Agrarian Apathy

A country of more than a billion population just cannot ignore to feed its population. Yes, we are talking about India, which has more than half of the popualtion dependent on agriculture as a source of livelihood and subsistence, is facing severe crisis in agricultural production. lacking economies of scale in productivity due to uneconomical land holdings, lack of innovation and adoptation methods in wrong farm practices due to climate change, and so on have made Indian agriculture almost beyond redemption. The recent editorial in the Business Standard dissect the problem with pellucidity.

"A survey of chronically drought-stricken Bundelkhand region of Uttar Pradesh ...come up with a more grim assessment. As a result of two consecutive years of deficient rainfall, farmers and their families in the area are cutting back on their already meagre meals and inching towards something approaching famine conditions. The survey by Swaraj Abhiyan, a farmers' activists group, found that more than 80 per cent of households reported cutting down on consumption of pulses and milk while more than three-quarters reported they were increasingly eating roti with just salt and spices. This grim reading came in a week when several states met the Union agriculture minister to discuss responses to the drought. What is needed instead is a long-term action plan to tackle the effects of deficient rainfall, the overuse of fertilisers, the unpredictability of conditions - witness the heavy rainfall in Tamil Nadu this month - brought on by climate change, as well as the seemingly permanent low-productivity trap of small-scale farming in India. Groundwater is rapidly depleting: fresh water per capita in India has declined from 3,000 cubic meters to 1,123 cubic meters per capita in the past half-century. Taken together, this is a colossal crisis - and yet it punches well below its weight in national priorities.

When the government is stirred to act energetically, it is usually to impose a ban on "hoarding" whichever food stuff where price hikes have hit the headlines - onions usually, or pulses more recently. But these knee-jerk reactions amount to tampering with market mechanisms and make things worse rather than better. The need for cold storage, or for increasing onion dehydration capacity, to solve the perennial shortage of onions has been suggested every year, only to be forgotten till the next episode of eye-watering prices. The emergency decision to import certain kinds of lentils was so low relative to the scale of the demand for pulses in India as to once again beg the question of whether the government was serious about solving the problem.

Instead of short-term responses, the Centre and the states need to dramatically increase funding for agricultural research and agricultural universities to develop better seeds and fertilisers, including varieties better able to thrive in the face of water shortages. Average landholdings are a mere 1.15 hectares - but this is all the more reason for urgent action. Drip feed irrigation is also a priority as the water paucity crisis unfolds daily. Agricultural growth is limping along at about two per cent - some experts predict it might actually slip further this year - while the rest of the economy is growing at more than seven per cent. This disparity in prospects does not bode well when agriculture still employs more than half the population. As a recent series of reports in this newspaper showed, the crisis now extends from supposedly rich agrarian states like Punjab - where the whitefly, abetted by an unusually extended hot weather period, has wreaked havoc on cotton farmers - to rubber farmers in Kerala, who have been clobbered by a collapse in prices. The limits of short-term responses to forces as unyielding as climate change and embedded low productivity on India's small farms have been on display all this year. It is time for the government to act."

one an example, two a coincidence and three a trend... female economist treatment.

Two female economists (hope more examples), I assume, outmatched their husbands were Joan Robinson and Elinor Ostrom...Justin Wolfers in thought-provoking essay tried to explore the treatment of female economists at the top by using the journalistic cliché that one is an example, two is a coincidence and three is a trend.

...Men’s voices tend to dominate economic debate, although perhaps this is shaped by how we talk about the contributions of female economists. This is easiest to see in how we discuss the work of economist power couples...there's a simple unconscious bias at work...Close your eyes for a moment, and picture an economist. Odds are you pictured a man...fit this pre-conceived idea of what an economist looks like...

fossil fuels sustainability in India!

Marc Saxer, the futurist, has raised concerns over long run viability and sustainability of the already limited fossil fuel use in the Indian production system. The energy basket in the production system needs to be clearly identified and understood for the optimal allocation.

He cites the ever changing input portfolio of the mature economies,.. aggressive push to regain competitiveness by digital automation has been widely noted. ..In manufacturing economies, the cost of energy has long surpassed the cost of labour. Decoupling productivity from the use of energy and resources is therefore a crucial step to regain competitiveness.

To understand this dramatic turnaround, one needs to look at a couple of game-changers. 

