2018 (4) 2,033 8.31 8,528 8.22 18,020 8.25 29,280 8.26 22,669 8.87 18,507 8.29
2019 (2) 10 8.29 17 8.29 39 8.37 50 8.93 0 8.30
2020 (2) 1,063 8.62 6,463 8.50 13,429 8.42 7,519 8.42 1,364 9.25 1,920 8.07
2021 (4) 24,898 8.19 52,673 8.18 1,48,850 8.19 1,91,675 8.25 1,04,712 8.89 1,85,767 8.87
2022 (2) 31 8.34 448 8.28 571 8.29 2,949 8.34 22,117 8.96 66,939 8.28
2024 (1) 11,163 8.30 46,887 8.30 1,11,538 8.30 1,92,833 8.39 27,914 9.01
2027 (3) 366 8.49 945 8.49 2,088 8.49 0 8.34 2,374 9.07 4,271
2028 (2) 0 8.54 1 8.62 5,220 8.58 1 9.27 4 8.56
2030 (1) 1,081 8.58 3,270 8.57 7,387 8.57 4 8.48
2032 (3) 92 8.53 270 8.52 436 8.52 8,124 8.54 1 9.17 1,120 8.38
2040 (1) 128 8.57 70 8.57 418 8.55 1,619 8.57 2,472 9.21 1,284
2041 (1) 305 8.58 544 8.55 1,895 8.56 2,694 8.57 8.64
3 State Govt Securities 1,478 8.74 879 8.61 4,364 8.67 4,659 8.69 2,337 9.15 2,328 8.57
Grand total (1 to 3) 48,967 1,25,431 3,31,022 4,86,660 2,04,295 3,05,738
(-) Means no trading YTM = Yield to maturity in per cent per annum NDS = Negotiated Dealing System OM = Order Matching Segment.
(1) Yields are weighted yields, weighted by the amounts of each transaction. (2) Trading in 2023,2034 to 2039 are negligible.
Source: Compiled by EPWRF; base data from RBI, CCIL.

Economic &Political weekly DBQ march 31, 2012 vol xlvii no 13 69

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MONEY MARKET REVIEW

straight trading days, propelled by sub­ in February. Both the premia moved in However, United Stock Exchange ( u s e )
stantial amount of foreign inflows com­ tandem and hardened by 46 bps and 25 managed to garner just 1% of overall
ing into domestic equity and debt mar­ bps over the month and ended at 8.91% turnover during the month.
kets. The situation suddenly turned and 7.56%, respectively on 29 February.
adverse from 7 to 10 February and the In January 2012, the forex market dai­ 2.3 Central Government Securities
domestic currency lost all its gains. ly turnover increased by 3.7% over the Four issuances of central government
From 13 February onwards, the rupee previous month. The inter-bank and for­ securities were held in raising Rs 49,000
witnessed a see-saw movement as a sud­ wards transactions led the rise and they crore in the aggregate as compared to
den spurt in crude oil prices undermined reported an 8.6% and 7.4% improve­ Rs 55,000 crore in January, completing
the market outlook, but uninterrupted ment in turnover. However, merchant more than 98% of the total government
portfolio inflows lifted the confidence. and spot dealings plummeted by 11.9% borrowing for the financial year 2011-12.
Except for some intermittent losses, the and 0.3% respectively during January Seven securities were issued in the month,
rupee gradually moved upwards and compared to December (Table 8, p 68). five securities issued twice, namely,
added 70 paise versus the dollar in 12 The currency derivatives market con­ 8.19% 2020, 8.79% 2021, 8.83% 2041,
market days. Overall, in a period of one tinued with its subdued trading behav­ 8.97% 2030 and 9.15% 2024. Overall,
month, the Indian rupee fell below the iour, domestic exchanges reporting a yield softened by 4 bps over the period
psychological Rs 49 mark and apprecia­ 13% reduction in total turnover during to 8.33%, while the bid cover ratio also
ted by 1.5% against the greenback to end February compared to the previous declined to 2.08 times (Table 9, p 68).
at Rs 48.94 per dollar on 29 February month. The aggregate daily average During the month, through three auc­
(Table 7, p 68). turnover also remained below Rs 30,000 tions the r b i purchased government
The forward premia across tenures crore. Segment-wise, futures turnover securities worth Rs 30,517 crore. The
hardened substantially during February reported a 5% fall, while options trading turnover of central government securities
as uncertain currency movements and a recorded a 16% fall during the month. In had plunged by 32% over the month, at
miserable external outlook owing to a the futures segment, u s d - i n r contracts Rs 3,08,878 crore. Overall yield had
sudden spurt in crude oil prices general­ garnered 96% of the market share as in eased by 7 bps to 8.26%, over the month.
ly made an adverse impact on premia. earlier months. Turnover of the remain­ Trade in special securities like o i l m k t -
The near-month premia hardened con­ ing products continued to be insignificant. n c o b o n d was worth Rs 1,329 crore in
siderably and touched nearly a five-year Among the exchanges trading in cur­ February. The top five securities contrib­
high of 10.62% on 28 February. The rency derivatives products, the National uting to almost 96% of the total turn­
premia ended the month at 10.18% on 29 Stock Exchange ( n s e ) witnessed a 17% over were 8.79% 2021,9.15% 2024,7.83%
February showing a 1.36 percentage reduction in total trading but sustained 2018, 8.19% 2020 and 8.97% 2030. The
point rise over the previous month-end. its dominance with 57% market share, highest turnover came from 8.79% 2021
However, the three-month and six- while the Multi-Commodity Exchange worth Rs 1,47,521 crore followed by 9.15%
month premia limited their hardening (m c x - s x ) contributed 42% towards the 2024 with contribution of Rs 1,11,538
trend, tracking a steady rise in the rupee total currency derivatives turnover. crore. The softened yield of 10-year
Table 11: Predominantly Traded Government Securities (Amount in Rs crore)
Descriptions February 2012 Previous Month Three Months Ago Six Months Ago
Last Week (24) First Week (3) Total for the Month (January 2012) (November 2011) (August 2011)
AMT YTM AMT YTM AMT YTM AMT YTM AMT YTM AMT YTM
GOI Dated Securities
6.85 2012 5 8.85 177 8.73 236 8.74 691 8.44 846 8.81 265 8.30
7.17 2015 39 8.17 210 8.10 486 8.13 1,265 8.10 287 8.64 438 8.22
7.59 2016 201 8.25 416 8.20 1,379 8.24 1,135 8.22 406 8.84 3,588 8.25
7.99 2017 55 8.33 340 8.20 575 8.23 3,214 8.29 1,573 8.89
8.07 2017 65 8.21 72 8.21 359 8.22 626 8.82 2,348 8.28
7.83 2018 1,440 8.29 8,527 8.22 17,245 8.24 29,270 8.26 22,663 8.87 18,502 8.30
7.80 2021 10 8.31 777 8.26 1228 8.26 6,129 8.30 40,172 8.92 1,85,762 8.28
8.79 2021 24,878 8.19 51,896 8.18 1,47,521 8.19 1,85,454 8.25 64,540 8.87
8.08 2022 30 8.34 78 8.27 152 8.30 1,465 8.33 4,214 8.97 26,559 8.38
8.13 2022 1 8.34 370 8.29 419 8.29 1,249 8.33 17,903 8.96 40,380 8.37
9.15 2024 11,163 8.30 46,887 8.30 1,11,538 8.30 1,92,833 8.39 27,912 9.01
8.26 2027 201 8.49 28 8.46 486 8.48 498 8.48 643 9.04 897 8.60
8.28 2027 162 8.50 916 8.49 1,590 8.50 4,704 8.58 1,692 9.09 3,363 8.55
8.97 2030 1,081 8.58 3,270 8.57 7,387 8.57 8,124 8.54
8.28 2032 80 8.52 270 8.52 424 8.52 3,530 8.55 1 9.17 1,119 8.58
8.30 2040 128 8.57 70 8.57 418 8.55 1,619 8.57 2,472 9.22 1,284 8.64
8.83 2041 305 8.58 544 8.55 1,895 8.56 2,694 8.57
Total (All Securities) 42,145 8.26 1,21,726 8.26 3,08,879 8.26 4,54,527 8.33 1,88,411 8.92 2,87,935 8.31
(-) means no trading YTM = Yield to maturity in percentage per annum. (1) Yields are weighted yields, weighted by the amounts of each transaction.
Source: As in Table 10.

