THE INDIA ECONOMY REVIEW 2011 - The IIPM Think Tank

THE 

INDIA ECONOMY REVIEW 

Volume VII | Quarterly Issue: 1st January 2011 

ISSN 2229-2004 

2011 

www.theindiaeconomyreview.org 

www.iipmthinktank.com 

RETHINK 

EDIFY 

DELINEATE 

URBAN 

DEVELOPMENT 

utopia or panacea to economic ills? 

A N I I P M T H I N K T A N K 

& 

G R E A T I N D I A N D R E A M F O U N D A T I O N P R E S E N T A T I O N

Original scanned portions from an article in Hindustan Times that appeared on 

13th July ‘08 . For the complete article log on to www.iipm.edu 

IIPM SET TO BEAT 

economic slowdown! 

13th March, ‘09: EXPRESS NEWS SERVICE: After setting new benchmarks in Bschool placements 

last year, the Indian Institute of Planning and Management (IIPM) has innovated to re-establish 

its superiority in placements in the current period of reduced growth. Data shows that 1,500- 

plus students at IIPM have already been placed on campus while the result of about 200 postcampus 

interviews is awaited. Over 450 companies have made recruitments in the current 

campus placement session. The average package so far has been Rs 4.2 lakh per annum which, 

though a fall from the last year’s average of Rs 5.2 lakh, is still fairly considerable especially 

in view of the current challenges. International placements currently stand at a commendable 

figure of 44. This year was one of the most challenging years for B-school placements... IIPM 

also made a special effort to mentor and counsel students to increase the conversion ratio. 

Skill-driven modules on retail banking and modules on consumer retailing and insurance were 

introduced. IIPM’s placements cell, Strategic Management Group (SMG), engaged a larger 

number of companies than it did last year... 

there is 

no other b-school 

in india that gives 

placement 

to more students! 

INDIA’S GLOBAL B-SCHOOL 

Companies snap up 

non-IIM B-school grads 

21st March, ‘09: BANGALORE: While the final placement season at the IIMs was grim 

this year, other B-schools based in Bangalore are celebrating - many recorded 100% 

placements. “This has been one of the most challenging times for placements... So 

far, 1,500-plus IIPM students across the country have been placed, with 44 bagging 

international offers and over 450 companies coming to the campus...” 

7th March, ‘09: New Delhi: IIPM has managed to place 1442 students from its campuses 

across the country in 400 companies... last year , of the 2600 students, 1600 had got offers 

by this time... In 2008 , while IIPM had the second highest international placements 

(165) among the B-Schools in India, its Delhi campus boasted of the highest (125) no. 

of International placements as a single institute... 

DARE 

TO THINK 

BEYOND THE 

IIMs! 

1500 FROM IIPM GET JOBS 

IIPM. Real Education. Real Placements. 

Modules Introduced To Combat 

Recession 

10th March, ‘09: Mumbai: While graduates from IIMs are settling for jobs in PSUs, 1500 

out of the 2600 students of IIPM have already been placed on campus. In view of the 

economic slowdown IIPM has additionally focused on Small and Media Enterprises 

(SME) across metros, tier 2 and tier 3 cities, industrial town and villages... the key 

recruiters this year were ADAG - Reliance Life Insurance, American Express, Axis Bank, 

Deutsche Bank, HDFC Bank, Hindustan, Unilever Ltd., Wipro KPO, Yamaha Motors, India 

Bulls Securities... The SME recruiters this year were IBIBO Web Pvt Ltd., NIIT Education 

centre, India Infoline, Time Education and Mahindra Club, among others...

THE GREAT INDIAN DREAM 

“A Society where man is at the centre of all activities, 

a society where exploitation of man by man has been 

abolished, where he is cared for as an in a family, where 

“to each according to his need’ is practised, a society where 

non bureaucratic National Economic Planning is given due 

importance for sustainable optimum growth, where adequate 

social safety net is a reality and yet market’s advantages are 

fully taken care of for creativity and entrepreneurship, such 

a society can be truly described as humane society and the 

vision as “Humanism”. 

Dr. M K Chaudhuri 

The Great Indian Dream, 2003, Macmillan 

India,New Delhi 

“Let us together dream of a country where poor are not 

just merely reduced to statistics but where there are no poor. 

Let there be a day when small children are taken to a poverty 

museum like science museum where they shiver at the plight 

of the way people used to live in the last millennium. Let this 

dream take the form of a revolution and as long as our dreams 

keep outweighing our memories, India would remain a young 

and dynamic nation on this path to global equality. And for 

this let the wait not be for eternity. Let us together achieve this 

in the next 25 years.” 

Prof. Arindam Chaudhuri 

The Great Indian Dream, 2003, Macmillan 

India,New Delhi

IIPM: THE FUTURE IS HERE 

Since its incorporation (1973), IIPM has been an institution with privileged traditions, in the diversity of its fraternity, its global outlook, its 

world class research and its commitment to alternative national economic planning process. 

It can be said, without much oversimplification that there are no ‘underdeveloped economies’. There are only ‘under managed’ countries. 

Japan 140 years was ago was an underdeveloped country by every material measurement. But it very quickly produced management of great 

competence, indeed of excellence. The policy inference is that ‘management’ is the prime mover and ‘development’ is the consequence. At 

IIPM, every one considers that development is a matter of human energies rather than economic wealth. And the generation and direction 

of these human energies is the task of ‘management’. Accordingly, we formed The Great Indian Dream. Unlike any other dream, this is 

one dream which each one of us are determined to realise and that too in our own lifetimes. Each bit of cynicism and condemnation from 

pessimists makes us evolve even stronger and determined. 

All our endeavours and initiative is towards realisation of this dream, where in we produce committed ‘bare foot’ managers and 

entrepreneurs who are needed by nation, on an insistent basis. As an educational institute, we aim at initializing a three dimensional 

personality in IIPMites, viz. 

Pursuit of knowledge in economics and management 

Commitment to economic, social, political and technological upliftment of masses and 

Cultivation of taste for literature, fine arts and etc. 

Economists often have limited access to the practical problems facing senior managers, while senior managers often lack the time and 

motivation to look beyond their own industry to the larger issues of the global economy. It has set before it the twin tasks: to reorient education 

and research towards the needs of both the private and public sectors and to establish the link between the National Economic Planning 

and the development of private enterprises in Indian economy. IIPM dares to look beyond, and understands that what we teach today, other 

adopt tomorrow. IIPM’s service output (education, research and consulting,) is a unique combination of two distinct disciplines: economics 

and management. Through this integration, IIPM helps guide business and policy leaders in shaping the Indian and global economy, bringing 

together the practical insights of industry with broader national and global perspectives. 

A hall mark of IIPM is that it is armed with the comparative advantage of engaging the committed, passionate and brightest management 

post graduates and undergraduates, who pursued the education at IIPM and subsequently joined it, to realise the dream. IIPM alumni, spread 

across the globe, holding crucial decision-making positions in the corporate sector, are bonded by the one ideology of making a positive 

difference, turning that ideology into a movement itself. 

The India Economy Review is another humble initiative towards the realisation of the same and more distinctly, engaging the broader 

publics and pertinent stakeholders. 

SEARCH, SIEVE, SCHEME... 

In economics, like in everyday existence, it is imperative to hear, perceive and consider what others have to say. Each issue of The IER 

brings together a selection of important contributions on a particular theme, authored by some of the brightest minds in different areas 

of Indian economics. The provocation for publishing these issues arises from the fact that over the years economic journals have become 

copious, exclusive and expensive. Most of the journals and a good many of the books have gone beyond the cerebral and financial reach of 

general students and other scholars. It is for them that these issues are primarily being raised and debated here. 

Much about India is transparent enough. One does not require detailed criteria, cunning calibration or probing analysis to pinpoint 

India’s problems and recognise its antecedents. There is in fact much that is perceptible about India. But not everything about India is even if 

simplistic is so simple. The learned reader would appreciate the fact that India is like an elephant that looms too large to be grasped within 

a distinct structure and paradigm the constituent parts of which would fail to reveal the entirety. Obviously and observably, no suggested 

solution to any protracted and complex socio-economic problem will satisfy all sides and stake-holders evenly. Consequently, there exists an 

enormous diversity in economic thinking and perspectives, as is also reflected in the viewpoints of different expert contributors in this issue. 

The intended outcome of this exercise is to facilitate the invention, improvement, deliberation and dissemination of innovation in economic 

thinking and national economic planning, insisting merely on well-grounded, open and unbiased debates, without predetermined outcomes. 

It is impossible to do justice to the entire field of Indian economics in a single issue. The topics selected for this issue are those which are of 

critical and immediate importance to India. Majority of them were freshly and exclusively written. Encapsulated, it is a constructive attempt 

aimed at helping India actualise its promises and potential. The editors hope that this issue of IER proffer the reader a flavour of dynamism 

and excitement and persuade her/him to participate in the journey towards realising ‘The Great Indian Dream’. At the same time, it illuminates 

the terrible, practical problems of India and Bharat. 

ACKNOWLEDGEMENTS 

The IIPM Think Tank likes to thank all the internal faculty who have been instrumental in coordinating with 

many authors all across India and according their unstinted support. The assistance of Prof. R.Krishnan (IIPM 

Chennai), Prof. Amlan Ray (IIPM Lucknow), Mr. Robin Thomas (IIPM Ahmedabad) and Mr Angshuman Paul 

has been more valuable than, perhaps, they realise.

E DITORIAL 

The First Words and The Last Word 

US JAILS BETTER THAN INDIAN HOMES 

Prasoon S. Majumdar 

Managing Editor 

(As it appeared in The Sunday Indian) 

Dear Readers 

The issue of housing in the Indian context has such 

a phenomenal potential that tactical campaigning 

for it alone could bring any political party to power. 

But then if manifestos are any indication then 

one can say for sure that most of the political parties 

do not think likewise. For, when it comes to 

this basic necessity, India experiences one of the 

biggest paradoxes. Amidst all the modern buildings, 

luxury housing colonies and massive mansions, 

there is a beeline of slums and wrecked 

houses. The same city (Mumbai) that boasts of 

having the world’s most expensive private property 

worth nothing less than $2 billion and having 

an interior area of 4,00,000 square feet (sq ft) also 

has Asia’s largest slum which is home to 1 million 

people. Almost every year, successive Governments 

in their respective budgets have been announcing 

budgets for housing development. But 

then, in spite of thousands of crores being spent, 

hundreds of surveys and numerous policies notwithstanding, 

India continues to fail in providing 

basic dignified living to its people. 

When it comes to housing, it’s just not that only 

homeless live in deserted conditions. Even those 

who have homes are not better off in any way. The 

fact fortifies when one goes through recent National 

Sample Survey Organisation’s (NSSOs) 

data. The survey reveals that around 32 per cent 

of urban houses are with area less than 258 sq ft 

with, on an average, 4.3 people living in a single 

house. The same can be reiterated for rural houses 

with an area of 312 sq ft and an average family 

of 4.8 persons. The personal living space is not 

even enough for one person to spread his legs 

comfortably. On an average, Indian houses have 

personal living space of less than 11.7 sq ft that 

includes living, sleeping, cooking and toilet!! Contrast 

India’s average housing area with that of US 

jails. Even a convict in the US gets more breathing 

space than what an Indian gets in his home (going 

by researches, a prisoner in the US jails gets a personal 

space of 60 sq ft with all basic amenities). 

It is said that with time and economic development, 

the living standard of a nation also gets 

upgraded, but then nothing like that seem to 

happen in India. On the contrary things have 

been on a constant deterioration. Since independence, 

in spite of Indians moving out of 

cramped houses, the proportion of Indians residing 

in homes with an area less than 100 sq ft has 

increased manifold. Not just that, unlike US and 

other developed countries’ jails, where the convicts 

have access to basic living conditions, Indians 

have to struggle for that too. Around 60 per 

cent of rural households do not have access to 

electricity. As per World Bank reports, no city in 

India - till date – has been able to provide nonstop 

water supply to its people. Even the condition 

of sanitation is in complete tatters. Open 

toilets and open defecation is a common phenomenon 

as around 700 million Indians do not 

have access to proper sanitation. 

Housing has always been an agenda on politico 

or socio forums. But even then nothing has been 

done with respect to converting slums into lowcost 

dignified homes. Shamefully, while convicts 

in the US enjoy better living conditions, even after 

committing heinous crimes, majority of the Indians 

have to spend their life in inhuman conditions 

without any faults of theirs’! And more shameful 

is the fact that this is yet not a concern for most of 

the leading political parties of the country! After 

all why would those who get exotic villas with uninterrupted 

power supply to stay in after winning 

elections would bother about the homeless? 

That is one side of the story where in the name 

of urban development skyscrapers are built and 

most of them are meant for a family of four. Thus 

on one side, we have buildings where on an average 

one person enjoys 100,000 sq km than on 

other 117 sq ft for a family of four or more. 

This issue of the IER tries to questions such 

dichotomy and lopsided planning process. Experts 

from different avenues pitched-in their perspective 

and suggested measures to make India a 

better home. We at the IIPM Think Tank, would 

enjoy the numerous seminal opinion pieces and 

research articles by eminent economists from 

world over. 

Best, 

Prasoon S. Majumdar 

THE INDIA ECONOMY REVIEW 

5

C ONTENTS 


ISSN 2229-2004 

CREDITS 

Founder 

Dr. M. K. Chaudhuri 

Editor-in-Chief 

Arindam Chaudhuri 

Managing Editor 

Prasoon.S. Majumdar 

Deputy Editor 

Sray Agarwal 

Consulting Editor 

Prashanto Banerji 

K K Srivastava 

Research Fellows 

Mrinmoy Dey 

Akram Hoque 

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Group Design Director 

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Senior Designer 

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Additional Thinking 



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Disclaimer : 

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disclaims any and all warranties, express or implied, including without 

limitation warranties of merchantability and fitness for a particular 

purpose, with respect to any service or material. In no event shall the 

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materials, although the reader may freely use the research and material 

provided, the IIPM Think Tank retains all trademark right and copyright 

on all the text and graphics. 

(F)ACT SHEET 

UNLEASHING URBANIZATION 

(Examines the suitability of models based on Western 

Economic Development experience — whether promoting 

pan-India urbanization is a logical conclusion or are 

alternatives worth exploring —that will suit India with its 

unique demographic, social, political and economic situation) 

Towards Making India’s Urbanization Inclusive 

Indermit Gill, Chor-ching Goh and Somik Lall 12 

Building Modern ‘Urban’ India 

Rok Spruk 20 

Climate Change Risks & Adaptation: Indian Mega Cities 

Architesh Panda 26 

Green City Carpool System for the Traffic Management 

Srinivasulu Rajendran and Kirti Danwar 34 

An Alternative and a Less Painful Process 

T.H.Chowdary 40 

Conceptualising Rural-Urban Dynamics 

Alex M. Thomas 46 

A Kind of Urbanisation 

Amal Sanyal 50 

Acquisition of Agricultural Land: Lucknow Metropolis 

S.S.A. Jafri, H.R.Nangalia and S.M.S. Jafri 56 

Tagore’s Vision of Rural Economic Upliftment 

Anshuman Paul 70 

AGRICULTURAL ECONOMICS 

(Attempts at exploring the contemporary realities of Indian 

agriculture with special focus on agricultural marketing 

practices and modes of irrigation that are tailor made to the 

topographic, hydrologic and geographic conditions of India) 

Technological Innovation in Indian Agricultural Marketing 

Aparajita Goyal 74 

Turning India’s Irrigation Portrait Upside Down: 

Dominant Views Vs Realities 

M. Dinesh Kumar, M. V. K. Sivamohan & A. Narayanamoorthy 80 

POLICY PERSPECTIVE 

(A take on various policy related issues like economic, social, 

regulation, governance related policies — present status, 

scope for improvement and the way forward) 

Towards Improving Governance 

SK Agarwal 96 

6 THE IIPM THINK TANK

C ONTENTS 

PERSPECTIVES 

EDITORIAL 

US Jails Better than Indian 

Homes 

Prasoon S. Majumdar 05 

UNLEASHING URBANISATION 

Bringing Back Harappa and 

Mohenjo-daro 

Sray Agarwal 08 

POLICY PERSPECTIVE 

An Imperative for Promoting 

Inclusive Growth 

Pradeep S. Mehta 90 

WELFARE ECONOMICS 

A Contribution to the Purpose 

of Economic Growth 

David Hudgins 146 

Cover Design: Vikas Gulyani 

RTI: Some Reflections and Ruminations 

Saumitra Mohan 102 

Male and Female Flower Trading Farms in West Bengal: 

A Case 

Sanjukta Chakrabarti and Debnarayan Sarker 108 

WELFARE ECONOMICS 

(Focuses on the optimal allocation of resources and goods 

and how this affects social welfare and economic well-being 

of the people) 

Engaging Communities for Better Health Care Services 

George Cheriyan and Om Prakash Arya 118 

Attaining Comprehensive Development: 

A Comparative Study of Demographic, Migration and 

Socio-Economic Trends 

R. S. Bora and Swati Virmani 122 

Social Security of Social Groups in Assam 

Chunnu Prasad and Gautam kr. Das 130 

Understanding Political Economy of Food Crisis in Niger 

Jaideep Rajak 140 

ENVIRONMENTAL ECONOMICS 

(Analyzes the impact of various economic activities on the 

environment and how economic mechanisms can be created 

that minimizes harm to the environment while allowing 

maximum economic benefits) 

Regional Patterns in the Distribution of Polluting Units 

Prabha Panth and Rahul A. Shastri 152 

Dealing with Environmental Degradation 

Anu Singh 164 

PLANNING PARADIGM 

(Analyzes roles of planning in the economic development of 

a country and the changing role of government to arrive at an 

optimum mix of state and the market) 

Planning vs the Market and the Role of Govt. 

Dang T. Tran 170 

FINANCIAL ECONOMICS 

(Deals with financial and growth related aspects of nation’s 

development and how financial crisis in a country affects the 

economies of the linked countries) 

Greek Crises & Its Impact on the World Economy 

T.Koti Reddy 176 


7

U NLEASHING U RBANIZATION 

Bringing Back 

Harappa and 

Mohenjo-daro 

Considering different strata of society while planning for future cities or 

towns would not only make the living space safer but would make it more 

learning-oriented, sustainable, futuristic and liveable along with providing 

a model for utopian city planning 

Sray Agarwal 

Deputy Editor, 

The IIPM Think Tank, 

New Delhi 

India has always had a history of 

planned civilization, but with 

urban migration and pressure on 

the cities and metros, residences 

started to mushroom and gave no space 

and time for planned cities to creep in. 

Today, every inch of an urban area is 

being converted to a residential unit. 

There were these days during Mohenjodaro 

civilization that town planning was 

so scientific that it formed the fundamentwal 

of modern urban town planning 

system. Mohenjo-daro for that 

matter was designed in a grid pattern 

with straight streets and had houses that 

were sound-proof. Paradoxically, today 

most Indian cities are reeling under 

problems of infrastructure collapse. 

The problem is all ought to increase 

given the fact that India today has more 

than 300 million people living in its 

5000 cities and towns — which is like 

accommodating the entire United 

States in one third of its land area! 

The problem today is just not of urban 

planning but extents to the whole vision 

of futuristic planning. Currently, urban 

governments lack a modern planning 

framework and most importantly the 

urban transport planning is rarely holistic. 

It goes without an iota of apprehension 

that citizen participation is 

pertinent to make such robust planning 

successful. Given the size of population 

that is expected to enter urban areas in 

next couple of decades, the consumption 

of energy too would increase. Thus, 

it becomes very important in our planning 

process to have clauses for not only 

conserving energy but also to produce 


T IME TRAVEL


energy. The next generation urban planning 

needs to convert every drop of rain 

and every ray of sun into energy. 

Our current model of cities/town has 

no space for different demography that 

is in heterogeneous mix in our society. 

So if on one hand we have Antilia that 

boast of 4,00,000 sq ft then on the other 

we boast of world largest slums, where 

life is a case study. The homes of poor 

in our nation are outright unfit for human 

habitation and do not even promises 

basic amenities. A common Indian 

earning either spent on treatment of 

so-called curable diseases or on payand-use 

toilets! There has been no 

provision in town planning to provide 

enough affordable land or housing. It’s 

very important to create space for such 

section of society as well. Not only 

poor's but even the fairer sex does not 

feel the city to be theirs. 

Numerous surveys conducted across 

cities of India have shown how women 

in India feel unsafe on roads. Urban 

planning has still been not able to promise 

a sense of security to the women of 

India. They still face insecurities and 

further have to deals with myriad antisocial 

elements. The problems of safe 

mobility add to their woes. Even affordable 

transport systems do not come to 

their rescue as most of the time they are 

overcrowded and sometimes dangerous 

and unreliable. Moving from women to 

children and other dependents who are 

again most vulnerable to a society that 

has de-linked social contacts from 

neighbourhoods and urban space. Increase 

in traffic has made it too dangerous 

for children to play out in open on 

the streets, which has not only reduced 

their ability of natural-learning but also 

have made them socially inactive. They 

have to all the time depend-on a caretaker 

to escort them around playgrounds 

or entertainment parks. However, 

among all these categories of 

people, there is still one category that 

gets blatantly ignored but do form a 

pivotal part of society. Across the world, 

especially in our nation, the so-called 

unproductive workforces are left on 

themselves to survive. The elderly a.k.a 

senior citizens in India not only suffer 

from series of social subjections and 

exclusion but also suffer from lot of 

diseases that ceases their mobility to 

large extent. Most of them are either 

left on the streets or are thrown in substandard 

old-age homes. In order to 

give these people their due respect and 

space, urban planning needs to start 

from designing outdoor spaces that are 

easily navigable and walkable which 

eventually would make mobility less 


T IME TRAVEL 

Numerous surveys conducted across 

cities of India have shown how 

women in India feel unsafe on roads 

stressful and free of anxiety. Involvement 

of older people with respect to 

housing issues, such as locality and land 

usage for special housing would encourage 

exclusion of older people to downsize 

from society. 

In order to make a utopian urban 

space, the future planners need to think 

of future generation and population 

expansion along with keeping in mind 

the changing lifestyle, technology and 

trend to make cities sustainable and 

long-lasting. The following ten points in 

shorts summarizes the needs of future 

urban planning especially in a country 

like India. 

1. Series of affordable and low cost 

quality housing is important to convert 

slums and ‘unsafe’ buildings 

into livable spaces. 

2. Mobility needs to be redefined. 

Streets and roads that are currently 

meant for vehicles needs to be redesigned 

to accommodate the elderly 

on foot, children on bicycles, advance 

public transport system and 

along with making them safe for 

women to commute any time. 

3. Public transportation options 

should be updated along with connecting 

it with suburbs and satellite 

towns with proper structures providing 

“safe space” for all kind of 

public transit. 

4. While refurbishing and developing 

new societies, “building-mix” 

should be considered that would 

ensure existence of residential 

building along with community 

centre and place of learning, medical, 

worship, recreation to avoid 

time wastage in commuting for basic 

goods and daily services. 

5. Provision of converting almost all 

possible natural resources in various 

energy forms should be provided 

to make cities and societies 

self-sufficient in energy needs. 

6. Green buildings, agri-land, ecologically 

sensitive building and 

green buildings needs to be encouraged 

with spaces and natural settings 

for different form of life. 

7. Pedestrian-oriented cities with 

proper waste disposal (and waste 

recycling) system would enhance the 

whole system of planning. 

8. Allow people’s participation of all 

possible age-groups and genders in 

urban town planning processes. 

9. Safety at homes and outside is very 

imperative to make the whole system 

sustainable and reliable. 

10. A city needs to make provisions to 

safely accommodate excluded members 

of society be it orphans, elderly, 

mentally and physically challenged 

citizens or people with 

different sexual orientations. 

Urban planning should provide environment 

for organic growth that leads 

to self learning, creativity, innovation 

and acts as a sources of inspiration as 

well. These attributes would not only let 

a society achieve a utopian dream of 

livable space but would also enhance 

the quality of life. Along with proper 

urban planning that would accommodate 

unprivileged class, children, 

women elderly and youth; such vibrant 

structure would encourage private participation 

and mushrooming of well 

designed society that would further 

reap what I would like to call “synergy 

of life.” 

(The views expressed in the write-up are 

personal and do not reflect the official 

policy or position of the organization) 


11



I NCLUSIVE INTEREST 

Towards Making India’s 

Urbanization Inclusive 

No country has urbanised without slums; by 

providing essesntial services like security, schools and 

sanitation, improved transportation along with well 

timed and targetted interventions, slums can be fully 

integrated into cities 

Indermit Gill 

Chief Economist, Europe and 

Central Asia, World Bank 

Chor-ching Goh 

Lead Economist, Ethiopia 

and Sudan, World Bank 

Somik Lall 

Senior Economist, Urban 

Strategy Unit, World Bank 

A 

few years ago, Slumdog Millionaire, 

a film set in Mumbai’s 

slums, picked up eight 

Oscars, making Jamal and 

Latika household names across the world. 

Slumdog Millionaire‘s success generated 

a lot of debate in India and abroad. Some 

Indians did not like the graphic images of 

cruelty and squalor being broadcast all 

over the world. Why single out India, when 

all countries have such an underbelly, or 

had urban squalor until quite recently? 

The complainers had a point. No country 

has urbanized without slums. Not so 

long ago, more than half of Singaporeans 

lived in slums. Paris got rid of its last slums 

just two decades ago. Melbourne, Manchester, 

or Manhattan, Seoul, Shanghai 

or Seattle, many of today’s world class 

cities were littered with slums. But no 

country has grown to high income without 

urbanizing. To avoid slums, it seems, is to 

reject economic development. 

Mumbai has not done well in making 

urbanization inclusive. Cities like Hong 

Kong, Seoul and New York relaxed their 

floor area restrictions and built better 

transport infrastructure to encourage 

density. For years, Mumbai’s planners 

went the other way, tightly regulating the 

height of buildings to control densities 

and, instead of relaxing these regulations 

to accommodate growth, further reducing 

allowable densities. Many poor people in 

Mumbai cannot afford public transport, 

and end up walking or riding a bicycle to 

work. Better infrastructure will connect 

them to prosperity. But while national 

programs such as the Jawaharlal Nehru 

National Urban Renewal Mission will 

improve urban infrastructure and public 

services in the country’s largest cities and 

state capitals, they will have to be accompanied 

by institutional reforms to make 

land markets work and provide basic services 

everywhere, especially in slums. 

But should such slums be tolerated, 

improved, or uprooted? The answer, from 

centuries of experience is that success 

comes with sequenced measures: first institute 

land markets and provide essential 

services such as security, schools and sanitation, 

and improve transport. Then, with 

well-timed and targeted interventions, 


13


slums can be fully integrated into cities. 

The Attributes of an 

Urbanization Strategy 

The issue of urbanization — how to make 

India’s towns, cities, and metropolises 

work for a more inclusive development 

— is one of the most important policy issues 

confronting the nation today. What 

are the core elements of an efficient and 

inclusive urbanization strategy? This article 

provides an answer to this question, 

based on the facts, analysis and policy 

experiences drawn from the 2009 World 

Development Report, Reshaping Economic 

Geography (available at www. 

worldbank.org/wdr2009). 

A strategy for urbanization that maximizes 

the contribution of cities to economic 

and social development must be 

realistic in what it can deliver, it should be 

rigorously derived, and it ought to be 

reasonable in the demand it places on 

policymakers for its implementation. 

For the approach to be realistic, it must 

recognize the following facts: (a) A large 

part of urbanization is generally over by the 

time a country reaches middle-income, viz., 

income levels of about $3,700 per capita; 

(b) the relationship between countries’ 

income levels and urbanization rates is not 

different for early and later developers; and 

(c) urban settlement patterns are similar 

between countries at different stages of 

development, and tend to remain stable 

over time. 

For the strategy to be rigorous, it must be 

grounded in analysis that identifies the role 

of urban settlements: (a) Towns enable firms 

and farms to exploit economies of scale; (b) 

cities allow firms in similar industries to localize 

and become efficient; and (c) metropolises 

encourage learning and innovation 

that comes from urban diversity. 

For a strategy to be reasonable, it must be 

prioritized and sequenced, and recognize 

capacity constraints: (a) During incipient 

urbanization, policymakers should not discriminate 

between urban and rural areas 

— they should instead provide basic social 

services everywhere, and ensure functional 

land and labor markets; (b) at intermediate 

stages of urbanization, connective infrastructure 

is needed in addition; while (c) 

Figure 1: The Pace of Urbanization Is Not Unprecedented 

Percentage point difference in urban population, 1985-2005 (except where specified) 

35 

30 

25 

Canada, 

1880-1900 

20 

Germany, 

1880-1900 

United Kingdom, 

1830-1850 

Denmark and United States, 

respectively, 1880-1900 

15 

10 

5 

Switzerland, 

1880-1900 

Mean of high-income 

countries, 1880-1900 

Mean of developing 


Median of developing 


0 

All countries 

Source: World Development Report 2009. 



advanced urbanization also requires, in addition, 

place-based interventions such as 

slum development programs. 

The Richer the Denser 

The global development experience shows 

that the speed of urbanization is most 

rapid when countries are at low income 

levels. 1 It also shows that the pace and pattern 

of urbanization is similar for early and 

later developers. It indicates that all nations 

have an urban hierarchy of metropolises, 

cities, and towns, and no country has 

grown to riches without a shift of populations 

from villages to urban settlements. 

Urbanization’s speed has precedents. 

Urbanization has always happened early 

in development, when countries have low 

levels of income and institutional capacity. 

This was the experience of early developers 

such as Britain and France; it happened 

similarly in South Korea as it grew 

from low to high income. And this is the 

situation in India today. 

The changes are related to shifts in production 

from agriculture to industry to 

services. Without these sectoral transformations, 

nations do not develop. Without 

urbanization, these transformations are 

simply not possible. But appalled by conditions 

in India’s cities, many continue to call 

for policies to slow down or reverse the 

flow of people from villages to its cities. 

That would be a mistake. Nowhere has 

successful urbanization progressed painlessly. 

“Between 1815 and 1851, for example, 

France’s population grew from 29 to 

36 million and it was the cities that absorbed 

the thousands of migrants unable 

to find work in the countryside. But there 

were simply not enough jobs. Unemployment 

and overcrowding created appalling 

living conditions. Only one in five houses 

had running water. In 1832 cholera wiped 

out some 20,000 Parisians.” “Like so many 

other European cities, Paris suffered from 

chronic post-war housing shortages. Of 

the 17 slum areas designed for clearance, 

most were still intact in the 1950s.” Painfree 

progress is an unrealistic aim. 

Urbanization’s pattern is also not unprecedented. 

Policymakers are often 

concerned about the enormous size of 

today’s cities. Mumbai is believed to be 

too overpopulated, Mexico City too 

poorly managed, and Bangkok grotesquely 

large for midsized Thailand. But rapid 

growth of large cities at early stages of 

development is not a new phenomenon, 

and urban primacy is a common — and 

often healthy — phenomenon. 

But the scale of the rural-urban shift 

today is unprecedented. With the benefits 

of better medicine and greater prosperity, 

today’s populations are bigger. While the 

world’s largest 100 cities averaged 700,000 

people in 1900, a century later this number 

was 6.3 million. In developing East Asia 

the scale of the rural-urban shift may be 

almost two million every month for the 

next two decades. 

While these numbers are daunting, the 

experience of recent developers shows 

that they are not unmanageable. And for 

India to grow to and through middle income 

to join the the community of developed 

economies, they must be managed 

well. But they require a sequenced approach 

that is deliberate and determined, 

and founded on a careful diagnosis of the 

benefits and costs of settlements. 

The Benefits of Economic Density 

The benefits of urbanization come from 

“agglomeration economies”. 2 These can 

be classified into three types of scale 

economies that are facilitated by settlements 

of different sizes: internal, localization, 

and urbanization economies. 

• Internal economies can be facilitated 

by towns and small cities. Towns facilitate 

internal cost savings for firms and 

farms to produce in scale. Such places 

do not have to be big. What is more 


15


Figure 2: The Size Distribution of Settlements is Stable During Development 

Low- income countries Middle- income countries High- income countries 

Log of rank 

6 

5 

4 

3 

2 

Log of rank 

6 

5 

4 

3 

2 

Log of rank 

6 

5 

4 

3 

2 

1 

1 

1 

1950 1980 2005 1950 1980 2005 1950 1980 2005 

0 

2 4 6 8 10 

0 

2 4 6 8 10 

0 

2 4 6 8 10 

Log of population 




important is that they provide basic 

social services such as schools, streets, 

security, and sanitation. The town of 

Sriperumbudur in southern India had 

fewer than 20,000 people when it was 

chosen by Hyundai to be the location 

for its plant in 1999, which had produced 

a million cars by 2006. 

• Localization economies usually need 

medium-sized cities. Cities encourage 

firms in similar industries to localize 

and become more efficient. With a 

ready supply of skilled workers and access 

to an efficient port, the city of 

Shenzhen in southeast China has nurtured 

a bustling electronics industry, 

• Urbanization economies require large 

cities. Metropolises promote learning 

and innovation from urban diversity. By 

providing a stable economic environment, 

livability, efficient finance and excellent 

transport links, Singapore provides 

services to all of Southeast Asia. 

These services are used by a wide range 

of activities from financial, educational, 

and medical services to shipping and 

manufacturing. Singapore’s diversity facilitates 

sharing, matching and learning. 

Function — not size — is important; and 

that places have to be flexible to prosper. 

Sriperumbudur helps Hyundai and others 

operate big plants, but it is not a big city. 

Shenzhen is a big city, but it has specialized 

in a few industries, mainly electronics. 

It has helped firms produce electronic 

goods in large quantities, and access world 

markets in an efficient manner. Seoul and 

Singapore have an industrial diversity that 

has fostered innovation in manufacturing 

and attracted finance from around the 

world. What is most important about these 

places is their function, not their size. 

Besides being functional, places have to 

be flexible. These places have had to do 

very different things over time. The same 

bits of land have housed everything from 

fishing huts and palaces to big factories 

and skyscrapers. Land use has to be flexible 

for places to do well. 

By doing this, these places have facilitated 

the growth of what is called “economic 

density”. Economic density is 

measured as production or wealth per 

square kilometer. It is a fundamental 

concept for urbanization. And the function 

and form of urban settlements must 

facilitate it for countries to prosper. 

Just as producers specialize, urban settlements 

specialize to help firms, farms, 

and families exploit the gains from specialization 

and trade. Most market economies 

require the services of villages, 

In East Asia the scale of the ruralurban 

shift may be almost 2 million 

every month for the next 2 decades 

towns, cities and metropolises, at all 

stages of their development. And their 

growth is largely independent of their size. 

Indeed, these patterns are so stylized that 

they are almost considered laws in urban 

economics (Figure 2). Whether we are 

looking at low income India, middle income 

China, or high income US, the patterns 

are similar and steady. 3 



Any sizeable nation or region needs a 

portfolio of places of different sizes, density, 

and function that facilitate particular 

types of scale economies. At the top of this 

hierarchy are a few large cities (see Map 1 

for the Republic of Korea’s portfolio of 

places). They tend to have diverse industrial 

composition, and cultural and other 

amenities. Partly because of the attraction 

of skilled people to this diversity, these 

cities serve as incubators for new ideas 

and industries. These cities deliver urbanisation 

economies, which are the 

productivity and cost benefits that come 

from great density and diversity. 

Below these large cities are usually an 

even larger number of medium sized cities. 

These cities act as regional foci for the 

economy and society, serving as regional 

hubs of transportation, finance and commerce. 

They also act as regional centers of 

advanced public health, higher education 

and cultural facilities. They are typically 

more specialised, being focused on manufacturing 

and the production of traditional 

and standardised items. In these 

secondary cities, localisation economies 

dominate. These are the benefits from 

specialisation in a particular industry, such 

as the availability of a pool of labour whose 

skills are specially suited to that industry, 

or specialised firms which supply components 

and parts within the industry. 

Finally, smaller towns are linked to the 

secondary tier of cities above and connected 

to a mass of rural areas at the base 

of the hierarchy. Towns are the connective 

tissue between rural and urban areas. 

They are facilitators of internal scale 

economies as seen in mills and market 

centers for agricultural and rural produce, 

and as stimulators of rural non-farm activities. 

Symbiosis is again the rule. Towns 

draw sustenance from the agricultural 

Map 1: Metropolises, Cities, and Towns In South Korea Serve 

Complementary Functions 

Ansan 

Mokpo 


Seoul 

Kwangju 

Chonju 

Chongju 

Taejon 

Daegu 

Ulsan 

Changwon 

Pusan 

Map 2: Economic Opportunities In Cities and Towns In India Will 

Pull People 

Source: World Bank GIS Lab, 2010. 


17


Table 1: An “I” for a “D”: A Rule of Thumb for Calibrating Urbanization Policy 

Area 

Incipient Urbanization Intermediate Urbanization Advanced Urbanization 

Urban Shares Less than 25 percent About 50 percent More than 75 Percent 

Examples 

Kampong Speu, Cambodia; Lindi, Tanzania 

Chengdu, China; Hyderabad, India 

Greater Cairo, the Arab Repulic of 

Egypt; Rio de Janerio, Brazil 

Dimensions of Policy Change 1-D: Build Density 2-D: Build Density, Reduce Distance 

3-D: Build Density, Reduce 

Distance, Eliminate Division 

Instruments for Integration 

Institution 

Land rights; basic education, health and 

water and sanitation 

Land use regulations; universal 

provision of basic and social services 

Land use regulations and land 

taxation; universal provision of 

basic services 

Infrastructure 

Transport infrastructure 

Transport infrastructure, demand 

management 

Interventions 

Slum area development; targeted 

programs to reduce crime and 

environmental degradation 

Source: World Development Report 2009, Chapter 7. 

activity of rural areas, but their prosperity 

also spills over to villages. 

India’s map of economic density does 

not look too different (Map 2). Delhi, 

Mumbai and Kolkata are the big economic 

mountains. And it is not at all surprising 

that poor people want to come to 

such places: this is where economic opportunities 

are greatest. 

Strategies For an Efficient 

and Inclusive Urbanization 

How can policymakers facilitate such a 

symbiosis? The experience of successful 

urbanizers such as the USA, France, Japan, 

and the Republic of Korea provides 

clues. Policy needs are simpler, and policy 

priorities fewer, at early stages of urbanization. 

They get progressively more numerous 

and complicated as urbanization 

picks up speed. Their experience also suggests 

that the sequencing of instruments 

should be correct. 

• First, institutions. Spatially blind “institutions” 

such as functional land markets 

and basic social services — schools, 

security, and sanitation — in rural and 

urban areas are a large part of an economic 

integration strategy, and the role 

of central governments is primary. This 

is still an unfinished agenda in India’s 

villages, towns and cities. 

• Then, infrastructure as well. In areas 

that are rapidly urbanizing such as 

Delhi and its neighboring regions, in 

addition to the institutional foundation, 

investments in connective infrastructure 

to prevent early congestion 

are now important so that the benefits 

of rising density are more widely 

shared. Coordination between central 

and provincial governments is necessary 

to deliver these services. 

• Finally, interventions where necessary. 

Policymaking is hardest for advanced 

urbanizers such as upper-middle income 

Brazil, or China’s booming 

coastal area, and the Greater Mumbai 

region. In such places, requiring in addition 

to institutions and infrastructure, 

well-designed and targeted interventions 

such as slum upgrading programs 

or formal housing schemes to reduce 

within-city divisions. The role of local 

governments becomes pivotal as urbanization 

reaches an advanced stage. 

Even when strictly prioritized and se- 



quenced, this seems like a tall order for a 

developing country. The experience of successful 

countries shows that it can be done. 

But the policy debates on urbanization are 

too often narrowly focused on places left 

behind by growing cities and urban enclaves. 

The emphasis then turns to interventions 

such as rural development programs 

and slum upgrading schemes. World 

Development Report 2009 proposes instead 

to focus on the interactions between 

lagging and prospering places, which are 

pulled together by the forces of agglomeration, 

migration, and specialization. 

If viewed through the lens of economic 

geography, India’s teeming urban agglomerations 

would no longer be seen by concerned 

citizens as a necessary evil. Migration 

from rural areas would be seen not as 

a failure of development policy, but as a 

sign of the desire of people to prosper. 

And the social and environmental stresses 

that come with geographic transformations 

would no longer considered in isolation 

from the enormous benefits that 

come from spatial specialization. 

And what is the main implication for 

policy? Spatially targeted interventions 

should not be seen as the main instrument 

for helping people who have been left behind 

in the rush to cities. India’s central and 

state governments have far more potent 

policy instruments for helping people in 

villages and slums: they can build the common 

institutions that unify all places, and 

put in place infrastructure to connect some 

places to others. Spatially targeted interventions 

that have been the staple of urbanization 

and regional development policies in 

India should be used sparingly and in conjunction 

with — never instead of — unifying 

institutions and connective infrastructure. 

If history is any guide, better policies do 

not mean that India will urbanize without 

slums. But with better institutions and 

infrastructure half of Mumbai’s 20 million 

people would not have to live in slums. 

Slums are a reflection of good labor markets 

and bad land markets. How else can 

one explain that cities like Mumbai can 

both inspire filmgoers with uplifting success 

stories and horrify newcomers with 

stratospheric land prices? 

End-notes and Additional Thinking 

1 

See Chapter 1 “Density” in World Development 

Report 2009. 

2 

See Chapter 4 “Scale Economies and 

Agglomeration” in World Development 

Report 2009. 

3 

The first regularity is the “rank-size rule” 

— the rank of a city in the hierarchy and 

its population are linearly related. The 

second regularity is the Gibrat’s law — a 

city’s rate of population growth tends to 

be independent of its size. 

(INDERMIT SINGH GILL, an Indian national, 

is the Chief Economist for Europe and 

Central Asia at the World Bank. He was the 

Director of the 2009 World Development 

Report 'Reshaping Economic Geography' 

and the principal author of several major 

reports, including 'An East Asian Renaissance'. 

He has a BA and MA in Economics 

from Delhi University, and a Ph.D. in Economics 

from the University of Chicago. 

CHOR-CHING GOH is a lead economist at 

the World Bank. She holds simultaneous BA 

and MA degrees, summa cum laude, from 

Yale University, and a PhD in Economics 

from Harvard University. She recently joined 

the Sudan and Ethiopia teams, and before 

that, she worked on Russia, Poland, and the 

former Soviet Republics. She is a co-author 

of the World Development Report 2009 Reshaping 

Economic Geography. 

SOMIK V. LALL, an Indian national, is a 

Senior Economist with the Spatial and Local 

Development Team of the World Bank’s 

Sustainable Development Network, and core 

team member of the World Development 

Report 2009: Reshaping Economic Geography. 

Until February 2007, Somik worked for 

the World Bank’s research department where 

his research focused empirical analysis of 

agglomeration economies and transport infrastructure 

on location decisions and productivity 

of businesses and identifying 

mechanisms for providing and financing local 

public goods in fiscally stressed urban 

areas. His research has spanned a range of 

developing countries including Bangladesh, 

Brazil, China, Colombia, India, Indonesia, 

Philippines, Mexico, South Africa, and Sri 

Lanka. Somik holds a B.S. in Engineering, 

Masters in City and Regional Planning, and 

a Ph.D. in Public Policy. 

The views expressed in the write-up are personal 

and do not reflect the official policy or 

position of the organization.) 


19


Building Modern 

'URBAN' India 

It is inevitably important for public policymakers to recognize the causes of the 

widespread growth of slum population rather than direct solutions applied by the 

government interference for improving urban living conditions 

Rok Spruk 

Economics Research Fellow, 

European Enterprise Institute, 

Brussels 

The challenges of urban development 

are indeed one of the 

most perennial questions in 

the context of economic development. 

After two decades of high 

economic growth, the state of urban development 

in emerging markets can be 

understood both as a challenge in improving 

the standard of living and as an 

opportunity to review some of the issues 

posed by the population growth. In recent 

years, the growth of megacities has 

received considerable attention, especially 

from the perspective of cost-benefit 

analysis. The unparalleled increase in the 

emergence of megacities has raised numerous 

questions regarding the evaluation 

of megacities. Are megacities sustainable 

in poor countries considering 

the improvement of living facilities, access 

to clean water, the quality of transportation 

infrastructure? Can the allocation 

of scarce resources in the course of 

urban development be solved by planning 

solutions? How to explain the evolution 

of slums? These questions lie at the heart 

of emerging countries since the improvement 

of urban living conditions affects 

not only the standard of living but also 

the quality of infrastructure. The latter is, 

aside from institutional quality, deemed 

essential for higher standard of living and 

higher long-run economic growth. The 

aim of this article is to discuss some of the 

most challenging puzzles of urban development 

faced by India. 

Using the Market for Urban 

Development 

Public policies in emerging countries 

devoted a considerable amount of attention 

to the growth and evolution of urban 

areas in the Western world as a role 

model in boosting urban development in 

emerging regions. Public policies in less 

developed countries have often adopted 

a principle of copying urban solutions 

from the West into particular areas such 

as town planning and slum reduction. A 

brief look upon the historical emergence 

of some of the world’s biggest cities such 

as New York, London and Amsterdam 

and the comparison of the urban development 

philosophy in poorer regions of 

the World reveal a striking difference in 

understanding urban development. To 


F UTURE CITIES 


21


understand the brisk growth of New York 

City, which emerged from New Amsterdam 

in 1674 after Westminster Treaty 

between the United Kingdom and Holland, 

it is impossible to ponder the efficiency 

of urban development without the 

institutional setback. Land division in 

early New Amsterdam was subject to a 

rigorous protection of property rights, 

safeguarding trade and investment. The 

colonial origins of the tradition of strong 

property rights continued well into the 

18 th and 19 th century, having firmly established 

the rule of law as the cornerstone 

of the city growth. From the second half 

of the 20 th century, third-world nations 

fell under considerable influence of government 

management of urban development. 

Contrary to market-based solutions, 

government interference with 

urban management in the last century 

unfolded a bold conviction that urban 

development can be solved by tentatively 

planned solutions and urban intervention. 

Without any hesitation, the quality 

of living in urban areas in least developed 

and developing countries still suffers 

heavily from the legacy of authoritarian 

regimes which, in spite of relentless attempts 

to fulfill utopian promises to 

eradicate poverty and improve the quality 

of urban facilities, proved that government 

failure of state-wide urban planning 

was immense. The emergence of slum 

population in less developed countries 

reflects an inherent government failure 

to enforce low-cost institutions based on 

the rule of law and private property rights 

protection. It is impossible to envision 

urban development without a clear 

framework of the rules of the game. 

Graph 1 depicts the percentage of slum 

population in 1990 and 2001 in 10 countries. 

In India, the percentage of slum 

Graph 1: The Distribution of Slum Population in Selected Countries 

Percentage of slum population 

100 

80 

60 

40 

20 

0 

Haiti 

Pakistan 

Bolivia 

India 

Source: United Nations Human Settlements Programme, 2003. 

Vietnam 

Venezuela 

1990 2001 

Egypt 

China 

Libya 

Morocco 

population decreased by 5.3 percentage prevalence of slum population in urban 

points between 1990 and 2001. 

settlements and high rates of crime and 

The evolution of slum communities shadow economy. Hernando de Soto, the 

culminated the absence of clearly defined 

property rights and contract en- 

the essence of property rights while de- 

Peruvian economist, famously captured 

forcement which consequently resulted scribing the absence of law and property 

in poor water and sanitation facilities. rights in Indonesia: 

The absence of the constitutional protection 

of private property rights quickly lation of my previous book into Bahasa 

“I was in Indonesia to launch the trans- 

resulted in subsequent land expropriation. 

The outcome originates in the benity 

to invite me to talk about how they 

Indonesian, and they took that opportulief 

that the purpose of private property could find who owns what among 90 percent 

of Indonesians who live in the extral- 

is, inherently, to pursue social goals. 

Once the belief is encroached in the egal sector. Fearing that I would lose my 

political philosophy, the economic consequences 

are detrimental. Given the explanation on how to structure a bridge 

audience if I went into drawn-out technical 

extent of uncertainty, the individuals’ between the extralegal and legal sector, I 

choice of living in slums is derived from came up with another way - an Indonesian 

a realm of economic and institutional way - to answer their question. During my 

rigidities. In fact, the combination of book tour, I had taken a few days off to 

inherent perception of autarkic informal visit Bali, one of the most beautiful places 

institutions and the political power of on Earth. As I strolled through rice fields, 

elites jointly resulted in poor incentives I had no idea where the property boundaries 

were. But the dogs knew. Every time to boost urban development, given the 

I 



crossed from one farm to another, a different 

dog barked. Those Indonesian dogs 

may have been ignorant of formal law, but 

they were positive about which assets their 

masters controlled. I told the ministers that 

Indonesian dogs had the basic information 

they needed to set up a formal property 

system. By travelling their city streets and 

countryside and listening to barking dogs, 

they could gradually work upward, through 

the vine of extralegal representations dispersed 

throughout their country, until they 

made contact with the ruling social contract. 

‘Ah,’ responded one of the ministers, 

‘Jukum Adat [the people’s law]!” 1 

From the economic perspective, market 

failure in urban development arises from 

asymmetric information, adverse selection 

and network externalities. The adverse 

effects of slum population typically result 

in poor education outcomes, high crime 

rates that eventually lead to the vicious 

Table 1: Population Growth Rate in % (2005-2010) 

Urban Growth Rate (%) Rural Growth Rate (%) Total Growth Rate (%) 

India 2.4 1.1 1.4 

China 2.7 1.0 0.6 

Indonesia 3.3 -1.1 1.2 

Vietnam 3.1 0.7 1.1 

Source: United Nations, World Population Prospects, 2010. 

circle of poverty and underdevelopment. 

It is inevitably important for public policymakers 

to recognize the causes of the 

widespread growth of slum population 

rather than direct solutions applied by the 

government interference. It is impossible 

to improve urban living conditions without 

a careful consideration of what actually 

spurred a contagious spread of the growth 

of slum communities which nonetheless 

result in subversive consequences for the 

quality of urban development and standard 

of living. The institutional preconditions 

for urban development require a bold and 

definitive adoption of property rights protection. 

The absence of risk of property 

expropriation, enhanced by the wellfunctioning 

judicial system is a necessary 

precondition for an organic and spontaneous 

urban development. Once the adoption 

of the formative mechanism of a 

guaranteed protection of property rights 

and contract enforcement is established for 

rich and poor, the quality of urban infra- 

Graph 2: Long-run Agglomeration and Poverty Dispersion in Lower-middle Income Countries 

80 

70 

y=6,7007x+14,156 

R 2 = 0,2309 

Nigeria 

Population below poverty line (% of total) 

60 

50 

40 

30 

20 

10 

Indonesia 

Honduras 

Philippines 

Pakistan 

India Iraq 

Egypt 

Morocco 

Vietnam 

Senegal 

Peru 

Sudan 

Paraguay 

Panama 

El Salvador 

Bolivia 

Cameroon 

Angola 

0 

China 

0 1 2 3 4 5 6 

Source: World Bank, World Development Indicators, 2010. Own calculations 


23


structure would probably undergo a dramatic 

improvement if the access to nonexclusionary 

public goods is provided. 

Population Growth and 

Agglomeration Density 

In its broadest sense, urban development 

is a complex set of measures at the intersection 

of economic, political, demographic 

and institutional features. In recent 

years, the literature on urban 

development has emphasized the impact 

of population growth on urban development. 

High population growth driven by 

high fertility rate and low old-age dependency 

ratio could undermine the growth of 

megacities if the institutional weakness in 

safeguarding private property rights and 

the rule of law prevail. Table 1 depicts 

population growth rates for selected 

emerging countries. In the last five years, 

total population growth rate in India stabilized 

at 1.4 percent. However, the growth 

rate of urban population exceeded the 

growth rate of rural population by twice. 

U.S Census Bureau estimated that the 

expected population growth rate in India 

in 2025 is one percent. 2 The economic 

benefits of high population growth stem 

from network externalities in the marginal 

cost of public goods provision since the 

greater the size of population, the lower 

the cost of providing key public goods. 

In Poor quality of physical infrastructure 

such as access to clean water and 

good sanitation conditions can easily 

add significant cost of the population 

High population growth driven by high 

fertility rate and low old-age dependency ratio 

could undermine the growth of megacities 

growth to the urban development. In 

fact, there is a thin line between significant 

costs and significant benefits of the 

population growth considering the prospects 

of urban development. The overall 

impact of the population growth on the 

measures of urban development can best 

be understood in the context of the agglomeration 

density of population. 

The growth of megacities is likely to 

double or triple the size of current population 

in large cities. In this particular 

framework, the quality and speed of 

urban development crucially depends on 

the set of initial conditions such as the 

quality of infrastructure, the percentage 

of the city with direct access to clean 

water, the quality of roads and the outlook 

of economic agglomeration - i.e. the 

concentration of similar economic activities 

at the same place. The economic 

agglomeration can greatly benefit the 

economic growth of cities since it encourages 

the patterns of specialization 

through economies of scale and network 

effects. If the quality of initial conditions 

is not provided to the greatest possible 

extent, diseconomies of agglom- 



eration, such as population crowding and 

congestion can be greatly disadvantageous 

to the future quality of living and 

economic growth in megacities. 

To estimate the predictive influence of 

the agglomeration of population on the 

share of population living below poverty 

line, I estimated the relationship between 

long-run densities of agglomeration, defined 

as the percentage of the population 

in urban area of more than one million, 

and the percentage of the population below 

poverty line. The purpose of the brief 

empirical analysis is to estimate the effect 

of the deviation of the percentage of 

population in urban settlements on 

the share of population below poverty 

line. Does the crowding of the 

population increase the share of poor 

population? I calculated the standard 

deviation of long-run density of population 

in urban agglomerations of more 

than one million for 20 lower-middle 

income countries between 1960 and 

2009. The result suggests that a one percentage 

increase in the standard deviation 

of the population living in millionsized 

urban agglomerations increases the 

proportion of the population below poverty 

line by six percentage points, holding 

all other factors constant. The estimated 

slope coefficient is statistically significant 

at the 0.1 percent level, suggesting that the 

impact of population agglomeration in 

urban settlements is persistent and systematic. 

In addition, long-run agglomeration 

density of the population living in 

urban areas of more than one million accounts 

for 23 percent of the cross-country 

variation in the share of population below 

poverty line. Hence, the estimates 

suggest that a dispersive growth 

of overcrowding significantly 

increases the proportion of the 

population living in poverty. Therefore, 

the growth of population between 1960 

and 2009 in urban settlements increased 

the share of poor population in countries 

included in the sample. 

Conclusion 

The growth of cities and megacities pose 

a significant challenge for India and 

other developing nations. The economic 

growth and projected increases in the 

population will strongly influence the 

structure of cities as well as the settlement 

of urban agglomerations. The possibility 

of negative externalities arising 

from the growth of cities in India is not 

excluded. One such negative externality 

is that between 1960 and 2009, a greater 

dispersion of the population in urban 

settlements of more than one million 

increased the proportion of the population 

by more than six percentage points, 

holding all other factors constant. If 

such trend persists over the long run, the 

share of poor population in large urban 

communities is likely to increase, further 

diminishing the prospects of economic 

growth and development and increasing 

the non-alleviated persistence of poverty. 

To facilitate the mitigation of negative 

externalities emerging from the 

pressure of the growth of cities and urban 

agglomerations, Indian policymakers 

should consider establishing a strong 

and bold system of private property 

rights and contract enforcement to reduce 

uncertainty and boost institutional 

confidence as to alleviate the risk of 

expropriation and reduce the systemic 

incentives to live in slum communities. 

The future growth of megacities and 

population can yield immense economic 

benefits resulting from agglomeration 

economies. In this respect, urban development 

cannot be enhanced without 

clearly defined property rights that secure 

the assets of India’s citizens from 

the risk of expropriation. In addition, 

high-quality infrastructure is a necessary 

initial condition for prospective 

benefits of the organic evolution of urban 

settlements in India. 


• See H. de Soto, “Law and Property 

Outside the West,” in M. Miles et al. 

(2004). The Road to Prosperity. Washington 

D.C: Heritage Books 

• See U.S. Census Bureau, International 

Data Base. http://www.census.gov/ipc/ 

www/idb/informationGateway.php 

(ROK SPRUK graduated from the Faculty 

of Economics, University of Ljubljana in 

October 2010, majoring in International 

Economics. He is economics research fellow 

at European Enterprise Institute in 

Brussels. The bachelor's thesis, entitled 

Long-term Crisis of Pension Systems in 

OECD Countries, provided a thorough 

theoretical and empirical assessment of the 

unsustainability of public pension systems 

in developed OECD countries in the light of 

ageing population and rapidly growing unfunded 

financial liabilities of Western governments. 

His research interests include 

economic growth and development, financial 

macroeconomics, econometrics and 

public economics. Currently, he is economics 

research fellow at European Enterprise 

Institute in Brussels. He regularly discusses 

contemporary dilemmas of the modern 

world on his blog Capitalism & Freedom: 

http://rspruk.blogspot.com 





25



C HANGING CLOUDS 

Architesh Panda 

Research Scholar, 

Institute for social and Economic 

Change, Bangalore, India 

Climate Change 

Risks & Adaptation: 

Indian Mega Cities 

All the four Mega Cities in India — Chennai, Delhi, Kolkata and Mumbai, are 

highly vulnerable to climate change risks; though the government has shown 

efforts in mitigation to climate change but there are very little efforts towards 

adaptation of the vulnerable people to climate change risks 

Climate change risks is expected 

to increase the frequency 

and intensity of 

current hazards, an increased 

probability of extreme events, 

spur the emergence of new hazards and 

vulnerabilities with differential spatial 

and socio-economic impacts. This is 

expected to further degrade the resilience 

and coping capacities of poor and 

vulnerable communities, who make up 

from a quarter to half of the population 

of most Indian cities (Satterthwaithe et al, 

2007). Hundreds of millions of urban 

dwellers in the Indian cities are at risk 

from the direct and indirect impacts of 

climate change. In July 2005, Mumbai, 

India, was struck by cyclone that dumped 

94 centimeters of rain in 24 hours, and 

leaving more than 1000 dead, mostly in 

slum settlements (Sherbinin et al, 2007). 

This event underscores the vulnerability 

to climate hazards faced by urban poor 

in Indian cities. 

Climate change will bring changes in 

the pattern and trend of temperature, 

precipitation, climate hazards in the 

urban areas. An important challenge for 

India is to reduce the risks of climate 

change and enhance the resilience of 

cities. The increasing population in the 

urban areas of India will further complicate 

and make the task of reducing vul- 


27


Table 1: Vulnerability to Climate Change 

City Pop Pop in 

2020 

Land 

Area 

Sq 

Km 

Density 

Total slum 

population 

Percentage 

of slum 

Population 

Share of 

migrants in 

total 

Population 

Population 

in Dry 

lands 

(000) 

Population 

in 

LECZ 

(000) 

Per capita 

water 

availability 

(M3) 

Per 

capita 

water 

2035 

Delhi 

12.79 25.83 1295 11050 1851231 18.7 16.4 16,800 

(100%) 

0 0 0 

Greater 

Bombay 

Calcutta 

16.37 25.97 484 29650 6475440 54.1 15.15 0 8,056 

(46%) 

13.22 18.54 531 23900 1485309 32.5 6.23 0 14,000 

(88%) 

277 101 

243 102 

Chennai 

6.42 8.88 414 14350 819873 18.4 6.64 2,358 

(30%) 

2,855 

(36%) 

224 113 

Source: Slum population, Census of India, 2001, www.citymayors.com , Balk et al, 2009, Nair et al, 2009 

Table 2: Climate Change Risks 

City Delhi Mumbai Calcutta Chennai 

Major Risks of 

Climate Change 

Raising intense rainfall, 

Heat waves, cold waves 

increased droughts 

Water scarcity 

Coastal flooding, cyclones, Sea 

level rise, increased rainfall 

Increased 

malaria risks 

Tidal upsurge, cyclones, 

Flooding and water 

logging, 

Sea level rise, coastal flooding, 

Cyclones, landslides , tsunami, 

Drought, salinity intrusion 

Predicted Climate 

Change 

+1.5 to 2.5C Air Temperature; 

Central Range 

-15 to +35 percen 

Precipitation Central 

range 

Annual average temperature increase 

1.75 C and 1.25C by 2050 

BAU, Average annual decrease in 

precipitation of 2% for the A2 and 

an increase of 2% for the B2 

scenario. (Sherbinin et al 2009 

Not available 

Not available 

Source: Sherbinin et al, 2009, Centre for climate systems research, Columbia University 

nerabilities to climate change more 

challenging. Over the early 21 st century, 

estimate is that an almost equal number 

of people will live in about 0.6 million 

villages as in 12-15,000 towns and cities 

by 2050. By 2025, an estimated 70 Indian 

cities are expected to have a population 

size of over one million. In addition, 

three mega urban regions: Mumbai- 

Pune (50 million), the National Capital 

Region of Delhi (over 30 million) and 

Kolkata (20 million) will be among the 

largest urban concentrations in the world 

(Revi, 2006, Census, 2006). Without effective 

adaptation to climate change 

there will be very serious consequences 

for the most people residing in the cities 

in India. 

The issue of climate change has recently 

entered into Indian public policy 

agenda. With the formulation of National 

Action Plan on climate change in 

2008, the issue of climate change mitigation 

and adaptation has come to the 

forefront in the public policy agenda. 

Still the focus is largely on the mitigation 

of climate change rather than increasing 

the adaptive capacity of the people and 

places to deal with the impacts of climate 

change. So far climate change concerns 

are not an important part in Indian cities 

and its planning process. India has certain 

institutional provisions such as disaster 

Management Authorities and state 

and city level integrated coastal zone 

management programmes, The Jawaharlal 

Nehru National Urban Renewal 

Mission (JNNURM) to deal with different 

aspects of climate risks related issues. 

However, there are very less components 

under these programmes that 

address the climate change risk reduction 

and adaptation in the urban areas. 

All the population in the urban areas 

will not be equally vulnerable to the 

impacts of climate change. People with 

high adaptive capacity will be less vulnerable 

but people who are most vulner- 



able are the urban poor, slum dwellers 

and low income category population. 

These populations have less adaptive 

capacity to deal with the impacts of climate 

change because of poor governance; 

the lack of investment in infrastructure 

and in the commons; and 

strong connections between the political 

class, real estate developers and public 

agencies (Revi, 2008). Recent research 

highlights an urgent need to improve our 

understanding and action on climate 

variability and adaptation in urban areas 

as an urgent priority, particularly where 

poverty levels and population growth 

rates are highest (Huq et al, 2007b) 

Vulnerabilities to Climate 

Risks in Indian Mega-Cities 

Climate change related risks exposure is 

explored in this section for the four megacities 

namely Delhi, Mumbai, Calcutta 

and Chennai in India. At the global 

level IPCC 2007 identified four major 

aspects of climate related to the cities. 

First, heat waves are likely to increase 

over most of the land areas. Second, the 

frequencies of heavy precipitation events 

are very likely to increase over most of 

the areas. Third, the area affected by 

drought is likely to increase. Fourth it is 

likely that intense tropical cyclone activity 

will increase. These climate risks can 

amplify the risks that cities face from 

non-climatic sources like large slum 

population living in the environmentally 

risky areas, poor housing conditions and 

low access to public services. However, 

all the four megacities of India are 

equally vulnerable to the impacts of 

climate change. It depends on the cities 

geographic factors such as whether the 

city is near to the coast line, societal and 

economic factors. 

