Capital flow measures: structural or cyclical policy tools?

This paper analyzes the use of capital flow measures in emerging markets. Drawing on a specially compiled new database of capital flow measures, it establishes that policy makers in emerging market economies do not use capital flow measures as an active tool at business cycle frequency. While there is a general trend toward the liberalization of capital accounts, the use of capital flow measures as a countercyclical policy tool is rather sporadic. Instead, countries show a distinct preference for using monetary policy, exchange rate adjustments, macro prudential measures, and adjustments in external reserves to modulate the impacts of domestic business cycles, international liquidity cycles, and shocks to capital flows. Regulation of different kinds of capital flows — resident and nonresident flows; inflows and outflows; and foreign direct investment, portfolio, and banking sector flows — is changed infrequently and is acyclical to domestic business and external liquidity cycles.

Gender gap in land ownership

Women comprise over 42 per cent of the agricultural labour force in the country signifying increasing feminisation of agriculture and yet they own less than 2 per cent of its farm land. According to the India Human Development Survey (IHDS) notwithstanding laws ensuring women’s rights to agricultural land most such land is owned by either men or undivided families. The IHDS a nationwide panel survey covering 41554 households in 1503 villages and 971urban neighbourhoods across India in two waves (2004- 05 and 2011-12) is jointly organised by the University of Maryland and the National Council of Applied Economic Research (NCAER).

It is also the first large-scale survey administering questions on acquisition and ownership of agricultural land. 

TheIHDSfindsthat57percentofrural and 9 per cent of urban households own any agricultural land. What is of greater concern is that 83 per cent of the agricultural land is reportedly inherited by male members of the family and less than 2 per cent by their female counterparts with the remainder being acquired through other means. A region-wise disaggregation of the data shows persistently low female ownership of farmland in all the regions ranging from 28 per cent in the hills to only around 8per cent each in the east and west. 

The IHDS findings are substantiated by the World Economic Forum’s Annual Meeting at Davos in January 2018 which reported that India is one of15 countries in the world mostly located in South Asia Latin America and sub-Saharan Africa where the prevalence of patriarchal traditions prevents women from enjoying equal ownership rights to property. Ironically most of these nations subscribe to the UN’s post-2015 Sustainable Development Goals (SDGs) especially Indicator SDG 5.a.1 which seeks to augment women’s share as rights-bearers of agricultural land by types of tenure. 

The numerous barriers in land ownership that Indian women face include lack of legal awareness about their inheritance rights their reluctance to claim property from hostile family members and the skewed implementation of laws fuelling gendered social discrimination. One of the primary reasons for this is the mediation of women’s land rights in India through various personal laws and customary practices rather than through legal discourse. “The property rights of the Indian woman depend on which religion she follows if she is married or unmarried which part of the country she comes from if she is a tribal or nontribal and so on” argues Shruti Pandey PIL lawyer in the Supreme Court and Delhi High Court and former National Director of the Women’s Justice Initiative of Human Rights Law Network India. Pandey contends that the property rights of Indian women are not only immune from Constitutional protection but also vastly discriminatory and arbitrary with women being assigned much lower shares in family property than men. A notable exception is the Civil Code in the state of Goa derived from Portuguese laws which has unique provisions ensuring joint ownership and equal share in each other’s property for married couples and a stipulation that daughters cannot be given a lesser share than sons. Although the Goanese code is often touted as a model for a potential Uniform Civil Code across the country it too does not translate into action on the ground. 

Activists argue that the conundrum of gender-based land ownership can be tackled through simple solutions. One instance is an ongoing partnership between the West Bengal Government and the Landesa Rural Development Institute working to secure legal land rights for poorest families. They found that merely ensuring sufficient space in land certificates to enable listing of both husbands and wives as owners had a huge impact leading to the inclusion of women in a majority of the land titles in the state. Such schemes could lead to a ripple of positive developments for women such as enhanced decision-making power better child nutrition and household food security improved educational attainment for girls and even the confidence to counter domestic violence and abuse. Political tools such as legislation and gendered allotment of agricultural land would certainly help. But the real change will come only when the women themselves stand up to claim their rightful ownership of property and the wide-ranging empowerment it brings. 

