Relevance of RCT can be explored in agricultural marketing policy research
- Relevance: G.S paper III: Economy
- Randomised control trials can be instrumental in assessing pre- and post-intervention of resource agencies towards capacity building of farmer organisations
RCT or Randomised Control Trial has become a fad in experimental research. Relevance of RCT can be explored in agricultural marketing policy research as agriculture and development cannot be seen in isolation. And that exploration bears some rationale for India.
- Small landholders account for a little over 85%, and have less than one to two hectares of operational landholdings. They, however, contribute to more than 40% of gross cropped area, but often realise a poor return as consequence of unexpected crop loss due to climate change, distress sales of their marketed surplus, and excessive intermediation in agricultural markets.
- Because of these interconnected issues, smallholders do often fail to take informed decisions on which crops they should grow, when, where, and how to market their produce.
To overcome such problems or to offer a real-time feedback to smallholders about market potential of their produce, National Agricultural Higher Education Project at the auspices of Indian Council of Agricultural Research has instituted the Centre for Agricultural Market intelligence in a few State Agricultural Universities.
- World Bank has extended funding support. The major objectives are to study price forecasting and behaviour of agricultural commodities, export competitiveness, evaluation of electronic National Agriculture Market (e NAM), capacity building of farmers and associated stakeholders or market institutions.
- The Centre need to carry out experimental research to a greater extent . Evidence-based scientific study needs in-depth understanding of the context and phenomenon, that Randomised Control Trails (RCTs) can achieve.
First, price forecasting of agricultural commodities necessitates an extensive field research to understand how farmers engage in price setting. RCTs make a significant difference as gainst other evaluation-based measures. For instance, in Africa, experiments have focused on assessing the role of price information in agricultural markets via SMS. In India, similar type of intervention took place in Gujarat in 2007-09 to elicit information about farmers’ price expectation and their attitude towards futures price adoption.
Second, export competitiveness of commodities is based on acreage and substitution effect of agricultural crops that leads to price effect in international trade. RCTs can be useful in assessing export competitiveness in those areas of cultivation which are awarded with GI for particular crop/commodity.
Third, evaluation of e-NAM requires a thorough understanding of agricultural market functioning. As 8-9% of total regulated market yards (about 7,500) are converted into e NAM, it is opportune time to use RCTs for evaluating the performance of the electronic spot market in terms of price discovery, crops arrival, auctioning, and trend in farmer participation. Based on RCT-based experimental research, agriculture marketing policies can be tweaked to increase farmer awareness of market realities, improve their bargaining power through collective action, and to bring about efficient allocation of resources.
Fourth, capacity building of farmers and stakeholders also need RCT. For instance, Farmer Producer Companies have drawn policy attention from the market access and risk management viewpoint. Notwithstanding a renewed interest in agriculture policymaking, capacity building programme need to assess farmer market orientation, perceived risk attitude, risk exposure, farm size and performance. RCTs can be instrumental in assessing pre- and post-intervention of resource agencies towards capacity building of farmer organisations.
Fifth, it is important to note that any evaluation-based experiment entails investment and time.
As poverty alleviation research has been emerged through a dedicated lab named J-PAL, a network of researchers does carry out extensive field-interventions in the developing and least-developed countries on poverty issues.
Drawing a parallel from such research, agricultural market intelligence centre needs an appropriate design for the required intervention and should develop a network of diverse scholars and professionals to incentivise farm realities with appropriate policy instrument and mechanism.
- To understand how badly govt policies are damaging the environment, we need a new development index
- Relevance: Mains: G.S paper II: Government policies
At International Monetary Fund and World Bank meetings in Washington this week, there will be much debate about slowing global growth, the impact of the US-China trade war, the role of central banks in preventing a global recession, the risk of disruption to oil markets, and much more. What you won’t hear, beyond a few platitudes, is a detailed plan for combating climate change and slowing the depletion of the earth’s resources.
- This pattern of neglect won’t change unless we do a much better job of linking the climate to economic progress. That in turn will require changing the way we measure development.