First, in many markets, the cost of electricity generation from solar has fallen below that from fossil fuels. Second, new technologies finally make it possible to store intermittent energies like solar and wind. 

Third, a growing number of governments have started to legislate their gradual exit from the carbon economy.

...they are enough to raise questions about the political viability of the $5.3 trillion in annual subsidies for fossil fuels. Consequently, the Bank of England and the German government recently issued a public warning about the “carbon bubble”. The overvaluation of fossil assets by an estimated $28 trillion could trigger another financial crisis. Many institutional investors like pension funds are bound by law to only invest in secure assets. Given the sheer amount of capital represented, this could mean that in financial terms, “peak oil” has already happened.

...Germany targets to cover 45 per cent of its energy demand from renewables by 2025, and 55-60 per cent by 2035. Major industry players have begun to overhaul their business models. The biggest utilities of Germany and Italy have decided to sell off their entire fleet of conventional power plants. Naturally, there has been a political backlash against energy price hikes. The German model, however, was always based on the disciplinary incentives of hard currency and high wages, catapulting its manufacturing base into the export powerhouse it is today. Shifting the tax burden from labour to energy is seen as the right incentive to accelerate the decoupling of mobility, housing and manufacturing from the use of resources.

In the long run, technological innovation and higher efficiency are set to bring down energy costs. ....Greening the economy is thus seen as the best way to curb geopolitical risks and improve energy security..

...Together with the disruptive innovations of the digital transformation, all advanced economies hope to unleash the third Industrial Revolution.

What does this mean for India? ...In the short run, India will enjoy a sweet spot between cheap labour and modest energy and commodity costs. Skyrocketing FDI numbers show investors are betting on an Indian economic miracle.

In the long run, India’s comparative advantages are under pressure. In many emerging economies, manufacturing costs have almost reached US levels, shifting investors’ focus to factors like quality, supply chains, shipping times and local governance. Digital automation will further erode the comparative advantage of cheap labour. Consequently, manufacturers are starting to re-shore — shifting production back to the old industrial centres. If giants like India and China fuel their growth with resources, rising commodity costs might price them out of the market. Stuck in the fossil regime, volatile commodity markets, geopolitical risks and insufficient energy efficiency are bound to become a major liability to sustainable development. This means the window of opportunity for export-led manufacturing growth is closing, turning industrialisation into a gigantic race against time. If India hopes to prevail in this race, it must not miss the bus of green growth.

Why Mom and Papa are almost universal?

The order in which babies learn to make sounds explains why the next closest usual caretaker to mom is so often called papa or baba. The story of strange linguistic coincidence is here.

India needs a new constitution!?

Nobel prize winning institutional economist Douglass North observed that “economic history is overwhelmingly a story of economies that failed to produce a set of economic rules of the game (with enforcement) that induce sustained economic growth.” For more than a century, India was under comprehensive exploitative and extractive colonial British rule. It was not primarily directed towards development of india, but rather towards extraction. The legacies continued as argued in a recent write-up by Atanu Dey and Rajesh Jain and reflected in the making of constitution of India.

They argued that the comprehensive government control of the economy through administration and control was left intact when the British decided to leave India, and was taken over by the government of Independent India.

"Although India attained political independence from the British raj, Indians did not become free of a controlling—and extractive—government." 

They concluded that India’s problem is structural and systemic, and not idiosyncratic. If the constitution were to change, the ultimate rules of the game would change, the policies (the derived rules) will change, and thus the action on the ground (the play of the game) will change, and therefore the outcome will change. 

"India needs a new constitution that is consistent with a nation of free individuals living in a complex, modern, large economy. This modern constitution has to be one that guarantees economic freedom to the individual, prohibits the government from making any laws that discriminate among citizens, guarantees freedom of speech and the press, prohibits the government from entering into businesses that are properly the domain of the private sector, and so on. In other words, India needs a constitution that protects the comprehensive freedom of the individual: economic, social and political."

However, in the last two decades, economically, India has broken out of the paradigm of low growth. And, the new growth is producing far-reaching changes in income, occupational structures, lifestyles and aspirations. Politically, India’s democracy has deepened, giving hitherto marginalised groups impressive representation and recognition. Administratively, the state has acquired unprecedented resources to spend on programs ostensibly designed for inclusion. And there is a palpable change in social consciousness: political democracy has induced a sense of agency and empowerment across different groups in society; today inclusion is a demand of citizens, not a gift given from on high. Certainly, the pace is slow, but steady, being big and nimble enough. So talking about the new rules of the game in the pluralist India is too much to ask!

