Jamaican writer Marlon James wins Man Booker Prize

His novel 'A Brief History of Seven Killings' is a fictionalized history on the attempted murder of the reggae singer, Bob Marley, in 1976.

Jamaican writer Marlon James has been named the winner of the Man Booker Prize for 2015 for his novel A Brief History of Seven Killings. It is the first Booker Prize to be won by a Jamaican, and the first for its independent publisher Oneworld Publications.

Mr. James’s book was chosen from a shortlist of seven writers, who included the bookies favourite Hanya Yanagihara for A Little Life, and the British writer of Indian origin Sunjeev Sahota for The Year of the Runaways.

Set in Jamaica

Set in Jamaica, the 686-page book is a fictionalized history on the attempted murder of the reggae singer, Bob Marley, in 1976. Mr. James (44) — who with his dreadlocks tamed into a ponytail at the back of his head — looks like a reggae artist himself, described his feelings as “surreal” in his acceptance speech. He dedicated his award to his late father from whom he said he had acquired his “literary sensitivities.”

He also acknowledged the book’s debt to Jamaica’s reggae singers like Marley and Peter Tosh “who were the first to realize that the voice coming out of our mouths was a legitimate voice for fiction and poetry.”

Making sense of the world

Acknowledging the other books in the shortlist as “outrageous, dark and beautiful,” he said that writers ultimately “try to make sense of the world we are in.”

The jury chair Michael Wood announced Mr. James’ name at a black-tie dinner at London’s Guildhall. Mr. Wood described the book as “startling in its range of voices and registers, running from the patois of the street posse to The Book of Revelation.”  A Brief History of Seven Killings reconstructs the attempted assassination through the voices of a range of witnesses, from the Federal Bureau of Investigation and CIA to ghosts, beauty queens and murderers.

‘Going beyond crime’

“It is a crime novel that moves beyond the world of crime and takes us deep into a recent history we know far too little about. It moves at a terrific pace and will come to be seen as a classic of our times,” Mr. Wood said.

In addition to his £50,000 prize and trophy, which he received from the Duchess of Cornwall, Mr. James also received a designer bound edition of his book and a further £2,500 for being short-listed. 

