home Stories written for Outlook
January-March 2007
No need for mega projects to help villages
Technology won't help rural health unless government stops marginalising rural population
No need for for mega projects to help villages
March 2007
Small, intelligent water projects bear fruit; large ones go
waste and attract corruption.
Water, being a life-giver, can make
village communities' existence comfortable but can also destroy it if there's a
scarcity. Like everywhere else in the country one sees this in Maharashtra's
Konkan coastal belt of Raigad and Ratnagiri districts. Many villages in this
hilly, sloping region with shallow soil and impervious rocks have seen—and
quite some are still seeing—severe water shortages from January-February to
May-June of every year.
While the region receives a good 2500-5000 mm amount of rainfall every monsoon
a major chunk of it would flow down to the Arabian Sea after the first
inundation of the land and the fields. Heavy chopping of trees on hills and
slopes by government and private contractors for legal and illegal supply of
timber to urban consumption centres meant still less stoppage (and consequent
seepage inside the ground to fill the groundwater tables) of the seaward
flowing rain water.
While rice cultivation during the rains continues unaffected by end-December
the groundwater tables would run dry and create all sorts of problems for the
villagers. Says Manoj Sawant, a young farmer from Usar village in Mangaon
taluka of Raigad district: "Till 2-3 years back, well water would get over
by December and we then had to get it from sources 4-10 kms away."
The difficulties are brought out starkly by Ashok Bhave, former Sarpanch
(2000-02) of Vihule Khond village in Mangaon: "Our village has about 275
homes and about 1,100 people. Uptil four years ago we had severe water
problems. By January-February there would be no water. There is a river 6-7 kms
away from where we had to fetch water. The path to the river had ditches and
downward slopes. Getting back climbing with filled water pots was a problem. We
had to go two times in the morning and two times in the evening to fulfill our
water needs. We used to take clothes to the river and wash them by its banks.
The cows were made to go there too. Men even used to bath by the riverside but
women had problems in doing that and so their bathing water requirement had to
be got back in water pots. We used to carry two pots per person, and due to the
difficult walking conditions some of us used to slip and injure our backs.
Walking in the hot sun was not a pleasant thing to do and even if men had had
their bath by the riverside they would be soaked in sweat by the time they
walked back 6-7 kms. Cows would drink water there but by the time they walked
about through the upward sloping path they would be thirsty again Those were
terrible days."
What has changed in the last six years for Sawant's and Bhave's village and
about 60 other villages in Raigad and Ratnagiri is the involvement of Society
to Heal, Aid, Restore & Educate (SHARE), the corporate social
responsibility (CSR) wing of Ronnie Screwwala-headed UTV. Providing for staff
(administrators, engineers, social workers), supported by Sophia College
Ex-Students Association (SCESA) and arranging for finance from Bombay-based
sources like the Rotary clubs and others, SHARE has implemented, since 2001, rainwater
harvesting systems, local topography-based water storage and management
systems, women's self-help groups (SHGs) and farmers' SHGs.
SHARE digressed from conventional government solutions to villagers' water
problems like laying long pipelines, construction of large tank-like structures
and drilling deep bore wells. It asked the villagers what they wanted, educated
them about the pros and cons of various solutions and on receiving their
consent implemented small, local topography-based systems of bunds to recharge
village wells, small cordons around springs, girdling of loose rocks with nets
on slopes to break the fast flow of water during rains and other localised
techniques. In all the villages the shramdhaan (labour) for constructing and
maintaining the various systems has been provided by the villagers themselves.
The results have been impressive. Water scarcity is considerably limited in
many villages to a period of just one month before monsoon and villagers have
more time on their hands to focus on other important activities. Says Maruti
Khetam, farmer in Vadachi Vadi village in Mangaon: "With time saved we
prepare our fields in a better way for sowing of rice during the rains by
burning the grass from the earlier harvest."
Adds Bhave: "Now, we understand the benefits. Today, we are saved from the
long walks to the river. The animals, particularly cows, have benefited the
most. Due to the bunds and recharged bore wells water is available nearby. We
are able to devote proper time during summertime for preparing our fields and
sowing seeds of rice, nachini and vari for the coming rainy season which starts
in June. Earlier children were required to walk upto the river but now they get
time to play with each other."
Women empowerment is also starting to show. Says Saili Gosalkar, active member
of womens' SHG in Vaave Manjras village in Mangaon: "I teach
clothes-stitching to young women at the SHARE centre in nearby Sai village and
we in the women SHG can do wonders with alternative sources of learning and
income-earning capabilities provided our water problems are under
control."