Climate change is likely to increase the 

present climate hazards these cities are 

facing and it is typically associated with 

vulnerability and hazard exposure. It is 

important to understand the different 

pathways through which climate change 

can impact the urban residents and increase 

their vulnerability to climate related 

risks. The four megacities are particularly 

vulnerable to the impacts of 

climate change for three reasons. First, 

a large and growing proportion of people 

at risk from climate change lives in the 

four megacities of India. 

Secondly, these urban centers in India 

are the engines of growth and successful 

Very little 

attention has 

been given to the 

vulnerabilities 

of low income 

population in 

urban centres 

national economies depend on the well 

functioning and resilient urban centres. 

This provides an important economic 

rationale for addressing the current urban 

vulnerabilities to extreme weathers 

and expanding protection from likely 

future changes. Thirdly, very little attention 

has been given to the vulnerabilities 

of low income population in urban centres 

in India. For example populations 

living in the slum areas are most vulnerable 

to the impact of climate change. In 

India 42.6 million people have been 

enumerated as living in urban slums 

(Census, 2001). These people will be 

most adversely affected due to climate 

related impacts. Till now most of the attention 

has been given to the rural population’s 

adaptation to the impacts of climate 

change. Table 1 provides a snapshot 

of vulnerabilities to climate change hazards 

in the four mega cities. The aim is 

not to assess definitively the vulnerability 

but instead to identify a set of data to 

understand the vulnerabilities in the 

four cities of analysis. 

Delhi 

Table 1 describes some of the important 

indicators of climate change vulnerability 

of Delhi. Delhi had a population 

of 12 million in 2001 and it is 

expected to be 20 million in 2020. 

Delhi is a city of contrasts — in 2000; 

1.15 million people were living below 

the national poverty line. On the other 

hand Delhi’s SDP at current prices was 

about $27 billion during 2007 (Department 

of Planning, 2008). Delhi faces 

several climate change risks such as 

intense rainfall events, heat waves, cold 

waves, increasing drought and water 

scarcity. The second table provides 

projected temperature and precipitation 

for Delhi. The table shows that 

Delhi is facing per capita water shortages, 

even today 1 ; Capital Delhi has no 

annual surplus water from precipitation. 

Further, extreme minimum and 

maximum temperature appear to be 

increasing in Delhi (Mehotra et al, 

2009) and Delhi is coming under the 

dry land ecosystems and the principal 

characteristics of dry land are low, unpredictable 

and erratic rainfall (Safriel 

et al, 2005). From the table it can be 

seen that 168 lakh populations is living 

in the dry lands (Balk et al 2009). Climate 

change is likely to result in water 

shortages in the dry lands in the future. 

Climate change will further challenge 


29


the livelihoods of those living in these 

sensitive ecosystems and may result in 

higher levels of resource scarcity. The 

IPCC Working Group 1 notes that 

“Long-term trends from 1900 to 2005 

have been observed in precipitation 

amount over many large regions… Drying 

has been observed in the Sahel, the 

Mediterranean, southern Africa and 

parts of southern Asia” (Commission 

on climate change and development, 

2008). The extent of vulnerability of 

people of Delhi within the city has been 

captured by statistics offered by Yamuna 

Action Plan; they observed that 

about 45% of the city’s population live 

in a combination of unregulated settlements, 

slums etc. further, three million 

people live along the Yamuna River, 

which is prone to flooding, where 

600,000 dwellings are classified as 

slums (Mehotra et al, 2009). 

Delhi is facing climate risks and the 

Government has made very little efforts 

towards climate change adaptation. The 

government has made considerable efforts 

in the area of mitigation to climate 

change. The most important climate 

mitigation initiative has been the establishment 

of world’s largest CNG fuelled 

public transport system. Some other 

mitigation measure include adoption of 

green building technology which is 

mandatory for all Public Works department 

and Airport Authority, expansion 

of forest cover; the forest cover has 

grown from three percent in 1998 to 19 

percent in 2005, energy efficient programmes 

in water supply, wastewater 

treatment and methane recovery. Although 

the government is making a lot 

of efforts towards mitigation, planned 

adaptation for climate change risks has 

not taken place yet. 

Mumbai 

Mumbai is the largest and economically 

most important city in India. It is on the 

West coast of India having a population 

of around 17 million making it the second 

most populous city in the world after 

shanghai. Even if Mumbai is the 

most important city in India, with its 

larger area located on a flood prone, 

poorly drained, composed largely on 

landfill, Mumbai is highly vulnerable to 

the climate hazards as shown by the 

large scale flooding during 2005. The 

most vulnerable are those 54% people 

living in slums, many of which are located 

in low-lying areas without adequate 

sanitation and water supplies. 

Further, much of the new settlements 

has occurred along the coastal areas of 

greater Mumbai, which are low lying and 

flood plain. Mumbai’s climate is tropical; 

with temperature ranging between 

When heavy rains 

combine with 

high tide surges, 

most landfills 

areas in Mumbai 

are prone to 

flooding 

16 degree C and 33 degree C. Mumbai 

is vulnerable to inland flooding during 

the monsoon seasons, sea-level rise, 

coastal flooding and various health risks 

like malaria. Climate change is expected 

to exacerbate the current problems. 

Flooding is the most important problem 

for Mumbai. When heavy rains combine 

with high tide surges or storm surges, 

most landfills areas in Mumbai are 

prone to flooding. However, the most 

vulnerable people due to flooding are 

the people living in slums and low lying 

areas. Populations densities for roughly 

one-half of Mumbai’s squatter communities 

are estimated to be as high as 

94,000 people per square kilometer, 

making it one of the most densely settled 

districts in the world (Sherbini et al, 

2009). Apart from inland flooding 

Mumbai is highly vulnerable to the impact 

of sea-level rise (TERI, 1996). As 

can be seen from the first table 46% of 

people are living in the low elevation 

coastal zones. According to one of the 

study (Dasgupta et al 2007) up to one 

percent of India’s urban areas could be 

inundated by three meter sea level rise. 

India was estimated to have the second 

largest populations located in the LECZ 

of 63 million and seventh in terms of 

areas i.e. 82,000 sq.km or about three 

percent of national geographic areas at 

risk (Mc Granahn, 2007). The Canadian 

centre for A2 and B2 scenarios predict 

an average annual temperature increase 

of 1.750 0 C and 1.250 0 C respectively by 

2050. Mumbai is predicted to have an 

average annual decrease in precipitation 

of two percent for A2 and an increase of 

two percent for B2 scenario. The sealevel 

rise is predicted to increase by 50 

centimeters by 2050. Further, a study by 

TERI put the cost to Mumbai of one 

meter sea level rise at US$ 71 billion 

dollar. The study concluded that US$24 

billion invested in protection against 

sea-level rise would reduce the economic 

impact by US$ 33 billion dollars 

(TERI, 1996). 

Calcutta 

Like many other big cities Calcutta, the 

capital city of West-Bengal is also facing 

different climate hazards. Calcutta is 



flanked by Hugli River and the soil is 

formed by alluvial deposit of Gangetic 

delta. The wet lands surroundings the 

city in the west and south west are now 

filled by urban expansion. The important 

climate risks the city is facing are 

tidal flooding, cyclones, urban flooding, 

water logging and sea level rise along 

the coast. Although there are no specific 

studies on the impact of climate 

change on Calcutta, there is a consensus 

that current climate hazards may be 

exacerbated due to climate change. As 

can be seen from the table that Calcutta 

has both dry land area and low elevation 

coastal zones which implies climate 

change is likely to have adverse impacts 

interns of increasing droughts in the dry 

land areas and sea level rise in the 

LECZ in the city. 

Chennai 

Chennai is one of the largest cities in 

India having a population of around 

seven million in 2001. Chennai is facing 

the climate risks of groundwater depletion, 

salinity intrusion, sea level rise and 

coastal flooding. In Chennai the monsoon 

rainfall is scanty and highly seasonal 

rainfall creates floods, as the 

drainage pattern is insufficient and the 

natural flood water evacuation systems 

such as canals, paddy fields and wetlands 

have been widely destroyed (Nair et al, 

2009). Chennai is also facing the risk of 

sea level rise and severe water shortages 

and the water bodies on which the city of 

Chennai depends are facing water shortage 

associated with climate anomalies 

and anthropogenic impacts. Unscientific 

storage system in Chennai causes 

tremendous water loss due to evaporation. 

Rising demands create more dependency 

on groundwater and the current 

rate of extraction using tube wells is 

not at all sustainable. 

The above analysis shows that the 

megacities are currently highly vulnerable 

due to the demographic, geographical 

and climatic characteristics. The city of 

Chennai is also 

facing the risk 

of sea level 

rise and severe 

water shortage 

associated with 

climate anomalies 

Chennai, Calcutta, and Mumbai is currently 

facing the problems of urban 

flooding, tropical cyclones and sea level 

rise. Delhi is facing the problem of heat 

waves and cold waves and increasing 

water shortages. Climate change is expected 

to accentuate the current problems 

in the cities. However, all the populations 

are not equally vulnerable to the 

impact of climate change. The most vulnerable 

are the people living in slums, 

poor people living in environmentally 

riskier areas, migrants living in informal 

settlements. Climate change can impact 

the urban residents through multiple 

channels such as, loss of livelihood opportunities, 

loss of community and informal 

social safety nets, reduced resilience 

to future shocks and coping capacity and 

reduced access to affordable public services 

leading to higher coping costs and 

consequent reduction on spending on 

basic needs (Revi et al, 2009). 

Climate Risk Management: 

Can We Adapt? 

Adaptation to climate change requires 

an effective Climate risk management in 

the Indian cities. Disaster management 

is one of the most important components 

of climate risk management in the cities. 

However, as the current disaster management 

policies in the megacities are 

not adequate for a successful adaptation 

to climate change and reducing the vulnerabilities 

of the poor who are most 

affected due to the climate hazards. For 

example, the government of Maharashtra 

developed India’s first urban disaster 

management plan (DMP) for Mumbai 

which identified flooding as a significant 

risk, pinpointed bottlenecks in each 

ward, and vulnerable slums and populations. 

However in spite of this, no systematic 

action has been taken over half 

a decade to mitigate the risks of disasters 

(Revi, 2005). Similarly, other megacities 

have also their disaster management 

plans. However, very less emphasis has 

been given to the issue of adaptation to 

climate change in the disaster management 

plans. 

It is now increasing accepted that local 

government plays an important role in 

reducing the risks of climate change and 

increase the resilience of cities to the 

impacts of climate change. The 74 th constitutional 

amendment of India places 

the responsibility of town planning in 

the hands of local government. However, 

states have not transferred the function 

to the city effectively (Revi, et al, 2009). 

The following important case study 

shows how local government can play an 

important role in disaster management 

in the cities. 

Adaptation to Climate Change: 

An Agenda 

The above section discusses that all the 

megacities are vulnerable due to the 


31


impacts of climate change due to different 

demographic, socio-economic 

factors. However, adaptation of cities 

to climate change has not received 

much attention at the global level and 

at the national level in India (IIED, 

2007, Revi, 2007). What is needed is 

urban climate change adaptation plans 

for the vulnerable people in the megacities. 

The state of adaptation planning 

in not equipped to deal with the 

future climate hazards. Analysis of 

opportunities and constraints associated 

with the implementation of local 

adaptation measure in eight cities of 

the world including Delhi shows that 

the challenge of climate change adaptation 

to a large extent connects to and 

emphasizes existing local development 

concerns and they are inextricably 

linked with local driving factors that 

determines vulnerability (Heinrichs et 

al, 2009). Further, there is a need to 

integrate climate change adaptation 

plans into city development plans 

which requires the awareness and understanding 

of climate risks at the local 

level (Tanner et al, 2009). The immediate 

concern for India is to ensure 

that our cities adapt to the adverse 

climatic conditions. 

One of the most important issues in all 

the four cities is the water supply; climate 

change is likely to decrease the 

water supply in the cities. Extremes in 

climate add to the water crisis and further 

deteriorate the urban environment. 

Most of the existing water supply in the 

cities were designed decades earlier and 

are now highly inadequate to meet the 

increasing demands. According to the 

World Bank (2001) Chennai and Delhi 

are ranked as the worst performing cities 

in terms of hours of water availability per 

day, while Mumbai and Calcutta are 

ranked second and forth worth performers 

respectively. 

The disaster management plans in 

India is not adequate to deal with the 

risks of climate change in the future and 

there is a need of shift from reactive to a 

proactive disaster management policies 

in the cities. However, India is one of the 

few large countries that have a central 

authority to address the disaster management 

and similar well developed institutions 

at the state level (e.g. GSDMA, 

OSDMA). Other than disaster management 

policies we require proactive planning 

to deal with the climate risks. For 

example, after the Mumbai floods in 

2005 different proactive actions were 

planned such as maintenance of drainage 

systems, improved flood early warning 

system etc. 

For developing a climate change adaptation 

framework for the urban cities, we 

need to identify the links between the 

climate risks and human vulnerabilities. 

Further, it requires developing the adaptive 

capacities of the most vulnerable 

populations in the urban areas. The paper 

suggest the following points for a 

successful adaptation to climate change 

in the megacities. 

1. Developing an Urban Adaptation 

Programme of Action to address the 

urban climate change risk reduction. 

2. Integrating the climate change risks 

into current city development plans. 

3. Developing the adaptive capacity of 

poor people who are living in the 



vulnerable zones in the city through 

income and employment programmes. 

4. Providing downscaled climate change 

impacts at the city level. 

5. Providing an effective early warning 

system in the cities to reduce the loss 

from climate disasters. 

6. Improving the basic services like access 

to affordable housing, water, 

sanitation and public transportation 

system for the poor people who are 

most vulnerable to the impacts of 

disasters and climate hazards. 

Conclusion 

Climate change is expected to increase 

the frequency and intensity of climate 

related hazards such as droughts and 

floods in India. A large concentration of 

population, economic activities in the 

urban areas exposed to the current hazards 

and future climate impacts poses a 

critical challenge for the government to 

manage the climate risks in the megacities. 

Reducing the vulnerabilities of 

people to the risks of climate change 

requires developing the adaptive capacities 

of most vulnerable population in the 

cities, who are more susceptible to the 

impacts. Successful adaptation to climate 

change risks in the megacities needs 

identification of differential vulnerabilities 

of people in the cities developing 

their resilience to climate shocks through 

a mix of economic, infrastructural, disaster 

management policies. 

End-notes 

1 

Water availability is calculated from 

the water surplus that represents excess 

water from precipitation after 

evapotranspiration and soil moisture 

recharge 

References and 


• Revi, Aromar (2005), “Lessons from 

the deluge: priorities for multi-hazard 

risk mitigation”, Economic and Political 

Weekly Vol 40, No 36, September, 

pages 3911–3916. 

• TERI (1996), The Economic Impact 

of a One Metre Sea Level Rise on the 

Indian Coastline: Method and Case 

Studies. Report submitted to the Ford 

Foundation, Tata Energy Research 

Institute. New Delhi. 

• Saleemul, Huq. (2002). Lessons 

learned from Adaptation to Climate 

Change in Bangladesh. International 

Institute for Environment and Development 

(IIED), UK, and Bangladesh 

Centre for Advanced Studies (BCAS), 

Dhaka, Bangladesh. 

• Satterthwaithe, D. (2006). Climate 

Change and Cities. London, IIED. 

• IPCC (2007) Climate Change 2007: 

Impacts, Adaptation and Vulnerability, 

Summary for Policy Makers. Geneva 

• De Vries, HJM, Revi, A. Bhat, G K. 

H. Hilderink, P. Lucas (2007). India 

2050: Scenarios for an uncertain future, 

Netherlands Environment Assessment 

Agency (MNP), Bilthoven. 

• Dasgupta, S. et. al. (2007). The Impact 

of Sea Level Rise on Developing 

Countries: A Comparative Analysis, 

World Bank Policy Research Working 

Paper 4136, February 2007 

• Mehotra S, et al, Framework for city 

climate risk assessment, 5 th Urban 

Research Symposium 2009 

• Mc Granahan et al, (2007), The rising 

tide assessing the risks of climate 

change and human settlements in low 

elevation coastal zones, Environment 

and Urbanization, 19;39 

• Revi, A. (2007). Climate change risk: 

An adaptation and mitigation agenda 

for Indian cities. India Background 

Paper for Global Urban Summit. Bellagio, 

July, 2007. 

• Census of India, 2001 

• Disaster Management: Global Challenges 

and Local Solutions, Rajib 

Shaw and R R Krishnamurthy, (Eds), 

Universities Press (India) Private 

Limited, India, 2009. 

• Alex De Sherbinin et al, (2007) The 

vulnerabilities of global cities to climate 

hazards, Environment and Urbanization, 

19;39 

• Nair, K. S, (2009), “An assessment of 

impact of climate change on the megacities 

of India and of the current 

policies and strategies to meet associated 

challenges”, Firth Urban Research 

symposium 

• Deborah Balk et al, (2009), “Spatial 

distribution and risk for urban populations: 

An international overview” 

• World Bank (2001), Background paper-International 

conference on new 

perspectives on water for urban and 

rural India- September, New Delhi. 

(After finishing Masters and M.Phil in 

Economics, MR PANDA is currently 

pursuing his doctoral studies at the Centre 

For Ecological Economics and Natural 

Resources (CEENR), Institute for Social 

and Economic Change (ISEC), Bangalore, 

India. His research seeks to examine 

the differential vulnerability of rural farming 

households to Climate Variability and 

Change and their current coping and adaptation 

mechanisms to it. 

The views expressed in the write-up are 


policy or position of the organization.) 


33


Green City Carpool 

System for the 

Traffic Management 

The best feasible way to deal with consitatntly increasing private cars is to 

promote car pool, which is an ideal alternative for future traffi c management 


G REEN GAPS 

Srinivasulu Rajendran 

Research Scholar (Economics), 

Centre of the Study of Regional 

Development (CSRD), Jawaharlal 

Nehru University (JNU), New Delhi 

Kirti Danwar 

Consultant (Economic Policy), 

New Delhi 

Delhi being the national 

capital of India is adjudged 

one of the most congested 

cities in the world. The 

root cause of the problem is the fuelling 

demand for personal conveyance particularly 

cars. This has brought to fore the 

government failure to ensure efficient 

public transport system and its management 

and keeping vehicular fleet under 

control. Besides, there are factors which 

are lending to the gravity of the situation 

such as exponentially increasing urbanization 

rate, fast rising per capita income, 

marked improvement in affordability, 

evolving sophisticated lifestyle and cheap 

auto loans. Where, increasing cars on the 

Delhi roads give the impression of raising 

standards of living; on the other hand it is 

significantly contributing to economic and 

environmental problems, which is bound 

to have major repercussions on wider issues 

of state and national importance like 

public health, fiscal deficit and economic 

progress of this very state. To put a break 

on this vicious circle, car pool is the best 

solution and needs full-fledged encouragement 

(Flow chat 1). 

Objectives of the Study 

The objectives of the study are follows: 

I. To analyze the trends in the number, 

share and growth of vehicles in Delhi. 

II. To analyze the impact of growth of 

vehicles particularly cars on the various 

factors. 

III. The study provides the policy suggestions 

to improve the existing systems. 

Trends in the Number, Share 

and Growth of Vehicles in Delhi 

To the extent that the total vehicular 

fleet in Delhi has become far more than 

that of India’s three major metros - 

Mumbai, Kolkata and Chennai put together 

at present. According to State of 

Environment Report (2010) the statistics 

reveal that in 1998-99 there were 

3.05 million vehicles in Delhi which has 

gone up to more than 6.30 million in 

2008-09, more than threefold increase 

in the volume. A further bifurcation 

Flow Chat 1: Vicious Circle of Traffic 

Reasons for Increasing Vehicular Fleet 

1) Rising urbanization rate 

2) Rising per capita income 

3) Raising standard of living 

4) Inefficient public transport system 

5) Cheap auto loans 

Repercussions 

1) Low work productivity leads to low state 

GDP and decline in per capita income 

2) Unwanted expenditure on health 

3) Impact on Common Wealth game 

4) Huge burden on state exchequer 

5) Low productive state investment and low 

economic development 

6) Rise in accidents and traffic rules violation 

Effects of Rising Traffic 

1) Traffic congestion 

2) Pollution (Environmental damages) 

3) Health problems like respiratory diseases, 

cardiovascular diseases, stress, etc 

4) More traveling time 

6) Inefficient utilization of energy and fuel 


35


Figure 1: Share of Vehicles in Total (%) in Delhi 

100% 

80% 

60% 

40% 

20% 

0% 

1991 

Cars/Jeeps 

Buses 

1992 

1993 

1994 

indicates that there is a stark rise in the 

cars as compared to the commercial 

vehicles in absolute terms, though both 

of them more than doubled in a decade’s 

time to 5.82 million and 0.48 million 

respectively by 2008-09. 

1995 

1996 

1997 

Motor cycles scooters 

others 

1998 

The Figure 1 shows that the share of 

cars/jeeps and motors cycles/scooters to 

the total vehicles increased from 1990-91 

to 2007-08. Decennial growth rate for the 

period 1998-2008 is highest for the cars 

(126%) followed by taxies (82%) and 

motorcycle/scooters (80%), whereas auto 

rickshaws have experienced negative 

growth rate (Figure 2). It clearly shows 

that the exponential growth in the number 

of personalised vehicles has increased in 

Delhi. This uncontrolled growth in the 

vehicles mainly cars is an outcome of several 

exogenous factors. 

Auto rickshaws 

Goods Vehicles 

Taxies 

The Impacts of Growth of 

Vehicles on the Various Factors 

First, due to growing economic activities, 

there has been marked rise in the Net 

State Domestic Product (NSDP), more 

than doubled during 2001-08. Subsequently, 

led to surge in the per capita income of 

the people of Delhi of 93% in the same 

period and has been consistently much 

higher than national per capita income 

figures for almost two decades (Figure 3). 

This increase in purchasing power has 

greatly improved the car affordability of 

people. A good proportion of households 

This uncontrolled growth in the 

vehicles mainly cars is an outcome 

of several exogenous factors 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

possess more than one car. 

2006 

2007 

2008 

Second, ready availability of auto 

loans at soft rate of interest in spite of 

rise in policy rates by RBI four times so 

far in 2010 to tame inflation, has also 

fuelled the demand. These two factors 

let alone has increase overall sales of 

vehicles not just in Delhi but in India as 

well. According to the figures released 

by Society of Indian Automobiles Manufacturers, 

there has been 23% rise in 

the vehicles in the month of August, 

2010 as compared to the same month 

last year. Whereas, cars has seen 33% 

growth and prospects are looking strong 

for the rest of the year as well. 

Third, urbanization rate, responsible 

for growing vehicle fleet in national capital 

is also seeing a rapid upward trend on 

account of both natural growth rate and 

migration. Between 1991 and 2000, Delhi 

population has grown at a decadal growth 

rate of 47%. It is expected to touch 18 

million mark by 2011, if the current annual 

population growth of four percent 

persist. There is high correlation between 

the increasing urbanization and number 

of cars in Delhi. 

Fourth, government failure in providing 

sturdy public transport system and 

poor connectivity has left people with no 

choice but to rely on personal conveyance. 

All these factors have led to impeccable 

surge in the demand for cars. This 

rising car fleet is becoming a great cause 

of concern given its ill effects. The immediate 

is the regular long traffic jams in 

Figure 2: Decennial Growth Rate of Vehicles - 1998 to 2008 

Overall 

Cars/jeeps 

Taxles 

Motor cycles/ scooters 

Buses 

Goods vehicles 

Auto rickshaws 

Cited in Indiastat, source : Transport Department, Government of NCT of Delhi. 

-10% 10% 30% 50% 70% 90% 110% 130% 


G REEN GAPS 

Figure 3: Per Capita Income at Current Prices NSDP and PCY of Delhi (1999-2008) 

90000 

14000 90000 

Rupees 

80000 

70000 

60000 

50000 

40000 

30000 

20000 

10000 

0 

1993-94 

1995-96 

1997-98 

1999-00 

2001-02 

2003-04 

2005-06 

2007-08 

Delhi 

India 

NSDP (Rs. Crores) 

12000 

10000 

8000 

6000 

4000 

2000 

0 

1999-00 

2000-01 

2001-02 

2002-03 

2003-04 

NSDP (Rs. Core) 

2004-05 

2005-06 

2007-08 

2008-09 

State per capital Income (Rs.) 

80000 

70000 

60000 

50000 

40000 

30000 

20000 

10000 

0 

State per capital Income (Rs.) 

Delhi and NCR. Delhi government has 

taken several measures like increasing 

the length of road network, widening of 

roads, construction of flyovers/grades 

separators and launching of metros, however 

the traffic congestion continues to 

increase unabated. According to latest 

figures, road network had been enlarged 

from 28,508 km in 2000-01 to 30,985 km 

in 2007-08, whereas, the vehicles had 

almost doubled from 33.7 lakhs in 

2000-01 to 63 lakhs in 2008-09. Consequently, 

the average vehicular speed has 

dropped to 15 km/hr from 18 km/hr. According 

to TERI, it is likely to further 

reduce to mere 5 Km/hr by 2011 end if 

the present scenario of huge imbalance 

between pace of increase in road network 

and volume of vehicles continues. Further, 

the effective distance travelled even 

by a personalised vehicle has also increased 

by about 50%. 

As a result of the massive rise in the 

vehicle fleet in Delhi in comparison to 

other major Indian cities, it has been assigned 

the maximum vehicle pollution 

loads across all pollutants categories, far 

more than other cities in consideration. 

The annual Nox trend reflects a significant 

ambient concentration over the 

years owing primarily to growing vehicular 

fleet mainly diesel powered cars. The 

other air pollutants are found to be above 

standards marks due to congestion, traffic 

jams etc. Additionally, Delhi has also 

potential for low ozone concentration 

build up owing to abundant sunlight and 

high vehicular movements. Concerns 

have been expressed about low concentration 

of ozone which is essential for 

protection from Ultra violate rays. This 

unrestrained increase in traffic mainly 

due to cars has inevitable negative externalities 

and bearing in terms of environmental 

damages (poor air ambient quality 

in spite of wide usage of clean fuel “CNG”, 

unleaded fuel, EURO II and modern exhaust 

technology). 

All this bound to have irrevocable spell 

on people’s health and work productivity, 

which is very much pertinent. High incidence 

rates of respiratory diseases, cancer 

and heart disease have been recorded in 

the city. The impact is not just limited to 

the adults but children are also at a grave 

risk of being affected by significantly 

lower serum vitamin D and high levels of 

parathyroid hormone and alkaline phosphate 

levels. The impact of this is also 

seen on the high levels of stress, poor family 

and social life. 

Besides, consistently high rates of car 

According to latest figures, road 

network had enlarged from 28,508 km 

in 2000-01 to 30,985 km in 2007-08 

accidental cases both injured and fatal had 

been registered for three consecutive 

years, 2004-06.This is followed by motorcycles/scooters. 

Apart from direct and 

visible consequences, this growing car 

fleet is aggravating other indirect but 

equally noteworthy social and economic 

problems, which are bound to have major 

repercussions on wider issues of state and 

national importance like sub optimal utilization 

of energy/fuel, troubling waters 

for the Common Wealth Games, burden 

on state exchequer, diversion of public 

investment towards unproductive purposes, 

deteriorating public health, poor 

work productivity and hence likely decline 

in economic progress of this very state in 

the future. 


37


statistical package STATA. Prior to IFPRI, 

he was working with IWMI, UNCTAD, 

TERI, and ICRIER in various capacities and 

projects. Alongside he has also taken various 

short term consultancy with UNDP, UNWFP, 

JBIC and DHI. His area of research interest 

includes Applied Econometrics, Household 

Survey Analysis, Time Series Analysis, Agricultural 

Economics, Trade and Environmental 

Economics. He also expertise in various 

econometric software applications and database 

includes STATA, E-Views, SPSS, WITS, 

Capita Line, Prowess and Business Beacon. 

He has done his master from Madras School 

of Economics (MSE). 

Conclusion 

The best feasible way to deal with this 

grim situation is to promote car pool, 

which is an ideal alternative for future 

traffic management. There are various 

initiative and innovative business models 

adopted by the various organizations in 

India to reduces traffic congestion and 

pollution level etc, but very few of them 

are successful in India. In Delhi, one of 

the successful car pool system is Green 

City Carpool initiative by young entrepreneurs 

Vineet Danwar and Sunil Palia 

(Times of India dated on 9 th August, 2010) 

having many fold benefits like, it will help 

in reducing travel cost and time; make 

travel more pleasurable and convenient; 

ensures better security to individuals; increase 

social networking opportunities; 

reduces congestion on roads which helps 

increase driving speed and help in reducing 

pollution, etc. Such carpools are the 

future of the Delhi traffic management 

and needs encouragement for the wholesome 

benefit of every citizen. 

Reference and 


• Government of Delhi (2010) “State of 

Environment Report- 2010”, Government 

of Delhi 

• Transport Department, Government of 

NCT of Delhi - Statistical Data cited 

from “Indiastat” 

• Times of India (2010) “Jump into car 

pool to tide over jams”, http://timesofindia.indiatimes.com/city/delhi/Jump-intocar-pool-to-tide-over-jams/articleshow/6277303.cms, 

Times of India 

(SRINIVASULU is pursuing his PhD in 

Economics from Jawaharlal Nehru University 

(JNU) New Delhi on the topic titled 

-Changing Market Structure and Marketing 

Efficiency in Fruits and Vegetables in India: 

A Case Study of Tamil Nadu. He was working 

as a Research Analyst at International Food 

Policy Research Institute on the USAID 

project "Rural Service Hubs: Business Catalysts 

for Rural Competitiveness and Inclusiveness" 

to analyze the household survey by using 

KIRTI DANWAR is individual consultant 

and consulting for various national and 

international organizations on the micro 

and macroeconomic issues. Prior to this, 

she was working as a Consultant in International 

Market Assessment (IMA) India Pvt. 

Ltd. The work task involved designing questionnaire, 

conducting primary survey online 

and analysing the data with the help of 

econometric models by using econometric 

software. Before IMA, she was working at 

Evalueserve.com Pvt Ltd as Assistant Manager, 

Market Research Data Analytics. During 

her tenure, she has handled multiple 

projects of top most reputed companies, 

related to various sectors like Pharmaceutical 

products, Logistics, FMCG products, 

Education, Security devices, Telecom etc., 

using various statistical techniques and 

tools. Her area of research interest includes, 

Applied Econometrics, Macro Economics, 

Time Series Analysis, Agricultural Economics 

and Trade. She has done his master from 

Delhi School of Economics. 





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An Alternative and a 

Less Painful Process 

By urbanising and by providing Urban facilities in the rural areas and by providing 

jobs to the educated young villagers like GramIT, the problem of overpopulation of 

Indian urban areas due to migration can be solved 

T.H.Chowdary 

Director, Centre for Telecom 

Management & Studies; Chairman, 

Pragna Bharati, Fellow, Tata 

Consultancy Services, Hyderabad 

Historically great civilizations 

like those of the Greeks 

and Romans; Mesopotamia, 

Persia and Mohenjo- 

Daro , even the Maya, Inca and Aztec 

were all urban civilizations. The city states 

of ancient Greece are well recorded in 

history. It appears that rural populations 

had been meant almost all over the world 

only for producing the food required for 

the urban populations besides feeding 

themselves(and for producing men for the 

State’s armies). Because of the density of 

people in an urban conglomeration communications 

between people becomes 

easier and the interchange and clash of 

ideas conduce to the growth of political 

systems, economic ventures, prosperity 

and security and empire -building. It is the 

cities especially those living on the Seashores 

which were trade centers throughout 

history, Seas provided the cheapest 

and the best means of transportation of 

goods. Benefits of technology are easily 

available first in the urban centers and 

later elsewhere in the country. Hospitals, 

telecoms, entertainment (like broadcasting 

and drama and cinema), schools and colleges 

are all more sustainable and within 

easy reach (affordability is a different matter) 

of city dwellers and not of the rural 

folks. When the economies are not so 

developed, then large number of people 

are to be engaged in agriculture to feed 

themselves and the city dwellers. 

In all the developed countries we see 

that agriculture contributes no more than 

five percent to the Gross Domestic Product 

(GDP) and less than five percent of 


M ITIGATE MIGRATION 

the working population is engaged in 

works related to agriculture. Agriculture 

is a rural profession. Industrialization 

which took place from the 18 th century in 

Europe and America by-passed India 

(and China) because of imperial colonial 

exploitative foreign rule. It is only in the 

last 100 years some industrializations has 

been taking place and cities are growing. 

In our country the contribution of agriculture 

to the GDP in 1951 was 65% to 70%. 

It is now 18% and continues to decline. In 

China it is between 12% and 15% and 

continues to decline. This is in line with 

what happened in the industrially developed 

countries. The difference between 

our country and the developed countries 

is what while in the latter industrial development 

took place over a long period and 

the migration of the rural populations to 

the cities took as much time, so that their 

administration had time to put in place 

institutions that are necessary for governance 

and human comfort and welfare. In 

India industrialization is happening fast 

since independence. The tertiary i.e services 

sector engaging educated people is 

now contributing over 55% of the GDP 

and it is growing. Manufacturing Industries 

all over the world are centered in and 

around the cities. They attract the labour 

from the country side. It may be of interest 

to know that when Jamshetji Tata 

started the first Textile Mill in Nagpur and 

later in Mumbai he was finding very difficult 

to get workers. The cities had much 

less population then. People had to be 

attracted from the country side. They had 

to be cared for, housed and looked after. 


41


Jamshetji Tata engaged agents to go to the 

countryside and sell the profession of 

industrial labour to inveigle the ablebodied 

from countryside to work in the 

factories in the cities. 

In India while the proportional contribution 

of agriculture to the GDP has declined 

from over 70% in 1951 to under 18% in 

2010. Those who depend upon agriculture 

and therefore remain in the rural areas has 

not been declining as fast. In 1951 the urban 

population in India was about 15%. 

Now it is over 30%. The rural population 

had come down only from 85% to 70%. 

The characteristic with the rural population 

now is that those who are educated 

and have acquired skills, the young are all 

emigrating to cities and towns. It is the 

unskilled and the aged who are largely remaining 

in the rural areas. Since the birth 

rate in the rural areas is higher than in the 

urban areas, even with the migration of the 

educated and the skilled, the rural population 

is not dwindling as fast as the contribution 

they make to the Gross Domestic 

product. No wonder that there is disparity 

in the Per Capita Income (PCI) in the urban 

and the rural populations. I reckon 

that the urban PCI is about seven times the 

rural PCI. But the cost of living in the rural 



areas is significantly less than in the urban 

areas. Most of the cost of living in rural 

areas is on food grains and since they produce 

it for themselves, the lower income is 

not a crippling deprivation. Lack of education 

and industrial skills confine people to 

rural areas. 

Whether urbanization is inevitable and 

better is a debatable point. As technologies 

of information, telecommunications 

and production (by robots) are extensively 

used, then it is quite possible that 

much of the activities that go on in cities 

can be performed in the rural areas (where 

the population is) themselves provided 

that population is educated, skilled and is 

able to handle the new technologies, machinery 

and devices. 

There has been some talk in our country 

of PURA — Providing Urban facilities 

to the Rural Areas. If there are good telecoms 

all the work in the services sector 

can be done from anywhere in the world; 

that is, the rural areas themselves. If the 

educated in the rural areas can be provided 

work there itself, then they need not 

have to migrate to cities for work. A concept, 

GramIT was developed and is under 

trial implementation in and around a 

small town, Bhimavaram in West Godavari 

District of Andhra Pradesh. 

Broadband telecom facilities which 

normally are first provided in big cities are 

extended to a small town, Bhimavaram 

and villages around it, by Optical Fiber 

upto Bhimavaram and from there, by 

wireless to villages. Graduates from rural 

areas in the villages within a circle of 

about seven km radius from a chosen village 

are interviewed and selected for their 

intelligence and industry and communication 

abilities including proficiency in 

working with computers. They were 

given further intensive training both in 

English and computers and work on computers 

which would enable them to do the 

work outsourced by US companies to a 

company in Hyderabad which has planned 

to get it done from the villages. The selected 

graduates in groups of 100 are assigned 

to a client in the US for offshore 

work. Before they were actually working 

for and interacting with an US client, the 

in-house work of the Hyderabad company 

was first got done from this rural group. 

When once it was found satisfactory, they 

were seconded to the US client. The expense 

to the Indian company by employing 

these graduates in situ is much less 

than if they are to be employed in Hyderabad 

where the costs of living are higher. 

Some of the reduced amount in the expense 

could be passed on to the US client, 

thus getting a competitive edge. 

Providing highly paying jobs for rural 

graduates within their villages has wonderful 

effects. So much money is now 

flowing into the village by way of salaries, 

the highly paid are living not in the congested 

and decaying and decease-prone 

and pollution-affected city but in the village 

itself; their high pay leads to better 

living. They want better housing, better 

roads, better health care; schooling and 

an improved village life. Thus broadband 

communications by taking the work to 

where people are and not moving the latter 

to cities can reduce if not significantly 

limit, the migration of rural people into 

cities. No Indian city or town as it is today, 

is capable of being expanded and improved 

to accommodate the hundreds of 

millions of rural educated young if they 

are to move for work and better life to the 

cities. The GramIT project demonstrates 

that the rural migration of the educated 

young can be stopped. In the process, the 

rural areas get all the facilities and conveniences 

and comforts that are sought in 

urban life. Commutation is reduced, 

crime will be much less; families will be 

encouraged to have limited number of 

children and give them high quality education 

which enables them to do the ICT 

— based work for global companies. Instead 

of wasting hundreds of billions of 

rupees on trying to improve the unimprovable 

present day cities which are already 

groaning under the weight of ever 

increasing migrant workers and populations, 

governments would do well to “rurbanise” 

that is, urbanizing the rural areas 

not in the traditional way but by putting 

facilities and infrastructures in the rural 

areas that are less costlier than the cities. 

This is a project which has to be scaled up 

and tried in much larger areas so that this 

can be the template for the whole of India 

to arrest urbanisation. 

More importantly there must be ideological 

commitment to this unorthodox method 

of containing immigration from rural areas 

into the traditional urban centers. 

While a new idea and a new project can 

be tried, there has to be a plan executable 

for the prevention of “slummification” of 

cities by rural immigrants into existing 

towns. Middle and upper class life in any 

city cannot be sustained without “menial 

workers”, (maids, sweepers, drivers, cleaners, 

conservancy staff and so on). These are 

the people who are immigrating into cities 

because they don’t have enough paying 

work in the rural areas as agriculture gets 

more and more capital and machine intensive 

requiring fewer workers. The 

hordes of immigrants have no place to live 

in the cities. They have to have water and 

electricity and as importantly transportation 

to places of work. Instead of multitudes 

assisted by vote-courting politicians 

encouraging them to encroach upon 


43


open spaces like parks or government residential areas of the immigrants should 

lands, as such workers are essential part be connected to the city centers by roads. 

of the human infrastructure that is required 

for urban life, they should be for these immigrants to work in the city. 

There should be free transport available 

looked after by the city administration. The state may therefore run busses between 

7 am and 10 AM and in the other 

Long ago the great statesman Sri Rajagopalachari 

thought about this and had direction from 5 pm to 8 pm. Those who 

proposed the following line of action. As go to city for work may be given identity 

land outside the city centers is less expensive 

and less coveted than in the city areas, urban community is thus made to indi- 

cards to avail the free transportation. The 

government should acquire the not so rectly pay for the services required from 

inexpensive land for housing, all the first these immigrants from rural areas. Like 

and perhaps the second generation immigrants 

into the urban areas. They out around a number of cities. 

the Gram IT, this idea must also be tried 

should provide inexpensive economy The Jawaharlal Nehru Urban Development 

Mission costing about Rs. 67,000 

housing, protected water, medical facilities 

and electricity and also schools upto crores to cover 65 cities, to be implemented 

in seven years, half of which are 

SSLC for children of the immigrants. Such 

Cost of De-slumming 

Dharavi, situated between Bandra and Mahim is the most populated and densest 

slum in India, perhaps in Asia. It started building up from the 1920s. Poor, indigent, 

workless from as far as UP and Bihar and Tamilnadu flocked into Mumbai to find 

work and to make a living at Dharavi. It has now a population estimated to be about 

a million in an area of just 0.67 sq. miles. It has got only one toilet for 1450 residents. 

Mahim creek is used by residents for urination and defecation leading to the spread 

of contagious diseases. It is estimated to have 5000 businesses and 15,000 single 

room factories, almost all of them illegal, non-tax paying unregistered, Law enforcement 

authorities may enter but cannot come out alive. 

Since 1997 there have been plans to redevelop Dharavi like the former slums (Tai 

Hang) of Hong Kong. In 2004, the re-development was estimated to cost Rs. 5000 

cr. Nothing was done since then. The cost is now estimated to be Rs. 15,000 cr. 

involving construction of 2.8 mln sq. mtrs of housing, schools, parks and roads to 

service the existing population along with 3.7 mln sq mtrs of residential and commercial 

place for sale, the proceeds of which would partially financ the redevelopment. 

Since the plan envisages the provision of only 225 sq. ft per existing family 

and it is meant only for the families existing before year 2000, the residents are 

resisting and the slum grows and deteriorates while the cost escalates. 

Every existing Indian city is teeming with such slums to which the workless rural 

folks are flocking, in search of work as well as to escape the shame of indigence 

and menial work by high caste poor in their native place. They are willing to do any 

menial work where their caste can be hidden. Such poor people are prone to crime, 

smuggling and drug–peddling. Mumbai’s wealth is not a little due to the slums. 

already over, will be a futile exercise, a 

money gone somewhere not known to 

many, just like the Rs. 26,000 spend in 

Commonwealth Games — a spectacle in 

a flash at immense cost. The widened 

roads with mosques, mazars, crosses and 

mandirs left in the middle will every soon 

be filled with vehicles; that will be a fight 

against infinity for eternity with money 

going into “black-holes”. The alternative 

of many new planned cities ( like Chandigarh) 

under P.P.P schemes is far more 

desirable, along with “Rurbanisation”, 

Gram-IT and Rajaji idea of social provision 

of housing and transport for immigrants 

to urban areas, the flow regulated 

by a permit system. 

Industries, especially the chemical industries 

and pharmaceutical should not 

be allowed to be established in or around 

cities. The Bhopal gas tragedy should be 

a lesson for us. The long term pollution by 

effluents sinking into the soil wherever 

pharmaceutical industries are located, is 

a great hazard. The prosperity and dispersal 

of industry in the US and western 

Europe is largely due to the existence of 

an extensive road network. If such road 

and telecom networks are available 

throughout the territory of India, it would 

be immaterial as to where industries are 

located. By dispersing them over as several 

states urbanisation enumeration 

around manufacturing industries can be 

avoided. In the last two decades manufacturing 

itself has been widely distributed 

throughout the world. A finished product 

is coming out at one place by assembling 

different parts procured from different 

parts from many towns and countries 

distributed around the world. Distribution 

networks are facilitating dispersed production. 

Even vegetables and other home 

consumption items are being procured 



thoughts and precepts of great Rishis, 

bring about harmony between scientific 

and technological development and spiritual 

life that man, God’s highest creation 

lives a life in harmony with nature? 

from several countries in the world and 

are available all over the world in every 

place, round the seasons. This is revolution 

that has come about by advances in 

surface and telecom advances. 

India is following the western mode of 

economic development. It is lacking in 

human development in the sense that 

humans being more and more simply, 

consumers and money earners. They are 

not realizing the spirituality of human life 

itself. Developing countries like India and 

China have a great opportunity to have a 

new paradigm of development. Economic 

development centered around urban areas 

is de-humanising and de-spiritualising 

people. This is also leading to our planet 

becoming rapidly uninhabitable because 

of rising consumption and exhaustion of 

earth’s resources and the processes that 

are leading to the warming of the globe. 

As part of the global endeavour to prolong 

life on this planet, a new paradigm for 

economic development not based upon 

urban life but the provision of traditionally 

city-available facilities and comforts in 

rural areas is worth trying. This requires 

statesmanship and wisdom and not politics 

whose aim is capturing state power and 

using it self-aggrandizement by use of levers 

of power. Would men be wise? Would 

India with its famed heritage of the 

(DR. T.H. CHOWDARY held executive, 

managerial and directorial positions (General 

Manager, Deputy Director General) in 

the Departments of Information and Broadcasting 

and Telecommunications, of the 

Government of India. He was the founding 

Chairman and Managing Director of India’s 

Overseas Communications Corporation 

(VSNL). He was Governor, INTELSAT, 

(Washington) and Executive Director, IN- 

MARSAT, (London). He was Senior Expert 

of the International Telecommunications 

Union in Guyana and Yemen and was engaged 

by the CIDA (Canada) for writing the 

Green Paper for restructuring of Telecoms in 

South Africa and for drafting Information 

and Communications Policy in Nepal. He 

was Member of the Prime Minister of India’s 

National Task Force on Information Technology 

and Software. Dr. Chowdary was Information 

Technology Advisor in the rank of 

Minister of State to the Government of Andhra 

Pradesh, mentoring the State’s extensive 

programmes for e-Governance, Government 

to Citizen services (e-Seva), establishment of 

Internet Kiosks, computer education in 

schools and colleges and broadband applications. 

Dr Chowdary was Fellow of Satyam 

Computer Services and the founding Director 

of the Center for Telecom Management and 

Studies and also serves as a Chairman of 

Pragna Bharathi. He is the author of several 

books on telecommunications, information 

technology, Indian culture and politics. 





45


Conceptualising 

Rural-Urban 

Dynamics 

For Sustained growth to take place social surplus produced 

by the Agricultural sector must fl ow back to rural areas in the 

form of landlords' rents and entrepreneurs' profi ts 

Alex M. Thomas 

Research Scholar 

(M.Phil Economics), 

University of Hyderabad 

Modern economic theory begins in 1776, with the 

publication of Adam Smith's Wealth of Nations. 

This period also coincides with the Industrial 

Revolution, which took place in large parts 

of Europe. In his book, Smith gives reasons for promoting 

manufacturing sector. He posits that this sector enjoys possibilities 

of unlimited division of labour, which would contribute to 

raising both production as well as productivity. Subsequent 

economists formulated theories, which neglected the role of 

agriculture, as a crucial sector in economic growth. However, 

once we take a look at the works of authors who wrote before 

Smith, we notice that the process of urbanisation did not take 

place without any strong dissent whatsoever. One such strong 

dissent came from a group of French economists known as 

'Physiocrats', of whom, Francois Quesnay was the leader and the 

most prominent. An inquiry into their work attains significance, 

for modern economic theory does not know how to accommodate 

dichotomies in an economy, such as the rural-urban divide 

or the formal-informal separation, in a comprehensive manner. 

Therefore, this article tries to clarify the distinct yet interrelated 

roles both the rural areas and the urban areas play in economic 

growth by revisiting the two major pre-Smithian economists – 

Richard Cantillon and Francois Quesnay. 

Richard Cantillon, writing around the 1730s, systematically 

analysed the emergence and role of villages, market towns and 

cities. This account survives in his only work – Essai sur la Nature 


P EOPLE BEFORE PELF 


47


du Commerce en General – which was published 

posthumously in 1755. His economic 

analysis is tethered to the concept of social 

surplus, which refers to the produce that is 

left over after necessary costs (of cultivation) 

are deducted. An increase in quantity and/or 

quality of land or an increase in quantity and/ 

or quality of labour would increase the social 

surplus. Alternatively, a reduction in the costs 

would also lead to a rise in the social surplus. 

Another perspective, which Cantillon provides, 

is that of social division of labour. He 

points out that the entire population in a 

country is socially divided between villages 

(rural) and towns (urban). Largely, the rural 

population engaged in agricultural activities 

and the urban population involved in manufacturing 

activities. 

As long as adequate land and labour was 

available, agricultural production would go 

unhindered. Also, an increase in agricultural 

surplus meant that there was more raw 

materials available for the manufacturing 

sector. That is, it is the agricultural surplus 

which sustained the output of the manufacturing 

sector. More importantly, it is the 

agricultural sector which provides food for 

the entire populace of a country, assuming 

that imports of food is a negligible amount. 

In addition, an increase in agricultural surplus 

also contributed to an increase in the 

extent of the market (to borrow Adam 

Smith's term), of both agricultural products 

as well as manufactured items. For, an increase 

in agricultural surplus meant that the 

incomes of the agricultural labour, who 

mainly resided in rural areas, rose, which 

was spent on consumption. Similarly, the 

increased production of manufactured items 

facilitated by an increase in agricultural 

surplus, would provide additional incomes 

to the labour in the urban areas which also 

would be spent on consumption. In this 

manner, an increase in agricultural surplus 

would foster economic growth via increases 

in income and consumption, which would 

motivate an increase of production (of both 

agricultural and manufactured articles) in the 

following period. In short, the presence of a 

sizable agricultural surplus was necessary for 

market towns and cities to grow, i.e. for urbanisation. 

However, it will be shown below 

that the presence of agricultural surplus 

alone is not sufficient for growth to take 

place in the rural areas. Next, we briefly go 

over Quesnay's political economy. 

When Quesnay was writing (1756 to 1767), 

French agriculture was in a state of ruin. This 

was due to rapid urbanisation which was 

orchestrated by government policies. Consequently, 

it led to large scale migration of 

An increase in agricultural surplus 

would foster economic growth via 

increases in income and consumption 

people from the countryside to the towns. In 

fact, as the historian, Fernand Braudel reminds 

us, the interaction between the villages 

and towns signify one of the “oldest 

and most revolutionary division of labour: 

the fields on one hand and the activities described 

as urban on the other” (Braudel 

1974, 373). Such migration of people and the 

disproportionate attention received by the 

towns led to a drain of wealth from the countryside 

to the towns. This policy measure was 

based on the state's notion of a peasant. As 

Quesnay writes, “The peasant is looked 

upon as a slave of the state. Rural life is 

made out to be the hardest, most troublesome 

and contemptible possible because 

rural dwellers are reserved for work only fit 

for animals. When a peasant tills the soil 

himself, it is a token of his poverty and his 

usefulness (Quesnay 1756, 22). Because of 

such a negative view the state had of rural 

dwellers/agriculture, Quesnay argued that 

“of all the occupations by which gain is secured, 

none is better than agriculture, none 

more profitable, none more 

delightful...”(Quesnay 1759, 15). In fact, the 

primary objective of Quesnay, was to demonstrate 

the importance of agriculture as an 

important sector in economic growth. 

With the aid of Tableau Economique, 

which is considered to be the prototype of an 

input-output table, Quesnay was able to 

convincingly show the demerits of a growth 

policy which favours a particular class – in this 

case, it was the urban manufacturers. One of 

the primary contributions of Quesnay to 

economic theory, was his depiction of the 

economy as a circular flow. This implied that 

the economy was an interconnected system. 

Therefore, a disproportionate flow of wealth 

in one sector at the cost of the other sectors 

would ultimately result in economic ruin. As 

Braudel highlights, the “town-country confrontation 

is the first and longest class struggle 

history has known” (Braudel 1974, 373). 

Hence, Quesnay maintained that it was essential 

for wealth, contained in the urban or 

manufacturing sector, to flow back into agriculture, 

so that production of food and raw 

materials could take place in the following 

period of production. By highlighting the 

interdependence in an economy, specifically 

in the production process, Quesnay was able 

to show that, the neglect of rural sectors/agriculture 

would prove detrimental to the 

entire economy in the long run. In fact, as 

even Smith notes, “The inhabitants of a city, 

it is true, must always ultimately derive their 

subsistence, and the whole materials and 

means of their industry from the country” 

(Smith 1776, 405). 


P EOPLE BEFORE PELF 

From the preceding discussion, it becomes 

clear that agricultural surplus, which arises 

mainly from the rural sector, is a necessary 

condition for overall economic growth and 

prosperity. However, Quesnay points out 

that sustained growth can only take place if 

the social surplus which is produced by the 

agricultural sector, in the form of landlords' 

rents and entrepreneurs' profits, flow back to 

the rural areas. However, as pointed out 

earlier, the presence of a large agricultural 

surplus is not sufficient to attain, what is now 

known as “inclusive growth”. From the works 

of Cantillon and Quesnay, it becomes clear 

that we need to examine the channels 

through which the rising incomes of the urban 

populace flow into the rural sector. In 

other words, it calls for a detailed study of the 

way in which the commodities as well as the 

people circulate between the rural and urban 

sector — the location of markets, the availability 

of good infrastructure, the number of 

intermediaries, the nature of production 

undertaken, the structure of earnings, the 

employment situation — which has been 

attempted at through the concept of the inter-sectoral 

terms of trade. However, this 

interaction or “struggle” between the rural 

and urban areas is much more complex that 

it calls for a far richer analysis. 

In contrast to the economics of Cantillon, 

Quesnay and even Smith, who had pointed 

out the interdependence in the production 

structure of an economy, the prevalent economic 

theory divides the economy into 

smaller parts, and studies them in isolation. 

That is, agricultural economics, industrial 

economics, urban economics, etc are considered 

to be legitimate areas of independent 

inquiry. This is one cause for concern. Another 

cause for concern is that the mainstream 

neoclassical/marginalist theory ascribes 

undue importance to the sphere of 

exchange, at the cost of almost a complete 

neglect of production structures and conditions. 

Whereas, only a study of production 

will throw light on the actual producers, their 

relation to the employer, the conditions of 

work, the compulsion to work, their incomes, 

etc. Production structure, in mainstream 

economic theory, pertains to market structure. 

Issues pertaining to property rights, role 

of gender, role of caste, environment, common 

property resources, technological 

change, unorganised markets, etc are not 

incorporated in the core study of microeconomics 

and macroeconomics; instead, these 

extremely significant aspects of economies 

are extensively taught and researched separately 

— law and economics, feminist economics, 

social exclusion, environmental 

economics, growth theory, etc. Basically, the 

crucial element of interdependence present 

in an economy, at various levels, have been 

neglected by mainstream economic theory. 

Owing to such misguided tools, it becomes 

extremely difficult to understand an economy 

where around 60% of the population is employed 

in agricultural activities and where 

around 90% of the economy falls under the 

unorganised sector, let alone frame policies! 

So, what is the way forward? The major 

change has to occur in the way economics is 

taught across India. A narrow focus on microeconomics 

and macroeconomics does not 

aid in making sense of the changes nor does 

it help in understanding the structure of the 

Indian economy. First, the curriculum should 

be tailored in such a way that non-mainstream 

approaches to economics are included. Secondly, 

research should adjust to the problems 

thrown up by the Indian society and economy 

at large; for, India cannot afford to do research 

which merely copies the West. Third, 

economics education should pay more attention 

to tools such as village studies and case 

studies, which aid in understanding the production 

process and consumption structure 

in a context-dependent manner. Last of all, 

it must be remembered that economic theory 

is and should ultimately be a servant of economic 

policy. 



• Cantillon, Richard (1755), Essai sur la 

Nature du Commerce en General, English 

translation, Henry Higgs (ed), London: 

Royal Economics Society/Macmillan, 

1931. 

• Braudel, Fernand (1973) [1974], Capitalism 

and Material Life 1400-1800, translated 

by Miriam Kochan, London: Fontana/Collins. 

• Quesnay, Francois (1759), Tableau 

Economique ('Third Edition'), as translated 

in M Kuczynski and R L Meek, 

Quesnay's Tableau Economique, with new 

material, translations and notes, New 

York: Augustus Kelly, for the American 

Economic Association, 1972. 

• Quesnay, Francois (1756), 'Fermiers', as 

translated in P D Groenewegen, Quesnay: 

Farmers 1756 and Turgot: Sur la Grande et 

la Petite Culture, Reprints of Economic 

Classics, Series 2, No 2, Sydney: University 

of Sydney. 

• Smith, Adam (1776) [1976], An Inquiry 

into the Nature and Causes of the Wealth 

of Nations, Vol 1, R H Campbell and A S 

Skinner (eds), Indianapolis: Liberty Fund. 

(ALEX M. THOMAS is a research scholar (M 

Phil Economics) at the Department of Economics, 

University of Hyderabad. His research 

interests include Indian economy, classical 

economics, history of economic thought and 

philosophy of economics. 





49


A Kind of 

URBANISATION 

Establishment of Satellite towns around congested state capitals, initiated by the 

government, has acquired unprecedented momentum lately but in most cases the 

implementation has failed to keep up with the vision and expectation 

Amal Sanyal 

Department of Accounting, 

Economics and Finance, 

Lincoln University, New Zealand 

India’s urban growth is fed by a 

number of parallel processes. First, 

the classic process of the migration 

of rural workers to industrial towns 

continues. It is augmented by the natural 

growth of the existing population of these 

industrial areas. Secondly, there is a continuous 

transformation of rural into semiurban 

and semi-urban into urban areas. 

This process too is partly fed by migration 

and partly by natural growth. A third process 

is the emergence of urban centres 

through the establishment of new industry 

conglomerates in formerly rural areas. 

This process which occurred vigorously in 

the first three Five Year Plans, has gained 

renewed momentum of late as state governments 

compete to attract large scale 

private investment. In this article, I do not 

want to discuss any of these processes but 

will focus on a fourth process that is fast 

becoming a dominant issue– for both 

economic and political reasons. It is the 

process of development of new townships 

with the following three characteristic 

features: (i) they are in the outskirts of our 

largest cities; (ii) they do not result from 

industrialisation of these areas; and (iii) 

they are not spontaneous but are initiated 

by the government. 

In the years since independence, several 

state governments have tried sporadically 

to establish satellite towns around 

their congested state capitals or new ones 

close to them. In these programs, overall 

planning and construction activities were 

overseen by state governments while funds 

came from the state as well as the centre. 

Of late, this process has acquired unprecedented 

momentum after a number of 

government decisions and reforms. Several 

initiatives of the ministry of urban 

development and change in the way the 

state governments can now contest for 


R EGULATION RESOURCES 


51


central funds like that of JNNURM and 

similar programs have been instrumental. 

Also instrumental is the rapid growth of 

the middle and upper income groups with 

large effective demand for high class housing 

and public amenities. The initiatives 

originating from the central government 

and the Planning Commission are based 

on a vision of urban development which is 

quite promising. They are expected to start 

a new and healthy chapter of urbanisation. 

Though it has brought some notable successes, 

the implementation has failed to 

keep up with that vision and expectation. 

The process now appears to be much different 

from the vision and the blueprints. 

The objective as initially conceived was 

to produce infrastructure and amenities 

for the satellite towns, connect them by 

transport and produce residential complexes. 

Also on the agenda was to promote 

economic activities in these areas so as to 

make part of the resident population less 

dependent on the hub city. The residences 

were visualised for low and middle income 

people who would be enabled to acquire 

ownership with support from the state and 

the central governments and commercial 

banks. Initiation of local economic activities 

would be encouraged by the same 

agencies as well. State level politics and 

vested interests have however undermined 

the vision in most cases in course of execution. 

As infrastructure got built and road 

and rail connections established, the areas 

became potentially suitable for high income 

residences away from the central 

business districts. 

In these areas land for infrastructure 

was to be acquired by the state government 

while residential land was supposed 

to be bought from local inhabitants. Private 

construction companies were to acquire 

the land from the state government 

to build the residential complexes. Arrangement 

connecting the state governments 

and builders in these projects differs 

across states and across projects. The common 

feature seems to be that private 

builders have been able to use them to 

divert a large part of the land for construction 

of residence for higher income people. 

The supply of dwelling units for lower 

income families has not increased significantly, 

and the congestion of living space 

and public amenities in the main cities has 

continued unabated. 

In result, we see the proliferation of 

high-cost residential apartments developed 

by private business in self-contained 

towns ready with civic amenities and shopping 

areas. Two ‘models’ can be identified. 

In one the state government has built the 

infrastructure and then residential land 

has been made available to private builders 

under various types of contracts. The 

contracts have turned out to be porous 

enough and/or the political clout of builders 

strong enough for the diversion of 



significant part of the land for high income 

residences. Some neighbourhoods have 

been created for low cost housing as part 

of those contracts; but they are too few 

and too shabby. Low profitability of lowcost 

housing leads to the transfer of land 

and resources to high cost housing to the 

extent tolerated by local politics. In an 

alternative model, developers acquired 

land from the government around newlybuilt 

urban facilities and infrastructure, 

developed them further and sold residential 

plots for large stand-alone dwelling 

units. The resulting towns in both models 

have come up with amazing speed in the 

last two decades. They are significantly 

better provided with civic amenities and 

local public goods than the larger cities 

around which they have been built. Apartment 

and land price in these townships 

include the cost of amenities, maintenance, 

security as well as exclusivity, and 

hence are affordable by only very rich 

people. Because housing for lower income 

families has not taken off significantly, 

decongestion of the cities has not succeeded. 

But commercial success of the 

development business has popularised 

these models. They are now emulated 

around the second tier cities and many 

district headquarter towns as well. 

Land Deals 

The towns are built on rural land bordering 

our larger cities. As a rule, the land is 

arable because our major cities had developed 

in the middle of large tracts of agricultural 

hinterland. Inhabitants of these 

places are typically small and marginal 

holders. Land for developing infrastructure 

is generally acquired by paying a 

compensation unilaterally fixed by the 

state government. Land for residential 

complexes is purchased from their owners. 

One of the most important issues of current 

urbanisation is the failure of the land 

market in these transactions, resulting in 

extremely unfair price for sellers. No less 

problematic is the compensation rate for 

acquired land. 

Markets for land transaction in these 

places are in the most rudimentary state. 

In most cases commercial land transactions 

are taking place perhaps for the first 

time in memory and so sellers have no 

benchmark of expected price. Hence fair 

and efficient prices can be established only 

after a sufficient amount of search for 

equilibrium price through bargaining. 

This cannot take place because of the 

asymmetric bargaining powers of buyers 

and sellers. Deals that have been interpreted 

as fair by state governments or 

government-appointed contractors offer 

sellers something close to the capitalised 

value of the land’s prospective earnings. 

However in the undeveloped market conditions 

surrounding the sellers, the opportunity 

cost of land is much more than 

the capitalised value of its produce. Most 

sellers do not have education, non-farm 

skill or other forms of capital. So, after the 

land is sold their income becomes unsteady, 

and the sale money has to support 

current consumption. It cannot be invested 

and hence the capitalisation 

equivalence makes no sense in this situation. 

Any realistic estimate of the opportunity 

cost of land should include the 

value of an appropriate form of capital 

that can earn the seller income in the future. 

In a reasonably free bargaining, 

sellers should be able to register their 

reservation price, which would include 

these factors evaluated as they think fit. 

On the buyers’ side, if the market had a 

number of competing buyers, then they 

would be willing to pay up to the capitalised 

value of profit flow from the development 

activities. A price between this and 

the reservation price of sellers is expected 

to emerge in a better market environment. 

But generally the price offered is below 

what should be the sellers’ reservation 

price. In some cases sellers have promised 

jobs for family members or dealership of 

building material etc in the future, apart 

from a cash offer of capitalised land value. 

This acknowledges that the opportunity 

cost of land is larger than the present 

value of its future product. Unfortunately 

these promises are rarely kept and there 

is no mechanism for remedy. 

Land for developing infrastructure is 

acquired by paying a compensation 

unilaterally fixed by the state govt 

Efficiency 

Inability of the land market to work properly 

has ramifications beyond fairness. 

