CENTRE PLANS TO FREE FOREST LAND FOR SEZ, Sudipta Moitra

After controversies ran the SEZ policy into the ground, the government is planning "forest SEZs". In a move couched in politically correct jargon - "multi-stakeholder partnership" - the government intends to give degraded forest land to industry to produce raw material like paper pulp.

The environment ministry proposal will contract government-owned forest lands for growing plantations. Called "multi-stakeholder partnership for degraded forest lands", the proposal has been shared with key ministries and a review of the proposition along with other ideas for increasing forest cover is expected soon.

The government intends to invite bids for degraded forest land, areas with a tree cover of less than 10%, under a contract to industries to "farm" trees which can be used as raw material. The proposal has been framed in the backdrop of hectic lobbying by the paper pulp industry which has been seeking to access forest lands.

On previous occasions, industry has requested the government to open up 1.2 million hectares of degraded forest land to such "partnerships". On the face of it, the proposal has been presented as a win-win deal. The ministry believes it will help generate investment in increasing India's forest cover to 33% by 2012. The industry is looking at an assured source of raw material. Those who live off the land are expected to benefit from being employed as labour by industry and whatever else they can negotiate with the industry.

At present, 80% of virgin wood for the paper pulp industry comes from private growers through open market sale. The proposal entails private companies to bid for forest or community land, after acceptance by the gram panchayat in case of the latter. The forest department will assess the proposals for technical and economic feasibility. If there is an on-going joint forest management (JFM) programme - where villagers harvest forest products for a livelihood - then they are expected to negotiate terms with industry.

"We think these JFMs are now politically mature enough to negotiate with these industries," said a senior ministry official. The test of this "maturity" has not been defined as yet. The industry will have the right to buy off traditional rights of fodder and other forest produce from people if it can negotiate with the gram sabha or JFM committees.

This reduces the government's role in transfer of forest land, something which has been bitterly criticised in the proposed SEZ policy now being studied by a GoM. While an earlier draft of the multi-stakeholder proposal suggested a cap on the size of land as well as an upper time limit for plantations, the current proposals does not have any cut-offs.

A senior official said duration and size would be negotiated for each proposal on a "case-to-case basis". The original draft, prepared by the Indian Institute of Forestry Management (IIFM), Bhopal, also gave the first right of refusal to work on contracted lands to villagers who had traditional rights over forests.

A similar proposal was mooted in 1996. At the time, government had suggested direct leasing of forest land to industry but the Planning Commission had pointed out that this was equivalent to giving subsidy to business at the cost of thousands of poor people dependent on forests.

The obvious concern that the market for lakhs of tree-growing farmers, who have undertaken agro-forestry, would crash as industry got subsidised and assured timber stirred sections of civil society into an agitation, forcing the government to drop the idea.

The current proposal has come up after the Confederation of Indian Industry brought out a report attempting to rubbish the 1996 Planning Commission report and looked to rework the proposal to deflect criticism. After thegovernment worked with CII and asked IIFM, Bhopal, to prepare a draft, it has been further fine-tuned.

‘Forest SEZs’ on degraded forest lands

The Ministry of Environment and Forests proposes to invite bids for areas with a tree cover of less than 10% under contract to the paper industry to ‘farm’ trees for paper pulp. It calls the plan a ‘multi-stakeholder partnership for degraded forest lands’

The SEZ controversy remains unresolved but the Indian government now plans to allow the paper industry to use degraded forest land to plant trees for its main raw material, paper pulp.

The Ministry of Environment and Forests (MoEF) proposes to invite bids for areas with a tree cover of less than 10%, under contract to the industry to ‘farm’ trees to produce paper pulp.

But the ministry is fighting shy of using the dreaded term Special Economic Zone, choosing instead to call the plan ‘multi-stakeholder partnership for degraded forest lands’.

It believes these forest SEZs will help generate investment in increasing India’s forest cover to 33% by 2012. And, while the paper manufacturing industry is looking at an assured source of raw material, the MoEF says those who live off the land will benefit from being employed as labour by the industry and whatever other benefits they can negotiate.

The forest department will assess proposals for their technical and economic feasibility. If there is an on-going Joint Forest Management (JFM) programme -- where villagers harvest forest produce for a livelihood -- then they are expected to negotiate terms with the concerned business.

Industry will have the right to buy off traditional rights to fodder and other forest produce from people if it can negotiate with the gram sabha or JFM committee. This reduces the government’s role in transfer of forest land, an aspect of the SEZ proposal -- currently under review -- that has evoked scathing criticism.

Reacting to the move, a senior ministry official said: “We think these forest management programmes are now politically mature enough to negotiate with these industries.” How this “maturity” is measured has not been specified.

While an earlier draft of the multi-stakeholder proposal prepared by the Indian Institute of Forest Management, Bhopal, suggested a cap on the size of land as well as an upper time limit for plantations, the current proposal does not impose such limitations.

A senior official said duration and size would be negotiated for each proposal on a “case-by-case basis”. The original draft also gave first right of refusal to work on contracted land to villagers.
Sources say the current proposal was framed after hectic lobbying by the industry that has been seeking access to forest lands. On previous occasions, industry has requested the government to open up 1.2 million hectares of degraded forest land for such “partnerships”.

A similar proposal was floated in 1996, where the government suggested direct leasing of forest land to industry. However, the Planning Commission of India rightly pointed out that this amounted to subsidising business at the cost of thousands of poor who were dependent on the forests.

The obvious concern that the market for thousands of tree-growing farmers who have undertaken agro-forestry would crash with the supply of timber stirred an agitation, forcing the government to drop its plan.

The current proposal was mooted after the Confederation of Indian Industry brought out a report attempting to debunk the 1996 Planning Commission report.

At present, 80% of virgin wood for the paper pulp industry comes from private growers through open market sale. This proposal allows private companies to bid for forest or community land, after the idea has been accepted by the gram panchayat.

Source:www.googlenews.com, May 21, 2007

www.yahoonews.com, May 21, 2007

Index of equity By APARAJITA BAKSHI and Critique of the article By Aditi Sarkar

A recent study shows that West Bengal is a leader with respect to redistribution of land to Dalit and Adivasi households.

IN the heat of the current debate on land acquisition in West Bengal, and in the aftermath of the violence in Nandigram, some critics have questioned the basic character of development in the State. They have attempted variously to portray the Communist Party of India (Marxist) and the Left Front as organisations of upper-caste elites whose interests, by implication, are distant from those of the socially oppressed, or West Bengal as a State where the plight of the Dalit and Adivasi masses, under globalisation and liberalisation, is no different from their plight elsewhere in the country. Even preliminary research on Dalit and Adivasi households in village economies and their access to land in West Bengal shows that such views have little basis in the reality of the post-land reform West Bengal countryside.