70 m a rc h 31, 2012 v o l x lv ii n o 13 E3X3 Economic &Political w e e k l y

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 MONEY MARKET REVIEW
Table 12: Yield Spreads (Weighted Average) - Central Government yields moved up to 8.74% In the secondary market, total turn­
Securities (basis points)__________________________________
Yield February 2012 Previous Three Six Months
and 8.71%, respectively over fell by 35% to Rs 17,780 crore during
Spread in bps Last Week First Week Entire Month Month Months Ago Ago over the month. Both the month. Yield rates across maturities
1 Year-5 Year 16 7 39 28 -2 yields firmed in the second moved up. For 91-day bills, yield firmed
5 Year-10 Year 2 8 6 6 9 3
auction over the first auc­ up by 34 bps to 8.84%; for 182-day bills it
10 Year-15 Year 15 21 20 0 11
1 Year-10 Year 18 13 45 37 15 tion. The bid cover ratio strengthened by 32 bps to 8.81% and in
Source: As in Table 10. declined to 1.44 times the case of 364-day bills it inched up the
Table 13: Details of State Government Borrowings (Amount in Rscrore) from 1.83 times in the pre­ highest by 41 bps to 8.53%. Total traded
Date of Auction Number of Total Bid-Cover YTMat Weighted vious month. Twelve state volume of 91-day bills was the highest,
1Jarticipating Amount Ratio Cut-Off Average
States Accepted Price (%) Yield (%) governments participated worth Rs 9,462 crore followed by 364-
07-Feb-12 7 6,410 1.60 8.70 8.67 in these auctions, while day t b s worth Rs 7,555 crore.
21-Feb-12 9 8,678 1.32 8.77 8.73 Karnataka, Kerala, Punjab
Total for February 2012 16 15,088 1.44 8.74 8.71 6 Corporate Bonds Market
and Tamil Nadu approached
Total for January 2012 22 20,128 1.83 8.67 8.64
Source: RBI press releases.
the market twice. From A whopping increase in private place­
the second auction, Tamil ments on n s e was seen during the month
Table 14: Auctions o f Treasury Bills (Amount in Rs crore)
Date of Auction Bids Bid-Cover Cut-off Weighted Cut-off Weighted
Nadu and Maharashtra at Rs 21,332 crore from Rs 9,999 crore in
Accepted Ratio Yield (%) Average Price (Rs) Average have raised Rs 300 crore January. Banks and financial institu­
Yield (%) Price (Rs)
A: 91-Day Treasury Bills and Rs 500 crore, over and tions raised the highest amount worth
01-Feb-12 9,000 1.97 8.81 8.77 97.85 97.86 above their respective Rs 9,779 crore, through 26 issues offer­
08-Feb-12 9,000 1.83 8.90 8.86 97.83 97.84 notified amount (Table 13). ing coupons in the range of 9%-n.50%.
15-Feb-12 9,000 2.18 8.94 8.90 97.82 97.83 In the secondary market, Non-Bank Financial Companies (n b fc s )
22-Feb-12 9,000 1.89 9.02 8.98 97.80 97.81
aggregate turnover during garnered Rs 5,693 crore by 30 issues
29-Feb-12 8,000 2.15 9.06 9.06 97.79 97.79
Total for Feb 2012 44,000 2.00 8.94 8.91 97.82 97.83 the month was Rs 4,364 paying coupons in the range of 9.43% to
Total for Jan 2012 24,000 2.25 8.61 8.57 97.90 97.91 crore, falling by Rs 295 10.35%. The highest coupon was offered
B: 182-Day Treasury Bills crore from January. Over­ by corporates in the range of 11.25%-
01-Feb-12 4,000 2.35 8.66 8.62 95.86 95.88 all, yield declined to 11.60% for raising Rs 2,838 crore. Central
15-Feb-12 4,000 3.19 8.66 8.64 95.86 95.87 8.67% from 8.69% over Undertakings, Rural Electrification Cor­
29-Feb-12 4,000 2.57 8.75 8.73 95.82 95.83
the period. State loans of poration and Power Finance Corpora­
Total for Feb 2012 12,000 2.70 8.69 8.66 95.85 95.86
Total for Jan 2012 8,000 2.80 8.49 8.42 95.94 95.97
Tamil Nadu worth Rs 727 tion also approached market by the way
C: 364-Day Treasury Bills crore were traded the of private placement issues raising
08-Feb-12 4,000 3.95 8.51 8.49 92.18 92.19 most in the month fol­ Rs 3,021 crore and offered the lowest
22-Feb-12 4,000 4.91 8.51 8.49 92.18 92.19 lowed by Maharashtra coupon range of 9.28% and 9.33%.
Total for Feb 2012 8,000 4.43 8.51 8.49 92.18 92.19 worth Rs 620 crore and Overall, coupon rates firmed up in
Total for Jan 012 8,000 2.65 8.34 8.27 92.33 92.39
West Bengal Rs 461 crore. February at 9% to 11.60% from 9% to
Source: RBI's press releases.
9.83% in January. During the month,
Table 15: Details o f Private Placement in Corporate Bonds on NSE 5 Treasury Bills out of a total 69 issues as many as 28
Institutional Category No of Volume in Rangeof Range of Maturity
Issues Five issuances of t b s were
Rs Crore Coupon Rates in Years (y) and issues were of zero coupon bonds by all
(in %) Months (m)
conducted in February, issuers except central government under­
Banks/FIs 26 9,779 9.00-11.50 ItolO
2 3,021 9.28-9.33 5
when 91-day, 182-day takings (Table 15).
Central undertakings
Corporates 11 2,838 11.25-11.60 1to 9 and 364-day t b s mopped Two public issues by Indian Railway
NBFCs 30 5,693 9.43-10.35 1 to 7 funds worth Rs 44,000 Finance Corporation and Housing and
Total for February 2012 69 21,332 9.00-11.60 ItolO crore, Rs 12,000 crore and Urban Development Corporation closed
Total for January 2012 23 9,999 9.00-9.83 1 to 1 Rs 8,000 crore, respec­ in the first half of February, after raising
Source: www.nseindia.com.
tively. Issuance of 91-day Rs 6,300 crore and Rs 4,685 crore,
maturities over the month from 8.25% to and 182-day t b s was higher by 83% and respectively against their base issue
8.19% as compared to the five-year 50%, respectively over the period. Better sizes of Rs 3,000 crore and Rs 2,000
maturities took the spread of 10-year bid cover was realised by 364-day t b s at crore, respectively.
maturities over five-year maturities into 4.43 times, which declined for the rest of Turnover of corporate bonds in the
a negative zone at -4 bps and the spread the two maturities. Cut-off and weighted secondary market has increased by about
of 10-year maturities over one-year matu­ yields firmed up across maturities. For 32% to Rs 67,909 crore from Rs 51,494
rity was 3 bps in February (Table io, 91-day t b s cut-off and weighted yields crore during the month. Tlirnover
p 69, Table 11, p 70 and Table 12). jumped over successive auctions during increased across trading platforms while
Two issuances of state loans held on 7 the month. The same was the case for the highest turnover was recorded by
and 21 February mopped up Rs 6,410 182-day maturity, but for 364-day fim m d a , worth Rs 33,696 crore, followed
crore and Rs 8,678 crore, respectively. t b s , both yields remained unchanged by n s e reporting a turnover of Rs 29,367
Overall, cut-off and weighted average (Table 14). crore in February.
Economic &Political w e e k l y US53 m a rc h 31, 2012 v o l x lv ii n o 13 71