A recent addition in some of these villages has been the construction of small
toilets outside every village home. Each is connected to a small soak pit dug
three feet deep and the human waste is taken care of by underground insects.
Says Kavita Gore, president of Kasar Malai village in Mhasla taluka of
Ratnagiri district: "It requires about Rs 8,000 worth of material to
construct one toilet. About 16 village homes contributed Rs 2,000 each for the
material cost and free labour for construction; the balance money being funded
by SHARE people."
Wonders do happen. Where there is a will there is always a way. And where
government IAS officers fail in their jobs in the villages, private NGOs like
SHARE-SCESA and their donors succeed.
Technology won't help rural health unless government stops marginalising rural population
March 2007
What the government couldn't successfully do in the field of
rural health earlier now it claims it will do better it using Information and
Communication Technology (ICT). In its 11th Five-year Plan, it targets a
reduction of infant mortality rate (IMR) from existing 58 per 1000 to 28 per
1000; similarly it wants to bring down mother mortality rate (MMR).
Speaking at a recent conference in Baramati, Maharashtra,
Rajeeva Ratna Shah, member of Planning Commission said the government "can
devise ICT-based mechanisms where family-wise data on underweight children,
anaemic women, pre-natal and post-natal natal care etc can be tracked,
monitored and recorded at the village level, brought to a block level centre
and uploaded through the internet instantly."
The idea is also to connect through broadband rural centres to
urban medical centres so that a basic doctor and a villager patient can
interact with more specialised doctors for treatment advice. It can be done by
both – government and private medical practitioners. Says K.Ganapathy, head of
Apollo Telemedicine Networking Foundation: "We talk about only IMRs and
MMRs but villagers can also have brain tumors, heart diseases etc which needs
to be addressed as well."
Specialised doctors in advanced urban medical facilities can use
transmitted images and audio from basic diagnostic tools at district level
facilities to give efficient and timely treatment advice. Ganapathy feels that
it also serves as a "tremendous method of medical education for doctors
practising at semi-urban and rural areas." He cites the instance of the
experience of a village-level ICT project of Apollo Hospitals in Tamil Nadu
where "it contributed to enhancing the knowledge of doctors at the village
level."
But ICT, while by itself is a terrific mechanism to achieve good
health in rural India, can not solve bureaucratic hindrances in government
facilities and the unwillingness of urban specialists to remove time for
consulting rural patients, through ICT, at a low cost. In addition, rural
India's health is also dependant on the physical and psychological conditions
of villagers which gets adversely affected by deteorating ecological conditions
caused by unbridled industrialisation in rural areas and also brought about by increasing
marginalisation of rural populations in terms of lack of control over means of
production like land, capital, natural resources and credit.
March 2007
Mounting uncertainties have
started plaguing the stock markets in India and world over since the last
few weeks. Our stock market did not begin its slide on the budget day. It
began three weeks before – from an all-time closing high of 14652 on
February 8 the Sensex had roller-coasted its way down by eight per cent to
close at 13478 on February 27, the day before the budget.
Then what followed is
well-known – four per cent fall on budget day and the roller-coaster
ride continuing for next two weeks with Sensex peeling off another 3.9% to
a 12430 close on March 16. But then last week (week beginning March 19)
again saw the roller-coaster take a sharp turn upwards as Sensex recovered
by 6.9% to close at 13292 on March 22.
Other world indices – that
of Hong Kong, Brazil, South Korea, China, Malaysia and even the US –
also saw a similar story being played out in varying intensities although
they didn't encounter a country budget being presented. China's Shanghai
Index had in a short span of time propelled itself its all-time high of
3039 on February 26 only to crash by 8.8% the very next day. And that
day—February 27—was set apart from other days in recent times as the
US equity indices also took a tumble of sorts – with S&P 500 sliding
by 3.5%, the largest one-day loss since the post-September 11 2001 fall.
Investors in India and
globally have been undoubtedly left wondering whether the renewed
choppiness in stock markets worldwide is different this time and whether a
bear phase is dawning on the markets. There is no unanimity among market
men and women on the factors behind the renewed market volatility but a
couple of common factors stand out among their assessments.
Its summarised well by
Sharat Shroff, portfolio manager at US-based Matthews International
Capital Management and a Securities and Exchange Board of India-registered
foreign institutional investor who thinks, "its
more a question of diminishing risk appetite on the part of investors, and
it could be caused by unwinding of Yen carry trade, fallout of the
non-prime mortgage market in the US, or rising inflation/interest rates.