West Bengal is a State where policy efforts have been directed to distribute land to the landless and the poor, and specifically to Dalits, Adivasis and other deprived social groups, and also to issue joint title deeds to men and women. Some of the social-distributive effects of the land reform programme show up in recent village-based research and analyses of secondary data. These show that West Bengal is a leader with respect to the distribution of agricultural and homestead land to Dalit and Adivasi households, and also with respect to the purchase of agricultural land by the rural poor, including Dalit households.

The village-level data come mainly from a series of village surveys conducted by Vikas Rawal and others in 2005 in seven villages in different agro-climatic zones in West Bengal (a study in which this writer participated).

The villages studied were: a predominantly tribal village of West Medinipur district, two villages from the agriculturally prosperous Barddhaman district, two traditional agricultural villages from Malda and Koch Bihar districts, a village in Uttar Dinajpur where tea is grown on individual holdings, and a prawn-cultivating village in the estuarine region of North 24 Parganas.

First, let us consider the redistribution of crop land to the landless and rural poor. In five of the seven villages the redistribution of land was an important component of land reform. For each of them, this writer constructed a simple Index of Access to agricultural land. This Index measures the share of Dalit households (or other social groups) in total land ownership, weighted by their share in total population. Thus, if Dalit households constitute 20 per cent of the total population and they own 20 per cent of the land in the village, the Index of Access is 1. Where the Access Index is less than 1, it represents a situation in which the proportion of Dalit households in the population is greater than the share of total land that they own.

Our data show that in three of these five villages, the Access Indices for Dalit households were 1.49, 1.28 and 1.21; in other words, their share in land ownership was greater than their share in the population. In the predominantly Adivasi village in West Medinipur, more than 60 per cent of Scheduled Tribe households gained agricultural land and almost 75 per cent of households gained agricultural or homestead land through land reform. In the last village (in Malda district), the Access Index was lower, that is 0.5, because the main recipients of land in the village were income-poor households from the Tanti caste, which is classified as an Other Backward Class (OBC).

By way of comparison, according to data from the Land and Livestock Holdings Survey conducted by the National Sample Survey Organisation (NSSO), the Access Index for Dalits in rural India as a whole was only 0.5. The NSSO data tend to confirm our village results, since they show that the Access Index for Dalit households in West Bengal was 0.8 (unfortunately, the most recent data in this regard are from 1992; more recent results from the 2003-04 survey are yet to be released). This is the highest Access Index for Dalits among the States of India after Tripura (where the proportion of Scheduled Castes in the rural population is smaller than in West Bengal).

Secondly, let us consider the distribution of house-site or homestead land, which is an important component of land reform in West Bengal. Ownership of homestead land means not only a place to live and a changed position in society, but also represents access to a new source of potential nutrition and livelihood support as a result of house-site and kitchen-garden cultivation. In all the seven study villages, we found that the Dalit and Adivasi households were the major beneficiaries of this aspect of land reform. Out of 210 households that gained homestead land, 21 per cent were Dalit, 46 per cent were Adivasi, 24 per cent were Muslim, and 10 per cent belonged to other caste groups. Of the last group, a majority belonged to the OBCs.

Thirdly, let us consider the participation of the poor in land markets. A 2001 study by Vikas Rawal of land markets in two West Bengal villages published in the international journal Economic Development and Cultural Change reported noteworthy results. The study showed that while empirical studies in other States had found that the net buyers of cultivable land were large landowners and the net sellers of agricultural land were small landowners, the trend was quite the opposite in the West Bengal villages that were studied. The major buyers in these two villages of Bankura district were landless households and small landowners. The paper attributed this difference to the increased purchasing power among the poor in West Bengal facilitated by land distribution, tenancy reform, higher wage rates, and access to credit.

The present study confirms and adds a new dimension to this conclusion. Five villages of the seven have significant Dalit populations. In four of them, Dalit and Muslim households were net buyers of land, while caste Hindus were net sellers. The acquisition of ceiling-surplus land by the Government of West Bengal for redistribution was and still remains a major disincentive for large landowners to purchase land.

The recent policy document on land use of the Government of West Bengal says that the State is poised for "advance into a new phase of industrial modernisation... and diversification into different forms of non-agricultural economic activity." If such a policy is indeed to succeed, West Bengal will have been among the few States of India where industrialisation and economic diversification are based on the achievement of a socially broad-based land reform.

Aparajita Bakshi is a Junior Research Fellow at the Indian Statistical Institute working on issues of household incomes in rural West Bengal.

Critique of article Index of Equity on Land Distribution in West Bengal
By Aditi Sarkar,

Aparajita Bakshi (2007) in her recent article Index of Equity constructs, in her own words, “a simple index of access to agricultural land” to claim the “socially broad based land reform” achievements by the government of West Bengal. This article professes the great strides that the government of West Bengal has made in achieving equality by enacting its policies of distributing land among the Dalits and the Adivasis.

Equity was measured simplistically as some combination of the fraction of land owned by certain under-privileged groups compared to the size of these groups to the total population. Even if this measure was called land-distribution equity, instead of equity index, it is ill-conceived. It does not, for example, factor in fundamental qualities of the land like soil type, its arability and its proximity to irrigation facilities.

The main point of this critique, however, is to show how the “simple” construction of an index of land distribution has been conflated with the much more complex and larger idea of equity. This is important, since Ms. Bakshi does not name her article Agricultural Land Access Index as would seem natural and true to her work, however ill-conceived. It is rather named Index of Equity, a term that has connotations of some grand index of justice to humanity.

Ms Bakshi implies two definitions of equity in her article, neither of which is true. First, she implies that equity means equal access. Second, she implies that equity is achieved by equal distribution of a commodity. Equity is unfortunately a complex concept that cannot be defined so simply.Equity is related to equality; but one needs to understand the difference between the two.

Equality is “an ideal, a moral imperative and a sociological datum, a legal principle and a social norm” (Boorstim, 1953). Whatever equality is, it is well accepted as something that can not and should not be practiced in most spheres of public policy. An example should clarify why equality is off thepolitical agenda for several years now. Suppose a rural bank in India offers equal opportunity loans to men and women to start small businesses based on their earnings. In a society where historically women either have had no salaries or are paid less then men for the same work and have no properties in their names, this egalitarian rule would make it impossible for a woman to obtain a loan. Public policy thus needs to be equitable and not equal.