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 Opportunities with a National NGO (Microfinance)
in 0 Sahulat Microfinance Society is a national NGO registered in New Delhi working in the
VSr
s a h u la t ) area of financial inclusion by way of interest free cooperative branches. The Society
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NOTES
R&D Strategies of MNCs in India
Isolation or Integration?
N MRINALINI, PRADQSH NATH, G D SANDHYA
India has emerged as one of the
major destinations for foreign
direct investment in research and
development. As a host country,
does India gain from the f d i
inflow into r& d ? Does it help
build its innovation capabilities?
It appears that the r& d centres of
the mncs operate in isolation and
use India as a human resource
hub for the mncs’ global
r& d activities.
N Mrinalini {nmrinalini@nistads.res.in),
Pradosh Nath (pradoshnath@nistads.res.in)
and G D Sandhya (gdsandhya@nistads.res.in)
are scientists at the National Institute of
Science Technology and Development Studies,
New Delhi.
Economic &Political weekly 0301 march 31, 2012
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esearch and development (r& d )
R was traditionally considered to be
a centralised core activity of a
firm. The disintegration of r& d and its
spread to various locations opened up
several issues related to the changes in the
strategies of multinational corporations’
(m n cs) r& d activities.
r& d internationalisation is not a new
phenomenon. As early as in the 1970s,
Ronstadt (1977) and Mansfield et al
(1979) had looked at the nature of r& d
activities undertaken by United States
(us) m n c s in their foreign locations: “In
early 1970s about one-half of the indus­
trial r & d performed in Canada and about
one-seventh of the industrial r & d per­
formed in the United Kingdom and
Germany were done by us-based firms”
(Mansfield et al 1979). With an increas­
ing need for innovation to keep pace
with growing competition coupled with
a human resource crunch in the home
country, m n c s , especially from Sweden,
initially looked for the scope for expan­
sion of r& d activities in other developed
countries for leveraging both skilled
manpower and r & d infrastructure in
the developed economies. It has been
observed that in addition to the cost
advantage and availability of highly
skilled scientific and technological man­
power, the research strength at the uni­
versities and research institutions has
been one of the major attractions for
m n c s seeking a particular location in
the developed countries to gain knowl­
edge from a similar or more advanced
scientific and technological knowledge
base. Cantwell observed that a highly
innovative environment leads to know­
ledge competition, which, in turn, re­
sults in undertaking high-end r& d
(Cantwell 1987). The nature and type of
r& d activity that m n c r& d centres
would undertake in a particular location
vol xlvii no 13
would also determine the extent of the
penetration of these centres through
their linkages in the host country inno­
vation system. A highly innovative in­
dustry in the host country would attract
an m n c to link up with local firms to
leverage benefits for new product or
process development (Chen 2007; Ernst
2006). Hakanson and Nobel (1993)
have observed:
Supply conditions in the market for engi­
neers and technical knowledge may in some
foreign countries be so favourable that they
induce companies to set up local research
establishments to ‘tap into’ the local scien­
tific infrastructure, be it in terms of labour
market for scientists and engineers, privi­
leged access to local universities and research
institutions, etc.
The choice of overseas location for r& d is,
therefore, a strategic decision guided by
expectations from locations and possi­
bilities of leveraging the capabilities
of the host countries (Ronstadt 1977;
Terpstra 1977; Kuemmerle 1997,1999).
During the first phase of globalisation of
r& d (mainly from one developed country
to another), the concern was whether
through the foreign r & d activities in
foreign shores the home country’s know­
ledge advantage was getting transferred
to the host country institutions. It was
observed that most of the research
activities undertaken were of an adaptive
in nature and so the scope for transferring
the knowledge advantage was limited. It
was around the mid-1980s that the global
spread of m n c r & d centres was growing
and the nature of it was changing, i e,
even core r & d activities and not just the
adaptive research was being performed
in other foreign locations (Cantwell 1989;
Niosi 1999; Florida 1997; Hakanson
1981; Odagiri and Yasuda 1996).
This change and also the growing pat­
tern of global foreign r & d investments
drew greater attention from researchers,
governments and policymakers to under­
stand factors that drive r & d activities
overseas and their implications for the host
and home country innovation systems.
Various studies have unveiled several
dimensions of globalised r & d activities
focusing mainly on issues related to the
organisation and coordination of r& d
73
centres in different locations, the choice
of location, factors that attract m n c s to a
particular country/location, etc (Pearce
1988, 1989; Hakanson 1981; Hakanson
and Nobel 1993; Granstrand et al 1992;
Dunning 1992; Cantwell 1987). The
strategy, however, changed course soon.
By early 2000, m n c s were seeking new
shores in the developing economies, m n c s
from the us were the trendsetters in this
regard. The us firms’ overseas r & d acti­
vities had increased from 3% in 1994 to
10% by 2002 ( u n c t a d 2005a).
The new trend has raised new con­
cerns. What are the guiding factors be­
hind this new-found advantage in the
developing economies like China and
India? Is it the access to the market, human
resources and/or r & d infrastructure?
What could be the possible gains of the
developing host countries from the pres­
ence of the m n c r & d centres? How do
the m n c r & d centres integrate or inter­
act with the innovation systems of the
developing host countries? This article
attempts to address some of these ques­
tions in the Indian context.
MNCs and Emerging Economies
As observed by the United Nations Con­
ference on Trade and Development
( u n c t a d 2005b), “the expansion of r & d
into selected developing countries is a
reaction to increased competition, which
forces firms to innovate more at lower
cost, t n c s are especially attracted to
host countries that have the appealing
combination of low wages and large
pools of skilled workers”.
The emergence of information, commu­
nications technology ( i c t ) -based network
technology that made distant communi­
cations possible in real time opened up
the opportunities for accessing resources
and management and monitoring of cor­
porate activities from overseas (James
2002). Countries with reasonable i c t
infrastructure were the best candidates for
overseas operations of m n c s . First came
the manufacturing set-ups in developing
countries where the availability of skilled
manpower and assurance of physical in­
frastructure like water, electricity and
transport network were reasonably
ensured. Manufacturing activities were
followed by r & d activities through
74
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Figure: Conceptual Model of Linkages and Outcome
Outcome
Move up the Modes
value chain Contract
Global market research
for R&D Joint research
capability programmes
Access to global ■ New
network curriculum
■Human dev
Resource
' Spin-off firms
Source: Mrinalini and Wakdikar (2008).
setting up of r & d centres and establish­
ing linkages with the r & d systems of the
host countries. The enabling conditions
for expanding r & d activities in develop­
ing countries, therefore, are the availa­
bility of r & d infrastructure and science
and technology ( s & t ) resources that
include manpower with skills to be
employable in the r & d activities. It is
this enabling condition that has made
China and India to become the most
favoured destinations of m n c s r & d
activities overseas.
The literature on various issues related
to m n c s locating their r & d centres in
the emerging economies started appear­
ing very recently. China is the main focus
of these studies. In 1997, Reddy had
dealt with m n c s in India and had ob­
served that the linkages of m n c s with
firms were negligible. At the same time,
m n c s were setting up research centres
for certain adaptive type of r & d acti­
vities. In addition, certain m n c s were
also setting up their global r & d centres
in India (Reddy 1997, 2000 and 2005).
The studies on the dynamics of these
r & d centres (both adaptive and global
r & d ) , however, are yet to become popu­
lar. In a conceptual paper, Mrinalini and
Wakdikar (2008) and Mrinalini (2009)
have suggested a framework for looking
at the linkages and their impact on Indian
system. Their concern was to under­
stand the ways m n c s r & d can have a
discernible impact on local technology
generation and production systems. The
methodological focus of the paper was
linkages between the production and
technology systems of the host country
M ARCH 31, 2 0 1 2
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Local R&D/Universities
Types of Linkages
•Joint research labs
Outcome
•Special training centres Modes
• Access to
•Centres of excellence Joint venture global market
Collaboration •Competitive­
Foreign R&D
Technology ness
Types of Linkages transfer •Spin-off firms
• Joint product development •Skill dev
•Contract for product
development_ _ _ _ _ _ _ _ _
Local Production
System
T
and the m n c s r & d activities (as shown
in the Figure).
This was in consonance with several
studies on China that had studied the
impact of the presence of m n c r & d
centres on China’s innovation system by
looking at the linkages between the
m n c r & d centres and China’s r & d and
production system and indicated that
impacts or outcomes depend on the
modes of linkages and also on the types
of the host country actors (universities,
r & d organisations, firms, etc) (Chen 2006,
2008; Quan 2010; Sun et al 2006, 2008;
Sun 2010). The study by Quan (2010)
examines the linkages between China’s
university system and the m n c s to
understand the process of expected
knowledge diffusion.
For the present study, we have used
the linkage approach to understand the
principal dynamics of the m n c r & d
activities in India. The methodological
details of the study are elaborated in the
following section.
Data and Methodology
This article is based on a primary survey
conducted during 2008-09 as a part of a
Technology Information, Forecasting and
Assessment Council ( t i f a c ) -supported
project on the impact of the presence of
m n c r & d centres on the Indian r & d and
production system. The study has identi­
fied 706 foreign firms investing in r & d
in India. Our preliminary details of the
706 firms show that 117 (16.57%) Anris
have various forms of linkages with the
actors in Indian innovation and tech-
nology/knowledge generation system,
v o l x lv ii n o 13 13259 E co n o m ic & P o litic a l w eekly
 NOTES
namely, educational institutions, r& d Table 2: Investment Size-wise Classification of For selection of firms for the study, in­
MNCs Having Linkages with Indian Institutions
institutions and domestic firms. We ar­ stead of any sampling method, we tried
Investment Range (in$billion) IT PH AU Total
rived at this number of 117 by scanning 1 1
to include as many firms as possible from
Above 1 bn 2
through all business news, company Less than 1 bn to 500 mn 2 X 1 3 the high investment size groups in each
reports, India Business Insight Database Less than 500 mn to 100 mn 11 2 2 15 cluster and each segment. The result
(ibid), company websites and also through Less than 100 mn to 50 mn 9 3 X 12 was the numbers of firms in each cluster
personal visits and interactions with Less than 50 mn to 10 mn 28 8 1 37 and sector as shown in Table 4. We have
industry people, research institutions Less 10 mn 11 15 1 27 studied total 3 8 m n c s : 2 6 from software
and educational institutions. The rest of Total 62 29 5 96 and i t industry, 10 from pharma and bi­
Source: The study, collated and constructed from various
the 706 firms, grouped as not having link­ business news, IBID, company websites.
otechnology industry and two from the
ages with any Indian actors, are those auto industry. There are 7 3 firms with
which have their interactions with the institutions formed the population for less than $ 1 0 0 mn investment. Our study
Indian systems limited to recruitment of the survey. Since we expect that firms has covered 2 2 (3 0 % ) of the 73 firms in this
manpower from various educational in­ having larger r & d investment will investment group. There are 2 0 firms
stitutions. Table 1 presents the broad over­ require more extensive and intensive above $ 1 0 0 mn investment, and of that
view of the linkages that these 117 m n c s linkages with the Indian institutions, the study covered 16 (80% ) firms. Given
have with various Indian institutions. we try to draw our sample as much as the small size of the population, the large
Table 1: Linkages of MNCs with Indian Actors percentage of coverage was essential for
Sector Educational Institutions ResearchInstitutions IndianFirms Total fair representation of the population.
Aerospace - 2 2 4
Besides m n c s , we have also included
Auto industry (AU) 2 1 5 8
Chemicals - 2 2
Indian institutions/firms having con­
Electronic components - 1 1 tract research or joint research arrange­
Machine and equipment - 1 1 2 ments with m n c s . The selection of such
Others 2 2 firms was based on the feedback about
Pharma and biotech (PH) 1 3 27 31 such arrangement from the m n c s that
Software and ITservices (IT) 43 8 47 98 we visited for the purpose of the study.
Total 46 18 84 148
The study also covered the spin-off
The num ber 148, in the above table refers to the total num ber of linkages by 117 MNCs. It also means th at some MNCs have
more than one type of linkage w ith m ore than one entity. firms/start-up firms from the group of
Source: The study*, collated and constructed from various businessnews, IBID Database, company websites. firms having collaboration with m n c s .
The size-wise classification of m n c s possible from the firms in the higher Such firms are not many in number and
reveals interesting features. Foreign investment size groups. Firms for the are mostly observed in the software and
direct investment (fd i) in r& d in India study were also chosen to have fair rep­ i t industry group. Table 5 (p 76) presents
has a typical feature that can be described resentations of the clusters. Table 3 gives sector-wise types of the firms studied.
as a large number of small investments the cluster-wise and investment size- Table 6 (p 76) gives the cluster-wise
and a small number of large investments. wise number of firms for the study. details of the firms studied. Total 63
Most of the investments are below $50 Table 3: Cluster-wise Distribution of the MNCs Having Linkages with Indian Institutions
million (mn). The intuitive understand­ Cluster Bangalore Chennai Hyderabad NCR Mumbai/Pune Total
Investment (in $) IT PH AU IT PH AU IT PH AU IT PH AU IT PH AU
ing is that the large number of small
1 bn and above X 1 X X X X X X X 1 X X X X X 2
investments in r& d is actually for low-
<1 bn-1/2 bn 1 X 1 X X X X X X X X X 1 X X 3
end r& d activities that neither require <500mn-100mn 3 X 1 1 X X 4 X X 2 X X 1 2 1 15
high-skilled manpower nor require link­ <100mn-50mn 6 2 X 1 X X 1 X X 1 X X X 1 X 12
ages with institutions of the high standard <50mn-10mn 9 3 X 4 X X 6 3 X 2 X X 6 2 1 36
r & d infrastructure. <10 mn 5 2 X 1 2 X 1 3 X 3 1 X 2 4 1 25
Out of 117 firms 96 (82.05%) are from Total 24 8 2 7 2 X 12 6 X 9 1 X 10 9 3 93
the three sectors, i e, software and infor­ Out of 96 we have total 93firms in the clusters.
Source: The study, collated and constructed from various business news, IBID, company websites.
mation technology ( i t) industry (62,
Table 4: Cluster-wise and Sector-wise Distribution of the Studied Firms
13.84% of the total f d i in r& d firms), Cluster Bangalore Chennai Hyderabad NCR Mumbai/Pune Total
pharma and biotech (ph) (29, 33.72% of Investment (in$) IT PH AU IT PH AU IT PH AU IT PH AU IT PH AU
total f d i in r& d firms) and auto industry 1 bn and above X 1 X X X X X X X X X X X X X 1
sector (a u ) (five, 19.23% of the total f d i <1 bn-1/2 bn 1 X 1 X X X X X X X X X 1 X X 3
in r& d firms). Table 2 presents invest­ <500mn-100mn 7 X X 2 X X 1 X X 1 X X X 1 X 12
ment size-wise classification of 117 firms <100mn-50mn 4 1 X X X 1 X 1 X 1 X X X 1 X 9
<50mn-10mn 2 1 X X X X X X X 1 X X 1 X X 5
that have various types of linkages with
<10mn 2 2 X 1 X X 1 X 2 X X X X 8
Indian institutions.
Total 16 5 1 3X 1 2 1 X 3 X 2 2 2 X 38
These 96 firms in the selected Source: Based on the study, collated and constructed from various business news, IBID, company websites, Part 1, Tables 1
sectors having linkages with the Indian and 2.