RTI needs a second revolution

The Right to Information Act is now 10 years old — long enough to give us a fair idea of how it has performed on the ground. Riding on a huge wave of civil society activism, it started on a positive note and made unexpected impact early on. It promised to herald transparency and accountability in government functioning and thus reduce corruption. A number of significant disclosures were forced by the RTI, including the information regarding 2G and Commonwealth Games and so on. Among the educated and city dwellers, the RTI spread faster. Most importantly, it led to the demand for several other equally important rights like the right to employment guarantee, the right to education and the right to food security. The RTI has had the effect of slackening the tight hold of the government and its officials on both information and instrumentalities of the state. The decade following 2005 witnessed the slow withering away of the Central government and the RTI surely played a role in that unravelling — by increasing irreverence, scrutiny and through the critiquing of its authority among the general public. However, of late, one witnesses a waning of fervour even though the number of RTI applications has been growing. We examine here the reasons for that. Understandably, from the beginning, civil society activists and the media have been more enthusiastic about the RTI than civil servants, who have traditionally used information as the source of their power and mystique. The civil service’s indifference and hostility towards the RTI has not diminished over the years; if at all, it has only increased although many government servants, no doubt mostly disgruntled, have also been most successful users of RTI, largely seeking information to fix their own cases and fix those they did not like. Ordinary citizens mostly seek personal information regarding various services otherwise denied to them by the system, be it a passport or a ration card or various commonly required certificates. Since disclosure of such information poses little threat to the system, the public authorities share such information relatively easily. It is the contentious or potentially controversial information that the public authorities have been very wary of disclosing. Thus, as far as personal information goes or information of an innocuous kind, the RTI has been a success. But as a tool to inculcate the value of transparency, the RTI has neither sunk deep into the government nor among most of the citizenry. The civil society enthusiasm for the RTI has declined; some leading stars of the movement that led to the RTI have moved on to politics or other equally important areas like analytical studies for the World Bank. Many small-time blackmailers, in the guise of media persons or RTI activists, have successfully milked the RTI to make a living or settle personal scores, thus giving it a bad name among public authorities. As such, the RTI has, in its rise as well as in its decline, done a lot of good to many people. The public authorities, and their otherwise harried employees, must be heaving a sigh of relief now that the pressure is less. The initial interest shown by the media has also somewhat waned. The attitude of the judiciary, in any case, was always ambivalent from the very beginning; many high courts had framed very restrictive rules — some even fixing a Rs 500 fee for each piece of information demanded (clearly not intended by the RTI Act), and thus making it very difficult for people to access the information held by courts. Between the Supreme Court and several high courts, a large number of decisions by information commissions have been stayed for years, without much explanation. This has created an impression among the public authorities that the judiciary is not very appreciative of the RTI or the way it is used by citizens. The contribution of the information commissions, both Central and state, in diluting the public interest in the RTI is no less. Long pendency in most information commissions — some even for a year or more — signals their casual approach. This, in turn, emboldens public authorities to take the RTI casually. Besides, a widespread reluctance to penalise errant government officials also contributes to a general sense of laxity in the enforcement of this law. The appointment of information commissioners, especially in the states — many of whom are not equal to the task in terms of intellect and stature — has seriously undermined the citizen’s trust in information commissions. The absence of enforcement provisions in the law has rendered the information commissions toothless. The law is too ambitiously and, some say, unrealistically drafted as it defines both “information” and “public authority” in the widest possible manner. As a result, the sheer volume and variety of information being sought places a huge burden on the public authorities. This induces a strong sense of resistance in them. Poor record-keeping makes retrieval of information very cumbersome. In most offices, the public information officer is a reluctant low-level official, without much clue about the information held or sought. Consequently, the response of the public authorities has often been sub-optimal and unsatisfactory for information seekers. Finally, in spite of the mandate of the RTI Act, most public authorities have failed to digitise their records and make proactive disclosure of their information in the public domain. Looking back, one can say the RTI has achieved much but clearly, it seems to have reached a plateau now. One witnesses the same old faces, some weary and tired, at all RTI meetings. People inside the public authorities seem to have taken the RTI in their stride. It would surely need a second revolution to revive the old fervour with which the RTI was first initiated. As far as laws go, the RTI Act has been the best thing to happen after the Constitution of India; we must make it work. - See more at: http://indianexpress.com/article/opinion/columns/rti-needs-a-second-revolution/#sthash.79OoFgbY.dpuf

Do not Loose heart (IAS PRE)

Dear friends

each and every year upsc conduct exam.every year many aspirants pass prelims and few of them finally qualify the final exam.every year we introspect what was missing in our preparation,we resolve for next year but same story sometime happen in next year.we have to be consistent in our preparation ,in our approach,in our thoughts,in our motivation.there is small difference of 2/3 questions who got qualified and who failed.we went in wilderness after result in thinking what other things we have to study,but believe me you have studied well but missing thing was understanding and practice.

upsc is just one exam.we should not be demotivated .we have to come over our emotions and prepare for another mission!!!

Nobel Laureate Arthur B. MacDonald on how the neutrino experiments can provide a fuller picture for the very basic laws of physics.

Nobel Laureate Arthur B. MacDonald on how the neutrino experiments can provide a fuller picture for the very basic laws of physics.

On October 6, Takaaki Kajita, Chief Scientist of Super-Kamiokande Collaboration, University of Tokyo, and Arthur B. McDonald, chief scientist at the Sudbury Neutrino Observatory (SNO) Collaboration, Queen’s University, Kingston, Canada, were awarded the Nobel Prize in Physics for proving that neutrinos change identities or ‘flavours’ from one type to another over time.

Shubashree Desikan
Professor McDonald, in this email interview with Shubashree Desikan, speaks about the 17-year journey from the start of the SNO Collaboration to the prestigious moment of recognition. Excerpts:

How does it feel to have won the Nobel Prize? Some physicists told me that it was widely anticipated that the observation of neutrino oscillations would win the Nobel this year.

Our SNO Collaboration was very pleased to have provided clear observation of neutrino oscillations for solar neutrino and to have verified models of the sun with great accuracy. However, having this strong international endorsement of the value of our work by a respected committee is very gratifying.

When you became the spokesperson for the Sudbury Neutrino Observatory in 1989, it was unusual then for Canada to make an investment of this magnitude on a basic science project. How did you convince them?