In Inequality Reexamined Amartya Sen (1992) confronts the “heterogeneity of human beings” and “the multiplicity of variables in terms of which equality can be judged” to clarify the complexity of the matter. At a minimum, equality can be judged to have seven dimensions (Boles, 1986). A necessary condition for an index to appropriately measure equity would be to take into account all the dimensions of equality.

One of the fundamental dimensions of equality is the “distribution of prestige and social status within the larger society” –something that can not be ignored when talking about the Dalits and the Adivasis.

The six other dimensions mentioned here are also vitally important and none can be ignored. “Freedom of speech, association and petition, equal access to public office, and fair and free elections,” considered “political equality” is the second dimension of equality.

“Equality of income, job security and personal autonomy” is the third dimension of equality. Equality of access that implies “differential physical, political, juridical and economic barriers to approaching, entering, obtaining and making use of the full range of goods and services to the society” is the fourth dimension of equality.

It is worthwhile to note at this point that in Ms. Bakshi’s index of access to agricultural land none of the aspects of equality of access, mentioned above, is considered.

Equality of influence, power and control that refers to “the pattern of agenda building, office holding, and decision making in society” that is denied to the lower castes in India is considered the fifth dimension of equality. Juridical equality, where “individuals must receive equal treatment from government through a system of [local] and [national] courts dedicated to impartial adjudication and enforcement of legal equality” is the sixth dimension of equality. Last but not the least, distributive equality, requiring “apportionment of goods and services,” is touched upon very lightly by Ms. Bakshi, is the seventh dimension of equality. It is only when all of these dimensions are taken into account, together with the innate heterogeneity of human beings, that one may form an index of equity. Until then let us not conflate simple one-dimensional measures of land distribution to the complex multi-dimensional ideals of equity.

The nature of justice, and hence equity, has been debated since the time of Socrates. Rawls (1971), one of the foremost scholars of more recent times, defined it as “the first virtue of social institutions, as truth is of systems of thought.” It maybe time for Ms. Bakshi to bring some thought to her system of constructing indices. I leave it upon her to decide to whom and by how much she would like to be true.

Bibliography
Bakshi, A. (2007). Index of equity. Frontline, 24(7).
Boles, J. K. (Ed.). (1986). The Egalitarian City: Issues of Rights, Distribution, Access and Power. New York, Hong Kong, Tokyo, Sydney: Praeger
Boorstim, D. J. (1953). The Genius of American Politics. Chicago: The University of Chicago Press.
Rawls, J. (1971). The Theory of Justice. Cambridge, MA: Harvard University Press.
Sen, A. (1992). Inequality Reexamined. Cambridge, MA: Harvard University Press.

References on Land Distribution in West Bengal:

1. Dipankar Basu, EPW: April 21, 2001

Author’s conclusion :
Though it cannot be denied that the land reforms had some beneficial impact on the peasantry in West Bengal (if compared to say Bihar or Orissa or MP), it was rather limited. Most importantly, the lion’s share of the benefit was cornered by the middle peasants; the agricultural labourers did not gain much. It was this emerging middle peasants that formed the bulwark of CPI(M) rule in rural West Bengal; they hegemonised the rural proletariat and small/marginal farmers through the party apparatus. Another interesting fact which is not known widely is that most of the land redistribution took place BEFORE the LF government came to power in 1977, i.e., most of the benefits came because of the radical movement of the agricultural workers andsmall peasants led by the Naxalites and not because of the LF government. If anything, the LF government put brakes on the movement and thereby consciously limited the possible scope of land reforms.

2. Paper by Anirban Dasgupta

Author’s conclusion:

“…the land redistribution undertaken by the LFG has been very limited in scope. Although it involves a sizable portion of the population dependent onagriculture, the amount of land redistributed has been meager. As a result, the agrarian structure in rural WB has not witnessed any significant change compared to the pre-reform period. Our analysis of ownership distribution of landholdings provides evidence that the level of concentration of land ownership has remained almost unchanged in the one and a half decades since the resumption of land distribution in 1977. The actual deterioration in the distribution of operational holdings (if the NSS estimates are accepted) since the LFG policies imply that the presence of tenancy has only managed to exacerbate the inequality in the access to land.”

Freedom from the Margins By Dr. Vandana Shiva

Throughout the coastal states of India - West Bengal, Orissa, Gujarat, Andhra Pradesh, Tamil Nadu, Kerala, Goa, Maharashtra - coastal communities celebrated 15th August differently from the official India with its empty rhetoric and the radical India with its negativity of Black Flag demonstrations against the failures of the last 50 years. Under the leadership of National Action Committee Against Coastal Industrial Aquaculture (NACACIA), coastal communities marched to shrimp farms which were banned by the historic order by the Supreme Court on 11th December 1996 but have continued to operate in total contempt of the court orders. They proudly carried the Indian tri-colour flag and sang the National Song "Vande Mataram". From the coast of India a new meaning is being given to freedom both for the people and the country. For the victims of the aquaculture industry, Independence Day was a day for celebrating and asserting their sovereignty over their natural resources and their freedom to engage in their livelihoods. It was a day for re-committing themselves to continue their struggle to free the coast of the destructive aquaculture industry. It was a day for condemning the attempts by the government, politicians and the industrialists to subvert the Supreme Court judgement which has defended their rights and their coast.

Freedom as the Right to Life.