How do we decide if the conversion of a 

cluster of villages into a residential area is 

an efficient reallocation of the land in 

question? To settle this we require information 

on the direct and indirect cost of 

moving land out of its present use. As I 

stated, offered land prices understate 

these costs by a large margin. Hence the 

profitability of residential construction is 

no indication that land is being efficiently 

re-allocated. The profit partly reflects the 

demand of the middle and upper income 

classes for living in less congested neighbourhoods 

better provided with local 

public goods. To satisfy this demand is 


53


certainly necessary and socially valuable. 

But we cannot conclude about the merits 

of the reallocation of a particular land area 

to meet this demand, until we have estimates 

of the cost of moving it from its 

present use. Because land is bought at 

arbitrary prices, large profit itself does not 

settle the issue. 

In some places those who had sold land 

previously for these projects are retrospectively 

agitating for a fairer deal and 

demanding compensation. Depending on 

the political situation of the state, governments 

may be forced to arrive at a compensation 

formula in some cases. This 

kind of retrospective bargaining with the 

help of political parties wastes significant 

number of working days, undermines 

governance and vitiates politics. We 

should replace it with a procedure and a 

pricing formula worked out at the national 

level with only local details to be 

filled in for a given project. Offer on the 

lines of the formula should be treated as 

an initial offer on the basis of which price 

bargain may be started. It will be also 

necessary to provide for legislation and 

effective mechanism to prevent intimidation 

in the bargain process. In principle, 

the process would ensure that (i) conversions 

would occur only if the effective 

demand for housing exceeds social cost 

of land reallocation, and (ii) individual 

sellers sell voluntarily. 

I have no illusion that working out such 

a procedure is easy. It will require inputs 

from and consensus of various quarters 

and is eminently prone to get politicised on 

the way. Yet we need such an arrangement 

to proceed with this strand of urbanisation, 

which is very important at the present stage 

of our economic development. 

Corruption 

We need this sort of standardised procedure 

for another reason. It is necessary 

for cutting out the space for discretion of 

state governments and local politicians. 

Given the very high profits from high-income 

residential construction, land 

around large cities has become a most 

coveted resource. As of now, state governments 

have enough discretionary 

power to acquire or purchase land and 

transfer it to private business for construction. 

This discretion is being grievously 

misused making land around large 

cities one of the biggest sources of corruption. 

The nexus of land developers and 

politicians in the states are open secrets. 

The room for discretion in the matter has 

corrupted an important industry as a well 

as local politics. We should count the 

It will be also necessary to provide 

for proper legislation to prevent 

intimidation in the bargain process 

further downstream effects too. Politicians’ 

share of developers’ profit is partly 

invested in maintaining a stable of vicious 

and violent party workers who play an 

important role in the proceedings. Politicians 

have been blamed of using their 

help to overcome sellers’ resistance to low 

land prices. This and the rest of the polity’s 

response to it have been increasing 

the level of violence in the political system 

of the states for some time. 

The nexus between politics and residential 

construction is further responsible 

for undermining a variety of regulations. 

Fisheries, water sources and forest 

areas around big cities or alongside highways 

have been often reclassified by local 

authorities to help residential construction. 

Regulations related to water conservation, 

social forestry etc. are often 

waived. This sort of violation can be 

curbed significantly if politicians are not 

obliged to the building industry. This in 

turn can be achieved by setting up a discretion-free 

mechanism for land acquisition 

and purchase. 

Social Issues 

We generally worry more about the economic 

and political aspects of these issues. 

I think we ought to care about the sociological 

fall out as well. Serious damage 

appears to be occurring to the rural society 

because of the callous and corrupt 

handling of land. Various official and 

media reports and claims of political parties 

indicate three broad groups among 

the people from whom land is acquired. 

The first is a small group that benefits 

rather than loses. Families of this group 

have sizeable amount of land, own other 

businesses and have some political clout. 

They generally manage to sell at very 

good price. In fact in many cases it is these 

land holders who lobby for the development 

and promotion of the areas where 

their land belong. As they promote themselves 

and get visibly richer, they get distanced 

from the rest of the community. 

When they get distanced, they in turn feel 

less obliged to do their community duties 

and start down a path that eventually 

leads to bigger separation and disruption 

of the community. 

The second is a group with a moderate 

amount of land. Head of the family would 

be generally literate and work in the government 

or at private jobs. If these people 

have to sell their land, they generally 



would use the money for worthwhile financial 

or real investment, including 

children’s education. In general, their 

living and means are not affected by the 

sale of their land per se. But they are affected 

to the extent that land gets underpriced. 

Having got education and being 

informed, they try out all the available 

means to plead and bargain for better 

prices for land. This also helps others in 

the village or the area. But as they continue, 

they risk being identified as leaders 

by land developers and politicians. In 

sharply polarised political situation, these 

people are in demand by both sides of the 

political divide — the ruling and the opposition 

groups. Thus the disruption of 

the community is deepened. 

The third group is made up of small 

and marginal holders and is the most 

numerous. These holders are not literate 

and work on their own land and as daily 

labourer. They cannot bargain unless 

mobilised and led by a political party or 

group. Typically they end up consuming 

the sale money pretty fast as it is used for 

current consumption and a variety of 

pending claims, including loan repayment 

and wedding expenses. Often these families 

are forced or lured to sell even their 

homestead in order for developers to get 

contiguous land. Family members, often 

including children, then look for unskilled 

job and makeshift living places in the 

emergent township or in the main city. As 

they leave in search of alternative places 

to live, the disruption of the community 

is complete. 

It is clear that the purpose of decongesting 

the city is defeated. So is the 

provision of better living space for low 

income people. Further the existing society 

and traditional institutions in these 

areas completely breakdown by the processes 

described above. The families that 

manage to hold on and stay back become 

out of place and get more and more marginalised 

as the new urban community 

gets settled. The families that are dispossessed 

of home and income settle at 

random in places that offer the least resistance, 

only to be uprooted when there 

is a demand for that block of land. They 

get disengaged from their previous community, 

in place of which no new meaningful 

community springs up. Some get 

separated from families. Socially unconnected 

and bitter about the system these 

people are often used by political parties 

and criminal groups. Overall erosion in 

social values in the average Indian city has 

to be partly attributed to this process. 

Quite ironically, the process is a planned 

process and the intention most certainly 

is to build not destroy. 

We Can 

I should end this essay by emphasising that 

much of the social disruption, corruption, 

hardship and political violence arising 

from these projects can be arrested by being 

serious about the conditions of land 

purchase and acquisition. We should produce 

a central and standardised set of 

procedures for pricing. Make the procedures 

and formulas public all across the 

country. The local variations that are possible 

should be part of the rule too and 

made public. Unambiguous conditions 

should be specified about what constitutes 

an offense and punishments should be 

severe enough to deter. Any deviation 

from the pricing rule would automatically 

reverberate through the media even if the 

sellers are hesitant to blow the whistle. We 

should build up whistle-blowing websites 

accessible to all and monitored by a body 

empowered to take actions. 

In this scenario, the government would 

pay sufficient subsidy to get houses built 

for low income people wherever it is 

needed; but would not allow price of land 

to fall below the formula. If that price is too 

high for developers to build residence for 

non-subsidised buyers, they will automatically 

avoid the cluster. This will in fact 

ensure that no land is reallocated for urban 

development unless marginal benefits exceed 

marginal cost, except for housing the 

very poor people. In short, we can do both: 

to proceed with a meaningful urbanisation 

and not marginalise the poor people living 

in the neighbourhood of big cities. 

(MR. AMAL SANYAL is associate professor 

in Economics at Lincoln University, New 

Zealand. He had also been a former holder 

of State Bank of India national chair on 

public policy, former Economic Advisor to 

the Ministry of Economic Planning in Mauritius 

and consultant in demand modeling 

and pricing strategy for core sectors like 

power, coal, petroleum and steel. 





55


Acquisition of 

Agricultural Land: 

Lucknow Metropolis 

Arable land should not be allowed to be used for non farm activities, so it is 

essential to identify the non-agricultural infertile land for urbanization 

S.S.A. Jafri 

Giri Institute of 

Development 

Studies, Lucknow 

H.R.Nangalia 

H.O.D. of Geography, 

M.B.P.Government. 

P.G.College,Lucknow 

S.M.S. Jafri 

Research Scholar, 

Dept.of Geography, Lucknow 

University, Lucknow 

India’s 1.5 percent or more than 21 

lakh hectares net sown area between 

1990 and 2003 have gone to 

non-farm activity. The actual 

figures could be much higher. If we accept 

21 lakh hectares of crop land which 

is diverted to non-agricultural uses and 

if this area was brought under wheat 

then it would amount to a mind-boggling 

57 lakh tones of produce, which could 

have fed more than 43 million hungry 

people every year. In Uttar Pradesh 68.6 

percent land is cultivated and 31.4 percent 

land is under non farm uses. Only 

seven percent land is under forest, when 

according to forest policy there should 

be one-third forest cover for healthy 

environment. Adverse environmental 

impact is now reflected in falling yield 

and increasing other fallow and current 

fallow land as it is becoming uneconomical 

to cultivate. For example in 

Sultanpur, Pratapgarh, Lucknow and 

Unnao districts other and current fallow 

lands have increased up to 15.0 percent. 


E NOUGH ENCROACHING 

In U.P. cereal production was 41.8 million 

metric tones in 2001-02 which has 

fallen to 37.6 million metric tones in 

2004-05 due to land degradation. 

In Central region of U.P. the growth of 

land put to non-agricultural use in rural 

areas has risen to 19.1 percent during 

2001-08. Similarly growth rate of land 

put to non agricultural uses in Bundelkhand 

has gone up to 17.6 percent in 

rural areas. In Lucknow division we find 

that during 2004-05 from an area of 

2420134 hectare the production was 

4958114 metric tones, while during 2005- 

06 the area decreased to 2314603 hectare 

and with it the production also decreased 

to 4721101 metric tones. 

Therefore, it is most essential to identify 

the non-agricultural infertile land 

through satellite imageries and on the 

basis of data the area available should be 

compulsorily utilized for urbanization. 

Million plus cities should not be allowed 

to further grow by putting ban on expansion 

of industries or any kind of activities 

which are not directly required for the 

cities. In this way urbanization would grow 

in un-urbanized areas and thus barren 

waste lands would be easily available for 

urban use. Agricultural land should not be 

allowed at any cost to be used for non 

farm activities. There should be strict 

check and control on the basis of clear cut 

formulated policies at the state and local 

level so that an all round sustainable development 

should be achieved and that 

too within a short period of time. If at all 

it is so essential to acquire the agricultural 

land then on the basis of average cost 

of the produce at present and future 

prices, it should be calculated for 30 years 

and paid to farmers every year. During 30 

years farmers would be able to adopt nonfarm 

livelihood as it is already in practice 

in Haryana State. 


57


Lucknow district occupies about 2519 

sq. km. area in Central region of Uttar 

Pradesh and it is privileged with having 

the capital city of the most populated 

state of India. Lucknow district is having 

eight blocks, namely, Malihabad, Mal, 

Bakshi-ka-Talab, Kakori, Chinhat, Sarojininagar, 

Gosaiganj and Mohanlalganj. 

Lucknow the capital city which is now a 

metropolis with 2.25 million population 

(2001) is spreading quite fast on its peripheral 

areas and encroaching on adjoining 

fertile agricultural land of rural 

blocks mainly Sarojininagar, Chinhat, 

Mohanlalganj, Mal and Bakshi-ka-Talab. 

Lucknow city along with Cantonment 

was occupying only 50 sq. km. in 1950, 

which spread on 110 sq.km. in 1971, 146 

sq.km. in 1981, 338 sq.km. in 1991 and 

about 450 sq.km. in 2001. In 1981 its 

population was 1.08 million which doubled 

in 20 years to 2.25 million in 2001 

and in next 20 years, i.e. 2021 it is expected 

to be 4.50 million. 

Till 1991 in U.P. land put to non-agricultural 

uses was around eight percent 

and by the beginning of 2000 the land 

put to non-agricultural uses increased 

to around nine percent. In 2008 the land 

put to non-agricultural uses occupies 

around 11.0 percent of the geographical 

area of Uttar Pradesh. The increasing 

size of land put to non-agricultural uses 

and recently decline in net area sown in 

rural areas is an indication that the 

prime agricultural land is fast being 

encroached by fringes of towns and cities 

and in due course of time they would 

become the part of urban land. Earlier 

land put to non-agricultural uses was 

generally meant that the land is being 

used as a common land for thrashing the 

harvested crops, exhibition grounds, 

playgrounds and other amenities and it 

was well within eight percent of the geographical 

area. Now with the beginning 

of the 21 st century it is especially found 

that around some of the fast growing 

cities and towns a large chunk of fertile 

land is being purchased and left by the 

industrialists, colonizers and individual 

entrepreneurs for future use as urban 

land. It is generally found that the expansion 

of cities is taking place on commercially 

viable areas ignoring the importance 

of environment and land 

meant for cultivation purposes. Around 

every city and town and in every district 

there are plenty of wastelands, which 

could have been brought under urbanization 

if there was any such law to restrict 

and spare the agricultural land 

and also to protect environment. 

The farmers on urban fringes are compelled 

and lured to sell their land to urban 

people and they loose their centuries 

old traditional livelihood from farming 

forever. Farmers are left only with their 

dwellings and it is found that once they 

become landless, for generations they do 

not become capable to earn their proper 

livelihood from non-farm occupations. 

Mostly they work as a casual labourers 

in their neighbourhood of city and their 

socio-economic condition remain deplorable 

for decades together. 

Lucknow being the capital city has a 

continuously fast process of occupying 

the neighbouring fertile land of the villages. 

The result is during last 13 years, 

i.e. between 1994-95 and 2007-08, the 

growth rate of land put to non-agricultural 

uses in neighbouring rural areas of 

Lucknow metropolis was recorded 45.1 

percent. For example, in Sarojininagar 

block the land put to non-agricultural 

uses grew to 109.8 percent, Chinhat 

block 83.3 percent, Mohanlalganj block 

43.7 percent, Gosaiganj block 34.0 percent, 

Mal block 30.0 percent and in 

Bakshi-ka-Talab block 21.5 percent. If 

we see the proportion of geographical 

area of Chinhat block brought under 

land put to non-agricultural uses was 

maximum in Lucknow district, i.e. 31.3 

In 2008 the land put to nonagricultural 

uses occupies 11.0 per 

cent of the geographical area of UP 

percent in 2008. 

It is an interesting study to survey few 

villages and their households, enquiring 

about the value of land received and its 

utilization, their changing occupation 

and income and their overall socio-economic 

and living conditions. This would 

guide us how to control the agricultural 

land brought to non-agricultural uses 

and how to plan the rehabilitation of 

agricultural farmers and their families 

before the city encroaches in an un- 



planned manner. In Lucknow metropolitan 

city, after independence the 

settlements of villages which had lost 

their valuable agricultural land are still 

existing and the plight of their dwellers 

is quite obvious. 

Sample Villages 

Among two, one slow and another fast 

urbanizing villages i.e. Dhawan and Shivpuri 

respectively are located adjacent to 

eastern side of Lucknow metropolis in 

Chinhat Block were identified for sample 

survey. The geographical area of Dhawan 

Village was 200 hectare and Shivpuri 

300 hectare. Among these villages 

Dhawan is left with only about 50 hectare 

of agricultural land when in Shivpuri 

most of the land is occupied in urban 

process. There are 250 households 

in Dhawan village with 3500 population 

when in Shivpuri 5000 households are 

there with 15,9000 population. Most of 

the houses in both the villages are pucca. 

Religion wise only less than 10 percent 

population belong to minority. Caste 

wise majority population belong to OBC 

(Other Backward Caste). In records 84 

households (64 Hindu, 20 Muslim) in 

Dhawan Village and 341 (326 Hindu and 

15 Muslims) in Shivpuri village belongs 

to BPL (Below Poverty Level) category 

who are entitled for various benefits 

under Government schemes. 

In Dhawan village about six ponds 

were there which were perennial but 

today only three ponds are left perennial 

and one pond non perennial. In 

Shivpuri only one pond was perennial 

earlier, which is now non perennial. In 

both the villages the ground water is 

about 20 to 25 feet below the ground 

surface, but for perennial boring farmers 

go up to 120 feet deep. In remaining 

agricultural land mainly wheat and 

paddy is grown and the productivity is 

lowered to 5 to 10 quintal per bigha and 

food grain is retained for only household 

consumption, except vegetable is sold in 

the market. Most of the households have 

almost shifted their dependence on non 

farm activities, as the remaining agricultural 

land has become non productive 

and it is in the process of selling with the 

hope of better prices for urbanization 

which is imposed. Lands purchased by 

Government by force are paid only less 

than Rs. 50,000/- per bigha when private 

parties are paying in millions of rupees 

(present rate is between Rs. 3 to 6 million). 

It is highly objectionable that farmers 

are deprived by Government by force 

and their livelihood is snatched through 

spurious laws. It is high time that Government 

must adopt the Haryana pattern 

where the productivity of land is 

calculated and the value is paid to the 

farmers for 30 years with consideration 

of cost escalation of agricultural produce 

during the years. It is the proper 

method through which farmers would 

slowly adopt to adjust with the non-farm 

livelihood, otherwise it is injustice to 

impose least value of land. 

During rainy season both villages suffer 

from the effects of bad drainage 

system. Household of both the villages 

mostly depend upon private hand 

pumps, except few households depends 

on public hand pumps mark IV. Households 

suffer mainly by stomach diseases, 

fever, cough, blood pressure, small pox 

and sugar but none of these villages have 

proper health centre. About 15.0 percent 

natives of these villages have their 

own toilets. When 60.0 percent newly 

settled households have their own toilets. 

There is a lot to do to improve the 

hygienic condition in these villages. 

There is co-ed primary-middle school 

in Dhawan village when in Shivpuri 

three primary-middle schools are there, 

however children of affluent class go out 

Under IAY 11 houses are constructed 

in Dhawan village when in Shivpuri 

village 42 houses are constructed 

for convent education i.e. English medium 

education. 

Under Indra Awas Yojana 11 houses 

are constructed in Dhawan village when 

in Shivpuri village 42 houses are constructed. 

In both the villages 50 to 80 

percent households have got T.V., Mobile 

phone and scooter/motor bike, when 

VCD, fridge, and four wheelers are rare 

in their household assets. No community 

or caste tension is reported in both 

the villages, but few police cases are 

recorded under crimes. There are also 

few court cases due to property and land 

compensation claims. Over all it is a big 

question before the uneducated native 

youth and working age population in 

both the villages that how to adjust with 

the changing scenario from centuries 

old agricultural dependence to non agricultural 

non-acquainted alien means 

of livelihood. 

Population Dynamics 

Over all 120 households were surveyed 

for this study. Total 60 households from 

each Dhawan and Shivpuri villages were 


59


Table No. 1: Caste wise Households and Population in Chinhat Block 

Main Occupation/ Surveyed 

Households Population 

Sample Villages H.H Higher Caste OBC SC Male Female Total 

Cultivators 

Dhawan 21 4 12 5 78 80 158 

Shivpuri 5 1 4 - 15 12 27 

Animal Husbandry 

Dhawan 6 - 6 - 16 13 29 

Shivpuri 3 - 3 1 9 8 17 

Business 

Dhawan 6 2 3 1 12 12 24 

Shivpuri 6 1 5 - 13 8 21 

Agricultural Labour 

Dhawan 10 1 8 1 26 26 52 

Shivpuri 2 - - 2 4 7 11 

Non Agri. Labour 

Dhawan 14 - 12 2 41 35 76 

Shivpuri 34 - 16 18 117 122 239 

Service 

Dhawan 3 1 1 1 5 10 15 

Shivpuri 10 2 5 3 24 26 50 

Total 

Dhawan 60 8 42 10 178 176 354 

Shivpuri 60 4 33 24 182 183 365 

Source: 

Based on survey conducted by the author and his team during December 17, 2009 to January 3, 2010 at Giri Institute of 

Development Studies, Lucknow 

identified belonging to their dominant 

occupations. Cultivators, animal husbandry, 

business, agricultural labourers 

non agricultural labourer and services. 

Thus information of 354 people of Dhawan 

and 365 of Shivpuri village were 

recorded. In Shivpuri sex ratio was recorded 

1006 females per thousand males 

because here SC households are comparatively 

more in household sample and 

higher castes households are less in comparison 

to Dhawan village where sex 

ratio was found 989. (See Table-1) 

Out of total surveyed population in 

Dhawan village nine percent are in the 

age group of 0-5, 23.5 percent in 6-14, 

64.4 percent in 15-60 and 3.1 percent in 

60 plus age group. When in Shivpuri village 

0-5 age group children are 7.7 percent, 

6-14 children are 25.8 percent, 

15-60 working age group in 66.0 percent 

and old age of 60 plus are only 0.6 percent. 

Children and old age dependents 

are slightly more in Dhawan village i.e. 

35.6 percent than Shivpuri village with 

34.0 percent .(See Table-2) 

Economic Activity 

In both Dhawan and Shivpuri villages 

people engaged in different activities are 

accounted and found it differed due to 

more available cultivable land in Dhawan 

village than in Shivpuri village which 

is almost urbanized. In Dhawan village 

12.0 percent people are self employed, 

when in Shivpuri only 5.3 percent are self 

employed. In Dhawan regular salaried 

employees are two percent, when Shivpuri 

they are three percent. In primary 

activities six percent percent people are 

engaged in Dhawan village when in Shivpuri 

only two percent people are engaged. 

In Dhawan non agricultural labourers 

are only four percent when in 

Shivpuri they are 11.5 percent. Just opposite 

in Dhawan one percent are agricultural 

labourers when in Shivpuri it is 

less then 0.2 percent . In Dhawan unemployment 

is only five percent when in 

Shivpuri where almost all the agricultural 

land is urbanized, unemployment 

is 12.0 percent. In household work, 

where mainly females are found in both 

the villages i.e. Dhawan and Shivpuri. It 

is 21.0 and 22.5 percent respectively. In 

household and other activity also mainly 

females are engaged the proportion is 

the same in both villages i.e. two percent. 

In Dhawan 40.0 percent and in Shivpuri 

34.5 percent students are recorded, 

which deferred due to more concentration 

of economically weaker sections in 

Shivpuri than Dhawan village. Non 

school age children and old age dependents 

are seven percent in each of the 

surveyed villages. (See Table-3) 

Land Acquisition 

and Compensation 

Till nineties agricultural land in Dhawan 

and Shivpuri villages was about 216 and 

147 bigha which was owned by 35 and 27 

households respectively. At the time of 

household survey it was reported that 

from both Dhawan and Shivpuri villages 

about 83.0 and 45.0 percent households 

respectively sold their lands, partially or 

completely. From Dhawan village 66.7 

percent agricultural land was sold while 

from Shivpuri village 58.2 percent agri- 



Table No. 2: Age Structure and Dependency Ratio in Chinhat Block 

Main Occupation / 


Surveyed 

H.H 

Age-group/Population 

0-5 6-14 15-60 60+ % Dependents 

Cultivators M F T M F T M F T M F T 

Dhawan 21 5 4 9 19 21 40 50 49 99 4 6 10 37.34 

Shivpuri 5 1 1 2 2 3 5 12 8 20 - - - 25.93 


Dhawan 6 2 - 2 3 2 5 11 11 22 - - - 24.14 

Shivpuri 3 - - - 3 3 6 6 5 11 - - - 35.29 

Business 

Dhawan 6 2 2 4 4 4 8 6 6 12 - - - 50.00 

Shivpuri 6 1 1 2 4 4 8 8 3 11 - - - 47.62 


Dhawan 10 - 5 5 5 3 8 21 18 39 - - - 25.00 

Shivpuri 2 - 1 1 1 2 3 3 4 7 - - - 36.36 

Non Agri. Lab. 

Dhawan 14 6 4 10 11 6 17 24 24 48 - 1 1 36.84 

Shivpuri 34 10 9 19 29 27 56 77 85 162 1 1 2 32.22 

Service 

Dhawan 3 1 1 2 2 3 5 2 6 8 - - - 46.67 

Shivpuri 10 1 3 4 7 9 16 16 4 30 - - - 40.00 

Total 

Dhawan 60 16 16 32 44 39 83 114 114 228 4 7 11 35.59 

Shivpuri 60 13 15 28 46 48 94 122 119 241 1 1 2 33.97 

Source: Based on survey conducted by the author and his team during December 17, 2009 to January 3, 2010 at Giri Institute of Development Studies, Lucknow 

Table No. 3: Household Population Engaged in Different Activities in 

Chinhat Block 

Main Occupation Sample Villages Population (Percent ) 

Self Employed Dhawan 12.00 

Shivpuri 5.28 

Regular Salaried Dhawan 2.00 

Shivpuri 3.00 

Primary Activities Dhawan 6.00 

Shivpuri 2.00 

Non Agri. Labour Dhawan 4.00 

Shivpuri 11.50 

Agri. Labour Dhawan 1.00 

Shivpuri 0.22 

Unemployed Dhawan 5.00 


H.H Work Dhawan 21.00 


H.H+Other Act. Dhawan 2.00 

Shivpuri 2.00 

Student Dhawan 40.00 


Dependent Dhawan 7.00 

Shivpuri 7.00 

Total (Percent ) Dhawan 354 (100.00) 

Shivpuri 365 (100.00) 

Source: 



cultural land was sold. Since agricultural 

land in both the villages was not sufficient 

for proper livelihood, therefore 

from very beginning majority of households 

were engaged in non-farm activities. 

Land sold to Government was only 

due to compulsion as land owners were 

forced by the Government orders to acquire 

the land. Since Government compensation 

was too low which ranged 

merely between Rs.16,000 to 36,000 per 

bigha, land owners try to evade it or sell 

their land to private parties from whom 

they get Rs.1,00,000 to Rs. 16,00,000 per 

bigha. Those land owners who were able 

to sell their land privately were lucky 

which is reflected from their life style but 

contrary to that land owners getting 

meager land compensation from Government 

remained poorer and poorer. 

Land owners of Dhawan village were 

extreme unlucky where 32.0 percent land 


61


Main Occupation/ 


Household 

owned/sold 

the land 

Total Land initially 

owned 

in bigha 

was sold to private buyers and 63.0 percent 

was sold to Government. When in 

Shivpuri village 66.0 percent land was 

sold to private parties and rest 34.00 

percent land was bought by the Government. 

Land owners who got hefty 

amounts from private buyers were able 

to enhance their income by investing in 

income generating activities, when those 

who got compensation from Govern- 

Table No. 4: Land Sold by Households in Chinhat Block 

% of H.H 

sold land/ 

affected 

% of 

land 

sold 

% age 

land sold 

privately 

% age 

land sold 

to Govt. 

Cultivator 

Dhawan 14 62.00 67.00 75.00 21.00 79.00 

Shivpuri 5 25.00 100.00 50.00 50.00 50.00 


Dhawan 4 30.00 100.00 50.00 73.00 27.00 

Shivpuri 2 24.00 67.00 50.00 50.00 50.00 

Business 

Dhawan 2 17.00 100.00 66.67 34.00 66.00 

Shivpuri 5 35.00 83.00 71.43 71.43 28.57 


Dhawan 4 18.00 100.00 100.00 00.00 100.00 

Shivpuri 1 3.00 100.00 66.67 67.00 33.00 


Dhawan 8 49.00 100.00 81.33 30.00 70.00 

Shivpuri 9 45.00 27.00 60.00 60.00 40.00 

Service 

Dhawan 3 40.00 100.00 61.54 34.00 66.00 

Shivpuri 4 12.00 100.00 50.00 50.00 50.00 

Total 

Dhawan - 216.00 83.00 66.67 32.00 68.00 

Shivpuri 1 147.00 45.00 58.18 66.00 34.00 

Source: 

Note: 



Private and Government rates of land per bigha was Rs. 100,000 to Rs. 16, 00,000 and Rs. 16,000 to Rs. 36,000 respectively. 

Table No. 5: Average Land Owned by Households Before/After Acquisition 

in Chinhat Block 

Per H.H. Avg. Agri. 

Land owned Before acquisition 

in bigha 

Per H.H. Avg. Agri. 

Land owned After acquisition 

in bigha 

Sample H.H owned/ 

Main Occupation Villages sold land 

Cultivators Dhawan 14 4.00 1.00 

Shivpuri 5 5.00 2.50 

Animal Husbandry Dhawan 4 8.00 4.00 

Shivpuri 2 12.00 6.00 

Business Dhawan 2 9.00 3.00 

Shivpuri 5 7.00 2.00 

Agri. Labour Dhawan 4 4.50 - 

Shivpuri 2 3.00 1.00 

Non Agri. Labour Dhawan 8 6.00 1.12 

Shivpuri 9 5.00 2.00 

Service Dhawan 3 13.00 5.00 

Shivpuri 4 3.00 1.50 

Total Dhawan 35 6.00 2.00 

Shivpuri 27 5.50 2.30 

Source: Based on survey conducted by the author and his team during December 17, 2009 to January 3, 2010 at Giri Institute of 


ment became hand to mouth. Haryana 

model of land compensation must be 

adopted by the Government where average 

value of crop yield is calculated for 

30 years with keeping in mind the price 

escalation. Then farmers are paid annually 

for 30 years. In this way, slowly farmers 

switch on to non farm activities and 

do not fall pray suddenly. (See Table-4) 

Before acquisition 35 surveyed 

households of farmers were having 

average six bigha of land in Dhawan 

village, when in Shivpuri village average 

per household agricultural land 

among 27.0 households of farmers was 

5.5 bigha, which reduced to two and 2.3 

bigha after acquisition respectively. In 

most of the cases the main source of 

livelihood is no more agriculture, which 

has shifted to non-farm activities. Even 

those households which are identified 

as cultivators are for name sake, their 

economic condition is deplorable. In 

few cases where households have more 

than five bigha, but their agricultural 

production has gone down due to over 

whelming urban environment like pollution 

and congestion. During nights 

the astray animals (mainly cows) from 

city enter into the fields and graze away 

the crops. Thus the remaining agricultural 

land is awaited to be sold preferably 

to private buyers if it is spared 

from Government grabbing by throw 

away prices (See Table-5). 

The compensation money which was 

received by the land owners after selling 

their agricultural land to either Government 

or private buyers was utilized in 

two major heads i.e. for personal use or 

construction of their house. After fulfilling 

their personal needs like construction, 

marriage ceremonies etc. very few 

households have also invested their 



Table No. 6: Utilization of Compensation Money by Households/Court 

Cases in Chinhat Block 

Main Occupation 

Sample 

Villages 

H.H owned/ 

sold land 

money in livelihood enhancing activities. 

Since most of the houses were of mud 

and thatched, they were built pucca. 

Thus in Dhawan village average 69.0 

percent land owners spent their compensation 

money in personal needs and 31.0 

percent land owners spent money in 

house constructions. In Shivpuri village 

also about 61.0 percent land owners 

spent their land compensation money in 

personal needs whereas 39.90 percent 

land owners spent their money in house 

construction. It is worry some that most 

of the land owners spent their compensation 

money which was received by them 

after selling their valuable agricultural 

land which was the only base of their 

livelihood, was utilized in fundamental 

day to day needs. Therefore, it is high 

time to chalk out the compensation 

policy by the Government urgently, so 

that farmer’s livelihood could be saved. 

(See Table-6) 

Income among sample households 

under different dominant occupations 

Percentage of H.H Utilized 

money for 

Personal 

Use 

House Construction 

%H.H. 

Cases in Court 

related to 

Land 

Cultivators Dhawan 14 50.00 50.00 - 

Shivpuri 5 60.00 40.00 

Animal Husbandry Dhawan 4 100.00 - 25.00 

Shivpuri 2 50.00 50.00 

Business Dhawan 2 50.00 50.00 - 

Shivpuri 5 50.00 50.00 

Agri. Labour Dhawan 4 75.00 25.00 - 

Shivpuri 2 100.00 - 

Non Agri. Labour Dhawan 8 100.00 - 62.50 

Shivpuri 9 56.00 44.00 

Service Dhawan 3 33.00 67.00 - 

Shivpuri 4 75.00 25.00 

Total Dhawan 35 69.00 31.00 17.00 

Shivpuri 27 61.00 39.00 

Source: 



Sample 

Villages 

Households owned / 

sold the land 

who may also possess some agricultural 

land varied during a decade or in between 

before and after land acquisition. 

In all cases some of households have 

grown income during a decade. In Dhawan 

village the income of some households 

has grown 10.6 percent after acquisition 

of land, when the growth of income 

was comparatively more in Shivpuri village 

i.e. 14.4 percent may be due to 

comparatively fast urbanization. After 

acquisition average household per 

month income of Dhawan and Shivpuri 

villages was recorded Rs. 4058.00 and 

Rs. 4470.00 respectively. In Dhawan village 

the household income grew more 

than average among business and service 

occupation only. When in Shivpuri village 

household income was found growing 

above the average in all occupations 

except among business and non agricultural 

labourers. Cultivators income 

growth during a decade was above the 

average growth in Shivpuri village, it is 

because land owners received a hefty 

amount of land compensation from private 

buyers, which is the main reason of 

fast growth viz-a-viz Dhawan village.(See 

Table-7) 

Table No. 7 : Household Income Before/After Acquisition of Land in Chinhat 

Block 

H.H Average Annual 

Income in Rs. 


Before acquisition After acquisition 

Cultivators Dhawan 14 42,100 44,879 

Shivpuri 5 55,500 64,380 

Animal Husbandry Dhawan 4 46,250 49,950 

Shivpuri 2 47,800 54,205 

Business Dhawan 2 75,500 90,600 

Shivpuri 5 57,000 64,638 

Agricultural Labour Dhawan 4 30,000 34,020 

Shivpuri 2 28,000 33,600 

Non Agri. Labour Dhawan 8 28,870 3,15,838 

Shivpuri 9 35,000 39,550 

Service Dhawan 3 69,000 81,144 

Shivpuri 4 51,000 61,200 

Total Dhawan 35 44,031 48,697 

Shivpuri 27 46,885 53,636 

Source: 




63


Table No. 8: Living Condition Before and After Acquisition of Land in Chinhat 

Block 


Living Condition 

Sample 

Villages 

H.H owned/ 

sold land 

During survey questions were asked 

from the sample households about their 

living condition before and after the 

acquisition of their agricultural land. 

Among 35 households who owned/sold 

or both of Dhawan village reported 

good living condition by 47.0 percent 

Reported Good Living Condition 

Before Acquisition After Acquisition 

Cultivators Dhawan 14 67.00 33.00 

Shivpuri 5 20.00 80.00 

Animal Husbandry Dhawan 4 - 40.00 

Shivpuri 2 33.00 67.00 

Business Dhawan 2 - 100.00 

Shivpuri 5 33.00 67.00 

Agri. Labour Dhawan 4 33.00 67.00 

Shivpuri 2 - 100.00 

Non Agri. Labour Dhawan 8 53.00 47.00 

Shivpuri 9 35.00 65.00 

Service Dhawan 3 12.00 88.00 

Shivpuri 4 00.00 100.00 

Total Dhawan 35 47.00 53.00 

Shivpuri 27 28.00 72.00 

Source: 



Table No. 9: Household Income, Expenditure and Loan taken in 

Chinhat Block 


Cultivators 


Business 

Agri. Labour 


Service 

Total 

Source: 

Sample 

Villages 

Surveyed 

H.H 

Avg. Income 

in Rs. 

Avg. Expend. 

in Rs. 

H.H 

taken 

Loan 

Avg. Loan 

taken in 

Rs. 

Rate of 

Interest 

% 

Dhawan 21 44879 43892 - - - 

Shivpuri 5 64380 41718 1 10,000 4 

Dhawan 6 49950 47852 - - _ 

Shivpuri 3 54205 35493 1 15,000 4 

Dhawan 6 90600 70143 - - - 

Shivpuri 6 64638 38835 - - - 

Dhawan 10 34020 32819 - - - 

Shivpuri 1 33600 28560 - - - 

Dhawan 14 31584 30488 5 23,800 4-8 

Shivpuri 34 39550 37185 7 5,929 4-8 

Dhawan 3 81144 48808 1 25,000 4 

Shivpuri 10 61200 45851 - - - 

Dhawan 60 48697 38286 6 24,000 4-8 

Shivpuri 60 53636 42174 9 7,389 4-8 



before acquisition and 53.0 percent reported 

good living condition after acquisition. 

It means more than half of the 

sample households in Dhawan village 

enjoying better living condition than 

before even after acquisition. In Shivpuri 

village only 28.0 percent sample 

households reported better living condition 

before acquisition when majority 

households i.e. 72.0 percent reported 

better living condition after acquisition. 

Here it is important to explain that acquisition 

of land does not take place all 

of a sudden but a sort of urban environment 

is created physically and mentally 

which discourages the agricultural 

growth. In this process farmers become 

half hearted towards agriculture and 

start thinking how to fetch better prices 

of their land. Dhawan farmers were 

quite unfortunate that most of their land 

was acquired by the Government which 

paid only less than one-tenth as compared 

to Shivpuri farmers who were 

quite fortunate by selling to private buyers 

and getting up to unimaginable Rs. 

6.0 million per bigha.(See Table-8) 

Though annual income and expenditure 

reporting is always doubtful even 

then it is recorded just as approximation. 

The average annual income of 60 sample 

households is Rs. 48697 of Dhawan village 

who spend average Rs. 38286 per 

annum i.e. 78.62 percent. Almost the 

same in Shivpuri village where average 

income and expenditure of 60 sample 

households is Rs. 53636 and Rs. 42174 

respectively which is almost the same 

78.63 percent. In most of the cases it 

doesn’t mean that respondents are saving 

money, rather many expenses like 

debt installment, taxes, fee, festival, ceremony 

and liabilities are not included. 

Otherwise then how they live malnourished 

and in poor condition. Out of 60 

sample households 6-10 percent households 

in Dhawan village had taken low 

interest, average Rs. 24,000 loans for 

various purposes. Similarly in Shivpuri 

village out of 60 sample household 9-15 

percent households had taken average 

Rs. 7389 loans at low interest. Most of 

these loans are under Government 

schemes that is why interest rate is lowest 

i.e. between 4-8 percent. Most of these 

loans are for agriculture, animal hus- 



bandry, artisan works and for house 

construction purposes. If low interest 

loans are easily available especially to 

artisans then they can free themselves 

from the clutches of entrepreneurs who 

pay least wages and exploit. Low interest 

loans as micro-financing would help in 

changing their farm dependence to non 

farm dependence with suitable income 

especially in urbanizing villages.(See 

Table-9) 

Overall in 60 sample households 

each in Dhawan and Shivpuri villages, 

it reveals that only less than one-fifth 

households reported that they have 

some technical skill 18.0 percent in 

Dhawan and 10.0 percent in Shivpuri 

villages among their family members, 

which is quite negligible. Technical skill 

is most important in villages where 

agricultural land is no more available 

as it helps in earning livelihood from 

non farm activities. Technical skill may 

be of auto-mechanic, tailoring, handicraft 

skill chikan, zardozi, manufacturing 

of candle, agarbatti, handloom, iron 

work, welding carpentry etc. Therefore 

Jan Shiksha Sansthan have to work effectively 

among villagers to impart 

technical skill so that they may stand on 

themselves in earning their livelihood. 

It is irony that in Dhawan and Shivpuri 

villages majority of households have no 

technical skill except manual, they are 

82.0 and 90.0 percent respectively. 

Manual workers only can be engaged in 

agricultural land which is scarce or 

maximum in house/road construction 

where labourers are in surplus. It is 

Table No. 10: Skilled/Unskilled Households and Wanted Government Help 

in Chinhat Block 


Sample Villages & 

Surveyed H.H 

unfortunate that household with their 

main occupation as cultivators and 

animal husbandry in both the villages 

Dhawan and Shivpuri do not posses 

any technical skill. Similarly among 

households of Shivpuri village with 

their main occupation as business and 

agricultural labour do not posses any 

technical skill. 

Percentage of H.H 

Having Existing 

Skills 

On asking what type of help you expect 

from Government which may help 

you in getting your livelihood. Majority 

expected to get micro-financing (low interest 

loans) as 58.0 percent from Dha- 

Percentage H.H wanted 

Government Help to Improve 

Living condition 

Tech. Manual Micro-Finance Land Training Other 

%H.H 

Having 

Account 

in Bank 

Cultivators 

Dhawan 21 - 100.00 67.00 33.00 - - 100.00 

Shivpuri 5 - 100.00 40.00 40.00 - 20.00 100.00 


Dhawan 6 - 100.00 - 100.00 - - 100.00 

Shivpuri 3 - 100.00 100.00 - - - 100.00 

Business 

Dhawan 6 33.00 67.00 - 55.00 - 45.00 89.00 

Shivpuri 6 - 100.00 83.00 - - 17.00 83.00 


Dhawan 10 17.00 83.00 67.00 16.50 - 16.50 83.00 

Shivpuri 1 - 100.00 100.00 - - 

100.00 


Dhawan 14 16.00 84.00 59.00 21.00 10.00 10.00 91.00 

Shivpuri 34 15.00 85.00 65.00 21.00 - 14.00 74.00 

Service 

Dhawan 3 25.00 75.00 62.50 37.50 - - 100.00 

Shivpuri 10 10.00 90.00 60.00 30.00 - 10.00 100.00 

Total 

Dhawan 60 18.00 82.00 58.00 28.00 7.00 67.00 92.00 

Shivpuri 60 10.00 90.00 67.00 20.00 - 13.00 78.00 

Source: 



Shivpuri village with their occupation 

as business and agricultural labour do 

not posses any technical skill 

wan and 67.0 percent from Shivpuri village 

desired from Government. About 

one-fifth households expected agriculture 

land to be provided to them by the 

Government i.e. 28.0 percent in Dhawan 

and 20.0 percent in Shivpuri villages, 

which is not practical. Only seven percent 

households belong to non-agriculture 

labourer as their main occupation 

desired training to be given to them in 

Dhawan village. Majority of households 

of both the villages were having their 

account in the bank i.e. 92.0 percent in 

Dhawan and 78.0 percent in Shivpuri 

village.(See Table-10) 

Health Condition 

Health of population is most important 

for overall development. Health starts 

- 


65


In this information age, product life 

cycles are shrinking and the business 

environment is much more dynamic 

Table No. 11: Recent Child Birth and General Treatment of Household 

Population in Chinhat Block 

Table No. 12: Literate, Students and Educated in Chinhat Block 

Main Occupation Sample Villages Male (Percent ) Female (Percent ) Total (Percent ) 

Literate Dhawan 80.00 76.00 78.00 

Shivpuri 80.00 72.13 76.00 

Students Dhawan 38.74 41.00 40.00 

Shivpuri 37.00 28.00 32.19 

Primary Pass Dhawan 19.00 22.00 20.00 

Shivpuri 19.00 29.00 24.21 

Middle Pass Dhawan 24.00 26.00 25.00 

Shivpuri 15.50 12.00 14.00 

High School Pass Dhawan 13.00 7.00 10.00 

Shivpuri 7.14 3.00 5.00 

Inter Pass Dhawan 5.00 3.00 4.00 

Shivpuri 1.20 1.00 1.00 

Grad. Pass Dhawan 4.00 5.00 5.00 

Shivpuri - - - 

P.G. Pass Dhawan 1.00 - 0.30 


T. Dip Pass Dhawan 1.00 1.00 1.00 


T. Deg. Pass Dhawan - 1.00 0.30 


Population (%) Dhawan 178 (100.00) 176 (100.00) 354 (100.00) 

Shivpuri 182 (100.00) 183 (100.00) 365 (100.00) 

Source: 

Main 

Occupation 

Sample 

Villages 

Percent of last delivery in 

Surveyed Households 

H.H 

At 

Home 

Govt. 

Hospital 

Pvt. 

Hospital 

Percent H.H visit for 

Treatment 

Govt. 

Hospital 

Pvt. 

Hospital Quack 

Cultivators Dhawan 21 67.00 33.00 - 33.00 33.00 34.00 

Shivpuri 5 20.00 20.00 60.00 20.00 40.00 40.00 

Animal Husbandry Dhawan 6 50.00 50.00 - 50.00 50.00 - 

Shivpuri 3 33.00 - 67.00 33.00 33.00 34.00 

Business Dhawan 6 33.00 67.00 - 50.00 50.00 - 

Shivpuri 6 67.00 - 50.00 17.00 17.00 66.00 

Agri. Labour Dhawan 10 50.00 33.00 - 20.00 70.00 20.00 

Shivpuri 2 100.00 - - - - 100.00 

Non Agri. Labour Dhawan 14 47.00 34.00 19.00 14.00 13.00 73.00 

Shivpuri 34 62.00 3.00 35.00 15.00 15.00 70.00 

Service Dhawan 3 63.00 25.00 12.00 13.00 67.00 20.00 

Shivpuri 10 40.00 40.00 20.00 40.00 10.00 50.00 

Total 

Dhawan 60 48.00 35.00 17.00 35.00 40.00 42.00 

Shivpuri 60 53.00 10.00 38.00 22.00 17.00 61.00 

Source: 



Based on survey conducted by the author and his team during December 17, 2009 to January 3, 2010, at Giri Institute of 


from motherhood and child delivery. If 

child is not born under medical care in 

hospital then their persistent health 

complications exist for both mother and 

child. Unfortunately about half of child 

births are reported at home under the 

premature care of Dai who is generally 

illiterate and does not know even the 

importance of hygiene. In Dhawan village 

48.0 percent and in Shivpuri village 

53.0 percent recent births were 

taken place at home, which is not a 

good sign when these villages are almost 

the part of metropolitan city of 

Lucknow. In Dhawan village 35.0 percent 

and 17.0 percent and in Shivpuri 

village 10.0 and 37.0 percent deliveries 

were performed at Government and 

private hospitals respectively. Since 

most of the households are poor, they 

go to charitable hospitals, which fall 

under private hospitals. Deliveries of 

Government hospitals are too low 

which are yet to be improved. 

Similarly for general treatment households 

reported mostly going to quacks 

rather to Government or private hospitals, 

which is again a matter of worry, 

despite of huge investment is done in 

Government medical system. In Dhawan 

village 35.0 percent reported visiting 

Government hospitals, 40.0 percent to 

private hospitals and 42.0 percent to 

quacks, when Shivpuri this proportion 

was 22.0, 17.0 and 61.0 percent . (See 

Table-11) 

Education 

For over all development educational 

level is most important as it enhances 

quality of human being by which they 

perform quite well in all sphere of life. 

Being adjacent and becoming part of 

Lucknow metropolis, both Dhawan and 



Shivpuri villages have impressive literacy 

rate which is 80.0 percent in each village 

respectively. However literacy rate is 

only the indication that a person can 

read and write, not the level of education 

or level of enlightenment. However, literacy 

among females is comparatively 

less than male counterparts, which is 

78.0 percent in Dhawan and 72.01 percent 

in Shivpuri village. Overall 40.0 

percent in Dhawan and 32.2 percent in 

Shivpuri village are students out of their 

total population. In Shivpuri village, females 

are behind the male counterpart 

than Dhawan village among school going 

children. About one-fifth of the population 

is primary pass, in which females are 

a head than the males. However, middle 

pass are one-fourth in Dhawan village 

where females are a head than the males. 

In Shivpuri village middle pass are quite 

less i.e. only 14.0 percent and there females 

are behind the males. Only 10.0 

Table No. 13: Housing Condition according to Occupation in 

Chinhat Block 



Surveyed 

H.H 

Percentage 

of 

Houses 

Avg. No. 

of Rooms 

per H.H. 

Percentage 

of H.H with 

Flush Latrine 

Percentage 

H.H with 

Bathroom 

Percentage Houses 

Connected 

with Pucca Drain 

Cultivators 

Dhawan 21 67.00 2.00 - - 43.00 

Shivpuri 5 100.00 3.40 20.00 80.00 60.00 


Dhawan 6 100.00 3.00 - 33.00 83.00 

Shivpuri 3 100.00 5.00 33.00 33.00 67.00 

Business 

Dhawan 6 100.00 3.33 100.00 50.00 33.00 

Shivpuri 6 100.00 3.33 67.00 67.00 67.00 


Dhawan 10 70.00 2.00 - 20.00 40.00 

Shivpuri 1 100.00 4.00 - - - 


Dhawan 14 86.00 2.43 43.00 21.00 27.00 

Shivpuri 34 97.00 2.41 41.20 44.12 35.30 

Service 

Dhawan 3 100.00 4.00 100.00 100.00 50.00 

Shivpuri 10 100.00 2.20 30.00 70.00 40.00 

Total 

Dhawan 60 80.00 2.00 25.00 22.00 56.00 

Shivpuri 60 98.00 3.00 22.00 52.00 42.00 

Source: 

Two and three rooms are in houses 

belonging to sample households of 

both Dhawan and Shivpuri villages 

Based on survey conducted by the author and his team during December 17, 2009 to January 3 ,2010, at Giri Institute of 

Development Studies, Lucknow. 

percent people are high school in Dhawan 

village and only five percent in 

Shivpuri village where females are almost 

half of the males. Similarly intermediate 

pass population in Dhawan 

village is only four percent and in Shivpuri 

village only one percent where also 

females proportion is almost half than 

their counterpart males. However, 

Graduate pass in Dhawan village are five 

percent and females are also slightly 

more than males, otherwise in Shivpuri 

no one was found Graduate in our sample 

survey. Post Graduates, Technical 

Diploma/Degree holders are quite negligible 

in Dhawan village and in Shivpuri 

village all these degree holders are 

absent. We can see the trend that after 

middle education the percentage goes on 

falling sharply specially among females, 


67


as the importance of education and also 

availability of affordable education goes 

on declining in lower strata of society. 

(See Table-12) 

Housing Condition 

Housing condition is also most important 

as it reflects the living condition of 

households. In both the villages about 

80.0 percent houses are pucca in Dhawan 

and 98.0 percent in Shivpuri. 

Households belonging to animal husbandry, 

business and service as the 

main occupation have cent percent 

their pucca houses in both the villages. 

About two and three rooms are in 

houses belonging to sample households 

of both Dhawan and Shivpuri villages 

respectively. Maximum five rooms are 

in Shivpuri village belonging to households 

engaged mainly in animal husbandry, 

while maximum four rooms are 

there in Dhawan village belonging to 

service class households. Only 25.0 

percent houses of respondents in Dhawan 

village and 22.0 percent houses in 

Shivpuri village have flush latrine in 

their premises. There are no latrines in 

the premises of households belonging 

to cultivators, animal husbandry, agricultural 

labourers of Dhawan village. 

Agricultural labourers of Shivpuri village 

also don’t have flush latrine in 

their premises. 

Provision of Bath rooms in the sample 

household premises are in 22.0 percent 

houses in Dhawan village and 52.0 percent 

in Shivpuri village. Cultivators of 

Dhawan village and agricultural labourers 

of Shivpuri village do not have bath 

rooms in their house premises. Drainage 

problem is a major problem of both the 

sample village, especially when it is a 

rainy season. However about 56.0 percent 

sample households of Dhawan village 

and 42.0 percent of Shivpuri village 

reported that their houses are connected 

with pucca drains. Those houses which 

are without pucca drains create drain 

flood affecting the entire neighbourhood. 

Hygienic condition is extremely 

poor in both the villages, where a lot of 

efforts are required while making them 

urbanized. (See Table -13) 

Conclusion and Suggestions 

Two sample villages namely Dhawan and 

Shivpuri were identified. Dhawan village 

is located about two kms. away from 

Faizabad road, which is partially urbanized, 

whereas Shivpuri village is located 

along Faizabad road which is almost urbanized. 

According to our survey most 



of the agricultural land of Dhawan village 

is forcibly purchased by the Government 

at a very nominal compensation as 

compared to market cost. In Shivpuri 

village most of the agriculture land is 

purchased privately and money is paid to 

farmer which is according to the market 

rate. Government rate and market rate 

varies between Rs. 16000-36000/- to Rs. 

100,000-16,00,000/- respectively (per 

bigha/20 biswa). 

Since there is no urban policy, wherever 

market economy is growing the 

land cost is increasing with the process 

of urbanization which is generally observed 

around metropolitan cities, 

while ignoring the small and medium 

towns. Prime agricultural land is seriously 

threatened around metropolitan 

cities and farmers are simply dislodged 

from their traditional occupation i.e. 

agriculture. The agricultural land which 

is most important to feed million of 

people is gradually reducing. The ideal 

situation could have been to spread 

urbanization in all regions to stop metropolitan 

expansion. Equal distribution 

of urbanization would have the advantage 

for utilizing the uncultivable land 

for urban expansion. 

Prime agricultural land has to be 

protected and urban regional disparity 

has to be minimized by controlling the 

unnecessary metropolitan growth. If 

situation becomes so compelled to acquire 

the land by the Government then 

farmers have to be paid a suitable compensation 

for their valuable land, so 

that they may comfortably be settled 

down during at least four to five decades 

and gradually switch over to some 

other non farm livelihood. 

The following key suggestions are 

made to resettle the landless and marginal 

farmers of rural-urban fringe : 

i) For compensation Haryana model 

should be adopted, in which farmers 

get crop value according to the cost 

escalation for 30 years. 

ii) Working age population should be 

identified and they should be trained 

in non-farm activities so that they 

may change their source of livelihood. 

Jan Shikshan Sansthan (JSS) can 

serve the purpose. 

iii) Similar to Kisan Credit Card (KCC) 

Shilpkar Credit Card (SCC) must be 

introduced to avoid procedural complication 

like in SHG formation etc. 

iv) School age children should be given 

scholarship up to High School to 

compulsorily go to school and desist 

of becoming the child labour. 



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Delhi 





69

Tagore's Vision of Rural 

This great visionary 

and literary giant 

understood the 

importance of rural 

economic up-liftment 

and Tagore established 

a strong co-relation 

with rural economy 

Low benches and table surrounding 

the huge trees and 

the lush green campus of 

Visva-Bharti will definitely 

convey that Tagore's vision in an education 

system which was not limited in the 

four-walls of classrooms. But not many 

knew that this great visionary and literary 

giant understood the importance of rural 

economic up-liftment for an independent 

India and paid-heed a lot to creating a 

source of employment for rural economy. 

For instance he conducted several melas 

(fairs) to provide a flat-form for the villagers 

of Shantiniketan and it's adjacent area, 

to sale their cultivated & manufactured 

products. The India Economic Review 

tries to trace this economic footprint of 

Tagore in Santiniketan and discuss the 

rural economic connect of Tagore. Such 

connection is echoed, when Tagore comments, 

"If we could free even one village 

from the shackles of helplessness & ignorance, 

an ideal for the whole India would 

be established. Let a few village be rebuilt 

in this way." He have religiously worked 

for rural reconstruction in the surroundings 

villages of his Santiniketan school in 

rural southern Bengal and the work of 

rural economic reconstruction was a pioneer 

endeavour to redeem the neglected 

village. Bucked up with such noble mission 

in 1922, he established rural reconstruction 

institute — Sriniketan within 


Economic Upwliftment 

one year of setting up of Visva-Bharti. 

Not many would imagine but the urge 

to do something for rural people came to 

Tagore when he was just 29 years old and 

was living in his family's agricultural estates 

in East Bengal. As an estate manager 

he viewed the local denizens from an 

economic philosopher rather than like a 

time-honoured Zamindars of those days. 

Based on such humanist ground, he developed 

the first key-stone of his welfareeconomics 

model which he later implemented 

in Santiniketan. The need of his 

economic development was based on 

creating a market that will bring all the 

villagers together and he did this through 

several melas (fairs). Like two of his dearest 

students Moitri Devi and Suchitra 

Mitra who later became renowned author 

& singer respectively, have written about 

the contribution of melas like Poush Mela, 

Nandon mela and Sriniketan mela in 

bringing villages together and connecting 

them to the rest of the world. Tagore christened 

these meals as the way to see all side 

of villages. 

In ‘The Modern Review of The History 

and Ideals of Sriniketan’, he states two 

objectives — first to educate the villager 

in self-reliance and to bring back to the 

villages; secondly to implement the concept 

of ‘life in its completeness’ with 

‘music and readings ‘ and financial independence. 

His efforts was to implement 

Anshuman Paul 

Senior Editor – Special Projects, 

Planman Media; Professor of 

Marketing & Branding, IIPM 


71


this concept in two or three villages completely. 

“Tagore wanted to develop these 

limited villages completely- it’s essential 

strength would be a co-operative society,” 

echoes Nilangan Banergee, Special Officer, 

Rabindra Bhavan. Community life 

and co-operation — Visva-Bharati still 

sustains that through Visva–Bharati Cooperative 

Bank ltd. But we will discuss 

such co-operative concept in later part of 

the article, let us start with Tagore's first 

organized step towards rural-reconstruction 

— Sriniketan. Set up in the era of 

British dominance — Institute of Rural 

re-construction in Sriniketan reflects that 

as a pragmatist he knew that there was 

not a lot he can do through his meager 

resources. But he was determined to 

make at least a beginning with the work 

even with a very small step. As, renowned 

author and a student of Visva-Bharti during 

Tagore's days Mahaseta Devi mentions 

how his rural reconstruction started 

from setting up cottage industry and everything 

-starting from bed-sheet to trash 

bin used in Santiniketan ashram was produced 

in these cottage industries of surrounding 

villages. 

Tagore sought to bridge the gap between 

city and village through the 

Sriniketan experiment of combining science 

and tradition. The traditional 

handicraft was made more durable by giving 

the touch of science and these artisans 

formed a single group to promote their 

product with the exporters. Modern 

economist will coin it as 'cartel'. Tagore 

wanted to do a widely reconstruction in 

limited villages but lack of fund was always 

an issue. Forming of cartel enabled villagers 

to earn their own money and they 

where educated to the art of savings. He 

personally identified young educated 

volunteers who willingly dedicated themselves 

to living and working in the villages 

and yet was never hungry for publicity. 

Such holistic economic re-construction 

model Tagore mentioned in ‘Palli Prakriti’, 

where he also mentions that rural-economy 

should not be based on charity. Echoes, 

Nripendranath Bandyopadhyya — 

Member, State Planning Board, 

Forming of cartel enabled villagers 

to earn their own money and they 

where educated to the art of savings 

Government of West Bengal who have 

been an active student, lecturer and have 

been involve with enormous re-construction 

work in Santiniketan; “Charity was 

something that Tagore hated and his concept 

rural-reconstruction was based on 

self-reliance.” 

Going beyond charity he wanted to 

make the rural economy independent 

and for that he knew only paying heed to 

cottage-industry was not enough. To uplift 

the rural economy he knew that the 

role of agriculture cannot be denied and 

to sustain rural economy, expertise in 

agriculture was vital. Tagore’s study of 

‘Other Agricultural countries’ had shown 

Tagore that land in those countries was 

made to yield twice or thrice the harvest 

by the use of science. Such knowledge he 

later experimented in Sriniketan by introducing 

the latest techniques of Western 

science to improve cultivation and 

agricultural production. He was so keen 

to adopt this latest technique of agriculture 

that in 1906 he sent his son Rathindranath 

along with two other students 

from Santiniketan to the University of 

Illionis at Urbana in USA to study agriculture 

and dairy farming so that they 

could bring back scientific methods of 

agriculture to the Indian village. Nehru 

would forever be considered as one of 

the pioneer in implementing the co-operative 

concept in free Indian economy 

but very few actually knows that Tagore 

started such scheme much before independence. 

The Sriniketan scheme was to 

organize the villages so that they could 

supply all their needs on a cooperative 

basis. Tagore believed that the villagers, 

when trained in self-reliance, could establish 

and maintain their own schools 

and granaries, banks and co-operative 

stores and such collaboration will tantamount 

to bring unity among the villagers. 

That was very much required as in the 

pr-Independence era, the cast & community 

system divided the society resulting 

even in 'untouchable' rules for the 

lower community people. Tagore insisted 

that Indians must unite themselves to 

provide nation-building services. 


V ISIONARY LEGACY 

The goal of self-reliance was the basic 

premise in Tagore's scheme of rural-economic 

reconstruction and it was apparently 

distinguished from the nationalist 

and economic thinking of those days 

where he rejected the Nationalist movement 

on swadeshi and swaraj. “Rather he 

chose the path of 'constructive swadeshi' 

where he wanted to make the villagers 

economically more independent. His 

logic was before you abandon foreign 

goods, you should be eligible enough to 

make your own goods. And if one analyzes 

his activities to implement such 

concept one would realize that he was 

talking more about today's 'Welfare 

Economist' rather than following the political 

movement of those days,” affirms 

Nilangan Banergee. Welfare economics is 

based on microeconomic techniques that 

evaluates economic well-being and as 

Banergee points out he wanted to actually 

improve the one or two villages rather 

than just talking about a radical change 

that the then political parties (read Indian 

National Congress) used to speak about. 

This is also echoed in the letters that 

Tagore wrote to Rathindranath in way 

back in 1910. Any welfare economist 

would agree to the fact that economic efficiency 

can be achieved not only by income 

distribution but also by social welfare 

and this literary giant argued that 

working for a 'national programme' was 

useless as long as its clamorous for political 

grievances rather than thinking of social-welfare. 

The Noble laureate's remedy to implement 

such social-welfare was by identifying 

young volunteers who would co-operate 

with the villagers to start the work 

of constructing roads, schools, water 

reservoirs and also to create a 'new objective' 

to village life. “His vision of a complete 

economic development is something 

which was very rare on those days 

and even though in just two villages but 

successfully these villagers where blessed 

to be touched by Tagore. Then there 

where volunteers who carried on these 

works after Tagore's death,” adds Prof. 

Udaya Narayana Singh, Tagore Professor, 

Visva-Bharati. We have mentioned 

about such volunteers earlier in this article 

but two such great volunteers that 

Tagore enlisted was his son and son-inlaw 

Nagendranath Ganguli. And it was 

the effort of these educated buoyant 

group of volunteers that Sriniketan's 

economic rural-economic reconstruction 

work proliferated from just two villages 

to twenty-two villages. 

During the time frame of 1937-1941, 

the period which comprises the end of his 

life, this great visionary was becoming 

discouraged about the state of India, 

especially with normal burden of economic 

problems like hunger, poverty and 

unemployment and he was more disturbed 

with such problems beings supplemented 

by politically organized incitement 

to communal violence between 

Hindus and Muslims. And his extrapolation 

was right as six years after his death 

this country achieved freedom but with 

freedom also came the widespread killings 

that took place during partition. In 

a letter written to his intimate friend 

Leonard Elmhirst in December 1939, 

where he has mentioned about the conversion 

of village economy into hunger, 

disease and exploitation. In fact, Elmhirst 

knew the economic concept of 

Welfare economics is broadly based 

on microeconomic techniques that 

evaluates economic well-being 

Tagore as this British philanthropist and 

agricultural economist had closely 

worked with him on rural reconstruction 

in India and till today Elmhirst Institue 

Santiniketan have been running child 

welfare centre in several villages in Santiniketan. 

Renowned economist and 

Nobel Laureate — Amrtya Sen, has commented 

that Tagore wanted to free villages 

from the shackles of helplessness 

and ignorance and this is where his economic 

vision matched with Elmhirst. 

This philosopher and educationist 

sought to balance his passion for India's 

freedom struggle with his vision of economic 

freedom and the accelerating socioeconomic 

decline of Bengal, propelled 

him to implement such concept in rural 

Bengal. His views pertaining to eco-ethical 

human living and sustainable rural development, 

as scattered in various works 

throughout his life and we made an attempt 

to assemble them to bring out his 

economic vision. Always positive and 

oriented towards action, his economic 

vision was based on creating a source or 

employment by forming co-operative societies. 

In exchanges with Einstein, Tagore 

had commented “The progress of our soul 

is like a perfect poem. It has an infinite 

idea which once realized makes all movements 

full of meaning of joy.” Such movements 

full of meaning and joy he wanted 

to spread among rural India also and just 

not limited only to urban India. 


personal and do not reflect the official policy 

or position of the organization.) 