The swings can be exaggerated by the fact that many of the emerging
economies in Asia are at or above their average historical valuation
ranges."
Yen-dollar-liquidity
connection. Leveraging on the cheapest source of funds is the name of the
game for investors in all asset classes. In the last six years the Bank of
Japan (BoJ) had kept its benchmark interest rate pegged at 0.25 per cent
or lower attracting global interest-rate arbitrageurs and a surge in
global liquidity. Says Deepak Jasani, head of retail research at HDFC
Securities: "Investors borrowed in Yen, converted into dollars and
invested all over the world."
Even
a basic fixed-income US Treasury yielded around 4-5 per cent and returns
from investment in emerging market equities were much higher and almost
assured for last 3-4 years and until now. At the forefront of such
arbitrage were Japanese investors themselves. Two years ago, in our equity
market, there was a buzz of Japan-based FIIs buying solidly into Indian
equities.
Bowing
to pressure from US and Europe the BoJ on February 21 doubled its bank
rate to 0.5 per cent. This had the effect of forcing investors long on Yen
to reverse their trades and cut short their losses. To repay their
Yen-based loans global investors had to sell off their investments
elsewhere. Its repercussions started being felt in Indian market too as
FIIs took out a net amount of $ 850 million (Rs 3,878 crore) from February
27 to March 21.
Chinese
and US slowdown. The steep fall in Shanghai Index and US indices had also
unnerved global investors. The Chinese market meltdown brought back fears
of a contagion effect that was seen from crashes in Thailand in 1997 and
in Russia in 1998.
Writes Orie L. Dudley Jr.,
chief investment officer at Northern Trust (whose few global funds are
registered as FIIs with Sebi) in a 'Perspective on the Market's Volatility
in Late February' report: "The Shanghai stock exchange had climbed
about 130% over the previous 14 months, so the Chinese government had good
reason to fear that a speculative bubble was forming. The Shanghai market,
which was already vulnerable to manipulation was literally being used as
slot machine by inexperienced Chinese investors."
Says Dean Baker, co-director
of a US-based independent think-tank 'Center for Economic and Policy
Research': "The markets had been acting as though the US and other
economies would continue to grow at the same pace as they have been
growing the
last three years."
The "markets being
overheated" logic is being increasingly propagated. Says Shroff:
" Investors may be concerned about an overheating Chinese economy,
and the inability of the government to contain lending and investment
growth." Adds Jasani: "At higher and higher levels, less and
less money is put on the table."
But not everyone accepts
that US and Chinese correction impacts other markets negatively. Says
Shroff: "Generally, we don’t believe fears of a Chinese slowdown
are creating an overhang on the markets." Dudley Jr. agrees in his
report stating "the premise that a correction or bear market in
Shanghai will somehow unhinge the global economy is not valid, in our
opinion."
The US markets were hit by
former US Fed chairman Alan Greenspan's statement at a conference in Hong
Kong on February 26 that a recession in US was possible this year. Says
Andrew Holland, MD of DSP Merrill Lynch: "Most analysts in US are not
used to such statements and combined with Chinese market fall things
became very volatile in the market." States Dudley Jr.: "Mr.
Greenspan simply noted that as business cycles age recessions become more
likely...but he also said he did not expect the US economy to slip into
recession this year. Recessions don't just materialise out of thin air,
they are usually the result of a meaningful and quantifiable drop in
global liquidity."
Rising inflation and
interest rates. Mis-handling of inflationary pressures in the economy by
the government has added fuel to the fire. In the budget the finance
minister raised the excise duty on cement from Rs 400 per tonne to Rs 600
per tonne on all sales above Rs 190 per 50 kg of bag, and reduced it to Rs
350 per tonne for sales at lower than Rs 190 rates. But when the cement
companies immediately jacked up the prices the government tried to
pressurise them to roll back the hikes but without success. The steel
industry was also pressurised and successfully.
Cement and real-estate
stocks slid in the meanwhile. Says Aunali Rupani, a sub-broker with
Motilal Oswal Securities: "In a free market its a fundamental mistake
to have price caps."
Notwithstanding the blunders
in government policies the market had already started softening due to
companies-related fundamental factors due to the impact of increased
interest rates on companies' debt cost. Says I.V. Subramaniam, CEO at
Quantum Advisory Services: "Corporate earnings growth in 2008-09 will
not be a lot slower than in 2007-08 and it looks like the market was not
willing to price these expectations."