At the time that our scientists were attempting to obtain approval of funding for this project, it was necessary to convince agencies in Canada, the U.S. and the U.K. of the importance of the measurements that we could perform. It took a long time and involved technical demonstrations of the engineering feasibility of the design. With strong peer review of the importance of the basic science we were proposing (now proven by the awarding of the Nobel Prize), we were able to obtain the funding.

The return on investment is a fundamental improvement in our knowledge of our world, excellent training of the best students who are attracted to such projects, and the innovative technology that had to be developed to accomplish this difficult experiment.

“ A major question remains about the ordering of the relative masses of neutrinos, which will be addressed with sensitivity by the India-based Neutrino Observatory detector.”

— Arthur McDonald
The SNO detector consists of a 12-m diameter transparent acrylic container holding 1,000 litres of ultrapure heavy water, which was supplied by Canada’s Department of Atomic Energy. Did this happen readily? Was there any worry that you could be carrying out secret research on nuclear weapons?

Senior scientists at Atomic Energy of Canada understood the importance of the research that we would perform and recommended the loan near the beginning of our discussions. There was then a bit of worry from the public about the relationship of heavy water to nuclear reactors, etc. However, one of our scientists drank a glass of heavy water at a public meeting (with a bit of Scotch for flavour) and showed clearly that it was a safe substance. We also pointed out continually that we were creating one of the lowest radioactivity locations in the world, far from worries about high radioactivity.

What main questions remain about the neutrino and why is neutrino research important? What other experiments are being planned around the world?

A major question remains about the ordering of the relative masses of neutrinos, which will be addressed with good sensitivity by the India-based Neutrino Observatory (INO) detector. In addition, the accurate values for other oscillation parameters that INO will provide will be important for developing detailed models of how finite mass neutrinos should be added to the Standard Model of elementary particles. Other questions that will be addressed in other experiments are the absolute masses of neutrinos and the asymmetry between matter and anti-matter in the universe that may be related to neutrino properties.

Neutrino science is important because they (neutrinos), along with electrons and quarks, are the basic building blocks which we do not know how to sub-divide further. Therefore, understanding their properties is essential to complete our knowledge of the world at a very fundamental level. For example, the observation of finite neutrino masses determined by the SNO and Super-Kamiokande experiments goes beyond the Standard Model of elementary particles and may help provide a fuller picture for the very basic laws of physics.

How did the offer of the site for the observatory by INCO Ltd, the nickel mining company, come about?

Again, after presentations by our scientists, senior members of the company management saw the importance of the science that could be done and recommended to their management that we be allowed to co-exist with ongoing mining operations at the mine. This strong support for the new international underground laboratory, SNOLAB, has continued with the present owner, Vale.

Did you have to develop any new engineering techniques or materials for the construction and support of the huge underground cavity? How did you ensure the stability of the rock above the underground observatory?

It was the largest cavity of its type built at that depth, but INCO engineers provided a design of excavation and rock support techniques that were reviewed by a panel of international experts and found to be feasible. The cavity was very carefully instrumented and provided wonderful data, enabling INCO to pursue large cavities at great depth for their ongoing mining operations. Several old and new techniques were combined for ground control for the cavity, and they worked very well.

Would you say 17 years is a long time to work without an indication of whether you were on the right track?

We knew that we could have a substantial impact on fundamental physics if we could carry out this major project and that inspired everyone working on the project throughout.

Looking back on over 30 years of your association with SNO, can you tell us what made it worth the while?

Our collaboration set about understanding our universe more fully and with our results, we feel that we have made a major contribution to that. The Nobel Prize for our work is a confirmation by a body that we greatly respect that we have made a truly valuable contribution.

When we were analysing our data, we purposely added in a known amount of false data, so that those doing the analysis could not be led to a pre-conceived result by the way they analyse the data. On one day when we had defined the best way to do the analysis, we lifted this “blindness condition,” removed the false events and all together were able to see our final results. The results were conclusive that solar neutrinos did change from one type to another and, therefore, do have a finite mass. That was a real “eureka” moment that every SNO collaborator remembers as a significant day in their scientific life

India’s struggle for power reforms

With the likely approval to the debt restructuring of electricity distribution companies (discoms) of eight states, the Union cabinet is hoping to untangle the Gordian knot of the extremely stressed power sector of the country. The plans to restructure the debt are welcome with the necessary caveat that such solutions are temporary in nature. A longer-term solution would involve politically difficult decisions such as raising tariffs and cracking down on power theft.

