The Biochar Blog

Archive for June, 2010

GLOBALIZATION- OPPORTUNITIES AND CHALLENGES

(with impact on Indian Economy)

Introduction

Indian economy had experienced major policy changes in early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient.

Globalization has many meanings depending on the context. In context to India, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India.

Impact of Globalization of Indian Economy

At the present, we can say about the tale of two Indias: We have the best of times; we have the worst of times. There is sparkling prosperity, there is stinking poverty. We have dazzling five star hotels side by side with darkened ill-starred hovels. We have everything by globalization, we have nothing by globalization.

Though some economic reforms were introduced by the Rajiv Gandhi government (1985-89), it was the Narasimha Rao Government that gave a definite shape and start to the new economic reforms of globalization in India. Presenting the 1991-92 Budget, Finance Minister Manmohan Singh said: After four decades of planning for industrialization, we have now reached a stage where we should welcome, rather fear, foreign investment. Direct foreign investment would provide access to capital, technology and market.

In the Memorandum of Economic Policies dated August 27, 1991 to the IMF, the Finance Minister submitted in the concluding paragraph: The Government of India believes that the policies set forth in the Memorandum are adequate to achieve the objectives of the program, but will take any additional measures appropriate for this purpose. In addition, the Government will consult with the Fund on the adoption of any measures that may be appropriate in accordance with the policies of the Fund on such consultations.

The Government of India affirmed to implement the economic reforms in consultation with the international bank and in accordance of its policies. Successive coalition governments from 1996 to 2004, led by the Janata Dal and BJP, adopted faithfully the economic policy of liberalization. With Manmohan Singh returned to power as the Prime Minister in 2004, the economic policy initiated by him has become the lodestar of the fiscal outlook of the government.

The Bright Side of Globalization

The rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 per cent during 1980-90 to seven per cent in the 1993-2001 period. In the last four years, the annual growth rate of the GDP was impressive at 7.5% (2003-04), 8.5% (2004-05), 9% (2005-06) and 9.2%(2006-07). Prime Minister Manmohan Singh is confident of having a 10% growth in the GDP in the Eleventh Five Year Plan period.

The foreign exchange reserves (as at the end of the financial year) were $ 39 bn (2000-01), $ 107 bn (2003-04), $ 145 bn (2005-06) and $ 180 bn (in February 2007). It is expected that India will cross the $ 200 bn mark soon.

The cumulative FDI inflows from 1991 to September 2006 were Rs.1, 81,566 crores (US $ 43.29 bn). The sectors attracting highest FDI inflows are electrical equipments including computer software and electronics (18 per cent), service sector (13 per cent), telecommunications (10 per cent), transportation industry (nine per cent), etc. In the inflow of FDI, India has surpassed South Korea to become the fourth largest recipient.

India controls at the present 45% of the global outsourcing market with an estimated income of $ 50 bn.

In respect of market capitalization (which takes into account the market value of a quoted company by multiplying its current share price by the number of shares in issue), India is in the fourth position with $ 894 bn after the US ($ 17,000 bn), Japan ($ 4800 bn) and China ($ 1000bn). India is expected to soon cross the trillion dollar mark.

As per the Forbes list for 2007, the number of billionaires of India has risen to 40 (from 36 last year)more than those of Japan (24), China (17), France (14) and Italy (14) this year. A press report was jubilant: This is the richest year for India. The combined wealth of the Indian billionaires marked an increase of 60 per cent from $ 106 bn in 2006 to $ 170 bn in 2007. The 40 Indian billionaires have assets worth about Rs. 7.50lakh crores whereas the cumulative investment in the 91 Public Sector Undertakings by the Central Government of India is Rs. 3.93 lakh crores only.

The Dark Side of Globalization

On the other side of the medal, there is a long list of the worst of the times, the foremost casualty being the agriculture sector. Agriculture has been and still remains the backbone of the Indian economy. It plays a vital role not only in providing food and nutrition to the people, but also in the supply of raw material to industries and to export trade. In 1951, agriculture provided employment to 72% of the population and contributed 59% of the gross domestic product. However, by 2001 the population depending upon agriculture came to 58% whereas the share of agriculture in the GDP went down drastically to 24 per cent and further to 22% in 2006-07. This has resulted in a lowering the per capita income of the farmers and increasing the rural indebtedness.