Economic &Political weekly QSS3 m a rc h 31, 2012 VOL xlvii no 13 75

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NOTES

firms were included: 3 8 m n c s , 21 Indian projected manpower requirement as de­ variation and their impact on Indian
firms with various types of collaborations clared by the company along with the institutions. The sample firms have been
with m n c s , and four spin-off firms. Again declaration of the investment in a parti­ analysed to delineate the nature, type
37 firms were from the software and i t cular project in India. The data on jobs and extent of linkages, m n c s ’ linkages
sector, with seven Indian firms having created, therefore, is in most of the have been examined separately for r& d
collaborative arrangements with m n c s , cases, an estimate. In reality, in some purposes and for human resources
and four spin-off firms. Pharma and cases, jobs created are more than what needs of the m n c s . While for the former
Table 5: Sample Firms and Types of Firms Studied was estimated, as in the case of g e linkages are essentially for research
FirmType Sector Total which has expanded its r& d centre activities of various types, and mainly
IT PH AU
much beyond its initial declaration. Sim­ with the premier institutions having
MNCs 26 10 2 38
Indian contract research ilarly, Hyundai in 2009 declared a $500 considerable r & d infrastructure, the
organisations (CROs) and firms mn r& d set-up in Hyderabad. This was need for human resources requires alto­
with collaborative research 6 10 4 20 in addition to their existing set-up in gether different nature of linkages with
Indian spin-off/start-ups 5 5
Chennai. The Hyderabad centre is to the educational institutions. Table 7 shows
Total 37 20 6 63
become their global r& d hub and will the various modes of linkages initiated
biotechnology sector had 10 m n c s and 10 create more employment. by the m n c s with the educational insti­
Indian firms in the study. Six firms from Total job creation during 2003-09 was tutions in India.
the auto industry were included, of which 2,47,403 on an investment of $29.23 bn. All the m n c s have linkages with edu­
two were m n c s and four Indian firms. Software and i t sector had a share of cational institutions; recruitment of man­
As we have mentioned earlier, m n c s 74.17% of the total employment created. power remains the most visible reason.
having extensive and intensive r& d Among other sectors, the auto industry The firms in software and i t services
linkages with Indian actors have special had a share of 5.29% and pharma bio­ sector have more intensive interactions
preference for some centres of excellenc­ technology a share of 3.31%. The soft­ with educational institutions in com­
es in India. Those are Indian Institutes ware and i t sector has a share of 50.30% parison to pharma-biotech and auto
of Technology (iits), International Insti­ of the total f d i in r& d , followed by industry sector.
tutes of Information Technology (h its ), the auto industry 9.88% and pharma-
and the Indian Institute of Science (use). biotechnology sector 9.24%. Employment MNCs in Software and IT Services:
Such linkages are most visible in case of created per million us dollar invested They have formal collaborations with
the software and the i t sector. Of the shows that the software and i t sector is premier educational institutions for stu­
i it s , i i t Kharagpur has a large number of the highest employment generator at dents’ capability enhancement, collabo­
r& d collaborations with m n c s , and were (12.83), whereas the pharma and bio­ rative research work, internships and
therefore covered in the study, h i t s in technology sector (2.97) and auto fellowships to meritorious students, hands-
Hyderabad and Bangalore and use industry sector (4.55) are more capital- on experience with toolkits, joint centres
Bangalore also have close interactions intensive investments. for research work and students’ training,
with m n c s and were covered. curriculum development, and professorial
MNCs Collaboration with chairs. With local educational institu­
Job Creation Indian Institutions tions (mainly engineering colleges), these
The information on jobs created has A detailed investigation of the sample m n c s have linkages for curriculum deve­
been collated from various sources. The firms has been done to understand the lopment, training programmes for both
main source, however, has been the pattern of the linkages, their sectoral teachers and students, setting up of
certain specialised courses, distribution
Table 6: Cluster-wise Distribution of Types of Firms Studied
Types of Firms Bangalore Chennai Hyderabad NCR Mumbai/Pune Total of tools and kits to students for hands
IT PH AU IT PH AU IT PH AU IT PH AU IT PH AU on experience. Their collaboration
MNC 16 5 1 3 1 2 1 3 2 2 2 38 with r& d institutions is few and short
CR0 3 4 1 1 2 2 3 1 1 2 20 term in nature where again it is with
Indian spin-off/ students and professors for encouraging
start-up . 4 1 5
Total 23 9 1 4 1 3 5 4 3
PhD programmes.
3 2 3 2 63
Source: Based on survey.
MNCs in Pharma and Biotech: They
Table 7: Nature of Linkages in Premier Educational Institutions in Various Sectors with th e MNCs
Sector Merit Scholarship/ Imparting New Professors Recruitment Providing have collaboration for research projects
Internships to Training Curriculum Chairs Toolkits/Practice with premier educational institutions,
Student School
and also collaboration with universities
Software and ITservices 18 5 3 3 20 4
Pharma and biotech 2 1
for research projects. They have collabo­
- - - 1
Auto industry sector - - 1 1 2 1 rative projects with research institutions
Total 20 5 4 5 22 6 and national laboratories and other
Source: Primary survey. research institutions. With the Indian
76 m a rc h 31, 2012 v o l x lv ii n o 13 [3253 Economic & Political w e e k l y