73

A GRICULTURAL E CONOMICS 

Technological 

Innovation in Indian 

Agricultural Marketing 

Information asymmetries often leave farmers at a disadvantage in rural areas. 

Improvements in information can reduce market imperfections by making 

buyers more competitive and can increase the returns received by farmers 

Aparajita Goyal 

Economist 

The World Bank 

Agriculture is crucial to the 

Indian economy, contributing 

21 percent to India's 

Gross Domestic Product. 

The rural areas are home to 72 percent of 

the India's 1.1 billion people, a large 

number of whom are poor. However, recent 

changes in domestic and global markets 

are creating tremendous opportunities 

for farmers and agribusiness 

entrepreneurs. The demand for highvalue 

primary products is rapidly increasing, 

driven by rising incomes, faster urbanization, 

and advancing technology. 

These developments are expanding market 

opportunities that are potentially important 

for faster agricultural growth 

(World Bank 2008). 

Well-functioning agricultural markets 

can reduce the uncertainty of supply and 

improve the food security of households. 

Efficient markets require institutions and 

services that provide market information, 

establish grades and standards, manage 

risks, and enforce contracts — a continuing 

challenge in many countries. For instance, 

in India, layers of intermediaries 

are common in the marketing of agricultural 

commodities. The traders and intermediaries 

are often self-funded because of 

limited access to credit, and they maximize 

the returns on their working capital by 

rapidly turning over small quantities, with 

little storage. Quality grades are rarely 

standardized, nor are weights and measures, 

making personal inspection by buyers 

essential. 

Improvements in information can have 

a dramatic impact on the marketing of 

agricultural output. Several innovative 

approaches are being piloted in developing 

countries, building on advances in 

communications technology (radio, cell 

phone, television, Internet) and the liberalization 

of telecommunications and 

broadcasting (Jensen 2007, Aker 2008, 


I NDUCING INFORMATION 

Muto and Yamano 2009). In India, the 

Ministry of Agriculture operates Ag- 

MarkNet that collects price information 

from wholesale markets nationwide and 

disseminates it through the Internet. The 

private sector in India is also investing in 

telecommunications infrastructure, such 

as mobile phone networks and Internetlinked 

rural kiosks, which aid in strengthening 

market information, extension, and 

other services to farmers. This paper 

highlights the effects of a pioneering in- 

Ministry of Agriculture operates 

AgMarkNet that collects price 

information from wholesale markets 

tervention implemented in the Indian 

state of Madhya Pradesh that delivers 

relevant price information to soybean 

farmers as well as facilitates direct interactions 

between farmers and processors 

to enhance the functioning of rural agricultural 

markets. 

Agricultural Marketing in 

Madhya Pradesh 

Madhya Pradesh (MP) is the second largest 

Indian state in terms of area and ranks 

seventh in population. The Madhya 

Pradesh State Agricultural Marketing 

Board, established in 1973, facilitated the 


75


development of mandis (government regulated 

wholesale agricultural markets) as an 

essential requirement for farmers to receive 

a fair price for their produce. Currently 

there are a total of 233 main mandis 

in the state with well built storage and 

display areas where farmers periodically 

sell their produce. The MP State Agricultural 

Marketing Act, 1972 prohibits transactions 

outside the mandis. Every farmer 

is required by law to sell his or her produce 

in these regulated markets. 

Soybean cultivation in India was negligible 

until 1970, but it grew rapidly thereafter 

in response to the domestic deficit of 

edible oil supply. India is now the 5 th largest 

producer of soybean in the world and 

MP produces more than 60 percent of 

India's soybean crop. Soybean is usually 

sown in June because it requires sufficient 

moisture for its germination, and the 

monsoon rains are important for the subsequent 

growth of the crop. The crop is 

ready to be harvested in September and 

being a cash crop, almost the entire crop 

is marketed. Approximately 65 percent of 

the total soybean produced in a year is 

sold in the mandis from October-December, 

immediately after the harvest. There 

also appears to be considerable seasonal 

fluctuation in price. For instance, the average 

price in the fourth quarter, over the 

years 2000-2005, is 8.5 percent lower than 

in the second quarter. 

After harvest, farmers transport their 

produce by animal-drawn carts and tractors 

to a nearby mandi where it is sold 

through an open outcry ascending bid 

auction. Field studies reveal that farmers 

travel 30-50 kms on an average to reach a 

mandi and they usually make this trip a 

couple of times each month (Anupindi 

and SivaKumar 2006). The farmer displays 

his produce in a heap in the mandi 

yard or simply stands besides his tractor. 

The auction begins when the auctioneer 

(a government employee) visually inspects 

the quality and sets the initial bid. From 

here the traders bid upwards until the 

produce is sold. This is a very rapid process 

and in a matter of seconds the final 

price is decided. The government employee 

and the traders move from heap 

Farmers travel 30-50 kms to reach a 

mandi and they usually make this 

a couple of times each month 

to heap picking up samples of the produce 

and making a price estimate. In 

principle, edible oilseeds are traded on 

the basis of Fair Average Quality (FAQ) 

determined by the presence of dirt, damaged 

seeds and moisture content in each 

lot of produce offered for sale. For instance, 

the highest or the FAQ price is 

offered to a sample of soybean that is on 

a 2-2-10 quality scale (not more than two 

percent of the sample contains dirt, two 

percent contains damaged seeds and at 

most 10 percent moisture in the seed). 

Traders start to discount the price of 

beans when the proportion of dirt, moisture 

and damaged seeds exceed that 

level. Once the final price is set, the 

farmer's produce is bagged and weighed 

on a manually operated balance scale. 



After weighing, the full value of the farmers 

produce is calculated and the farmer 

is paid in cash. 

Although the traders make up for lack 

of infrastructure such as transport and 

storage facilities in rural areas, they are 

also well informed about prices prevailing 

in different markets and the price offered 

by processors (Bardhan and Udry 1999). 

Farmers often do not have information 

about market conditions prior to the sale. 

Moreover, processors are unable to perfectly 

monitor the traders. Access to information 

as well as direct interactions between 

farmers and processors can 

therefore have a potentially important 

effect both on the price received by rural 

producers and on their behaviour. 

An Innovative Private Sector 

Intervention in Central India 

A large private sector company, ITC 

Limited, launched a unique e-choupal 

intervention in October 2000 in the state 

of Madhya Pradesh that to some extent 

addressed this need. Prior to this intervention, 

ITC bought soybean from traders 

(operating in the mandis) and processed 

the beans to produce edible oil for 

sale in the Indian domestic market and 

DOC (de-oiled cake) for export. Since 

ITC did not have any direct contact with 

the farmers, it commissioned certain traders 

(called commission agents) to buy 

soybean from the mandis on its behalf. 

The company was dependent on its 

agents' knowledge about local farmers 

and their produce. 

Interviews with ITC officials revealed 

that the distortion of quality undertaken 

by the agents meant that the company 

paid a high price for a lower overall quality 

of soybean, which upon processing 

yielded less oil and more contaminated 

ITC calculated that it saved Rs. 12.9 

million in the first year of operation 

through better quality oil and DOC 

DOC. ITC believed that by bypassing the 

intermediaries, it would be able to better 

control the quality of the produce and 

also lower its transaction costs. ITC calculated 

that it saved Rs. 12.9 million in 

the first year of operation through better 

quality oil and DOC obtained from 

processing soybean procured through the 

e-Choupal intervention. Moreover, the 

company had dual roles for the infrastructure 

that it was creating as it planned to 

sell its own consumer products in rural 

areas in the future. 

This intervention provided an alternative 

both to ITC for procuring soybean 

and to soy farmers for selling their produce. 

Beginning in the year 2000, ITC 

established a total of 1700 internet kiosks 

and 45 hubs over the course of 4.25 

years in the major soy growing districts 

of the state. The intervention has two 

dimensions. Internet kiosks were set up 

in villages that provide information 

about mandi prices to soy farmers in the 

state. Each day the (minimum and 

maximum) prices of soybean in approximately 

60 local mandis are posted 

on the website. Along with this information, 

ITC's own offer price at its 45 hubs 

is also posted. In addition, information 

on farming techniques and weather 

conditions is also available in the local 

language to farmers through the kiosks. 

Each internet kiosk was designed to 

cater to its host village and four other 

neighboring villages within a five kilometer 

radius (Prahalad 2003). The internet 

kiosks are managed and operated by 

trained farmers who are selected from 

within the village and provide free services 

to other soy farmers. 

Hubs represent a point of contact between 

farmers and the ITC. A farmer can 

sell directly to ITC by going to the nearest 

hub. ITC's goal is to have a hub within a 

30-40 km. radius of its target farmer. Once 

the farmer arrives at one of the hubs, his 

produce is carefully tested to discern quality. 

ITC can offer a price below the posted 

FAQ price if quality is below the FAQ 

level. However, the minimum support 

price (declared annually by the Government 

of India) is the lowest price that ITC 

can offer for a certain poor quality threshold. 

After the price is set and accepted by 

the farmer, his beans are weighed on an 

electronic weighbridge, and the weight is 

multiplied by the offered price. The 

farmer then receives cash instantly. 

In the initial period of the intervention, 

ITC used a provision in the by-laws of the 

Marketing Act to procure soybean from 

farmers at its hubs. This provision permitted 

farmers with small landholdings and 

low annual output, who are unable to 

travel to the mandi, to sell their produce 

outside the regulated markets, in front of 

a government official in the village (Government 

of MP 2003). The state Marketing 

Act was subsequently amended in April 

2003 allowing farmers to sell outside the 

mandis provided that the buyers obtain a 

‘Purchase Center License’. This license 

enables a particular buyer to establish 

centers to procure agricultural produce 

outside the physical confines of a particular 

mandi subject to full documentation of 

its transactions and the payment of mandi 


77


tax. The amendment of the Act represents 

an important step towards greater flexibility 

in the marketing of agricultural produce 

in the state. 

In recent work (Goyal 2010), I examined 

the impact of this innovative initiative 

on the price received by soybean 

farmers in the mandis and on their subsequent 

planting decisions. Improvement 

in price information to farmers, due to 

the presence of kiosks, is likely to reduce 

the trader's monopsony power leading to 

an increase in the offer price of the good 

in the mandis. The presence of a hub, 

however, is likely to exert two opposing 

forces. On one hand, direct buying by 

ITC is expected to divert a part of the 

sales away from the mandis, leading to an 

upward pressure on price, the competition 

effect. On the other hand, scientific 

testing of quality performed at the ITC 

hubs might induce farmers to self-select, 

putting a downward pressure on the 

price offered in the mandis, the composition 

effect. If farmers with good quality 

soybean have a greater tendency to sell 

directly to the private company, the effect 

of the hub on the mandi price is a 

priori ambiguous, and is ultimately an 

empirical question. 

The location and installation date of 

each internet kiosk and hub, available 

from the private company, provide the 

spatial and time patterns of the implementation 

of the intervention in the state 

of Madhya Pradesh. The outcomes, 

monthly wholesale price and volume of 

crops sold in all government regulated 

mandis in the state from April 2000 to 

September 2005, are available from the 

Madhya Pradesh State Agricultural Marketing 

Board. Measuring the output response 

to this intervention is crucial for 

understanding the effect of this intervention 

on farmers' behaviour. Annual district 

level data on area cultivated, production 

and yield of crops from 1998 to 2004 

are available from the Commissioner of 

Land Records, Madhya Pradesh. 

This is the first attempt to collect detailed 

data on price and volume of crops 

sold in the mandis to examine the impact 

of information technology on the functioning 

of rural markets in India. Using 

differential timing in the introduction of 

kiosks and hubs across the districts of 

the state, the study finds an immediate 

and significant increase in the average 

price of soybean after the kiosks are introduced, 

The presence of an internet 

kiosk in a district is associated with an 

increase in the monthly mandi price of 

soybean by approximately two percent. 

While the presence of hubs appears to 

have no effect on average price, hubs are 

associated with a dramatic reduction in 

the volume of sales in the mandis. In addition, 

the dispersion of soybean prices 

across the affected mandis in Madhya 

Pradesh decreased after the intervention. 

The increase in price and the reduction 

in dispersion appears to influ- 



ence farmers' planting decisions. There 

is a significant increase in the area under 

soy cultivation due to this intervention. 

The findings of the study show that information 

provision to farmers is potentially 

crucial to increasing the efficiency 

of rural markets in India. The analysis 

also contributes to an understanding of 

the role of information technology in 

enhancing rural development. 

Conclusion 

Price information is crucial for market 

efficiency. The introduction of internet 

kiosks across districts of the state of Madhya 

Pradesh is associated with a significant 

increase in the monthly price of 

soybean in government regulated wholesale 

agricultural markets. The use of Information 

and communication technologies 

by farmers, fishermen and other 

agents in the agricultural supply chain, 

particularly in the marketing of output, 

such as obtaining price information or 

arranging sales has risen significantly in 

recent years. Moreover, direct interactions 

between producers and processors 

are gaining considerable interest in the 

developing world. While intermediaries 

deliver critical services to rural producers, 

they are also often exploitative and there 

can be large efficiency gains from their 

removal. The innovative intervention by 

ITC shows that it requires serious investment 

to bypass intermediaries, but it is 

possible, and can be beneficial for both 

farmers and final buyers. 



• Anupindi, Ravi, and S. Sivakumar. 

2006. “Supply Chain Reengineering in 

Agri-Business: A Case Study of ITC’s 

e-Choupal.” In Building Supply Chain 

Excellence in Emerging Economies, ed. 

Hau L. Lee and Chung-Yee Lee, 265– 

307. New York: Springer. 

• Aker, J. 2008. “ Does Digital Divide or 

Provide? The Impact of Cell Phones on 

Grain Markets in Niger,” Center for 

Global Development Working Paper 

No. 154 

• Bardhan, P. and Udry, C. 1999. Development 

Microeconomics, Oxford University 

Press. 

• Government of Madhya Pradesh. 2003. 

“Agricultural Marketing Act, 1972.” 

M.P. Act No. 24. 

• Goyal. A. 2010. “Information, Direct 

Access to Farmers, and Rural Market 

Performance in Central India,” American 

Economic Journal: Applied Economics 

2(3): 22-45. 

• Jensen, R. 2007. “The Digital Provide: 

Information (Technology), Market 

Performance, and Welfare in the South 

Indian Fisheries Sector,” Quarterly 

Journal of Economics, 122(3), 879- 

924. 

• Muto, Megumi, and Takashi Yamano. 

2009. “The Impact of Mobile Phone 

Coverage Expansion on Market Participation: 

Panel Data Evidence from 

Uganda,” World Development, 37(12): 

1887–96. 

• Prahalad, C.K. 2003. “What Works 

Case Study Series,” University of 

Michigan Business School 

• World Bank 2008. World Development 

Report: Agriculture for Development, 

World Bank. 

• Bhatnagar, S. and Schware, R. 2000. 

Information and Communication Technology 

for Development: Cases from 

India, SAGE Publications India Ltd 

• Brown, J. and Goolsbee, A. 2002. 

“Does the Internet Make Markets 

More Competitive? Evidence from 

the Life Insurance Industry,” Journal 

of Political Economy, 110 (3), 

481-507. 

• Upton, David, and Virginia A. Fuller. 

2003. “ITC eChoupal Initiative.” Harvard 

Business School Case Study 

604016. 

(APARAJITA GOYAL is an economist at the 

World Bank. Her research focuses on microeconomic 

issues of development. Prior to her 

doctoral studies, she worked with an NGO, 

ActionAid. In 2000-2001, she received the 

Graduate Merit Award at the London School 

of Economics and was the recipient of the 

Economic Club of Washington Research Fellowship. 

Her research has been featured in 

The Economist, Financial Express, Frontline, 

and others. She obtained a PhD in Economics 

from the University of Maryland, College 

Park in 2008. 





79


Turning India’s Irrigation 

Portrait Upside Down: 

Dominant Views Vs Realities 

Making choices between Surface Scheme and Groundwater scheme considering 

only irrigated area by source is hydrologically and economically absurd; which 

model of irrigation would be sustainable and best suited can only be judged by 

the nature of topography, hydrology and aquifer conditions 


W ATER WOES 

In recent years, a myopic view favouring 

only private well irrigation 

in preference to canal irrigation is 

emerging among a few irrigation 

“experts” in India. We all know that major 

irrigation projects contributed to expanding 

irrigated area in the country over the 

years. A few scholars have recently documented 

the larger socio-economic (Bhalla 

and Mukherjee, 2001) and welfare impacts 

(Perry, 2001; Shah and Kumar, 2008) 

of large surface irrigation projects. Private 

well irrigation system in the last three 

decades witnessed rapid growth surpassing 

flow irrigation in its contribution to 

the net irrigated area. This was because of 

massive rural electrification, heavy electricity 

subsidies and institutional financing 

for pump sets. However, the distorted 

thinking of considering one system superior 

to the other came because of a poor 

understanding of determinants of irrigation 

growth and the fundamental difference 

between well and surface irrigation. 

Canal vs Well Irrigation: 

Comparing Apples and Oranges 

Surface irrigation systems provide more 

dependable sources of water than groundwater-based 

systems in most parts. For 

flow irrigation, there should be a dependable 

source of water, and a topography 

permitting flow by gravity to the places of 

demand. Ideally, the design itself ensures 

sufficient yield from the catchment to supply 

water to the command areas for an 

estimated duty of the design command, or 

in other words, the design command is 

adjusted to match the flows available from 

the catchment. Hence, the design life of 

the scheme is by far realistic for reliable 

“dependable yield” estimates, unless major 

changes occur in the catchment that 

changes the flow regimes and silt load. 

But, in case of groundwater, thousands 

of farmers dig wells drawing water from 

the same aquifer. Since they all operate 

individually, “safe yield” of the aquifer is 

not reckoned while designing the well. So, 

the productive life of a well is not in the 

hands of an individual farmer who owns 

it, but depends on the characteristics of 

aquifer, wells and total abstraction. In the 

entire hard rock peninsular and central 

India and some parts of western India, as 

the static groundwater resource is negligible, 

the wells go dry or yield reduces 

drastically when aquifer is “over-exploited”, 

or when monsoon fails. In spite of 

explosion in well numbers, the well irrigated 

area has not increased here during 

the past decade. Experience shows that 

the bore wells last for only 1-3 years. 

Secondly, growth rate in well irrigation 

is almost decelerated in most parts of India 

since nineties. Most of well irrigation 

in India is in the arid and semi arid regions 

of northern, north-western, western and 

peninsular India (Table 1). Amongst this, 

intensive well irrigation in terms of per 

capita groundwater withdrawal per annum 

is highest in some of the northern 

and north western States, viz., Punjab 

(1729.9 m3/capita/annum), Rajasthan, UP 

and Haryana and to an extent Gujarat, 

Tamil Nadu and Andhra Pradesh (Figure 

1, Source: Kumar et al., 2008b). 

Intensive irrigation could sustain for 

many decades only in a few pockets such 

as alluvial Punjab and Haryana and UP. 

These regions are already saturated in 

terms of irrigated area. Further, expansion 

in irrigated area is not possible in 

these areas. Whereas in Rajasthan, Gujarat, 

Andhra Pradesh and Tamil Nadu, 

problems of over-exploitation halt further 

growth in well irrigation. Most of the 

untapped groundwater is in eastern 

M. Dinesh Kumar 

Executive Director, Institute 

for Resource Analysis and 

Policy, Hyderabad 

M. V. K. Sivamohan 

Principle Consultant, Institute 

for Resource Analysis and 

Policy, Hyderabad 

A. Narayanamoorthy 

Professor and Head, Centre for 

Rural Development, Alagappa 

University, Karaikudi, Tamil Nadu 


81


Table 1: Gross Irrigated Area and Well Irrigated Area for Major Indian States 

Sr. No Name of the State Gross Irrigated Area 

Source: Ministry of Agriculture, Government of India, 2000. 

Gross groundwater 

Irrigated Area 

Percentage Contribution of 

Groundwater 

1 Andhra Pradesh 5.74 2.45 42.68 

2 Bihar 4.55 2.43 53.50 

3 Gujarat 3.51 2.81 80.06 

4 Haryana 5.22 2.57 49.23 

5 Karnataka 3.17 1.19 37.54 

6 Madhya Pradesh 4.59 3.10 67.54 

7 Maharashtra 3.82 2.63 68.85 

8 Orissa 2.39 0.62 25.94 

9 Punjab 7.80 5.92 75.90 

10 Rajasthan 6.60 4.30 65.15 

11 Tamil Nadu 3.50 1.88 53.71 

12 Uttar Pradesh 17.67 13.42 75.95 

13 West Bengal 3.50 2.13 60.86 

Figure 1: Per Capita Groundwater Withdrawal Rates in Different States (m3/annum) 

West Bengal 

Uttaranchal 

Uttar Pradesh 

Tamil Nadu 

North Eastern States 

Rajasthan 

Orissa 

Maharashtra 


Kerala 

Karnataka 

Jharkhand 

Jammu & Kashmir 

Himachal Pradesh 

Haryana 

Gujarat 

Delhi 

Chattisgarh 

Bihar 

Assam 

Andhra Pradesh 

0.0 200.0 400.0 600.0 800.0 1000.0 1200.0 1400.0 

Punjab 

Gangetic plains, devoid of sufficient arable 

land that lies un-watered (Kumar 

and Singh, 2005; Shah and Kumar, 2008; 

Kumar et al., 2008b). Peninsular India 

and central India have a lot of un-irrigated 

land. Agriculture is prosperous in this 

part of the country, and demand for water 

is only going to grow. But, well irrigation 

is experiencing a “leveling off” and sometimes 

decline due to “over-exploitation” 

and monsoon failure. 

A recent analysis in the hard rock areas 

of Narmada river basin in Madhya 

Pradesh showed that the average area 

irrigated by a single well has declined 


W ATER WOES 

Table 2: Reduction in Average Command Area of Wells over Time in Selected Districts of Madhya Pradesh 

Name of District Falling 

in Narmada Basin 

Average Area Irrigated by a Well in 

1974-75 1980-81 1985-86 1991-92 1995-96 2000-01 

Balaghat 4.50 2.25 2.35 2.57 1.73 1.96 

Chhindwara 4.56 2.58 2.26 1.42 1.50 1.75 

Shahdol 2.04 0.18 0.50 0.70 0.99 0.47 

Jhabua 2.93 1.87 0.89 1.20 1.26 0.57 

Betul 6.97 3.37 3.02 1.98 2.06 2.18 

Source: Kumar (2007) 

over a 25-year period (Table 2 based on 

Kumar, 2007). Such a phenomenon is occurring 

due to well-interference, a characteristic 

feature of hard rock areas, 

which starts occurring when all the 

groundwater, that can be tapped, is already 

tapped. In such situations, an increase 

in number of wells does not result 

in increase in total irrigated area (Kumar, 

2007). Hence, it is wrong to assume that 

well irrigation could sustain the same 

pace of growth in coming years. 

This spatial mismatch in resource 

availability and demand can be effectively 

addressed only by large surface 

water projects, and not by groundwater 

projects 1 . Water was taken from rich upper 

catchments of river basins, which 

formed ideal locations for storages. Surface 

irrigation can expand in future also 

with investments in large reservoirs and 

transfer systems that can take water from 

the abundant regions of the north and 

east to the parched, but fertile lands in 

the south, though their economic viability 

and social costs and benefits will have 

to be ascertained. But, the same is not 

true for wells, as engineering feasibility 

of transferring groundwater in bulk itself 

is a questionable proposition. 

It is totally wrong to assume that well 

irrigation could sustain the same pace 

of growth in coming years as well 

Outdated Irrigation 

Management Concepts 

Now and then arguments are heard that 

the government investment in surface irrigation 

systems should be diverted for 

better management of our aquifers. They 

stem from the presumption that surface 

irrigation systems perform badly. Such 

arguments are based on obsolete irrigation 

management concepts, which treated 

the water diverted from reservoirs in excess 

of crop water requirement as “waste” 

(Seckler, 1996). As Seckler (1996) notes, 

the fundamental problem with this concept 

of water use efficiency based on supply 

is that it considers inefficient both 

evaporative loss of water and drainage. It 

is not well informed by the water use hydrology 

of surface irrigation systems. 

Most of the seepage and deep percolation 

from flow irrigation systems replenish 

groundwater, and is available for reuse by 

well owners in the command (Allen et al., 

1998; Seckler, 1996). This recycling process 

not only makes many millions of wells 

productive, but also saves the scarce energy 

required to pump groundwater by 

lowering pumping depths. This is one 

reason why well irrigation can sustain in 

many parts of Punjab and Haryana, Mulla 

Command in Maharashtra, in the Krishna 

river delta in AP and Mahi and Ukai- 

Kakrapar command in south Gujarat. 

B. D. Dhawan, one of the renowned 

irrigation economists, looked at the economic 

returns from surface irrigation 

systems in his book wherein he examined 

the merits of he claims and counterclaims 

about the benefits of big dams. He 

had highlighted the social benefits generated 

by large irrigation schemes through 

the positive externalities such as improvement 

in well yields, and reducing incidence 

of well failures and increasing the 

overall sustainability of well irrigation by 

citing the example of Mulla command in 

Maharashtra (see Dhawan, 1990). 

The social benefits these canals generate 

by protecting groundwater ecosystems 

are immense (Shah and Kumar, 2008), 

reduced energy cost for pumping groundwater 

being one (Vyas, 2001). But, irriga- 


83


tion planners have, by far, nearly failed to 

capture them in the cost-benefit calculations 

(Shah and Kumar, 2008). The recent 

data from government of Andhra Pradesh 

shows that the command irrigated regions 

of the state have the lowest number of 

groundwater “over-exploited” mandals. 

The tail end regions of the canals have 

sufficient number of bore wells, which 

actually reap the benefit of return flows 

from canals, and thus have good yields. 

The large reservoirs had raised cereal 

production to the tune of 42 million ton 

in fifty year since Independence. The social 

benefit this had generated by lowering 

cereal prices in the country was estimated 

to be Rs. 4300 crore annually (Shah and 

Kumar, 2008). Added to these are the 

multiple use benefits that canal water 

generate such as fish production, water for 

domestic use and cattle in rural areas. 

Groundwater Recharge using 

Local Runoff: Catching the Crane 

Using Butter? 

It is often suggested that flows from the 

small canals (Shah, 2008) or small water 

harvesting/ artificial recharge structure 

(GOI, 2007; Shah, 2008 as quoted in TOI, 

2008) should be used for recharging aquifers. 

This is fallacious as the arid and 

semi arid regions, where aquifers are 

depleting (GOI, 2005; Kumar, 2007), have 

extremely limited surface water (Kumar 

et al., 2008a). From the map which shows 

the over-exploited regions in India 

(source: GOI, 2005), one can make out 

that they also coincide with the regions/ 

basins of poor surface water availability. 

Examples are Western and Central Rajasthan; 

almost the entire Punjab; north 

Gujarat; parts of Andhra Pradesh, Madhya 

Pradesh, Maharashtra and Tamil 

Nadu. The surface water resources in 

these basins are extremely limited and 

are already tapped using large and medium 

reservoirs (source: GOI, 1999). 

Any new interventions to impound 

water would reduce the d/s flows, creating 

a situation of “Peter taking Paul’s water”. 

Such indiscriminate water harvesting is 

also leading to conflicts between upstream 

and downstream communities as 

reported by Ray and Bijarnia (2006) for 

Alwar in Rajasthan; Kumar et al., 2008a 

for Saurashtra in Gujarat. Kumar et al. 

(2008a) shows that in semi arid and arid 

regions water harvesting/recharge not 

only has poor physical feasibility and 

economic viability, but has negative impacts 

on access equity in water (Kumar et 

al., 2008a). Kumar et al. (2008a) argued 

that the central government’s Rs. 1800 

crore-scheme to recharge groundwater 

through open wells in hard rock areas of 

India, if implemented, would render 

many small and large reservoirs unproductive, 

unless bring water from surplus 

basins in the north and east is brought for 

recharging the aquifers in peninsular and 

western India. 

Bringing water from water-surplus basins 

to peninsular India would require 

large head works, huge lifts, long canals, 

intermediate storage systems, and intricate 

distribution networks. As we have 

argued, recharge schemes using local 

water are economically unviable. Need for 

vast precious land for spreading water for 

recharge, would make it also socially unviable, 

while further increasing economic 

costs. Since the aquifers in hard rock areas 

of India have extremely poor storage 

capacities, efficient recharge would require 

synchronized operation of recharge 

systems and irrigation wells. This would 

call for advanced hydraulic designs, and 

sophisticated system operation. Therefore 

such an approach of using imported surface 

water for recharge would sound like 


W ATER WOES 

“catching the crane using butter”. The fact 

that practicing environmentally sound 

artificial groundwater recharge is a very 

expensive affair in these water-scarce hard 

rock areas is yet to be appreciated by a 

section of the water community. 

Hence, the best option would be for the 

farmers to use this expensive canal water 

for applying to the crops in that season of 

import (mainly monsoon season), and use 

the recharge from natural return flows for 

growing crops in next season. Opportunities 

for using water from “surplus basins” 

for recharging depleted aquifers exist at 

least in some areas. Examples are alluvial 

north Gujarat and north-central 

Rajasthan. Ranade and Kumar (2004) 

has shown that use of surplus water from 

Sardar Sarovar project during years of 

high rainfall for recharging the alluvial 

aquifers of north Gujarat through the 

designated command area in that region 

(Ranade and Kumar, 2004). They proposed 

the use of existing Narmada Main 

Canal, and the rivers and ponds of north 

Gujarat for this. It can protect groundwater 

ecology by reducing pumping; reduce 

the revenue losses in the form of electricity 

subsidy; and increase the flows in rivers 

that face environmental water scarcity, 

apart from giving direct income 

returns from irrigation. But, one cannot 

agree more on the point raised by Rath 

(2006) that only crops having very high 

water use efficiency will have to be promoted 

in the commands receiving such 

waters so as to generate sufficient returns 

from irrigated production. But, this will 

be possible only if the price of irrigation 

water is pitched at a level it starts reflecting 

the scarcity value of the resource. 

Misuse of Statistics 

Making choices between surface scheme 

and groundwater scheme based on crude 

numbers of “irrigated area by source” is 

“hydrologically and economically absurd”. 

Which model of irrigation is best 

suited for the area in future can be 

judged by the nature of topography, hydrology 

and aquifer conditions. For instance, 

in rocky central and peninsular 

India, only imported surface water can 

sustain and expand well-irrigation. Indiscriminately 

embarking on well irrigation 

would only ruin the rural economy. 

Farmers in these regions desperately 

drill bore holes to tap water with high 

rates of failure (Kumar and Singh, 2008), 

and resultant farmer suicides. 

At least some scholars have begun to 

use “declining area under canal irrigation” 

to build a case for stopping investments 

in surface irrigation (Shah, 2009; 

TOI, July 10 & 17, 2008). But, this is a 

clear case of misuse of statistics. The 

reasons can be understood if we look at 

the real factors that influence the irrigation 

performance of surface systems. 

First: As a recent study in Narmada 

river basin in central India shows, increased 

pumping of groundwater can 

In rocky central and peninsular India, 

only imported surface water can 

sustain and expand well-irrigation 

significantly reduce stream flows in basins 

where groundwater outflows contribute 

to surface flows (Kumar et al., 

2006), thereby affecting the inflows into 

reservoirs. Also, as is evident from the 

earlier discussions and from some studies, 

small water harvesting systems are 

adding to the reduction in inflows into 

reservoirs (Kumar et al., 2008; Ray and 

Bijarnia, 2006). 

Second: Farmers in most surface irrigation 

commands install diesel pumps to lift 

water from the canals, and irrigate the 

fields. Such instances are increasing with 

pump explosion in rural India. The better 

control over water delivery, which farmers 

can secure by doing this, is the reason for 

their preference for energy-intensive lifting 

to gravity flow. Another important 

reason is the illegal water diversion which 

is rampant in canal irrigation. The pumping 

devices enable illegal diversion of water 

for irrigating plots that are otherwise out 

of command due to topographical constraints. 

Such areas get counted as pump 

irrigated areas in government statistics. 

Third: Large reservoirs, primarily 

built for irrigation in this country, are 

being increasingly used for supplying 

water to big cities and small towns as 

recent studies show. A recent analysis 

involving 301 cities/towns in India shows 

that with increase in city population, the 

dependence on surface water resources 

for water supply increases, with the dependence 

becoming as high as 91% for 

larger cities (Figure 2, Source: Mukherjee 

and Shah, 2008). Many large cities depend 

entirely on surface water imported 

from large reservoirs, built primarily for 

irrigation. Some examples are Bangalore, 

Hyderabad, Ahmedabad, Chennai, 

Rajkot and Jodhpur. 

Fourth: Farmers in canal command 

areas, especially at the head reaches, tend 

to put more area under water intensive 

crops, ignoring the cropping pattern considered 

in the design. This is one of the 

reasons for shrinkage in the irrigated 

command area. 


85


Figure 2: Degree of Dependence of Cities on Reservoirs 

100 

91.1 

90 

80 

% Dependence on reservoirs 

70 

60 

60.2 

68.0 

76.0 

53.3 

50 

40 

11,000-99,000 100,000-500,000 500,000- 

1,000,000 

1,000,000- 

2,500,000 

2,500,000- 

12,000,000 

Last, but not the least, reservoirs are 

experiencing problems of sedimentation 

causing reduction in their storage capacity 

and life, though as found world-wide in 

some cases the rates are higher those used 

at the time of design (Morris and Fan, 

1998). The average annual loss of live storage 

for 23 large reservoirs in India with a 

total original live storage of 23,497 MCM 

(23.497BCM) studied by the Central Water 

Commission was to the tune of 213 

MCM, i.e., an annual reduction of 0.91 per 

cent. Hence, generally for older reservoirs, 

the loss of storage would be quite significant. 

Such annual losses can sometimes 

reduce the effect of additions in storage 

achieved through new reservoir schemes 

on expanding irrigation. Therefore, it is 

likely that with the passage of time, the 

area under surface irrigation would decline, 

if nothing is done to revive the reservoirs. 

It is also therefore quite obvious 

that with cumulative investments in surface 

irrigation systems going up with time, 

there may not be proportional rise in surface 

irrigated area. 

Therefore, at least some of these above 

facts are compelling reasons for fresh 

thinking on the planning and implementation 

of irrigation in India. Clearly, the 

solution does not lie in completely writing 

off surface systems for wells as the latter 

ones are not replacement for the earlier. 

Can Wells become the 

“Poverty Alleviating Machines”? 

Over the past few decades, well irrigation 

has been romanticized by some scholars 

has a poverty alleviating machine (IWMI, 

2007; Mukherjee, 2002). While it is understood 

and also well documented by many 

scholars in the past that irrigation has a 


W ATER WOES 

Figure 3: Intensity of Groundwater Use in Different States 

0.45 

0.4 

0.35 

0.3 

0.25 

0.2 

0.15 

0.1 

0.05 

0 

Andhra Pradesh 

Assam 

Bihar 

Chattisgarh 

Gujarat 

Haryana 

Depth of groundwater uer per cropped area 

Himachal Pradesh 

Jammu and Kashmir 

Jharkhand 

Karnataka 

Kerala 


Maharashtra 

Orissa 

Punjab 

Rajasthan 

North eastern states 

Tamil Nadu 

Uttar Pradesh 

Uttar Pradesh 

West Bengal 

significant impact on poverty alleviation 

in rural areas (Bhattarai and Narayanamoorthy, 

2003; Hussain and Hanjira, 

2003), the over-emphasis on groundwater 

is somewhat difficult to assimilate. More 

strikingly, major arguments about the 

poverty impact of groundwater irrigation 

are made in the context of eastern India. 

As Mukherjee argues, “in regions of 

abundant rainfall and good alluvial aquifers, 

ground water irrigation can be a 

powerful catalyst in reducing poverty 

(IWMI, 2007). Eastern India’s potential 

for triggering country-wide agricultural 

growth through a boost in well irrigation 

is also strongly argued (Shah, 2001; 

Mukherjee, 2002). Here, one really wonders 

about the actual effect of rainfall on 

irrigation demand. Also, one wonders 

about the effect of irrigation versus land 

on economic surplus in areas of high water 

availability. It is a truism that marginal 

returns from irrigation would be 

higher in areas of high aridity and low 

moisture availability, and not in humid/ 

sub-humid areas with high moisture availability. 

Eastern India falls in the latter. 

What is surprising is that in the entire 

policy discourse on the impact of irrigation 

on agricultural development, the key 

factor of production, i.e., “land” does not 

find a place anywhere. In fact, we would 

like to vehemently argue here that it is 

simply fallacious that in eastern India, 

with plenty of groundwater, there could 

be a boom in well irrigation, with proper 

electrification and energy policies. The 

water demand for irrigation is very low in 

this region. 

The maximum water needed for irrigation 

is a direct function of per capita arable 

land and reference evapo-transpira- 


87


tion; and inverse function of effective 

rainfall, provided the socio-economic 

conditions are favourable. In eastern India, 

not only that the rainfall is high, but 

the ET is comparatively lower than western, 

north western and southern India. 

The per capita arable land is lower than 

that of western, peninsular and northwestern 

India (Kumar et al., 2008b). In 

Bihar, it is one of the lowest in the country 

with 0.068 ha against 0.17 ha in Punjab, 

and only 40% of the net sown area 

remained un-irrigated in 2000 (source: 

based on Agricultural Census, Ministry of 

Agriculture, GOI, 2000). 

The groundwater use intensity is already 

quite high in Bihar and other eastern 

Indian states like Assam and west 

Bengal (see Figure 2). This is far higher 

than the groundwater use intensity in 

Rajasthan and Andhra Pradesh, which 

are facing severe problems of over-exploitation. 

Given that, already more than 60% 

of the net sown area in Bihar is irrigated. 

Even if we improve the affordability of 

irrigation water for millions of poor farmers 

in this region, what we can achieve is 

very minimal. Unfortunately, such pampered 

views dominate the water policy 

debate in India. The huge opportunity 

cost of delaying the most essential investments 

in irrigation, in regions where it 

matters, is by and large ignored. 

Conclusions 

Evidence available from both Indo- 

Gangetic plains and in peninsular India 

suggests that there is a strong nexus between 

surface irrigation development 

and sustainability of well irrigation. 

Therefore, it is not prudent to invest in 

well irrigation without investment in 

large surface reservoirs and conveyance 

systems in semi arid and arid areas. Also, 

it is high time for the “die-hards” of well 

irrigation to understand that water, 

whether well water or canal water, has to 

come from the same hydrological system. 

Promoting aquifer recharge using surface 

runoff from the same area, to sustain 

well irrigation is a hydrological and 

economic nonsense. East India, which 

has abundant groundwater resources, is 

not capable of driving growth in well irrigation 

in future. A greater recognition 

of the fact that availability of arable land, 

rather than the availability of groundwater, 

is a major determinant of regional 

growth in irrigation demand would 

change the paradigm of water resource 

development for irrigation. 

End-notes 

1 

This, however, does not to trivialize the 

role of demand management in regions 

where demand exceeds supplies. 



• Allen, R. G., L. S. Willardson, and H. 

Frederiksen (1998) Water Use Definitions 

and Their Use for Assessing the 

Impacts of Water Conservation. Proceedings 

ICID Workshop on Sustainable 

Irrigation in Areas of Water 

Scarcity and Drought (J. M. de Jager, 

L.P. Vermes, R. Rageb (eds). Oxford, 

England, September 11-12, pp 72-82. 

• Bhalla, S and A. Mookerjee (2001) Big 

dam development: facts, figures and 

pending issues, International Journal 

of Water Resources Development, 17 

(1) Taylor & Francis Ltd. 

• Bhattarai, Madhusudan and A. Narayanamoorthy 

(2003) Impact of irrigation 

on rural poverty in India: an aggregate 

panel data analysis, Water Policy, 5 

(2003): 443-458. 

• Dhawan, B. D (1990) Big Dams: 

Claims, Counterclaims, New Delhi: 

Commonwealth Publishers. 

• Government of India (2000) Agricultural 

Census-2000, Government of India, 

New Delhi. 

• Government of India (2007) 2007): 

‘Report of the Expert Group on 

‘Groundwater Management and Ownership’, 

Planning Commission, Yojana 

Bhawan, New Delhi. 

• Hussain, Intizar and Munir Hanjra 

(2003) “Does Irrigation Water Matter 

for Rural Poverty Alleviation? Evidence 

from South and South East 

Asia,” Water Policy, 5 (5): 429-442. 

• International Water Management Institute 

(2007) Water Figures: Turning 

Research into Development, IWMI 

Newsletter, Issue 3, 2007. 

• Kumar, M. Dinesh and O. P. Singh 

(2008) How Serious Are Groundwater 

Over-exploitation Problems in India? 

Fresh Investigations into an Old Issue, 

proceedings of the 7 th Annual Partners’ 

Meet of IWMI-Tata Water Policy Research 

Program “Managing Water in the 

Face of Growing Scarcity, Inequity and 

Declining Returns: Exploring Fresh 

Approaches,” ICRISAT Campus, Patancheru, 

Hyderabad, 2-4 April, 2008. 

• Kumar, M. Dinesh and O. P. Singh 

(2005) Virtual Water in the Global 

Food and Water Policy making: Is there 

a Need for Rethinking? Water Resources 

Management, 19: 759-789. 

• Kumar, M. Dinesh, Shantanu Ghosh, 

O.P. Singh and R. Ravindranath 

(2006) Changing Surface water- 

Groundwater Interactions in Narmada 

River Basin, India: A Case for Transboundary 

Water Resources Management, 

paper presented at the III international 

symposium on 


W ATER WOES 

trans-boundary water management, 

UCLM, Ceudad Real, Spain, June. 

• Kumar, M. Dinesh, Ankit R. Patel, R. 

Ravindranath and O. P. Singh (2008a) 

Chasing a Mirage: Water Harvesting 

and Artificial Recharge in Naturally 

Water-Scarce Regions, Economic and 

Political Weekly, 43 (35): 61-71. 

• Kumar, M. Dinesh, M V. K. Sivamohan 

and A. Narayanamoorthy (2008b) Irrigation 

Water Management for Food 

Security in India: The Forgotten Realities, 

paper presented at the International 

Seminar on Food Crisis and 

Environmental Degradation-Lessons 

for India, Greenpeace, New Delhi, 

October 24, 2008. 

• Morris, L. M. and J. Fan (1998) Reservoir 

Sedimentation Handbook: design 

and management of dams, reservoirs 

and watershed for sustainable use. 

McGraw Hill, New York. 

• Mukherji, Aditi (2003) Groundwater 

Development and Agrarian Change in 

Eastern India, IWMI-Tata Comment # 

9), based on Vishwa Ballabh, 

Kameshwar Chaudhary, Sushil Pandey 

and Sudhakar Mishra, IWMI-Tata Water 

Policy Research program. 

• Mukherjee, Sacchidananda and 

Zankhana Shah (2008) Large Reservoirs: 

Are they the Last Oasis for Survival 

of Cities in India?, proceedings of 

the 7 th Annual Partners’ Meet of IWMI- 

Tata Water Policy Research Program 

“Managing Water in the Face of Growing 

Scarcity, Inequity and Declining 

Returns: Exploring Fresh Approaches,” 

ICRISAT Campus, Patancheru, 

Hyderabad, 2-4 April, 2008. 

• Perry Chris J. (2001) World commission 

on dams: implications for food and 

irrigation, Irrigation and Drainage, 

50:101–107. 

• Ray, Sunil and Mahesh Bijarnia (2006): 

‘Upstream Vs Downstream: Groundwater 

Management and Rainwater 

Harvesting’, Economic & Political 

Weekly, July 10. 

• Seckler, David (1996) The New Era of 

Water Resources Management: from 

Dry to Wet Water Saving, Research 

Report 1, International Water Management 

Institute, Colombo, Sri Lanka. 

• Shah, Tushaar (2001) Wells and Welfare 

in Ganga Basin: Public Policy and 

Private Initiative in Eastern Uttar 

Pradesh, India, Research Report 54, 

International Water Management Institute, 

Colombo, Sri Lanka. 

• Shah, Tushaar (2009) Taming the Anarchy: 

Groundwater Governance in South 

Asia, Resources for Future and International 

Water Management Institute. 

• Shah, Zankhana and M. Dinesh Kumar 

(2008) In the Midst of the Large Dam 

Controversy: Objectives, Criteria for 

Assessing Large Water Storages in the 

Developing World, Water Resources 

Management, 22: 1799-1824. 

• Times of India (2008) Wasting $50 billion 

Dollar in Major Irrigation, Swaminomics, 

July 10 and 17. 

• Vyas J (2001) Water and energy for 

development in Gujarat with special 

focus on the Sardar Sarovar project, 

International Journal Water Resources 

Development, 17(1):37–54. 

(M. DINESH KUMAR is a Ph. D in Water 

Management. He had worked with engineering 

consultancy organizations, national and 

international research/academic institutions 

and NGOs, and had worked very closely with 

many reputed international and national 

agencies, viz., UNICEF, the Ford Foundation, 

the International Development Research 

Centre (IDRC), the Aga Khan Foundation, 

New Delhi, Sir Ratan Tata Trust, Mumbai 

and Arghyam, Bangalore. He is currently the 

Executive Director of Institute for Resource 

Analysis and Policy (IRAP). He has nearly 

120 publications to his credit, including three 

books; one edited volume; many book chapters; 

and several papers in international peerreviewed 

journals. 

DR. SIVAMOHAN was a Member of Senior 

faculty and Chairman Agriculture and Rural 

Development Area. He served international 

organizations like Irrigation Research Group 

at Cornell University, Ithaca USA, National 

Reserve Institute UK, ICRISAT Hyderabad 

and International Water Management Institute 

IWMI, Srilanka. Currently he is Principal 

Consultant and Member of Governing 

Board, Institute for Resource Analysis and 

Policy (IRAP). He has several national and 

international research publications and 

books to his credit. 

DR. A. NARAYANAMOORTHY is currently 

working as NABARD Chair Professor 

and Professor and Director, Department of 

Rural Development, Alagappa University, 

Tamil Nadu. Dr. Narayanamoorthy has published 

three books, three mimeographs and 

over 80 research papers in international and 

national journals. He has completed several 

research projects sponsored by the Ministry of 

Agriculture, , Planning Commission, GoI 

and NABARD. He has been a consultant for 

the International Water Management Institute, 

Colombo. Dr. A. Narayanamoorthy also 

received the prestigious Professor Ramesh 

Chandra Agrawal Award of excellence for the 

outstanding contribution in the field of agricultural 

economics for the year 2009. 





89

P OLICY PERSPECTIVE 

Pradeep S. Mehta 

Secretary General, 

CUTS International 


R EGULATORY SYNERGY 

An Imperative 

for Promoting 

Inclusive Growth 

Despite the existence of a competition law, a competitive 

environment might not be established due to the 

inconsistency between the orientation of competition 

law and restrictions imposed by other regulations — 

here arises the necessity of National Competition Policy 

As part of the economic governance 

system of a country 

a competition policy is 

aimed at improving economic 

democracy and thereby push equitable 

growth and help the poor. Competition 

policy should be more than a 

technical intervention in markets when 

competition challenges vested interests. 

As Joseph Stiglitz has observed: “Strong 

Competition Policy is not just a luxury to 

be enjoyed by rich countries, but a real 

necessity for those striving to create 

democratic market economies.” 

The Planning Commission has laid out 

a road map for the 11 th five year plan 

(2007-2012) and prepared a policy document: 

“Inclusive Growth”. This was 

adopted by the National Development 

Council in December, 2007. One of its 

recommendations was to prepare and 

adopt a National Competition Policy. 

Competition policy is one of the four pillars 

of the macro economic framework 

— others being fiscal policy, monetary 

policy and trade policy. This is yet to happen 

though the government continues to 

say that it will do so at the earliest. The 

delay is part of the policy drift that we see 

in many areas of our economic governance, 

which seems to be overloaded with 

governance failures of all types. 

In spite of the shrinking of their commitment 

to promote competition, the 


91


government should revisit the same to 

ensure that inclusive growth is promoted, 

and poverty reduced. Promoting competition 

is not only important as a principle in 

itself for providing a just environment for 

all businesses, big or small, the fair race 

that it initiates among rival firms, including 

small producers, drives sustained 

growth. It also keeps prices low by ruling 

out collusive pricing and the erection of 

barriers associated with monopoly pricing 

as firms compete for the attention of 

consumers by minimising costs and associated 

marked up prices through efficient 

production. 

Competition Law Not Enough 

In 2002, India adopted a new competition 

law to give a boost to the forces of competition 

in the economy. Now implemented 

after much wait, it replaced the vastly ineffective 

Monopolies and Restrictive Trade 

Practices Act enacted earlier in 1969. This 

earlier law was more of a licencing law, 

and in terms of anticompetitive practices, 

it involved a mechanical approach for 

dealing with them: firms came under the 

scanner only if they acquired a certain 

large share in the market. Thus, it was the 

magnitude of market shares that was important, 

not how such market shares had 

been engineered. 

Be that as it may, it is important to realise 

that a competition law cannot by 

itself ensure that the competitive spirit 

and culture permeates deep into the 

economy. It should be complemented by 

a National Competition Policy (NCP) 

which pushes structural and legislative 

reforms to promote competition in markets 

where it is restricted. 

Competition law only focuses on the 

conduct of firms and ensures that such 

conduct is consistent with the spirit of 

competition. On the other hand, there 

could be competition distortions either 

due to another law or policy. There are 

many such incongruities. For instance, the 

mineral policy places restrictions on 

quantitative extraction of minerals and 

that the licensee can sell only as per government 

diktats. Unless there are valid 

social or environmental reasons, such 

policy conditions maybe against the 

spirit of competition. 

It was magnitude 

of market 

shares that was 

important, not 

how such market 

shares had been 

engineered 

Cartelisation Due to 

Restrictive Policy 

A highly publicised spat between the 

Planning Commission and the Roads 

Transport & Highways Ministry has highlighted 

one vital aspect, that of possible 

cartelisation of road builders due to the 

stiff norms of qualification of bidders, 

which promotes collusion among a limited 

number of firms. A similar case was 

once commented upon adversely by a 

parliamentary committee on Indian Railways 

for its patronising a limited number 

of concrete sleeper suppliers to bid for 

contracts without allowing the sale of 

tender documents to any new parties. 

After that the problem was set right, but 

should it have arisen at all. Use of trade 

policy instruments like anti-dumping or 

safeguard measures, without examining 

their deleterious effects on downstream 

industries, on the basis of complaints 

from domestic lobbies is another such 

recurring phenomenon. 

Cartelisation or other types of anticompetitive 

practices can be actioned 

against under the Competition Act, 2002. 

But, in such cases if the same has emerged 

due to a government policy or praxis, action 

can hardly be taken or if taken, 

chances of success are remote. The case 

of Jindal Steel complaining under the 

competition law against Railways for not 

allowing it to offer rails is a case in point. 

Actually, the Railways should have simply 

allowed Jindal to quote through an informed 

policy rather than face unnecessary 

litigation, and garner the fruits of 

competition. It is therefore to deal with 

such quirks, that governments adopt a 

competition policy which can inform all 

branches of the government on how they 

should ensure that competition principles 

are followed in whatever they do. 

To stimulate discussion and awareness 

on competition impacts of various policies, 

a natural precondition for the effective 

implementation of a competition 

policy, CUTS has been coming out with a 

Competition Distortions Dossier (CDD) 

since March 2009 (http://cuts-ccier.org/ 

Competition_Distortions_India.htm). 

Trade Policy Distortions 

Let me illustrate. A policy measure with 

vast implications for competition is the 

imposition of an anti dumping duty 

(ADD), which has been called a toxin by 

respected trade economists like Bhagwati 

and Srinivasan. When imposed correctly, 

such duty helps prevent predatory or below 

cost pricing by a powerful foreign 

competitor to eliminate competition from 

domestic or other suppliers and gain monopoly 

control of the market. Such impo- 



sition thus helps maintain contestability 

among players and hence competition in 

the relevant market. 

When imposed incorrectly, ADD 

serves to insulate domestic suppliers 

from competition from abroad. In effect, 

this may do away with the compulsion for 

domestic producers to hone efficiency 

and remain competitive by international 

standards. In the short run, end users and 

consumers suffer because they consume 

the product levied with duty at an enhanced 

price, though domestic producers 

and their input suppliers gain as these 

augment their market shares. In the long 

run, such suffering is compounded as 

ADD, by building a protective cocoon 

around producers, restricts the downward/upward 

movement of price/quality 

resulting from efficiency improvements 

born out of competition. 

A government recommendation in October, 

2010 for imposition of ADD on radial 

truck and bus tyre imports from China 

and Thailand and the resulting debates, 

captured in detail through the CDD, highlight 

all the dilemmas mentioned above. 

Such imports at low prices obviously benefit 

household consumers and end users 

providing transport services but they result 

in the contraction of sales of domestic rubber 

growers supplying Indian tyre manufacturers. 

The recommendation for imposition 

of ADD has been perceived in 

certain circles as an outcome of the demands 

of domestic rubber growers voiced 

through the Rubber Board. 

Thus, there is a very real danger that the 

pulls and pressures from potentially benefiting 

and losing stakeholder groups 

might lead to hasty decisions taken without 

an adequate and systematic scrutiny 

of sector realities and associated, potential 

welfare costs and benefits from imposition 

of ADD. Note that ADD helps to 

enhance competition in the long run and 

is justified only if there is predatory or 

below cost pricing by the supplier. The 

scrutiny process, which constitutes the 

core of competition policy, thus necessar- 

When imposed 

incorrectly, 

ADD serves to 

insulate domestic 

suppliers from 

competition from 

abroad 

ily has to compare import prices with costs 

corresponding to efficient production – 

this may be done directly or by ascertaining 

the parity of international prices with 

import prices. 

Similar comparisons are needed when 

safeguard duties are demanded by well 

organised producers with consumers 

and end users standing to lose as in the 

case of aluminium products and antibiotics 

in India; when government contemplates 

continuation of its efforts to 

artificially render public sector enterprises 

viable through subsidies, at the 

expense of competitiveness of the private 

sector, with the overt objective of 

maximising employment; or while 

evaluating a draft anti monopoly policy, 

as in the case of the Indian port sector, 

which tries to clip the wings of powerful 

but efficient players in a declared attempt 

to boost competition. 

Systematic Appraisal Needed 

Given that industrial, trade, labour and 

other government policies too might have 

competition reducing/enhancing impacts, 

a systematic appraisal of all such important 

government polices is in order. 

A competition policy allows the government 

to weigh the competition distorting/ 

enhancing effects of every important government 

policy against positive/negative 

impacts in regard to other issues which are 

in the public interest — employment, 

poverty alleviation, equality in income 

distribution, bridging of the gender divide, 

promotion of infant industry etc. 

Given the vastness, diversity and complexity 

of the Indian economy and the 

varied policy interventions being undertaken 

by the government to promote development, 

a competition policy which 

undertakes distinct appraisals of different 

policies is imperative and would help 

maximise the overall welfare impact of 

government policy. 

The well elaborated case of ADD on 

tyre imports and other cases touched on 

above, all captured through various issues 

of the CDD, illustrate the advantages 

of policy choice based on scrutiny 

of diverse welfare impacts including competition 

rather than the pressures imposed 

by poorly matched stakeholder 

groups. It is hoped that such efforts will 

help prepare the Indian stakeholder 

community and government for introduction 

and effective implementation of a 

formal competition policy. 

Promoting Competition Principles 

Some sector specific regulators would 

also be implementing their own sector 

laws which may not adhere to the competitive 

spirit. Despite the existence of a 

competition law, a competitive environment 

might not be established due to this 

inconsistency between the orientation of 

competition law and restrictions imposed 

by other regulations. This is where the 


93


need for a NCP (National Competition 

Policy) arises. 

NCP tries to ensure consistency of all or 

most national and state laws with the 

principles of competition. Viewed in this 

manner, a competition policy helps to 

further the objectives of a competition law 

— to foster competition in all sectors of 

the economy and thereby induce efficiency, 

innovation and growth 

For a successful NCP extensive advocacy 

and stakeholder consultation are 

needed. This requires the cooperation 

and coordination of institutions such as 

the competition authority, civil society 

organisations, sector regulators and government. 

The primary motivating factor 

behind NCP is however political will and 

priority accorded to growth as a political 

objective, which no one doubts. 

Ensuring competitive neutrality is another 

crucial part of the NCP, which ensures 

that government businesses do not 

get any undue advantage over private 

businesses, like making it mandatory for 

government travellers to use only Air India. 

Competitive neutrality is necessary 

for ensuring competition within and 

across public and private enterprises. It 

not only boosts the performance of utilities 

but also increases private sector participation, 

which is crucial for innovation 

and overall economic efficiency. 

Assessing Impact 

The Planning Commission’s working 

group on the NCP in 2007 examined its 

various facets and came up with policy 

recommendations to move the agenda 

forward. This working group had raised 

concerns over some policies, statutes and 

regulations at the levels of the central and 

state government that limit competition 

and had recommended review of such 

policies through the tool of competition 

impact assessment. 

Australia has undergone such an assessment 

in depth. Their approach towards 

competition policy can be useful in the 

Indian context. Like India, in Australia 

the competition law came before the 

adoption of competition policy. However, 

the competition policy was preceded by an 

extensive review of all legislations from 

the competition perspective and all laws 

and measures which had provisions (over 

2000 in number) violating the spirit of 

competition were repealed or amended. 

One study done by the Australian Productivity 

Commission showed that the economy 

gained by as much as 5.5 percent over 

time, creating many more jobs and promoting 

consumer welfare. 

Equitable and 

Consistent Application 

The envisaged NCP approach would ensure 

the equitable application of competition 

rules to all economic agents in the 

Indian economy. It works on the principle 



of competition through the synergy of 

competition policy and law as well as the 

evolution of effective institutions and 

engagement of multiple stakeholders in 

this regard. 

that social welfare is best served by promoting 

competition in the economy. Once 

adopted, the central government in coordination 

with the state governments 

should ensure that implementation of the 

NCP is uniform across the country, particularly 

in respect of structural reform of 

public monopolies, review of anti-competitive 

legislation and regulation and the 

elimination of undue advantages enjoyed 

by government businesses where they 

compete with the private sector. In this 

regard the need for cooperation from state 

and local bodies to ensure effective implementation 

cannot be overemphasised. 

The NCP is an important step forward 

in establishing a consistent national economic 

framework to promote and maintain 

competition in all sectors of the 

economy. This, however, is clearly only an 

initial step in initiating wide ranging reforms 

for generating a culture and spirit 

of competition in the economy. While 

paying due attention to the implementation 

of this step, it is important to develop 

a long term perspective for the promotion 

(PRADEEP S MEHTA is the founder secretary 

general of the Consumer Unity & Trust 

Society (CUTS International), one of the 

largest consumer groups in India, with offices 

in London, Lusaka, Nairobi, Hanoi and 

Geneva. Mehta serves/has served on several 

policy making bodies of the Government of 

India, related to trade, environment and 

consumer affairs, including the National 

Advisory Committee on International Trade 

of the Ministry of Commerce and its working 

groups. He chairs the Advisory Board of the 

South Asia Network on Trade, Economics 

and Environment, Kathmandu. Mehta also 

serves on the advisory boards of Centre Advisory 

& Review Group of the Research 

Centre on Regulation and Competition, Institute 

for Development Policy and Management, 

Manchester University, UK; Institute 

for Consumer Antitrust, Loyola College, 

Chicago, USA; American Antitrust Institute 

(AAI), Washington DC, USA; Brains Trust 

of the Evian Group, Lausanne; the OECD’s 

Advisory Committee for Investment in Africa, 

OECD, Paris; Advisory Committee of the 

Central Electricity Regulatory Commission, 

New Delhi. In the past, Mehta has been an 

NGO Adviser to the Director General, WTO, 

Geneva, besides serving on the governing 

boards of the Life Insurance Corporation of 

India, Mumbai; theInternational Centre for 

Trade & Sustainable Development, Geneva 

and the Consumer Coordination Council, 

New Delhi. 





95


TOWARDS IMPROVING 

GOVERNANCE 

Governance should be made much more transparent by using tools like Integrity 

Pact, e-Governance in order to combat corruption 


C ORRUPTION CONCERNS 

SK Agarwal 

Vice Chairman, 

Transparency International India 

According to Transparency International’s 

Corruption Perception 

Index-2009, India 

continues to be one of the 

most corrupt countries. With little change in 

its Integrity Score of 3.4 (as in 2008) out of 

10, India ranked 84 th out of 180 countries in 

2009. Improving Governance is a part of 

development process. It needs the ‘Right to 

be Heard and Consumer Education’, i.e., 

educating the consumer about his rights. 

The right to good governance is considered 

as an essential part of the citizen’s 

rights. It can be introduced through public 

participation, transparency, accountability 

and probity in administration, and can also 

help to curb corruption. Accordingly, a 

number of initiatives are being taken by the 

government to incorporate citizens’ concerns 

as inputs in the formulation of policy 

as well as in the quality and reliability of 

services. These can be brought through 

various tools, including the Citizens’ Charters, 

Right to Information, e-Governance, 

Report Cards, Social Audits and the Integrity 

Pact. 

Among the various tools, Citizens’ Charters 

constituted an official commitment towards 

the standard, quality and time frame 

of public service delivery, grievance redressal 

mechanism, transparency and accountability. 

It may be defined as “a document 

which charts the way of a citizen to avail 

hassel-free public services. According to 

Transparency International’s Global Corruption 

Barometer, most of the respondents 

perceived that maximum corruption is in the 

public services, particularly those which 

have monopolistic nature. Therefore, the 

Citizens’ Charters Citizens’ Charters are to 

be drawn-up with care and concern for the 

concerned service users with the following 

essential ingredients: 

(a) Listing of standards of specific services, 

including anticipated time schedule, 

being offered by the Department in 

consultation with the concerned service 

providers, service seekers and NGOs; 

(b) Location and timings of offices connected 

with the delivery of services; 

(c) The names (with address, telephone no. 

etc.) of the officers responsible for delivery 

of the concerned services; 

(d) The grievance redressal authority in 

case of deficiency in promised standards; 

(e) Amount of ‘compensation in case of 

deficiency in promised standards. 

Accordingly, 842 Citizens’ Charters (131 

of the Central Govt. and 711 of the State 

Govts) had been formulated by the Central 

Government, State Governments and Union 

Territories. These can be accessed from 

the GOVT. WEBSITE - www.goicharters. 

nic.in 

Accordingly, the Delhi Government has 

introduced eSLA (Service Level Agreement) 

enabling the common man to get timely 

services in the offices of Transport, Food & 

Supplies, Trade & Taxes, Divisional Commissioner, 

MCD, NDMC and Chief Electoral 

Officer. The penalty has been set between 

Rs. 10 to Rs. 200 per day in case of 

any deficiency. This money will be handed 

over to the applicant in the case of delay. 

Number of initiatives are being taken 

by the government to incorporate 

citizens’ concerns as inputs 

Similarly, Madhya Pradesh has passed a 

Public Services Guarantee Act on July 30, 

2010 to ensure delivery of notified public 

services in a fixed time. In case of delay, the 

concerned service provider will have to pay 

a fine of Rs. 250 per day with a maximum of 

Rs. 5,000 to applicants as compensation. 