The agricultural growth of 3.2% observed from 1980 to 1997 decelerated to two per cent subsequently. The Approach to the Eleventh Five Year Plan released in December 2006 stated that the growth rate of agricultural GDP including forestry and fishing is likely to be below two per cent in the Tenth Plan period.

The reasons for the deceleration of the growth of agriculture are given in the Economic Survey 2006-07: Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system and lo post-harvest value addition continued to be a drag on the sectors performance. With more than half the population directly depending on this sector, low agricultural growth has serious implications for the inclusiveness of growth.

The number of rural landless families increased from 35 %in 1987 to 45 % in 1999, further to 55% in 2005. The farmers are destined to die of starvation or suicide. Replying to the Short Duration Discussion on Import of Wheat and Agrarian Distress on May 18, 2006, Agriculture Minister Sharad Pawar informed the Rajya Sabha that roughly 1, 00,000 farmers committed suicide during the period 1993-2003 mainly due to indebtedness.

In his interview to The Indian Express on November 15, 2005, Sharad Pawar said: The farming community has been ignored in this country and especially so over the last eight to ten years. The total investment in the agriculture sector is going down. In the last few years, the average budgetary provision from the Indian Government for irrigation is less than 0.35%.

During the post-reform period, India has been shining brilliantly with a growing number of billionaires. Nobody has taken note of the sufferings of the family members of those unfortunate hundred thousand farmers.

Further, the proportion of people depending in India on agriculture is about 60 % whereas the same for the UK is 2 %, USA 2 %and Japan 3 %. The developed countries, having a low proportion of population in agriculture, have readily adopted globalization which favors more the growth of the manufacturing and service sectors.

About the impact of globalization, in particular on the development of India, the ILO Report (2004) stated: In India, there had been winners and losers. The lives of the educated and the rich had been enriched by globalization. The information technology (IT) sector was a particular beneficiary. But the benefits had not yet reached the majority, and new risks had cropped up for the losersthe socially deprived and the rural poor. Significant numbers of non-perennial poor, who had worked hard to escape poverty, were finding their gains reversed. Power was shifting from elected local institutions to unaccountable trans-national bodies. Western perceptions, which dominated the globe media, were not aligned with local perspectives; they encouraged consumerism in the midst of extreme poverty and posed a threat to cultural and linguistic diversity.

Social Services: About the quality of education given to children, the Approach to the Eleventh Five Year Plan stated: A recent study has found that 38 per cent of the children who have completed four years of schooling cannot read a small paragraph with short sentences meant to be read by a student of Class II. About 55 per cent of such children cannot divide a three digit number by a one digit number. These are indicators of serious learning problems which must be addressed. The less said about the achievements in health the better. The Approach to the Eleventh Plan concedes that progress implementing the objectives of health have been slow. The Report gave the particulars of the rates of infant mortality (per 1000 live births) for India as 60 against Sri Lanka (13), China (30) and Vietnam (19). The rate of maternal mortality (per 1, 00,000 deliveries) of India is 407 against Sri Lanka (92), China (56) and Vietnam (130).

Growth of Slum Capitals: In his 2007-08 Budget Speech, Finance Minister Chidambaram put forth a proposal to promote Mumbai as a world class financial centre and to make financial services the next growth engine of India. Of its 13 million population, Mumbai city has 54 per cent in slums. It is estimated that 100 to 300 new families come to Mumbai every day and most land up in a slum colony.

The cumulative FDI inflows (until September 2006) to the New Delhi region were of Rs. 27,369 crores and to Mumbai Rs. 24,545 crores. The two spots of New Delhi and Mumbai received 46 per cent of the total FDI inflows into India. The FDI inflows have in no way assisted in improving the health and environment conditions of the people. On the other hand, the financial capital of India and the political capital of India are set to become the topmost slum cities of the world.

