Indian Ocean Dipole

Indian Ocean Dipole

The Indian Ocean Dipole (IOD) also known as the Indian Niño is an irregular oscillation of sea-surface temperatures in which the western Indian Ocean becomes alternately warmer and then colder than the eastern part of the ocean

The IOD involves an aperiodic oscillation of sea-surface temperatures, between "positive", "neutral" and "negative" phases. A positive phase sees greater-than-average sea-surface temperatures and greater precipitation in the western Indian Ocean region, with a corresponding cooling of waters in the eastern Indian Ocean—which tends to cause droughts in adjacent land areas of Indonesia and Australia. The negative phase of the IOD brings about the opposite conditions, with warmer water and greater precipitation in the eastern Indian Ocean, and cooler and drier conditions in the west.

The IOD also affects the strength of monsoons over the Indian subcontinent. A significant positive IOD occurred in 1997–8, with another in 2006. The IOD is one aspect of the general cycle of global climate, interacting with similar phenomena like the El Niño-Southern Oscillation (ENSO) in the Pacific Ocean.

The IOD phenomenon was first identified by climate researchers in 1999.[1][2] Yet evidence from fossil coral reefs demonstrates that the IOD has functioned since at least the middle of the Holocene period, 6500 years ago.

Gujarat farmer paves way for a new, climate-smart cash crop - sunshine

 using the excess energy to pump more groundwater to irrigate wheat and banana crops, Ramanbhai Parmar from Gujarat sold the extra energy he generated over four months back to the power grid.
He received Rs7,500 ($120) for 1,500 kilowatt hours kWh of electricity which, if used to run his water pump, would have extracted extra 8 million litres of groundwater.
“’Solar crops’ are a very exciting example of a triple-win,” Tushaar Shah, IWMI senior fellow, said in a statement.
“Farmers, the state, and precious water reserves all benefit from a single intervention.”
When solar-powered water pumps were introduced in Gujarat, it quickly transpired that farmers took advantage of what they saw as free energy to extract more water than they needed and groundwater reserves were depleted.
“We know that India’s farmers are extremely responsive to incentives that improve productivity and incomes,” said Shah.
“By offering them the chance to sell the electricity generated by their solar-powered water pumps, we could make agriculture in India cleaner and greener.”
Gujarat gets up to 3,000 hours of sunlight per year, but at the same time suffers from extended dry spells. Giving farmers an opportunity to sell excess energy could encourage them to pump only the water they need, said IWMI.
IWMI estimates that around 11 million farmers across India are currently connected to the electricity grid could install solar-powered water pumps and sell the extra energy produced.
According to the 2011 census, about 33% of India’s households lacked access to electricity. Scaling up the initiative could help relieve pressure on the state’s overwhelmed electricity board,

Six steps to a successful sanitation campaign

Inadequate sanitation costs India $54 billion a year. To that, add the challenge of juggling our nationalistic aspirations of superpowerdom with the ignominy of housing the largest share of human population that defecates in the open.

Amid many reports that the Swachh Bharat Abhiyan (SBA) is failing, we need a dose of optimism. While SBA might be failing, it certainly isn’t the first, nor will it be the last state-led sanitation programme to fail in India. Our large schemes to tackle this challenge have, more often than not, ended up as models of just what one should avoid doing if they are serious about bringing about total sanitation.

It is now widely acknowledged that conventional approaches are not working: those that set up a false dichotomy between construction and behaviour change; those that are content with pit latrines as opposed to functional toilets; those that use reductionist conceptions such as communities being open defecation free rather than focusing on personal and environmental sanitation and hygiene as a whole; and those that settle for incremental coverage instead of full coverage from the start.

However, it’s not that there are no success stories within India or in our immediate neighbourhood. For one, the experiences of locally-embedded NGOs that have taken their interventions to scale can be highly instructive. There have also been state-led successes in Maharashtra and Himachal Pradesh that can offer valuable lessons. So what could some key design elements in a sanitation programme be?