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 NOTES
firms, they have collaborative research in which India has much softer norms r& d centres are engaged in high-end
setups and also contract research. compared to many developed countries. r& d activities, it is expected to be re­
Table 10 shows the collaboration with flected in the patenting activities of the
Auto Industry: Not much collaborative the national laboratories. respective m n c s . A comparison between
work with premier or other educational Table 10: MNCs with National Labs the m n c s ’ patenting activities as reflect­
institutions. There are, however, cases of and Research Institutions ed in global patenting on the one hand,
Sector Collaborative Research
collaborations with research institutions Software and IT services (IT) 3 and patents generated through the r & d
for joint product development. Pharma and biotech (PH) 4 activities in India, on the other, will indi­
Auto industry sector (AU) 1 cate the importance of the r & d activities
Linkage for R&D Collaboration Source: Based on Primary Survey. undertaken in India in the overall r & d
For r & d collaboration modes of interac­ It is clear from Table 10 that the m n c s value chain. Table 11 presents patent-
tions are different. As shown in Table 8, hardly have linkages with the research related information on the m n c s ’ Indian
apart from funding research projects, institutions and they also emerged from and global operations. It is to be noted
there are cases of m n c s investing in r& d the discussions that the academic insti­ that out of 706 companies investing in
institutions for upgradation of research tutions are preferred for research col­ India, only 74 companies have patents
infrastructure and in some cases jointly laborations. The national labs are well- from India. Again the software and i t
Table 8: Types of Linkages for MNC R&DActivities
equipped both in human sector has the major share (54 compa­
Sector Project Joint Research Joint resources and infrastruc­ nies). These 74 companies together have
Funding/ Project/ Infra­ Research ture. The national labs are 2,14,686 global patents. And only 1,166
Sponsorship ResearchWork structure Lab
into r & d activities in vari­ of those patents are from India. Again
Software and IT services (IT) 6 6 4 8
Pharma and biotech (PH) 1 2 - -
ous areas in which many of software and i t sector shares 749 of
Auto industry sector (AU) - 2 - 1 the m n c r & d centres in 1,166 patents from India. Another inter­
Total 7 10 4 9 India are operating. The esting revelation from Table 11 is that 63
Source: Based on primary survey. m n c s r & d presence can be firms out of 74 have less than 5% share
Table 9: Indian Firms' Linkages with MNC R&DCentres
leveraged by the national of patents from India vis-a-vis their
Sector Centres Contract Contract Indian labs through more focused global patents.
with MNCs Research/ Research Spin-offs collaborations and part­
Collaborative forMNCs and
Research Start-ups nerships. Linkages be­ Conclusions
forMNCs tween the National Chemi­ The interesting dimension that is emerg­
Software and IT services (IT) 3 3 - 5 cal Laboratory ( n c l ) and ing from this study is that the m n c s do
Pharma and biotech (PH) 1 3 6
DuPont as well as National not have much linkages with the Indian
Auto industry sector (AU) - 4 - -
Source: Based on primary survey.
Institute of Oceanography institutions. Absence of linkage is more
(n io ) and Biogenus, the pronounced in the case of collaborations
developing research labs for defined Colorado-based biotechnology company with research institutions. This means
purposes. As expected, the software and are some of the examples of the linkages. that for a new product development or
i t sector is most active in r& d collabora­ The other side of the impact of the any scientific or technological research
tions. In the cases of pharma-biotech r& d activities o f the m n c s is through the input, they are not looking towards
and auto sectors it is mostly limited to r& d output generated by these centres Indian production and r& d system. There
joint research projects. in the host country. Expected spillover is some sectoral variation observed with
Table 9 presents an overview of the effect on host countries’ innovation system the i t sector linking more with the uni­
Indian firms’ linkages with the m n c is generated through the host country versity system and this is the sector
r & d set-up. It is evident that the m n c manpower that is engaged in the r& d which is investing almost around 50% of
r& d system has insignificant linkages activities in these centres. If the m n c total investment in r& d , followed by the
with the Indian production system. Con­
tract research is the most prominent Table 11: Patenting Behaviour of Firms Bringing in FDI for R&D
Sectors NoofR&DFDI Patent fromIndia Global Patent NoofCompanies Having%ShareofPatent from
mode among a few collaborations be­ Companies IndiainRespectiveTotal Global Patent
tween the two sides. However, in the <1 1<5 5<10 10<50 >50
Software and IT (IT) 54 749 1,29,385 22 21 4 3 4
software industry, there are a few cases
Pharma and bio (PH) 4 19 3,413 3 1
of spin-off firms, which can be claimed
Auto industry sector (AU) 3 5 12,460 3
as the direct effect of the m n c s ’ linkages
Machine and equipment 5 47 12,583 4 1
with the Indian actors in the r& d systems. 1 1
Electronic compts 1 338
It is evident from Table 9 that the Metals and minerals 1 5 1,992 1
m n c s need, the Indian firms for some sort Chemical 3 4 6,285 3
of contract research. In case of pharma- Others 3 336 48,230 2 1
biotechnology sector such association is Total 74 1,166 2,14,686 39 24 4 3 4
becoming important for clinical research, Source: Delphion Database.
Economic &Political w e e k l y QSQ m a rc h 31, 2012 v o l x lv ii n o 13 77