Our national song begins with the words, Vande MataramSujalam, Suphalam referring to abundance water and the abundance fruits that this rich land has gifted her people. In the coastal areas today there is no drinking water, peasants cannot get the fruits of the earth, and fishworkers cannot get the fruits of the sea because of the ecological havoc caused by the shrimp industry. 1 ha. of an industrial shrimp farm requires 120,000 cubic metres of sea water annually. This 12 metres of saline water over and above the water in coastal ecosystems creates serious problems of ground water salinisation. Ground water salinisation is creating a major drinking water famine creating tremendous difficulties for women of coastal regions. Women are walking for 10 miles to collect water of paying Rs.5/- for a pot of water. Since people’s livelihoods are being destroyed as a result of the destruction of coastal ecosystems, this additional burden is becoming economically unsustainable and families are migrating out of coastal villages. The seepage from the aqua farms creates salinisation and water logging of neighbouring agricultural farms. Salinisation of land creates a forced displacement of peasants and farmers from coastal agriculture. Some of the coastal regions are the most fertile bread baskets of the country. Nellore is named after "Nellu" which means rice in Telugu. This rice bowl is now totally destroyed through the impact of shrimp farms. The Cauvery Delta is another fertile area in which agriculture land is being converted into shrimp farms. The destruction of the rice bowls in coastal districts will contribute to major food insecurity as well as to massive unemployment generating, economic insecurity and social conflict. Factory farming of shrimp requires 4-6 tons per hectare of artificial feed. Only 16.7% of this feed is converted into shrimp biomass. The rest is converted into pollution, which deteriorates water quality inside the pond and in the ecosystem. It is this build up of pollution that is responsible for collapse of shrimp production in a short period and for the destruction of the productivity of estuarine and coastal waters. Industrial shrimp (prawn) farming is by its very nature non-sustainable. Intensive farming collapses in 5 years, semi-intensive farming collapses in 15 years and extensive farming collapses in 25 years. On the other hand traditional polyculture systems which work with nature’s cycles are perennial. Marine fisheries is destroyed in three ways by industrial shrimp farms: a) Wild fry is the major source of seed in shrimp farms. For every single fry of commercially desirable P. Monodon caught, more than 1000 other marine species are wasted as "fry by catch" leading to species loss and extinction. b) Fish caught at sea is a major source of shrimp feed. Each ton of industrial shrimp requires 10 times its weight in marine fish for conversion to feed. c) The pollution from shrimp farms also kills fish life and destroys marine resources. The argument used to justify the large scale destruction by the shrimp industry is the dollar earning that it brings to the shrimp industry even though it is made to appear that the private profits of the industry are an increase in national wealth. However, behind every dollar of earnings by the shrimp industry, there is 200 dollar worth of damage of local ecology and local economy if the ecological footprint of industrially produced shrimp is taken into account. The ecological footprint of a productive system is the productive ecosystem required to supply inputs to the production and to assimilate waste outputs from the production cycle. Entry 1 M2 of an industrial shrimp farm can require upto 200 M2 of marine and coastal ecosystems for input supply of shrimp seed and water and for sinks for waste and pollution. The destruction of coastal ecosystems leads to the destruction of coastal livelihoods. It is in recognition of this fact that the Supreme Court ordered closure of the shrimp factories within the coastal zone in order to protect the fundamental right to life that is guaranteed under the Constitution. It is this freedom as the right to life of the people which is being denied by the shrimp industry’s right to profit and which was being defended by the coastal communities in their celebration of theirs and India's freedom.

Freedom from Corruption

The shrimp industry is a breeding ground for ecological as well as political pollution which is known as corruption. While Multinational Corporations are the driving force in the shrimp feed industry and in the shrimp trade, our politicians and bureaucrats are also involved. The shrimp scam -- the involvy Bill (AAB) was rushed through Rajya Sabha. Through the AAB, the politicians are using the structures of democratic India meant to protect the people as instruments for their own power and accumulation and as an assault on the fundamental rights and civil liberties of the coastal people. Chief Ministers of every coastal state have interests in it. MPs, MLAs, bureaucrats are involved. The Finance Minister himself is supposed to be involved in the shrimp industry. Meghna farm in Shrikali in Tamil Nadu is reported to be owned by his brother-in-law. It is also reported that the Finance Minister himself has a shrimp farm in Ramnathpuram to establish which he cut down 5,000 coconut trees. The Prime Minister had stated in his Quit India celebration speech, that those who hold high offices and are corrupt are anti-national and traitors. In his Independence Day speech from the Red Fort, he stated,

Anyone with any proof of corruption against any of my cabinet member can come to me and action will be taken without reservation.

During the Golden Jubilee year of India’s Independence we would like the Prime Minister to establish his commitment to wipe out corruption by taking action against the "traitors" involved in the shrimp scam. We would like the Prime Minister to not participate in the nurturing and protection of corruption by letting his cabinet undermine the Supreme Court judgement by bringing the AAB to Lok Sabha. Corruption is not just a matter of bribes. It is the institutionalised loot of the resources of the poor by those in power. Let the Prime Minister begin the cleaning up of corruption in his government by investigating the shrimp scam and by implementing the Supreme Court judgement. Attempts of subversion of the Supreme Court order through the AAB and the review petitions are a subversion of our justice system and our democratic fabric. Freedom is the defense of our democratic structures. The people are defending these structures while those in power are attempting to destroy them. Freedom from fear of Mafia rule Since the aqua industry has been established by violating every law of the land and by trampling on the rights of local communities, it continues to operate only through the rule of terror and violence. While each farm creates only employment for 2 people per hectare in the productive activity, there is a major "employment generation" through the need for private securities and private armies to defend the the shrimp factories from the people whose water, land and biodiversity is being destroyed and who are rising in revolt. An attempt is being made to contain the local agitations through money power and muscle power. Inspite of threats from the shrimp mafia, coastal people took out their freedom marches on 15th August even in the hot land of the mafia rule. People are showing that they are fearless because they are engaged in a just struggle to defend their lives. Fifty years after independence the challenge is to protect the freedoms we gained half a century ago, and to expand and deepen the meaning of freedom beyond our fifty years legacy so that it becomes a reality for the eighty per cent of India which has been marginalised by the five development decades and which is being rendered dispensable by the new economic policies of trade liberalisation and globalisation. The shrimp industry is a child of these "reforms" which are based on turning the "licence-permit raj" into the "licence to loot and the permit to plunder raj". Our Finance Minister, Shri Chidambaram is said to have said,

So, to those of you who wish to come to India, I say, come and stay there for a long time... the last time you came to India to take a look, you stayed 200 years. So, this time if you come, you must be prepared to stay for another 200 years. That is where the largest rewards are...

While the Finance Minister in whose hands the country has trusted its economic planning is inviting invaders to loot and recolonise us, he is also personally looting the resources of the poor coastal communities while maintaining the image of "Mr. Clean". Today, India seeks her freedom not just from the foreign powers who are attempting once again to colonise her. She seeks freedom from the political class which is dismembering her ecologically and socially. And this new freedom struggle for a free India is appropriately beginning in her social and environmental margins -- from the coasts, led by women, the traditional fishworkers and the landless or small peasants. The rebirth of a free India is taking place amidst the brutalisation and debasement of murders, abductions, caste and communal wars, political corruption and criminalisation of politics and the destruction of the natural and economic wealth of the people. In the margins, a new India is getting born-- an India built on the principles of sustainability and justice, of peace and harmony of democracy and diversity. The freedom from the margins, the freedom of the marginalised, will be India’s real search for freedom. This second freedom struggle has just begun.