To make Globalization Work

Under the phenomenal growth of information technology which has shrunk space and time and reduced the cost of moving information, goods and capital across the globe, the globalization has brought unprecedented opportunities for human development for all, in developing as well as developed countries. Under the commercial marketing forces, globalization has been used more to promote economic growth to yield profits to some countries and to some groups within a country.

India should pay immediate attention to ensure rapid development in education, health, water and sanitation, labor and employment so that under time-bound programmes the targets are completed without delay. A strong foundation of human development of all people is essential for the social, political and economic development of the country.

Though at present India appears to be dominant in some fields of development as in IT-ITES, this prosperity may be challenged by other competing countries which are equipping themselves with better standards of higher education. As detailed earlier, our progress in education has been slow and superficial, without depth and quality, to compete the international standards.

The government should take immediate steps to increase agricultural production and create additional employment opportunities in the rural parts, to reduce the growing inequality between urban and rural areas and to decentralize powers and resources to the panchayati raj institutions for implementing all works of rural development. Steps should be taken for early linking of the rivers, especially in the south-bound ones, for supply of the much-needed water for irrigation.

It should be remembered that without a sustainable and productive growth of the agricultural sector, the other types of development in any sphere will be unstable and illusory. Despite the concerted development in manufacturing and service sectors, despite the remarkable inflow and overflow of foreign reserves, agriculture is still the largest industry providing employment to about 60 per cent of the workforce in the country.

Mere growth of the GDP and others at the macro level in billions does not solve the chronic poverty and backward level of living norms of the people at the micro level. The growth should be sustainable with human development and decent employment potential. The welfare of a country does not percolate from the top, but should be built upon development from the bottom

References:

Globalisation and Poverty: Centre for International Economics, Australia. Globalisation Trend and Issues T.K.Velayudham, Globalisation and India Lecture: Prof .Sagar Jain, University of N.Carolina. Repositioning India in the Globalised World Lecture: V.N.Rai. Globalization of Indian economy by Era Sezhiyan Globalisation and India’s Business prospective Lecture Ravi Kastia. Globalisation and Liberalisation Prospects of New World Order Dr.A.K.Ojha, Third Concept An International Journal of Ideas, Aug 2002. Globalisation: Imperatives, Challenges and the Strategies.

We need only read the front page headlines of every major newspaper to understand the deepening oil crisis and the worldwide repercussions of supply and demand as it relates to our traditional energy resources. Is it any wonder that renewable sources of energy are gaining in popularity as an alternative resource? Biofuel is one emerging energy source that may help address the supply-and-demand dilemma versus modern world overdependence on petroleum and petroleum-based applications. Furthermore, biofuel advocates stress that biofuels give off cleaner emissions of carbon dioxide and sulfur oxide, two greenhouse gases that are responsible for climactic change and global warming.

The Difference Between Biofuel and Fossil Fuel

The critical difference between biofuel and traditional fossil fuel is the number of years it takes to form. Biofuel is derived from recently dead biological or organic material. Traditional fossil fuel comes from long dead (read: millions of years old) biological organisms. For this reason, biofuel is considered a renewable resource because it can be replenished in a short period of time. Fossil fuel is classified as a non-renewable resource because its reserves are being depleted much faster than it takes to form new reserves.

While biofuel and fossil fuel are carbon-based properties (they both derive from biological matter) biofuel is considered carbon neutral because the energy is derived from plants, which remove carbon dioxide from the atmosphere. Whereas, fossil fuels released carbon dioxide, which has been stored beneath the earth surface for millions of years, into the air. Carbon dioxide emissions are the number one pollutant.

Biofuel comes from a variety of feedstock sources, of which the more common ones are corn, sugar cane, palm, wheat, algae, and jatropha. From these feedstock sources, two popular fuels are produced for transportation and machineries. They are biodiesel and bioethanol. Broken down further, biodiesel is derived from plant oils; bioethanol is derived from fermented starch or sugar crops.

How Are Biofulels Used?

Biofuels can be used in a pure (denoted as B100) or a blended form (denoted as a percentage). Biofuel is the most common fuel used in Europe because European car manufacturers outfit their cars with diesel engines. For most unmodified diesel engines, advocates say blends of up to 20% (B20) are deemed safe. Higher concentrations require modifications to the diesel engine.