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NOTES
pharmaceutical and auto sector. Employ­
ment created per million dollars invested
shows that the software and i t sector is
the highest employment generator. The
linkages with the Indian systems show
that the software and i t sector, being
more dependent on human resources,
has a wide variety of interactions with
educational and r& d institutions, whereas
in the pharma and biotech sector it is
more with the Indian firms, and to some
extent, with the research institutions. In
the auto industry sector, again it is more
with the Indian firms. In all the three
sectors, the linkages with research insti­
tutions are not very prominent. The patent
information indicates that the r& d acti­
vities undertaken by m n c s in India in
comparison to their global r & d activities
do not reflect much importance of their
Indian set-ups, or their interest in high-
end r& d initiatives. The patent data
analysis also clearly shows that the firms
are not into high-end r& d . The other
interesting feature is that the m n c s ,
especially in the i t sector, have linkages
with the university system, where again
their emphasis is on creating human
resources for their requirement by pro­
viding training, etc. The i t industry, in
particular, faces a severe crunch of quality
manpower. They try to overcome the
problem by introducing new curricu­
lum, encouraging students to take up
specialised courses, familiarising the
students in specific toolkits at the teach­
ing level, etc. They also provide incen­
tives through scholarships, internships,
and also through creating special faculty
positions at the university/institution
levels. From the study it emerge that the
m n c s are not looking for knowledge
advancement as their linkage with the
educational institutions is for having
access to human resources and to enhance
the capability of human resources for
their future requirement. So, m n c s are
drawn to India to access human resources,
which has been stated by Reddy and
u n c t a d for doing their r & d activities
which are not the high-end r & d (Reddy
2000: 202; u n c t a d 2005a). At the same
time, they are collaborating with the
university system for training them for
their r& d requirements for the future,
which could be a resource in the future
78
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for high-end r& d . It looks like India is
emerging as a human resource hub for
the m n c s for their global activities.
[This article is based on a study, “Impact of FDI
in R&D on Indian R&D and Production System”,
by the National Institute for Science Technology
and Development Studies, and supported by
the Technology Information, Forecasting and
Assessment Council. The prim ary survey was
completed in 2010. The study covers the period
2003-09. Authors acknowledge the support
from Kiran Zacharia; Abhishek Kumar un­
grudgingly helped in processing and tabula­
tion of the data.
The authors also acknowledge the assistance
provided by Rammi Kapoor in project work.
Observations and suggestions from anonymous
reviewers of the review committee constituted
by TIFAC helped in conceptualising the article.]
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Economic&PoliticalwEEKLY
available at
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v o l x lv ii n o 13 13223 Economic &Political w e e k l y
D ISC U SSIO N
Macroeconomics Curricula
in India and the United States
PARAG WAKNIS
A response to “Some Thoughts
on the Macroeconomics
Curriculum in India” ( e p w , 21
January 2012) distinguishes the
various schools in contemporary
macroeconomics, and surveys
the teaching of the subject at the
undergraduate level in the
United States. It argues for
greater flexibility for teachers in
India to decide their curricula.
Parag Waknis (parag.waknis@umassd.edu)
is with the University of Massachusetts,
Dartmouth, US.
Economic &Political w e e k l y Q 3Q
he design of a good curriculum in
T economics in general and macro­
economics in particular is a press­
ing need for most Indian universities.
G Visakh Varma’s article “Some Thoughts
on the Macroeconomics Curriculum in
India” (epw , 21 January 2012) on this
matter could not have come at a more
appropriate time. There is not only a
need for total revamp of curricula but
also for a more serious Indian orienta­
tion, for more exposure to new theoreti­
cal developments as well as the empiri­
cal research being done world over on
India. This is obviously a daunting task.
Notwithstanding this, I do not agree
with Varma’s assessment of what is miss­
ing in current curricula and what exacdy
needs to be added to make it more hetero­
dox. Also, the comparison with what is
taught in the United States (us) needs
some elaboration. In what follows, I out­
line my critique. Having taught economics
in both the countries for some time now, I
plan to exploit the insider’s advantage.
First of all, I would like to point out that
what is mainstream and what is hetero­
dox is not so clear unless we account for
existing practices and contexts in differ­
ent countries. It is also important to be
clear about what we mean by different
schools of thought in macroeconomics,
especially in cross-country comparisons
of curricula.
The Classical or its Neoclassical coun­
terpart, as I understand it, believes in the
efficiency of markets, while the old Key­
nesians believevthat markets do not al­
ways work and in such cases, the govern­
ment usually has to step in. However,
both these schools of thought use a static
framework to analyse economic events.
This is where the new classical and New
Keynesian schools differ from their old
counterparts. Both these “New” schools
use a dynamic framework.
m a rc h 31, 2012 v o l x lv ii n o 13
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The new classical school of thought uses
the Solow growth model-based frame­
work with optimising agents to determine
the values of various macroeconomic ag­
gregates. It is also referred to as the “real
business cycle” ( r b c ) framework because
of its emphasis on real shocks, i e, shocks
to the Solow residual as an explanation for
business cycles. It uses techniques of dy­
namic optimisation and dynamic pro­
gramming to arrive at results. Some initial
expositions can be found in the Frontiers of
Business Cycle Research, a collection of
articles edited by Thomas Cooley (1995).
Daron Acemoglu’s Introduction to Econo­
mic Growth and Robert Barro and Xavier
Sala-i-Martin’s (2003) Economic Growth
are good examples of this school in the
graduate textbook arena.
The New Keynesian model used today
really is an offshoot of the New Classical
model. As pointed out by Stephen Wil­
liamson (2011) in blog posts,1 Michael
Woodford (2003) of Columbia University
laid out the framework for it in his Inter­
est and Prices: Foundations of a Theory of
Monetary Policy. It has all the elements of
the New Classical model except that mo­
nopolistically competitive firms rather
than the perfectly competitive firms of
the New Classical model decide prices.
This introduction of imperfect competi­
tion along with the use of menu costs or
Calvo pricing allows for some price sticki­
ness in the model. However, it is still as
micro-founded as the New Classical/RBC
model, where the representative agent
decides things optimally. It is also the
workhorse model of monetary policy
analysis at various us banks and the Fed­
eral Reserve, though after the crisis its
use has been severely criticised.
The US Situation
In most cases in us universities, teachers
are free to design their own curricula
and tests and choose the text they will
use for courses. This allows teachers tre­
mendous flexibility in bringing in fresh
perspectives and choosing texts that
support their view of the subject matter.
In spite of this freedom, we do find gen­
eral consensus on subject matter in a typi­
cal introductory macroeconomics course.
79
DISCUSSION
At the undergraduate level, many of the
popular texts that end up being adopted
more or less look the same. They deal with
the short term in the context of sticky pric­
es and wages, and the long run in the con­
text of flexible prices. So a hybrid of Classi­
cal and Old Keynesian traditions is pre­
sented to the students. A few texts have
now introduced the New Keynesian mod­
els at this level.*12
Most of the undergraduate texts in
intermediate macroeconomics are in the
New Keynesian framework as well.
Examples include textbooks by Olivier
Blanchard, Greg Mankiw, and Charles
Jones, among many others. On the other
hand, only a couple of textbooks like those
by Robert Barro or Stephen Williamson of­
fer both New Classical and New Keynesian
perspectives at this level. They also touch
on search theory in labour markets, New
Monetarist Economics (search theory in
money) and overlapping generations mod­
els. However, because transition from a
New Keynesian principles text to an inter­
mediate one in the same tradition is easier,
texts by Mankiw, Jones, Blanchard or Fred:
eric Mishkin are adopted in most places.
In the case of graduate texts, however,
Thomas J Sargent and Lars Ljungqvist’s
(2004) book seems to be an increasingly
popular choice. Varma refers to Sargent
and Ljungqvist’s text as a mainstream
one, probably because Keynesian mod­
els are conspicuous by their absence.
Otherwise, the text does an impressive
job in conveying the heterodox flavour of
macroeconomics as practised by re­
searchers. It classifies the models of mac­
roeconomy in complete or incomplete
markets set-ups. The benchmark is the
Arrow-Debreu world; subsequent chap­
ters deal with departures from it. In this
sense, this approach is closer to the way
macroeconomic research is conducted to­
day. It also has substantial chapters on
search theory of labour as well as money,
overlapping generations models, econom­
ic growth (exogenous and endogenous),
game theoretic perspectives on macro­
economics, political economy and so on.
Thus, in the us. New Keynesianism
seems to be the mainstream when it
comes to undergraduate texts; graduate
macroeconomics seems to be more
eclectic. Of course, one can still argue that
80
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it is not eclectic enough since it does not
include the Austrians, Behaviourists,
Structuralists, Kaleckians and so on.3 The
main concern, however, is that popular
opinion in the us is more informed by Key­
nesian perspectives; the eclectic macro­
economics taught in graduate school has
not made it into undergraduate curricula.
The Indian Context
As said before, the macroeconomics cur­
riculum in India does need a total revamp.
However, changes have to be both at the
level of the system as well as content. In
addition, these changes need to occur in
the context of huge disparities in the
skills and knowledge of students as well
as teachers, and given that teachers do
not have any stake in the curriculum de­
sign and testing in most places.
A systemic change is an important one
in this context. For example, updating a
syllabus has to mean more than just chang­
ing the names of books in the syllabus. But
in most places, change is limited to such
cosmetics. More often than one would like,
newly added books get relegated to refer­
ence book status and more diluted and
stripped versions of these texts become a
staple for teachers and students alike. So it
does not really mean much when the sylla­
bus refers to Sargent and Ljungqvist’s book
as a text. In some places like Jawharalal
Nehru University, Delhi School of Econom­
ics or Indira Gandhi Institute of Develop­
ment Research, students do get exposed to
multiple perspectives. Those graduating
from these places have contributed to fur­
thering the understanding of issues faced
by the Indian economy. However, not
much of this research informs even the
graduate curriculum across India, leave
aside the undergraduate.
I think one reason why this is the ease
is because teachers have a little or no say
in what is to be taught. A way out is to
get rid of standardised curricula and
testing practices that characterise many
universities and imbue the system with
more flexibility and individual agency.
Better schools in India already do this.
This would open up some competition in
instruction and also create a demand for
better written textbooks. The transition
would take time and will not be without
hiccups, but will definitely pave a way for
MARCH 31, 2012
All use subject to https://about.jstor.org/terms
redesigning the whole system of econo­
mics curriculum design and instruction.
As for the redesigning of syllabi, any
such restructuring exercise cannot be done
in isolation. To build an eclectic perspec­
tive, multiple electives have to be of­
fered that follow up on the core material.
To do so, one has to take a more holistic
view of what is taught in economics under­
graduate and graduate courses and not
just consider the macroeconomics syllabus
alone. Also, the importance of an Indian
orientation cannot be overemphasised.
Theories have a higher pedagogical val­
ue when they are grounded in the insti­
tutional realities of a particular economy.
n o t e s _________
1 Stephen Williamson (2011), a Professor at Wash­
ington University in St Louis, writes a blog
called “New Monetary Economics” which can
be accessed at: http://newmonetarism.blogs-
pot.com/. His scholarly work on New Monetar­
ist Economics is available in the latest issue of
the Handbook of Monetary Economics.
2 Tyler Cowen and Alex Tabarrok’s (2012), Mod­
ern Principles: Macroeconomics is the only ex­
ception I know of. They cover both the New
Keynesian and New Classical models.
3 Note that many higher level electives are offered
quite routinely that cover behavioural macroeco­
nomics, or microeconomics from institutional
perspective, political economy, history of thought,
etc. Of course, the frequency and importance of
such courses in the overall scheme of things may
differ from department to department.
REFERENCES____________________________
Acemoglu, Daron (2008): Introduction to Economic
Growth (Princeton: Princeton University Press).
Blanchard, Olivier (2010): Macroeconomics, updated
edition (Upper Saddle River, New Jersey: Pear­
son Prentice Hall).
Barro, Robert (2010): Intermediate MACRO (Mason,
Ohio: South-Western College Pub).
Barro, Robert and Xavier Sala-i-Martin (2003):
Economic Growth (Cambridge: MIT Press).
Cowen, Tyler and Alex Tabarrok (2012): Modern
Principles: Macroeconomics (New York: Worth
Publishers).
Cooley, Thomas (1995): Frontiers of Business Cycles
Research (Princeton: Princeton University Press).
Jones, Charles (2011): Macroeconomics (New York:
WW Norton).
Mankiw, Gregory N (2012): Principles of Macroeco­
nomics (Mason, Ohio: South-Western Cengage
Learning).
Mishkin, Frederic (2009): The Economics of Money,
Banking and Financial Markets (Upper Saddle
River, New Jersey: Prentice Hall)
Sargent, Thomas J and Lars Ljungqvist (2004): Re­
cursive Macroeconomic Theory (Cambridge:
MIT Press).
Varma, G Visakh (2012): “Some Thoughts on the
Macroeconomics Curriculum in India”, Eco­
nomic &Political Weekly, 47(3): 22-26.
Williamson, Stephen (2011): Macroeconomics (Up­
per Saddle River, New Jersey: Pearson).
Woodford, Michael (2003): Interest and Prices:
Foundations of a Theory of Monetary Policy
(Princeton: Princeton University Press).
v o l x lv ii n o 13 DEE3 Economic &Political w e e k ly
 CURRENT STATISTICS EPW Research Foundation