Innovate in Rural India

Innovation had been there in rural India since ages. In North India, it is called Jugaad. Joseph Schumpeter contributed greatly to the study of innovation, famously asserted “creative destruction is the essential fact about capitalism”, had argued that industries must continuously look to innovate with better or more effective processes and products through economic and marketing strategies, such as the connection from the craft shop to factory. The emergence of start-ups in the last two decades or so can be termed as innovation. Writing for Business Standard, recently, Rapidi2i CEO, Srikanth Srinivas & Harvard Business School Professor, Vijay Govindarajan argued that how the start-ups, especially in the rural India can solve local problems through different innovation possibilities.

They identified the three key factors that have created the right conditions for a start-up boom in India:

1. The existence of huge, latent demand; an intensive need for disruptive, low cost solutions that can reach the masses, in order to meet challenges on many fronts - education, health care, water, and agriculture to name just a few. Start-ups are designed to create disruptive solutions.
2. The success story of start-ups like Flipkart, created a positive spillovers, and there is a large supply of eager entrepreneurs that want to make an impact and make it big. The millennials are not driven by getting a 'steady job'. They are more independent and willing to take risks.
3. The barriers to entry have never been lower with respect to infrastructure (easy to get in, elastic, cloud-based infrastructure such as Amazon Web Services), and global reach (ability to leverage Google, Apple and the marketplace that has democratised access). Large scale cell phone penetration can be tapped to provide innovative solutions to the masses.

..What is needed now is to shift focus to solving the problems faced by Indians. For instance, most Indians lack adequate health care. If start-ups can use digital technologies to provide affordable good quality medical diagnosis, those solutions will have applicability not just in India but all over the world, including in rich countries like the US. This is the reverse innovation opportunity that Indian startups should target. By shifting the focus and solving local problems while at the same time keeping in mind reverse innovation possibilities, start-ups can serve as the catalyst to channel the energy in areas that will help take India global.

For example, Amazon introduced Easy Ship in India because sellers in India lacked the logistics capabilities. Amazon takes care of picking up from the seller's location. At the same time, customers get trackable shipments. Now, this is a service that is available in other countries.

They cited the potential...low hanging fruits in the areas of healthcare and education. If start-ups can create disruptive solutions here, there is a latent market of 3 billion people that can be served with these same solutions. In addition, many so-called advanced countries, are struggling to cope with out of control healthcare costs and an expensive education system that is out of reach for many, and are looking for solutions that will bend the cost performance curve in a disruptive way. On the other hand, start-ups by their very nature are very risky. Amidst all this euphoria, this message of risk may get lost. It is therefore, important to build a strong and robust ecosystem.

Some potentialities of The 'village' start-ups include:

• Mentoring organisations: For example, Lemon Ideas, based in Nagpur, is a start-up mentorship organisation dedicated towards fostering the start-up ecosystem in India that has a formal programme and a partnership with several funding organisations.
• Venture capital: TLabs is a start-up accelerator as well as an early-stage seed-fund focused on Indian internet and mobile technology start-ups.
• Early adopters: Consumers and enterprises that are willing to give these start-ups a chance; those that see the early benefit of the disruptive cost-performance curve (knowing that there may still be deficiencies that need to be ironed out along the way)
• Academic and research institutions: CIIE, for example, is an IIM Ahmedabad initiative to promote entrepreneurship and bridge gaps in the ecosystem.
• Government: Kerala Startup Village is a good example of a public-private partnership that aims to launch 1,000 technology startups over the next 10 years and start the search for the next billion-dollar Indian company.

Statistically significant variables are not necessarily predictive!?

Why aren't significant variables leading to good prediction of outcomes? This conundrum affects both simple and complex data in a broad range of science and social science fields.....Statistical significance is a traditional, long-standing measure in any researcher's toolbox but thus far, scientists have been puzzled by the inability to use results of statistically significant variants in complex diseases to make predictions useful for personalized medicine. Here is the link.

Game Theory Professor files lawsuit against citibank!

The news is interesting as the suit is filed by brilliant game theory Professor Eric Rasmusen. He wrote a textbook on Game theory while pursuing his doctoral degree!