- The world still looks at human progress in almost exclusively economic terms. Countries view growth in their stock markets and their GDP per capita with chest-thumping pride. Almost three decades ago, the United Nations Development Programme tried to produce a more nuanced measure of progress by including life expectancy and education along with income in its Human Development Index (HDI).
- While a welcome innovation, the original HDI is still relatively crude, failing to account for such things as sustainability and inequality.
How much those omissions can matter became clear recently, after the UN added an inequality-adjusted index (IHDI) to its 2018 Human Development Report. Including inequality as a factor dramatically altered countries’ rankings. The US, for instance, fell from 13th on the original index to 25th on the adjusted one. By contrast, Finland rose from 15th to fifth place.
- Accounting for climate damage would likely have an even bigger impact. Countries that rank high on the human development index also use more carbon and deplete more natural resources than those below them.
- In other words, our metrics favour unsustainable, environmentally damaging growth. (Using more energy also produces a higher ranking, but only up to roughly 100 gigajoules per person; beyond that, countries are wasting energy in inefficient systems, not improving human development.)
- The same applies to the relationship between the HDI rankings and a measure known as an “ecological footprint.” Up to the middle of the list, where around 140 mostly low- and middle-income countries sit, the footprint is relatively small, less than 2 global hectares per capita (a measure of the world’s global ecological capacity per person).
- That number rises sharply among countries with higher development levels, however, increasing to as much as 8-10 global hectares.
If we want leaders to consider how badly their policies are damaging the environment, we need a new development index, one that takes account of various environmental variables such as CO2 emissions per capita, SO2 emissions (a measure of air quality), groundwater extraction and share of renewable energy.
Doing so would drop the rankings of countries from the US to Kuwait, Saudi Arabia and Australia by over 15 spots apiece. If the ecological footprints of countries were considered, the rankings of Canada, Estonia and, surprisingly, Finland in addition to those countries would drop by over 20 places.
- Other attempts to produce a more sophisticated measure of development haven’t gotten traction. While the UN agreed to pursue its Sustainable Development Goals in 2015, the system— which includes 17 goals and 169 indicators—is too complicated to measure succinctly.
- The Happy Planet Index hasn’t gained wide acceptability because it mixes observed data on things like life expectancy and inequality with survey results measuring well-being. (Its rankings show Costa Rica and Vietnam in the top two positions, with New Zealand the only fully industrialised country among the top 20; the US ranks 105th.)
A Social Progress Index, inspired by the writings of Nobel-winning economists such as Amartya Sen, Joseph Stiglitz and Douglas North, produces rankings that don’t differ all that much from the HDI.
- The World Bank has introduced the concept of adjusted net savings to measure changes to wealth (a stock) rather than GDP (a flow), while accounting for additions or depletion of natural capital.
- But, the measure doesn’t adequately address the huge stock of accumulating CO2, SO2 or methane in the atmosphere, the country-sized swarms of plastic now floating in the oceans or the melting of glaciers—all things that show we may be at an environmental tipping point.
Over the last 30 years, the shift from looking just at GDP to judging countries on health and education outcomes has produced real progress, as the world has improved its human development index by over 20% since 1990 and, more meaningfully, in the least developed countries by over 50%.
- PMC crisis: Commercial banks subject to greater regulatory rigors of RBI
- Relevance: G.S paper III: Banking Sector
There have been several Committees, which have attempted to streamline the functions and working of cooperative banks in India
Of late, banks in India have been in the news for all the wrong reasons—NPAs, continued deterioration in asset quality, grossly inadequate capital levels, etc.
- While the PMC is small compared to the size and reach of most commercial banks, it is still the fifth largest cooperative bank. As of FY19 it had 137 branches, deposits of Rs 11,617 crore, advances of Rs 8,383 crore, NPAs of 4%, capital adequacy of 12% and a net profit of Rs 99.69 crore compared to Rs 100.90 crore a year ago.
- This made PMC seem like a relatively well-run co-operative bank.