India's trade deficit widened to $148.7 billion till January 2012 during 2011-12, compared with $105.9 billion in the previous year. This is consequent to the export growth rate falling from 31.8% to 28.7% while
the growth rate of imports expanded from 24.5% to 34.8% between the two years. The foreign exchange reserves position, excluding gold, has however weakened recently, showing a steep fall of $15.9 billion
during 2011-12 from $278.9 billion in March 2011 to $263.0 billion as on 9 March 2012.
Macroeconomic Indicators
Variation (%): Point-to-Point
Index Numbers of Wholesale Prices*
Weights February Over Over 12 Months Fiscal Year So Far Full Financial Year
2012 Month 2011 2010 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07
All Commodities 100.0 158.4 0.4 7.0 9.5 6.0 8.7 9.7 10.4 1.6 7.7 6.7
Primary Articles 20.1 201.5 0.9 6.3 15.9 7.1 14.3 13.4 22.2 5.4 9.6 12.8
Food Articles 14.3 192.3 0.5 6.1 11.0 7.4 10.8 9.4 20.6 8.0 5.6 13.2
Non-Food Articles 4.3 186.7 2.1 -2.6 34.4 -2.3 27.5 27.1 20.4 0.6 16.3 10.6
Minerals 1.5 329.6 1.6 25.3 17.7 23.6 13.6 15.2 37.9 -2.8 '28.2 13.8
Fuel & Power 14.9 173.2 0.2 12.8 12.4 9.8 9.6 12.6 13.8 -3.4 7.4 1.1
Manufactured Products 65.0 141.7 0.4 5.7 6.3 4.4 6.2 7.5 5.3 1.7 7.1 6.3
Food Products 10.0 153.4 0.0 5.7 0.0 5.6 2.4 2.5 15.1 6.3 8.4 4.3
Food fndex (computed) 24.3 176.3 0.3 5.9 6.8 6.8 7.7 6.8 18.5 7.3 6.7 9.6
All Commodities (Monthly average basis) 100.0 155.5 - 9.0 9.6 8.9 9.6 9.6 3.8 8.1 4.7 6.6
A The date of first release of data based on 2004-05 series wef 14 September 2010.
* Consequent upon the decision of the Cabinet Committee on Economic Affairs (CCEA) held on 24 January 2012, weekly release of Wholesale Price Index (WPI) for the commodities/items under the Groups "Primary Articles" and
"Fuel and Power" is discontinued with immediate effect. WPI shall, henceforth, be released on a monthly basis only. The last Weekly WPI forthe weekending 14 January 2012.
Variation (%): Point-to-Point
Cost of Living Indices Latest Over Over 12 Months Fiscal Year So Far Full Fiscal Year
Month 2012 Month 2011 2010 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06
Industrial Workers (IW) (2001=100) 1981 0.5 5.3 9.3 7.0 10.6 8.8 14.9 8.0 7.9 6.7 5.3
Agricultural Labourers (AL) (1986-87=100) 6181 0.0 4.9 8.7 5.6 9.9 9.1 15.8 9.5 7.9 9.5 5.3
Note: Superscript numeral denotes month to which figure relates, e g, superscript 1 stands for January.
Variation
Moneyand Banking (Rs crore) 24 February Over Month Over Year Fiscal Year So Far Full Fiscal Year
2012 2011 2011-12 2010-11 2010-11 2009-10 2008-09
Money Supply (M3) 7226270 66800(0.9) 859550(13.5) 726780(11.2) 764020(13.6) 896817(16.0) 807920(16.8) 776930(19.3)
Currency with Public 1015980 19330(1.9) 110630(12.2) 101780(11.1) 137860(18.0) 146704(19.1) 102043(15.3) 97040(17.1)
Deposits Money with Banks 6209220 49080(0.8) 751440(13.8) 627590(11.2) 626380(13.0) 750239(15.5) 707606(17.2) 683375 (19.9)
of which: Demand Deposits 667340 2800(0.4) -11500(-1.7) -50320(-7.0) -39130(-5.5) -310 (-0.0) 129281 (22.0) 10316(1.8)
Time Deposits 5541880 46280(0.8) 762940(16.0) 677910(13.9) 665510(16.2) 750549(18.2) 578325(16.4) 673059(23.5)
Net Bank Credit to Government 2326600 25590(1.1) 453640(24.2) 343830(17.3) 203770(12.2) 313584(18.8) 391853(30.7) 377815 (42.0)
Bank Credit to Commercial Sector 4726820 57500(1.2) 622990(15.2) 491410(11.6) 612420(17.5) 743997(21.3) 476516(15.8) 435904(16.9)
Net Foreign Exchange Assets 1461960 -19310(-1.3) 81480(5.9) 68620(4.9) 99010(7.7) 111858(8.7) 367718 (-5.2) 57053 (4.4)
Banking Sector's Net Non-Monetary Liabilities 1302830 -3020(-0.2) 299690(29.9) 178070(15.8) 152510(17.9) 274078(32.2) -9050 (-1.1) 94672 (12.4)
of which: RBI 537570 -12040(-2.2) 166020(44.7) 169220(45.9) 69900(23.2) 66660(22.1) -86316 (-22.3) 177709(84.5)
Reserve Money (9 March 2012) 1406070 3310(0.2) 113730(8.8) 29250(2.1) 136680(11.8) 221170(19.1) 167652(17.0) 59696(6.4)
Net RBI Credit to Centre 505250 5940(-) 193880(-) 111210(-) 99780(-) 182460 149819 176397
Scheduled Commercial Banks (24 February 2012)
Aggregate Deposits 5815470 47370(0.8) 727470(14.3) 607500(11.7) 595170(13.2) 715143(15.9) 658716(17.2) 637170(19.9)
Demand 596440 2510(0.4) -7610(-1.3) -45260(-7.1) -41560(-6.4) -3905 (-0.6) 122525 (23.4) -1224 (-0.2)
Time 5219020 44860(0.9) 735080(16.4) 652760(14.3) 636730(16.6) 719048(18.7) 536191 (16.2) 638395 (23.9)
Investments (for SLR purposes) 1744930 54910(3.2) 258260(17.4) 243310(16.2) 101920(7.4) 116867(8.4) 218342(18.7) 194694(20.0)
Bank Credit 4407520 56190(1.3) 594510(15.6) 465440(11.8) 568230(17.5) 697294(21.5) 469239(16.9) 413635(17.5)
Non-Food Credit 4324310 56070(1.3) 576590(15.4) 446510(11.5) 551430(17.3) 681500(21.3) 466961 (17.1) 411825(17.8)
Commercial Investments 175280 4070(2.4) 21230(13.8) 27679(18.8) 35979(30.5) 28872(24.5) 11654(11.0) 10911 (11.4)
Total Bank Assistance to Comml Sector 4499590 60140(1.4) 597820(15.3) 474189(11.8) 587409(17.7) 710372(21.4) 478615(16.9) 422736(17.5)
Note: Government Balances as on 31 March 2011 are after closure of accounts.
Index Numbers of Industrial Production January* Fiscal Year So Far Full Fiscal Year Averages
(Base 2004-05=100) Weights 2012 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07
General Index 100.00 187.9(6.8) 169.0(4.0) 162.5(8.3) 165.4(8.2) 152.9(5.3) 145.2(2.5) 141.7(15.5) 122.6(12.9)
Mining 14.157 137.2-(2.7) 125.5-(2.6) 128.9(6.3) 131.0(5.2) 124.5(7.9) 115.4(2.6) 112.5(4.6) 107.6(5.2)
Manufacturing 75.527 202.4(8.5) 179.9(4.5) 172.3(8.9) 175.6(8.9) 161.3(4.8) 153.8(2.5) 150.1(18.4) 126.8(15.0)
Electricity 10.316 151.1(3.2) 148.8(8.8) 136.8(5.3) 138.0(5.6) 130.8(6.1) 123.3(2.8) 120.0(6.4) 112.8(7.3)
* Indices for the month are Quick Estimates.
Fiscal Year So Far 2010-11 End of Fiscal Year
Capital Market
16 March 2012 Month Ago Year Ago Trough Peak Trough Peak 2010-11 2009-10 2008-09
BSE Sensitive Index (1978-79=100) 17466(-4.9) 18154 18359(7.0) 15175 19702 16022 21005- 19445(10.9) 17528(80.5) 9709(-37.9)
BSE-100 (1983-84=100) 9197(-3.8) 9568 9557(5.1) 7805 10262 8540 11141 10096(8.6) 9300(88.2) 4943(-40.0)
BSE-200 (1989-90=100) 2163(-4.2) 2246 2258(5.0) 1824 2427 2034 2753 2379(8.1) 2200(92.9) 1140(-41.0)
S&P CNX Nifty (3 Nov 1995=1000) 5318(-3.5) 5522 5511(7.5) 4544 5912 4807 6312 5834(11.1) 5249(73.8) 3021 (-36.2)
Skindia GDR Index (2 Jan 1995=1000) 2498(-15.3) 2525 2947(6.0) 1875 3441 2477 3479i 3151(9.3) 2883(134.2) 1153(-56.2)
Net Fll Investment in (US $ Mn Equities) - period end 110221(9.7) 106026 100436(33.4) - - 101454(31.5) 77159(43.1) 51669(-18.6)
January* Fiscal Year So Far Full Fiscal Year
Foreign Trade
2012 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05
Exports: Rs crore 130129 1153800(28.7) 896518(31.8) 1118823(32.3) 845534(0.6) 840754(28.2) 655863(14.7) 571779(25.3) 456418(21.6) 375340(27.9)
US$mn 25347 242792(23.5) 196633(37.8) 245868(37.5) 178751 (-3.5) 185295(13.6) 163132(29.0) 126361(22.6) 103091(23.4) 83536(30.8)
Imports: Rs crore 205911 1859168(34.8) 1379478(24.5) 1596869(17.1) 1363736(-0.8) 1374434(35.8) 1012312(20.4) 840506(27.3) 660409(31.8) 501065(39.5)
US$mn 40108 391459(29.4) 302529(30.1) 350695(21.6) 288373(-5.0) 303696(20.7) 251654(35.5) 185749(24.5) 149166(33.8) 111517(42.7)
Non-POL US$mn 27783 273545(25.7) 217596(34.0) 249006(23.7) 201237H2) 210029(22.2) 171940(33.5) 128790(22.4) 105233(37.1) 76772(33.2)
Balance ofTrade: Rs crore -75782 -705369 -482959 -478047 -518202 -533680 -356449 -268727 -203991 -125725
US$mn -14761 -148668 -105896 -104827 -109621 -118401 -88522 -59388 -46075 -27981
* Provisional figures.
Foreign ExchangeReserves (excluding Variation Over
gold but including revaluation effects) 9 March 11 March 31 Mar Fiscal Year So Far Full Fiscal Year
2012 2011 2011 Month Ago Year Ago 2011-12 2010-11 2010-11 2009-10 2008-09 2007-08 2006-07
Rs crore 1315670 1254253 1245284 5570 61410 70390 82007 73038 -57826 33975 359500 189270
US$mn 263028 277428 278899 893 -14400 -15871 17737 19208 18264 -57821 107324 46816
Figures in brackets are percentage variations over the specified or over the comparable period of the previous year. (-) not relevant.
[Comprehensive current economic statistics with regular weekly updates, as also the thematic notes and Special Statistics series, are available on our website: http://www.epwrf.in].