By Anupma Mehta

(The writer is editor at the National Council of Applied Economic Research. Views expressed in this article are personal)

Steel Magnolias: US trade tariffs on steel and impact on India

Last month the United States President Donald Tump imposed 25% tariffs on steel imports into the county citing concerns about the dumping of cheap imported steel ruining American industries and taking away jobs. Given the trade relations between the US and India it is important to examine what these tariffs will mean for the Indian steel industry.

Growth trends of Indian steel

The Indian steel sector continues to struggle to post the financial crisis period. As per data collected for the Report of the Working Group on Steel Industry for the Twelfth Five Year Plan (2012–2017) the total production of finished steel in the decade preceding deregulation (1982–83 to 1991–92) ranged between 8.5 and 14.2 million tonnes showing a compound annual growth (CAGR) of 5.9%. In the post-deregulation period (1992–93 to 2010–11) the steel sector production of finished steel ranged between 16.9 and 66.01 million tonnes showing a CAGR of 8.4%.

Using the steel production numbers from the Index of Industrial Production (IIP) one can see that the steel sector has shown weak and falling growth post-2011 and 2012 (Figure 1). In fact in 2015–16 the growth rate of the industry was -1.3%

Aided by the imposition of anti-dumping duties on imports of various steel products from various countries including China South Korea European Union South Africa Taiwan Thailand and the United States the sector has shown signs of recovery in 2016-17.

Steel production has shown a year-on-year (y-o-y) growth of 6.4% for the April–January 2017–18 period. However when we analyse month-wise data we observe volatile growth patterns. Over 80% of all Indian steel production is domestically consumed.

As per the report export of steel reached a peak high of 5.24 million tonnes at the end of Tenth Five Year Plan in 2007. For the eleventh plan (2007-2012) export of steel slowed down and recorded negative annual growth rate of nine percent from 5.08 million tonnes in 2007-08 to 3.46 million tonnes in 2010-11.

Exports of Indian finished steel have soared from 3.8 million tonnes in 2014-15 to 8.2 million tonnes in 2016-17. Figures for 2017-18 promise to be even higher as for April-February 2017-18 exports were 8.911 million tonnes exhibiting a growth of 34.6% on a y-o-y basis. Since 2016-17  India has become a net exporter of steel.

Total Indian exports of iron and steel (HS code 72) increased from 10711 million tons in 2016 to 17476 in 2017 exhibiting a growth of 63.2% (Ministry of Commerce). Exports to the United States for the corresponding period of the same product increased by 47.5% from 266 to 392 million tons. Similarly  exports to the US for iron and steel articles (HS code 73)increased from 494 million tons in 2016 to 958 million tons in 2017 showing a whopping increase of 94%

India is the eleventh largest exporter of steel to the USA in terms of volume which has shown a triple-digit rise in 2017. Specifically India is one of the top five exporters of ‘pipe and tube’ and stainless steel to the United States.

How will the tariffs affect India?

Although their impact will be limited the tariffs will cause a setback to the Indian Steel Policy. If India is to achieve its National Steel Policy target “to have a wider presence globally in value added/ high grade steel” the tariffs will act as barriers to the US markets act and restrain growth in an industry that is still recovering.

The tariffs also threaten to set back the government’s ‘Make in India’ program although the government did use the same “infant industry” argument to protect some of its manufacturing industries in the current budget. This further limits the government’s power and capability to negotiate the tariffs with the United States. However with the looming threat of a global trade war the more concerning matter at hand is to see whether the imposition of tariffs by the US will penetrate into other industries as Indian markets for services are much more vulnerable than the steel industry.

By Bornali Bhandari

(The writer is Fellow at the National Council of Applied Economic Research. Views expressed in this article are personal)

Tripura’s bamboo sector: Potential and challenges

About a third of the total area of Tripura is covered by bamboo and bamboo has emerged as a key thrust area for the state’s industrial development. Based on a field visit that was undertaken to study skill development in Tripura’s bamboo sector Bornali Bhandari discusses the livelihood-based approach of Tripura Bamboo Mission vis-à-vis a market-based approach adopted by a private bamboo wood manufacturing unit.