Earlier, the Central Vigilance Commission 

(CVC) issued a circular on November 

22, 2006, asking all public dealing departments 

to put all forms on their websites in a 

downloadable form by January 1, 2007, and 

make available on-line status of applications 

pending with them, including deficiencies, if 

any, by April 1, 2007 in an effort to minimize 

personal contact, which breed corruption. 

The CVC had also proposed disciplinary 

action against erring officials. It would also 

help the foreigners who have to approach 

the Foreigners Registration Office with their 

applications for longer stay. 

Besides, each department has now developed 

its public grievance redressal mechanism 

by designating a senior officer for the 

purpose with authority to call for files/papers 

relating to grievances projected by the 

clients. The public is at liberty to approach 

them with relevant information supported 

by documents for seeking redressal of their 

grievances. Failing in their efforts, they may 

contact the Addl. Secretary, Deptt. of Adm 

Reforms & Pub Grievance, Sardar Patel 

Bhawan, New Delhi-110001. In addition, 

the web address of the President of India’s 

Secretariat’s Help-line is: http://helpline. 

rb.nic.in/ 

Meanwhile, the Department of Administrative 

Reforms & Public Grievances 


97


(DAR&PG) has evolved a Certified Service 

Standard called Sevottam (Best of Service). 

Now, all Ministries are expected to mention 

the level of their preparedness for improving 

their public service delivery to achieve certification 

under Sevottam in their Annual 

Reports. The Sevottam framework will institutionalize 

assessment improvement exercises 

undertaken for service delivery departments 

and their results will be available 

in public domain to ensure that a transparent 

and accountable mechanism of service 

delivery improvement is visible. 

Through this framework, it is possible to 

foster a culture of continuous improvement 

and bring about large-scale changes even in 

organizations that have been operating in 

traditional environments. At the heart of 

this whole initiative lies the fact that service 

provider organizations should have confidence 

to publicly acknowledge the quality of 

services delivered and engage in dialogue 

with civil society or their representative 

groups to align their actions with citizens’ 

expectations. Implementing Sevottam is no 

doubt a challenging task and yet the challenge 

is only as big as the implementing 

agency is capable of taking on. 

The Right to Information Act (RTI) 

came into force on 12 th October, 2005, is a 

part of fundamental rights under Article 19 

(1) of the Constitution of India. It has jurisdiction 

over every public authority in the 

whole of India except the J&K State. In 

States, which have already passed such laws, 

both the Acts will co-exist — giving citizens 

a choice. Under RTI, public servants can 

also be questioned on their conduct. It empowers 

all individuals by providing penalties 

on erring officials for not providing information 

or misinforming, and thus ensures 

administration accountable, and to bring 

transparency. There is a provision of penalties 

or fines @ Rs. 250 a day and to a maximum 

of Rs. 25,000 for delaying without 

reasonable cause. Besides, the government 

bodies have to put on website all information 

which may be required by general 

public. Its National Helpline (in Hindi and 

English) is 9250-400-100. 

This law is considered to be among one of 

the most progressive RTI laws enacted by 

more than 66 countries. The problem lies 

with its ‘malafide’ interpretation only flouting 

basic principles of natural justice, because 

most of the information commissioners 

are former bureaucrats. They do not 

have the will and strength to make governance 

transparent and are not willing to leave 

their old mind-set. 

Bihar’s Exemplary Initiative: As an example 

for other States, Bihar launched a 

help line service (0612-155310). Under the 

system, a RTI applicant is required to dial 

(0612) 155311 requesting to send an application 

to the concerned official with a duplicate 

copy to the District Magistrate (DM) 

through e-mail, followed by a fax message 

and a copy to the caller within three days. 

RTI came into force on 12th October, 

2005, is a part of fundamental rights 

under Article 19 (1) of consitution 

Thereafter, the caller will be given a special 

number for follow-up action. This service is 

expected to save the common man from the 

nitty-gritty problems. 

Citizens’ Report Card 

Citizens’ Report Card (CRC) is a participatory 

service delivery assessment system and 

provides an opportunity to reform and reorient 

service delivery. It generates user 

feedback on a variety of qualitative and 

quantitative indicators of services based on 

a household and exit interviews. 

e-Governance: 

Key to Improve Governance 

Electronic governance or e-governance is 

considered an effective tool of improving 

governance to ensure better transparency 

and services to the public. It makes delivery 

of public services and information an efficient, 

speedy and transparent process and 

allows citizens to communicate with government, 

participate in its policy-making and to 

communicate without facing government 

officials physically. In other words, it is to: 

• provide the productive and efficient work 

to the people 

• reduce corruption & differences among 

communities 

• make efficient use of resources and time 

• make use of technologies for sophisticated, 

speedy, easy and accurate service 

• acquaint the people about the government’s 

role in socio-economic development 

• remove the inner flaws in the working 

system 

In other words, e-Governance is to provide 

SIMPLE, MORAL, ACCOUNTA- 

BLE, RESPONSIVE and TRANSPAR- 

ENT, i.e., SMART Government. 

Application of e-governance saves money, 

time and effort, while infusing efficiency 

into the system. With the passage 

of time, the adoption of ‘e-Governance’ is 

expected to become an effective tool, inter-alia, 

for efficient governance and 

eliminate corruption to a large extent. 

Among them, Railways, Judiciary, Post 

Offices and Income Tax have already 

taken some of the steps; more steps are on 

the way. There is a minimum agenda for 



each Ministry/Department for an effective 

e-Governance. 

In a major thrust towards e-governance, 

the Central Government had decided to set 

up one lakh Common Services Centres 

(CSC) to provide e-governance services such 

as payment of electricity, telephone and water 

bills, and acquiring application forms. 

Several State Governments have also taken 

various innovative steps, such as Chief Minister’s 

Information System (Andhra Pradesh, 

Madhya Pradesh and Rajasthan) to monitor 

a range of activities from developmental 

programmes to redressal of public grievances; 

Vikas Darpan (mirror of development) of Rajasthan; 

APSWAN (Andhra Pradesh State 

Wide Area Network) for improving government-citizen 

and government-industry interface; 

single-window/one-stop delivery of 

public services in the case of Andhra Pradesh, 

Kerala, Madhya Pradesh, Maharashtra and 

Tamil Nadu; etc. 

Realising the importance of e-Governance 

in providing better services, National 

Informatics Centre (NIC) has been providing 

informatics support by developing many 

e-projects. To create a knowledge base of 

key initiatives and best practices, NIC has 

published a handbook, titled ‘Good Governance 

Through ICT’ (Nov. 2005), so that the 

IT specialists and administrators can provide 

benefits of IT to the common man. 

Knowledge Centres 

Across Rural India: 

Since connectivity is the key to empowerment 

in rural India, a consortium with representatives 

from the government, India Inc. 

and NGOs aims to create one lakh village 

Information & Communication Technology 

(ICT) centres across by 2008. The idea is to 

help them set up and manage kiosks for 

content and services in villages. Already 

1,800 kiosks were operational as delivery 

points and learning centres for the rural 

community across the country. Microsoft 

along with International Development Research 

Centre (IDRC) has also announced 

a Rural Incubation Fund with a seed capital 

of $200,000. It will enable the independent 

software vendors to create relevant content 

and application for use in villages. 

In order to ensure that the real should 

accrue to the citizens, it is recommended 

that e-Governance projects should be citizen 

friendly and build with defined deliverables 

for citizens. Further, the government 

needs to be at the doorstep of the citizen 

offering a basket of services. 

The idea that Information Technology 

(IT) can be an enabling force, not only for 

business and trade but also for governance, 

1,800 kiosks were operational as 

delivery points and learning centres 

for the rural community 

has now been widely accepted. However, in 

view of prevalent illiteracy, it is felt that the 

kiosk having the Touch Screen Information 

System would provide easy real-time access 

to common community information needed 

to avail a particular public service. This 

system is already in operation at the selected 

Railway Stations/ Reservation Offices for 

the convenience of railway passengers. 

Besides, TV channels have now given way 

to hope. They interview and capture the 

outrage of citizens on various issues with 


99


stunning effect, something print-media 

could not achieve. This interactivity have 

now made possible a revolution and a force 

for empowerment of a common man, suppressed 

for decades by a government monopoly. 

In fact, TV viewers have compelled 

the government machinery to listen to ordinary 

people. Such viewer activism can be 

called as ‘justice of the people, by the people, 

and for the people’. However, there are 

still hundreds of millions of people having 

no access to such tools. But we hope, they 

will soon be empowered with such a tool. 

Integrity Pact 

It is the public procurement that most of the 

“grand corruption” occurs with much of the 

damage visibly inflicted upon the development 

process in poorer countries and countries 

in economic transition. Numerous tools 

and resources have been created to assist 

companies in the effective implementation 

of anti-corruption policies for procurements 

and contracts. “Islands of integrity” is a 

process in which voluntary agreements are 

made, involving bidders and the government, 

to restrict opportunities for corruption 

in a particular project. Keeping it in 

view, the Integrity Pact (IP) was designed 

and launched by Transparency International. 

It is such a tool developed during the 

1990s by Transparency International (TI) to 

help governments, businesses and civil society 

in fighting corruption in the public contracting. 

It consists of an agreement between 

a government /government agency and bidders 

participating for a contract. 

The IP sets out rights and obligations to 

the effect that neither side will pay, offer, 

demand or accept bribes, and that bidders 

will not collude with competitors or bribe 

representatives of the government/government 

agency to obtain the contract. Other 

obligations are: bidders would disclose all 

commissions and other payments made by 

them to anyone in connection with the contract. 

The IP further establishes a monitoring 

process for determining violations, 

which carry sanctions as a consequence. 

IP in its present form has three players: 

i) The Principal or the Company, 

ii) The Vendor, and 

iii) The Independent External Monitor 

(IEM) 

The Principal signs an agreement with the 

participating vendor/vendors for any type of 

contract related to procurement of goods 

and services. Its obligations essentially include 

an undertaking by the Principal that 

its officials will not demand or accept any 

bribes, kickbacks, gifts, facilitation payment 

etc. The bidder gives an undertaking that it 

has not paid, and will neither offer nor pay 

any bribe, kickbacks, facilitation payments, 

gifts etc. in order to obtain or retain the 

contract. IEMs, appointed by the CVC 

among the persons having the unquestionable 

integrity and domain knowledge, play 

a role only if the obligations in the IP are not 

fulfilled by the Principal and/or bidders/ 

vendors. Thus, IP is both a legal document 

and a process. It is also adaptable to many 

legal settings. 

The goal of the Integrity pact is to reduce 

any (and almost ensure no) chances of corrupt 

practices during procurement through a 

binding agreement between the agency and 

bidders for specific contracts. It is intended 

to accomplish two primary objectives: 

• To enable companies to abstain from 

bribing by providing assurances to them 

that (i) their competitors will also refrain 

from bribing, and (ii) the government 

procurement, privatisation or licensing 

agencies will undertake to 

prevent corruption, including extortion, 

by their officials and to follow transparent 

procedures. 

• To enable governments to reduce the high 

cost and the distortionary impact of corruption 

on public procurement, privatisation 

or licensing. 

Thus, the Integrity Pact is a specific tool 

used to build transparency in public pro- 



curement, bidding or licensing process by 

both public institutions and private agencies. 

The establishment of such a fair and transparent 

basis for awarding contracts not only 

ensures efficiency but also helps in building 

public trust in government and the private 

sector. Its key elements are: 

• A pact (contract) among a government 

office inviting public tenders for a supply, 

construction, consultancy or other services, 

or for the sale of assets, or for a license 

or concession (the Authority, i.e., 

the “principal”) and those companies 

submitting a tender for this specific activity 

(the “bidders”); 

• An undertaking by the principal that its 

officials will not demand or accept any 

bribes, gifts, etc., with appropriate disciplinary 

or criminal sanctions in case 

of violation; 

• A statement by each bidder that it has not 

paid, and will not pay, any bribes; 

• An undertaking by each bidder to disclose 

all payments made in connection 

with the contract in question to anybody 

(including agents and other middlemen 

as well as family members, etc., of officials); 

the disclosure would be made 

either at the time of tender submission 

or upon demand of the principal, especially 

when a suspicion of a violation by 

that bidder emerges; 

• The explicit acceptance by each bidder 

that the no-bribery commitment and the 

disclosure obligation as well as the attendant 

sanctions remain in force for the 

winning bidder until the contract has 

been fully executed; 

• Undertakings on behalf of a bidding 

company will be made “in the name and 

on behalf of the company’s Chief Executive 

Officer”; 

• A pre-announced set of sanctions for any 

violation by a bidder of its commitments 

or undertakings, including (some or all): 

— Denial or loss of contract; 

— Forfeiture of the bid security and performance 

bond; 

— Liability for damages to the principal 

and the competing bidders, and 

— Debarment of the violator by the principal 

for an appropriate period. 

Bidders are also advised to have a company 

Code of Conduct (clearly rejecting the use of 

bribes and other unethical behaviour) and a 

Compliance Program for the implementation 

of the Code of Conduct throughout the 

company. The Code of Conduct should include, 

inter alia, the following: 

• Clear definitions and prohibition of all 

forms of bribery and bid rigging; 

• Rules on offering of gifts, entertainment, 

travel fees, and money contributions; 

• Education on the Code of Conduct 

throughout the company; Internal and 

external audits and inspections, and 

sanctions against violators (including 

dismissal); 

• Provisions against any retaliatory acts 

upon any of the whistleblowers reporting 

inside corruption 

• To provide an incentive for Bidders to 

submit the Company Code of Conduct, it 

is suggested that the Government should 

adopt an amendment to the standards for 

qualification evaluation. 

TI India is pursuing the adoption of Integrity 

Pacts in various contracts and deals by 

various Government Departments and 

PSUs since 2001. As a consequence, the 

Ministry of Defence in its Defence Procurement 

Procedure Manual-2005 made 

IP mandatory for all of its deals of over Rs. 

300 crores. Subsequently, this threshold 

limit has been reduced to Rs. 100 crores, 

and Rs. 20 crores for defence PSUs. 

Thereafter, ONGC became the first Central 

PSU to adopt IP in its major contracts 

and procurements. 

However, it got its boost when the Central 

Vigilance Commission (CVC) issued an Office 

Order on December 4, 2007, recommending 

‘adoption and implementation of 

the Integrity Pact in respect of all major 

procurements of the Government organizations’. 

This Order was followed by other 

orders/ circulars issued on 28 th December 

2007, 19 th May and 5 th August 2008. Enclosing 

these Orders/circulars, CVC issued a 

comprehensive “Standard Operating Procedure” 

on 18 th May 2009 for adoption of IP 

in major government departments and organisations. 

As a result, the number of 

Central PSUs offering to adopt IP has risen 

to 39. Meanwhile, the Second Administrative 

Reforms Commission, in its Fourth 

Report on ‘Ethics in Governance’, has also 

recommended IP’s adoption, and the DP&T 

issued a circular on June 16, 2009 addressed 

to Chief Secretaries of all States recommending 

adoption of IP for their PSUs. 

Conclusion 

However, despite the governments above 

mentioned efforts for improving the governance, 

the continuing general perception 

among the public is that the government is 

either not serious, or not sufficiently concerned, 

about combating corruption. According 

to our Defence Minister Shri A K 

Antony, our Government’s commitment to 

eradicate corruption “is reflected in the successful 

implementation of Right to Information 

and the way it has been received and is 

being used by the people. RTI has set into 

motion a process of ‘opening up’ which will 

gradually, but definitely lead to a change in 

old mindsets.” 

(The views expressed in the write-up are personal 




101


RTI: Some 

Reflections and 

Ruminations 

With the increased popular participation made possible by 

the RTI Act, the overall accountabality and transparency of 

administration have also increased remarkably 


I NFORMATION ACCESS 

Saumitra Mohan 

District Magistrate and Collector, 

Birbhum, West Bengal 

As they say, information is 

necessary to 'form, perform, 

conform and reform'. It is so 

basic to any aspect of human 

existence, be it learning or acquisition of 

knowledge, performance of one's duties or 

any activity, compliance to any rules or 

laws and reform in any system subsequent 

to revelations of deficiencies discovered 

and changes required. It is subsequent to 

this realization that Right to Information 

Act (RTI Act) was enacted way back in 

2005 in our country. Since its enactment in 

2005, RTI has become a potent tool in the 

hands of hoi polloi and it has used this Act 

to further the cause of democracy and 

democratic rights in this country. Principles 

of natural justice also subsumes the 

right to fair hearing which presumes a right 

to information. 

The various powers and rights accruing 

to common people under the Act have been 

widely used, with positive implications for 

effective governance in this country. The 

government and its sundry administrative 

wings have literally been on toes in the past 

few years providing various kinds of information 

to different classes of people. The 

war against various systemic evils unleashed 

in the wake of RTI has been termed as the 

'Third War of Independence'. The conservative 

bureaucracy can no longer hide 

behind the fig-leaf of the Official Secrets 

Act, 1923 to deny information to the citizens 

unless the same could be justified in 

strict public interest. 

Even though RTI came into existence only 

in 2005 in this country, it is argued that it has 

always been there an inalienable part of our 

democratic ethos. The right to information 

is said to be implied across many disparate 

rules and provisions of the Representation 

of Peoples Act, Consumer Protection Act, 

1986, Indian Factories Act, 1948, The Constitution 

of India (e.g. Articles 19, 21 and 22), 

Indian Evidence Act, 1941, The Criminal 

Procedure Code, 1973, The Public Records 

Act and many judgements of the Supreme 

Court and High Courts. It has also been part 

of global discourse due to its inclusion in 

various international Instruments and Conventions 

including the Universal Declaration 

of Human Right, 1948 and in the Acts/ 

laws of many developed countries. 

In fact, for any law or Act to be effective 

in a democracy, it is very important that the 

common public is duly informed about the 

various aspects and provisions. Not only 

that, these people should also be conscious 

and conscientized about the need to use 

their various rights and powers available 

under the Act. And RTI is no different. The 


103


common people of this country have not 

only been greatly empowered by the Act, but 

they are also gradually learning to use the 

same effectively resulting in more democratization 

of the system. 

With the increased popular participation 

made possible by the Act, the overall accountability 

in the system has also increased 

remarkably. As almost any and every information 

is now in public domain, the wily 

government servant thinks twice before doing 

anything wrong as he/she is aware that 

tomorrow he/she might have to account for 

or explain the action/decision taken by him/ 

her. The RTI Act has definitely made the 

administration more transparent and accountable 

than it ever was. 

The basic features of good governance 

include transparency, accountability and 

predictability. After the enactment of 

RTI, these parametres could clearly be 

seen to be writ large across the governance 

system in this country. Still, there is 

a lot which needs to be done to make this 

Act further effective. 

First of all, voluntary disclosure of information 

and appointment of public information 

officers (PIOs) as warranted under respective 

sections 4 and 5 of the Act by 

various agencies have still not been done 

suitably and properly. Section 4, sub-section 

2 of RTI Act says, "It shall be a constant 

endeavour of every public authority to take 

steps in accordance with the requirements 

of clause (b) of sub-section (1) to provide as 

much information suo motu to the public at 

regular intervals through various means of 

communications, including internet, so that 

the public have minimum resort to the use 

of this Act to obtain information." RTI actually 

implies the 'Theory of Full Belly' i.e. if 

someone's stomach is full, he/she would 

never ask for food. Similarly, if information 

is provided suo moto, people shall never 

resort to RTI. 

Again, Section 5, sub-section 1 of RTI Act 

says, "Every public authority shall, within one 

hundred days of the enactment of this Act 

[i.e. 21 st June, 2005], designate as many officers 

as the Central Public Information Officers 

or State Public Information Officers, as 

the case may be, in all administrative units or 

offices under it as may be necessary to provide 

information to persons requesting for 

the information under this Act." So, it is 

important that to realise the objective of this 

Act, the spirit behind these sections are realised 

and actualised as early as possible. 

Notwithstanding the fact that there are 

approximately 50,00,000 public authorities 

in the country, still, these SPIOS and AS- 

PIOS (State Public Information Officers and 

Assistant State Public Information Officers) 

have not been notified by many of them. 

And where they have been so notified, they 

have not been suitably publicised, resulting 

in confusion and inefficiency in the disposal 

of the RTI petitions. At many places, 

there is a single SPIO for the entire Organisation, 

something which makes the 

system very cumbersome because of dependence 

on a lone person. So, the onus 

could be suitably and conveniently apportioned 

among many SPIOs for better performance 

and speedier disposal. 

While in the beginning, the public authorities 

would complain against the paucity 

of funds to take various measures as required 

by the Act including voluntary disclosure of 

information. However, now there is enough 

contingent funds under different schemes 

which could be suitably utilised to realise this 

basic prerequisite to make RTI more effective. 

As there is always shortage of manpower 

for such work, it won't be out of place 

to suggest outsourcing of such works. The 

massive amount of work required towards 

voluntary disclosure of information could be 

better executed by professional agencies 

skilled in such tasks. The care, however, 

should be taken to ensure that the information 

is easy to understand and is provided 

through suitable linguistic media. 

Even though we have come a long way in 

implementation of RTI in this country, 

there is still considerable lack of awareness 

among public and public servants regarding 

various aspects and provisions of the Act. 

The ignorance is reflected in the kinds of 

petitions filed and the responses of various 

public authorities. 


I NFORMATION ACCESS 

Many of the petitions filed have been 

found to be motivated. The political parties, 

as one could say with experience, often use 

it to literally annoy the local administration 

e.g. loads of RTI petitions if you don't listen 

to them or accede to one or the other of 

their demands. While the brief of the Act is 

to supply the information available in public 

domain, people have actually been seeking 

action and justice under the Act which is not 

the brief of the Act. Many of the petitions 

are filed without any purpose or locus standi. 

More often than not, the way RTI petitions 

are filed or the way information is sought 

also creates confusion among the public 

authorities who themselves are often not 

clear as to how to deal with such petitions. 

Though anyone and everyone could seek 

any and every information in the public 

domain, the information not readily available 

and which involve disproportionate diversion 

of public resources need not be 

provided as per section 7, sub-section 9 of 

the Act. However, such petitioners could 

seek the benefit of record inspection subject 

to the payment of requisite charges. Again, 

many of the public authorities provide information 

free of cost even to non-BPL people, 

something which is not advisable as it encourages 

the non-serious types to file frivolous 

and motivated petitions. The SPIOs 

and ASPIOs should invariably desire the 

RTI petitions to be made along with the 

payment of the requisite fees as required for 

the purpose. Not only this, the petitioners 

should also be asked to fork out the bill for 

provisioning of information including the 

inspection charges, Xeroxing charges or 

charges for providing a CD as applicable. 

Sometimes, sending the estimated cost of 

provisioning information including Xeroxing 

charges should be sufficient to discourage the 

non-serious seekers of information to approach 

public authorities and waste their 


105


quality time and energy. In fact, the public 

authorities could save a lot of their time and 

energy dealing with such petitions if only they 

could comply with the directions enshrined 

in section 4 relating to voluntary disclosure. 

A good website or kiosk shall do the needful 

in this regard. The petitioner could just be 

informed about the website, if one is computer 

savvy, to access the information required. 

And for the non-computer savvy ones, the 

hard copies of such information should be 

made available in the local libraries. 

Many SPIOs and ASPIOs still wait for the 

approval of their superiors or appellate authorities 

to finally pass on the information 

to petitioners, something which delays sharing 

of information and is completely avoidable. 

The SPIOs and ASPIOs could right 

away share information without referring 

the same to their superiors as should be 

decided well in advance unless there is confusion 

with regards to a serious issue or a 

policy matter. Also, some queries involving 

lots of manual work could be dealt by requesting 

or inviting petitioners to come and 

inspect the records at the payment of requisite 

charges. The really needy shall come 

forward but the non-serious ones shall 

never venture forth. But as the burden of 

providing information within the stipulated 

timeframe is on SPIO/ASPIO, they definitely 

should take care to evince enough 

desire to share the information sought. 

There are still many grey areas with regards 

to implementation of this Act e.g. 

'which information is in public domain and 

which is not' is still not clear to many. The 

stipulation of provisioning information 

within 30 days is still very vague as the same 

It would be more advisable to 

dispose these petitions early by 

scheduling a quick hearing 

is interpreted differently by public and public 

authorities. As people living below the 

poverty line (BPL) are exempted from paying 

charges for information sought, many 

petitioners have been filing proxy petitions 

through BPL people to avoid paying charges 

of accessing information. 

Many vague or abstract petitions are often 

left undisposed for quite some time, 

even at the expense of inviting pecuniary 

penalties from the last appellate authority. 

It would be more advisable to dispose these 

petitions early by scheduling a quick hearing 

or by inviting a written clarification from the 

petitioner. In fact, one needs to be doubly 

sure before providing information involving 

some costs. It is, therefore, advisable to hear 

the petitioner in person in such cases before 

supplying the same. 

The information relating to judiciary and 

its activities is still out of bounds for the 

public, something which is still mired in controversy. 

When we are talking of democracy, 

people's rights, none being above law, there 

is no reason why judiciary should be out of 

RTI ambit. One hopes this tangle is resolved 

early for making RTI more effective. 

Again, there has been a confusion as to 

whether foreigners or non-citizens could be 

provided information under the Act. The 

answer is in the affirmative for the rights 

admissible to them and for the information 

available in public domain. While many of 

the information (as per section 8 of the Act) 

could not be shared including the information 

relating to purely personal matters and 

the information held in fiduciary capacity, 

but property returns or IT returns of public 

servants are supposed to be in public domain 

and could be demanded under RTI. 

Such petitions should be transferred to the 

requisite SPIO in time. 

The awareness about the various aspects 

of the Act among public and public authorities 

need to increase with strengthening 

of the RTI set up at various levels including 

provisioning of adequate resources and man 

power. Given the massive expansion in the 

welfare state activities, RTI set up is in urgent 

need of having dedicated officers and 

staff members to attend to various queries 

and requests for information from members 

of the public. 

This would definitely make our service 

delivery more efficient and effective. Those 

found deliberately skirting or avoiding sharing 

of information should be duly penalised. 

But, there should also be action or penalties 

prescribed against the motivated petitioners. 

However, the provision for penalties 

should be applied with lots of care and discretion 

than arbitrarily as seen in many 

cases. While there is also a need to clarify 

and define the role of the competent authorities, 

some observers feel the need to 

give more discretionary powers to PIOs and 

appellate authorities to deal with such situations 

and cases. 

(DR. SAUMITRA MOHAN is a member of 

the Indian Administrative Service of 2002 

batch and belongs to the West Bengal Cadre. 

He is presently posted as the District Magistrate 

and Collector, Birbhum in West Bengal. 

Before entering the IAS, he had worked as 

Assistant Regional Director with Indira Gandhi 

National Open University, as a Lecturer in 

Political Science with Meerut University and 

as a Journalist with the Press Trust of India. 





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O UTREACH • OUTPERFORM • OUTSHINE


Male and Female Flower 

Trading Farms in 

West Bengal: A Case 

Rural Markets are more efficient than Urban Markets in fl ower cops and female marketing 

agent are more efficient but overall the the fl ower market is very unorganized 

Sanjukta Chakrabarti 

Assistant Professor, 

Bhangar College, 

University of Calcutta 

Debnarayan Sarker 

Professor and Secretary, 

Centre for Economic Studies, 

Presidency University, Kolkata 

Floriculture is an important area 

of horticulture, comprising large 

groups of fruits, vegetables, 

mushrooms, flowers, plantation 

crops including cashew, spices, medicinal 

and aromatic plants etc. for potential diversification 

and value addition in the primary 

sector. The diversity of physiographic climate 

and soil characteristics and enormous 

biodiversity enable India to grow a large 

variety of flower crops. In India, a large 

number of people earn their livelihood either 

by producing or marketing of flowers. 

Floriculture plays an important role in 

the Indian economy by augmenting rural 

employment/empowerment of backward 

women and earning foreign exchange (Goswami, 

2009:85). About 80% of all female 

workers are employed in agriculture, 

whereas only 70% of rural men are in agriculture. 

Thus agriculture is the single most 

important contribution of employment in 

the rural sector and more so to the rural 

women (Vepa, 2005.p2565). The census 

2001 data show that 39% of the total workers 

in farming (cultivators plus agricultural 

labour) are women and participation of 

women is relatively high in non crop agricultural 

activities (ibid: 2563.). 

Despite considerable research for assessing 

the degree of competitiveness and 

efficiency of marketing between men and 

women marketing agents in some areas, 

there is very little research on this issue in 

the domestic trade market of flower crop. 

The studies that usually appear in flower 

crop marketing do not demarcate between 

men and women (Kiran et.al., 2007; Agro- 

Economic Research Unit, 2007; Agro economic 

Research Unit, 2003; Maerterns and 

Johan, 2009). Sarker and Chakraborty’s 

(2005) study based on five districts of West 


M ARKET TROULBLE 

Bengal reveal that, in general, marketing 

efficiency decreases with the increase of 

number of intermediaries in the marketing 

channel. High price spread is the common 

phenomenon, because of concentration of 

market intermediaries. One of important 

findings of this study is that the trade market 

of flower crop in West Bengal is not 

very efficient in nature and not implied an 

orderly marketing system for some categories 

of major commercial flower crops 

(rose, tuberose and bel) produced in alluvial 

zone in West Bengal, because the 

farmer - producers’ interest for fair price 

of those flowers are not supported during 

lean season. This paper seeks to measure 

the magnitude of inter temporal and spatial 

variations in the prices of flower crop 

between same type of marketing institutions 

as well as different types of marketing 

institutions and to assess the competitiveness 

and efficiency of marketing in the 

domestic trade markets of flower crops in 

West Bengal where female act as important 

marketing agents. The underlying hypothesis 

is that flower marketing system is efficient, 

competitive and closely integrated 

in terms of price movements, and marketing 

efficiency is higher for female marketing 

agents compared with man, and rural 

markets are more efficient than urban 

markets in all flower crop markets. 

This paper is organised as follows. A 

short review of the domestic flower trading 

market of West Bengal appears in Section 

II. Section III presents the data set and 

methodology. The results are contained in 

Section IV. Section V concludes. 

Flower Trading 

Markets in West Bengal 

West Bengal is India’s third largest flower 

producer after Karnataka and Tamilnadu in 

the production of cut flowers. West Bengal 

produces flowers like Rose, Tuberose, 


109


Marigold, Gladiolus, Gardenia, Carnation, 

Gerbera, Chrysanthemum, which have vast 

scope of its external and internal demand. 

The area under flower crop in West Bengal 

was 9.8 thousand hectares in 1996-97, but in 

2002-03, it stood at 17.33 thousand hectares, 

registering around 9.8 percent increase of 

compound growth rate per annum between 

1996-97 and 2002-03, whereas production 

growth was around 16.54 percent during 

that period (Government of West Bengal, 

2001, 2004). Though the history of growing 

flowers and ornamental plants is too old, 

the commercial trade on these have generated 

recently, mainly, due to impact of 

economic reform (1991-92). 

Intra-state flower trading market of West 

Bengal is of four types — primary, secondary, 

sub and metropolitan. It appears in 

Diagram 1. 

Primary village level markets usually exist 

at the village level where the flower crop is 

originally produced, and directly connect 

the trade flow to the secondary market or/ 

and metropolitan market. Secondary markets, 

which gather larger quantity of flowers 

than primary markets, usually sit nearby the 

important railway station or bus terminus, 

and directly connect the trade flow to the 

metropolitan market. The sub markets sit 

usually at different districts towns, sub divisional 

towns and other important town areas. 

The character of primary and secondary 

markets is that a considerable portion 

of flowers of these two markets are sent to 

metropolitan market mainly for sale, 

whereas the marketing agents of sub markets 

usually purchase flower crop from 

metropolitan market or secondary market 

Diagram 1: Intra-state Flower Trading Market of West Bengal 

Village Market 

or primary market and sell those crops in 

the former markets (sub-markets). In metropolitan 

market, which makes a close link 

to all other types of market, the daily volume 

(quantity) of sales and purchase of 

different types of commercial flower crops 

is the highest of all types of markets. 

Also important to mention that five districts 

— Midnapore, Nadia, Howrah, 24 

Parganas (North) and 24 Parganas (South) 

The slow reduction of poverty levels 

in rural areas against urban areas is 

an evidence of the and the sluggish 

— have higher proportion of area under 

commercial flower crops in alluvial Zone 

and Darjeeling districts produce commercial 

flower crops in hill Zone in West Bengal 

(ibid). We consider all our samples from 

alluvial Zones because of the close proximity 

(nearest in distance) of the samples from 

our residence. 

The Data Set and Methodology 

The Data Set 

To examine the stated objectives field survey 

(primary source) is the main source of data 

collection for this study, as no published 

data relating to the marketing agents of the 

flower markets under study are available 

from any secondary source. Data collected 

from the sample respondents were taken up 

during the period from 1 st April 2006 to 31 st 

Metropolitan Market 

Sub-Market 

Secondary market 

March 2007. Although this paper considers 

sample from 600 marketing agents belonging 

to village level and urban markets (sub 

market and metropolitan market), the 

broader study undertook household survey 

to 800 flower crop marketing agents — 400 

female marketing agents (core group) and 

400 male marketing agents (control group) 

— taking samples from all types of markets 

under five districts namely Kolkata, 24 Parganas 

(North), Nadia, 24 Parganas (South) 

and Midnapore of West Bengal. This study 

considers stratified random sampling 

method. The procedure of selection is in 

the following lines. 

Firstly, we consider all our samples from 

alluvial Zones because of the close proximity 

(nearest in distance) of the samples from 

our residence. Secondly, we selected two 

markets of each type from three types of 

market (village level , secondary and sub 

markets)under five districts including 

Kolkata, with the principle that those markets 

have higher number of marketing 

agents than other markets under each 

district, and one metropolitan market 

(Mallikghat) from Howrah in Kolkata. 

Worthwhile to mention that Mallikghat 

flower market is the biggest metropolitan 

market of eastern India, because the daily 

volume (quantity) of sales and purchase of 

different types of commercial flower crops 

is the highest of all flower markets in eastern 

India (ibid). Moreover, the inter-state 



The slow reduction of poverty levels 

in rural areas against urban areas is 

an evidence of the and the sluggish 

trade and inter-country trade of flower 

crop are executed from Mallikghat flower 

market in Kolkata. 

The village level markets selected for final 

survey are Puranagar from Nadia district 

and Gaighata from 24 parganas(S) 

district. Similarly, the secondary level markets 

selected for final survey are Thakurnagar 

from North 24 parganas district and 

Deolti from Midnapore district; submarkets 

selected from Kolkata are New Market and 

Sealdah Market; the only metropolitan 

market selected for final survey is Mallikghat 

flower market, the biggest flower 

market ( in quantitative flow of business) in 

eastern India. 

Thirdly, selection of the sample of marketing 

agents of core group (female marketing 

agents) has been done by the method 

of SRSWOR depending on pilot survey on 

total number of marketing agents in each 

market selected for final survey. The common 

features that appears from pilot survey 

of this study are: i) the prevalent marketing 

agents (or market middlemen), who 

act as sellers of flowers in different types 

of market in the area we surveyed, are local 

wholesaler (local paikars), secondary (local) 

wholesalers, market wholesalers and 

retailers; ii) the significant majority of 

women marketing agents almost (about 78 

percent cases in an average) act as retailers 

in all categories of flower crop markets, 

whereas the importance of local wholesaler 

(local paikars), who act as about 62 

percent cases in an average, is the most 

important for male marketing agents (control 

group) in all categories of flower crop 

markets; iii) the prevalent flower crops 

offered for purchase and sale in the area 

we surveyed is of seven categories: Rose, 

Tuberose, Bel, Jui, Marigold, Gladiolus 

and Chrysanthemum. 

Finally, female marketing agents’ households 

(core group) are randomly selected 

(SRSWOR) from the population of each 

selected market based on pilot survey with 

two principle characteristics. (i) We took 

samples for two categories of marketing 

agents — retailers and local wholesalers, 

because they are the most prevalent marketing 

agents in the flower crop markets in 

our surveyed area that appears from pilot 

survey. (ii) Also important is that we took 

samples from pure marketing agents, i.e. 

marketing agents who independently (not 

jointly) act as retailer or local wholesaler. 

Samples for core group (female marketing 

agents’ households) in each market were 50, 

comprising 25 samples from retailers and 25 

from market wholesalers. As each type of 

market comprises two markets, the number 

of samples for each type of market is 100 

— 50 samples from retailers and 50 local 

wholesalers. However combining all samples 

together total samples for core group 

(female marketing agents’ households) in 

four types of market are 400 — 100 from 

village level market (50 from Gaighata and 

50 from Puranagar), 100 from secondary 

level markets (50 from Thakurnagar and 50 

from Deulti), 100 from sub markets (50 from 

New market and 50 from Sealdah) and 100 

from Metropolitan market (Mallikghat 

flower market at Howrah in Kolkata). 

Similarly, 400 pure male marketing 

agents’ households (control group) are randomly 

selected (SRSWOR) from the popu- 


111


lation of each selected market based on 

pilot survey taking equal number of samples 

in keeping with core group selected from 

each market. 

But, more importantly, as this paper attempts 

to study the competitiveness and 

efficiency between male and female marketing 

firms in rural and urban flower trading 

markets, data have been collected from 600 

pure marketing agents — 300 female marketing 

agents (100 from village level market, 

100 from sub markets and 100 from Metropolitan 

market)and 300 male marketing 

agents (100 from village level market, 100 

from sub markets and 100 from Metropolitan 

market) — with an intensive field enquiry 

through a scheduled questionnaire. 

Methodology 

In order to study the competitiveness and 

Table 1: Socio-Economic Characteristics of Sample Households 

Types of market/ 

Types of 

marketing 

agents 

Village Level 

Retailer 

Local wholesaler 

Sub-Market 

Retailer 


Metro. 

Market** 

Retailer 


Average 

size of 

Households 

4.68 

(5.27) 

4.72 

(5.22) 

3.89 

(4.45) 

4.18 

(4.61) 

3.86 

(4.18) 

4.12 

(4.10) 

% of HH 

Belonging 

to SC 

and ST 

92 

(84) 

87 

(84) 

80 

(72) 

86 

(78) 

76 

(68) 

73 

(76) 

% of 

HH 

Illiterate 

6 

(10) 

4 

(12) 

4 

(0) 

5 

(2) 

2 

(2) 

6 

(8) 

% of HH 

Primary 

Education 

80 

(84) 

82 

(78) 

71 

(76) 

78 

(76) 

68 

(72) 

81 

(74) 

Average 

size of 

Land Holding 

(acres) 

0.16 

(0.46) 

0.12 

(0.53) 

0 

(0.36) 

0.14 

(0.480 

0 

(0.22) 

0 

(0.41) 

% of BPL 

Households+ 

72 

(28) 

55 

(12) 

42 

(10) 

Source: Field survey. 

Note: Figures within ( ) indicate values for male marketing agents. 

*Secondary Level Marker; 

**Metropolitan Market; + As per BPL Survey 2005, Department of Panchayats and Rural Development, Government of West Bengal. 

17 

(5) 

0 

(0) 

0 

(0) 

efficiency of marketing of flower marketing 

agents related to this study proportions, 

simple percentage analysis, averages etc. 

have been used in tabular analysis. In this 

perspective the following measures have 

been introduced. 

As regards efficiency is concerned, efficiency, 

in quantitative term, is measured as 

a ratio of output to input. Markets are efficient 

when the ratio of the value of output 

to the value of input throughout the marketing 

system is maximized. One of the forms 

of marketing efficiency is pricing efficiency. 

The goal of pricing efficiency is efficient 

resource allocation. Activities that may 

improve pricing efficiency are improvements 

in market news and information and 

competition. Competition plays a key role 

in fostering pricing efficiency. It is said that 

most of the conditions of efficiency in marketing 

are best satisfied by perfectly competitive 

conditions. The closer the actual 

conditions to perfect competition, the 

stronger would the possibilities for minimizing 

wastes and exploitation and the greater 

the tendency for a uniform price to prevail 

over the entire market area. 

Price Spread Over Different Markets: 

Following Ashok Rudra (1992: 62) we calculated 

price spread over different markets 

and over different marketing agents in our 

study. The symbols θ± δ means the following: 

the midpoint of the prices of flower 

crops to the different marketing agent in a 

given market is θ, the highest observed 

value is θ+δ and the lowest observed is θ-δ. 

± δ has given an idea about the intra market 

price variation. Comparison of the 

values of θ for different flower crops in the 

same market and for different markets for 

the same flower crops gives some idea 

about the inter market and intra-market 

price variations. The hypothesis of Rudra’s 

(1992) calculation of price spread over different 

markets and over different marketing 

agents is that if the range of price variation 

for the homogenous product under 

different markets (excluding marketing 

costs) in any particular marketing agent as 

well as inter- marketing agents for the same 

period is not far from uniformity, the market 

of the particular homogeneous product 

becomes closer to perfect competition. As 

data related to agricultural inputs and outputs 

are usually short term in nature in the 

developing economies like India, Rudra’s 

(1992) estimate seems to be more pertinent 

in determining the competitiveness among 

agricultural farms based on such agricultural 

data. 

Producer’s share in consumer’s price (in 

percentage) = (P p 

/P c 

)*100, where P p 

is the 

price received by the producer and P c 

is the 



Table 2: Inter (Intra) Market, Inter (Intra) Marketing Agents Variation in Peak Season and Lean Season 

Prices of Rose (100 flowers) 

Peak season 

Prices(in Rs) offered by 

Lean season 


Retailer Local wholesaler Retailer Local wholesaler 

Type of market Male Female Male Female Male Female Male Female 

Village Level Market 100±3 97±3 96±4 95±3 45±15 42.50±12.50 41.50±8.50 40.50±9.50 

Sub Market 175±6 170±4 165±4 162±6 85±15 80±16 48±12 45±10 

Metropolitan Market 140±5 114±4 136±4 130±3 50±10 45±10 43.50±11.50 40±15 

Source: Field Survey 

mid-point and rang 

price paid by the consumer. The price received 

by the producer is estimated as sum 

of production cost of the producer and 

profit of the producer, higher (lower) the 

producer’s share in consumer’s price (in 

percentage), higher (lower) is the efficiency 

of marketing. 

Share of middlemen’s profit (Marketing 

Margin) in consumer’s price (in percentage) 

(MM/P c 

)*100, where MM is the marketing 

margin. Higher (lower) the middleman’s 

profit in consumer’s price (in percentage), 

lower (higher) is efficiency of marketing. 

Marketing efficiency indicates the movements 

of goods from producer to consumer 

at the lowest possible cost with the maximum 

satisfaction of the consumer. Marketing 

efficiency of individual flower crop is 

calculated with the measure of modified 

marketing efficiency (Sundaravaradanajan 

and Jahanmohan, 2002, Agro Economic 

Research, 2003). 

Modified Marketing efficiency (MME) 

=P p 

/(MC+MM) where MC is the marketing 

cost and MM is the marketing margin. 

Higher (lower) the value of Modified Marketing 

efficiency higher (lower) is the efficiency 

of marketing. 

Making Margin of the middlemen 

The general expression for estimating the 

margin for intermediaries is given below: 

Intermediaries margin =Gross 

Price(selling price) – Price Paid(buying price) 

– Cost of Marketing 

Results 

The socio-economic profile of the sample 

villages is presented in Table 1. Some of 

important characteristics of the Table are: 

i) the considerable majority of men and 

women marketing agents’ households in all 

types markets (more than two-thirds of 

households in all markets) belong to SC or 

ST. ii) Majority of women retailers’ households 

in village level market live under BPL 

category, as per BPL Survey 2005, Department 

of Panchayats and Rural Development, 

Government of West Bengal. Even 

about 42 percent of women retailers’ households 

in the sub-level market live under 

BPL category. However, the incidence of 

BPL households is much higher in village 

level market than that of urban markets 

— sub and metropolitan markets. As regards 

the educational status is concerned, 

more than two-third of both male and female 

marketing agents in all types of market 

has received education up to primary level. 

All these facts seem to suggest that both 

women and men marketing agents’ house- 


Prices of Tuberose (kg) 

Peak season 


Lean season 



Type of market 

Male Female Male Female Male Female Male Female 

Village Level Market 70±5 67±3 65±5 62±3 23±3 20±3 20±4 17±4 

Sub Market 90±3 87±4.50 85±3 83±2 45±3.50 42±4.50 41±3 38.5±3 

Metropolitan Market 75±5 72±3 72±5.50 70±5 30±3 27.80±2 21±2.50 20±1.80 


mid-point and range 


113



Prices of Bel (kg) 


Peak season 


Lean season 




Village Level Market 80±10 77±9 75±10 72±8 32±7 31±9 27±5 25±5 

Sub Market 95±15 92±14 90±15 86±14 40±8 38.50±9.50 36±6.50 33±7.50 

Metropolitan Market 90±10 81±13 83±12 77±11 30±7 28.50±5.50 25±5 23±7 

Source: field survey 


Prices of Jui(kg) 

Peak season 



Lean season 




Village Level Market 85±15 82.50±13.50 80±15 77±13 38±8 36.50±9.50 35±5.50 33±7 

Sub Market 100±15 97±14.50 95±12 94±13.50 55±10 53.50±8.50 42±9 40±7 

Metropolitan Market 94±10 92±8.50 88±12 85.50±9 41±9 39±8 36±7 35±5 



Prices of Marigold (kg) 

Peak season 



Lean season 




Village Level Market 35±5 33±7 30±8 27±6.50 12±3.50 10±4.50 9±3.50 8.50±2.50 

Sub Market 55±8 52±10 53±13 51±12 30±5.50 25±4 14±1.50 13.50±1 

Metropolitan Market 43±7 39±8 35±7 33±6.50 12±4.50 10±3 10±3 9±2.50 


holds possess low social status, but from 

economic point of view women marketing 

agents’ households, in particular, have 

much poorer economic conditions compared 

with their male counterpart, and 

women retailers’ households are more 

badly off than male wholesalers’ in almost 

all types of market in general and village 

market in particular. Therefore dependence 

on the trade market of flower crop 

particularly for female marketing agents 

under this sample, in particular, is expected 

to have a substantial impact on the livelihood 

of those households. 

The phenomenon whether prices vary 

across different markets and over different 

marketing agents (or market middlemen) in 

a way which is different from uniformity 

during lean and peak seasons of the year 

are given in Tables 2 to 8. Following Rudra 

(1992) we have calculated price spread over 

different markets, different marketing 

agents and among sample male and female 

marketing agents under our study. Some 

important features that appear in Tables 

2-8 are 

1) Price per unit offered by marketing 

agents for all flower crops under study is 

the lowest in village level markets followed 

by metropolitan market and sub 

markets — Urban markets. 

2) Female marketing agents acting as retailer 

or local wholesaler (local paikar) 

offer lower price for all flower crops in 

all markets compared with male marketing 

agents. 

3) Local male and female wholesalers offer 

lower price for all flower crops in all 

markets than retailers. 

4) Inter market (intra-market) price variation 

is not so far from uniformity in any 

particular marketing agent and inter 

marketing agents during both lean and 

peak seasons 1 for Tuberose (Table 3) and 

Gladiolus (Table 7) and during peak 

season for Rose (Table 2), whereas for 

other flowers Bel (Table 4), Jui (Table 5), 

Chrysanthemum (Table 8), Marigold 



(Table 6) during both peak and lean season 

and for Rose during lean season 

(Table 2), the range of price variation 

under different markets is far from uniformity 

in any particular marketing agent 

and inter-marketing agents. 

It is difficult to find from this study that the 

range of price variations for most of the 

flower crop within different markets or intra-market 

for the same period (lean or 

peak season) is not far from uniformity in 

any particular marketing agent and also 

within different marketing agent for both 

female and male category. However intermarket 

(intra-market) price variation for 

Tuberose and Gladiolus during both peak 

and lean seasons, and Rose during peak 

season is not so far from uniformity in any 

particular marketing agent and inter marketing 

agents for both female and male 

category. Thus more competitive and 

closely integrated market structure of 

flower crop in terms of price movement 

seems to prevail in the market of Tuberose 

and Gladiolus during both the lean and 

peak seasons and that of Rose during peak 

season in all types of markets where female, 

the core group of our study, act as marketing 

agents in those market. 

We now present the index of modified 


Prices of Gladiolus (Dozen Spikes) 


Prices of Chrysanthemum (Dozen Flowers) 

Peak season 


Lean season 





Village Level Market 55±11 52±8.50 51.50±7 50±5.50 19±6.75 16±4 15.50±3 14±2.50 

Sub Market 67±13 63.50±8 65±11 64±9.50 32±8 30±6.50 26±4 24.50±5 

Metropolitan Market 62±10 60±9.50 57±8.50 55±7.5 27±6 24.50±6.20 17±4.50 15±5 


Peak season 



Lean season 




Village Level Market 57±5 54±4.50 52.50±4 52.50±3 33±3.50 30±4 19±3.50 17±3.50 

Sub Market 70±5 68±6 65±4.50 63±4 40±3.50 37±2.50 24±3 21±3.50 

Metropolitan Market 65±6 62.50±4.50 57±3.50 55±3 34±3.50 32.50±3 21.50±4 20±3 


Table 9: Indicators of Marketing Efficiency in Village level Market for Male and Female Marketing Agents 

Name of 

Flowers 

Producer’s share In Consumer’s 

rupee (in percentage) 

Trader’s profit (marketing margin) in 

consumer’s rupee (in percentage) 

Modified Marketing 

Efficiency 

Peak Season 

Lean Season Peak Season Lean Season Peak Season Lean Season 

M F M F M F M F M F M F 

1)Rose(100 Flowers) 55.4 56.8 39.8 41.4 31.2 30.5 38.1 36.8 1.2 1.3 .66 .70 

2)Tube rose(KG) 42.2 45.3 39.0 43.1 41.5 38.6 38.8 33.9 .73 .82 .64 .75 

3) Bel (KG) 23.5 25.2 18.6 18.9 48.7 47.9 59.0 58.5 .31 .33 .22 .23 

4)Jui(Kg) 29.4 30.7 29.1 29.5 48.0 48.2 49.1 48.9 .41 .44 .41 .41 

5)Marigold(Kg) 14.2 15.2 11.3 12.6 50.9 50.1 54.9 53.2 .16 .17 .12 .14 

6)Gladiolus (Dozen Spike) 38.6 40.3 31.5 33.9 37.3 36.1 36.0 34.4 .61 .67 .46 .51 

7) chrysanthemum 

(Dozen Flowers) 19.2 20.5 13.0 13.5 47.4 47.2 54.3 53.1 .23 .25 .15 .15 



115


Table 10: Indicators of Marketing Efficiency in sub- Market for Male and Female Marketing Agents 

Name of 

Flowers 

Producer’s share In Consumer’ s 

rupee (in percentage) 

Trader’s profit(marketing margin )in 



Efficiency 

Peak Season Lean Season Peak Season Lean Season Peak Season Lean Season 


1)Rose(100 Flowers) 42.7 43.9 37.4 38.7 34.2 33.6 31.0 29.4 .74 .78 .59 .63 

2)Tube rose(KG) 4.8 47.1 38.1 40.0 36.7 34.5 36.0 34.5 .81 .89 .62 .67 

3)Bel(KG) 30.0 31.2 20.0 21.5 48.4 47.2 43.9 40.8 .42 .45 .25 .27 

4)Jui(Kg) 34.6 36.1 33.8 35.1 43.5 42.2 37.8 36.7 .53 .56 .51 .54 

5)Marigold(Kg) 16.8 17.3 15.9 18.3 47.6 46.9 39.2 33.2 .20 .20 .19 .22 

6)Gladiolus(Dozen Spike) 34.7 35.4 24.1 26.0 39.5 38.4 40.1 36.6 .52 .56 .31 .35 

7)Chrysanthemum 

(Dozen Flowers) 16.7 17.8 15.4 17.2 52.9 51.5 51.3 48.6 .20 .21 .18 .20 


Table 11: Indicators of Marketing Efficiency in Metropolitan Market for Male and Female Marketing Agents 

Name of 

Flowers 

Producer’s share In Consumer’ 

s rupee (in percentage) 

Trader’s profit (marketing margin in 



Efficiency 

Peak Season Lean Season Peak Season Lean Season Peak Season Lean Season 


1)Rose(100 Flowers) 50.8 52.8 41.4 42.8 35.8 33.6 34.2 33.8 1.0 1.1 .70 .75 

2)Tube rose(KG) 39.0 40.7 29.9 32.0 38.5 36.1 42.2 40.4 .63 .68 .43 .47 

3)Bel(KG) 27.7 28.9 17.9 19.5 45.8 45.7 46.3 45.3 .36 .40 .22 .24 

4)Jui(Kg) 26.9 28.1 25.7 27.5 51.5 51.5 54.1 52.5 .39 .39 .34 .37 

5)Marigold(Kg) 16.2 17.2 14.2 15.7 47.7 48.1 49.7 49.4 .19 .20 .16 .18 

6)Gladiolus (Dozen Spike) 35.3 37.1 33.6 35.7 36.7 35.7 34.8 32.5 .54 .59 .50 .55 

7) Chrysanthemum (Dozen Flowers) 19.1 20.4 8.82 9.6 44.3 43.2 47.8 50.1 .23 .25 .09 .10 


marketing efficiency, producer’s share in 

consumer’s rupee and traders’ profit margin 

in consumer’s rupee (Tables 9 to 11). Tuberose 

and Gladiolus during both lean and 

peak seasons and Rose during peak season 

have higher producers’ share in consumers’ 

rupee, higher modified marketing efficiency 

and lower traders’ profit margin in consumers’ 

rupee compared with other flower 

crops. Such a phenomenon does prevail for 

both female and male marketing agents 

under study. 

These findings do not fully support our 

hypothesis because flower marketing system 

for most of the flower crops is inefficient. 

Although the trade market of all flower 

crops where female act as important marketing 

agents under our study are not efficient, 

competitive and closely integrated in 

terms of price movements for most of the 

flower crops, the trade market of tuberose 

and gladiolus during both lean and peak 

seasons and rose during peak seasons are 

more efficient, competitive and closely integrated 

in terms of price movements compared 

with other flower crops. As regards 

the extent of marketing efficiency is concerned, 

modified marketing efficiency is 

somewhat higher for female marketing 

agents compared with their male counterpart, 

and rural markets are more efficient 

than urban markets in almost all flower crop 

markets. These facts support our hypothesis. 

Also important is that a general phenomena 

arises from Tables 9-11 is that 

during lean season, the MME and producer’s 

share in consumers rupee for almost all 

flower crops is much low as compared with 

its peak season. 

Conclusions 

This study lends credence to the fact that 

rural markets shows somewhat higher efficiency 

than urban markets, and the extent 

of modified marketing efficiency for some 

flower crops is somewhat higher for female 

marketing agents in relation to men. However 

the trade market for most of flower 

crops are not efficient in the area we studied. 

But efficient marketing system is very 

essential for accelerating production. It 

makes higher producers’ profit in consumer’s 

rupee which influences farmer’s 

decision in allocating area under a particular 

crop in a particular time period. Therefore 

more competition in the trade of traditional 

flower crops needs to be 



introduced. Mini and Small assembling 

centre may be established in private or 

comparative sectors in flower producing 

areas, which will save the cost of transportation 

in assembling labor charges and 

distribution phases. 

The study also reveals that during lean 

season, the MME and producer’s share in 

consumers rupee for almost all flower crops 

is much low as compared with its lean season. 

This may cause the gradual diminution 

for farmer’s decision in allocating area under 

particular crop in a particular time period. 

So emphasis should be given for adequate 

storage facilities and the expansion of 

inter-state, intra-state and inter–country 

trade of flowers, particularly, during lean 

season when producers incur loss. Co-operative 

marketing system can be encouraged 

in this regard. Remunerative prices should 

be assured to the flower growers during lean 

season; otherwise, the desired growth of 

flower production as well as momentum of 

flower trade will be diminished gradually. 

Thus Government induced market activities, 

co-operative marketing system, better 

information and storage structure may help 

in overcoming the deficiency of marketing 

system of flower crops. 

End-notes 

1 

Prices for all flower crops are usually 

higher for peak seasons than that of their 

lean period. But lean or peak seasons for 

all crops are not same. However during 

pujas and national festivals the price for 

most of the crops under our study becomes 

usually high. 



• Agro Economic Research (2007): “Viable 

entrepreneurial trades for women in agriculture 

in Haryana,” Agricultural situation 

in India, Vol 64, no 5. August. 

• Agro economic Research Unit (2003): 

“Development of Floriculture in Uttar 

Pradesh- Problems &Prospects”: Agricultural 

Situation in India, March, 799- 

805 . 

• Goswami S.(2009): “An Analysis of the 

Indian Horticulture Industrywith reference 

to Floriculture” Artha Beekshan, 

Vol 18. No.:2 Sep,pp-85-91. 

• H.Gravelle and Rees(1988): Microeconomics, 

Longman, London and New 

York. 

• Kiran K, P. Jayasheela and H. V. Basic 

(2007): ‘Commercial Floriculture in India: 

opportunities for cut flowers development’ 

Southern Economist, 46 ( 11), 

pp-18-22. 

• Maertens,M. and J.F.M.Swinnen (2009): 

‘Gender and Modern supply chains in 

Developing Countries’, LICOS Discussion 

paper Series, Discussion paper 231, 

pp 1-36. 

• Rudra, A. (1992): Political Economy of 

Indian Agriculture, K. P. Bagchi& Company, 

Calcutta, pp. 47-69. 

• Sarkar, D and S Chakraborty (2005): 

“Household Decision Making in Agricultural 

labour HHs: A case study of WB” 

Indian Social Science Review, Vol. 17. No 

2, pp 55-79. 

• Sarkar, D (2004): “Gender Bias and Violence 

against Women: A case study of 

Flower marketing Agents in West Bengal” 

Indian Journal of Human Rights and 

the Law Vol I, No 1-2, pp43-60. 

• Sundaravaradarajan K.R. and K.R. Jahanmohan 

(2002): “Marketing Cost 

Margin, Price-Spread and Marketing Efficiency 

of Cashew in Tamil Nadu”, Agricultural 

Situation in India,Vol.LIX, April 

pp.43-60. 

• Vepa, S.S., (2005): ‘Feminisation of agriculture 

and marginalization of their 

economic stake’, Economic and Political 

Weekly, 40 (25): 2563-68. 

(DR. DEBNARAYAN SARKER is currently 

Professor and Secretary at the Centre for Economic 

Studies, Presidency University, and 

Kolkata. He has to his credit about 100 research 

papers published in National and international 

journals and some books including 

edited volumes of repute. He is the author of 

the book titled ‘How to Execute Joint Forest 

Management Programme Sustainable? Evidence 

from India’. Three of his important 

edited volumes are ‘Emerging Issues of Development, 

‘Second Generation Reforms: What 

is to be Done’, and ‘Agriculture Industry Interactions: 

An Approach to Developing Economies’..In 

addition to his guiding research to 

Ph.D. research scholars of high academic excellence 

of whom some research scholars have 

already obtained Ph.D. degree in economics 

under the sole guidance of him, he has had a 

profound experience for guiding some UGC 

research projects independently. His main research 

encompasses the problems related to 

both theoretical and empirical issues on primary 

sector, environmental economics, gender 

and development studies, financial economics, 

political economy, developing economics 

and operation research. 

DR. SANJUKTA CHAKRABARTI is currently 

Assistant Professor at the Bhangar 

College under University of Calcutta. She got 

through M.Sc. in Economics under University 

of Calcutta in 2000 and received Ph.D. in 

Economics in 2010 from the same University. 

She has to his credit five research papers published 

in National and international journals 

including edited volumes of repute. 





117

W ELFARE ECONOMICS 

Engaging Communiti e 

Health Care Services 

Inadequacies in infrastructure coupled with paucity of 

personnel, absenteeism and poor supply of medicine 

are resulting in poor service delivery across the nation 

George Cheriyan 

Director, 


Om Prakash Arya 

Project Coordinator, 


It has been now two days, since 

seven years old Ravi is down with 

fever. His mother, Sita, a poor 

landless labourer’s wife, must 

wind up her day’s chores before she can 

attend to him. The fever is high and he 

badly needs medical assistance. But the 

nearest Primary Health Centre (PHC) at 

Barbaas is 23 kilometers from Sitarampura 

in Todaraisingh block in Tonk district 

of Rajasthan. She will have to spend 

three hundred rupees just to get there, 

but she doesn’t have a choice. Sita and 

Ravi are unfortunate symbols of grossly 

deficient medical services in the world’s 

largest democracy. 

Indian Economic Survey 2009-10, supports 

the above mentioned ground reality, 

which says only 13% of rural residents 

have access to a PHC, 33% to a sub-centre, 

9.6% to a hospital and 28.3% to a 

dispensary or clinic. About two-thirds of 

country’s registered hospitals are private. 

The survey also highlights a shortage of 

20,486 sub-centers, 4,477 PHCs and 2,337 

community health centers (CHCs) based 

on 2001 population norm. Village level 

health and sanitation committees were 


H EALTH HAZARDS 

es for Better 

still to be constituted in nine states. 

India’s primary healthcare system is 

based on a well structured three tier public 

health infrastructure comprising of 

Community Health Centre (CHCs), Primary 

Health Centres (PHCs) and its attached 

sub-centres, each of them covering 

5-6 or more villages, spread across rural 

and semi-urban areas. However inadequacies 

in infrastructure including shortage 

of personnel, absenteeism, poor 

supply of medicine etc., are resulting in 

poor quality of service delivery and waste 

of public funds. 

Governments in developing countries 

spend substantial amount on public services 

including public health care. In 

2010-11, 37% of the total plan outlay in 

India goes to social sector. Despite this, 

dissatisfaction is frequently expressed over 

the performance and quality of services. 

In order to address inadequacies and to 

provide accessible health services to the 

poorest households in the remotest regions 

of the country, the National Rural 

Health Mission (NRHM) was launched in 

2005. It is a national effort at ensuring 

effective healthcare in rural areas, especially 

to the poor and vulnerable sections 

of the society. It also aimed at undertaking 

architectural correction of the health 

system to enable it to effectively handle 

increased allocations and strengthen public 

health management and delivery. 

Simultaneously, India’s financial allocation 

for the health sector also increased 

from 10,040 crore in FY 2005-06 to Rs. 

22,641 in FY 2009-10, a rise of 125 percent. 

NRHM allocations more than doubled 

from Rs. 6,788 cr in 2005-06 to Rs. 

14,178 cr in 2009-10 and Rs.15,154 cr in 

2010-11. NRHM allocations constitute 

63% of the total allocations for health and 

family welfare. 


119


Absenteeism is widespread across the 

country among the physicians and health 

care personnel of public health care facilities, 

as in many other developing 

countries, and have wide financial implications. 

Surprisingly, however, these issues 

are not as widely discussed in the 

policy framework in the health systems, 

despite their potentially adverse effects 

on health service delivery. 

Recently, a study was done by CUTS 

International, an Indian origin International 

advocacy group, in one of the districts 

(Tonk) of Rajasthan to measure the 

rate of absenteeism among health service 

providers and the status of service delivery. 

As part of Transparency and Accountability 

Programme (TAP), implemented 

in 18 countries, the study was in 

collaboration with Results for Development 

(R4D) Institute, Washington DC 

and the Human Development Network 

Figure 1: Absenteeism (%) among Health Officials in Tonk District 

40 

35 

30 

25 

20 36 34 33 

15 

22 

10 

12 

5 

0 

Doctor M Nurse LT LHV ANM 

of the World Bank. 