First, do not approach communities with a single message (build and use toilets), but with a comprehensive health and hygiene intervention. Gram Vikas, an Odisha-based NGO, approaches communities with a package of interventions: a toilet and bathing room, and a community-level overhead tank to provide piped water supply to all houses through three taps (one each in the toilet, bathing room and kitchen). The community engagement should start with the promotion of individual level, household level and environmental sanitation. This will automatically place an emphasis on the participation of every household in the community. Also, talk about menstrual hygiene. Doing this makes the programme one that talks to communities about their lifestyles, health, livelihoods and dignity, rather than just about toilets.

Second, instead of being subsidy-averse, be ready to experiment until you get the design right. Recent research in Bangladesh shows that a subsidy helps overcome barriers to sanitation that cannot be overcome by information campaigns alone. Specifically, they find that joint investment commitments from a community accompanied with subsidies targeted at the poorest families helps increase take-up. The same is the experience in Maharashtra under a state-led sanitation programme. The popular failings of subsidies in India have been due to a combination of mis-targeting, poor community buy-in and shoddy construction. However, an optimal level of financial assistance and delivery should continue to be part of the policy design and implementation strategy.

Third, play on local power relations. Messages targeted at young women encouraging them to demand that toilets be available in households they marry into seem to have worked in many places. On the other hand, it is important to ensure that messages targeting women and girls are not misinterpreted in patriarchal societies that usually make up the audience. Supporting the poorest households (who are also likely to lower caste groups) can also translate into social pressure on the rich (and upper caste) households to catch up in terms of adopting safe sanitation practices.

Fourth, allow communities to evolve their own norms around individual and collective rights and responsibilities. As the water and sanitation infrastructure is being built up, gram sabhas should deliberate about shared codes of conduct and keeping the campaign to promote toilet usage running. While one may not be in favour of local norms that border on coercion, it is best to allow time for shared norms to evolve.

Fifth, do not hurry into scaling up: Yes, big numbers are important in a vast country like India. However, all too often, organisations in a rush to scale up end up compromising on key design elements that made their pilots a success. This is a typical problem with sanitation programmes. When communities become aware of the ‘target-pressures’ on the field staff, it gives them undue bargaining capacity. In an attempt to hasten their work, staff also focus more on the ‘hardware’, ignoring the critical ‘software’.

Sixth, and perhaps most important, be conscientious about quality. The poor do not deserve poor solutions to be thrust upon them. When designing a communications campaign, do not insult the intelligence of the communities you are working with. When constructing toilets, pay utmost attention to technical specifications.

One may be tempted to say that these are impossible conditions for a large-scale state-led programme to pull off. In each of these six components outlined above, it is important to integrate a dose of experiential learning and evidence-informed decision-making. It is critical that implementers are responsive to the dynamic context. The successful sanitation practitioners bring with them years of experience of engagement with informal institutions, local governance structures and local institutions such as schools, clinics and anganwadi centres.

A clear message from years of failure is that technocratic and reductionist approaches will struggle on the ground. Transformative change requires a willingness to work with local politics, allowing for interventions to take root and mature, and an evidence-informed learning approach that eschews pre-conceived biases. A fully decentralised system of implementation is non-negotiable. Only then will we start making progress towards the goal of ‘Swachh Bharat’.

'GROSS VALUE ADDED - GVA' .

A productivity metric that measures the difference between output and intermediate consumption. Gross value added provides a dollar value for the amount of goods and services that have been produced, less the cost of all inputs and raw materials that are directly attributable to that production

 In a major overhaul of the way India’s gross domestic product (GDP) is calculated, the Central Statistics Office will start measuring the country’s economic growth by gross value-added (GVA) at basic prices, replacing the practice of measuring it by GDP at factor cost.

The new measurement under the new base year of 2011-12, replacing 2004-05, will be released on 30 January for three years to 2013-14.