The Myth Of Foreign Investment Benefits By Jayati Ghosh.

Governments with over-optimistic expectations from foreign direct investment should be aware that it does not necessarily increase employment and can have negative effects on a fragile economy.

ONE of the myths that appears to be indestructible, despite growing evidence to the contrary, is that of the generally positive and desirable nature of foreign direct investment (FDI). It is certainly seen as being preferable to other forms of foreign capital inflow, such as commercial borrowing and portfolio investment. Furthermore, it is considered to be eminently advantageous in its own terms, and something to be actively sought by governments of developing countries. In fact, access to more FDI is now touted as one of the major benefits of the recent economic globalisation, which is supposed to outweigh its many negative effects.

In India, this perception has, if anything, intensified in recent times. Witness the Budget speech of the Finance Minister, in which he announced a reduction on corporate tax paid by foreign companies from 48 per cent to 40 per cent, despite the shocking shortfalls in tax collection in the current year. This concession was explicitly declared to be a means of wooing more FDI into the economy.

Of course, one can quarrel with the Finance Minister's (false) notion that tax concessions will work to attract more FDI into a stagnating economy. But the more fundamental mistake is to assume that it is necessary to attract FDI in whatever form into the economy, and that this justifies tax and other concessions.

An important book by David Woodward (The next crisis? Direct and Equity Investment in Developing Countries; Zed Books, London and New York, 2001) shows just how problematic such an assumption can be. Woodward's book contains a penetrating and occasionally startling analysis that lays bare in a succinct way many of the current myths about FDI.

To start with, Woodward reveals how little we actually know about even the extent of FDI, and especially stocks of FDI, in different countries. It emerges that official data - including those produced by the International Monetary Fund (IMF) and the World Bank - almost certainly underestimate to a substantial extent, the true value of inward FDI stocks and their absolute rate of increase. Far from trying to improve this state of affairs, the Fund and the Bank have promoted the liberalisation of foreign investment regimes, which actually tends to reduce the availability of data and even the possibility of collecting it.

This matters not only because it is useful for a host country to know the exact stocks of inward FDI, but because inadequate assessment of their extent may lead to policy misjudgment and failure to anticipate potential crises. As Woodward points out, the lack of information on the extent of external liabilities contributed to the external debt crisis of the 1980s, and a similar process may be under way with respect to private investment today. Moreover, since FDI is not unambiguously positive, such lack of knowledge of the extent of inward FDI stocks can even be dangerous in other ways.

Consider, for example, the foreign exchange effects of FDI, which are often simplistically assumed to be positive. In actual fact, the foreign exchange effects are much more negative than what emerges from an idealised view of FDI. Woodward shows that positive effects arise only where new productive capacity is created in the export sector, or in very strongly import-substituting sectors. If FDI takes the form of purchase of existing capacity, even in the export sector it will have a negative foreign exchange effect even if export production goes up, unless the productivity of capital increases enough to offset the other increased foreign exchange costs. At lower levels of import substitution, the effects of "greenfield" FDI on new capacity are much more ambiguous, and may be negative.

Similarly, Woodward indicates how misleading it may be to assume that FDI necessarily contributes to increased employment. In fact, the employment effect will depend on a whole range of variables, including the balance between greenfield FDI and the purchase of existing assets; the labour intensity of new productive capacities or new organisational techniques; the extent to which FDI-based production substitutes for existing production and their relative labour intensities, and so on. In general, therefore, it is not the case that FDI creates much more net employment unless it is really very large in scale and heavily involved in greenfield activities, and even in such cases it need not be more employment-intensive.

Large-scale flows of FDI also have effects on other domestic economic policies. To begin with, reliance on such flows imposes severe constraints on domestic government policy because of the fear of withdrawal, and of course the potential impact of disinvestment increases as the FDI stock grows. Further, FDI is embodied in the presence of multinational corporations (MNCs) which tend to be large and powerful lobbies in the matter of domestic policies.

And then, of course, the very competition to attract more FDI by governments with over-optimistic expectations regarding such investment, means that all sorts of concessions are offered, which may turn out to be very expensive for the economy in the medium or long term. Woodward suggests that such FDI promotion tends to focus heavily on the demand side, in terms of requirements imposed on host countries which involve changing their own policies in order to make themselves more attractive. Such unilateral concessions are increasingly sought to be entrenched through international agreements.

Another interesting point that Woodward makes is that much of the over-optimism surrounding foreign investment stems from a tendency to look at the host country in isolation from the developing world as a whole. But in fact there are strong negative spillover effects on other developing countries, which may outweigh whatever limited gains actually do accrue to the host country.

Woodward analyses the 1990s boom in FDI to developing countries, to conclude that it has the elements of a temporary surge similar to those affecting the market for equity (or portfolio) investment. While deregulation of foreign investment across the developing world has played a role, this has probably been less significant than the large-scale privatisation programmes, which have been a major source of both FDI and portfolio investment, and the debt-equity conversions, which were especially common in Latin America. Further, some flight capital may re-enter the country as FDI - some estimates suggest that this has been significant, for example, in China.

All these are clearly short-lived, or temporary forces. Even the globalisation of production can be seen as a finite conversion process, albeit one which is more prolonged and complex. But it is important to note that all these features make FDI, along with portfolio investment, strongly pro-cyclical in nature.

Even worse, FDI can contribute to the underlying fragility of an economy and make it more susceptible to balance of payments crises. Woodward considers several ways in which this can happen. First, as rapidly growing stocks of inward FDI generate similarly growing profits that form part of the foreign exchange outflow. Secondly, when FDI fuels an increase in imports, such as capital goods for investment projects and other such payments. Thirdly, because current foreign exchange costs of MNCs typically exceed the foreign exchange they tend to earn through exports of import substitution. Fourthly, through the role played by foreign affiliates, including those involved in retailing, in changing patterns of consumption through advertising and brand promotion.

For these and other reasons, FDI can contribute to large current account deficits, which tend to precede financial crises. They can also add to both the economic shocks preceding crises and to the process of contagion. Woodward provides examples of a number of East Asian economies and of Mexico prior to their respective financial crises. He does not mention Argentina, whose major crisis broke after this book was published, but it provides an even more classic example of his argument.