Citizens' Report Card (CRC) tool was 

used to know about their perception on 

the status of health service delivery. In 

addition, through the Participatory Absenteeism 

Tracking Process (PATP), 900 

unannounced on the spot observations 

were made for 35 consecutive days, except 

on Sundays, by 150 monitors selected 

from the catchments of the PHCs. 

On an average one third of the health 

services personnel was observed missing 

during duty hours in PHCs. Absenteeism 

was as high as 36 percent among doctors 

while in five categories of health service 

providers it was found to be 27 percent on 

an average. 

The financial loss on account of absenteeism 

was 84 lakh per year for the target 

district, with out taking in to consideration 

the opportunity cost. 

The PHCs lacked facilities like clean 

drinking water and toilets. The study found 

that 30 percent of the PHCs had either 


H EALTH HAZARDS 

poor or no proper drinking water facility. 

A 10 percent of the PHCs lacked toilets 

and 13 percent, electricity. An interesting 

co-relation also was found between the 

absenteeism and physical infrastructure. 

Wherever the physical infrastructure was 

poor, absenteeism was high. 

Along with rampant absenteeism, the 

study observed that on average 12 percent 

posts of health personnel in PHCs are 

vacant. The vacant posts ranged from five 

percent in the case of male nurses to 25 

percent in Lady Health Visitors. 

44 percent of the service recipients were 

not found satisfied with health service 

delivery. 69 percent of respondents were 

complaining of either not getting any 

medicines or getting only a few. As many 

as 47 percent said they did not know about 

the existence of Village Health and Sanitation 

Committee (VHSC), while a 

whooping 82 percent reported that they 

had no knowledge of any existing grievance 

redress mechanism. 

Janani Suraksha Yojna (JSY) is aimed 

at encouraging intuitional delivery. However, 

‘Pregnant women refuse to come to 

PHCs, because of non-availability of female 

staff at the PHCs. They don’t want 

to consult a male doctor’, says Gayatri 

Verma, who is an ASHA (Accredited Social 

Health Activist under NRHM) Sahyogini 

in village Pachewar. 32 percent of 

beneficiaries said they did not receive any 

cash assistance under JSY. 

Many doctors themselves complained 

about meager supply (once or twice in a 

year) of medicines and poor diagnostic 

facilities at the primary health centers 

(PHCs). It was observed that absence of 

governance and accountability structure 

was the major impediment in the process 

of service delivery, though NRHM suggests 

an accountability framework with 

Figure 2: Doctor's Absenteeism vs. Presences of Facilities 

70 

60 

50 

40 

30 

20 

10 

0 

Yes 

Public Transport 

Facility 

No Yes No Yes No Yes No 

On an average one third of the 

health services personnel was 

observed missing during duty hours 

three pronged process. 

People expressed lack of faith in the 

PHC and its services, and they prefer to 

go to quacks with medicines rather than a 

PHC without doctors, diagnostic facilities 

and medicines. This is a serious matter of 

concern and waste of public money. 

Two core strategies, community monitoring 

and third party engagement, of 

NRHM was found not gained a momentum 

yet, even after five years of implementation 

of the mission. 

The success of any scheme lies in the 

civic engagement in the implementation 

of schemes as the accountability improves 

with civic participation. But unfortunately, 

this aspect is generally ignored. Community 

ownership and participation can only 

be the solution to these issues. 

(GEORGE CHERIYAN is currently the 

Director of CUTS International and heads 

the CUTS Centre for Consumer Action, Research 

& Training (CUTS CART). George is 

a member United Nations Roster of Consultants 

on sustainable development and a 

Member of International Resource Team of 

the World Bank Institute on Sustainable 

Toilet Facility Water Facility Govt. Residence 

Development (WBISD), on social accountability. 

He is also a Member of the State Advisory 

Committee of the Rajasthan Electricity 

Regulatory Commission (RERC) and a 

member of the Central Consumer Protection 

Council (CCPC), Government of India, 

representing CUTS. His publications includes 

a research paper titled ‘Enforcing right to 

food in India: Bottlenecks in delivering the 

expected outcomes” as part of the International 

Project of the United Nations University 

–World Institute of Development Economics 

and Research. 

OM PRAKASH ARYA is a rural management 

professional possessing over six years of 

experience in the field of development. Since 

2007 he is associated with CUTS-International 

and working in the programmatic area 

of governance with specific focus on the usage 

of Social Accountability approaches and 

tools. Being the Project Coordinator, he is 

involved in the implementation of various 

social accountability projects. 





121


Attaining 

Comprehensive 

Development 

A comparative study of demographic, migration and socio-economic trends in 

Uttarakhand and Himachal Pradesh along with Uttar Pradesh 

R. S. Bora 

Associate Professor, 

Institute of Economic 

Growth, Delhi University 

Swati Virmani 

Research Analyst, 

Institute of Economic 

Growth, Delhi University 

Development is generally 

perceived as a multi-dimensional 

process, reflected 

in a wider context 

like improvement in the quality of life, 

achieving demographic transition, 

population stabilization, creating economic 

infrastructure and much 

needed investment. It includes growth 

and is a broader perspective term. The 

success story of inclusive growth, poverty 

reduction and achieving socioeconomic 

development depends upon 

the quality of governance. Inadequacies 

of governance may not be reflected 

from overall growth rates, but 

are clear from issues such as unmet 

demand leading to migration. It is 

therefore important that any analysis 

of government intervention must not 

simply take into account growth; it 

must capture development in an equitable 

way. 

During the formation in 2000 there 

were widespread expectations that reforms 

would rapidly put Uttarakhand 

on the path of balanced development 

and provide a surge of opportunities. 

However such expectations went unobserved, 

as the development literature 

itself supports that economic activities, 

social development activities, and demographic 

transition tend to foster 

growth in those regions that are already 

developed. Instead of a balanced pattern 

of development, an increase in 

regional inequalities was observed; 

resulting in a situation wherein only 

state policies and governance could 

counter regional imbalances (Bhattacharya 

and Sakthivel, 2003; Krugman, 

1991). Uttarakhand is a case of late 

formation, whereas, Himachal is all set 

to meet the National Population Policy 

(NPP) targets and is better placed in 

terms of development indicators, in a 


M OVING MIGRATION 

way pointing towards the benefit of 

being a timely formed state. 

It is often argued that as a result of 

formation of smaller states, the unproductive 

expenditure on the administration 

increases. Though national per capita 

expenditure on administration may rise in 

the first instance, but the productivity of 

such expenditure may also increase in 

smaller states (Rao, 2010). As Uttarakhand 

was bifurcated from the larger state 

of UP, the study pays attention to some of 

the characteristics of UP to validate the 

rationale for the constitution of smaller 

states, quite clear from Uttarakhand’s 

(and Himachal, another smaller state) demographic, 

education, migration and 

growth trends, outperforming UP. 

The study is divided into six sections. 

The second section analyses the recent 

demographic trends; trends in education 

and employment are analyzed in third; 

forth is devoted to analyzing the structure 

of economy; fifth looks at the extent of 

migration; and finally the last section 

draws a few broad conclusions. 

Demographic Trends 

and Development 

Population and development are closely 

Though average national per capita 

expenditure on administration may 

rise in the first instance in a state 

linked to each other. Stabilizing population 

is a pre requisite for promoting sustainable 

development with more equitable 

distribution (NPP-2000). In many states of 

India, population growth continues to be 

high on account of high fertility, high infant 

and maternal mortality. If controlled, 

these demographic indicators can reduce 

population growth. The National Population 

Policy (NPP, 2000) has set up medium 

term objectives which have to be achieved 

by 2010. Some of these are: bringing down 

the Total Fertility Rate (TFR) to replacement 

level of 2.1, reduce infant mortality 

rate to below 30 per 1000 live births and 

achieving maternal mortality rate to below 

100 per one lakh live birth (NPP, 

2000; Census of India, 2001). 

In the context of the NPP objectives, 

Himachal already achieved replacement 


123


level of fertility by 2005 and after 2010 the 

state will have below replacement TFR of 

1.8. Uttarakhand and UP, on the other 

hand, achieved 84.0 and 55.0 percent of 

their TFR reduction in 2010 (SRS, 2000 

and 2005). Examining the projected TFR, 

Uttarakhand lagged 20 years behind 

Himachal. Looking at Figure 1, in UP and 

Uttarakhand there is a big difference between 

wanted and actual TFR (1.5 and 0.7 

respectively). Though Uttarakhand’s 

wanted TFR is below 2.1 (target), but the 

actual rate is 2.5, thus implying is a need 

to control unwanted fertility. 

The conditions conducive to unwanted 

fertility decline are pitiable in U.P, Uttarakhand 

and in the country as a whole 

(NFHS-3, 2005-06). 

Infant Mortality Rate (IMR) is also 

considered an important indicator of 

socioeconomic development. As per the 

NPP target, IMR should be below 30 per 

thousand births. Though projected IMR 

is lowest for Himachal, yet the state lags 

behind the target; none of the three 

states under study would achieve this 

target up to 2025 (Table 1). Due to hilly 

location child care facilities are not accessible 

easly. 

Talking about the maternal health, as 

per the safe motherhood programme 80 

percent of all deliveries should take place 

in institutions; however, only 43 percent 

deliveries took place in Himachal, followed 

by all India (39 percent), Uttarakhnd 

(33 percent) and UP (21 percent). 

Secondly, all deliveries should be attended 

by trained personnel, but only 39 

and 27 percent deliveries were attended 

Figure 1: Total Fertility Rate : Wanted & Actual (NFHS III) 

4 

3.5 

3 

2.5 

2 

1.5 

1 

0.5 

0 

1.9 

1.5 

Himachal 

2.5 2.3 

1.8 

in Uttarakhand and UP, whereas 

Himachal had 48 percent and all India 

had 47 percent attended. Also the goal is 

to have the maternal mortality ratio 

(MMR) reduced to a level below 100 per 

lakh live births (NFHS-3). For the smaller 

states the SRS does not give any estimation, 

still the combined figure for UP 

and Uttarakhand was 517 per one lakh 

(SRS, 2001-2005). This value is very comparing 

with the national average of 254. 

The safe motherhood indicators reveal 

that though Himachal is well above the 

national average, but it too is far from 

Infant Mortality Rate (IMR) is also 

considered an important indicator 

of socioeconomic development 

Rate 

3.8 

2.7 

1.9 

Uttarakhand U.P. All India 

Wanted TFR* 

Actual TFR* 

meeting the safe motherhood norms in 

near future. 

Overall in terms of demographic indicators, 

while comparing with other Indian 

states, Himachal has already attained 

the status of demographically 

advanced state, whereas Uttarakhand 

still lags behind. 

Education and Employment 

The literacy rate (as per 2001 census) was 

highest for Himachal (76.5 percent) followed 

by Uttarakhand (72 percent) and 

UP (56.3 percent). The rates for former 

two were higher than the National average 

of 65 percent. Figure 2 shows Male- 

Female literacy gap wherein Himachal 

stands out with 18 percent, even below the 

national average of 22 percent. The 

higher gap in Uttarakhand and UP could 

be explained by higher percentage of marriages 

before 18 years (Figure 3) 

Up to middle level the proportion of 

females is higher in Himachal, in Uttarakhand 

and UP the proportion is 

higher only up to primary level. Looking 

at the dropout rates of Himachal during 

2005-06, for I-V, I-VIII and I-X, are 

10.69, 10.82 and 0.0 (indicating no drop- 



Table 1: IMR Trends 

Projected * 

2001 2005 NFHS 2005-06 2010 2020 2025 

Total Rural Urban Total Rural Urban Total Total Total Total 

Himchal 54 56 32 49 50 20 36 40 33 30 

Uttarakhand 48 69 26 42 56 19 42 60 49 45 

U. P 83 86 62 73 77 54 73 66 52 46 

All India 66 72 42 58 64 40 57 54 44 40 

Source: SRS, 2001 and 2005 

*Population Projection, May 2006. 

out) respectively. For states such as UP, 

the respective dropout rates are 9.76, 

41.25 and 43.02 (figures inclusive of Uttarakhand; 

indiastat). 

Trends in Work Participation 

and Shift in Employment 

Over the decade, the proportion of main 

workers has declined in both the states, 

but the declining trend among the total 

main workers as well as rural main workers 

has been higher in Uttarakhand 

(NSSO, 2004-05). In Himachal both male 

and female work participation trends are 

noticeable; in Uttarakhand female work 

participation is declining, whereas male 

participation has shown a definite increase 

over 1999-2000, but still remained lower 

than Himachal. 

Coming to changes in the structure of 

employment, in Uttarakhand, the proportion 

working in agriculture and allied activities 

has declined from 64.5 percent in 

1999-2000 to 61.7 percent in 2004-2005 

(NSS 1993-94, 1999-00, 2004-05). However, 

over all trend reveals that in Uttarakhand, 

since 1993-94, shift of workers 

from agricultural sector to other activities 

has been very slow and participation in 

agricultural activities is still high, agricultural 

workforce accounting for 62.0 percent. 

This is in contrast to falling growth 

rate of agriculture sector. 

In Uttarakhand, therefore, because of 

impeded growth of non- agricultural sector 

workers did not have any other option 

other than subsistence agriculture or to 

migrate-out in search of jobs, indicating a 

job less growth. 

Structure of Economy 

Development disparities and benefits are 

reflected in the forms of per capita income, 

below poverty line population and 

sectoral growth. Since the post reforms, 

In Uttarakhand female work 

participation is declining, whereas 

male participation is increasing 

the Indian economy has been growing at 

about six percent per annum. With the 

adoption of globalization, the socio-economic 

gap between rich and poor and also 

between developed and backward regions 

has increased. Between rich and poor 

states, the extent of disparities which was 

125 percent by early 1970, escalated 

Figure 2: Male-Female Literacy Gap (2001) 

Figure 3: Percentage Married before 18 Years (2001) 

Percentage 

30 

25 

20 

15 

10 

5 

17.93 

23.65 

26.6 

Percentage 

60 

50 

40 

30 

20 

10 

10.1 

14.4 

18.8 

26 

40.5 

52.2 

Men 

Women 

0 

Himachal Uttarakhand U.P. 

0 

Himachal Uttarakhand U.P. 

Source: NFHS-3, 2005-06 Source: NFHS-3, 2005-06 


125


steeply to 200 percent towards the end of 

the nineties (Rao, 2005). This disparity 

creates socio-economic as well as demographic 

imbalances. 

Status of Economic Growth 

The trends in gross state domestic product 

(GSDP) shows that before the formation 

of Uttarakhand state i.e., between 1993-94 

to 1999-2000, the economy grew at the 

rate of 3.2 percent per annum, which was 

far below than the UP’s average of 4.7 

percent and Himachal’s average of 7.2 

percent (CSO, 2006). After its formation 

as a separate state the GSDP grew at the 

rate of 10.0 percent per annum (at factor 

cost at 1993-1994 constant prices) during 

the period 1999-2000 to 2004-2005. Since 

its formation the economy started moving 

towards a higher growth path, and the rate 

was far higher than the two neighboring 

states of Himachal (6.4 percent), UP (3.8 

percent), and all India average of six percent 

per annum. Similarly, during the 

same period, Uttarkhand’s per capita 

GDP grew from 1.3 percent per annum to 

a little above eight percent, almost double 

in comparison to its neighboring states 

and national average. 

However, it is very early to say whether 

such growth is sustainable, mainly because 

its base is not as strong as that of Himachal, 

who’s past growth rates have been very 

high and stable. 

Population BPL has declined in India 

but in some states poverty is not 

responsive to the SDP growth rate 

Figure 4: Population Below Poverty Line (2004-05) 

Percentage 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

Source: CSO, 2006 

10.7 

3.4 

40.8 

Sectoral Performance 

In Uttarakhand, the agriculture and allied 

activities, a mainstay of vast majority of 

population showed a deceleration. It declined 

from 2.33 percent per annum to 

1.81 percent during Uttarakhand’s pre 

and post formation, whereas in Himachal 

36.5 

33.4 

30.6 

Himachal Uttarakhand Uttar Pradesh 

Rural 

Urban 

the sector was growing at the rate of sixpercent 

in these activities (CSO, 2006). As 

was shown in previous section, agriculture 

formed the main sector of livelihood for 

the population of Uttarakhand, and with 

such low growth rate it is apparent that 

this sector could not sustain burden well, 

in turn leading to migratory decisions by 

the workers. 

Except agriculture and allied activities, 

all the sectors and sub-sectors showing 

high growth rates are partly due to the 

small base of these sectors in the past and 

partly due to role of administration and 

governance in the form of fiscal incentives 

given to private participation (Sabyasachi 

Kar, 2007; Mamgain and Mehta, 2006). In 

terms of segregation of sectors into primary, 

secondary and tertiary, the share of 

primary sector declined accompanied by 

increase in the share of secondary and 

tertiary sectors, with latter occupying a 

dominant status in case of all three states 

under comparison. 

Poverty Issues 

Over the period, population below poverty 

line (BPL) has declined in India but 

in some states poverty is not responsive 

to the SDP growth rate. Figure 4 shows 

BPL population for three states for both 

rural and urban areas. It therefore seems 

that in Uttarakhand efforts towards poverty 

reduction are not substantial and 

existing poverty is not responsive to the 

SDP growth. 

The growth trends of Uttarakhand and 

Himachal shed light on the missing link 

between attaining high GDP and realizing 

the benefits of the same; manifested 

from a slow achievement of demographic 

goals, and educational and employment 

status. Further, BPL population indicates 

a gap in achieving comprehensive level of 



Figure 5(a): Uttarakhand: Out-Migration 

Figure 5(b): Uttarakhand: In-Migration 

35 

80 

33 

33.06 

70 

60 

69.045 

Percentage 

31 

29 

27 

25 

Delhi 

30.45 

Uttar Pradesh 

Percentage 

50 

40 

30 

20 

10 

0 

5.18 

4.8 

2.553 

Uttar Pradesh Bihar Punjab Delhi 

development in Uttarakhand in comparison 

to Himachal. 

Migration Trends 

Migration is an economic phenomenon, 

occurring against regionalization of development 

and growth. As long as disparities 

in development among the regions exist, 

the process of migration will continue 

(Bilsborrow, 1987; Bora, 1996, 2008; 

Cashin and Sahay, 1996; Kuznets, 1966; 

Harris and Todaro; 1970). 

In India between 1991 and 2001 the 

proportion of migrant population to total 

population increased from 27.9 to 

30.6 percent, an increase of 2.5 percent. 

The increasing mobility was recorded 

among intra-district and inter-state migrants; 

though a rise in the inter-district 

migration was negligible at the national 

level, it was higher in two hill states 

(Census 2001). 

Inter-District Migration 

In Uttarakhand, out of thirteen districts 

the net effect of migration was negative in 

seven districts i.e., more people were going 

to other districts than coming in these 

seven districts. In the process these districts 

lost 4-12 percent of their population. 

The population gain through in-migration 

was especially high in Nainital, Dehra 

Dun, Udham Singh Nagar and Haridwar 

(Census, 1991, 2001) and major losers 

were Pithoragarh, Almora, Tehri Garhwal, 

Garhwal and Bageshwar. In Himachal of 

the twelve districts, the net effect of migration 

was negative in six districts. Three 

districts namely Shimla, Kullu and Solan 

observed higher net-in migration. Compared 

to Himachal state, the proportion 

of net loss in each sending district has 

been significantly higher in Uttarakhand, 

implying a high level of inter-district variations 

in the level of development in Ut- 


127


Figure 6(a): Himachal Pradesh: Out-Migration 

Figure 6(b): Himachal Pradesh: In-Migration 

Percentage 

40 

35 

30 

25 

20 

15 

10 

5 

36.59 

17.35 

11.67 

Percentage 

45 

40 

35 

30 

25 

20 

15 

10 

5 

42.142 

14.354 

8.017 

0 

0 

Punjab Delhi Haryana 

Punjab Uttar Pradesh Haryana 

In comparisons to pull factors, push 

factors dominates in influencing outmigration 

from the hill states 

tarakhand, the state is not homogenous 

and higher incidence of inequality of income, 

assets and development persists. 

Inter-State Migration 

As per 2001 census, from Uttarakhand a 

total of 9.27 lakhs persons or 10.93 percent 

of the total population out-migrated 

to other states and from other states 8.67 

lakhs or 10.21 percent in-migrated. The 

volume of out-migration is larger, but the 

volume of in-migration is also very large. 

Overall, Uttarakhand lost 0.72 percent of 

its population. 

In Himachal, in-migration from other 

states and out-migration to other states is 

far below than Uttarakhand. A total of 

3.44 lakhs or 5.70 percent of the total 

population enumerated as in-migrants 

and 4.51 lakhs persons or 7.41 percent 

out-migrated, implying net-migration (inout) 

of 1.7 percent of the total population, 

Himachal was losing more population. 

Figures 5(a), 5(b), 6(a) and 6 (b) shows 

the major states of ‘out’ and ‘in’ migration, 

from and into these states. 

The extent of out-migration and destination 

reveal that persons from these two 

hill states have migrated to areas where 

the level of industrialization, urbanization 

and agricultural development is higher. 

Our analyses reveal that in comparisons 

to pull factors, push factors have dominated 

in influencing out-migration from 

the hill states. ‘In search of work/employment’ 

has been a major cause of migration 

for the inter-state and inter-district migrants 

in both the state. 

Conclusion 

The paper looks at a comparative difference 

in the changes taking place in the 

socio-economic and demographic aspects 

of the two hill states. The study reveals 

that the developmental activities whether 

economic, social and demographic, tend 

to expand fast in those states/regions that 

have past advantages in development. This 

is true among the states as well as within 

the state/regions, in respect of all these 

issues. As is clear from the trends, 

Himachal has been outperforming Uttarakhand, 

with the latter facing greater 

disparities in development. With the result, 

the volume of migration and its intensity 

is higher in the state of Uttarakhand. 

State policies and its positive role therefore 

form an essential mediator in bringing 

down disparities and imbalances. In the 

context of out-migration, push factors 

must be kept in mind while evaluating the 

impact of policies and programmes such 

as National Rural Employment Guarantee 

Act (NREGA), which play an important 

role in combating migration, especially 

from rural to urban regions. 





• Bhattacharya and S. Sakthivel, (2003). 

“Regional Growth and Disparity in India: 

A Comparison of Pre and Post- Reform 

Decades”, Discussion Paper No. 

74/ 2003, IEG, Delhi. 

• Bilsborrow, R., (1987). “Population 

pressures and Agricultural Development 

in Developing Countries: a Conceptual 

Framework and Recent Evidence”, 

World Development, 15(2), 

183-203. 

• Bora, R. S., (2008). “Arresting Outmigration: 

Some Policy Considerations 

for Uttaranchal”, in Growth, Equity, 

Environment and Population: Economic 

and Sociological Perspectives, 

Edited by Kanchan Chopra and C. H. 

Hanumantha Rao, Studies in Economic 

and Social Development No. 69, 

IEG, Delhi, SAGE. 

• -------- (1996). Himalayan Migration: A 

Study of the Hill Region of Uttar 

Pradesh, IEG, Delhi, SAGE. 

• Cashin P. and R. Sahay, (1996). “International 

Migration, Center-State 

Grants, and Economic Growth in the 

States of India”, IMF Staff Papers, 

Vol.43, No. 1, March. 

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Provisional Population Totals, Paper 1 

of 2001. Census of India 2001, D Series, 

Electronic data, http;//www.censusindia. 

net 

• Census of India, (1991). Series I, India, 

Part V-D Series, Migration Tables, Vol- 

India, States and Union Territories. 

• GoI, (2006). Family Welfare Statistics 

in India, Ministry of Health and Family 

Welfare, New Delhi. 

• -------- (2000). National Population 

Policy, Department of Family Welfare, 

Ministry of Health and Family Welfare, 

New Delhi. 

• Harris, I. R. and Todaro, M. P., (1970). 

“Migration Unemployment and Development: 

A Two Sector Analysis”, 

American Economic Review, 60 (1). 

• Kar, S., (2007). “Inclusive Growth in 

Hilly Regions: Priorities for the Uttarakhand 

Economy”, Working Paper Series 

No. E/281, IEG, Delhi. 

• Kuznets, S., (1966). Modern Economic 

Growth, New Haven, C T: Yale University 

Press. 

• Mamgain, Rajendra P. and Singh, M. B., 

(2006). “Employment and Income in 

Uttaranchal: Trends and Policy Issues”, 

The Indian Journal of Labour Economics, 

Vol. 49, No. 3, pp. 475-495. 

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(2005-06). India, Himachal and Uttarakhand, 

International Institute for Population 

Sciences, Mumbai. 

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Special Bulletin on Maternal Mortality 

in India, 2004-05, SRS, GoI. 

• Rao, M. Govinda, (2005). “State-Level 

Fiscal Reforms in India”, in India’s 

Emerging Economy: Performance and 

Prospects in the 1990s and Beyond, ed. 

Kaushik Basu, pp.115-149, OUP, New 

Delhi. 

• University Grants Commission Annual 

Report, (2005-06), India. 

• www.indiastat.com 

(R. S. BORA is Associate Professor at the 

Institute of Economic Growth Delh, a Ph.D. 

in Economics. He has been working since 

completion of his doctoral thesis and completed 

various research projects related variously 

to: Governance and Development 

Performance of Indian States; Demographic 

Trends and Development Performance; Missing 

Issues in the Imbalance of Child Sex 

Ratio; A Study on the Use of Ultra Sound 

Machine by Registered Ultra Sound Clinics 

in Delhi; Bonded Labour in India; Japanese 

Investment in India; Spread of AIDS in India, 

and currently Co-coordinating an ICSSR 

Research Project entitled Migrant Workers In 

the Informal Sector: A Study of Conditions 

of Work, Health Status and Social Security; 

and also jointly co-coordinating a study on 

the Mapping of Medical Health Facilities and 

the Mechanism of Recording and Reporting 

Data for strengthening Health Management 

Information System (HMIS) and Operationalizing 

the Mother and Child Tracking System 

(MCTS) in the National Capital Territory of 

Delhi. He has written a book on Himalayan 

Migration: a Study of the Hill Region of Uttar 

Pradesh, SAGE publications. He has published 

around fifteen papers in the peer reviewed 

Journals. 

SWATI VIRMANI is a PhD Economics 

student at University of Manchester, UK. She 

has also worked at the Institute of Economic 

Growth as Research Analyst for Prof. Bina 

Agarwal and Dr. R.S. Bora, during 2009-10. 

Swati holds a Masters’ in Economics from 

Delhi School of Economics, India (2007-09). 

She wrote and presented the following research 

papers: “Forecasting Agriculture 

Product of India, 1971–2001”, “Gender 

Wage Discrimination in Indian Urban Labour 

Market (2004)”, “Governance and 

Development Performance of Indian States” 

and “Indentured Women: Bound or Free?”. 

During May-July 2008, Swati worked as Co- 

Researcher at the Oakland University, 

Michigan (USA), carrying out data collection, 

literature review and analysis on Residential 

Mortgage Refinancing in United 

States over 1980-2007 interval. 





129


Social Security 

of Social Groups 

in Assam 

High number of SC, ST and OBC class people, lower growth rate, lower 

urbanization rate, uneven distribution pattern of income amongst different class of 

people in different region, lower income security, lower per capita income, higher 

rate of illness, insuffi cient health security — the case of Social Security in Assam 


S AFETY NETS 

Assam, a strategic border 

state of India, witnessed the 

influx of migrants since the 

British period from then 

East Bengal, now Bangladesh. The influx 

was largely engineered by the British, 

given the economic rationale of cheap 

labour that the migrants provided for the 

sprawling tea estates in Assam. However, 

this issue of migration assumed political 

and communal overtones after independence, 

and continues to be an issue of 

concern. Assam the land of various social 

groups, are one of the eastern most state 

in entire north-eastern region. Various 

social groups are living in different condition 

over a period of time. Paper largely, 

focuses on the issues of social security 

related to various social groups. It divided 

into three parts to understand the socioeconomic 

conditions of the social groups. 

In first part it analyse the main types of 

housing. Secondly, the sources of income 

and thirdly, the health conditions particularly 

illness and source of treatments. 

As per the Assam state is concerned it 

is divided into 27 administrative districts 

viz. Tinsukia, Dibrugarh, Sibsagar, Dhemaji, 

Jorhat, Lakhimpur, Golaghat, Sonitpur, 

Karbi Anglong, Nagaon, Marigaon, 

Darrang, Kamrup Rural, Nalbari, Barprta, 

Bogaigaon, Goalpara, Kokrajhar, 

Dhubri, North Cachar Hills, Cachar, 

Hailakandi, Karimganj, Kamrup Metropolitan, 

Baksa, Chirang and Udalguri. 

More than half of these districts were 

carved out during 80s and 90s from original 

viz. Lakhimpur, Jorhat, Karbi Anglong, 

Darrang, Nagaon, Kamrup, Goalpara, 

North Cachar and Cachar districts, 

delineated by the British. Earlier, during 

70s, Dibrugarh was separated out from 

original Lakhimpur district. These districts 

are further sub-divided into 49 Subdivisions 

or Mohkuma. 1 Every district is 

administered from a district head quarter 

with the office of the District Collector, 

District Magistrate, and Office of the 

District Panchayat and usually with a District 

Court. The districts are delineated on 

the basis of the features such as the rivers, 

hills, forests, etc and majority of the 

newly constituted districts are sub-divisions 

of the earlier districts. The local 

governance system is organised under the 

Jila-parishad (District Panchayat) for a 

district, Panchayats for group of or individual 

rural areas and under the urban 

local bodies for the towns and cities. Presently 

there are 2489 village panchayats 

covering 26247 villages in Assam. The 

town-committee or nagar-xomiti for small 

towns, municipal board or pouro-xobha 

for medium towns and Municipal Corporation 

or pouro-nigom for the cities consists 

of the urban local bodies. For the 

revenue purposes, the districts are divided 

into revenue circles and mouzas; for the 

development projects, the districts are 

divided into 219 development-blocks and 

for law and order these are divided into 

206 police stations or thana 2 . 

As per the census of India 2001, total 

population of Assam is 26.66 million with 

4.91 million households. Higher population 

concentration was recorded in the 

districts of Kamrup, Naogaon, Sonitpur, 

Barpeta, Dhubri, Darang and Cachar 3 . 

The Technical Group on Population Projection 

constituted by the National Commission 

on Population (India) in 2006 has 

estimated Assam’s population at 28.67 

million in 2006 and has estimated it to be 

30.57 million by 2011, 34.18 million by 

2021 and 35.60 million by 2026. In 2001, 

the census recorded literacy in Assam at 

63.30 percent with male literacy at 71.30 

and female at 54.60 percents. Urbaniza- 

Chunnu Prasad 

Centre for Political Studies, 

Jawaharlal Nehru University, 

New Delhi 

Gautam Kr. Das 

Centre for the Study of Regional 

Development, Jawaharlal Nehru 

University, New Delhi 


131


tion rate was recorded at 12.90 percent. 

Growth of population in Assam has experienced 

a very high trajectory since the 

mid-decades of the 20 th century. Population 

grew steadily from 3.29 million in 

1901 to 6.70 million in 1941, while during 

the later decades it has increased unprecedentedly 

to 14.63 million in 1971 and 

22.41 million in 1991 to reach the present 

level. Particularly, the growth in the western 

and southern districts of Assam was 

of extreme high in nature. 

The per capita income of Assam was 

higher than the national average soon 

after Indian Independence. But it has 

slipped since, and the difference has become 

larger since liberalization of the 

Indian economy in the 1980s. Economy of 

Assam today represents a unique juxtaposition 

of backwardness amidst plenty. 

Growth rate of Assam’s income has not 

kept pace with that of India’s during the 

Post-British Era; differences increased 

rapidly since 1970s. While the Indian 

economy grew at six percent per annum 

over the period of 1981 to 2000, the same 

of Assam’s grew only by 3.3 percent. In the 

Sixth Plan period Assam experienced a 

negative growth rate of 3.78 percent 

against a growth rate of six percent as 

compare to national level and the gapes 

become more widened further after 1991 

in post-liberalised era 4 . 

Amongst mineral resources, oil takes 

the top place. Oil was first struck more 

than one hundred years ago and the oil 

well of Digboi and other areas are a major 

source of fuel for not only the north-east 

but for the country as a whole. The economy 

of Assam can be broadly divided into 

three sectors- Primary (agriculture, mining 

etc.), secondary (manufacturing) and tertiary 

(services like electricity, water, trade, fi- 

The per capita income of Assam was 

higher than the national average 

soon after Indian Independence 

nance, banking, telecommunication etc). 

In the current decade, according to 

recent analysis, Assam’s economy is 

showing signs of improvement. In the 

Table A: Assam's GDP 

Year 

State’s GDP 

1980 25,160 

1985 56,730 

1990 106,210 

1995 194,110 

2000 314,760 

Source: Ministry of Statistics and Programme Implementation with 

figures in millions of Indian Rupees (1980-2000) 

year 2001-2002, the economy grew in 

1993-94 constant prices at 4.5 percent, 

falling to 3.4 percent in the next financial 

year. During 2003-2004 and 2004-2005, in 

the same constant prices, the economy 

grew more satisfactorily at 5.5 and 5.3 

percent respectively. The advanced estimates 

placed the growth rate for the year 

2005-2006 at above six percent. In the 

1950s, soon after the independence, per 

capita income in Assam was little higher 

than that in India; it is much lower today. 

In the year 2000-2001, per capita income 

in Assam was Rs. 6,157 at constant prices 

(1993-94) and INR 10,198 at current 

prices, which is almost 40 percent lower 

than that in India. According to the recent 

estimates, per capita income in Assam 

at 1993-94 constant prices has 

reached INR 6520 in 2003-2004 and INR 

6756 in 2004-2005, which is still much 

lower than the same of India. Table A 


S AFETY NETS 

mainly shows the trend of gross domestic 

product of Assam at market prices which 

is estimated by the Ministry of Statistics 

and Programme Implementation in figures 

in millions of Indian Rupees 5 . 

Assam’s gross domestic product for 

2004 is estimated at $13 billion in current 

prices. The average annual growth rate of 

Table B : Number of Households in Assam Belongs to Different 

Social Groups 

ST SC OBC Total Population 

351069 258372 615394 2496341 

Source: NSSO 59 th Round, Schedule 33, Vista-1, Block-3, Level-2 

Table C : Number of Households in Assam Belongs to Three Major 

Region Belongs to Different Social Groups 

Source: NSSO 59 th Round, Schedule 33, Visit-1, Block-3, Level-2 


Region-1 106492 128166 348715 1054887 

Region-2 129524 1302206 266502 1326224 

Region-3 115053 0 178 115231 

Total 351069 258372 615395 2496342 

Table D: Dwelling of SC, ST and OBC Population 


Owned 

Region-1 105620 123897 323237 975666 

Region-2 129320 123191 243073 1277829 

Region-3 115053 0 178 115231 

349993 247088 566488 2368726 

Hired 

Region-1 0 0 1160 1160 

Region-2 204 1397 9645 17365 

Region-3 0 0 0 0 

204 1397 10805 17365 

No Dwelling Unit 

Region-1 0 0 1547 2938 

Region-2 0 0 0 0 

Region-3 0 0 0 0 

0 0 1547 2938 

Others 

Region-1 873 4270 22771 75125 

Region-2 0 5619 13784 31031 

Region-3 0 0 0 0 

873 9889 36555 106156 

Source: NSSO 59 th Round, Schedule 33, Visit-1, Block-3, Level-2 

agriculture, which was only 2.6 percent 

per annum over 1980s, has unfortunately 

fallen to 1.6 percent in the 1990s. Manufacturing 

sector has shown some improvement 

in the 1990s with a growth rate of 3.4 

percent per annum than 2.4 percent in the 

1980s. Since past five decades, the tertiary 

sector has registered the highest growth 

rates than the primary and secondary sectors, 

which even have slowed down in the 

1990s than in 1980s 6 . 

Social Groups (Households) 

Social groups are mainly divided into 

three categories Scheduled Castes (SC), 

Scheduled Tribes (ST) and Other Backward 

Castes (OBC), constitutes a total 

population of 12,24,835 out of 24,96,341. 

Again these social groups are divided 

into three major regions (region 1, 2 & 

3) respectively. 

Housing is vital for human survival and 

therefore essential for socio-economic 

development. The need for improved 

housing is most acutely felt among the 

rural poor. As part of the efforts to meet 

the housing needs of the rural poor, Indira 

Awaas Yojana was started in May 1985 as 

a sub-scheme of Jawahar Rozgar Yojana. 

From 1 st January, 1996 it is being implemented 

as an independent scheme. The 

objective of Indira Awaas Yojana is primarily 

to help construction of dwelling units 

and up-gradation of existing unserviceable 

kutcha houses of members of SC/ST, freed 

bounded labourers and also OBC rural 

poor below poverty line by providing them 

with grant-in-aid. 

Income Security 

The study is made on the data of National 

Sample Survey Organization’s (NSSO) 

59 th round of unit level data of level 2 and 

block 3. The 59 th round made a survey on 

the situation assessment of the farmer in 

2003. The study mainly tries to discuss 

about the social conditions of the social 

groups with reference to the sources of 

income and health conditions. According 

to the NSSO Assam has broadly divided 

into three regions, eastern plains, western 

plains and hilly regions. Eastern plains 


133


Table E: Sources of Income of Household of Social Groups (%) During 2003 

ST SC OBC OTHERS 

Cultivation 

All Assam 17.86 8.56 23.91 49.66 

Eastern Plain 5.30 8.98 36.85 38.87 

Western Plain 11.36 9.14 17.33 62.17 

Hills 100 0 0.00 0 

Farming other than Cultivation 

All Assam 0.26 0.00 45.45 54.30 

Eastern plain 0.00 0.00 47.51 52.49 

Western plain 0.46 0.00 43.80 55.74 

Hills 0.00 0.00 0.00 0 

Other Agricultural Activity 

All Assam 0.00 29.66 50.54 19.80 

Eastern plain 0.00 51.08 31.62 17.29 

Western plain 0.00 14.04 64.33 21.63 

Hills 0.00 0.00 0.00 0.00 

Wage/Salaried Employment 

All Assam 5.65 11.00 29.49 53.86 

Eastern plain 2.53 12.20 27.16 58.11 

Western plain 6.60 9.90 33.13 50.37 

Hills 97.50 0.00 2.50 0.00 

Non-agricultural Enterprises 

All Assam 9.44 25.84 16.20 48.52 

Eastern plain 1.60 38.31 22.77 37.33 

Western plain 4.06 18.39 12.63 64.92 

Hills 100 0.00 0.00 0.00 

Pension 

All Assam 11.46 0.00 26.22 62.32 

Eastern plain 0.00 0.00 0.00 0.00 

Western plain 12.63 0.00 28.91 58.46 

Hills 0.00 0.00 0.00 0.00 

Remittances 

All Assam 

Eastern plain 18.59 40.92 5.23 35.26 

Western plain 0.00 0.00 0.00 0.00 

Hills 9.62 26.70 2.71 60.98 

Others 

All Assam 6.56 1.35 16.86 75.26 

Eastern plain 

Western plain 2.73 2.40 1.54 93.32 

Hills 100 0.00 0.00 0.00 

Source: NSSO 59 th round, SCHEDULE, 33, visit 1, Block-3 Level-2 


S AFETY NETS 

included 10 districts, Nogaon, Sanitpur, 

Lakhimpur, Dhemeji, Tinsikua, Dibrugrah, 

Sibsagar, Jorhat, Golaghat and 

Cacher. Western plain included 11 districts, 

they are Kokrajhar, Dhubri, Goalpara, 

Bongaigaon, Barpeta, Kamrup, 

Nalbari, Darrang, Marigaon, Karimganj, 

and Hailakandi, and finally the Hilly region 

includes 2 districts of Karbi Anlong 

and North Cachar hill. Hilly regions are 

totally dominated by the ST populations. 

Others two are mixed of all social groups 

(SC/ST/OBC/Others). 

The study is made largely in the rural 

sector of Assam. It is divided into two 

parts. In its first part it explained the 

sources of incomes of the various social 

groups and in second parts it included the 

health profile of Assam in the three regions 

simultaneously. In the present condition 

it mainly discuss about the sources 

of income of major social groups in the 

three regions of Assam. According to 

NSSO 59 th round the sources of income 

are divided into nine parts for example 

cultivations, farming other than cultivations, 

others agricultural activity, wage/ 

salaried employment, non agricultural 

enterprise, pension, remittances, interest 

and dividend, and others. 

While after data extraction it has been 

found that there is not any income from 

the interest and dividend so it is excluded 

from the table. Table E shows that in Assam 

the income from the cultivations of 

OBC is much higher about 23.91 percent 

as compared to the 8.56 percent and 17.86 

percent respectively from SC and ST. 

Across region, in eastern plain the income 

from cultivations of OBC is also higher as 

compared to the other two regions. Second 

position is occupied by the ST household 

in eastern plain. Income of the SC 

from the cultivations is high in the western 

region as compared to others region. But 

in hilly regions the incomes from the cultivations 

is totally dominated by the ST 

population. The main reason is due to the 

hilly region and totally domination by the 

tribal populations. This implies that in 

eastern plain OBC and the ST household 

has sufficient land for cultivation but, SC 

household do not have sufficient land for 

the cultivation that is why income from 

the cultivation of SC household is very 

low. On the other hand incomes from the 

cultivation of the OBC household is more 

than any other social groups which means 

OBC household has more land to cultivate. 

There is no income indication of the 

SC household from the farming others 

then the cultivations, but in case of OBC 

household the incomes from the same is 

much high, where of the ST household 

result is marginal. 

Generally, more capital is required for 

the starting of farming. Data indicates 

that the income of OBC household from 

the farming other than cultivation is more 

as compare to SC and ST. Similarly, there 

is no income from the same of the SC 

household, which directly indicates that 

SC household has not any sufficient fund 

to start a firm or any kind of business. On 

the other hand income from the others 

agricultural activity in Assam of OBC 

household is greater than other social 

groups. If we analyse region wise Table 

(E) shows that, in Western plain the incomes 

of the OBC from the others agricultural 

activity is higher than Eastern 

plain, but the case is reverse in case of SC 

population. In case of ST population the 

income from the same sources is completely 

negative. 

In case of the income from the wage 

and salaries of OBC household is more 

than double of the SC population and 

more than triple of the ST populations. In 

Assam 29.49 percent of OBC household 

earn their income from the wage and the 

salaried employment, but for the SC and 


135


ST, result is 11 percent and 5.65 percent 

respectively. Within Assam western plain 

the income of the OBC from the same 

was 33.13 percent as compared to the 

27.16 percent of the eastern plain. Similarly, 

6.60 percent of ST household has 

earned their income from the wage and 

salaries in eastern region as compared to 

the 2.53 percent in the western region. 

Here also the case is reverse for the SC 

household comparatively. This means 

that there is employment scarcity for the 

SC and ST household as compared to the 

OBC household. 

The incomes from the non agricultural 

enterprises of SC household are far 

greater than any other groups. Across 

regions the income from the non agricultural 

enterprise of SC household are very 

high in the eastern plain as compared to 

the western plain. The case is also same 

for the OBC household. But in hilly region 

the income from the non agricultural 

enterprise of the ST household is same in 

percentage. The main reason behind this 

Table F: Percent of Family Members Fell Ill During the Last 365 Days 

ST SC OBC OTHER 

Eastern plain 10.70 11.90 39.18 38.21 

Western plain 8.71 8.07 19.77 63.45 

Hills 99.67 0.00 0.33 0.00 

All Assam 12.89 9.29 26.75 51.07 


is hilly regions and majority of the household 

are of ST population. Hence, it has the SC household in both the eastern 

The incomes from the remittances of 

been is proved that SC households do not plain and in hilly region it is high as compared 

to the other two social groups but 

have sufficient land for cultivation and 

this is the reason why they move to the in case of the OBC household the income 

non agricultural enterprise to earn their from the remittances is even lower than 

income. In eastern plain 12.63 percent the ST populations. The income from the 

and 28.91 percent of ST and OBC household 

respectively earn their incomes from ern plain 40.92 percent as compared to 

remittances of SC is very high in the East- 

the pensions. This directly indicates that the hilly region. In cases of ST household 

the former generation of members of the this may be due to the reason that in eastern 

plain the members of SC and ST 

OBC household was engaged in the government 

sector job. But there is not any household migrate from the home for 

income of SC household from the pension. 

Study proves that not any former urban areas. But the income of OBC 

works in others area and this could be in 

generation members of the SC household household from remittances is very low 

are engaged in the government job. because, they are either cultivating in 

their home in their own land or engage in 

the others activity like farming. SC household 

in hilly region is low and due to their 

poor economic condition may comes out 

from the regions and moved to others 

area for work. Hence, remittances of SC 

household in hilly region become high. 

From the overall study it has been analysed 

that the income from the farming 

and cultivation of OBC household is more 

in the eastern plain as compared to the 

western plain. Similarly the income from 

the other agricultural activity and the 

wage and salaries of OBC in western plain 

is greater than the eastern plain. Similarly 

the income from almost all sources of incomes 

of the ST household is more in the 

hilly region and this is so because the main 

region is hilly and totally dominated by the

S AFETY NETS 

Table G:Households Various Types of Treatments for Illness (in %) 

Community Health Center/Govt Hospital 

Private Clinic/Doctor 

Eastern plain Western plain Hilly Region All Assam Eastern plain Western plain Hilly Region All Assam 

ST 12.06 12.72 100.00 14.58 9.58 7.91 100.00 9.16 

SC 14.34 10.14 0.00 11.57 11.03 8.74 

OBC 35.02 20.24 0.00 25.65 37.78 21.21 

OTHER 38.59 56.89 0.00 48.21 41.61 62.14 

0 9.78 

0 28.92 

0 52.14 

Sub Center/Dispensary 

Primary Health Center 

Eastern plain Western plain Hilly Region All Assam Eastern plain Western plain Hilly Region All Assam 

ST 5.25 9.66 100 12.89 12.49 9.02 100 19.18 

SC 26.93 6.85 0.00 11.10 9.09 7.50 0.00 7.20 

OBC 46.02 20.67 0.00 25.47 41.94 15.68 0.00 21.73 

OTHER 21.80 62.82 0.00 50.54 36.48 67.80 0.00 51.89 

Traditional Treatment Other Treatment No Treatment 

Eastern 

plain 

Western 

plain 

Hilly 

Region 

All 

Assam 

Eastern 

plain 

Western 

plain 

Hilly 

Region 

All 

Assam 

Eastern 

plain 

Western 

plain 

Hilly 

Region 

All 

Assam 

ST 16.42 1.07 100.00 12.51 7.92 9.02 0.00 8.75 7.88 0.00 0.00 5.42 

SC 6.22 12.67 0.00 8.46 20.57 3.48 0.00 7.61 8.73 0.00 0.00 6.00 

OBC 35.31 22.35 0.00 29.81 36.05 6.46 0.00 13.61 47.21 49.27 0.00 47.86 

OTHER 42.06 63.92 0.00 49.22 35.46 81.04 0.00 70.02 36.18 50.73 0.00 40.72 

ST population also the ownership of lands 

are under the ST household. The incomes 

from almost all given sources of the SC 

households are more in the eastern plain 

as compared to the eastern plain. This 

indicates that the conditions of SC household 

in the western plain are better than 

the western plain comparatively. 

Health Security 

Table F shows, that in Assam 26.75 percent 

of household family members of the 

OBC’s are fall illness in last 365 days 

from the date of survey, which is followed 

by ST household family members 

and next to it is SC household family 

members. Among the regions in eastern 

plain the 11.90 percent and 39.18 percent 

SC and OBC family members respectively 

fall ill in more as compared to the 

other two regions. But in case of ST in 

hilly region 10.70 percent family members 

fall ill respectively. 

Hence, it can be said that people of 

western plains are more conscious about 

their health. Relating to the issue of 

treatment NSSO has broadly divided six 

type of treatment for illness. They are sub 

center/dispensary, primary health center, 

community health center/government 

hospital, public clinic/doctor, traditional 

treatment, and others treatment. Table G 

discusses about the various types of treatment 

taken by the household among 

different social groups in Assam. In Assam 

25.47 percent of OBC households go 

to the sub center/dispensary for treatment. 

In case of SC and ST it is 11.10 

percent and 12.89 percent respectively. 

Among the region, in eastern plains the 

SC and the OBC household go to the sub 

center/dispensary which is higher than 

the western plain 7 . 

Similarly the OBC household in the 

eastern plain goes more to the primary 

health center then the western plain. 

Moreover, the ST household go to the 

private health center in the entire region 

which is higher than the SC household. In 

region wise SC and OBC household of the 

western plain goes to primary health 

center is higher than the eastern plains. 

Into the community health center/government 

hospital the SC and the OBC household 

goes more in western plain as compared 

to the eastern plain. In case of 

western plains SC and OBC household 

goes to the private clinic/doctor more as 

compared to the eastern plain. But among 

the SC ST and OBC, OBC household 


137


largely goes to the private clinic/doctor for 

their treatment. This means those OBC 

households are richer as compared to the 

others to social groups. 

In western plain only 6.22 percent of SC 

household go to the Traditional treatment 

but the result is very high for the OBC and 

the ST household. Similarly, in the eastern 

plain 1.07 percent of the ST household go 

to their traditional treatment as compared 

to the 12.67 of SC household and 22.35 

percent of the OBC household. 

In all the cases it has been found that 

except hilly region in both the western 

plain and the eastern plain the OBC 

household takes all types of treatment and 

is higher as compared to the western 

plain. The main reason behind this is because 

of the fall in illness of the OBC 

household in eastern plain is more than 

the western plain. In hilly region the same 

Table H: Household Not Able to Take Treatment Due to Financial 

Constrain (in %) 


ST SC OBC OTHERS 

Eastern Plain 0 0 78.62 21.38 

Western Plain 0 20.03 50.55 29.43 

Hilly region 0 0 0 0 

All Assam 0 19.22 51.68 29.1 

percent of the ST population goes to the 

treatment for their illness and it is so because 

this region is largely dominated by 

the ST populations. 

In Assam 47.86 percent of OBC household 

are not able to take the treatment for 

their family members. On the other hand 

six percent of SC and 5.42 percent of the 

ST household are not able take the treatment 

for their family members. Across the 

region percentage of OBC household are 

not able to take treatment for their family 

member in western plain as compared 

to the eastern plain shown in table H. 

In eastern plain number of household 

of OBC are not able to take treatment 

which is more than the western plain. 

There are various reason for not able to 

take the treatment out of their financial 

constrain. Total of 19.22 percent of SC and 

51.55 percent of OBC household are not 

able to take their treatment because of the 

financial constrain. Similarly in eastern 

plain 78.62 percent of the OBC household 

are not able to take the treatment because 

of the same reason as compared to the 

50.55 percent of the western plain. In the 

eastern plain 20.03 percent of SC household 

are again not able to take the treatment 

because of their financial problem. 

This is mainly because the financial conditions 

of OBC in the eastern plain are very 

poor and on the other hand the financial 

conditions of the SC in the western plain 

are comparatively poor. 

Coming to the part of employment 

opportunities, Assam largely failed to 

generate employment opportunities for 

the educated youth. This is the reason 

why its youth shifting their choices towards 

insurgent groups like ULFA, 

SULFA, BLT etc. where they are at least 

getting money to fill their families’ stomach. 

This is so because of the states 

wrong policy and heavy corruption in the 

part of policy implementation. No doubt 

with the help of the Government of In- 


S AFETY NETS 

dia the Employment Assurance Scheme 

(EAS) was launched on 2 nd October, 

1993 to identify and implement various 

schemes for employment generation and 

in this 1778 backward blocks identified 

in the state. The blocks selected were in 

the drought prone areas, desert areas, 

tribal areas and hilly areas. Later, the 

scheme was extended to the remaining 

blocks of the state in phased manner. At 

present, the scheme is being implemented 

in all the rural blocks of the 

state. The programme has been restructured 

from 1 st April, 1999. As its name 

suggests, the primary objective of the 

EAS is to provide gainful employment 

during the lean agricultural season in 

manual work to all able bodied adults in 

rural areas who are in need and desirous 

of work, but can not find it. The work 

may be either on farm or on other allied 

operations or on the normal plan/noplan 

works during such a period. The 

secondary objective is the creation of 

community, social and economic assets 

for sustained employment and development. 

What ever the case may be in reality 

this could not work effectively due to 

heavy corruption and discrimination 

with the social groups in the region. All 

the schemes and opportunities remain 

in paper and expired due to delay. 

Conclusion 

In conclusion one can draw an argument 

by saying that except cultivation the incomes 

of the SC household in western 

plain are lower than the eastern plain. Due 

to the financial problem most of the SC 

household are not able to take treatment 

for their illness. From the analysis it can be 

said that the condition of SC household of 

eastern plain is far better than western 

plain. Since, the income from the cultivation 

of SC household as compared to others 

social groups is very low, hence it could 

be said that SC household do not have sufficient 

land to cultivate. Moreover, OBC 

household has more land as compared to 

ST and SC household. Similarly the condition 

of ST household in hilly region is far 

better than two regions. Among all the 

social groups the sources of income of 

OBC household is more as compared to 

other social groups and due to this their 

social condition is far better as compared 

to other social groups in the regions. 

As compare to OBC, SC and ST are 

worse of in social sector. Under Congress 

regime the state always had an opportunity 

to be stable and had also chance to do 

much more what people expected to do, 

but it failed to do anything positive in social 

sector for social groups. Various data 

shows that, how the State Government 

even after many decades of stable rule did 

not improved more as compare to other 

states of India. The State Government has 

to work seriously to improve the conditions 

of social groups mainly keeping social security 

in her forefront. There is also need 

of special attention in the field of health, 

housing, drinking water, education and 

employment sectors considerably. 


1 

Revenue Department, Government of 

Assam, http://assamgov.nic.in 

2 

Directorate of Information and Public 

Relations, Government of Assam 

3 

Information of the districts of Assam, 

Government of Assam, http://assamgov. 

nic.in 

4 

See more information from, http:// 

en.wikipedia.org 

5 

Ministry of Statistics and Programme 

Implementation with figures in millions 

of Indian Rupees (1980-2000) 

6 

Directorate of Economics and Statics, 

Assam and Central Statistical Organization, 

Government of India 

7 

NSSO 59 th round, SCHEDULE, 33, 

visit 1, Block-3 Level-2 

(DR. CHUNNU PRASAD trained as a 

Social Scientist and Socio-Political Activist. 

He is associated with the Centre for Political 

Studies, Jawaharlal Nehru University New 

Delhi. His interest area is Migration, Refugees, 

Human Rights, Dalits, Tribals, Ethnicity, 

Movements, Religion and Sexuality. He 

has contributed more then Thirty Five articles 

in referred journals and in edited books. 

He worked with various Government and 

Non-Government Organizations viz. 

NATRSS, ISSR, IIDS, and CPS/JNU New 

Delhi over a period of time. He has presented 

numbers of papers in national and 

international conferences/seminars/workshops 

in India and abroad. He has been 

awarded young Social Science award in 

collaboration with IDRC, Canada and India 

Social Science Research on the area 

related to social inclusion in India’s Northeast. 

Apart from it he visited many countries 

like Ethiopia, Senegal, and Nepal. 

MR. GAUTAM KR. DAS trained as an 

economist. He is with the Centre for the 

Study of Regional Development, Jawaharlal 

Nehru University, New Delhi. His area of 

interest is Public Distribution System, Social 

Security of Social Groups, Rural and Urban 

Development, Regional Development of 

India’s northeast. He did his Graduation 

and Master of Arts from Gauhati University, 

Assam and Master of Philosophy from 

Jawaharlal Nehru University, New Delhi. 





139


Understanding Political 

Economy of Food Crisis in Niger 

Though the reason behind the food crisis in Niger was natural and climatic — 

natural disadvantages, population growth, and drought and desert locust — but 

man-made factor too played a signifi cant role 

Jaideep Rajak 

Centre for West Asian and 

African Studies, School of 

International Studies, Jawaharlal 

Nehru University, New Delhi 

The Food and Agricultural Organization 

(FAO) projection for 

the year 2010 reveals increasing 

distinctively of food security 

circumstances of Sub-Saharan Africa. It 

shows that compared with other regions 

food supplies per-capita were lowest in Sub- 

Saharan Africa. The number of malnourished 

in other developing countries is expected 

to record a fall by 20 percent from 

1990-92 to 2010 but in Sub-Saharan Africa 

there shall be reverse situation as it is expected 

to rise by 23 percent. FAO also estimated 

that 30 percent population of Sub- 

Saharan Africa would be under-nourished 

by the year 2010, while no other region of 

the world will have more than 12 percent of 

its population under-nourished. 

Niger, the Sahelian country in the Sub- 

Saharan African region, suits itself as a case 

study in the understanding of the political 

economy of food crisis. Niger is ranked by 


P OLITICAL HUNGER 

the United Nations Development Programme 

(UNDP) as the poorest country in 

the world and second lowest in Human 

Development Index (HDI). On an average, 

63 percent of populations of Niger are poor 

and 34 percent live in extreme poverty. The 

total population of the country was 13.5 

million at mid 2004, out of which, 3.2 million 

were suffering from acute food crisis. 

Niger is a land-locked country located in 

western Africa with hot and dry climate that 

affects its socio-economic structure. Agriculture 

and livestock is the mainstay of Niger 

economy. However, the perpetual 

drought cycle, desertification, high population 

growth rate and lack of infrastructure 

have aggravated the agricultural sector. 

Therefore, agriculture is done only at subsistence 

level. The other major source of the 

economy is the uranium export. But the 

international market of this mineral is 

highly precarious, making informal trade 

and seasonal migration common practices. 

In such a situation, the shortage of food has 

Drought cycle, desertification, 

high population growth rate have 

aggravated the agricultural sector 

made Niger highly vulnerable. 

Food crisis in independent Niger can be 

traced back to the Sahelian drought of 

1968-74. It was estimated that six million 

people were in the grip of malnutrition in 

the region. In 1974, the official harvest figure 

in Niger was 800,000 tons, an estimated 

300,000 tons below the requirement. This 

led to civil disorder due to the deteriorating 

political and economic condition of Niger. 

Therefore, in 1974 the chief of staff of the 

armed force Lt. Col. Seyni Kountche overthrew 

Hamani Diori. A Council Military 

Supreme (CMS) was established with the 

mandate to attain food self-sufficiency and 

distribute food fairly among the people of 

Niger. The welfare measures to improve 

living standard were named societe de developpement 

[society of development]. 

However, with state based resources 

shrinking, the ‘societe de developpement’ 

proved a failure. As a result, a new strategy 

of governance in national economic policy 

was introduced. This policy shift consists of 

initiatives and reforms promoted by donor 

countries and international financial institutions 

which aim to address food deficit 

through the market. The reforms mandated 

economic liberalization and limited government 

intervention in markets. It negated the 

emphasis on self sufficiency and supply 

management as way to secure food supplies 

through Officies des Produits Vivriers du 

Niger [Office of the food product of Niger] 

(OPVN), a government agency in charge of 

the regulation of cereal market. Further, 

Niger economy being crisis-ridden, it is estimated 

that half of Niger budget is dependent 

on external aid. 

The decade of 1990s, however, was 

marked by political turmoil due to government 

austerity budget. This led to 

social unrest, strike of union des travailleurs 

du Niger [Union of the traders of 

Niger] (USTN) and political agitation that 

compounded food insecurity resulting in 

successive coup de tat. It was estimated 

by an enquiry of early warning system 

that there was a cereal deficit of 152,000 

tons in 1997 exposing over a quarter of 

the population to famine, which led to 30 

percent rise in the price of main cereals. 

Moreover, food aid was stalled as response 

by the international community 

and donor agencies to the political crisis, 

worsening the situation further. 

Finally, democratic elected government 

was constituted with Mamadou Tandja as 

President and Hama Amadou of Mouvement 

Nationale de la Societe de Developpement 

[National movement of the society 

of development] (MNSD) as Prime Minister 

in 1999, with high expectation. But, in 

2004, the combined onslaught of drought 

and desert locust in the country’s agropastoral 

areas devastated agricultural 

production. This resulted in a loss of cereal 

production for an estimated 15 percent 

compared to the average annual 

production over the past five years which 

led to the food crisis in 2005. The Niger 

government, however, stubbornly refused 

to admit that the country faces a famine 

that made it extremely difficult for external 

agencies to provide timely assistance. This 

led to widespread anti-government demonstrations, 

social unrest and two unsuccessful 

motions of no-confidence against 


141


the government. Finally, in 2007, Parliament 

voted out the Hama Amadou government 

over a corruption scandal. 

The scope of the study is significant as 

there is no extensive research work on the 

topic and is expected to fill up the knowledge 

gap. Moreover, viewing the food crisis 

from the perspective of man made causes in 

its political and economic ambit, would give 

an added dimension to the research. Therefore, 

the study of political economy of food 

crisis in Niger is of immense importance. 

The food crisis in the Sub-Saharan Sahelian 

Africa, particularly the crisis faced by Niger 

is not only nature-caused but also manmade. 

Hence, the political economy of the 

food crisis in Niger is being researched with 

the objectives like, the understand the nature 

and causes of food crisis in Niger; Examining 

and differentiate domestic and 

external factors of food crisis in Niger; 

Analyzing human causes of the food crisis 

and arrive at a frame of political economy 

of the crisis; Understanding the impact of 

food crisis in political and economic spheres 

and so on so forth. 

Methodologically, study carried on employing 

the historical, theoretical and analytical 

framework with qualitative and 

quantitative methods drawing information 

from a wide range of available primary and 

secondary sources. The primary sources 

data collected from government documents 

of Niger particularly Ministry of 

Agriculture, Ministry of Commerce, Ministry 

of Human Resource Development, 

Ministry of Planning, Ministry of Finance 

and Ministry of External affairs, Parliament 

debates in Niger, Archives of French 

administration, UN documents, FAO-Estimates 

and IMF-Niger: Statistical Annex 

and the secondary sources of data drawn 

from books, articles, research journals, 

newspapers, magazines and websites. The 

relevant data and reports of the Non- 

Governmental Organizations (NGOs) also 

used for this paper. 

Theoretical Understanding of 

Food Crisis 

Theorizing food crisis enhances critical insight 

to understand the problem of availability 

and accessibility of food. Various approaches 

available in this regard can be 

broadly classified into two schools; nature 

focused and society focused. The difference 

between the two schools lies on the focus of 

factors rather than of coverage. The nature 

focused view has been the traditionally 

dominant one; while society focused view 

has broken the traditional understanding. 

In the society focused view, the roles of 

political economy and politics are taken 

into account. In brief, this school concentrates 

on the man-made factors which form 

the focus of the study. 

Gakov (1987) gives an overview of agriculture 

situation in Africa. In his book, he 

argues that the agricultural crisis has its 

profound roots in the integration of African 

economies into the world capitalist system, 

which is essentially oriented towards the 

world market and not towards the feeding 

of the local people. It further argued that it 

is only the African and extra African energies 

that would endeavor to make the African 

people the true master of their destiny 

through reorganization of society that 

Agri crisis has its profound roots in 

the integration of African economies 

into the world capitalist system 

would ensure them all their rights and freedom. 

Sen (1982a) in another way deals with 

the causes of famine for which the author 

had examined the Great Bengal Famine 

(1943), Ethiopian Famine (1972-74) and 

Sahel (1968-73). Sen argued that food availability 

per head is a poor indicator of starvation 

and in this regard put forward the Entitlement 

approach. The Entitlement 

approach concentrates on the ability of 

people to command food through the legal 

means available in the society. To the author, 

it is the collapse of entitlement that 

creates famines. The book has been the 

base for understanding man made food 

crisis, i.e., other than the naturally caused. 