This is the most comprehensive review of the GDP measurement, including the sources of data, ever undertaken, said Pronab Sen, chairman of the National Statistical Commission.

The new method was recommended by the United Nations System of National Accounts in 2008 and will make India’s GDP growth numbers comparable with that of developed nations.

GVA at basic prices will add the net of production taxes and subsidies to GDP at factor cost. While the change in base year is likely to lead to a higher GDP, the impact of the measurement change is unclear.

Stamp duties and property taxes are part of production taxes in India, while subsidies to labour, capital and investment such as apprentice subsidies and interest subsidies constitute production subsidies.

The Indian economy grew at 6.7%, 4.5% and 4.7% during 2011-12, 2012-13 and 2013-14 fiscal years, respectively. Sen said that along with GVA at basic prices for these three years, revised measurements for GDP at factor cost will also be provided in the appendix for historical comparison. Providing GVA growth rates at basic prices historically for earlier years may take longer, he said.

The statistics department will release the advance estimates of the economy for 2014-15 along with the fiscal third quarter data on 9 February.

The change in base year is being done in accordance with the recommendation of the National Statistical Commission, which had advised to revise the base year of all economic indices every five years. The new base year has been selected in line with the latest quinquennial round of employment-unemployment survey.

The new 2011-12 series will incorporate results of the recent national sample surveys such as enterprise survey (2010-11), employment-unemployment survey (2011-12), all India debt and investment survey, situation assessment survey of farmers and survey on land and livestock holdings (2013). It will also take into account the population census (2011), agriculture census (2010-11) and livestock census (2012).

The statistics department will also release Consumer Price Index (CPI) for January with a new base of 2012 next month. The GDP data revision will also incorporate the new CPI instead of the current practice of using CPI for various groups such as agricultural labourers and industrial workers. The new series of Index of Industrial Production and Wholesale Price Index are likely to be released by March 2016.

The change in base year of national accounts statistics will result in an increase in the size of the economy in 2013-14 to Rs.111.7 trillion as against the earlier estimate of Rs.105.4 trillion, said Devendra Kumar Pant, chief economist and senior director (public finance) at India Ratings.

“The 2013-14 fiscal deficit and current account deficit are likely to decline to 4.3% of GDP (4.6% earlier) and 1.6% of GDP (1.7% earlier), respectively,” he said.

India Ratings expects the economy to reach $3 trillion by 2019-20 with the change in base to 2011-12, it said in a statement. On the 2004-05 base, it would have happened a year later in 2020-21.

“Of the last three base year changes, while the size of economy changed significantly in two cases, it did not change much in one case. The growth impact of a base year change both in India and recently in UK has been minimal,” the rating agency said. “The reason for the increase in size of the economy is the usage of more up-to-date information for these estimations

GVA is linked as a measurement to gross domestic product (GDP), as both are measures of output. The relationship is defined as:

GVA + taxes on products - subsidies on products = GDP

As the total aggregates of taxes on products and subsidies on products are only available at whole economy level,^[3] Gross value added is used for measuring gross regional domestic product and other measures of the output of entities smaller than a whole economy. Restated,

GVA = GDP + subsidies - (direct, sales) taxes

Over-simplistically, GVA is the grand total of all revenues, from final sales and (net) subsidies, which are incomes into businesses. Those incomes are then used to cover expenses (wages & salaries, dividends), savings (profits, depreciation), and (indirect) taxes.

RBI's inflation indicator

RBI's inflation indicator
The basket of goods whose prices are measured by CPI inflation is constant. Hence, the CPI reflects the prices of goods and services consumed by domestic households. It is the best indicator

The chief economic advisor, Dr Arvind Subramanian, has recently suggested that it may worthwhile revisiting the issue of which inflation indicator the RBI should use in conducting monetary policy. His basic argument rests on comparing the somewhat contrasting recent trajectories of inflation as measured by the consumer price index (CPI), the wholesale price index (WPI) and the GDP deflator. While the CPI is currently still around five per cent, the WPI inflation and the GDP deflator numbers are close to zero. Consequently, if one measures the stance of monetary policy by the repo rate minus the inflation rate, CPI inflation suggests that monetary policy is very accommodative while the other two suggest that it is very tight. Which of these measures is most informative for policy?