The complex nature of the legacy issues of the power sector is such that any solution carries with it a plethora of questions, if not the seeds of a bigger problem in the future. Recasting the mammoth Rs.4.3 trillion of debt comes with a moral hazard. Unless the restructuring is linked to state utilities getting their acts together, little will be gained. A similar Financial Restructuring Plan was announced in 2012 but found few takers among the states. In fact, debt restructuring is always linked to performance objectives, but the centre has few options of recourse once the state utilities fail to attain those.

What makes the power sector so difficult to reform? The nature of electoral cycles, ubiquitous distribution of pampered constituencies and fierce political contest which degenerates into competitive pandering to populist instincts creates a unique political economy for the power sector.

Industries pay the highest tariffs and together with the commercial consumers cross-subsidize agricultural and household consumers. Commercial and industrial consumers pay tariff rates similar to what their counterparts pay in much richer parts of Europe and the US without getting a similar quality of supply. This reduces any scope for further cross-subsidization, especially at a time when industrial output is at an ebb.

Agricultural consumers are charged very less, if at all. Most of the irrigation pumpsets are not metered, thus not allowing any realistic estimates of the revenue losses. The losses due to decrepit infrastructure and power theft remain high despite some progress made in the past few years. Even though entry for the private sector is allowed, most of the utilities continue to be owned by the states, given the bleak prospects of positive financial returns. The degree of autonomy accorded to, and quality of personnel manning, state electricity regulatory commissions leave a lot to be desired. All of these issues flow, directly or indirectly, from the political economy created and nurtured over the years.

Such market distortions benefit the relatively well-off farmers, not the landless ones, and the pampered household consumers, both rural and urban. These benefits are also washed away as the irregular supply—emanating from discoms’ inability to buy peak power and hence resort to load-shedding—leads to consumers relying on kerosene lamps and diesel-run generators, bleeding themselves as well as the state.

The distance India has to cover can be gauged from the fact that load-shedding data is not even captured in most parts of the country.

The egregious costs that politics imposes on the power sector was quite visible in the last Delhi state election, which was fought on the back of competitive promises to lower electricity tariffs. The party with the most lucrative bid won handsomely.

To begin with, the centre should insist that states run by the BJP initiate reforms. They can take cues from the record of Prime Minister Narendra Modi himself, who as the chief minister of Gujarat took some tough decisions resulting in the state’s discoms outperforming their peers from other states.

In a recent statement, Union power minister Piyush Goyal has said that the discoms can be revived without a tariff hike and laying off a single employee. He believes plugging inefficiencies can revive the health of discoms. Such solutions can help to an extent and no further. Different states suffer from a different combination of problems, including low tariffs, high technical losses and high percentage of subsidized consumers. Hence, a tariff hike is neither a silver bullet, nor can it be ruled out.

An honest appraisal on such lines is immediately required. Debt restructuring is only a stop-gap solution. The political economy questions have to be dealt with if the centre and the states are serious about power reforms.

The monetary dimensions of inflation Addressing inflation requires a deep understanding of how currency moves from banks into the cash economy

The monetary dimensions of inflation

Addressing inflation requires a deep understanding of how currency moves from banks into the cash economy

The empirical facts of the inflationary episode are well known and extensively documented (see for example, Dev, Pandey and Rehman 2015), and there is little need to cover the ground yet again. Suffice it to say that inflation measured by the Consumer Price Index (CPI) remained at or near double-digit levels for five consecutive years (2009-10 to 2014-15) despite a consistently tight monetary policy followed by the Reserve Bank of India (RBI) throughout the entire period.

In mid-2014, the RBI announced its adoption of inflation targeting (IT), and proposed a “glide path” for CPI inflation to go down to 8% in January 2015 and then further to 6% in January 2016. To everyone’s surprise, the inflation rate plummeted shortly thereafter and went below the January 2016 target by December 2014.

All commentators are agreed on one thing: that the inflation was led by food prices. There are of course quite expectedly differences on the reasons underlying the food price inflation and its persistence. However, nobody appears to have a credible explanation for its dramatic decline. Moreover, all the explanations of food inflation appeal to real factors – the so-called structural causes – and there is no mention whatsoever of any monetary mechanism behind the propagation and perpetuation of the inflationary process.