The "fire-sale" of domestic productive assets to foreign companies, which often accompanies attempts to come out of such financial crisis, may initially limit the reduction of FDI to the affected countries, as indeed happened in South Korea. But this occurs at a high long-term cost, in terms of the build-up of more FDI stock and further adverse balance of payments effects.

Once again, the case of Argentina over the past two decades provides a stark, if telling, example - indeed, it is almost as if this script were written for Argentina, in terms of the pattern of sale of public assets to foreign multinational companies in the early 1990s, followed by very adverse balance of payments effects which contributed in turn to the external debt build-up, which then precipitated the most recent crisis.

This more pessimistic - and more realistic - view of the impact of FDI provides a very different angle on the substantial and rapidly increasing stocks of inward FDI in a number of developing countries. Far from being a source of celebration, it may in fact be, as Woodward describes it, "an accident waiting to happen". The latest round of crises in emerging markets has perversely operated to strengthen both the positive attitude to FDI and efforts to promote it. But in the new climate, in which developing country markets are seen as riskier and international investors are becoming more risk-averse, efforts to attract more FDI will involve even more concessions on the terms of such investment. "The result will be to accelerate the build-up of liabilities without a commensurate effect on the now seriously limited capacity of national economies to bear them" (page 207) .

In fact, such a crisis appears to be almost inevitable, since any serious efforts to prevent it would require both a change in attitudes to foreign capital and a change in political structures. As Woodward says, "Only when governments represent the interests of their populations and both their business communities, and have (international) political influence proportional to the populations they represent, can we realistically expect to achieve an international financial and economic system which will genuinely serve the interests of people, and not of transnational companies" (page 215).

Until then, it looks as if the world will have to brace itself for the next round of financial crises, this time probably emanating from the balance of payments problems caused by the current adulation of FDI. And we in India will have to bear with further concessions to multinational investment that may not be in our long-term interest, even if such investment does choose to come into the country

Is Wal-Mart what the Doctor Prescribes? By Mohan Guruswamy.

That the Prime Minister of India met Mr. John Menzer, President of Wal-Mart has once again kindled a frenzy of excitement in the pink papers and in the business pages of their white siblings. Not since Kenneth Lay and Rebecca Mark came calling to sell us Enron's plans to lead India out of darkness have we seen such excitement. Enron was a classic con job and what is worrying is that the same people who sold Enron so hard are hard at it selling Wal-Mart. We can be sure that Wal-Mart is no Enron leading us up the garden path. It is a much-respected company whose worldwide sales exceed US$ 255 billion. It is the corporation that has transformed how America shops by giving the average American value for money. Its contribution to the American way of life cannot be any less than that of GM or IBM.

But is Wal-Mart what the good doctor would prescribe for us given our present health condition? Very simply it is all about jobs. Unlike FDI in manufacturing or IT or financial services, all of which create jobs, FDI in retail would entail job losses on a massive scale. The profile of India's retail sector with its overwhelming preponderance of small and self employed retailers is a direct consequence of our inability to provide gainful employment to the millions who join the workforce each year. At last count these numbered about 45 million. These are not just "mom and pop" businesses such as the neighborhood Kirana shop. For every one of them there are dozens of handcart and pavement vendors with little more than a pile of vegetables or fruits as their investment for survival. Food produce accounts for over 14% of all retail trade and most of our small retailers are employed in this sub segment. It is important to remember that most of them are in this business out of necessity and not by choice.

Mr. Menzer himself gave India a fine demonstration of how Wal-Mart gave America value for its money at the lunch for journalists hosted by the US Embassy on May 12, shortly after his happy meeting with Dr.Manmohan Singh. He waved his little black wallet at everyone saying: "We sell this piece, sourced from India, at $17 a piece in the US. Our competitor sells it for $70." Now that is still value for money, considering that Wal-Mart in all probability would have bought that wallet for not more than the equivalent $3. No wonder its consistently big bottom-lines had made its founder Sam Walton the richest man in the world and Warren Buffet its most happy investor. In its quest to give India too value for its money, Wal-Mart will no doubt scour the manufacturing centres of the world and give the Indian consumer goods that are value for money. Right now this means lots of Chinese goods. One must wonder what this will do to our manufacturers of consumer goods?

Wal-Mart is the USA's largest corporation and one of its most profitable. It has been good for America. Wal-Mart is in the business of making profits and it seeks to enter India in search of profits. Unfortunately there are many in this country, and some of them holding high office, who believe that Wal-Mart is carrying a cure for our economic woes. In the last few days it has been argued as to how Wal-Mart, which has 45 stores in China, out sources US$ 20 billion of merchandise from China. By contrast Wal-Mart, they woefully state, only imports only US$ 1 billion of merchandise from India and all Wal-Mart has is a procurement office in Bangalore.

But it is not as if the quantum of Wal-Mart imports are related to the number of stores. Wouldn't Wal-Mart keep importing from China even if it didn't have a single store there? China's exports amount to almost US$ 450 billion whereas India's exports are in the vicinity of US$ 55 billion. This is so because Chinese goods are manufactured to be extremely competitive in terms of price and quality. It is because of this fact, even if China did not have a single Wal-Mart, Wal-Mart would keep importing what it presently does from China. Just as it does what it does from India.

So we must discard this notion that the presence of Wal-Mart stores in India will result in more exports to Wal-Mart in the USA. For that India will have to become a much better and more efficient manufacturer of goods. All kinds of goods. China today is the world's leading exporter of cellular phones, digital cameras, computers, toys and what have you. India leads in H1B visas to the USA. No wonder the Chinese Ambassador in India is able to pithily observe that while India is the office of the world, China is the factory of the world!

How one wishes that people like Dr.Manmohan Singh spent a little more time thinking about how to make India an efficient producer of high value added goods like China has become, rather than on meeting every businessman who wants to set up shop in India. And when was the last time that Dr. Manmohan Singh met representatives of Indian farmers or small retailers or small-scale industry or handloom weavers or construction workers or anybody apart from the representatives of big business like the CII or FICCI?

Now to many of our opinion leaders having the Wal-Mart marquee adorn our urban landscape might be very important. It might even make them feel more at home here? Others might argue that it is the way of the future, while some others can justifiably argue that it will bring better management practices and new technology to shape up our agri-commodity business. One cannot but be skeptical of the argument that Wal-Mart and the likes will give India a cold chain from farm to home, a modern and efficient transportation system that will haul the cauliflower from Betul in Central India to the dinner tables in the big cities.