Amin (1973) analyses the economies of 

nine French-speaking countries of West 



Africa as well as Ghana and Gambia to 

understand the reason behind the underdevelopment. 

He viewed that an irresistible 

pressure for the maintenance of colonial 

structure and policies has produced foreign 

domination and underdevelopment. Patnaik 

(1992) examines the effects that market 

has on the availability of basic food 

grains for cultivation by studying the experiences 

of India, Africa and the Latin America. 

Accordingly, there has been differential 

decline of all types of crop production per 

head, but not overall decline. This differential 

production is due to the superior purchasing 

power of the metropolitan centres. 

This article enables one to understand the 

matrix of two highly unequal segments of 

varying weight. Eicher (1982) argues that 

African food crisis stems from a seamless 

web of political, technical and structural 

constraints which are products of colonial 

surplus extraction strategies, misguided 

developmental plans and priorities of independent 

African states, and faulty advice 

from expatriate planning advisers. It is, 

therefore, argued that unless steps are 

taken to solve the basic constraints many 

African states may end up as permanent 

food aid clients of the US, the European 

Economic Community (EEC) and Japan. 

Political Economy of Niger 

The available literature explains the development 

strategy initiated by Niger government 

in the post-colonial period. The 

strategy that emerged from the colonial era 

is based on revenue generated by groundnut 

exports, sporadic livestock sales, French 

subsidies and modest amount of foreign aid. 

Out of these, groundnut and livestock sales 

could be directly influenced by the policies 

of the Niger government. Under the state 

led initiative, the revenues from groundnut 

continued to provide the most important 

source of finance for economic expansion. 

In 1970s, however, the emphasis shifted 

from groundnut to uranium due to external 

political influences. But state failed to sustain 

economic growth because within a 

short period the demand for uranium 

dropped sharply, combined with the decline 

in agricultural production due to unfavorable 

weather conditions. As the state was 

gripped under the crisis, structural adjustment 

programme was introduced with 

market to play vital role in the political 

economy of Niger. The economic reform 

programme was initiated with the aim to 

accelerate economic growth to bring development 

and eradicate poverty. 

Fuglestad (1983) gives a historical account 

of the economic and political development 

in Niger based on primary and 

secondary sources and also on archival 

sources, i.e., the archives of the French 

administration. The book deals with the 

complexity and above all the ambiguity of 

the colonial period. It also examines and 

compares the various regimes and ethnic 

groups in Niger to highlight the evolutionary 

trends of her history. Furthermore, it 

viewed the dynamics of French colonial 

rule and its relation with Niger especially 

in the context of social, political and economic 

spheres. Robinson (1991) examines 

the period from economic boom to stagnation 

in Niger. It has been argued that the 

military regime, in order to counter the 

decay of government effectiveness posed 

by the onset of a crisis in the political 


143


economy of development has opted for 

corporatist solution. This gave rise to new 

form of political participation channelized 

through structures that reinforce behaviour 

in accordance with classical corporatist 

principles. Graybeal and Picard (1991) 

analyses the evolving political system 

within the framework of decolonization 

and institutional development in Niger. It 

examined ineffectiveness of state managed 

economic expansion that led to the introduction 

of stabilization programme supported 

by International Monetary Fund 

(IMF). However, it has been argued that 

state sphere of responsibility should be 

broadened as the International Monetary 

Fund, the World Bank and bilateral donors 

have shown only limited sensitivity to the 

people of Niger. Hart (1982) emphasizes 

the principal forces in West African agricultural 

development, namely, the state, 

the market and the capital. He argued that 

political forms determine agricultural development 

and stagnation. Therefore, he 

argues that in West Africa, it requires political 

evolution of a kind that could sustain 

economic development. But, in the present 

scenario, it seems almost sacrilege to contemplate. 

Ibrahim (1994) focuses on the 

post-colonial Niger characterized by authoritarian 

exclusion of large segments of 

society from participation in the political 

process on ethnic lines that led to the subimperialism 

of Zerma/Songhay group. 

Though, in 1990s transition from ethnically 

based authoritarian military regime to 

civilian democratically elected pluralist 

regime has taken place, yet it has to address 

number of important political and economic 

issues, which could destabilize the 

democratization process. 

Food Crisis in Niger 

The root of Niger’s food crisis can be 

traced back to the colonial period. The 

economic policy of French had direct impact 

on the food situation of Niger. During 

the French rule, the expansion of cash crop 

cultivation and heavy taxes provoked chain 

reaction that had far-reaching consequences 

making life difficult for the people of 

Niger. The situation, however, did not 

improve even after the attainment of independence. 

Niger has been experiencing 

food crises at regular intervals. In this regard, 

mention can be made of 1968-74, 

1984, late 1990s and 2005. Though the 

decline in food production has been attributed 

to the drought and locust invasion, 

the affordability to access food has been a 

cause of concern in Niger. 

The study by Mousseau and Mittal (2006) 

examines the prevalence of food crisis in 

Niger giving valuable insight to the whole 

Sahel region along with solution that would 

help to break this cycle. It reviews the roles 

of the Niger government, international 

communities, market and the outcome of 

international economic reforms and development 

policies in Niger. The authors argue 

that the food crisis is a case of ‘free market 

famine’ and advocate for the public service 

based food security requiring regulation to 

protect the domestic market by providing 

sufficient income for farmers and consumers 

of low income. Clay (2005) analyses the 

causes of food crisis of 2005. He argued that 

the early warning system of food crisis is 

ineffective due to internal and external situations. 

Keenan (2005) focuses on the role 

of Mamadou Tandja, the President of Niger 

in mitigating the food crisis. It criticized the 

role of Mamadou who made it extremely 

difficult for external agencies to provide 

timely assistance. Furthermore, the food 

situation became more serious with the 

embezzlement of foreign aid by country’s 

political and commercial elite. Miles (2005) 

analyses the changing dynamics of Niger- 

Nigeria relationships and its impact on the 

food security of Niger. Kennan (2004) looks 

at America’s interventionist strategy in the 

Sahelian Sahara, notably its Pan Sahel Initiative 

that is popularly known as Trans- 



Sahara counter terrorism initiative. He examines 

the weak and dictatorial 

governments of the region — Chad, Niger, 

Mali and Mauritania in relation to the 

United States strategy in Africa. By analyzing 

the United States strategy in Sahel, it 

has been argued that US Pan Sahel Initiative 

has direct bearing on chronic food 

shortage, as it has banned alternate sources 

of livelihood which the nomads opt at the 

time of drought such as tourism, state subsidies 

and to lesser scale smuggling and 

banditry. This article is useful in examining 

the external constraints in achieving food 

security in Sahel. 

A section of the literature on Sahelian 

food crisis particularly in Niger, has taken 

the climatic factor as the root cause. 

Though, the existing literature is giving 

valuable insight into the food crisis, yet it is 

necessary to evolve a broader understanding 

on the food crisis in Niger poignantly its 

political economy. 

The food crisis has been a major problem 

blanketing the entire Sahel region of 

Sub-Saharan Africa. It refers to the situation 

that exists when people lack secure 

access to sufficient amount of safe and 

nutritious food for normal development 

and an active and healthy life. It is increasingly 

threatening the stability of the region. 

Particularly, mention may be made of Niger 

as it has been struggling to establish 

stable democratic government. Ostensibly, 

the existing political fragility is due to the 

persistent food crisis. Even after the transition 

from military and autocratic rule to 

democratic form of government, it has 

been facing a stiff challenge due to the 

shortage of food. This has led consistently 

to widespread anti-government demonstration 

and motion of no-confidence that 

had blocked the overall development process. 

Thus, the food crisis and the resultant 

political instability impeded the development 

process in Niger. 

With the attainment of independence, 

Niger adopted strong state intervention in 

all sectors of economy. A number of dedicated 

institutional structures were created 

for the promotion of the agrarian sector, 

with the overall objective of achieving national 

food self-sufficiency. But due to unprecedented 

levels of poverty and spiraling 

debt, the Nigerien government abandoned 

the principle of national food self-sufficiency. 

The structural adjustment programs 

implemented since the early 1980’s, mandated 

the withdrawal of State intervention 

in all economic and social sectors. The 

logic being that the private sector would 

take over the productive sectors with the 

supposition that private sector would yield 

Niger continues to suffer from 

chronic hunger and was plunged into 

a one of its worst food crisis in 2005 

economic growth that would pull the country 

out of poverty. Yet, Niger continues to 

suffer from chronic hunger and was plunged 

into a one of its worst food crisis in 2005. 

Conclusion 

Food crisis in Niger is attributed to natural 

disadvantages, population growth, and 

drought and desert locust. Drought and 

desert locust have become so inextricably 

linked with Niger’s food crisis in both popular 

and academic analyses that the relationships 

between the two is taken almost axiomatically 

as cause and effect. Social 

scientists too have taken it for granted that 

the causes of Niger’s food crisis are natural 

and climatic. There is substantial literature 

on social, economic and political after-effects 

and on the prospects of post-drought 

social, economic and ecological reconstruction. 

Thus, Niger’s food crisis share one 

basic premise as it treats the issue of diminishing 

food supply primarily in terms of 

natural calamity. However, apart from it, 

man made factor too plays a very significant 

role. In 2005, the food deficits at the national 

level represent 7.5 percent even after 

taking into account commercial imports. 

Though the figures of deficit did not seem 

enormous at the national level, more than 

three million people were extremely vulnerable 

to food insecurity. This fact gives an 

impetus to understand the food crisis in 

Niger in different perspective than merely 

to treat it as caused by the vagaries of nature. 

Therefore, the proposed study would 

intend to include political and economic 

factors to broaden the understanding of the 

causes of the current predicament. It is only 

by an enlarged understanding of the crisis 

in its political and economic perspectives 

that the policies of development for the 

food starved Niger could be augmented and 

substantially improved. In the course of 

research hypotheses drawn to see the structural 

adjustment programme intensified the 

food crisis in Niger. The food crisis in Niger 

is attributed to the fall in purchasing power 

i.e. entitlement or exchange entitlement. 

The exclusion and non-representation on 

ethnic lines in politics has aggravated the 

problem of food and the dependence on 

export income, informal trading and seasonal 

migration has left landlocked Niger 

vulnerable to instability. 

(The views expressed in the write-up are personal 




145


Satiation in the 

Solow Model 

An analysis of Schumacher measurement index 

where consumers optimize their welfare under 

satiation preferences which can be applied in 

conjunction with the Solow growth model 

David Hudgins 

Department of Economics, 

University of Oklahoma 

Modern economic growth 

theory began with 

Solow’s (1956) paper, 

A Contribution to the 

Theory of Economic Growth, which developed 

the standard neoclassical growth 

model. Mankiw, Romer, and Weil (1992) 

augmented and empirically tested the 

Solow model in their paper, A Contribution 

to the Empirics of Economic Growth. 

The goal of this analysis is to complete 

the trilogy with a contribution to the purpose 

of economic growth by developing 

an index that defines and evaluates economic 

growth when nations are characterized 

by satiation. The biggest problem 

with the neoclassical Solow growth 

model is addressed only by Schumacher 

(1973). This problem is that growth in 

capital and the wrong types of technology 

actually diminishes the quality of both 

human life and of nature. The Solow 

model incorrectly defines economic 

growth and it offers absolutely no reason 

as to why it would be desirable. 

The Schumacher Index 

for Consumers and Workers 

The purpose of economic growth is to 

improve the total life experience of the 

individual participants. Based on this 

objective, the only true definition of eco- 


S OLOW MODEL 

Growth in capital and the wrong 

technology diminishes the quality 

of both human life and of nature 

nomic growth becomes clear. Economic 

growth is an improvement in the overall 

welfare of the participants of an economy 

through the allocation and uses of its 

economic resources. Economic growth 

does not mean the growth of the total 

consumption of goods or the growth of 

income. This can be stated directly in 

equation (1), where represents the new 

Schumacher index of life experience for a 

representative individual and is the instantaneous 

life experience at any given 

moment of time t. 

(1) 

The instantaneous life experience is 

function of the person’s consumption 

welfare index (CWI) of material output, 

the leisure welfare index (LWI), and the 

level of the personal development index 

(D). 

The Solow model defines the economic 

growth rate to be the growth rate in per 

capita income, which creates two prob- 


147


lems. Firstly, higher income growth is not 

synonymous with higher growth in total 

personal welfare; thus, economic growth 

is incorrectly defined. Secondly, the 

model does not state any purpose for having 

a higher or lower growth rate. The 

Ramsey model, as well as other standard 

models, fills in this gap by defining consumer 

welfare with a utility function that 

is strictly increasing in total consumption 

(Romer, 2005). This approach has permeated 

the field of economics. In these 

models, consumers maximize their welfare 

by maximizing present and discounted 

future consumption. 

Schumacher (1973, p. 54) recognized 

this basic problem with the model and 

stated that “the aim should be to obtain 

the maximum of human well-being with 

the minimum of consumption.” He advocated 

a pragmatic, non-quantitative approach 

that completely abandoned the 

Figure 1: 

CWI 

Solow model offers much promise, 

as long as it is placed on a firm 

foundation that has purpose 

1 

0.9 

0.8 

0.7 

0.6 

0.5 

0.4 

0.3 

0.2 

0.1 

0 

0 5 10 15 20 25 30 35 

neoclassical growth model. However, the 

Solow model still offers much promise, as 

long as it is placed on a firm foundation 

that has purpose and applicability. The 

model needs to be re-formulated utilizing 

the above specifications regarding the human 

welfare resulting from consumption. 

A consumption welfare index (CWI) that 

characterizes this is the following modified 

gamma function, where C denotes an 

individual’s consumption of output. 

(2) 

Figure 1 shows a graph of this function 

where Q1 = 0.026722, Q2 = 20, and Q3 

= 0.2. The value of CWI will be 0 when 

consumption is 0, since an individual must 

consume some amount of output to live. 

It will reach a maximum satiation point, 

or bliss point, once consumption reaches 

a level that is above subsistence and just 

large enough to allow the individual to 

give the maximum focus toward meaningful 

pursuits. 

The term Q1 can be chosen so that the 

maximum value of the index is 1, as in this 

example. The function will decline and 

eventually approach Q1 > 0 as consumption 

increases beyond the optimal value, 

and will equal Q1 in the limit as consumption 

approaches infinity. This reflects 

human behavior where excessive attachment 

to hedonistic consumption actually 

detracts from the quality of life. 

Satiated preferences are essential to 

C 


S OLOW MODEL 

modeling growth. Economic theory 

has typically assumed monotonic 

preferences where hedonistic consumers 

always prefer more to less, 

and has viewed satiation as a theoretical 

anomaly with little practical 

use. Varian (2010, p. 45) even stated 

that “Economics would not be a very 

interesting subject in a world where 

everyone was satiated in their consumption 

of every good.” This view 

is misguided. 

The interest of economics is to 

provide guidance for individuals to 

find balance between the bliss point 

combination of consumption and 

abstention for all goods. Due to the 

negative environmental and health 

effects of overproduction, it could 

be argued that the U.S. is currently 

producing and consuming beyond 

its bliss point level. For example, summary example, the application to 

ten states in the U.S. currently have an India and other developing nations is 

obesity rate of over 29 percent (Robert obvious. Any development agenda that is 

Wood Johnson Annual Report, 2010). This based upon measuring progress by Western 

idealized consumption maximization 

shows evidence that welfare would be 

enhanced with a smaller per capita consumption. 

Although this is only one brief growth, rather than generating true eco- 

is doomed to lead to immiserizing 

Figure 2: 

1.0 

0.9 

0.8 

0.7 

0.6 

LWI 0.5 

0.4 

0.3 

0.2 

0.1 

0.0 

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 

L 

nomic and social progress. 

The neoclassical growth model 

also ignores leisure. After their basic 

material needs are met, consumers 

will place an increasing value on leisure 

and smaller value on consumption. 

Although this backward-bending 

labor supply function appears in 

some models, it is absent from the 

Solow model. 

The term leisure needs to be redefined. 

It does not mean that an individual 

is only gaining leisure-derived 

welfare while resting and doing nothing. 

It is incorrect to view a worker 

who is enjoying leisure, and not 

working for a given unit of time, as 

not being productive. On the contrary, 

it means that an individual is 

equally productive when allocating 

time to leisure, because productivity 

is defined as the amount life experience 

that the individual gains per unit of 

time, where the objective is to maximize 

this experience. Leisure does not equal 

rest in this usage; rather, it is defined as 

any time not spent during the production 

process of economic goods. 

The leisure welfare index (LWI) is not 

the inverse of the time spent on labor, 

however. Schumacher (1973) points out 

that each individual can be assumed to 

gain some satisfaction from providing labor 

in the production of the economic 

output. This labor actually enhances an 

individual’s welfare by providing a complementary 

experience up to a certain 

level of hours. The optimal labor-to-leisure 

ratio is not zero, although it is presumably 

less than one. Otherwise, consumers 

would prefer to spend more hours 

of a day working than pursuing leisure. 

Let L represent the percentage of that 

time spent on working to produce eco- 


149


nomic output, so that (1 – L) represents 

the percentage of that time spent on leisure. 

A leisure welfare index, LWI, that 

captures a person’s preferences can be 

expressed as follows. 

(3) 

The maximum value for the LWI index 

will occur at LWI(v) = 1. Presumably, v 

< 1/3, since a person would optimally 

work less than an eight-hour workday (1/3 

of a 24-hour day). Figure 2 shows the index 

values where v = 1/6, where individuals 

maximize their welfare by working an 

average of four hours out of every 24- 

hour day. 

How much of economic growth actually 

represents improvement in life experience? 

For Schumacher, this was the primary 

question. What the previous models 

essentially treat as progress is almost the 

antithesis of development. When a lesser 

developed country becomes more attached 

to consumption, and substitutes its 

citizens’ focus from personal goals toward 

pure consumption, this actually represents 

reduced life experience, rather than its 

enhancement. Increased income does not 

equal progress, and the standard by which 

the model measures consumer welfare 

must account for this. 

The final input into the consumer welfare 

function is the personal development 

index, D, which is given by the following 

expression. 

(4) 

It is a measure of the quality of individual 

experiences. This will depend in 

part on the individual’s cumulative level 

of education and training, which is denoted 

by H, and in part on the combination 

of physical consumption and leisure 

to produce levels of life experience, 

which form a multiplicative interaction. 

The H variable could be measured by 

various schemes, but higher values represent 

a higher quality and quantity of 

training, and could also include a measure 

at the aggregated country level that 

increases with greater physical and emotional 

fitness. 

This Schumacher-Solow index discussed 

here tacitly addresses the environmental 

dilemma. Since the individual and 

collective national welfare function penalizes 

consumption that occurs beyond the 

level that maximizes life experience, the 

use of resources will be held in check. As 

long as the optimal value for resource usage 

is less than the rate of regeneration 

for renewable resources, the entire system 

will be sustainable. 

Each of the three indices above can now 

be used in equation (1) to form the full 

Schumacher objective function, where 0 ≤ 

CWI, LWI ≤ 1. If the functional form of Q 

is Cobb-Douglas, then the objective function 

in equation (1) becomes 

(5) 

Substituting equations (2), (3), and (4) 

into (5) yields the following, where life 

experience is a function of labor (L), con- 

This Schumacher-Solow index 

discussed here tacitly addresses 

the environmental dilemma 

sumption (C), and the education and 

health index (H). 

(6) 

Equation (6) can also be used for the aggregate 

economy by using the variables 

consumption per human contribution unit 

(c) and education per human contribution 

unit (h), instead of consumption (C) and 

education (H). 

Satiation must be included in population 

growth. Labor growth in the neoclassical 

model creates two major problems. 

Firstly, the growth in the labor force is 

not exogenous, since the decisions regarding 

reproduction and labor force 

participation are determined by the level 

of development and income. More importantly, 

there is no penalty in the Solow 

model for continuous population growth. 

A common problem with developing 

countries on a finite globe is excessive 

population growth. 

The labor force index N can be written 

analogously to figure 1 and equation (2), 

where P is the total population. 

(7) 

In this case, (L P) is the amount of labor 

that is supplied, and N is the contribution 

which that labor supply makes toward 

output production. Through this labor 

index, output itself has a built-in quality 

of life component since it is a function of 

N, rather than just total labor hours employed. 

Given a labor force participation 

rate of L, then all else constant, the shape 

of the graph would be similar to that in 

Figure 1, where the labor index N has an 

interior maximum. In this model, once 

the labor supply equals its optimal value, 

the optimal growth rate will be n = 0. 

This recognizes that the economy is 

not an open system, and addresses environmental 

concerns by limiting the population 

size and the output produced. It 

also helps to explain a crucial empirical 

failing of the Solow model, which suggests 

that highly skilled workers will move 

from developed countries to developing 

countries. Countries with populations 


S OLOW MODEL 

that exceed their optimum 

levels will be characterized 

by a lower quality of life. 

Therefore, the most skilled 

individuals will migrate toward 

the developed countries 

to improve their own 

life experience. 

Conclusion 

This Solow-Schumacher 

Growth Model has purpose 

and direction. Although 

these two individuals originally 

approached growth 

from seemingly dissonant 

perspectives, the proper 

synthesis of these two modes 

of analysis has indeed struck a resonant 

chord. The revised model allows nations 

to optimize consumption, rather than 

maximize it. Further research should 

empirically explore the desired target 

values and actual behavior. Each economy’s 

current average workweek, population, 

saving rates, education level, 

capital stock, and production levels 

should be assessed relative to the bliss 

point values that maximize the life experience. 

If a country’s average workweek 

is 42 hours, and the optimal workweek 

is 28 hours, and that the levels of economic 

production are 33% higher than 

the bliss level, then public policy should 

give incentives for decreases in hours 

worked, production, and per capita income. 

This would likely be the case for 

most “developed” economies. 

Schumacher (1973) observed that there 

seems to be an inverse relationship between 

countries’ real leisure time and the 

amount of machinery and wealth at its 

disposal. The whole concept of “developed” 

countries needs to be redefined. A 

country that is on either side of the optimal 

bliss point based on its per capita 

consumption, or leisure time, is “less-developed” 

than a country that is closer to 

the bliss point. Development in this context 

is no longer a linear progression of 

income, but rather a movement toward an 

optimal balance of the factors discussed 

above. Some of the “less-developed” 

countries under the current classification 

would become re-classified as being the 

more developed countries if their overall 

life-experience is rated highly, in spite of 

considerably lower per capita income, 

consumption, education, life expectancy, 

and other current benchmarks. The Human 

Development Index, for example, 

embeds the assumption that welfare is 

strictly increasing with GDP and life expectancy. 

The Schumacher index is superior 

since it considers quality as well as 

quantity and satiation. 



• Easterly, W., 2002. The elusive quest for 

growth: economists’ adventures and 

misadventures in the tropics 

(MIT Press, Cambridge, MA). 

• Mankiw N. G., Romer, D., Weil, 

D. N., 1992. A contribution to 

the empirics of economic 

growth. Quarterly Journal of 

Economics 107, 407 - 437. 

• Robert Wood Johnson Foundation, 

2010. F as in fat - how 

obesity threatens america’s future. 

Annual Report, 

http://www.rwjf.org/files/research 

/20100629fasinfatmainreport. 

pdf. 

• Romer, D., 2005. Advanced 

macroeconomics, 3 rd ed., (Mc- 

Graw-Hill , New York, NY). 

• Schumacher, E.F., 1973. Small is beautiful: 

economics as if people mattered, 

(Harper & Row, New York, NY). 

• Solow, R. M., 1956. A contribution to 

the theory of economic growth. Quarterly 

Journal of Economics 70, 65-94. 

• Varian, H.R., 2010. Intermediate microeconomics: 

a modern approach, 8 th 

ed. (Norton, New York, NY). 

(DAVID HUDGINS holds a B.S. degree in 

Business Administration from Oklahoma 

State University, where he received the Richard 

H. Leftwich Award in Economics in 

1988. He received an M.S. and Ph.D. degree 

in economics from the University of Illinois 

at Urbana-Champaign in 1993. He is currently 

a professor at the University of Oklahoma, 

where he teaches both graduate and 

undergraduate courses in economics and 

statistics. He has published research in various 

books and journals on various topics in 

international and applied economics. 





151

E NVIRONMENTAL E CONOMICS 

Regional Patterns 

in the Distribution 

of Polluting Units 

Liberal Industrial Climate and pushing aside 

environmental concerns for economic and industrial 

benefi ts are resulting in increasing industrial pollution 

— the case of Andhra Pradesh 

The role of the government in 

directing the economy is being 

increasingly eroded, due 

to greater emphasis being 

given to privatisation. The neo-classical 

assumption that “market forces” can help 

to achieve equilibrium, and that the private 

sector would be more efficient in 

achieving various economic goals, is leading 

to greater importance being given to 

it in the economic life of the country. 

However, various imperfections in the 

market lend doubt to the veracity of the 

perfect working of the market, and the 

“efficiency” of the private sector. This is 

all the more glaring in case of environmental 

effects. There is ample proof that 

market failure leads to environmental 

deterioration, and validates the greater 

need for stricter governmental control to 

protect the environment. Hence Planning 

cannot be subservient to privatisation in 

the case of environmental protection. 

In India, the liberal industrial climate 

has resulted in increasing industrial pollution, 

as environmental laws are subservient 

to economic and industrial laws. This 

is especially true in the case of the spatial 

distribution of polluting industries that 

tend to cluster in certain regions to take 

advantage of locational benefits. Unfortunately, 

the Govt also encourages such 

zones in the name of “Industrial parks” or 

“estates”. These estates are usually located 

outside the main residential area of 

a city and provided with good transportation 

access, including road and rail. Although 

they are set up outside urban areas 

to reduce the environmental and 

social impact within the city limits, the 

concentration of a large number of polluting 

units results in large scale pollution in 

these areas. Agglomeration of similar 

types of industries, though leading to ex- 

Prabha Panth 

Professor of Economics, 

O.U. P.G. College, Secunderabad 

Rahul A. Shastri 

Professor and Joint Director, National 

Akademi of Development, Hyderabad 


P OLLUTION PATTERN 


153


ternal economies of scale, also leads to 

external diseconomies in the form of pollution 

and environmental degradation. 

This leads to localised pollution and environmental 

problems that are spread unevenly 

over a State or country. 

In this paper we examine the regional 

patterns in the distribution of polluting 

industrial units in Andhra Pradesh. We 

also analyse the industrial pollution intensity 

and industrial pollution exposure 

rates over different districts and regions 

of AP. 

Industrial Composition 

Andhra Pradesh is the fifth largest in 

terms of area, and is among the top 10 

industrialised states in the country, having 

around 11.44% of total industrial units in 

India in 2007 (CSO website). The industrial 

development of AP accelerated during 

the period 1975-1985, when various 

Industrial Estates were formed under the 

aegis of the Andhra Pradesh Industrial 

Infrastructure Corporation Ltd. A variety 

of subsidies as well as Sales Tax exemptions 

were given to the industrial 

firms to encourage their growth. Under 

the Industrial Investment Promotion 

Industrial Investment Promotion 

Policy initiated incentives for the 

growth of the industrial sector 

Policy for 2005-2010, a slew of incentives 

for the growth of the industrial sector 

were further initiated. [GOAP, www.aponline.gov.in] 

The State specialises in Drugs and 

Pharmaceuticals, and Hyderabad-Medak 

region in AP is considered to be the “Bulk 

drugs capital” of the country. Pharmaceutical 

production from this region accounts 

for around one third of India’s total bulk 

drug production. In 2005, the Government 

of Andhra Pradesh developed the 

Jawaharlal Nehru Pharma City at Parwada 

near Visakhapatnam, to further 

promote the growth of the pharmaceutical 

industry. Further, (SEZ) Special Economic 

Zones are being promoted at Visakhapatnam 

and Kakinada, and leather 

and chemical parks are also on the anvil 

in these regions. [GOAP, www.aponline. 

gov.in] 

Industrial Pollution 

AP has attained global notoriety for its 

large scale industrial pollution [www. 

greenpeace.org]. AP is the third most polluted 

State in India, in terms of Industrial 

Pollution [CPCB Annual Report, 2004-05]. 

Out of the 24 industrial pollution hotspots 

identified by the CPCB in 1991, four were 

in AP [www.cpcb.nic.in]. In Dec 2009, a 

Comprehensive Environmental Pollution 

Index (CEPI) was formulated by the 

CPCB, in consultation with the Ministry 

of Environment & Forests, to identify 

highly polluted industrial clusters in India 

[www.cpcb.nic.in]. Out of 88 industrial 

areas or clusters selected for the study 

across the country, five are in AP 1 . 

In 2006-07, around 59% of large and 

medium scale Red industries in AP, belonging 

to the 17 most polluting categories, 

i.e. Red industries, were not compliant 

with pollution regulations. Also six 

percent of all hazardous wastes of India 

were produced in AP (495,985 tonnes/annum) 

in 2006-07 by 1,583 industrial units. 

The state also has the largest number of 

illegal dumpsites for hazardous wastes (40 

sites) in the country [CPCB Annual Report, 

2006-07]. 

However, the polluting industries are 

not equitably distributed, and there is 

grouping of different types of polluting 

categories of industries in different regions 

of AP. This leads to localised environmental 

impacts of industrial activity. 

Objective of the Study 

In this study we aim to estimate the ‘disparity 

index’ of location of different pollution 

categories of large and medium 

industries units in the districts and regions 



of AP, for the year 2007. We also attempt 

to find out the pollution intensity, and the 

pollution exposure rate, to gauge the 

relative area and population exposed to 

pollution from these industrial units. This 

will help to identify those regions in AP 

that are highly affected by industrial pollution. 

The study is based on the operating 

large and medium scale industries 

belonging to the three categories of pollution 

identified by the CPCB – Red, 

Orange and Green. Unfortunately pollution 

status of small scale industries is not 

available in the state. 

Methodology 

Sources of Data: Cross section data of 

8296 medium and large industrial units in 

AP for the month of September 2007 is 

taken from the online publications of the 

Andhra Pradesh Pollution Control Board 

(APPCB). The Board gives the number of 

operating, closed and sick industrial units 

in the three polluting categories (Red, 

Orange and Green) for 25 districts of AP, 

grouped under five Zones [www.appcb. 

org]. Data on other variables is taken from 

various CPCB and APPCB Annual reports, 

from the Government of AP website, 

www.aponline.gov.in and from CSO, 

ASI online publication. 

Statistical Methodology 

1) Disparity Index (DI): While there are 

many measures of regional disparities in 

location of industries (Hirschman-Herfindahl 

index, Entropy index, etc.) we use the 

Disparity Index. We use this index to show 

the differences in location of polluting 

industrial units across these five zones, as 

well as among the districts of AP: 

Region’s share in units of a certain 

pollution category 

DI = ------------------------------------------- 

Region’s share in total operating 

units 

This Index shows whether a region’s share 

in a particular polluting category of industries 

exceeds or is less than its share of 

total operating units in the State. For instance, 

if a region has 60% of all industrial 

units belonging to a particular polluting 

category (say Red), and it has 40% of 

the total industrial units in the State, then 

Table 1: Pollution categories and Working status of Large and Medium 

Industrial units of AP (September 2007) 

Red Orange Green Total working status 

Operating 2431 3430 814 6675 

Closed 427 530 83 1040 

Sick 182 364 35 581 

Total Pollution Category 3040 4324 932 8296 

Source: APPCB website 

its DI will be: 60/40 = 1.5 

2) Pollution Intensity (PI): One measure 

of concentration we put forth in this paper 

is based on the area of the region/district 

being studied. It measures the pollution 

intensity per thousand sq. km. This measure 

stems from the idea that the area over 

which industrial units are spread decides 

the ability of the region/district to ‘bear’ 

pollution. The larger the area, the greater 

the volume of air/water/land that can absorb 

pollutants. An area of one thousand 

square kilometres will have half the ability 

to carry pollutants than an area of two 

thousand square kilometres. We thus define 

PI as: 

Number of polluting units of 

different categories of a region 

Pollution 

intensity =------------------------------------ 

Area of the region 

3) Exposure Rate of Pollution (ERP): A 

second measure of pollution intensity is 

based upon population density. Between 

two regions with the same pollution intensity 

per thousand sq. km., the one with a 

larger population density will be more 

vulnerable to the effects of pollution. 

Population density is taken from the 2001 

census for this purpose. We call the measure 

the “Exposure Rate to Pollution”. 

(Regional Pollution intensity) 

× Regional pop’n density 

Exposure Rate 

of Pollution =--------------------------------- 

1000 sq km 

Data given by APPCB on the status of 

large and medium units in AP belonging 

to the three polluting categories in 2007 is 

given in Table 1. 

It can be seen that only 6675 units belonging 

to the three pollution categories 


155


were operating in AP in September 2007. 

We hence base our analysis only on these 

units, as the other units were non-functional 

at the time of our study. 

Analysis 

Share of Regions in Polluting Categories: 

For the purpose of analysis in this paper, 

we reclassify the districts in the state of 

Andhra Pradesh into five regions: Hyderabad 

and Ranga Reddy, other Telengana 

Districts, Rayalseema, North 

Coastal Andhra consisting of Vishakhapatnam, 

Vizianagaram and Srikakulam, 

and South Coastal Andhra region containing 

all the remaining districts of 

coastal Andhra. 

We first of all look into the distribution 

of the 6675 large and medium operating 

industrial units across the five regions of 

AP, in terms of polluting category in 2007. 

We first look at the share of each region 

in each polluting category of industry 

(Figure 1). 

We can see that: 

• Hyderabad (+RR) and other Telengana 

districts have the largest share in Red 

industries with 30-31% each of the total 

Red units in the state. South coastal 

Andhra follows with 21% of the Red 

units in the state. Rayalseema, and 

North Coastal Andhra come a distant 

third with 8-9% each of the Red units 

in the state. 

• South coastal Andhra has the largest 

share of Orange units in the state at 

38%. It is followed by Other Telengana 

which has nearly 22%. All the other 

three regions have 12-15% each of the 

Orange industries. 

• More than half of the Green industries 

are in Hyderabad (+ RR) and over ¼ 

in Other Telengana. Thus together, 

these two regions contain over ¾ of the 

Green industries. Rayalseema has a 

negligible share in Green industries, 

while south coastal Andhra has 14%. 

North coastal Andhra has a very small 

share of about six percent in the Green 

Figure 1: Share of Five Regions in Units of Three Polluting Categories 

60% Hyderabad & Ranga Reddy 

51.2% Rayalseema 

50% 

North Coastal 

40% 

30% 

20% 

10% 

0% 

26% 

2.8% 

14% 

5.6% 

12.3% 

21.8% 

Figure 2: Disparity Index of Polluting Category against Share in 

Operating Units of the State of Each Region 

13.1% 

3.00 

2.50 

2.00 

1.50 

1.00 

0.50 

0.00 

38.4% 

14.5% 

Telangana other 

South Coastal 

31% 

29.9% 

9.6% 

Green Op. Orange Op. Red Op. 

Disparity Index of Polluting Category against Level of Industrialisation 

2.55 

Green Op. 

Orange Op. 

Red Op. 

1.54 

1.19 

1.05 

0.82 

0.67 

0.71 

1.12 0.45 1.23 0.46 1.21 

0.87 

0.61 

0.24 

Hyderabad & Ranga 

Reddy 

Telangana other Rayalseema South Coastal North Coastal 

20.9% 

8.5% 

industries in the state. 

Disparity Index: Inter-Regional Disparities 

One limitation of looking at the share of 

each region in the total number of units is 

that the estimated shares may be affected 

by the total number of operating units in 

the region. For instance, Rayalseema may 

have a small share of Green units because 

it has much fewer industrial units than 

other regions of the state. Hence, it makes 

sense to correct for the number of operating 

units in each region. 

For this purpose, we develop a disparity 

index for the share of each region in units 

of each category. This index is the ratio of 

the region’s share in units of a certain 

category divided by its share in total operating 

units. 

If the index is equal to or nearly one, 

then the region’s share is on par with its 

share in operating units of the state. If it 

is more than one, then its’ share in that 

category exceeds its share in operating 

units of the state. If it is less than one, then 

its share in that category is less than its 

share in operating units of the state. 

It can be seen that the share of Hyderabad 

(+RR) Green industries is more than 

proportionate to its share in total industries 

in the state. Specifically, it is 2½ times 



its share in total units in the state. Its share 

in Red industries is 1½ times its share in 

total operating units in the state. However, 

its share in Orange industries is below 

par, at 0.6 times the share of operating 

units. Thus, Hyderabad (+RR) is far 

more Green and Red than due, and far 

less Orange than due to its share in the 

number of operating units of the state. 

In case of other Telengana districts, we 

find that their share in Green industries is 

on par with their share in total operating 

units of the state. The share in Red units 

is 1.2 times the share in operating units, 

while the share in Orange units is 0.9 

times the share in operating units. Other 

Telengana districts are mildly more Red 

than due, on par with Green, and mildly 

less Orange than is due to their share in 

operating units of the state. 

In case of Rayalseema, we find that 

their share in Orange units is 1.1 times 

their share in total operating units. However, 

the share in Red units is 0.8 times the 

share in operating units, while the share 

in Green units is only ¼ th its share in operating 

units in the state. Thus, Rayalseema 

is mildly more Orange than is due, and 

mildly less Red than due, and extremely 

less Green than is due to its share in operating 

units of the state. 

South and north coastal Andhra have 

similar attributes as can be seen from the 

figure and can be clubbed together for 

purpose of discussion. Their share in Orange 

units is 1.2 times their share in operating 

units. Their share in Red units is 

more than 2/3 rd their share in total operating 

units of the state, while their share in 

Green units is less than half their share in 

operating units of the state. Thus coastal 

Andhra is mildly more Orange than due, 

less Red than due, and extremely less 

Green than is due to their share in total 

Figure 3. Incidence of Units of a Given Category in Total Operating 

Units in that Region 

Green Op. Orange Op. Red Op. 

70% 

60% 

1177 units 1475 units 

50% 

40% 

30% 

20% 

10% 

0% 

26.0% 

26.6% 

47.4% 

Hyderabad & Ranga 

Reddy 

12.7% 

operating units of the state. 

44.2% 

43.1% 

3.3% 

Intra-regional Shares of Pollution Categories 

— Incidence of Polluting Units: 

We now look at the shares of different 

pollution categories within each region. 

This can be termed as Incidence of Polluting 

units, as it shows the distribution of 

polluting units within each region. 

Figure (3) shows that almost half of the 

1177 operating units in Hyderabad & RR 

are Red. The Orange and Green units are 

a quarter each of the total operating units 

in this region. Thus, Red and Orange units 

together account for ¾ of the operating 

units, while ¼ are Green. 

Rayalseema is the least industrialised. 

However, of the 681 operating units, Red 

units account for 33% of the total in Rayalseema. 

Orange industries account for 

63%, while Green industries account for 

a negligible proportion of the operating 

units. Thus, almost all industrial units in 

Rayalseema are polluting. 

South and north coastal Andhra regions 

display a striking similarity in the incidence 

of the three types of units. Of the 

total operating units, nearly 2/3 are from 

Orange industries. Over ¼ (26-27%) are 

Red. Only 5-6% of the total operating 

63.6% 

33.1% 

5.8% 

67.9% 

26.3% 27.7% 

6.0% 

66.3% 

581 units 1825 units 703 units 

Telangana other Rayalseema South Coastal North Coastal 

units are from Green industries. 

Exposure Rate to Pollution: 

The above analysis, although interesting, 

does not reveal those districts and regions 

that are more vulnerable to industrial 

pollution. 

As mentioned above, two measures of 

pollution vulnerability of regions/districts 

are adopted. 

1. Pollution Intensity: One measure is 

based on the area of the region/district 

being studied. It measures the pollution 

intensity per thousand sq. km. This 

measure stems from the idea that the 

area over which industrial units are 

spread decides the ability of the region/ 

district to ‘bear’ or ‘endure’ pollution. 

The larger the area, the greater the 

volume of air/water/land over which 

pollutants can be dispersed. An area of 

one thousand square kilometres will 

have half the ability to carry pollutants 

than an area of two thousand square 

kilometres 2 . 

Number of polluting units of 

different categories of a region 

Pollution 

intensity =-------------------------------------- 

Area of the region 


157


2. Exposure Rate of Pollution: A second 

measure of pollution intensity is based 

upon population density. Between two 

regions with the same pollution intensity 

per thousand sq. km., the one with 

a larger population density will be 

more vulnerable to the effects of pollution 

3 . Population density is taken 

from the 2001 census for this purpose. 

We call the measure the “Exposure 

Rate to Pollution”. 

Exposure Rate of Pollution = (Regional 

Pollution intensity/1000 sq km) × Regional 

population density 

In order to assess the vulnerability of 

districts to industrial pollution, we need 

to give pollution weights to units of different 

categories. Such weights (for instance 

BOD levels of industries) are not available 

in published literature. 

However we find that the fees/penalty 

charged by the APPCB for units of different 

pollution categories varies in the 

proportions: Green: 1::Orange: 1.5:: Red: 

2. We adopt these weights for better measures 

— i.e. taking the weight of Green as 

unity, we assume that the pollution intensity 

of Orange is 1.5 times that of Green, 

and Red is 2 times that of Green. 

The above weights to pollution categories 

solve the problem of relative 

weightage to units of different pollution 

categories. But it does not measure the 

absolute amount of pollution. As a result, 

the measurement of pollution can 

only be relative. 

For this reason, we take the pollution 

intensity of the least polluting region/ 

district as the norm, and measure pollution 

intensity of other regions/districts 

relative to that. In most indices, the region’s 

level is measured against the 

State’s average. However, since we are 

interested in the disparities of pollution 

Focus for anti pollution drives 

should first be on Hyderabad (+RR), 

followed by coastal Andhra region 

vulnerability between regions, we compare 

each region with that of the lowest 

ranking region, to show the variability of 

pollution exposure. 

We find that the pollution intensity as 

well as the pollution exposure rate is the 

lowest for Rayalseema. Hence these are 

set as the norm, and the pollution intensity 

and pollution exposure rate for other 

regions are measure relative to Rayalseema 

in cols. 4 and 5 of the Table 2. 

With these assumptions and weights, 

the pollution per thousand kilometres of 

a region, which we may call the “Vulnerability 

Index” is calculated and presented 

in Table 2. Since Rayalseema has the lowest 

level of pollution intensity, we take this 

as the norm (weight =1), and compare the 

other regions against it, to rank them according 

to their vulnerability index: 

• Hyderabad (+RR) tops the pollution 

intensity with a score of 19 times that of 

Rayalseema. Also because it is far more 

densely populated than Rayalseema, its 

relative pollution exposure rate is 90 

times that of Rayalseema. 

• South and North Coastal Andhra regions 

come second with a relative pollution 

intensity of 2.5-3 times that of 

Rayalseema, respectively. Their pollution 

exposure rates are 4.5−5.5 times 

that of Rayalseema, respectively. 

• Other Telengana districts have very 

low pollution intensity and exposure 

rates, which are just 1½ times that 

of Rayalseema. 

This analysis suggests that the focus for 

anti pollution drives should first be on 

Hyderabad (+RR), followed by coastal 

Andhra region. Telengana and Rayalseema 

when considered as a whole 

seem to be less vulnerable and less exposed 

to pollution. 

Analysis at the District Level: 

The question that arises is whether this 

finding survives disaggregation into districts. 

For finding this out, we measure the 

Table 2: Vulnerability Index 

Population 

Density 

Pollution intensity× 

Pollution Exposure 

Rate 

Relative Pollution 

Intensity* 

Relative Pollution 

Exposure Rate * 

(1) (2) (3) = (1) × (2) (4) (5) 

Hyderabad & Ranga Reddy 954.6 329.3 314,385 19.0 90.2 

North Coastal 367.0 51.2 18,800 3.0 5.4 

South Coastal 334.4 45 15,041 2.6 4.3 

Telengana other 190.1 26 4,957 1.5 1.4 

Rayalseema 201.5 17.3 3,486 1.0 1.0 

*× Pollution /1000 sq.km; The Measures for Rayalseema are taken as the norm = 1, 



Table 3: Pollution Intensity and Exposure Rates Across Districts of AP 

Population density Pollution Intensity Exposure Rate Relative Pollution Intensity* Relative Exposure Rate* 

(1) (2) (3) = 1×2 (4) (5) 

Hyderabad 19149 1849.8 35,422,569 106.91 10,160 

Ranga Reddy 442 129.0 57,036.3 7.46 16.4 

Krishna 481 74.5 35,841.5 4.31 10.3 

E. Godavari 454 74.6 33,887.1 4.31 9.7 

Srikakulam 438 72.9 31,934.1 4.21 9.2 

Guntur 392 64.4 25,243.5 3.72 7.2 

West Godavari 494 46.6 23,035.3 2.70 6.6 

Visakhapatnam 342 51.1 17,472.6 2.95 5.0 

Medak 275 42.6 11,714.7 2.46 3.4 

Vizianagaram 346 31.3 10,846.2 1.81 3.1 

Karimnagar 296 32.6 9,663.3 1.89 2.8 

Chittoor 246 28.9 7,115.2 1.67 2.0 

Nalgonda 229 29.3 6,713.9 1.69 1.9 

Nellore 204 23.2 4,735.6 1.34 1.4 

Nizamabad 293 16.1 4,706.4 0.93 1.4 

Warangal 252 18.5 4,672.7 1.07 1.3 

Mahaboobnagar 191 21.8 4,156.6 1.26 1.2 

Kurnool 199 18.7 3,731.2 1.08 1.1 

Prakasam 176 14.2 2,500.3 0.82 0.7 

Anantapur 191 12.2 2,335.7 0.71 0.7 

Khammam 161 12.9 2,072.4 0.74 0.6 

Kadapa 169 10.6 1,796.8 0.61 0.5 

Adilabad 155 7.5 1,167.0 0.44 0.3 

* Relative to Rayalseema estimates set as norm. 

pollution intensities and exposure rates at 

the district level. 

The estimates of pollution intensity and 

exposure rates are reported in Col (2) and 

(3) of Table 3. Since the estimates are 

based on an arbitrary norm, the corresponding 

estimates of Rayalseema reported 

in Table (2) earlier are taken as the 

norm and the relative magnitudes of pollution 

intensity and exposure rate are reported 

in cols. 4 and 5 of the table. The 

districts have been arranged in descending 

order of relative pollution intensity for 

each region. This is done to focus attention 

on the problem districts within each 

of the five regions. 

Districts by Exposure Rate 

1. Hyderabad and Ranga Reddy districts 

top the problem districts. Hyderabad 

has a relative pollution intensity that is 

100 times that of Rayalseema and an 

exposure rate that is 10,000 times that 

of Rayalseema thanks to an extremely 

high density of population. It is followed 

by Ranga Reddy that has a relative 

pollution intensity of 7.5 times and 

an exposure rate that is 16.5 times that 

of Rayalseema. 

2. In South Coastal Andhra Regions, East 

Godavari and Krishna are the most 

vulnerable to pollution. They have pollution 

intensities that are 4.3 times and 

exposure rates that are nearly 10 times 

that of Rayalseema. Industrial Pollution 

control efforts in these regions 

must start with these two districts. West 

Godavari and Guntur districts come 

next with pollution intensities of 2.7-3.7 

times Rayalseema, respectively and 

relative exposure rates of 6.5-7 times 

that of Rayalseema. It can be noted 

that the relative exposure rates are 

much higher than the pollution intensities, 

because the population densities 

in these districts is much higher than in 

Rayalseema. For this reason, these 

districts also merit attention in efforts 

to control industrial pollution. Of the 

remaining, Nellore and Prakasam are 

the least problematic with pollution 

intensities and exposure rate less than 

1.5 times and even less than Rayalseema 

respectively. 

3. In North Coastal Andhra Regions, 

Srikakulum ranks highest with a relative 

pollution intensity of 4.2 and a 

relative exposure rate of nine. Vishakhapatnam 

and Vizianagaram come 

next with relative pollution intensities 

of three and 1.8 respectively and relative 

exposure rates of five and three 

respectively. All north coastal districts 


159


have relatively high rates of pollution 

intensity and pollution exposure 

rates. 

4. In the case of Other Telengana 

districts, we noticed earlier that the 

relative pollution intensities were 

only 1.5 times that of Rayalseema. 

However, when we disaggregate 

data at the district level two to 

three districts stand out as having a 

higher level of relative pollution 

intensity and exposure rates. 

It can be seen that Medak tops the 

region with a relative pollution 

intensity of 2.5 that of Rayalseema, 

and an exposure rate that is even 

higher — viz., 3.5 times that of Rayalseema. 

Karimnagar comes next with 

a relative pollution rate of 1.9 times 

and relative exposure rate of 2.8 times 

that of Rayalseema. Nalgonda is the 

third in the problem list with a relative 

pollution rate of 1.7 times and a 

Table 4: District Ranking by Pollution Intensities 

relative exposure rate of 1.9 times 

that of Rayalseema. The relative pollution 

and exposure rates of the remaining 

districts in the region fall in 

the zone of 1-1.5 times that of Rayalseema, 

and therefore can be considered 

to be less problematic. 

5. Finally, in Rayalseema, it appears that 

Pollution Rank/ District Pollution Intensity per ‘000 sq km With Adilabad as norm 

1. Hyderabad 899.92 137.6 

2. Ranga Reddy 228.88 35.0 

3. Krishna 57.63 8.8 

4. E. Godavari 56.48 8.6 

5. Medak 50.74 7.8 

6. Srikakulam 50.66 7.7 

7. Guntur 46.87 7.2 

8. Visakhapatnam 40.29 6.2 

9. West Godavari 35.53 5.4 

10. Nalgonda 25.73 3.9 

11. Vizianagaram 24.92 3.8 

12. Karimnagar 24.23 3.7 

13. Chittoor 22.89 3.5 

14. Nellore 17.86 2.7 

15. Kurnool 14.43 2.2 

16. Warangal 13.40 2.0 

17. Mahaboobnagar 11.80 1.8 

18. Nizamabad 11.29 1.7 

19. Prakasam 10.09 1.5 

20. Khammam 10.06 1.5 

21. Anantapur 9.62 1.5 

22. Kadapa 8.65 1.3 

23. Adilabad 6.54 1.0 

Chittoor can be identified as a vulnerable 

district, since it has relative pollution 

intensity of 1.7 and a relative 

exposure rate that is somewhat higher 

at two times the regional average. 

Hence, industrial pollution efforts in 

this region can focus on Chittoor. 

It can be seen that the pollution per 

thousand square kilometres is lowest 

for Rayalseema 14/1000 sq.km of 

geographical area. This is the equivalent 

of seven Red units in thousand 

square km. 

Districts by Pollution Intensity 

The pollution intensity in Hyderabad 

(+RR) is the highest. It is 18 times the 

pollution intensity of Rayalseema, and 

stands at the equivalent of 144 Red units 

per thousand square kilometres. 

The pollution intensity in other Telengana 

districts is higher, being 1½ times 

that of Rayalseema, standing at about 10 

Red units per thousand square kilometres 

of geographical area. 

In south and north coastal districts the 

pollution intensity is 2.5 to 2.8 times that 

of Rayalseema respectively, standing at 17 

and 19 Red units per thousand square 

kilometres of geographical area. 

Our analysis reveals that the pollution 

load of Hyderabad (+RR) is unacceptably 

high. Outside this, pollution intensity 

in north Andhra region is also high, 

being more than 2½ times that of Rayalseema. 

Comparatively, other Telengana 

districts and Rayalseema enjoy a 

lower degree of pollution per thousand 

square kilometres. 

Ranking of Districts 

by Pollution Intensities: 

We now estimate the pollution intensities 

by district, taking the least polluted 

district: Adilabad’s pollution intensity as 



the norm. 

• It can be seen that Hyderabad tops the 

list with a pollution intensity of 138 

times that of Adilabad. 

• Ranga Reddy comes next with a pollution 

intensity of 35 times Adilabad. 

• Krishna and E. Godavari occupy the 

next ranks with a pollution intensity of 

8.5-9 times Medak, Srikakulam and 

Guntur come next with pollution intensities 

of 7-8 times that of Adilabad. 

• Vizag ranks 8 th in the districts with a 

pollution intensity that is six times that 

of Adilabad. 

• West Godavari ranks 9 th with a pollution 

intensity of 5.5 times that 

of Adilabad. 

• Nalgonda, Karimnagar, Vizianagaram 

and Chittoor take the 10-12 rank with 

pollution intensities that are 3.5-4 times 

that of Adilabad. 

Table 5: Summary of Indices Over Regions (2007) 

Region 

Index 

• The remaining districts have relatively 

low pollution intensity. 

In Short: 

If we take the top 10 districts with the 

highest Disparity Index in the polluting 

categories, we find the following: 

Hyderabad and Ranga Reddy top in DI 

in Red industries, with enormous difference 

in their Pollution Intensity and Exposure 

rates compared with the next 

ranking district (329.3 to 51.2, and 314385 

to 18800 respectively). This shows the colossal 

pollution burden being borne by 

The pollution intensity in Hyderabad 

(+RR) is the highest. It is 18 times the 

pollution intensity of Rayalseema 

D.I. Red D.I. Orange D.I. Green Pollution 

Intensity 

Exposure 

Rate 

Hyderabad & RR 1.54 0.61 2.55 329.3 314,385 

Other Telengana 1.19 0.87 1.05 26 4957 

North Coast 0.71 1.21 0.46 51.2 18800 

South Coast 0.67 1.23 0.45 45 15041 

Rayalseema 0.24 1.12 0.82 17.3 3486 

Hyderabad and Ranga Reddy regions, 

and the concentration of industrial pollution 

in these two regions of AP. 

Growth of Polluting Units 

From the above analysis, it is clear that 

there is great urgency to take care of the 

environmental problems in the regions 

which have high DI, PI and ER. 

One method to reduce these levels is to 

encourage the growth of Green and reduce 

that of Orange and Red industries. 

However, data shows (Table 6) that 

from 2006 to 2007, the growth rate of 

the least polluting category (Green) was 

negative almost -10%, whilst that of 

Red and Orange were 17% and 

13% respectively. 

This reduction in Green units is due to 


161


fall in the number of operating Green 

units in 2007, along with a rise in the 

numbers closed. Red and Orange on the 

other hand, have shown a rise in the 

number of operating units, as well as in 

the other categories. 

From Table 7, it can be seen that Green 

operating units have shown a negative 

growth rate of 14.5%, while that of Red 

and Orange have increased by 9.2% and 

11% respectively. The growth of number 

of Green units closed for non-compliance 

is also high (46%), as is the growth of 

Green sick units (66%). All these are driving 

down the least polluting industries in 

Table 6: Growth Rate of Various Pollution Categories (2006 to 2007) 

Years Total Green Total Orange Total Red 

2006 1030 3829 2594 

2007 932 4324 3040 

Difference -98 495 446 

Simple growth rate -9.51% 12.93% 17.19% 


Ban doesn't have effect, for the 

number of industrial units in the 

various polluting categories 

Table 7: Growth Rates of Various Pollution Categories (2006-07) 

the State, while favouring the most polluting 

ones. 

As there is no decreasing trend in the 

most polluting units in the State, we can 

tentatively infer that the efforts of the 

PCB to restrict them are at variance with 

that of the other Government departments 

of the State, which want to encourage 

industrial development regardless of 

the environmental impacts. 

Growth Rates Across Districts: 

According to ban orders issued by the 

APPCB, the Government has banned the 

establishment and expansion of different 

types of polluting industries in the four 

districts of Medak, Rangareddy, Mahaboobnagar 

and Nalgonda, since 1996. In 

1998, this ban was made permanent 

(G.O.M. 62). 

Let us now see if the ban orders are 

under implementation in these four 

highly polluted districts identified by the 

State Government, and if there is a fall in 

the number of industrial units belonging 

to the most polluting category — Red 

and Orange. 

From Table 8, it can be seen that except 

for Orange units in Nalgonda, which have 

shown a negative growth, in all the other 

districts both Red and Orange units show 

a positive growth over the year 2006 to 07. 

Even in Nalgonda, there is positive growth 

of Red units in this year. 

We thus find that the ban does not 

seem to have taken effect, for the 

number of industrial units in the various 

polluting categories continues to expand 

in these districts. 

Year Red op Org op Green op Red closed Org closed Green closed Red sick Org sick Green sick Total 

2006 2226 3096 952 234 450 57 134 283 21 7453 

2007 2431 3430 814 427 530 83 182 364 35 8296 

Difference 205 334 -138 193 80 26 48 81 14 843 

Simple Growth 9.21% 10.79% -14.50% 82.48% 17.78% 45.61% 35.82% 28.62% 66.67% 11.31% 



Table 8: Status of Polluting Units in Regionswith Ban Orders (2006 to 

2007) 

Conclusion 

In this paper we have attempted to 

gauge the disparity in the pattern of location 

of polluting industries, the exposure 

to pollution and pollution intensity 

of various regions and districts of AP. 

We find that on all counts, the Hyderabad 

and Ranga Reddy regions lead in 

the ranking of Disparity Index, Pollution 

Intensity Index and Exposure Index. 

The highest positions are taken by 

Hyderabad-Ranga Reddy, Srikakulam- 

Vishakhapatnam, Other Telengana including 

Medak, and East and West 

Coastal Areas of AP. 

Red units growth 

Environmental regulation should concentrate 

on reducing pollution in these 

regions, as well as reduce or prevent further 

growth of polluting industries in 

these areas. At present, regional plans 

that include environmental components 

Orange units growth 

Medak + 44% + 50% 

Nalgonda + 28% − 74% 

Ranga Reddy + 16% + 40% 

Mahaboobnagar + 4% + 3 % 


and provide for industrial zones compatible 

to the surrounding land uses do not 

exist in India. Environmental planning in 

industrial hotspots, will help in reducing 

pollution impacts from industries. However, 

this tool has seldom been used in this 

country. Proper siting of newly planned 

industries and industrial estates is a strong 

pollution preventive instrument that will 

ensure environmental soundness of industrial 

development. 

Without proper environmental planning, 

agglomerative factors and industrial 

zones created by the AP Govt. have 

resulted in increase of such concentration. 

A strange outcome of such agglomeration 

is that of growth of Red and Orange 

industries, while there has been a 

negative growth of Green industries. 

Surprisingly, even in almost all those 

districts where there is a ban on Red and 

Orange units we find a positive growth of 

these industries. In this context greater 

government control on the concentration 

of polluting industries, and encouragement 

for the growth of green industries 

becomes imperative. 

End-notes 

1 

Kathedan, Kukatpalli, Patancheru- 

Bollaram, Vijaywada and Vishakhapatnam 

2 

Of course, the type of topography is 

also important in the spread of pollutants 

in a region. 

3 

We take only the anthropogenic impacts 

— though we are aware that there 

will be various other forms of ecological 

impacts in the region. 



• A.P. Pollution Control Board website: 

www.appcb.ap.nic.in 

• Central Pollution Control Board website: 

www.cpcb.nic.in 

• CSO website: mospi.nic.in/cso 

• Greenpeace website: www.greenpeace. 

org 

• CPCB Annual Report, 2004-05, 2006- 

07: www.cpcb.nic.in 

• Doing Business with Andhra Pradesh, 

www.apind.gov.in 

• Belarus: addressing Imbalances in the 

Economy and society: National human 

Development Report, Appendix 3: 2004 

– 2005 

• G.O.Ms.No.62 (1999) Environment, 

Forests, Science & Technology (Env) 

Department, 20 th April. 

• Panth, Prabha [2006]: Regional concentration 

of polluting industries: a study 

of Andhra Pradesh, Indian Economic 

Journal, September issue. 

(DR. PANTH is a professor at Osmania 

University, Hyderabad. Her area of speacialisation 

is Environmental Economics 

and have published about 22 articles in 

various academic journals and presented 

them at different seminars. She have also 

completed a UGC major research project 

entitled: "The Economic Significance of 

Wastewater Management: A case study of 

Bolaram Industrial Estate." This article is 

based on one of the chapters . 

DR. SHASTRI is a Director, Research Centre 

for International Business, CVR College of 

Engineering, Faculty, Department of Economics, 

Osmania University. He has also 

published twenty research papers in diverse 

areas. His Doctoral Dissertation (awarded in 

1989 by Osmania University) was on “The 

Contribution of Michal Kalecki to Economic 

Theory: Focus on Income Distribution”. 

He secured distinction in M.A. (Osmania 

University), standing first in the Faculty 

of Social Sciences in M.A., and was the recipient 

of the Nawab Ali Yawar Jung Gold 

Medal and the McKenzee Book Prize. 





163


Dealing with Env i 

Degradation 

Coordinated and effective participation by the business sector, the 

voluntary sector, central and local authorities and individual people 

is critical towards superior performance in relation to national and 

international targets and to safeguard environmental qualities 

Anu Singh 

Economist & Entrepreneur, 

Bangalore 

The purpose of local economic development 

(LED) is to build up the economic capacity 

of a local area to improve its economic 

future and the quality of life for all. It is a 

process by which public, business and nongovernmental 

sector partners work collectively to create better 

conditions for economic growth and employment generation. 

1 The whole idea of LED is to improve quality 

of life for all. 

Local economic development depends on local initiative, 

driven by local stakeholders and it involves 

identifying and using primarily local resources, ideas 

and skills in an integrated way to stimulate economic 

growth and development in the locality. 

Goals of Local Economic Development 

The major goals of local economic developments are: 

• Encourage development and redevelopment for 

increased economic vitality of the districts 

• Create and retain employment in the City 

• Assist in the rehabilitation of older facilities and/or 

expansion of existing industrial facilities 

• Enhance attractiveness of our community 

• Maintain environmental balance in the city and 

ensure environmental sustainability 

• Avail basic necessity to the society like water 

and sanitation. 

Among the above goal which is on the hot seat of the 

today’s developing economy is to maintain environ- 


C OORDINATION CONERNS 

ironmental 


165


mental balance in the society to keep up 

with health and security of the localities. 

Environmental degradation is the 

major problem not only of the local 

government but also of the whole world. 

Industrialization and its subsequent fast 

population growth and concentration 

are the chief contributors to environmental 

troubles in both developed and 

developing countries. The magnitude of 

the problem varies from country to 

country depending on various factors, 

including stage of industrial development 

and the degree of enforcement of 

environmental regulations. 

Today environmental pollution is one 

of the most serious problems of the 

globe facing mankind. Air, water, and 

soil are essential to the survival of all 

living creatures on planet earth, but unfortunately 

they are debilitated by pollution. 

Air polluted beyond tolerable levels 

can cause sickness, and even demise. 

Pollution damages land, water and air. It 

can cause contamination of the earth’s 

environment with materials that interfere 

with human health, the quality of 

life, and the natural functioning of ecosystems 

(living organisms and their physical 

surroundings). 

Pollution is usually caused by actions of 

human, but can also be the result of natural 

disasters. Pollution can also occur 

from disruption or damage to waste-water 

collection and treatment infrastructure 

due to severe natural events like hurricanes 

or flooding. Pollution is caused by 

the garbage and waste material especially 

non recycled material that people most 

often throw on the ground or into oceans, 

lakes or rivers. 

People have always polluted our environment, 

but pollution was not a major 

problem in early days when machines 

were not there. Most of the people lived 

in rural areas and the pollutants (waste 

products) they produced were scattered 

widely. At that time pollution-causing 

machines such as factories industrial 

plants or motor vehicles, were not introduced. 