Bioethanol is suggested as a substitute for gasoline in vehicles. However, users have to be careful in choosing the proper blend of ethanol. Generally, a 10% blend of ethanol (E10) may be safe to be used in newer cars. Lower concentrations have been used in some older engines without having adverse effects on vehicle fuel lines, but users should consult their car manufacturers to find out if bioethanol is safe for their engines. In some cases, conversions can void the manufacturer warranty.

Proponents Say

Advocates suggest businesses, especially those in the transportation industry will benefit from using biofuels on two fronts: (1) When biofuel prices are more stable than oil prices, companies are in a better position to plan and budget fuel expenditures for the year. (2) Cleaner vehicular emissions may save transportation companies maintenance costs, while helping them meet new government mandated environmental standards.

Opponents Say

Opponents question how governments establish standards, regulations, and mandates and suggest that the underlying motivation for setting certain standards and enforcing mandates is political.

In other words, opponents contend that politicians are showing preferential treatment to their constituents and lobbyists. The end result is that governments, not the economy, are creating winners and losers. If your company or industry falls on the out of political favor side, you may wind up paying higher taxes or incurring higher costs to meet those politically inspired mandates

Car Manufacturer Status

Car manufactures today are being forced to produce more vehicles that are biofuel ready. In addition to using cheaper fuel, both manufacturers and buyers will be given government incentives (in the form of tax credits) to embrace renewable and alternative energy. Studies also suggest that certain types of biofuel (e.g., biodiesel) can make engines last longer when users maintain their cars by using the right biofuel blend.

The Food vs. Fuel Debate

Biofuel does have an underside and has been the subject of a current debate on food vs. fuel. Since biofuel uses plants that are also used in food supply (corn, maize, wheat, sugar cane, and coconut), this raises the question of whether it is appropriate to use food crops to create alternative fuel instead of filling world food demand. The debate has been further intensified as the world experienced what was deemed as a food crisis in 2007. Critics contend that using agricultural land to produce crops to be used in biofuel production led to this crisis.

These issues must be ironed out by policymakers and regulatory bodies to ensure a workable balance between access to energy and all other necessities.

Proponents and opponents come together around environmental and health benefits of going green. Thus the conversion to more biofuels is probably inevitable. Some are very concerned with how that is executed, since the timing of the changes is not clear. Also total direct and indirect costs and what groups benefit and which groups suffer are major concerns. With Congressional leadership dedicated to accelerating greener energy in a way that benefits their constituents and lobbyists (For example, why do tax deductions for trial attorneys help the general public?), there will definitely be winners and losers.

What the biofuels discussion is pointing to is the urgency to begin planning NOW for this inevitability to help protect industries and consumers from rising costs from energy, regulations and taxes.

Product Description
Since the First Edition appeared, Air Pollution Control: A Design Approach has become the leading air pollution control text on the strengths of good writing, comprehensive coverage, an emphasis on design, and excellent… More >>

Product Description
This book is not for the put-your-head-down-and-ride-like-the-wind-while-only-seeing-the-pavement-and-the-tire-in-front-of-you-rider. It is a primer for adults who want to get back into cycling but have been putting it o… More >>

The need for tax shifting – lowering income taxes while raising taxes on environmentally destructive activities – in order to get the market to tell the truth has been widely endorsed by economists. The basic idea is to establish a tax that reflects the indirect costs to society of an economic activity. For example, a tax on coal would incorporate the increased health care costs associated with breathing polluted air, the costs of damage from acid rain, and the costs of climate disruption.

Nine countries in Western Europe have already begun the process of tax shifting, known as environmental tax reform. The amount of revenue shifted thus far is small, just a few percent. But enough experience has been gained to know that it works.

Among the activities taxed in Europe are carbon emissions, emissions of heavy metals, and the generation of garbage (so-called landfill taxes). The Nordic countries, led by Sweden, pioneered tax shifting at the beginning of the 1990s. By 1999 a second wave of tax shifting was under way, this one including the larger economies of Germany, France, Italy, and the United Kingdom. Tax shifting does not change the level of taxes, only their composition. One of the better known changes was a four-year plan adopted in Germany in 1999 to shift taxes from labor to energy. By 2001, this had lowered fuel use by 5 percent. A tax on carbon emissions adopted in Finland in 1990 lowered emissions there 7 percent by 1998.