A look at the aggregate
profit and income figures of the top 100 stocks in the last three quarters
of 2006 does point in this direction. The total income and profit after
tax of 50 NSE-Nifty stocks which had collectively risen by 13.4% and 32.4%
respectively from the second to third quarter of 2006 saw the growth rate
crashing to just 1.8% and 2.9% from third to fourth. Similarly, the next
50 top stocks from Nifty Junior index which witnessed a 10.4% and 43.3%
rise in income and profits from second to third quarters saw it slowing
down to a rate of just 2.3% and 19.5% from the third to fourth quarters.
Inflationary pressures and
rising interest rates are something that is on the minds of every global
investor with regard to every global market. Says Baker: "Rising
commodity prices add to the risk of a downturn, since they make it less
likely that inflation fighting central banks will lower
interest rates to sustain growth."
Risk-return equations
against equities. Not many investors are foreseeing the same kind of
growth rates in the market and rising interest rates have meant that bank
deposits are looking attractive. Says Mrugank Sanghvi, a sub-broker with a
NSE broker: "The risk-reward ratio in 2003 was the most favourable
when select large stocks were giving 5-6% by way of dividend yield
(compared to bank FD rates of also 5-6% at that time) many investors went
into equities to tap into the looming bull run."
But bank FD rates today are
8-10% and risk of low growth in equities is being taken seriously. Says
Subramaniam: "Earlier global money was cheap and risk low but with
money becoming costlier now people are factoring in risk " Adds
Sanghvi: "I have seen many high-networth investors calculating the
risk-return ratio before investing and clearly there is a thinking among
them that equities won't give more than 12-15% returns and since you are
getting 8-10% from bank FDs why take a risk with going long on
equities?"
Price manipulation in newly
listed stocks. Sebi came out with an interim order February 22 in the
price manipulation case of Atlanta whose price had went up wildly from Rs
192 on listing in September last year to Rs 1,259 by mid-December. Sebi
found out two market operators Manish Marwah and Dilip Nabera through
their associate companies were responsible for price manipulation in
Atlanta.
Marketmen say that Marwah's
operation was not limited to one stock but extended to 30-40 stocks. So
when the Sebi order came in mid-February all those operators and traders
with positions in these stocks started getting out fearing a Sebi
investigation in all the stocks which though has not taken place so far.
This is also being attributed as a reason behind the softness in the
market.
With all negatives happening in February it is no wonder then the stock markets have been jittery.
Budget 2007 - Impact on markets
February 2007
Just
two days before the Indian budget on February 28, market men and women were getting
ominous signs. Alan
Greenspan, former chairman of the US Federal Reserve, stated at a
conference in
Hong Kong on Monday, February 26, that a recession in US was likely
this year.
On that very day, the Chinese equity market which was opening after a
week's
off on account of Chinese new year holidays, saw its benchmark Shanghai
Composite Index reach its all-time high of 3039.
This
was not
ominous though. But the next day turned out to be one as the same
Chinese
market index registered its biggest fall in a decade to close 268
points, or
8.8 per cent, lower at 2771. This, along with the earlier Greenspan
comment,
triggered off a fall in the US markets the same day, with Dow Jones
Industrial
declining 3.3 per cent (416 points) to 12216, S&P 500 falling
3.5 per cent
and Nasdaq Composite Index shedding 3.9 per cent. This were their
largest
one-day point loss since the day their markets resumed trading
following the
September 11 2001 attacks on US sites.
US
analysts
got busy scrambling for explanations. Says Doug Henwood, a US-based
economist
and author of book 'Wall Street: How it Works and for Whom': "There's
the
possibility of a meaningful slowdown in both the US and Chinese
economies, which
have become so tied together that trouble in one means trouble in the
other;
the bursting of a speculative bubble in Chinese stocks; and the chance
that
troubles in the US housing market, which Wall Street has declared to be
largely
over, are actually getting seriously worse."
Not that our stock market was peaking the two days before budget. On Monday (February 26) the 50-stock Nifty was down four per cent from its level a week earlier and it shed another one per cent on Tuesday to close at 3893.
And then came Chidambaran on Wednesday with his various budget proposals some of which the market found unfavourable. So, with the Asian and US markets declining steeply, our stock markets too tumbled along on the budget fall. Nifty closed the day at 3745, down 3.8 per cent from the previous day.
Chidambaram's
budget was considered by many in the market to market neutral with a
mix of
positive and negative impact. Says Ashu Suyash, MD, Fidelity Fund
Management:
"There were a few surprise announcements which are sector specific,
especially on IT and construction, but overall it is a neutral Budget."