Assuming that all this happens, and then what will we do about the tens of millions who will become redundant? But if having a handful Wal-Mart's or Tesco's is just another totem of globalization that we must install, like the golden arches of MacDonald's, lets have them. But lets also make sure that they just don't become a conduit for foreign goods. This is important for a company like Wal-Mart will facilitate the entry of foreign goods by eliminating the multiple tiers of the traditional distribution channels in India. This can be easily achieved by insisting that they be foreign exchange neutral, say, for the first ten years.

The Commerce Minister ought to know that we still post a huge trade deficit each year. The only reason we have a reasonable good current account situation is because of "invisibles", which is what we call the remittances sent home by the millions who have been forced overseas by the paucity of jobs in India. The term "Invisibles" is full of irony as it is most appropriate for the remittances of invisible people of India who made it good abroad. But what about the invisible people who are still stranded here?

FDI in Retailing: More Bad than Good By Mohan Guruswamy.

The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. AT Kearney, the well-known international management consultancy, recently identified India as the 'second most attractive retail destination' from among thirty emergent markets. It has made India the cause of a good deal of excitement and the cynosure of many foreign eyes. With a contribution of 14% to the national GDP and employing 7% of the total workforce or 42 million (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy. Not only is it the largest component of the services sector it is also double the size of the next largest broad economic activity in the services sector.

The retail industry is divided into organized and unorganized sectors. Organized retailing refers to businesses employing more than ten persons and includes the corporate-backed hypermarkets and retail chains. The organized sector accounts for just 2% of the trade and employs just 5 lakh persons. Unorganized retailing refers to the traditional formats of low-cost retailing such as the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, handcart and pavement vendors, etc and employs over 4 crore persons. Obviously India's retail sector is highly fragmented, with about 11 million outlets operating in the country and only 4% of them being larger than 500 square feet in size. Its greatest contribution is that it is labour intensive. Compare this with an employment of just 0.9 million in the US, yet doing a business more than 13 times of the Indian retail market size.

Estimates vary widely about the true size of the retail business in India. AT Kearney estimated it to be Rs. 4,00,000 crores and poised to double in 2005. On the other hand, if one used the Government's figures the retail trade in 2002-03 amounted to Rs. 3,82,000 crores. One thing all consultants are agreed upon is that the total size of the corporate owned retail business was Rs. 15,000 crores in 1999 and poised to grow to Rs.35, 000 crores by 2005 and keep growing at a rate of 40% per annum.

A simple glance at the employment numbers is enough to paint a good picture of the relative sizes of these two forms of trade in India - organized trade employs roughly 5 lakh people, whereas the unorganized retail trade employs nearly 3.95 crores! According to a GoI study the number of workers in retail trade in 1998 was almost 175 lakhs. Given the recent numbers indicated by other studies, this is only indicative of the magnitude of expansion the retail trade is experiencing, both due to economic expansion as well as the 'jobless growth' that we have seen in the past decade. That about 4% of India's population is in the retail trade says a lot about how vital this business is to the socio-economic equilibrium in India.

Food sales estimated to be 60% of all retail is a very large segment of the total economic activity of our country and due to its vast employment potential, it deserves very special focused attention. Efficiency enhancements and increase in the food retail sales activity would have a cascading effect on employment and economic activity in the rural areas for the marginalized workers. Thus even without FDI driving it, the corporate owned sector is expanding at a furious rate. The question then that arises is that since there is obviously no dearth of indigenous capital, what is the need for FDI? It is not that retailing in India is in the need of any technology special to foreign chains.

But a report prepared by McKinsey & Company and the Confederation of Indian Industry (CII) predicted that global retail giants such as Tesco, Kingfisher, Carrefour and Ahold were waiting in the wings to enter the retail arena. This report also states that the Indian retail market holds the potential of becoming a $300 billion per year market by 2010, provided the sector is opened up significantly. It does not talk about creating additional jobs however, which should be the prime concern of the policy maker.

One of the principal reasons behind the explosion of retail and its fragmented nature in the country is the fact that retailing is probably the primary form of disguised unemployment/underemployment in the country. Given the already over-crowded agriculture sector, and the stagnating manufacturing sector, and the hard nature and relatively low wages of jobs in both, many million Indians are virtually forced into the services sector. Here, given the lack of opportunities, it is almost a natural decision for an individual to set up a small shop or store, depending on his or her means and capital. And thus, a retailer is born, seemingly out of circumstance rather than choice. This phenomenon quite aptly explains the millions of kirana shops and small stores. The explosion of retail outlets in the more busy streets of Indian villages and towns is a visible testimony of this. The presence of more than one retailer for every hundred persons is indicative of the lack of economic opportunities that is forcing people into this form of self-employment, even though much of it is marginal. Because of this fragmentation, the Indian retail sector typically suffers from limited access to capital, labour and real estate options.

As on January 1st of this year, there were 413.88 lakhs job seekers registered at the Employment Exchange. They register at the exchange, to enjoy the benefits and security that a job in the organized sector provides - lifetime employment, pension, and union membership etc. But over the period 1992-93 to 2001-02, only a total of 30,000 jobs have been added in the organized sector in the whole country.

Since jobs are so hard to come by retailing with low capital and infrastructure needs is by far the easiest business to enter, and as such performs a vital function in the economy as an alternative social security net for the unemployed. India, being a free and democratic country, provides its people with this cushion of being able to make a living for oneself through self-employment, as opposed to say China, where the society is highly regulated. In this light, one could brand this sector as one of "forced employment", where the retailer is pushed into it purely because of the paucity of opportunities in other sectors.

Last year the largest retailer in the world 'Wal-Mart' has a turnover of $ 256 bn. and is growing annually at an average of 12-13%. Its net profit was $9 bn. It had 4806 stores employing 1.4 mn persons. Of these 1355 were outside the USA. The average size of a Wal-mart is 85,000 sq.ft and the average turnover of a store was about $ 51 mn. The turnover per employee averaged $ 175,000. In 2004 Wal-Mart had a 9% return on assets and 21% return on equity. By contrast the average Indian retailer's turnover is just Rs. 186,000 and fewer than 4% have shops larger than 500 sq.ft.

Let alone the average Indian retailer in the unorganized sector, no Indian retailer in the organized sector will be able to meet the onslaught from a firm such as Wal-Mart - when it comes. With its incredibly deep pockets Wal-Mart will be able to sustain losses for many years till its immediate competition is wiped out. This is a normal predatory strategy used by large players to drive out small and dispersed competition. This entails job losses by the millions.