Environmental tax reform is spreading, with the reform process now under way in Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Sweden, and the United Kingdom. The United States imposed a stiff tax on chlorofluorocarbons to phase them out in accordance with the Montreal Protocol of 1987. At the local level, the city of Victoria, British Columbia, adopted a trash tax of $1.20 per bag of garbage, reducing its daily trash flow 18 percent within one year.

One of the newer taxes gaining in popularity is the so-called congestion tax. City governments are turning to a tax on vehicles picture of urban traffic entering the city, or at least the inner part of the city where traffic congestion is most serious. In London, where the average speed of an automobile was 9 miles per hour – about the same as a horse-drawn carriage – a congestion tax was adopted in early 2003. The $8 charge on all motorists driving into the center of the city between 7am and 6:30pm immediately reduced the number of vehicles by 24 percent, permitting traffic to flow more freely while cutting pollution and noise.

Environmental tax shifting usually brings a double dividend. In reducing taxes on income – in effect, taxes on labor – labor becomes less costly, creating additional jobs while protecting the environment. This was the principal motivation in the German four-year shift of taxes from income to energy. The shift from fossil fuels to more energy-efficient technologies and to renewable sources of energy reduces carbon emissions and represents a shift to more labor-intensive industries. By lowering the air pollution from smokestacks and tailpipes, it also reduces respiratory illnesses, such as asthma and emphysema, and health care costs – a triple dividend.

When it comes to reflecting the value of nature’s services, ecologists can, for example, calculate the values of services that a forest in a given location provides. Once picture of logging operation these are determined, they can be incorporated into the price of trees as a stumpage tax of the sort that Bulgaria and Lithuania have adopted. Anyone wishing to cut a tree would have to pay a tax equal to the value of the services provided by that tree. The market would then be telling the truth. The effect of this would be to reduce tree cutting, since forest services may be worth several times as much as the timber, and to encourage wood and paper recycling.

Some 2,500 economists, including eight Nobel Prize winners in economics, have endorsed the concept of tax shifts. Former Harvard economics professor N. Gregory Mankiw, who was nominated to be Chairman of the President’s Council of Economic Advisors in early 2003, wrote in Fortune magazine: “Cutting income taxes while increasing gasoline taxes would lead to more rapid economic growth, less traffic congestion, safer roads, and reduced risk of global warming – all without jeopardizing long-term fiscal solvency. This may be the closest thing to a free lunch that economics has to offer.” Mankiw could also have added that it would reduce the military expenditures associated with ensuring access to Middle Eastern oil.

The Economist has recognized the advantage of environmental tax shifting and endorses it strongly: “On environmental grounds, never mind energy security, America taxes gasoline too lightly. Better than a one-off increase, a politically more feasible idea, and desirable in its own terms, would be a long-term plan to shift taxes from incomes to emissions of carbon.” In Europe and the United States, polls indicate that at least 70 percent of voters support environmental tax reform once it is explained to them.

Subsidies, which are essentially “negative taxes,” also must be reformed. Each year the world’s taxpayers underwrite $700 billion of subsidies for environmentally destructive activities, picture of oil rig such as burning fossil fuels, over-pumping aquifers, clear-cutting forests, and overfishing. A 1997 Earth Council study, Subsidizing Unsustainable Development, observes that “there is something unbelievable about the world spending hundreds of billions of dollars annually to subsidize its own destruction.”

Subsidies are not inherently bad. Many technologies and industries were born of government subsidies. Jet aircraft were developed with military R&D expenditures, leading to modern commercial airliners. The Internet was a result of publicly funded efforts to establish links between computers in government laboratories and research institutes. And the combination of the federal tax incentive and a robust state tax incentive in California gave birth to the modern wind power industry.