Adds C.J. George, MD, Geojit Financial, NSE member: "The budget is
neither
here or there except for some innovative proposals like reverse
mortgage loans
for senior citizens, allowing local bodies to issue bonds for
infrastructure
development, and partial use of forex reserves for infrastructure
financing."
Dividend
distribution tax.
The budget proposal that stood to immediately impact the stock
market the most was one concerning the raising of dividend distribution
tax
(DDT) from 12.5 per cent to 15 per cent for companies and of DDT for
individual
investors' investments in money market and liquid funds (issued by
domestic
mutual funds) from 12.5 per cent to 25 per cent. The first one, says
Mukesh
Dedhia, director, Ghalla Bhansali Securities, NSE member: "is negative
for
all dividend-paying companies and there was no need for the FM to do it
as it
won't raise much revenues for him."
The
second
one—on liquid funds—was somewhat expected. Says
Suyash: "it is not an
entirely unexpected development." Thats so because the FM, after
ignoring
bank deposits and even removing tax-exemption on bank interest two
years ago,
wants the deposit growth of banks to be sustainable to drive the credit
offtake
of the industry. But since interest on bank fixed deposits (FDs) is
taxable
upto 30 per cent many investors had preferred to get better post-tax
returns
from money market and liquid funds of the domestic MFs.
But
now, says
Anita Gandhi, head-institutional business, Aryan Capital, NSE member:
"At
present, liquid and money market funds are attractive short-term
investments
because pay 20 per cent DDT and individuals pay 12.5 per cent and this
is much
lower compared to 30 per cent on short-term bank FDs." Since these
moneys
could potentially go to the banking system, feels Gandhi, "the FM is
trying to take care of bank FDs by reducing the tax incentive on their
competitor products."
Adds
Dedhia:
"With only a five per cent difference in tax now, investors will now
factor in seriously the credit risk inherent in the portfolios of
liquid funds
vis-a-vie the assured returns from bank FDs." Agrees Geojit's George:
"As a corporate investing ourselves in liquid funds till now, we will,
with the tax differential coming down to just five per cent, now not
ignore the
bank FDs due to its assured returns aspect."
Short
selling.
Although this comes under the jurisdiction of the capital
market regulator, Securities and Exchange Board of India, the FM in his
budget
speech talked about allowing institutional investors to short sell in
the
market. Presently, any short selling during a day has to be squared off
otherwise the delivery has to be effected on T+2.
A
Sebi paper
on short selling, and FM's statement, recommends that securities
lending and
borrowing (SLB) be permitted so that investors going short can borrow
shares
from lenders and deliver on T+2. Says Ravi Narain, MD, National Stock
Exchange:
"Because of lack of SLB and since all open sales have to result in
deliveries,
institutional investors couldn't resort to short selling and exercise a
two-sided view depending on their assessment of the market."
With
SLB that
will become possible. However, the Sebi paper on short selling excludes
individual investors from short selling or even lending shares to
institutional
borrowers. Says George: "The SLB mechanism should also be made
available
to individual investors so that they can earn some interest on their
share
portfolios by lending to the institutions."
The
stock
futures segment of derivatives today permit strategies that involve
both short
selling and securities lending. But the latter is risky due to the fact
that
futures contracts are settled on cash difference and not through
delivery of
shares.
PAN-based
UIN.
The FM cleared
the air with regard to the need to have a unique identification number
(UIN)
for market participants and investors with an objective to monitor and
deter
manipulators and fraudsters. Two years ago Sebi had discontinued
biometrics-based UIN system. As per FMs budget statement, the market
will have
now have a UIN system that will use income tax department-issued
permanent
account numbers (PANs) as the basis of UIN. Sebi is likely to issue
circulars
soon formalising the use of PAN in a Sebi-mandated UIN system.
Commodities
derivatives blamed for inflation.
The evening before budget Forward
Markets Commission (FMC), regulator for commodities derivatives market,
banned
futures contract in wheat and rice. A month earlier, FMC had banned
futures
trading in urad and tur. The FM, in his budget speech, outlined these
being
among the measures to control inflation.
But
investors
and market participants in commodities exchanges are flabbergasted at
the move.
Says Susan Thomas, professor, Indira Gandhi Institute of Development
Research:
"Its a hogwash and political posturing." Adds Geojit's George:
"There is no empirical evidence to suggest that futures trading in
commodities leads to inflation." Says Thomas: "Global commodity
markets are seeing volatility and ad hoc banning of futures contracts
on select
commodities is not the right attitude to take."