The choice of indicator rests crucially on the requirement that the chosen indicator reflect current inflationary pressures in the economy as accurately and as quickly as possible, since monetary policy needs to respond in a timely fashion to unfolding developments. One of Subramanian's proposed candidates is the WPI. This measure is wholly unrepresentative of the economy since it doesn't include the service sector which comprises over 60 per cent of output and around 40 per cent of employment in India. Any measure that fails to include the service sector will fail to provide a reliable indicator of the true state of the economy.

Another of his candidates is GDP deflator inflation. This measure has at least two problems. First, the GDP deflator includes prices of the country's exports, which can often have very little to do with the prices being paid by consumers domestically as also the types of goods being consumed locally. Consequently, it is an incomplete indicator of domestic inflation, which makes it of relatively limited usefulness.

Second, the GDP deflator is subject to large uncertainty due to its dependence on GDP estimates from the national income accounts. As is well known, GDP numbers are subject to large and significant revisions over time. The first estimates of quarterly GDP that are put out by the CSO are necessarily based on quick estimates which subsequently get revised as more data for the previous quarter come in. These revisions often continue for over a year. India is no exception in this. In the USA, the revision of quarterly GDP growth numbers have averaged nearly 1.5 percentage points since 1965, a period when average US GDP growth has been 2.7 per cent. Clearly, inflation based on the GDP deflator is a rather poor reflector of the true contemporary state of the economy.

In view of these limitations of other measures of inflation, central banks the world over mostly tend to target either headline or core CPI inflation (core inflation excludes some items like food and fuel). The CPI is not prone to large revisions. Moreover, the basket of goods whose prices it measures is constant. Hence, the CPI reflects the prices of goods and services consumed by domestic households. It is presumably for these reasons that the RBI has chosen to target headline CPI inflation. It is the best option amongst the available alternatives.

One concern with the CPI is that it may not accurately reflect prices faced by producers since it measures prices paid by consumers. The difference between producer prices and consumer prices is typically the distribution cost of getting the good from producers to households. It is conceivable that CPI inflation might be higher than inflation in the producer price index (PPI) due to increases in distribution costs. Unfortunately, the PPI does not yet exist in India though the recently constituted Goldar committee is currently working on it. Once it becomes available, the RBI could consider enhancing the information set on which it takes decisions to include the PPI. But this has to be clearly announced to the public.

The last point about clear announcement brings me to a much more fundamental problem with Subramanian's suggestion of revisiting the CPI as the inflation indicator. A key component of inflation is the private sector's expectation regarding inflation. Thus, firms set prices and labour negotiates wages based on their expectations of future inflation. Clarity regarding the inflation indicator that the RBI is using as well as the target level of inflation are both key for private agents to anchor their inflation expectations. This is precisely what the recent agreement between the RBI and the government on a four per cent long-run target for CPI inflation was meant to achieve. For the CEA to the government to now suggest that this may be worth revisiting is unfortunate, since it risks undercutting the precise goal of the agreement that the government itself signed.

The sub-text underlying Subramanian's suggestion is of course the government's desire that the RBI lower interest rates more aggressively. Subramanian justifies this by implying that high interest rates are stretching firm balance sheets and thereby causing further problems for banks that have lent to these corporates. This is disingenuous at best, since it conveniently omits to mention that the deterioration in firm and bank balance sheets occurred over the past few years when real interest rates were hovering close to zero by all measures of inflation. The causes of this balance sheet fragility are clearly elsewhere.