This is surprising in view of Nobel Laureate Milton Friedman’s dictum: “Inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output.” Strangely, even the RBI, which is the designated anti-inflation fighter and custodian of monetary policy in India, has not articulated any monetary explanation of what has happened. Its position has been that the inflation has been caused by supply-side factors over which it has little control, and its contractionary monetary stance has been justified on the grounds that it is necessary to control inflationary expectations and prevent further acceleration of the inflationary process.

In this article, I argue that while the initiation of the inflationary process may have been rooted in structural factors, there is a monetary story to be told about its propagation across commodities and perpetuation over time. This understanding explains RBI’s helplessness and may help in designing appropriate policy interventions for similar inflationary episodes in the future.

Monetary dualism

The notion of ‘dualism’—that a country can be viewed as having two distinct sectors—has a long and rich history both in development economics as well as in popular Indian discourse (this is referred to as the “Bharat-India” divide). I propose a specific form of dualism: that the Indian economy is composed of two sub-economies—a credit economy and a cash economy (roughly defined as the entire rural economy plus a significant part of the urban informal sector). In the credit economy, all transactions within it are mediated through the banking system; whereas in the cash economy, all transactions are in cash. The key assumption is that all transactions between these two sub-economies are carried out only in cash. I further assume, following Friedman, that the average price level of goods produced by the cash economy is determined by the amount of liquidity or the stock of currency available in the cash economy—along with other factors affecting demand.

The total stock of currency in the country is used for three purposes: (a) transactions in the cash economy; (b) transactions in “black” assets; and (c) reserves held by the banking sector (including bankers’ deposits with RBI). The total stock of currency is determined uniquely by the RBI as a policy decision. There are two predominant instruments through which the RBI can increase the stock of currency in the country—purchase of either government securities or of foreign exchange. In both cases, RBI action directly increases only the currency reserves of banks, and not the currency held by the public. It is, therefore, important to understand the mechanisms by which currency moves from the reserves of the banks to the cash economy.

There are three main channels. The first is the net value of transactions between the cash and the credit economies. If the money value of purchases by the credit economy from the cash economy exceeds the value of purchases by the latter from the former, the difference between the two values will be reflected in an increase in the stock of currency in the cash economy. The second channel is through the government’s fiscal activities. The government not only buys and sells goods and services with the cash economy (which are included in the first channel), but also makes substantial transfer payments in the form of social security, scholarships and the like. The third channel is the net value of cash injections into the black economy less the cash withdrawals through money laundering.

Effects of an agricultural shock

In such an economy, if the production in the cash economy is adversely affected by a shock (say, a monsoon failure), the prices of agricultural products will rise since the liquidity available will now exceed the availability of goods. If we further assume that food (a major component of agricultural output) is an essential good so that its demand in the credit economy is inelastic (not responsive to changes in prices), then consumers in the credit economy will withdraw currency from their banks for purchase of food. This will increase the supply of liquidity in the cash economy, leading to a further increase in prices.

Even when production returns to normal (say during the next harvest), food prices will not decline to the original levels since there would now be more liquidity in the cash economy than earlier. This permanent increase in the price of food relative to all other goods will continue to induce further flows of cash from the credit economy into the cash economy, leading to further increases in food prices. This process will continue until such time as the induced shift in demand towards credit economy goods eventually leads to a zero net transfer of currency between the two sub-economies. Such a shift in demand will occur as the result of the price of credit economy goods falling relative to that of the cash economy goods.

In the credit economy, so long as the currency reserves held by banks exceeds the minimum levels required for precautionary purposes, there will be no reduction of credit available. Thus, there can be a fairly extended period of food inflation with no change whatsoever in any of the monetary aggregates (M0 or M3). The inflationary process in such a case is supported by a compositional change in the holdings of currency from passive bank reserves to active circulation in the cash economy.

The role of minimum support prices

It has been forcefully argued with empirical evidence by Surjit Bhalla and others that the principal determinant of food inflation in India has been increases in the minimum support price (MSP) of cereals. The argument is that the MSP not only sets the floor price of cereals in the country but also affects the prices of other agricultural products by inducing a shift of land towards cereal production, thereby reducing the availability of other agricultural products. While the floor price argument is undoubtedly true, the land-switching effect is not borne out by data on area under crops. However, the story is more complex than that, and involves the entire chain of interventions by the government in the food economy.