The Finance Minister announced in the Union Budget 2018-19 an allocation of Rs. 300 crores for the bamboo sector1.  In this note I seek to illustrate the importance and potential of the bamboo sector in the state of Tripura and challenges related to it. This is based on a field visit to the state undertaken from the perspective of skill development in the bamboo sector supported with literature review. The visit highlighted the contrasts and paradoxes of the approach to skill development and how that is intrinsically linked to the actual growth dynamics of a particular sector in a state. It brings into focus that policy prescriptions for a state have to be analysed holistically and not in silos.

Bamboo

“The world bamboo market is currently worth US$ 8 billion/year of which China’s share is US$ 5.5 billion. Traditional markets cover handicrafts blinds bamboo shoots chopsticks and traditional bamboo furniture which count for 95 per cent of the market to date. New market products include modern/laminated furniture flooring and panels cover the remainder five per cent of the bamboo sector.” (Tripura Bamboo Mission website).

As per the Forest Survey of India (FSI) 2012 “bamboo is green gold poor man’s timber. It is a non-wood forest resource found in both forested and non-forested areas. They are fast growing widely present renewable versatile low-cost natural resource and can grow across a wide variety of soil conditions. It is a viable alternative to timber.” After China India is the second richest in bamboo in terms of genetic resources. Bamboo belongs to the grass family and India has approximately 148 species of bamboo. Of the 148 species 90 species are found in the northeastern hilly states with 41 species endemic to that region (Sharma and Nirmala 2015).

Bamboo in Tripura

Tripura a state in northeast India has at least 19–21 species of bamboo. It covers 3246 km2 of the state which is approximately 31% of the total area. Given its comparative advantage bamboo has emerged as one of the key thrust areas for industrial development in Tripura after natural gas and rubber (FSI 2012)2.

The Government of Tripura formulated a State Bamboo Policy in 2001 and in 2007 “it developed Tripura Bamboo Mission (TBM) for integrated development of bamboo sector in the state. The Mission’s objectives of scaling up turnover of Bamboo sector and simultaneously increasing livelihood opportunities for poor are sought to be achieved through cluster development approach involving institution building technological linkage better market and credit facilities coupled with resource upgradation working on a project mode. Majority of the beneficiaries are women and minorities who comprise of the poorest sections of the population in the state.” It is being implemented in a public-private partnership mode with Infrastructure Leasing and Financial Services (IL&FS) Clusters initiative.

TBM had an initial objective of enhancing turnover of bamboo sector from Rs. 27.9 crore to Rs. 75.85 crores by 2010. By the mid-term review in 2009 through various initiatives and activities the mission had scaled up the state’s turnover to Rs. 56.56 crore by 2009–10 and Rs. 115.56 crore by 2012–13. Its target was Rs. 200 crore by the end of 2016–17. The turnover (export from state) of commercial bamboo sector was estimated at Rs. 96.53 crore for 2016–17. The state has 16 clusters for incense sticks production 24 for handicraft/furniture production and seven for bamboo plantations (TBM 2017).

Field visits; Tripura Bamboo Mission: Livelihood-based approach

A visit to a furniture cluster brought out the challenges of using bamboo to manufacture furniture in Tripura. Connectivity with markets (due to the remote location of the state) and on-time delivery are key issues. A bamboo hanger maker received an order but non-delivery of hooks from Kolkata on time (on account of festival season) translated into cancellation of the order and accumulation of inventory.

A visit to a self-help group (SHG) also showed the importance of the SHG in connecting to the market. The development of the SHG had given the women tremendous confidence in themselves financial independence and of course skills but lack of regular orders meant that work was sporadic. The cluster was near their villages which meant that they could balance their house duties and work. The SHG had converted to a producers’ group and the TBM was helping them to connect to the markets. Further the SHG had hired designers in bamboo to help them come up with new products.

