G-20 and World Economic Recovery

28/09/2009

Leaders of the G-20 countries have met 3 times in the last one year to discuss ways and means of overcoming the world economic slow down. However, these countries including the rich countries such as the US, Japan and Germany and the emerging giants such as China and India have not fully succeeded in their efforts to overcome the economic and financial crisis in their own countries though they may finally succeed soon. The rest of the world should not look to the G-20 countries to help them fully recover from the crisis. The rich countries can help the poor countries only to a certain extent. Every country should in its own way find ways to recover from the crisis.

The simple solution for any country to register GDP growth is to increase production of goods and services. For this, governments should provide opportunities to all the people – including children above 14 or 15, women, handicapped and old people – to work according to their abilities. In fact, in difficult times, people should work longer (than the normal 8 hours, perhaps 10 hours a day) and harder to further increase production of goods and services.

Bringing in more liquidity i.e. bringing in more money into circulation is necessary to stimulate the economy but if this is not preceded or immediately followed by increased supply of goods and services, the economy would not grow. On the other hand, there would be increase in prices which in turn will lead to cut in production and negative growth in GDP. Money should be put into the hands of the people, after taking work from them.  Embarking on additional welfare measures like extending financial and material assistance, waiver of loans, fees, charges, etc. will only help people to temporarily face the effects of recession but will not revive the economy. Ultimately, it would deepen the economic crisis.

Since there is greater scope of employment generation in developing countries than in developed countries, developing countries are in a better position to recover from economic and financial crisis earlier than in developed countries.

It would be helpful if World Bank and IMF could advise countries, particularly poor countries to gradually reduce grants and subsidies and provide opportunities for all people to work. Increase in production of food, clothing and housing should get priority in poor countries.

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Popularising Solar Energy

28/09/2009

Solar energy has been talked about for decades all over the world. Unfortunately, energy generation from sunshine till now is negligible compared to generation from thermal or hydro sources.

Several governments extend subsidies and concessions for solar energy but entrepreneurs have not come forward in large numbers to benefit from these subsidies. This is because they are not sure of the profitability or viability of solar energy projects. Since the private sector is reluctant , governments should come forward and set up solar power generation units either departmentally or through government undertakings. Once the governments stabilize the generation of solar power, they should sell the project to private entrepreneurs for management and embark on new projects. This is because it is easier for governments to establish the second project than for the private entrepreneurs to establish a new unit. The entrepreneur, to whom the first unit is sold, should also be encouraged to expand the unit.

After a few units are established, these will become popular; the viability of solar projects would be confirmed and private sector would enter  the solar energy generation sector.


Global Warming or Weather Extremes

17/09/2009

In the last few years, particularly in the last 3 -4 years, we get the news that several parts of the world had the hottest day in 50 years, 70 years or even in recorded history. This has led people to conclude that there is global warming and that the ice at the poles would melt, leading to the submerging of several island countries. The conclusion is incorrect.

During this same time period, we also read news that several parts of the world experienced the coldest day in several decades or even the coldest day in recorded history. This means that what we witness now is not global warming but rather weather extremes. While estimating the increase in the volume of sea water and rise in sea level, the following need to be kept in mind.

  1. When it is hot in the northern hemisphere, it is cold in the southern hemisphere. Thus the snow melting is restricted to just 50% of the area of snow
  2. When snow melts, the volume of the melted snow, i.e water comes down by around 10%.
  3. During summer, when snow melts and raises sea water level, there is substantial evaporation of sea water leading to lowering of sea water level. Evaporation has been calculated to be higher than the quantum of flow of river water into the sea.
  4. With increased use of surface water, the flow of water into the sea from the rivers is decreasing steadily.
  5. With increasing exploitation of ground water, seepage of seawater into the earth takes place, reducing sea water level.

Based on these points, the consequences of ”global warming” is not so alarming as is made out by some scientists or experts.

However, it has to be noted that the rivers bring into the sea not only water, but also mud, sand, salt and minerals which, get deposited into the sea, thus reducing the quantum of water which the sea can hold. Dredging to the extent possible, extraction of minerals, desalination of sea water for irrigation purposes as well as for other uses including industrial use would all serve to reduce sea water level.


Loans from International Organisations

13/09/2009

There is news that the Government of India is seeking a loan of US$3 billion or Rs.15,000 crores from World Bank for converting about 6,000 kilometers of single-lane national highways into two-lane highways.

For road works foreign exchange is not required too much. If the government wants money in Rupees, it can raise loans in India itself. If it difficult to raise loans from the public, it can borrow from Reserve Bank of India (RBI). If RBI has any difficulty, it can create a special purpose fund by printing currency and lending to the government. The amount can be recouped over a period of time, say 10 or 15 years.

If the government wants some quantum of foreign exchange, it can withdraw from the country’s foreign exchange reserves. These reserves are over $260 billion and have been deposited in foreign government bonds and in foreign banks yielding very low interest.

Thus, there is no need to seek loan from World Bank or any other international organizations.


Subsidies to Farmers in Developed Countries

06/09/2009

Food and Agriculture Organisagion (FAO) says that about one billion people, i.e. about 15% of the world’s population, are suffering from hunger. The people in this group are unable to feed themselves as food prices are high, which restricts access.

Most of the world’s grains are exported by developed countries and imported mainly by developing countries with a few exceptions. India is among the countries which import food grains, occasionally, if not regularly. In the years to come, India’s imports of food grains will increase. In such a situation, India should argue for ways and means of making food grains cheaper in the international market.

However, at the World Trade Organisation (WTO) negotiations of Doha Round, India, along with a few developing countries, is opposing the subsidies given by USA and Europe to their farmers. This approach seems to be wrong. Farm subsidies in developed countries make food grains cheaper in the domestic and international markets.  Food-importing developing countries, including India, should be happy that the food-exporting developed countries make their produce cheap in the international market by subsidizing their farmers.


India’s Partition in 1947

06/09/2009

There is a discussion on who was responsible for India’s partition in 1947 and how it could have been avoided. This discussion is pointless at this time as, if India was not divided in 1947, it would in all probability have been partitioned in the 1990s when the Muslim-majority provinces of the former Soviet Union became independent countries. Former Yugoslavia also split into several independent countries. The only thing to be regretted is the large scale violence and deaths that took place at the time of partition and the bitterness it created among the people of the partitioned countries.