But just as there is a need for tax shifting, there is also a need for subsidy shifting. A world facing the prospect of economically disruptive climate change, for example, can no longer justify subsidies to expand the burning of coal and oil. Shifting these subsidies to the development of climate – benign energy sources such as wind power, solar power, and geothermal power is the key to stabilizing the earth’s climate. Shifting subsidies from road construction to rail construction could increase mobility in many situations while reducing carbon emissions.

In a troubled world economy facing fiscal deficits at all levels of government, exploiting tax and subsidy shifts with their double and triple dividends can help balance the books and save the environment. Tax and subsidy shifting promise both gains in economic efficiency and reductions in environmental destruction, a win-win situation.

History judges political leaders by whether they respond to the great issues of their time. For today’s leaders, that issue is how to deflate the world’s bubble economy before it bursts. This bubble threatens the future of everyone, rich and poor alike. It challenges us to restructure the global economy, to build an eco-economy.

The choice is ours – yours and mine. We can stay with business as usual and preside over a global bubble economy that keeps expanding until it bursts, leading to economic decline. Or we can adopt Plan B and be the generation that stabilizes population, eradicates poverty, and stabilizes climate. Historians will record the choice, but it is ours to make

World Environment Day, which is commemorated each year on June 5th, is one of the most significant mode through which the United Nations stimulates the global awareness of the environment. It is by this way that the United Nations attract political attention and enhances action to shape a better global environment. Each year the World Environment Day is celebrated in recognition of unique theme. Norway was honored to host International World Environment Day 2007 celebrations in recognition of the theme — ‘Melting Ice – The Hot Topic’. Over a hundred nations across the globe celebrates the World Environment Day with highly relevant theme each year.

The slogan for World Environment Day 2008 is ‘Kick the Habit! Towards a Low Carbon Economy’. With an understanding of the fact that the change in climatic condition is gradually becoming one of the most defining issue of the age, UNEP is requesting the nations, companies and communities to put special focus on the greenhouse gas emissions and to put spare thought over how to reduce them. The World Environment Day 2008 is going to highlight resources and focuses on promoting low carbon economies with a view to shape a better and healthier future. Promoting a low carbon economy involves steps towards improved energy efficiency, alternative energy sources, forest conservation and eco-friendly consumption. The chief international celebration of the World Environment Day 2008 is going to be held in New Zealand.

The Heads of State, Prime Ministers and Ministers of Environment deliver statements and commit themselves to care for this only green planet of the universe. Serious pledges establish sound and non-transitory governmental policies related to environmental management and economic planning. bicycle parades, tree planting , recycling campaigns, clean-up campaigns, street rallies, school level essay and poster competitions etc. are organized all over the world on June 5th to celebrate the World Environment Day.

Here are some information on World Environment Day for the last ten years regarding where the WED celebration was held at and what were the respective themes each year:

Places of celebration:
World Environment Day 2007 – Tromsø, Norway
World Environment Day 2006 – Algiers, Algeria
World Environment Day 2005 – San Francisco, U.S.
World Environment Day 2004 – Barcelona, Spain
World Environment Day 2003 – Beirut, Lebanon
World Environment Day 2002 – Shenzhen, People’s Republic of China
World Environment Day 2001 – Torino, Italy and Havana, Cuba
World Environment Day 2000 – Adelaide, Australia
World Environment Day 1999 – Tokyo, Japan
World Environment Day 1998 – Moscow, Russian Federation

Themes of celebration:
World Environment Day 2007 – Melting Ice – a Hot Topic?
World Environment Day 2006 – Deserts and Desertification – Don’t Desert Drylands!
World Environment Day 2005 – Green Cities – Plan for the Planet!
World Environment Day 2004 – Wanted! Seas and Oceans – Dead or Alive?
World Environment Day 2003 – Water – Two Billion People are Dying for It!
World Environment Day 2002 – Give Earth a Chance
World Environment Day 2001 – Connect with the World Wide Web of Life
World Environment Day 2000 – The Environment Millennium – Time to Act
World Environment Day 1999 – Our Earth – Our Future – Just Save It!
World Environment Day 1998 – For Life on Earth – Save Our Seas

Product Description
In the new times of globalisation, international academic contacts and collaborations are ever increasing. They are taking many forms, from international conferences and publications, student and academic exchange, cross… More >>