Economic &Political weekly Q3Q march 31, 2012 vol xlvii no 13 8l

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STATISTICS

Secondary Market Transactions in Government Securities and the Forex Market - Weeks Ending March 2/9/16,2012
1 SettlementVolumeofGovemmentSecuritiesTransactions
16 March 2012 9 M arch 2012 2 M arch 2012 18 M arch 2011 2 011-12* 2 0 1 0 -1 1 * *

N um ber Volum e N um ber Volum e N um ber Volum e N um ber Volume N um ber V olum e N um ber Volum e
ofT rades (Face value ofT rades (Face value ofT rades (Face value ofT rades (Face value o fT rades (Face value ofT rades (Face v alue
inR scrore) inR scrore) inR scrore) inR scrore) inR scrore) in R scrore)

Outright Trades 7154 63875 4487 39036 6390 59607 6007 44878 400966 3390888 322149 2799616

RepoTrades 608 67609 626 68932 698 67523 5 19 69374 28688 3646024 26481 3969292

Total 7762 1 3 1483 5113 107968 7088 1 2 7130 6526 114252 429654 7036 9 1 1 348630 6768909

DailyAvgOutright 1431 12775 1122 9759 1278 11921 1201 8976 1790 1 5138 1354 11763

DailyAvgRepo 101 11268 1 25.2 13786 116 11 2 5 4 87 11562 103 13068 94 14026

2 Type-wise Settlement Volume of Government Securities Transactions 5 Top 2 Traded Central Government Dated Securities
Outright Repo Outright Repo Outright Repo Outright Repo Security Description Value % Value to
Central Government 57042 40071 33615 41706 52326 43179 39590 57913 (Rscr) Total

State Government 851 1109 1307 388 643 614 1224 139 Week Ending 16March 2012
Treasury Bills 5983 26429 4113 26839 6638 23730 4064 11322 8.79%GS2021_______________ 40261 70.58
Total 63875 67609 39036 68933 59607 67523 44878 69374
7.80%GS 2021_______________ 8796 15.42
3 Intercategory-wise Outright Trades - Central Government Securities - Market Share (in%) Week Ending9 March 2012
Buy Side Sell Side Buy Side Sell Side Buy Side Sell Side Buy Side Sell Side 8.79%GS2021_______________19836 59.01
Foreign Banks 26.62 30.49 32.99 35.75 29.23 31.60 29.27 31.33
9.15%GS2024_______________ 10201 30.35
Public Sector Banks 18.56 10.70 25.73 17.19 23.20 16.95 23.14 16.50
20.66 16.14 22.84 20.27 20.89 Week Ending 2 March 2012
Primary Dealers 27.86 24.72 27.33
Private Sector Banks 23.60 20.89 16.08 17.01 17.52 18.52 14.63 15.09 8.79%GS2021______________ 25079 47.93
Mutual Funds 3.89 3.52 2.33 1.83 2.85 2.59 4.15 5.10 9.15%GS2024________________ 21069 40.26
Others 0.65 0.05 2.44 0.03 1.96 0.38 3.23 0.18
Cooperative Banks 2.88 2.50 2.12 2.24 2.65 2.73 2.48 2.32 6 Market Share in Outright Settlement Volumes (%)
InsCos 3.02 3.09 1.65 3.04 1.91 2.33 1.80 1.88 Top V Market Players 16 March 2012 9 March 2012 2 March 2012
FIs 0.13 0.91 0.54 0.08 0.42 0.18 0.42 0.26
Top5___________ 32.59 32.97 32.29
4 Intercategory-wise - Market Share (in%) Top 10___________5086_______ 49.58 50.49
Reverse Repo Reverse Repo Reverse Repo Reverse Repo
Repo Trades Trades Repo Trades Trades Repo Trades Trades Repo Trades Trades Top 15___________ 6166_______ 61.29 62.76
Mutual Funds 54.80 0.00 53.99 0.00 17.15 0.00 75.61 0.00 Top20___________7103_______ 70.63 71.62
Private Sector Banks 9.91 5.20 8.97 12.32 14.58 8.70 8.54 19.50
Ins Cos 14.29 0.00 15.66 0.00 21.99 0.00 8.31 0.00 7 Per Cent Share in Activity: Forex_______________
Foreign Banks 6.42 41.92 6.94 33.69 11.74 35.26 6.77 41.60
Top'n'Market Players 16 March 2012 9 March 2012 2 March 2012
Primary Dealers 1.25 49.69 0.54 38.76 0.38 54.41 0.63 26.55
Others 0.00 0.00 0.18 0.00 0.00 0.00 0.06 0.00 Top5 33.91 31.48 34.71
Cooperative Banks 0.20 0.03 0.07 0.60 0.13 0.46 0.06 10.43 Top 10___________5158_______ 54.08 57.82
PublicSector Banks 12.17 3.16 13.66 14.63 34.04 1.18 0.01 1.92 Top 15___________ 7046_______ 67.63 73.08
FIs 0.96 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Top20___________7003_______ 77.60 81.98
8 Settlement Volume of Forex Segment
16 M arch 2012 9 March 2012 2 March 2012 18 March 2011 2011-12* 2010-11**
N um ber Volume N um ber Volume N um ber Volume N um ber Volume N um ber Volume N um ber Volum e
o f Deals (USSmn) o f Deals (USSmn) o f Deals (USSmn) o f Deals (USSmn) o f Deals (USSmn) o f Deals (USSmn)
C ash 1 05 8 14820 896 11083 1088 14444 920 13508 43866 524693 37910 485876

Tom 1538 18568 1302 12 8 1 4 1712 20647 1392 1 5 703 661 1 4 662777 61 5 5 2 619914

Spot 43850 43931 36094 36120 41860 51382 36538 38130 2141700 2237501 1947164 2041179

Forward 846 6276 628 4698 16998 75527 692 6822 200488 981765 164440 835485

Total 47292 83596 38920 64715 61658 162001 39542 74163 2452168 4406736 2211066 3982453

Average 9458 16719 7784 12 9 4 3 12332 32400 7908 1364 110 9 6 19940 9655 17391

9 Collateralised Borrowing and Lending Obligation (CBLO)

N um ber o f Value N um ber o f Value N um ber o f Value N um ber o f Value N um ber o f Value N um ber of Value
Trades (Rscrore) Trades (Rscrore) Trades (Rscrore) Trades (Rscrore) Trades (Rscrore) Trades (R scrore)

Overnight 2 871 210210 2189 150124 2493 159032 2400 235143 112957 9103386 117159 10133487

Term 63 3 46634 475 228 4 1 758 46943 480 43945 24229 16 1 4 5 6 9 23358 1700977

Total 3504 256845 2664 172965 3251 205974 2880 279088 1371 8 6 10717 9 5 5 14 0 5 1 7 11834465

Average 584 42807 533 34593 542 34329 480 46515 492 38416 497 41818

10 Tenor-wise Forward Trades

T enor 16 March 2012 9 March 2012 2 March 2012 18 March 2011
N um ber Value Per C ent to N um ber Value P e rC e n tto N um ber Value P e rC e n tto N um ber Value P e rC e n tto
o f Deals (U SSm n) Total Value o f Deals (U SSm n) Total Value o f Deals (U SSm n) Total Value o f Deals (U SSm n) Total V alue

< 3 0 days 278 331 9 53 115 2979 63 1352 14034 19 264 3546 52

> 3 0 d a y s& < =to d a y s 2 16 1136 18 68 441 9 2033 17916 24 130 841 12

> 9 0 d a y s & < = =1 8 0 d a y s 110 788 13 39 589 13 1657 12816 17 120 7 52 11

> 1 8 0 days & < =365 days 220 926 15 84 644 14 3109 27742 37 144 1281 19

> 1 year 22 107 2 8 45 1 348 3018 4 34 402 6

Total 846 6276 100 314 4698 100 8499 75527 100 692 6822 100

* Data pertainsto 1 April 2011-6 March 2012. ** Data pertains to 1 April 2010-18 March 2011.
Source: Clearing Corporation of India Limited (CCIL).

82 march 31, 2011 vol xlvii no 13 BCC3 Economic &Political weeklv

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March 31, 2012 Regd No MH/MR/West-238/2012-14
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84

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