World Statistics Day

The world statistics day is celebrated on 20 Oct. This is only the second World Statistics Day, celebrated every Oct 20 occuring in a year divisible by five...Here is the link of NYT.

Arhar Daal (Tur Pulse) hits double Century!

Arhar Daal ka Dohra Shatak...the news item in Hindi newspaper Dainik Jagran had given some food for thought to deep-dive the problem. It's basic economics of supply and demand, stupid! The cost-push supply and demand pull is the reason for pushing up the price of this pulse in India! 

The cost-push supply side first. 

a. The area sown of slow growth crops, pulses, had not increased over the period, rather gone down: it is fluctuating between 3.3-4 million hectares since last 10 years. 

b. The yield of Arhar (tur) is also very low with 6-7 quintals per hectare, also being long-cycle crop, once sown, locking in the farmer for the entire season. But, it also leaves the crop vulnerable to late-season deficiency in rainfall. The crop withers, expectations of output are scaled down and, consequently, those about prices are ratcheted up. In both 2009 and 2015, adverse short-term impacts from the monsoon pattern reinforced the long-term structural stagnation in the crop to cause a sharp drop in output (or expected output). The total factor productivity (TFP) growth, measure the growth of production not attributable to growth of inputs, of Arhar also shows the lack of technical progress and efficiency improvements in the production hampering the overall yield.

c. Further, unlike other pulses, Arhar has lower shelf life and low production world-wide, which also hampers the supply side factor in short term.

Now the Demand pull factor.

a. Among all kind of pulses, Arhar, considers as 'superior good', behaves in a typical Engels' Law, with an  increase in incomes, the demand for such goods increase more than proportionately. The Indian dietary patterns are moving from cereal-dominated diets to increasing shares of proteins and vegetables. In fact, this is also an indicator of Indian economic development story.

Obviously, from the policy perspective, it is not easy to execute. The right kind of incentives mechanism can be designed in keeping with the above simple factors in mind.

Nobel Laureate Angus Deaton vs Banerjee on Development Debate

Angus Deaton of Princeton University wins the Nobel prize. He works closely with numbers, and his preferred topics are consumption, poverty, and welfare.  His understanding encompasses about empirics, the importance of economic development, and indirectly a prize about economic history. His recent book The Great Escape, which focuses on how modernity revolutionized standards for consumption. I will share more links on his contribution to development economics, in particular understanding the poverty debate in India later on. Instead, I would like to share the debate, which happened more than two years ago DEATON V BANERJEE. It is worth watching and listening to both on the identifying pathways to development.Banerjee and Duflo are strong advocate of RCT (Randomised Control Test) 

Livelihood Resilience in Bihar Districts

This is almost like a long hiatus after I am restarting to write and share some useful write-ups, etc. Hopefully, this would be regular...Recently, we did some quick check on the understanding of livelihood resilience at the district level in Bihar..

Livelihood resilience is visualized as ideal, wherein variability of bio-physical, economic and social systems operates within respective threshold limits and adaptive capabilities (Swaminathan, 1991). The Livelihood Resilience Index (LRI) developed here, includes three major components: Bio-physical resources, Economic resources, and Social resources. The resilience of bio-physical systems is influenced by factors like biodiversity, redundancies, response diversity, spatiality, and governance and management plans. The Bio-physical resilience index (BRI), is largely constructed from stock and flow resource indicators to capture the dynamics of climate change and impacts on bio-physical (re)production cycle by judiciously selecting static and dynamic indicators.

Social resilience can be increased through improvements in communications, risk awareness, and preparedness. Social resilience index (SRI) can be constructed from personal and social well-being indicators, like health, nutrition, education, employment, income-consumption, housing, and energy. Further, there is a need to examine whether the resources in a given context are over-exploited to meet the local and or global economic demand crossing the threshold limits of the resilience.

The Economic Resilience Index (ERI) is constructed from production, productivity and resource allocation indicators, for example, shifting attention to ‘more crop per drop’ and total factor productivity growth. The indicators were carefully chosen at the district level to capture the essence of the livelihood resilience as well as the practicality of available data. The standardized index, adapted from that used in the Human Development Index, computed and rescaled into a single scalar – a composite index, the LRI is scaled from 0 (least resilient) to 1 (most resilient).

Here is the link ET BLOGS