After the whistle blower’s September 17, 2019 letter, the MD and CEO Joy Thomas wrote a detailed five-page confession to RBI. RBI responding “swiftly and promptly” curbed all activities of PMC Bank and appointed an administrator for six months.
- It was found that PMC Bank’s exposure to the bankrupt Housing Development Infrastructure Ltd (HDIL) was Rs 6,226 crore—four times the regulatory cap with the single exposure limit for banks being 15% of capital fund.
It was 73% of the banks entire loan book.
- In terms of RBI’s sweeping restrictions, curbs were placed on fresh lending, accepting fresh deposits and investments. Customers withdrawal was initially capped at Rs 1,000 (later raised first to Rs 10,000 and again to Rs 25,000) from the Bank, irrespective of the type, total balance or the number of accounts.
- In the event of emergencies like hospitalisation, etc., the RBI may grant a case-by-case exception, though it is not certain to come through. RBI also sacked the Board and suspended the MD and CEO.
- PMC created over 21,000 dummy accounts (mostly of dead account holders), did creative banking and showed large number of project loans and, worst, deliberately delayed computerisation. The FIR shows the modus operandi.
- HDIL promoters allegedly colluded with the bank management to draw loans from the Bank’s Bhandup branch.
Further, PMC Bank had also reportedly granted a personal loan of Rs 96.5 crore to HDIL’s promoter Sarang Wadhawan. These aspects forced the bank to go down under.
Generally commercial and cooperative banks are seen to be similarly placed but there are several important differences. Considered in a proper historical and comparative perspective, commercial banks vis-à-vis cooperative banks are subject to greater regulatory rigors of RBI; generally, the levels of manpower and operational efficiency are discernibly higher and they are also required to list on the stock exchanges, thereby subjecting them to market discipline.
- The genesis of cooperatives can be traced to the formation of the Fenwick Society on March 14, 1761 in Scotland. Cooperative Banks in India have a long history of over 110 years in India. But unfortunately, they seem to be failing more often.
- The Madhavpura Mercantile Cooperative Bank failure of 2001 because of Ketan Parekh is a case in point.
Historically, the dual control of the state government and RBI has often been identified as an important reason for the mess. No wonder, the number of cooperative banks have steadily declined from 1,926 in 2004 to 1,551 in 2018.
- There have been several Committees, which have attempted to streamline the functions and working of cooperative banks in India, e.g., Satish Marathe Committee (1991), Madhav Rao Committee (1999), N.H. Vishwanathan Working Group on augmenting capital of urban cooperative banks (2005), R Gandhi Working Group on information technology systems in urban cooperative banks (2007-08), VS Das Group on an umbrella organisation for the urban cooperative banking sector (2009), YH Malegam Committee on licensing of new urban cooperative banks (2011), R Gandhi Committee (2015).
- The R Gandhi Committee recommended, inter-alia, an accelerated winding up/merger process, effective regulation of such banks and meeting the capital needs of urban cooperative banks in a greater measure.
Besides, with deposit insurance limited to Rs 1 lakh per bank account, India is among the countries with lowest protection to depositors in the unlikely event of bank failure.
While India’s DICGC’s scheme covers 70% of bank deposits, accounts with less than Rs 1 lakh together account for only about 8% of cumulative bank accounts.
Issues of contagion effect, short-termism as against sustained growth, corporate governance and conflict of interest also need to be carefully considered for a comprehensive assessment and perspective.
RBI’s measures like revamping its regulatory and supervisory structure by creating a specialised cadre of supervisory officers, strengthening its analytical vertical and enhancing onsite supervision, market intelligence and statutory auditor roles for supervision and creating an institutional mechanism for sharing of fraud-related information among urban cooperative banks (UCBs) like Credit Fraud Registry (CFR) for commercial banks are contextually significant.
- In the ultimate analysis, given the interplay between cooperative banks and the socio-political system, the issue boils down to greater political will to address the fault-lines in a coordinated and concerted manner with a sense of urgency.