It is perhaps best for the government to focus on dealing with the structural issues facing the economy instead of trying to undercut some of the better articulated operating procedures like CPI inflation targeting for some purely short-run expediency.These statements are more likely to just confuse markets

India’s first visually challenged diplomat

IFS gets “hidden treasure” in Beno Zephine; 10 things to know about India’s first visually challenged diplomat

Beno Zephine being felicitated in DoPT

DURING the last few days senior ministers in the corridors felicitated a 25-year-old girl from Tamil Nadu. She is Beno Zephine. Literally, Beno means daughter of God and Zephine means hidden treasure. Yes, Indian Foreign Service gets a “hidden treasure” when Beno Zephine became the first 100 per cent visually challenged person to be inducted into the country's elite foreign service. Here are 10 things you may like to know about Beno Zephine.

1. Daughter of Indian railway employee Luke Anthony Charles and Mary Padmaja, a homemaker, Beno secured the 343rd rank in the 2013-14 civil service examination.
2. But, she had to wait as the government had to change the rules to accommodate her in IFS. After all, the existing government rules did not allow anyone with 100% blindness to be an IFS.
3. Beno’s first choice in UPSC was the Indian Foreign Service. So, when she got a call on June 12, 2015, from an under secretary-ranked official in the ministry of external affairs informing her that she was selected, she was overjoyed.
4. She is a post-graduation in English literature from Loyola College, Chennai.
5. After she completed her MA in 2013, she was selected as a probationary officer with the State Bank of India (SBI).
6. "With my first salary, I bought a gold chain for my father and earrings for my mother”, she said in an interview with rediff.com recently.
7. Her mother read out many books for her. Also, she regularly listened to the 9 o'clock news of All India Radio from her childhood, something which helped her cracking the UPSC examinations.
8. After her joining in SBI and passing the civil service examination, he gave motivational speeches in schools and colleges across the state of Tamil Nadu. She loves tell the students: “Understand your strengths and weaknesses, only then will you be able to strengthen your strength and weaken your weakness.”
9. Beno’s enthusiasm and zeal to work had earned her the title of "Collector" among the residents of the colony in Chennai from where she hailed, according to a Government of India statement about her felicitation.
10. When personnel minister and MoS in the PMO Jitendra Singh felicitated her recently, additional secretary and EO Rajiv Kumar, additional secretary T Jacob and other senior officials of DoPT made it a point to join the felicitation programme and encouraged h

Name defaulting companies

Name defaulting companies

A front-page item in the June 14 edition of this newspaper ("Infrastructure companies' debt woes worsen") indicates that the debt burden of several Indian infrastructure companies has risen to unserviceable proportions. Contrary to expectations, public sector undertakings such as NTPC and Power Grid Corporation are financially healthier, with considerably lower debt-equity and higher interest-coverage ratios, than some private sector companies such as Jaiprakash Associates, Adani Power, GVK Power and Infrastructure, GMR Infrastructure and Lanco Infratech. Currently, the government's and the Reserve Bank of India (RBI)'s attention is focused on the extent to which debt-laden Indian firms need financial assistance and the consequent risk capital requirements of the banking sector. Public sector banks (PSBs) have higher levels of stressed assets than private banks, as they are more susceptible to pressures from government to lend for long-gestation infrastructure projects.

On July 15, 2014, the RBI issued a notification titled "Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries", which has come to be known as the 5:25 year scheme. This order appears to be designed to allow banks to revise the terms of long-term loans every five years over a 25-year period without having them classified as restructured. CRISIL has warned that about Rs 50,000 crore worth of infrastructure loans disbursed under this 5:25 arrangement would need lending terms to be further softened.

Although infrastructure development is needed, side-stepping of credit risk considerations on long-term loans ends badly for banks. No governmental or regulatory magic can make credit risk disappear. Financial engineering can at best slice risk and package it such that lenders can manage it better.

With this as the backdrop, the RBI followed up on its February 16, 2014, "Framework for Revitalising Distressed Assets in the Economy - Guidelines on Joint Lenders' Forum (JLF) and Corrective Action Plan (CAP)" with a notification dated June 8 this year and titled "Strategic Debt Restructuring Scheme" (SDR). It is farcical that the RBI felt the need to state a universally accepted basic banking norm in this order that the "general principle of restructuring should be that the shareholders bear the first loss rather than the debt holders".