India has 35 towns each with a population over 1 million. If Wal-Mart were to open an average Wal-Mart store in each of these cities and they reached the average Wal-Mart performance per store - we are looking at a turnover of over Rs. 80,330 mn with only 935 employees. Extrapolating this with the average trend in India, it would mean displacing about 4,32,000 persons. If large FDI driven retailers were to take 20% of the retail trade, as the now somewhat hard-pressed Hindustan Lever Limited anxiously anticipates, this would mean a turnover of Rs.800 billion on today's basis. This would mean an employment of just 43,540 persons displacing nearly eight million persons employed in the unorganized retail sector.

With possible implications of this magnitude, a great deal of prudence should go into policymaking. Rather we seem to moving towards a policy steamrolled obviously by vested interests acting in concert with the CII & FICCI. In this context we must be concerned about the statement the Finance Minister, Mr. P. Chidambaram, made while making the mid year review for 2004-05. On retail, the review noted that creating an effective supply chain from the producer to the consumer is critical for development of many sectors, particularly processed and semi-processed agro-products. In this context, it says, the role that could be played by organized retail chains, including international ones merits careful attention. Indeed a hard look is called for, but not just through Mr. Chidambaram's eyes.

FDI in Retail: A Question of Jobs, Not Ownership By Kamal Sharma and Jeevan Prakash Mohanty.

AFTER farming, retailing is India's major occupation. It employs 40 million people. A sizeable majority of owner/employees are in the business because of lack of other opportunities. The decade of liberalisation has so far been one of jobless growth. It is no wonder that retail has become the refuge of these millions. Lopsided economic development is transforming India from an agrarian economy directly to a service oriented post-industrial society.

In the Indian perspective, any policy that creates jobs is good policy. Any industry, Indian- or foreign-owned, that generates employment is welcome. The question over foreign direct investment (FDI) in retail is not as much about ownership as about jobs.

The Indian retail industry is highly fragmented. According to AC Nielsen and KSA Technopak, India has the highest shop density in the world. In 2001, it was estimated that there were 11 outlets for every 1000 people. Since the agriculture sector is over-crowded and the manufacturing sector stagnant, millions of young Indians are virtually forced into the service sector. The presence of more than one retailer for every hundred persons is indicative of how many people are being forced into this form of self-employment, despite limitations of capital and space.

Trade/retailing is the single largest component of the services sector in terms of contribution to the gross domestic product. It accounts for 14 per cent of the service sector, i.e., twice that of the next largest economic activity in the sector — banking and insurance. The total number of retail outlets (both food and non-food) was 8.5 million in 1996 and 12 million in 2003, a 41 per cent rise.

The CSO's employment numbers give a comprehensive picture of the importance of this form of livelihood in India. Organised retail trade employs roughly 0.5 million people and unorganised 39.5 million. The fact that about 4 per cent of the population is employed in the unorganised retail trade speaks volumes about how vital this business is to the socio-economic equilibrium in India.

In 2004, Wal-Mart had a turnover of $256 billion and it recorded a net profit of $9 billion. Its 4,806 stores employs 1.4 million persons. The average size of a Wal-Mart outlet is 85,000 square feet and the average turnover about $53 million. The turnover per employee is $1,82,000.

By contrast, the Indian retailer had a turnover of Rs 1,86,075 ($4,100 approximately) and only 4 per cent of the 12 million retail outlets occupied space larger than 500 square feet. The total turnover of the unorganised retail sector, which employs 39.5 million persons, was Rs 735,000 crore. India has 35 towns each with a population of over one million. If Wal-Mart were to open, on an average, one store in each of these 35 cities and if each achieved the average Wal-Mart performance per store, the turnover would amount to over Rs 8,033 crore and number of employees to only 10,195.

Extrapolated to the rest of the country, it would mean displacing around 4,32,000 persons. In other words, every new Wal-Mart employee will render 40 retailers surplus. If FDI retailers with deep pockets were to take over 20 per cent of the retail trade, this would mean a turnover of Rs 1,47,000 crore. This represents an employment of about 43,000 persons, displacing nearly eight million persons in the unorganised retail sector.

The most important argument against modern retailing and supply chain integration is that it displaces labour in a labour-surplus society. Till such time that we are in a position to create jobs on a large scale in manufacturing and construction, it would make eminent sense to keep on hold any policy that results in the elimination of jobs in the unorganised retail sector.

The primary task of the government is still providing livelihoods and not create so-called efficiencies of scale by creating redundancies. If we assume 40 million adults in the retail sector, it would translate into around 160 million dependents. Opening the retailing to FDI means dislocating millions from their occupation and pushing vast number of families under the poverty line. The Western concept of efficiency is maximising output while minimising the number of workers involved. This will only increase social tensions in a developing country like India, where tens of millions are still seeking gainful employment. Companies such as Wal-Mart boast about how they give the consumer better value. Not surprisingly, Wal-Mart procured $20 billion worth of goods from China and just $1 billion worth of goods from India. This is simply because China is a better producer of manufactured goods and not because Wal-Mart has stores there.

Consider a chain such as Wal-Mart with a single point of procurement entering India. Since it already procures huge quantities from China, this make for a massive entry point of China's largely state-owned consumer goods industry into the insatiable market made up of the new consuming elite.

It is true that it is in the consumers' best interest to obtain quality goods and services at the lowest possible price. However, this vocal assertion by the chattering class cannot override the responsibility of any government to provide economic security for its vulnerable population. Countries such as China, Malaysia and Thailand, which have opened their retail sector to FDI in the recent past, have been forced to enact new laws to check the horrific expansion of the new foreign malls and hypermarkets.

In a recent Oxfam study, a decade ago coffee producers earned $10 billion from a global market worth $30 billion. Now they receive less than $6 billion in a global market over $60 billion. Large numbers of producers now interact with monopolistic marketing structures and these chains transfer a large and growing proportion of added value away from producers to companies in industrialised countries.

Neither scale nor efficiency has raised the incomes of the coffee producers. The lessons are clear, bulk procurement plays havoc with producer's margins. Enabling legislation and positive regulation is required to expand our industrial sector whose contribution to employment generation and GDP is much lower than that of the services sector.

The percentage contribution of industry to GDP growth in 1992-96 and in 1997-03 was 30.9 per cent and 23.7 per cent respectively, while for China over roughly the same period it was 62.2 per cent and 58.5 per cent.

We need to address issues at home before we inviting problems from abroad. Vocal proponents of FDI need to ponder a bit more about India's true circumstances.