- Govt must nudge farmers towards non-farm jobs for higher growth
- Relevance: Mains: G.S paper II: schemes and policies
- The govt must nudge small farmers towards better-paying, non-farm jobs, and junk the thinking that prized state-ownership China has just celebrated the 70th anniversary of the Communist takeover in 1949.
- It boasts that it grew by 8.1% per annum on average over 1952-2018. This comes to an increase of income 54 times its value in real terms in 1952. China’s income didn’t grow steadily each year at 8%. It grew at just the same rate as India for the first 25 years after 1950.
- In 1975, India and China had the same per capita income. China’s growth began after Deng Xiao Ping reversed the Mao-era policies that had not just crashed the economy, but cost 50 million lives by then. China’s growth happened in the last 20-25 years.
- The CAGR has to be ~twice 8.1% to achieve that.
Now, compare India. Over 70 years since 1950, India increased its income by 28 times.
- India grew at around 3% for the first 30 years, 1950-1981. Then, the growth rate stepped up to about 5% for the next 22 years. It is in the last 15 years, 2003-2018, that the growth rate went up to 7.7%.
- In those last 15 years, income grew four times. Thus, in the first 40 years, it grew seven times, and, then, in the last 15, four times. Such is the magic of compound growth numbers.
Look at India’s experience in the three phases.
The first phase of 1950-1981 is dismal. India pursued import substitution.
This meant not benefiting from foreign trade and not letting its cotton textile industry increase exports. Industrialisation was capital intensive. Agriculture was neglected on the idea that the problem was redistribution of output from landlord to tenant and not of growth or productivity.
It was a disaster. The long-run, secular effects of this strategy is that we still have far too many people living in agriculture with two-thirds of the farmers practising subsistence-level agriculture. Agriculture has not grown even as fast as 5% on average for five years at a stretch. While there is a lot of romanticism about the kisan, agriculture is the biggest obstacle to achieving high growth rates.
The most urgent need is now to help farmers to move out of agriculture and into some other activity which can afford them a better livelihood. Subsistence-level farmers already rely on non-agricultural activity to supplement their incomes, as a Nabard survey shows. Instead of giving farmers `6,000 and having them stay on the farm, the Centre should be give a substantial sum to leave farming.
In the second phase, 1981-2003, a sort of realism crept in. The economy crashed due to the oil price shock. Indira Gandhi abandoned self-sufficiency and took a large loan from the IMF.
Rajiv Gandhi began borrowing money from abroad (from NRIs). He liberalised imports, though he didn’t reform the industrial economy to increase exports. The economy crashed again, and, in 1991, another emergency loan had to be taken.
This taught India that it had to borrow abroad to grow. It had to let its economy to benefit from international trade. So, in 1991, PV Narasimha Rao liberalised the economy, cutting tariffs and abolishing quotas. The growth rate increased to around 5%, higher than the 3% previously, but was still inadequate. Still, neoliberalism was denounced by the Left in the Congress and outside.
The Vajpayee government, in the last five years of this period, began to free the government policy from blind faith in state-ownership. Slowly, it began to divest. The big delusions of the first generation of economic planners—import substitution, neglect of agriculture, self-sufficiency and state-ownership—were abandoned, though very unwillingly. Vajpayee’s was the first government that dealt with international trade and capital movements in a grown-up manner.
The stage was set for the third and latest act. India prepared itself to thrive as an open economy. Luckily for India, there was a global macroeconomic boom from 2003 to 2008, and, after a crisis, enough countries reflated to avoid a severe depression. This helped India.
So, what is next?
The first step is to have an ambitious programme to transfer farmers out of farming to other jobs. The government could make it a condition of debt cancellation that the debtor farmer would quit agriculture. The second task is to abandon the preference for state-ownership. It was always an economic folly whichever political label it carried. It was the biggest waste of scarce money in a desperately poor country to flatter the egos of an elite. A large-scale sale of state-owned enterprises is urgent. The BJP has no investment in the ideology of Fabian- or Soviet-style socialism that Congress had.