Every year, during harvest time, the government procures nearly 25% of the cereal production at the MSP; the remaining 75% of the grain is sold to traders, who are a part of the cash economy for the most part (in recent years, the annual procurement has averaged 60 million tonnes out of a total production of about 240 million tonnes).Thus, twice a year, within a very short time, there is a massive injection of currency into the cash economy through the procurement process.

During the course of the year, the government releases a major part of the grains procured at highly subsidised rates through the public distribution system (PDS) and a smaller part free of cost for certain government schemes. Nevertheless, this usually leaves a significant amount of grains undistributed. (Of the 60 million tonnes procured, 45 million tonnes are released through the PDS and 5 million tonnes are provided free to schemes, leaving about 10 million tonnes undistributed. The undistributed amount can either be issued as ad hoc allocation to certain states and for exports or can remain in the government’s buffer stocks.)

Thus, on the supply of cereals, the procurement-cum-PDS operation is equivalent to a mild supply shock with one important provision: there is no loss of income for the farmers. On the monetary side, these operations inject a huge amount of net liquidity into the cash economy. Over the past several years, the procurement price has been increased every year, but the PDS issue price has remained constant. Thus, the monetary injection has steadily increased year by year. Back-of-the-envelope calculations suggest that the net liquidity injection through this process accounts for roughly half of the total increase in the currency held by the public in any given year.

The inflationary consequences of these two effects can be very substantial indeed even in a normal year. Since there is no loss of income for the farmers, the additional liquidity is spent on other goods, including non-cereal food items, thereby raising their prices. Of course, a part is also spent on credit economy goods thereby reducing some of the extra liquidity, but given that the consumption basket of farmers is dominated by food, this effect is probably small (typically, food accounts for about 60% of the rural consumption basket, and about the same for the urban poor as well).

The consequence is that the price impulse spreads rapidly from food grains to all other food items as well. In so far as the credit economy is concerned, the general increase in food prices will induce a flow of cash out of bank reserves into the cash economy, thereby perpetuating the inflationary process. The larger the increase in MSP, the stronger will be this inflationary process not only because of the direct effect on food grain prices, but also because it would induce a higher proportion of food grains being offered for procurement.

What happened in 2014?

I believe that the monetary process described above is the root cause of the persistent food inflation observed since 2005 when sizable increases in MSP were made by the UPA (United Progressive Alliance) government. This was exacerbated from 2008 when the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was rolled out nationally, which represented a new source of liquidity injection into the cash economy.

On average, MGNREGS injected about Rs.320 billion annually. As a result, in 2008-09, although reserve money grew at only 6.4%, currency with the public grew at 17.1%. Matters came to a head in 2009 when India experienced the worst drought in 30 years. This not only involved a substantial supply shock, but MGNREGS payments shot up by nearly 50% (MGNREGS pay-out in 2009 was nearly Rs.480 billion). To make things worse, there was gross mismanagement of the food economy by the government with food grain stocks actually increasing due to releases being significantly lower than the procurement during the year. This not only meant a supply shortage larger than just the loss of production, but also additional liquidity injection which further supported the inflationary process.

The inflationary impetus provided by the events of 2009 persisted for the next four plus years and eventually spilled over into the non-agricultural sector, despite the best efforts of the RBI. The RBI not only increased the policy interest rates substantially, but also reduced the rate of growth of reserve money significantly especially in 2011-12 and 2012-13 when it was 3.7% and 6.1% respectively. Currency with the public, however, grew at 11.2% in both years.

A possible contributory factor to the persistence, and indeed acceleration, of inflation was the collapse of transactions in the real estate sector. Since this sector represents the single largest repository of black assets, a part of the currency sequestered in property transactions was probably released into the cash economy, thereby partially off-setting the RBI’s monetary contraction.

In light of this monetary explanation of inflation, the dramatic reduction of the inflation rate in the second half of 2014 can be explained by three developments. First, the increase in MSP in that year was only 3.8%, which was well below the prevailing food grain inflation of 11%. Thus, the real liquidity injection was actually negative.