The real question is whether this livelihood approach is sustainable in the face of technological shocks changes in trade policy and other exogenous factors. The workers are especially challenged as they have few other skills or opportunities. This is illustrated by the ubiquitous incense stick. TBM (2017) documents the fast transition from handmade production of incense sticks (the basic raw material) to semi-mechanised products in the last 2–3 years. Combined with reduction in import duty from 30% to 10% and flowering of the main species of bamboo in 2008 the demand for incense sticks produced in the state decreased substantially (TBM 2017). As per TBM (2017) in the last 3–4 years the production of bamboo sticks has reduced to one fifth of the capacity and livelihood of 1.5 lakh households were affected. Tripura has lost its dominant position of supplying 70% of incense sticks to China and Vietnam. The state had recently begun to impart skills in semi-mechanised ways of production and entrepreneurs were slowly adopting the semi-mechanised technology.

In 2016–17 the TBM organised 24 skill development training programmes training 710 artisans; two programmes on capacity-building training in bamboo furniture training 40 artisans; five programmes for training of 25 trainers two programmes on soft skill training; and four skill exchange programmes for 82 artisans. One is almost forced to ask whether this is a case of too little too late or the inability to foresee the change and adapt quickly?

Market and innovation-based approach

A private enterprise located in a first of its kind Bamboo Park in Agartala Tripura opened a bamboo wood manufacturing unit and commenced commercial production in 2014. A semi-automated facility employing 100 people the unit is producing wood from bamboo and manufacturing products out of that wood including furniture flooring panels outdoor decking etc. It is the first of its kind in the state. These products are new in India but have an international market which is dominated by China.

ompletion of grades VIII X or XII. Ninety five per cent of its employees are Class VII pass-outs who are then trained in both hard and soft skills for 7-8 months. Multi-skilling is required along with specialisation. The firm has a unique way of retaining fresh hires: it retains a portion of their salary for the first three months and if they work all three months they get the remainder of the salary. The Regional Directorate of Apprenticeship Programme is in Kolkata.

The training given in the local Industrial Training Institute (ITI) is not up to the mark. Although the Project Manager of the enterprise is part of the advisory group of the local ITI the perception is that the ITIs are not open to change. According to the managere there is a vast gap in the skill level in the state and “mainland” India. Government jobs act as a disincentive for the educated to work in the private industry.

As per the interviews right now in India bamboo dust a side product of making semi-mechanised incense sticks is thrown away. In China bamboo dust is used to make bamboo bricks. Bamboo has a lot of potential and can be a game changer both for the state and the country if the industry is encouraged to make innovative products that have international demand.

Since bamboo is a renewable source it is green in nature. A shift from livelihood-based production of goods to more modern goods is required and should be encouraged. Education skilling re-skilling and up-skilling would be critical elements of this process.

This article is based on field visit that was conducted in Agartala Tripura in November 2016. The author is grateful to TBM IL&FS Skills and Mr Rabin Bose of Mutha Industries.

Notes:

1. As per the Union Budget 2018 the National Bamboo Mission (NBM) was initially started as a Centrally Sponsored Scheme in 2006-07 and was subsumed under Mission for Integrated Development of Horticulture (MIDH) during 2014-15 and continued till 2015-16. Funds were released for maintenance of bamboo plantations grown earlier under NBM. From 2018-19 onwards it has been decided to revitalise the NBM with appropriate restructuring giving adequate emphasis on production product development and value addition activities.

2. Unfortunately there is no precise measure as to how much bamboo contributes to Tripura’s Gross State Domestic Product.

By Bornali Bhandari

(The writer is Fellow at the National Council of Applied Economic Research. Views expressed in this article are personal)

Study to Identify the Gap in Institutional Funding in Agro-Processing Cooperative Sector in India: Overview and Policy Implications

This NCAER study examines the issue of credit penetration, its impact on the performance of agro-processing cooperatives, and the role of the National Cooperative Development Cooperation (NCDC) in facilitating cooperative activities through its financial and logistical support.

The bulk of the subsidy in agriculture in India goes to farmers for pre-harvest operations and hardly there is any subsidy available for post-harvest operations like storage, marketing and processing of agricultural produce, which is the crucial forward linkage of the agricultural sector. It is also important to provide assistance, interest subvention and subsidies to the cooperative sector engaged in post-harvest operations for the benefit of farmers at the grassroots level. Boosting post-harvest operations in the cooperative sector could prevent the losses being suffered by farmers. The study investigates the possible gaps in institutional funding to NCDC that might reduce its effectiveness in supporting agro-processing cooperatives in India.

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