The RBI's June 2015 SDR notification allows banks to take over 51 per cent or more of promoter equity within 30 days of reviewing a company's accounts. Of course, banks are urged to offload such equity stakes quickly since they do not have the expertise to manage the companies they take over. It is likely that takeover of companies under the RBI's SDR would be challenged in courts. For this and several other reasons, the government's intention to get a new bankruptcy code enacted - as announced in this year's Budget speech - should be implemented urgently.

The right to recompense for lending institutions should include interest or principal waived in the past. That is, restructuring agreements should require that if and when a company or related companies regain financial viability, they make good on the debt repayments that were foregone earlier. If the legal position on such rights for lenders is unclear, this should be included in the proposed bankruptcy code.

At the end of March 2015, total non-performing assets (NPAs) of PSBs were 5.2 per cent of disbursed loans and their stressed-assets ratio stood at 13.2 per cent - that is, around Rs 7 lakh crore. The total proportion of stressed assets, including private sector banks, is around 10 per cent. According to corporate debt restructuring (CDR) cells of banks, about 300 companies are looking to reschedule debt totalling Rs 3 lakh crore. For instance, Bhushan Steel is seeking extensions in the maturities of debt amounting to Rs 35,000 crore and banks have rescheduled Rs 7,500 crore of debt owed by Anil Ambani group's Pipavav Defence and Offshore Engineering. Separately, Mukesh Ambani-promoted Reliance Gas Transportation Infrastructure has refinanced debt amounting to Rs 16,000 crore, with repayments stretched out to 2030.

In the past 12 months, stock prices of companies overladen with debt, for example, Unitech, Jaypee Infratech, Jaiprakash Power Ventures, DLF and GTL, have fallen significantly, reflecting doubts about the ability of these companies to service their debt. And Essar Steel's Joint Lenders Forum is finding it difficult to reach consensus to recover about Rs 12,000 crore owed to them.

Taking a step back, Indian sponsors starting with relatively low levels of equity capital often invest across four or more companies. Debt is contracted for the balance-sheet needs of these four companies - and, say, three out of the four companies go bust. It is possible that one out of this group of four companies ends up doing well. The owners then default on loans for the first three companies, resulting in higher NPA levels all around, since banks cannot acquire assets of the fourth company, which is profitable.

The RBI's "Master Circular on Wilful Defaulters" of January 7, 2015, and notification on "Collection and Dissemination of Information on Wilful Defaulters" of April 23 provide enough wriggle room for large borrowers to make complex legal arguments that default was not wilful. Banking regulators in developed countries do not use such measures since in their jurisdictions there are comprehensive bankruptcy laws. Anecdotal evidence suggests that the RBI has resorted to this wilful defaulter mechanism because of the interminable delays in Indian debt recovery tribunals and corresponding appellate tribunals. In practice, some smaller firms end up getting terrorised by this wilful defaulter label. On balance, this distinction between wilful and other defaults should be abolished.

PSBs have to share the blame, too, because they usually delay decisions on debt rescheduling requests, converting manageable liquidity issues into solvency problems. Banks should be made accountable to respond to debt restructuring requests in a time-bound manner. If banks allow rescheduling, it should clarify that debt servicing delay was based on risks the borrower could not have anticipated.

To sum up, taxpayers can legitimately demand, as the ultimate lenders of last resort, that the RBI instruct banks to list on their websites estimates of the face and present value of debt that has been restructured. Such disclosures for borrowings with at least Rs 1,000 crore as principal should have a salutary impact on borrower and lender behaviour. The RBI should provide readily accessible summary information on its website about all corporate debt defaulters and the amounts involved. If there are any legal infirmities or ambiguities to providing such information, this should again be rectified in the proposed bankruptcy code.