Secondly, despite the fact that 2014 witnessed a below-normal monsoon, the outlay on MGNREGS dropped sharply by nearly Rs.120 billion. Finally, and most importantly, the government released more than 6.5 million tonnes of food grains from its stock through open-market operations, which both augmented the supply of cereals as well as sucked out about Rs.80 billion in liquidity from the cash economy. This was helped by the fact that global food prices had fallen and therefore there was no incentive for traders to export the additional food grains.

These three factors together imply that the injection of liquidity into the cash economy in 2014 was more than 30% less than in previous years (the average increase in the currency with the public in the previous three years was aboutRs.900 billion). It was no wonder that the inflationary process collapsed. There are, however, two features of this reduction in inflation that need to be noted. First, it led to massive rural distress.

A sub-par monsoon is always bad news for rural India, and it was made considerably worse by the lack of livelihood support from MGNREGS. Moreover, the release of food grains from the government stocks was singularly badly timed in that it came roughly at the time of the harvest. This meant that the market prices received by the farmers were well below the level that would have been justified by the production shortfall, thus adding to their woes. Second, the RBI had absolutely no role to play in all of this.

Lessons

There is by now compelling evidence which suggests that the normal monetary transmission mechanisms either do not work or are very weak in most developing countries (Mishra, Montiel and Spilimbergo 2010). It is amply clear from the recent inflationary experience that this is true of India as well. In countries characterised by monetary dualism, such as India, this is only to be expected.

Addressing inflation which has its origins in the cash economy requires a deep understanding of the processes by which currency moves from the coffers of the banking sector into the cash economy, and what the central bank can do about it. While there is considerable research globally on the transmission mechanisms through which monetary policy, especially interest rate changes, work through the credit system, there is virtually none which address this particular issue.

Now that India has adopted inflation targeting as the centrepiece of its monetary policy, this lack of understanding can be very costly. Inflation in India can arise from a variety of causes, and it is important to know what the appropriate monetary instruments are for each case. Use of inappropriate monetary instruments can do more harm than good, and limiting the monetary authority’s instruments to a single primary one can be very dangerous indeed.

RBI can certainly be proud of finally having achieved a ‘state-of-the-art’ monetary framework. Now if only we had a state-of-the-art economy.

Green India Mission Plans of Four States Approved

Green India Mission Plans of Four States Approved

The second meeting of National Executive Council (NEC) of the National Mission for a Green India (GIM) held here recently, approved the Perspective Plans & Annual Plan of Operations (APOs) submitted by four States - Mizoram, Manipur, Jharkhand and Kerala.

The Perspective Plans of all four States, with a total financial outlay of Rs. 90, 202.68 lakh for a Plan period of 5 to 10 years were approved, along with APOs of Rs.11, 195.32 lakh for this financial year. The total forest and non-forest area taken up in these four States under GIM during the total plan period will be 1, 08, 335 hectares (ha) out of which 81, 939 ha will be improving the density of existing forests and 16, 396 ha will be new areas. For the current financial year, it will be 28, 250 ha and 7, 827 ha respectively. Approval has been granted for alternative energy devices such as biogas, solar devices, LPG, biomass-based systems and improved stoves for 27, 032 households for the current financial year and 81, 233 households for the total plan period. This will help in reducing pressure on forests, gaining carbon benefits, along with health and other associated benefits.

GIM, one of the eight Missions outlined under the National Action Plan on Climate Change (NAPCC), acknowledges the influence that forests have on environmental amelioration though climate change mitigation, food security, water security, biodiversity conservation and livelihood security of forest dependent communities. The mission hinges on decentralized participatory approach involving grass root level organizations and community in planning, decision making, implementation and monitoring with emphasis on landscape approach and convergence with complementary schemes and programmes for better coordination in developing forests and their fringe areas in a holistic and sustainable manner.

The meeting, held on October 9, 2015, was attended by the members of NEC, inter-ministerial experts, Mission Director, Principal Chief Conservator of Forest (PCCFs) and State nodal officers from four States. The meeting was chaired by Secretary, Ministry of Environment, Forest & Climate Change (MoEFCC), Shri Ashok Lavasa. The Secretary appreciated the efforts being taken up by the States in working upon convergence opportunities with complementary schemes/programmes to ensure requisite investment and saturation of the landscapes.