The rapid growth of Industrialization 

and the development of busy cities 

in the 1700's and the 1800's made 

pollution a major problem to mankind, 

plants and animals. Factories and human 

beings in these urban cities released 

enormous quantity of pollutants into 

small areas. 

Review of Literature 

Local economic development (LED) is 

a process in which partnerships between 

local government, the private sector 

and the communities are established to 

handle local, and access external, resources 

that can be used to stimulate 

the economy of a well defined territory. 

In its earlier incarnations, the goal of 

Local Economic Development was 

mainly restricted to growing the economic 

and tax base of a location. More 

Factories and human beings in the 

urban cities released enormous 

quantity of pollutants into small areas 

recently, in the context of the Millennium 

Development Goals, a new goal 

has been included in the LED’s objective 

to combat environmental degradation 

at local level and give healthy and 

secure life to the local people and area. 

In a few countries municipal corporations 

has already done good job in 

achieving these goals. 

These corporations examines enterprise, 

location and community from the 

perspective of economic, ecological and 

social sustainability, showing how lack of 

attention to the conditions for sustainability 

of any one sphere will ultimately undermine 

the sustainability of the other 

two. It also demonstrates how creative 

thinking can turn social and environmental 

sustainability problems into opportunities 

for local people. Now we will discuss 

the environmental issue and its handling 

by individual and government bodies at 

local level, the problem they are facing 

and how to overcome it. After reviewing 

the various literatures we have found the 

following important discussion. 

Major Environmental Issues 

Let us discuss few major issues related 

with environment to illustrate how environment 

is affected by life and how it is 

affecting life. 

Unsustainable Development: The landmark 

report of the World Commission 

on Environment and Development, entitled 

"Our Common Future", warned 

that unless we change many of our lifestyle 

patterns, the world will face unacceptable 

levels of environmental damage 

and human suffering. The Commission, 

echoing the urgent need for tailoring the 

pace and the pattern of global economic 

growth to the planet's carrying capacity, 

said that: "Humanity has the ability 

to make development sustainable and to 

ensure that it meets the needs of the 

present without compromising the ability 

of future generations to meet their 

own needs." 2 

Affecting Poor: environmental degradation 

is not all about global warming, de- 



sertification or climatic change, ozone 

layer depletion, but it is also related with 

the weaker section in marginal areas are 

generally pretty localized in character, 

revolving around direct issues related 

with their life and living conditions, such 

as the degradation of a particular rangeland 

or soil erosion on farmland or the 

progressive reduction of fallow. 

Food Problem: Population increases, aging 

populations, consumption patterns - 

living beyond means, over consumption 

affect the poor because they are directly 

related to household food security. Degradation 

of the resource base by and large 

translates into decreases in production or 

income and thus in the availability of 

food. Declining soil fertility leads to 

lower crop yields while rangeland depletion 

reduces off take, and any deterioration 

in water quality adversely affects the 

fish catch. 

Vicious Circle: In their quest for food 

security, the rural poor have sometimes 

little choice but to overuse the limited 

resources available to them. The resulting 

effects of environmental degradation 

among poor people impose further constraints 

on their livelihood in what has 

been called a "downward spiral" or "vicious 

circle". 

Poor Health: A sentry lifestyle combined 

with health impacts of environmental 

pollution and emissions, use and abuse of 

pesticides, anti-biotic etc is affecting the 

health of the future generations. The 

environment influences our health in 

many ways — through exposures to 

chemical physical, and biological risk factors, 

and through related changes in our 

behavior in response to those factors. 

Energy: The rate at which energy is being 

used is affecting the climate; every source 

of energy has an environmental impact. 

Energy efficiency is not just technology, 

but also cutting back the ill effects on 

environments. Not only this the technology 

like hydropower are involved in great 

displacement of people from villages. 

Environmental Issues 

at Local Level: 

1) Lack of Efforts at Individual Level: 

Still in country like India, people are 

less educated about the environmental 

damage and its effects on social living. 

They are totally ignorant about how 

their small mistakes and carelessness 

like disposing garbage with full of non 

recycled products can harm the whole 

community, its health and its land. 

There is a need to educate people regarding 

waste disposal and creating 

awareness related with harm we people 

are giving to the society. 

2) The Lack of Community Efforts: 

To address social and environmental 

problems related to solid waste management 

in Asian cities that have 

been initiated by local groups suffer 

the typical limitations of small volunteer 

projects. They are facing difficulty 

getting the support and cooperation 

of city solid waste departments 

and cannot directly influence solid 

waste planning or the industrial 

causes of waste problems. 

3) No Support for Green Consumerism: 

In a country like India, green consumerism 

world still exists in books and 

journals only. People are not at all worried 

about what they buy and whether 

it is affecting negatively to the environment. 

Unlike in developed nation like 

United States where citizens have 

adopted green consumerism in their 

life style. 

4) Increasing Polluted Vehicle: We can 

see the roads of India and can find 

numbers of vehicle specially cars are 

emitting CO 2 

and polluting the city. 

Driving a car is one of the most polluting 

acts an average citizen of world 

commits. Emissions from passenger 

There is a need to educate people 

regarding waste disposal and 

creating awareness related with harm 

vehicles are increasing not only in 

countries like Canada and the US but 

also in countries like India and other 

developing nations despite of government 

efforts to run good quality public 

transport system. 

5) Excessive Use of Paper Material at 

Offices: When you go and see any office 

of a developing nation you will see 

hundreds of file overlapping each 

other on single desk. The excessive 

use of paper is one of the major issues 

which have to be tackled at individual 

level only. People in developing nation 

like India are quite ignorant and 

least bothered about the recycling of 

paper and using environmental 

friendly material. 

Dealing with Pollution Externalities: 

Joint Efforts of Government, 

Individual and Voluntary Sector 

There are basically two broad categories 

of solution to the problem of pollution 

externalities. The first category is termed 

as private solutions because they leave it 

up to the individuals (or firms) involved 

taking actions to remedy the externality. 


167


The second solution will be called public 

solutions because action is taken by a 

public authority. The private solution can 

be divided into three sub categories 

1. Business 

2. Individual, and 

3. Voluntary sector 

The business sector has a central role to 

play in efforts to bring about sustainable 

development. Its capability and competence 

for innovation that can lead to 

more sustainable production processes 

and the willingness of businesses to operate 

in a socially responsible way will ultimately 

be crucial for achieving central 

political objectives. In this connection, 

interaction between international institutions, 

authorities and the business 

sector is important. 

It is an important task to design policy 

instruments so that they encourage the 

business sector to make use of opportunities 

for growth within the framework of 

sustainable development in dealing with 

environmental challenges. 

At the individual level, if Consumers 

start looking for green products only, 

there will be a clear increase in the demand 

for green products. With the increase 

in demand for green products 

Businesses will have to look into the 

green process generating corporate environmental 

profiles, monitoring and 

evaluating green performance, and improving 

corporate image as a result. 

Individuals can help their city by reducing 

how much trash they create — at 

home and at work. They can have a look 

on what they throw away and soon they 

will notice ways to save money and the 

environment, buying durable, reusable 

products also saves valuable resources. 

Avoiding single- or limited-use items 

such as plastic razors, throwaway cleansing 

pads and cigarette lighters, non-refillable 

pens and foil baking pans products 

like use of disposable diapers, can help in 

Reducing or eliminating trash which 

harms the environment which account 

for approximately two percent of total 

landfill volume. 

Broad-based participation of voluntary 

sector in policy development is a central 

tool for sustainable development. The 

environmental organizations play an 

important role in focusing attention on 

environmental problems, stimulating 

debate and giving environmental protection 

a higher profile. In order to play this 

role, the organizations must have good 

access to information and opportunities 

to play a part in decision-making processes. 

These activities help strengthen 

civil society in developing countries and 

to ensure input to and support for fighting 

with pollution externalities from 

these organizations. 

Efforts of NGOs to promote sustainable 

development through development 

cooperation in developing countries and 

efforts to raise awareness of environmental 

issues can lead to changes in 

individual people’s consumption patterns 

which can contribute to sustainable 

development. 

The Role of Government: The Ministry 

of the Environment should support 

projects organized by the Local and Regional 

Authorities to incorporate environmental 

protection and sustainable 

development into training for newly 

elected officials in the municipalities and 

counties. Support should also be provided 

for a development programme for green 

procurement in the municipal sector. 

Community mobilization and local responsibility 

for environmental policy are 

necessary to ensure better performance 

in relation to national and international 

targets and to safeguard environmental 

qualities that are important for people’s 

health and well-being. 

Suggestion and Recommendations: 

To prevent and control domestically, 

households can learn about the reasons 



and causes of such pollution and take the 

appropriate steps to limit overflow and 

make sure overflow of water stays clean. 

Household plastics, cleaners, oil, grease, 

and some food or paper products should 

not be flushed down drains or washed 

down the street. 

The municipalities should be given 

more authority to deal with pollution 

through new regulations relating to local 

air quality. The Government should pursue 

an active policy to promote corporate 

social responsibility. The local authorities 

should have a wide range of environmental 

and business policy instruments that 

can be applied to the business sector. 

The Government should strengthen 

environmental protection at municipal 

level by giving the municipalities more 

responsibility, greater freedom and more 

tools for carrying out local environmental 

tasks. 

Green taxes are one way of pricing 

the environmental costs involved in the 

production and consumption of a particular 

good or service, and help to 

make products and services that have 

negative effects on the environment 

more expensive than those with less 

impact. In most cases, price is an important 

criterion when consumers choose 

between different products. Thus, when 

green taxes are introduced, more consumers 

will choose products with less 

impact on the environment. 

Conclusion 

Thus, everyone can contribute to sustainable 

development. Coordinated and effective 

participation by the business sector, 

the voluntary sector, central and local 

authorities and individual people requires 

a common understanding of the 

challenges we are facing and opportunities 

for different groups and people to 

contribute to sustainable development. 

To achieve this, the different actors must 

have the best possible access to all relevant 

information and there must be a 

satisfactory dialogue between the authorities 

and other groups. Sustainable 

development involves important challenges 

for private companies and market 

actors. Many forms of economic activity 

have an impact on the environment and 

on social conditions. Those who cause 

such impacts must also have responsibilities 

to deal with them. 

End-notes: 

1 

Local economic development retrieved 

on 19 th November 2009 from http://web. 

worldbank.org/WBSITE/EXTERNAL/ 

TOPICS/EXTURBANDEVELOP- 

MENT/EXTLED/0,,menuPK:341145~ 

pagePK:149018~piPK:149093~theSite 

PK:341139,00.html 

2 

Ghana: Combating Environmental 

Degradation retrieved on 18 th November 

2009 from www.africanconservation.org/content/view/130/405/ 

Reference and 


• Hill Marquita K. ‘ Understanding Environmental 

Pollution’ retrieved on 

18 th July 2010 from http://assets.cambridge.org/97805218/20240/ 

excerpt/9780521820240_excerpt.pdf 

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worldbank.org/WBSITE/EXTERNAL/ 

TOPICS/EXTURBANDEVELOP- 

MENT/EXTLED/0,,menuPK:341145~ 

pagePK:149018~piPK:149093~theSite 

PK:341139,00.html 

• Last, Steve. ‘ What is pollution?’ Retrieved 

on 10 th July 2010 from http:// 

ezinearticles.com/?What-is- 

Pollution?&id=776711 

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of the Environment Movement 

in Bangladesh’ Retrieved on 10 th July 

2010 from http://www.ben-center.org/ 

BEN/BAPA/nazrulislam.oct20.htm 

• ‘ Environmental Pollution in India’ Retrieved 

on 11 th March 2010 from 

http://www.gits4u.com/envo/envo4.htm 

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agenda21/natlinfo/countr/india/eco. 

htm 

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Supplement%20I%20Pollution.doc 

(DR. ANU SINGH is primarily an economist 

and now an entrepreneur, running her 

own restaurants at different locations in 

Bangalore. She gives lectures on Managerial 

Economics in different management 

schools of Bangalore. She also delivers 

online lectures to the students of Australia, 

America and United Kingdom. 





169

P LANNING PARADIGM 

Planning vs the Market 

and the Role of Govt. 

An economically free market economy stimulates effi ciency, technological 

advances, innovation but government intervention is necessary in the case of 

market failures or protection of infant industries, or adopting necessary policies 

that would promote human development 

Dang T. Tran 

Chair and Professor, Department of 

Economics & Statistics, College of 

Business & Economics, California 

State University, Los Angeles

C OMPARATIVE PLANNING 

Let's discuss the prerequites of a 

planning system at first. In a 

planning system, an ideal structure 

is set up as follows: 

1. Long-term perspective planning. 

2. Medium-term plans. 

3. Sector programs and projects. 

4. Policy framework. 

5. Annual planning and the budget. 

6. Plan for the private sector and the working 

of the financial infrastructure. 

7. Planning in the individual states 

or provinces. 

8. Problems of implementation in some 

critical areas. 

9. Plan evaluation. 

In a long-term perspective of 15-25 years, 

broad national long-term objectives are laid 

out, such as to advance from $300 per capita 

GDP to $2,000 in about 25 years or to 

lower poverty rate in rural areas from 40% 

to 20% in 15 years, or to raise manufacturing 

ratio in GDP from 10% to 20% in 15 

years. They represent the aspirations of the 

country to achieve better material life in a 

set time period given the resource constraints. 

A set of broad guidelines for a 10- 

15-year period outlines a development 

strategy, pointing to broader objectives and 

priorities, and reflecting the broad structural 

changes that are necessary in this period. 

These objectives will be implemented 

in successive medium-term plans of 4-7 

years (mostly 5-year plans but the number of 

years depends on the elected President’s term 

in office). They provide an overall economic 

framework consistent with the guidelines, 

to help maintaining some internal and external 

balance in the economy. The medium 

plans could contain plans, policies, and 

programs in selected sectors and an elaboration 

of financial requirements. They could 

provide some measures for mobilizing resources; 

estimates of saving and investment, 

exports and imports, current and capital 

government expenditures; forecasts of financial 

resources; an elaboration of fiscal 

and credit policy; and measures to develop 

proper financial institutions. The medium 

plans spell out details in what to be done, 

what to be produced, how much to be produced, 

and how they are to be produced, 

given the resources available. The plans 

would include projections of real GDP 

growth and growth of various sectoral outputs. 

Output targets of most essential commodities 

such as food, electricity, construction, 

infrastructure (physical, financial, and 

institutional), education, exports, and imports 

are given. It is here that sector programs 

and projects are needed to meet the 

targets. A list of projects with appropriate 

feasibility studies has to be made and funding 

methods must be analyzed. 

To implement the five-year plans, annual 

plans are designed in such a way that there 

is a link between material production requirements 

and monetary and fiscal policies. 

The government has to adopt a consistent 

stabilization policy and a macroeconomic 

environment conducive to production programs 

to achieve the annual targets. There 

are many difficulties in implementing the 

projects, but annual planning itself is an appropriate 

mechanism for ensuring proper 

implementation. In many developing countries, 

the government plays an important 

role as it establishes and owns many corporations. 

In many cases, these corporations 

are privatized to promote efficiency and to 

relieve the public’s financial burden. Infrastructure 

projects (such as roads, highways, 

transportation systems, fuel, water and power, 

communication systems, schools, health care 

systems, etc.), which have enormous social 

benefits but low private benefits, have to be 

undertaken by the government. Their funding 

comes from the budget which necessarily 

involves either domestic tax revenue, 

bond issuing, foreign aid, foreign loans and 

debt servicing. The budgetary decisions 

should reflect the annual plans. The fiveyear 

plans could call for foreign investment 

in certain industries if domestic sectors lack 

technological or financial capability. 

A crucial element in planning is the question 

of resources. They refer to not only fi- 


171


nance, but also manpower, key materials, 

and institutions. The question should address 

training of personnel at different 

management levels, forecasts of imports and 

exports of some key commodities, and administrative 

and institutional reforms which 

include passing of necessary legislation to 

facilitate the efficient working of the labor 

and product markets. 

The five-year plans also discuss the role 

played by the private sector in implementing 

the plans and how the government is going 

to help it attaining its own plans. They outline 

how the government is to carry out 

sectoral dialogue with the private sector and 

what sort of arrangements necessary to ensure 

that the relationship between the two 

is undertaken in an orderly and informed 

manner, and that decisions resulted from 

this dialogue are expedited. 

An important aspect of development is 

to strengthen the efficiency of financial 

infrastructure to mobilize savings and lending 

to those investors who need them. 

There may be a need of both quantitative 

expansion and qualitative improvement in 

the lending operations. There should be a 

close link between financial institutions’ 

policy and government operations, between 

government’s credit policy and 

policies of financial institutions. 

In a large economic system with political 

federation like India, there is a need for better 

planning and coordination of various 

development activities at the state or provincial 

level. Better information can be 

provided through the state plans or regional 

plans. An administrative office could be set 

up to provide whatever help to states with 

regard to their implementing the five-year 

plans and annual plans. 

Plans’ evaluation is relatively easy since 

projections and targets are clearly specified 

in the plans. The main question is to find 

out where the problems reside. The most 

difficult problems frequently are in the 

project implementation. The first serious 

obstacle is created by lack of clear objectives 

and purposes and by missing baseline 

data for measuring achievement. Then, 

there is a problem of insufficient project 

appraisals and technical studies. This leads 

to delay and overspending. Finally, there is 

an imperfect coordination between various 

government units to follow the plans, particularly 

between agencies responsible for 

macroeconomic policies and those implementing 

the sectoral programs and projects 

at the micro level. 

Difficulties Associated 

with a Planning System 

It goes without saying that the system outlined 

above to be successful requires an 

enormous amount of skilled manpower and 

an efficient administrative structure, both of 

which are wanting in most developing countries. 

An extreme case in which prices of 

thousands of products were set by the government, 

as in the Soviet Union before its 

collapse in 1989, shows the impossibility of 

totally planning and controlling a diversified 

economy. It is well-known fact that quantitative 

planning in Soviet Union, in which there 

was no place for the market to work, led to 

corruption, inefficiency, waste, and consumer 

dissatisfaction. 1 

A planning system mentioned in the first 

section doesn’t have to be close to the 

Soviet model. However, the prerequisites 

for even a less-than-total planning system 

are still hard to meet. This has been shown 

by the abandonment of the planning system 

in the developing world. Many of them now 

only follow a general guideline system without 

a detailed plan suggested above. Let’s us 

cite a number of overriding difficulties. 

As is well-known, a worthy development 

plan now puts less emphasis on growth but 

more on human development, i.e. development 

refers now to not only the development 

of countries but also development of persons. 

Economic growth as measured by real GDP 

growth is just one among many development 

indicators. It measures growth in living standards. 

But there are others such as longevity 

(a proxy for health and nutrition) which measures 

life expectancy, and education measured 

by the number of school years. The three 

measures of living standards, longevity, and 

education are included in the United Nations 

Human Development Index (HDI). We 

could rank the countries in terms of how high 

or low in HDI. The trouble is that this HDI 

is still inadequate. It does not include unemployment, 

poverty, and income distribution. 

It has been observed that there is no neces- 



sary connection between GDP growth and 

improvement on unemployment, or on poverty, 

or on income distribution. 

Many countries with fast economic 

growth also have higher unemployment 

rate and poverty rate. As to income distribution, 

it tends to increase during the first 

phase of economic development and decrease 

during the later phase. For instance, 

the gaps between the richest 20% of the 

population and the poorest 20% in Brazil, 

India, Indonesia, Mexico, Thailand have 

risen during 1980s and 1990s. It is expected 

that once the GDP per capita passes the 

per-capita income threshold of the developed 

countries, these measures will decline 

to the level comparable to those of the 

more-developed countries. However, some 

segments of the society might not realize 

this trend and become impatient in the face 

of economic growth. For instance, the 

younger generation in Korea now grows 

restless and demands a more equal distribution 

of income. Thus, despite the general 

validity of the inverted Kuznets curve 

of Gini coefficient in relation to per- capita 

GDP, for some country, to prevent social 

instability, care must be taken to address 

the distribution question in the early phase 

of economic growth. 

A planning system whose goals are 

broader than simple GDP growth faces 

more uncertainty as it has to deal with more 

variables which are not easily measured. 

These variables may not be purely economic 

but social or political in nature such 

as health care, education, income distribution, 

or even freedom. Once we define development 

not simply as economic development 

but also as human development, the 

problems of planning envisaged in the first 

section become intractable. Thus, the more 

we are concerned about non-economic objectives, 

the less the planning system becomes 

manageable. 

Benefits of a Market System 

and the Role of Government 

It has been generally acknowledged that, 

during the past fifty years, the socialist 

model of development has been a total failure. 

2 A system driven by dominating egalitarian 

principles offers no incentives for 

people to work and to produce to their utmost 

capacity. A minimal production incentive 

yields minimal output. On the other 

hand, a system which rewards efficiency and 

The more we are concerned about 

non-economic objectives, the less the 

planning becomes manageable 

diligence and punishes inefficiency and indolence 

will generate ample output and 

creativity. To work hard is an individual decision 

based on the freedom of choice which 

must be motivated by appropriate material 

rewards. The market system provides the 

best motivating system as regards to work, 

entrepreneurship, risk-taking, production, 

and innovation. An economically free market 

economy with open trade stimulates the 

development of technological capabilities 

and innovations which engender industrialization 

and growth in manufactures exports. 

The same one with institutions that 

protect private property, promote transparency 

in government, and ensure individual 

liberty, works better than the one with the 

state planning. This does not preclude the 

necessary government intervention in the 

case of market failures or protection of infant 

industries, or adopting necessary policies 

that would promote human development. 

What we mean by “working better” 

we mean the achievement of the goals laid 

out in the second section, namely the development 

not only of countries but also of 

persons and their creative talents. In the 

following, we list the major areas that the 

government can do to boost the economy. 

Free market system implies open trade 

system which facilitates growth. Many Korean 

economists now regret that Korea did 

not open its ports sooner to expand trade 

when it first embarked on industrialization 

process during 1960s. 

Most jobs are created by the private sector 

rather than by the government sector. 

Within the private sector, small businesses 

offer more employment than the large firms. 

Thus the government should make it easy 

to open a new business. In China today it 

takes a few days to open a business. In Hong 

Kong which ranks first in the Economic 

Freedom of the World Index, it takes about 

five hours. In India, in the past, it might take 

years to expand a business. This red tape 

and bureaucracy slow down employment 

growth and breed graft and corruption. 

Microfinance should be promoted and given 

aid by the government to foster independent 

self-employed businesses. 

In general, there are two fundamental 

problems associated with underdevelopment: 

insufficient knowledge about technology 

(know-how) and about attributes. Examples 

of technical knowledge are computer chip 

fabrication, business management techniques, 

software engineering, accountancy, 

and nutrition. Knowledge about attributes, 

such as the quality of a product, the diligence 

of a worker, or the creditworthiness of a firm 

or a borrower, is crucial to effective markets. 

Information is the lifeblood of markets. Incomplete 

knowledge of attributes lead to 

market failures and impede efficiency and 


173


growth. Developing countries can reduce 

insufficient knowledge of attributes by establishing 

standards and certification through 

the governments, private organizations, laws, 

or social norms. Development requires an 

institutional transformation that improves 

information flows and creates incentives for 

work and enterprising effort, innovation, saving, 

and investment. 

The government can close the knowledge 

gaps between the less-developed countries 

(LDCs) and the more-developed countries 

(MDCs) by (i) absorbing knowledge through 

universal basic education and tertiary technical 

education; (ii) acquiring knowledge 

through open trading system, foreign investment 

and foreign licensing; (iii) communicating 

knowledge to the economic agents by 

using communications technology as well as 

through increased competition, private sector 

provision, and appropriate regulation. 

Technical knowledge can be raised by 

“learning to learn” new technologies. A developing 

country needs to build learning capability 

by investing in new skills, technical information, 

organization methods, and 

international connections. This costly learning 

process is part of the development of technological 

capabilities at the firm level and the 

national level. Technological capability is defined 

in terms of physical investment (plants 

and equipments), human capital (education 

and training), and technological effort (e.g. 

facilities to promote research and development). 

At the firm level, capabilities should focus on 

investment (identify, prepare, design, obtain 

technology for, construct, equip, and staff 

plants), production (process optimization, quality 

control, operation, maintenance, inventory 

Interplay between incentive structure, 

capabilities & institutions determines 

the industrialization success 

control), and linkages (procurement of inputs 

and raw materials, absorbing/providing technology 

from/to input suppliers, subcontractors, 

consultants, service firms, etc.). At the national 

level, the government should provide appropriate 

macroeconomic incentives (interest 

rates, exchange rates, development funds, etc.), 

incentives to promote healthy domestic and 

international competition, incentives to foster 

flexible and efficient factor markets. It is the 

interplay between appropriate incentive structure, 

capabilities, and institutions that determines 

the industrialization success. 

The government plays a critical role in 

reducing the uncertainty created by lack of 

rules. The government should provide a 

framework of clear-cut general rules for 

doing business as well as resolving conflict 

in a free-market setting. It should not favor 

any industry by special subsidies, tariffs, 

quotas, or other non-tariffs barriers. Nevertheless, 

in its early phase of economic development, 

a LDC may protect infant and 

strategic industries to be developed based 

on its resource endowments. Coordination 

failure induced by externalities calls for 

government intervention to organize private 

entrepreneurs into investments that they 

might not otherwise have made. 

More importantly, the government may 

take the lead in providing technological development. 

The best example is given by 

Korea which is the most technologically capable 

among the East Asian newly-industrializing 

countries (NICs). Korea followed the 

footstep of Japan by fostering giant local 

private firms, the chaebol, which were given 

the mission of spearheading the industrialization 

drive, just as the Japanese counterparts, 

the keiretsu, once were. Korea selectively 

encouraged activities and firms via credit allocation 

and subsidization. It provided technology 

financing in the form of both grants 

and subsidized loans which were directed by 

the government to specific activities or firms. 

Just as Japan in the old days, foreign direct 

investment in Korea was severely restricted 

and only permitted when it was the sole way 

of obtaining the technology or gaining access 

to world markets. Thus it relies primarily on 

capital-goods imports and technology licensing 

to acquire technology. The other successful 

model among the NICs as opposed to the 

Korea-Japan model is Taiwan’s in which 

medium-size and small firms were promoted 

by the government. However, both Korea 

and Taiwan adopted the Japan's "guided 

capitalism" in which the government played 

a dominating role. The government laid 

down the rules of the games and firms competed 

within the rules. Just as there was a 

close cooperation between industry, banking, 

and government sectors in Japan, the same 

was found in Korea and Taiwan. 

Finally, the government should be proactive 

in providing an institutional and macroeconomic 

environment conducive to human 

development. The institutional 

environment comprises of both soft and 

hard infrastructure. The hard infrastructure 

includes roads, railways, seaports, airports, 

communications network, educational institutions, 

and basic health care systems. The 

soft infrastructure covers formal and informal 

institutions such as a fair legal system, a 

moral system, a democratic political system, 

and a social system which ensures mobility 

among different groups. In addition, the 

government should protect freedom and 

democracy and consolidate them with considerable 

citizen participation; it should 

ensure property rights and enhance human 

capital. The macroeconomic environment 



should exhibit stable price, output, employment, 

and disciplined fiscal and monetary 

policies. All of these aim at supporting a 

quality of life for citizens. In this overall 

environment setting, the policy conduct 

should be carried out with transparency and 

integrity. Correct strategies and policies are 

essential to development success. 3 

New Role for the 

Planning Commission 

From the discussion above on the difficulties 

of a planning system that has non-economic 

goals, it can be seen that the main problems 

lie in the implementation at the micro level 

and coordination at the policy level. The 

implementation could be successful for certain 

goals such as health and education as in 

the case of socialist Cuba. However, its exclusive 

emphasis on health and education requires 

an enormous commitment by the 

government at the expense of other goals. 

Ninety-nine percent of the Cuban labor force 

is employed by the government. This means 

that the government is able to put a tight 

control on the population. But without freedom 

it is hard to stimulate innovations and 

entrepreneurship. Cuban leaders now realize 

that without the private sector, it is impossible 

to develop the country. As a result, the 

government plans to lay off seventy percent 

of its workers. It demonstrates once again 

that even a die-hard socialist system will 

eventually crack under the weight of excessive 

government control. Traditionally, the 

LDCs have invested a disproportionally large 

amount of spending on education but a relatively 

small amount in health care. The government 

may try to balance this by increasing 

the expenditure on health care. These two 

services generate large enough externalities 

to justify the government intervention. However, 

let the market take care of goods-producing 

sectors unless some of them are classified 

as infant industries needed to be 

protected from international competition. 

Given this framework, there is little role 

for a planning commission initially charged 

with supervision of a traditional planning 

system. Its continued existence is justified by 

its new function of laying out the long-terms 

goals and strategies for the nation. Based on 

this, they will provide studies and suggest 

appropriate policies to achieve these goals 

without any detailed five-year or annual 

plans. An illustration will suffice. For India, 

domestic consumption is more important for 

its economic growth than China which relies 

more on exports. The question for interest 

rate policy is whether interest rate should be 

low to encourage consumption and/or investment. 

Thus a study should be made on elasticities 

of consumption and investment with 

respect to change in interest rate. Recently, 

Korea faced a decline in exports due to the 

global recession, it needed to boost either 

domestic consumption or investment. Studies 

by all Korean research institutes indicated 

that interest elasticities of consumption were 

near zero while domestic investment was 

more elastic with respect to interest rate. The 

Korean Central Bank ultimately decided to 

lower main interest rate to near zero percent 

to encourage investment. This strategy 

worked by raising investment thereby preventing 

Korea from suffering a great recession 

as many other nations did. 

Since there is no planning per se, the 

name of Planning Commission is no longer 

appropriate. Now, it plays more of a role of 

an advisory council (say, National Advisory 

Council) but with a power greater than any 

Ministry because, after some debates, whatever 

it proposes the Ministries and the 

Central Bank should implement. 


1 

Tran, Dang T., Vietnam: Socialist Economic 

Development, 1955-1992, Country 

Studies Series No. 12, International 

Center for Economic Growth, San Francisco, 

April 1994. 

2 

An example of the failure of a typical 

socialist model, see Tran, Dang T., "Lessons 

From the Socialist Experiment in 

Vietnam," The Social Engineer, 4, No. 1, 

January 1995, 8-15. 

3 

For more detailed analysis of what the 

LDCs should do to promote growth, see 

Tran, Dang T., “Globalization and 

Growth of Developing Countries”, in Khi 

V. Thai, Dianne Rahm, and Jerrell D. 

Coggburn, Eds, Handbook of Globalization 

and the Environment, Boca Raton, 

Florida: CRC Press, 2007, 491-525. 

(DANG T. TRAN is Department Chair and 

Professor of Economics & Statistics at California 

State University, Los Angeles, U.S.A. He 

holds a Ph.D. (1977) and M.A. (1976 ) in 

Economics from the Maxwell School of Citizenship 

and Public Affairs, Syracuse University, 

New York, and a B.Ec. (Hons.) (1968) 

from University of Western Australia, Australia. 

Having taught at Utica College of Syracuse 

University and the University of Baltimore, 

Baltimore, Maryland, he has published extensively 

in various professional journals such as 

Journal of Regional Science, Eastern Economic 

Journal, Applied Economics, and 

Economia Internazionale/International Economics. 

He is an Associate Editor of Indian 

Journal of Economics & Business and on Editorial 

Board of Asian-African Journal of Economics 

and Econometrics. He was Chief 

Economist for Ministry of Planning and Development 

of the Government of South Vietnam. 

He also has consulted for the World Bank. 





175

F INANCIAL E CONOMICS 


G REEK CRISIS 

Greek Crises & 

its Impact on the 

World Economy 

Domestic Factors like high government spending, structural rigidities, tax evasion, 

corruption coupled with International factors like the adoption of the euro and lax 

enforcement of EU rules aimed at limiting the accumulation of debt have contributed 

to Greece’s current crisis which is affecting the Euro Zone and their trading partners 

T.Koti Reddy 

Professor in Economics, 

IBS, Hyderabad 

The economy of Greece is 

the twenty-seventh largest 

economy in the world by 

nominal gross domestic product 

(GDP) and the thirty-third largest by 

purchasing power parity, according to the 

data given by the International Monetary 

Fund 1 for the year 2008. Its GDP per 

capita is the 25 th highest in the world, 

while it’s GDP PPP per capita is also 

the 25 th . Greece is a member of the 

OECD, the World Trade Organization, 

the Black Sea Economic Cooperation, 

the European Union and the Euro zone. 

The Greek economy is a developed 

economy with the 22 nd highest standard of 

living in the world 2 . The public sector accounts 

for about 40% of GDP. The service 

sector contributes 75.8% of the total 

GDP, industry 20.8% and agriculture 

3.4%. Greece is the twenty-fourth 

most globalized country in the world and 

is classified as a high income economy. 

History 

Greece adopted the euro as its currency 

in January 2002. The adoption of the euro 

provided Greece (formerly a high inflation 

risk country under the drachma) with access 

to competitive loan rates and also to 

low rates of the Eurobond market. This 

led to a dramatic increase in consumer 

spending, which gave a significant boost 

to economic growth. 

Between 1997-2007, Greece averaged 

four percent GDP growth, almost twice 

the European Union (EU) average. As 

with other European countries, the financial 

crisis and resulting slowdown of the 

real economy have taken their toll on 

Greece’s rate of growth, which slowed to 

two percent in 2008. The economy went 

into recession in 2009 and contracted by 

two percent as a result of the world financial 

crisis and its impact on access to 

credit, world trade, and domestic consumption 

— the engine of growth in 


177


Greece. Key economic challenges with 

which the government is currently contending 

include a burgeoning government 

deficit (13.6% of GDP in 2009), 

escalating public debt (115.1% of GDP in 

2009), and a decline in competitiveness. 

The EU placed Greece under its Excessive 

Deficit Procedure in 2009 and has 

asked Greece to bring its deficit back to 

the three percent EU ceiling by 2012. In 

late 2009, eroding public finances, misreported 

statistics, and inadequate followthrough 

on reforms prompted major 

credit rating agencies to downgrade 

Greece’s international debt rating, which 

has led to increased financial instability 

and a debt crisis. 

Under intense pressure by the EU and 

international lenders, the Greek Government 

has adopted a three-year reform 

program that includes cutting government 

spending, reducing the size of the 

public sector, tackling tax evasion, reforming 

the health care and pension 

systems, and improving competitiveness 

through structural reforms to the labor 

and product markets. The Greek Government 

projects that its reform program 

will achieve a reduction of Greece’s 

deficit by four percent of GDP in 2010 

and allow Greece to decrease the deficit 

to below three percent by 2012. In April 

2010, Greece requested activation of a 

joint European Union-International 

Monetary Fund support mechanism designed 

to assist Greece in financing its 

public debt. 

The financial crisis and the consecutive 

recession caused an increase in unemployment 

to nine percent in 2009 (from 7.5% 

in 2008). Unfortunately, foreign direct 

investment (FDI) inflows to Greece have 

dropped, and efforts to revive them have 

been only partially successful as a result of 

declining competitiveness and a high 

level of red tape and bureaucracy. At the 

same time, Greek investment in Southeast 

Europe has increased, leading to a net 

FDI outflow in some years. 

Greece has a predominately service 

economy, which (including tourism) accounts 

for over 73% of GDP. Almost nine 

percent of the world’s merchant fleet is 

Greek-owned, making the Greek fleet 

the largest in the world. Other important 

sectors include food processing, tobacco, 

textiles, chemicals (including refineries), 

pharmaceuticals, cement, glass, telecommunication 

and transport equipment. 

Agricultural output has steadily decreased 

in importance over the last decade, 

accounting now for only five percent 

of total GDP. The EU is Greece’s major 

trading partner, with more than half of 

all Greek two-way trade being intra-EU. 

Greece runs a perennial merchandise 

trade deficit, and 2009 imports totaled 

$64 billion against exports of $21 billion. 

Tourism and shipping receipts together 

The US exports to Greece reached 

$2.4 billion, accounting for 2.7% 

of Greece's total imports in 2008 

with EU transfers make up for much of 

this deficit. 

European Union (EU) Membership 

Greece has been a major net beneficiary 

of the EU budget; in 2009, EU transfers 

accounted for 2.35% of GDP. From 1994- 

99, about $20 billion in EU structural 

funds and Greek national financing were 

spent on projects to modernize and develop 

Greece's transportation network in 

time for the Olympics in 2004. 

The centerpiece was the construction 

of the new international airport near 

Athens, which opened in March 2001 

soon after the launch of the new Athens 

subway system. 

EU transfers to Greece continue, with 

approximately $24 billion in structural 

funds for the period 2000-2006. The same 

level of EU funding, $24 billion, has been 

allocated for Greece for 2007-2013. These 

funds contribute significantly to Greece's 

current accounts balance and further reduce 

the state budget deficit. EU funds 

will continue to finance major public 

works and economic development 

projects, upgrade competitiveness and 

human resources, improve living conditions, 

and address disparities between 

poorer and more developed regions of the 

country. They are planned to be phased 

out in 2013. 

US-Greece Trade 

In 2008, the US trade surplus with Greece 

was $1.1 billion. There are no significant 

non-tariff barriers to American exports. 

US exports to Greece reached $2.4 billion, 

accounting for 2.7% of Greece's 

total imports in 2008. The top US exports 

remain defense articles, although American 

business activity is expected to grow 

in the tourism development, medical, 

construction, food processing, and packaging 

and franchising sectors. US companies 

are involved in Greece's ongoing 

privatization efforts; further deregulation 

of Greece's energy sector and the country's 

central location as a transportation 

hub for Europe may offer additional opportunities 

in electricity, gas, refinery, 

and related sectors. 


G REEK CRISIS 

Objectives of the Study 

1. To Understand the Greek Economy & 

the Historical Macroeconomic Changes 

in Greece and the Progress of 

Greece after Joining European union 

2. To Understand and analyze the reasons 

behind the Recent Debt Crises in 

Greece and Its impact on the Global 

capital Markets & world Economy. 

3. To Highlight the Lessons to be learnt 

from the Greece Crises & Suggest 

some policy implications to Greece 

Government. 

Methodology of the Study 

The entire study is based on secondary 

data collected from various news articles 

& Experts views on the Greece Crises. 

Review of Literature 

Greece crisis that is the sovereign risk 

that evolved this year is horrifying. We 

find the economy totally paralyzed and 

as Kenneth Rogoff 3 said once the fallout 

of financial Armageddon fades off, it 

paves the way for fiscal imbalances and 

sovereign downgrades. If we listen to 

Niall Ferguson 4 at Peterson institute of 

international economics conference, he 

draws on a historical perspective of 

Greece debt crisis. If we go back into the 

past this is the fifth time that Greece is 

on the verge of default. But as we know 

the situation was different then. Why do 

we say this because Greece had its own 

monetary framework put in place. So it 

had the option of devaluing its currency 

to rescue itself from the chasm. Now 

situation is different as it is stuck in a 

monetary union and the unalterable laws 

framed in the Lisbon treaty at the time of 

monetary unification makes the situation 

worse. Then we have bond vigilantes 

claiming for fiscal austerity in the midst 

of a turmoil thereby aggravating the financial 

trauma of Greece. 

The situation also has been driven by 

the continuous fudging of national accounts 

by making use of currency swaps 

just to mask the debt situation thereby 

trying to create an image that the norms 

prescribed in the Maastricht treaty are 

followed. Greece can’t really inflate the 

situation away because its hands are tied 

to ECB. There is no currency option as 

well. The only way to come out of this 

pothole is to restructure its debt and try to 

restore its budget imbalances to create 

some kind of confidence for its creditors. 

This suggestion has been provided by 

many economists across the globe. We 

have seen Greece getting help from Germany 

and France as well. The countries 

have responded cohesively and have 

calmed the markets and have held the 

monetary union together just to keep the 

euro smiling. The situation is good so far 

if we go by the cds spreads. We never 

know if there is a financial implosion 

which could the push the economy back 

into the mess. The measures have taken 

up by Greece finance minister and the 

president. The situation is under control 

according to them. 

Greece’s Debt Crisis 

How All It Happened? 

Over the last ten years, to fund the Government 

budget and current account 

deficit 5 Greece government barrowed 

heavily from international capital markets. 

In the period between 2001 and 

2008, when Greece adopted euro as its 

currency, they reported budget deficit of 

Greece averaged five percent per year, 

compared to the average budget deficit of 

two percent for the entire Euro zone, and 

the reported current account deficit of 

Greece averaged nine percent per year, 

compared to the average current account 

deficit of one percent for the entire Euro 

zone. But as per the revised Statistics in 

2009, the budget deficit is estimated to 

We never know if there is a financial 

implosion which could the push 

the economy back into the mess 

have been more than 13% of GDP, and 

many attributed these high budget and 

current account deficits to the high spending 

of successive Greek governments. As 

discussed earlier Greece government 

funded both of these deficits by borrowing 

from Global capital markets, leaving 

Greece with high external debt i.e., 115% 

of GDP in 2009. But this High Level of 

Budget deficit & Current account deficit 

are well above those permitted by the 

rules governing the EU’s Economic and 

Monetary Union (EMU). Even though the 

US financial crises led to Liquidity problems 

in most of the world economies, the 

Greek government managed to raise the 

funds from international markets. The 

financial crises which led to global economic 

slow down placed a lot of pressure 

on the governments of various economies 

including Greece, resulted in increases in 

Government expenditure & decrease in 

Tax Revenues. 

The whole problem started during late 

2009 when the new socialist government, 

led by Prime Minister George Papandreou, 

released the revised estimates of 

the government budget deficit for the 

year 2009 from the existing estimate of 


179


6.7% of GDP to 12.7% of GDP 6 . Subsequent 

to this three main credit rating 

agencies downgraded the Greek bonds, 

which actually made investors to loose 

the confidence on Greek Economy. 

Countries with large external debts, like 

Greece, were of particular concern for 

investors. Allegations that Greek governments 

had falsified statistics and attempted 

to obscure debt levels through 

complex financial instruments also contributed 

to a drop in investor confidence. 

Before the crisis, Greek 10-year bond 

yields were 10 to 40 basis points above 

German 10-year bonds. With the crisis, 

these spreads increased to 400 basis 

points in January 2010, which was at the 

time a record high 7 . High bond spreads 

indicate declining investor confidence in 

the Greek economy. 

Despite increasing nervousness surrounding 

Greece’s economy, the Greek 

government was able to successfully sell 

€8 billion ($10.6 billion) in bonds at the 

end of January 2010, €5 billion ($6.7 

Billion) at the end of March 2010, and 

€1.56 billion ($2.07 billion) in mid-April 

2010, albeit at high interest rates 8 . However, 

Greece must borrow an additional 

€54 billion ($71.8 billion) to cover maturing 

debt and interest payments in 2010, 

and there are concerns about the government’s 

ability to do so. 

At the end of March 2010, the Euro 

zone member states pledged to provide 

financial assistance to Greece in concert 

with the IMF, if necessary and if requested 

by Greece’s government. In mid- April 

2010, the details of the proposed financial 

assistance package for this year were released: 

a three-year loan worth €30 billion 

($40 billion) at five percent interest rates, 

above what other Southern European 

countries borrow at, but below the rate 

currently charged by private investors on 

Greek bonds. It is expected that an IMF 

stand-by arrangement, the IMF’s standard 

loan for helping countries address balance 

of payments difficulties, valued at €15 billion 

($20 billion) for this year would precede 

any assistance provided to Greece by 

the Euro zone members. Investor jitteriness 

spiked again in April 2010, when 

Euro stat released its estimate of Greece’s 

budget deficit. At 13.6% of GDP, Euro 

stat’s estimate was almost a full percentage 

higher than the previous estimate 

released by the Greek government in 

October 2009 9 . This led to renewed questions 

about Greece’s ability to repay its 

debts, with €8.5 billion ($11.1 billion) falling 

due in mid-May 2010. On April 23, 

2010, the Greek government formally 

requested financial assistance from the 

IMF and other Euro zone countries. The 

European Commission, backed by Germany, 

requested that the details of 

Greece’s budget cuts for 2010, 2011, and 

2012 be released before providing the financial 

assistance. In late April 2010, the 

spread between Greek and German 10- 

year bonds reached a record high of 650 

basis points, and one of the major credit 

rating agencies, Moody’s, downgraded 

Greece’s bond rating. 

Possible Causes of the Crisis 

Greece’s current economic problems have 

been caused by a mix of domestic and international 

factors. Domestically, high 

government spending, structural rigidities, 

tax evasion, and corruption have all contributed 

to Greece’s accumulation of debt 

over the past decade. Internationally, the 

adoption of the euro and lax enforcement 

of EU rules aimed at limiting the accumulation 

of debt are also believed to have 

contributed to Greece’s current crisis. 


G REEK CRISIS 

Domestic Factors 

High Government Spending and 

Weak Government Revenues 

Between 2001 and 2007, Greece’s GDP 

grew at an average annual rate of 4.3%, 

compared to a Euro zone average of 

3.1% 10 . High economic growth rates were 

driven primarily by increases in private 

consumption (largely fueled by easier access 

to credit) and public investment financed 

by the EU and the central government. 

Over the past six years, however, while the 

central government expenditures increased 

by 87%, revenues grew by only 

31% 11 , leading to budget deficits well 

above the EU’s agreed-upon three percent 

of GDP threshold. Observers identify 

a large and inefficient public administration 

in Greece, costly pension and 

healthcare systems, tax evasion, and a 

general “absence of the will to maintain 

fiscal discipline” as major factors behind 

Greece’s deficit. 

According to the OECD, as of 2004, 

spending on public administration as a 

percentage of total public expenditure in 

Greece was higher than in any other 

OECD member, “with no evidence that 

the quantity or quality of the services are 

superior.” In 2009, Greek government 

expenditures accounted for 50% of GDP. 

Successive Greek governments have 

taken steps to modernize and consolidate 

the public administration. However, observers 

continue to cite over-staffing and 

poor productivity in the public sector as 

an impediment to improved economic 

performance. An aging Greek population 

— the percentage of Greeks aged 

over 64 is expected to rise from 19% in 

2007 to 32% in 2060 — could place additional 

burdens on public spending and 

what is widely considered one of Europe’s 

most generous pension systems. 

According to the OECD, Greece’s “replacement 

rate of 70%-80% of wages 

(plus any benefits from supplementary 

schemes) is high, and entitlement to a full 

pension requires only 35 years of contributions, 

compared to 40 in many other 

countries.” 12 Absent reform, total Greek 

public pension payments are expected to 

increase from 11.5% of GDP in 2005 to 

24% of GDP in 2050. 

Weak revenue collection has also contributed 

to Greece’s budget deficits. 

Many economists identify tax evasion and 

Greece’s unrecorded economy as key factors 

behind the deficits. They argue that 

Greece must address these problems if it 

is to raise the revenues necessary to improve 

its fiscal position. Some studies 

have estimated the informal economy in 

Greece to represent between 25%-30% 

of GDP. Observers offer a variety of explanations 

for the prevalence of tax 

evasion in Greece, including high levels 

of taxation and a complex tax code, excessive 

regulation, and inefficiency in the 

public sector. Like his predecessor Constantine 

(Costas) Karamanlis, Prime 

Minister Papandreou has committed to 

cracking down on tax and social security 

contribution evasion. Observers note, 

however, that past Greek governments 

have had, at best, mixed success seeing 

through similar initiatives. 

Structural Policies and Declining 

International Competitiveness 

Greek industry is suffering from declining 

international competitiveness. 

Economists cite high relative wages and 

low productivity as a primary factor. According 

to one study, wages in Greece 

have increased at a five percent annual 

rate since the country adopted the euro, 

about double the average rate in the 

Euro zone as a whole. Over the same 

period, Greek exports to its major trading 

partners grew at 3.8% per year, only 

half the rate of those countries’ imports 

from other trading partners 13 . Some observers 

argue that for Greece to boost its 

international competitiveness and reduce 

its current account deficit, it needs 

to increase its productivity, significantly 

cut wages, and increase savings. As discussed 

below, the Papandreou government 

has begun to curb public sector 

wages and hopes to increase Greek exports 

through investment in areas where 

the country has a comparative advantage. 

In the past, tourism and the shipping 

industry have been the Greek 

economy’s strongest sectors. 

Successive Greek governments 

have taken steps to modernize and 

consolidate the public administration 

Consequences of Greek Crisis 

• As Euro is the common currency for 

the entire European Union, Euro zone 

— and all trading partners of Euro 

zone — is affected due to wide range of 

currency fluctuations and the Drastic 

fall in the value of Euro. 

• The immediate effect of the Greek 

crises is on the other 15 Euro zone 

economies as they agreed to help out 

Greece and hence the taxpayers of 

these economies will effectively share 

a part of Greece's burden. 

• There is also huge fear that the problems 

associated with Greece economy 

will have an adverse domino effect on 


181


Figure 1: Export Prices of PIIGS From 2004 To 2010 

1.6 

1.4 

1.5 

1.2 

1.4 

1.3 

1 

1.2 

1.1 

0.8 

1 

0.9 

0.6 

0.8 

0.4 

0.7 

0.6 

0.2 

0.5 

0.4 0 

Spain 

Greece 

Ireland 

Italy 

Portugal 

Figure 2: Inflation Rates of PIIGS From 2003 To 2010 

120 

110 

Spain 

Greece 

Ireland 

Italy 

100 

Portugal 

90 

2003M01 

2003M05 

2003M09 

2004M01 

2004M05 

2004M09 

2005M01 

2005M05 

2005M09 

2006M01 

2006M05 

2006M09 

2007M01 

2007M05 

2007M09 

2008M01 

2008M05 

2008M09 

2009M01 

2009M05 

2009M09 

2010M01 

2004M04 

2003M05 

2003M09 

2004M01 

2004M05 

2004M09 

2005M01 

2005M05 

2005M09 

2006M01 

2006M05 

2006M09 

2007M01 

2007M05 

2007M09 

2008M01 

2008M05 

2008M09 

2009M01 

2009M05 

2009M09 

2010M01 


G REEK CRISIS 

Figure 3: Industrial Production of Greece, IrelandaAnd Portugal From 2002 To 2009 

6 

5.5 

5 

4.5 

4 

Greece 

Ireland 

Portugal 

3.5 

3 

2.5 

2002M01 

2002M06 

2002M11 

2003M04 

2003M09 

2004M02 

2004M07 

2004M12 

2005M05 

2005M10 

2006M03 

2006M08 

2007M01 

2007M06 

2007M11 

2008M04 

2008M09 

2009M02 

2009M07 

2009M12 

International capital markets. Which 

in turn affects the weak members of 

the euro zone, such as the so-called 

“PIIGS” — Portugal, Ireland, Italy 

and Spain as well as Greece — all of 

whom face challenges rebalancing 

their books. 

• Rating Agencies also played a crucial 

role in the entire process. Rating Agencies 

actually rates countries, companies 

& financial products like equity & 

Debt. A country or a company with 

good rating can raise the funds at a 

cheaper cost. Now there are concerns 

that their downgrading of Greece, 

Spain and Portugal might trigger a 

sovereign debt crisis, where countries 

can no longer raise money to pay their 

bills. This fear resulted in the increase 

in the interest rates which means that 

these countries have to pay more intrest 

to barrow in open market. 

• The Greek crises has an Impact on the 

Global banking system also as many 

Global major banks have invested in 

the Debt instruments issued by Greece 

Government. So ultimately this economic 

crisis will affect many ordinary 

investors or people who own their 

shares through pension funds. 

• Greek crises has also impact on the 

Currency markets, Most of the Currency 

traders have feared that some 

countries with large budget deficits — 

such as Greece, Spain and Portugal — 

might be tempted to leave the euro. 

• The other major problem is with the 

European Union itself. Any country 

which left the European Union could 

allow its currency to fall in value, and 

there by improving its competitiveness. 

But it would cause huge ruptures in the 

financial markets as investors would 

fear other nations would follow, potentially 

leading to the break-up of the 

monetary union itself. 

Influence on other Factors 

Export Prices 

Figure1 shows the trend of Export Prices 

in PIIGS from 2004 to 2010. Export 

prices depend on the economic Condition 

of the country. If the economy is performing 

well, currency will appreciate and 

Exports become expensive and vise versa. 

Now if we look at Figure 1, it shows that 

till 2007-2008 the euro is appreciating 

making its export expensive but during 

the period of Debt Crisis currency falls 

abruptly making the exports highly competitive 

but PIIGS are not the major exporters 

their main source of revenue are 

shipping and Tourism, which gets highly 

effected during this period. 

Inflation 

Inflation is one of the most important 

economic indicator. We can see from 

Figure 2 that the Inflation is growing at a 

constant pace in PIIGS till 2007 but after 

that their was a drastic change in the inflation 

pattern. The rise in inflation is due to 

high austerity measures taken by the government 

after the Bailout packages from 

IMF and ECB. 


183


Figure 4: Employment Rate of Greece, Euroland , Ireland and Portugal From 1998 To 2009 

0.8 

0.7 

0.7 

Greece 

Euroland 

0.6 

Ireland 

Portugal 

0.6 

0.5 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 

Figure 5: GDP (% Change) of Greece, Euroland and Spain From 1996 To 2010 

0.10 

Greece 

0.00 

Euroland 

Ireland 

-0.10 

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 


G REEK CRISIS 

Figure 6: Current Account Balance of Spain, Italy and Greece From 2005 To 2010 

0 

-5 

-10 

-15 

-20 

Spain 

Italy 

Greece 

-25 

-30 

-35 

2005-01 

2005-02 

2005-03 

2005-04 

2006-01 

2006-02 

2006-03 

2006-04 

2007-01 

2007-02 

2007-03 

2007-04 

2008-01 

2008-02 

2008-03 

2008-04 

2009-01 

2009-02 

2009-03 

2009-04 

2010-01 

Industrial Production 

Index of Industrial Production indicates 

how well different industry of a country is 

performing. It generally includes all the 

industry which has major contribution in 

GDP. However in Greece shipping and 

tourism is the major contributor in GDP 

and the manufacturing sector apart from 

a few sectors is not developed. During the 

crisis as we can see from Figure 3, there is 

decrease in industrial production. However 

this fall is not significant because 

shipping and tourism industry is not included 

in the index. 

Employment Rate 

Figure 4 shows the employment rate in the 

PIIGS countries. We can see from this that 

employment is almost steady till 2007-08 

but after that the employment fall it was 

due to the high austerity measures taken 

by government. These austerity measure 

fall on the companies and they finally start 

laying of employees so this is the reason 

for the high employment rate. 

GDP (% change) 

GDP is the most important measure of 

the well being of a country. Figure 5 

shows the year on year percentage change 

of GDP. There has been a continuous 

growth in the GDP of the two countries 

from 1996-2007 except a slight glitch in 

the period 2002-2004. However during 

the sovereign debt crisis which started 

showing in the books of account from 

2008 there has been a drastic fall in the 

GDP of both the countries. The crisis 

then percolated to the entire Europe 

which is reflected in the change in GDP 

of the entire Europe. 

Current Account Balance 

Current account is a book of account 

where all the transaction of a country 

with rest of the world is recorded. It reflects 

whether the country is deficit or 

surplus in trade transactions (export-import). 

Here we can see that all the three 

countries has trade deficit. It is because 

all of them are major importing countries. 

Since they lie in a financially integrated 

zone therefore they produce and 

export in the field where they are better 

off than others. In other areas their policy 

is to import. However we can see from 

the graph that deficit is increasing because 

of higher import to match increasing 

domestic demand of the country. This 

rise in the import is not off set by the 

export. But since 2009 when the government 

has announced austerity measure 

the demand has drastically reduced thus 

reducing the demand for foreign products 

(import) and in turn decreasing the 

trade deficit. 


185


Concusions 

The Spillover Effect — 

How the Things Could Have Got Affected 

This political and economic failure 

leads to the third Greek warning: that 

contagion can spread through a large 

number of routes. A run on Greek banks 

is possible. So is a “sudden stop” of 

capital to other weaker euro-zone countries. 

Firms and banks in Spain and 

Portugal could find themselves shut out 

of global capital markets, as investors’ 

jitters spread from sovereign debt. Europe’s 

inter-bank market could seize up, 

unsure which banks would be hit by 

sovereign defaults. Even Britain could 

suffer, especially if the May 6 th election 

is indecisive. 

So this crisis shows how a debt burden 

can prove to be a bane to the country. 

Keeping these symptoms in mind government 

all over the world has decided to 

reduce there Debt burden. 

If we look at the India, it is having 80% 

of GDP as a debt burden and government 

is taking many steps to reduce the debt 

amount like disinvestment. 

Moreover because of financial integration 

i.e. the formation of Euro is under 

question as countries don’t have the Monetary 

power so cant print money neither 

they can control interest. 

End-notes 

1 

About International Monetary Fund 

from Wikipedia. 


G REEK CRISIS 

Oxford Economics, January 29, 2010. 

2 

About Greece Economy from 

Wikipedia. 

3 

Kenneth Rogoff is Professor of Economics 

and Public Policy at Harvard 

University, and was formerly chief 

economist at the IMF. 

4 

Niall Ferguson, Harvard University, 

Niarchos Lecture, Peterson Institute 

for International Economics, Washington 

DC May 13, 2010 

5 

The current account is the difference 

between exports and imports, plus 

net income payments and net unilateral 

Transfers. By accounting identity, 

the current account is equal to net 

inflows of foreign capital. Current 

account deficits are financed by foreign 

capital inflows. 

6 

“Is Greece Heading for Default?,” 

Oxford Economics, January 29, 2010. 

7 

“Fiscal Woes to Dog Greek Bonds 

Even if Aid Offered,” Reuters, March 

22, 2010. 

8 

Exchange rate used in the memo is the 

exchange rate April 26, 2010: €1 = 

$1.331. Source: European Central 

Bank, http://www.ecb.int/stats/exchange/ 

eurofxref/html/eurofxref-graph-usd. 

en.html. 

9 

Peter Garnham, “Greece Crisis Takes 

Toll on Euro,” Financial Times, April 

24, 2010. 

10 

At constant prices. IMF, World Economic 

Outlook, October 2009. 

11 

Update of the Hellenic Stability and 

Growth Programme, Greek Ministry 

of Finance, January 2010, 

http://www.mnec.gr/export/sites/mnec/ 

en/economics/growth_programme_2005-8/2010_01_15_SGP. 

pdf. 

12 

“OECD Economic Survey: Greece,” 

OECD July 2009. 

13 

“Is Greece Headed for Default?,” 



• Rebecca M. Nelson, Paul Belkin & 

Derek E. Mix, April 27, 2010 

“Greece’s Debt Crisis: Overview, 

Policy Responses, and Implications” 

Congressional Research Service. 

• "Greek Debt Concerns Dominate – 

Who Will Be Next? – Seeking Alpha". 

http://seekingalpha.com/ 

article/183820-greek-debt-concernsdominate-who-will-be-next. 

Retrieved 

on 2 nd September 2010. 

• "ECB suspends rating limits on Greek 

debt | News". Business Spectator. 

22 nd October 2007. http://www.businessspectator.com.au/bs.nsf/Article/ 

ECB-suspends-rating-limits-on-Greekdebt-549GS?opendocument&src=rss. 

Retrieved 5 th May 2010. 

• Jon Hilsenrath, “Q&A: Carmen Reinhart 

on Greece, US Debt and 

Other ‘Scary Scenarios’,” Wall Street 

Journal, February 5, 2010. 

• Carmen Reinhart, “The Economic 

and Fiscal Consequences of Financial 

Crises,” VoxEU, January 26, 2009. 

• For more on the global financial crisis, 

see CRS Report RL34742, The 

Global Financial Crisis: Analysis and 

Policy Implications, coordinated by 

Dick K. Nanto. 

• Niall Ferguson, May 13, 2010, Fiscal 

crises and imperial collapses Historical 

Perspectives on Current Predicaments, 

Niarchos Lecture, Peterson 

Institute for International Economics, 

Washington DC. 

• Kenneth Rogoff, From Financial 

Crisis to Debt Crisis? Article published 

in Project Syndicate, 2009, and 

can be retrieved from http://www. 

project-syndicate.org/commentary/ 

rogoff60/English. 

• “2010 European sovereign debt crises” 

Retrieved from http://en.wikipedia.org/wiki/2010_European_sovereign_debt_crisis. 

• "Greek debt to reach 120.8 pct of 

GDP in '10 – draft". 5 th November 

2009, Retrieved from http://www.reu- 

ters.com/article/idU- 

SATH00496420091105 

Retrieved 2 nd May 2010. 

• "Greece's sovereign-debt crisis: Still 

in a spin". Retrieved from http://www. 

economist.com/displaystory.cfm?story_ 

id=15908288 . Retrieved 2 nd May 

2010. 

• "Greeks and the state: an uncomfortable 

couple". Associated Press. 3 rd May 

2010. http://news.yahoo.com/s/ 

ap/20100503/ap_on_bi_ge/eu_unruly_ 

greece. 

• "FT.com / Capital Markets – Strong 

demand for 10-year Greek bond". 

And can be retrieved from 

http://www.ft.com/ 

cms/s/0/245030a8-2773-11df-b0f1- 

00144feabdc0.html 

(DR. T. KOTI REDDY presently working as 

Faculty in Economics at IBS, Hyderabad. 

His area of teaching includes Managerial 

Economics, Macro Economics & Business 

Environment, International Finance&Trade. 

He has published widely in International and 

National Journals. He has authored three 

books titled: Indian Economy, Interview 

Manual, Andhra Pradesh Economy and 

contemporary issues in rural india.His area 

of interest is Development Economics. 





187

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Dr. V.M.Madiman Rao, Institute for Social and Economic Change, 

Bangalore 

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PRAISE FOR IER 

“Thank you very much for sending me the India Economic Review 

2007 on India’s Policy Deficit: Planning for Change. I appreciate the 

initiative taken by the IIPM Think Tank in this area.” 

Dr. Indira Hirway, Centre for Development Alternatives, Ahmedabad 

“Your publication is interesting and useful to us in our work.” 

Mr. Mihir.R.Bhatt, Honorary Director, All India Disaster Mitigation Institute, 

Ahmedabad 

“It is nicely designed and also rich in contents.” 

Dr. Rudra Narayan Mishra, Gujarat Institute of Development Research, 

Ahmedabad 

“We at IDEI do appreciate the efforts being made by your organization...IER 

which is committed to enhance public awareness of policy 

issues in economics and management and to engineer solutions that 

will fulfil the Great Indian Dream.” 

Ms. Rajpreet Kaur, Program Support Officer, International Development 

Enterprises (India), New Delhi 

“I like the content, which is extremely detailed but balanced and 

certainly offers a good non-ideological mix from leading authors.” 

Dweep.I.Chanana, UBS Philanthropy Services, a consulting unit of UBS 

AG, Zurich 

“I managed to flip through the Review and found some of the articles 

very interesting ... IER has an interesting mix of articles and the photos 

and layout are also very well done.” 

Ms. Kumkum Dasgupta, Hindustan Times, New Delhi 

“They are highly informative, focusing on contemporary issues.” 

Dr. Rajib Kumar Sahoo, Senior Economist, Canara Bank, Bangalore 

“Presentation of IIPM Think Tank is really of high quality. Your team 

led by Dr. M. K. Chaudhuri and Prof. Arindam Chaudhuri deserve 

the appreciation from every one who has a vision and dream for a 

new innovative India. Hope your effort will become a path finder for 

innovative research workers.” 

Dr. Gouri Pada Dutta, Chairman, Subject Committee (Health), State Planning 

Board, West Bengal, Kolkata 

“I would like to Congratulate IIPM for bringing such critical policy 

issues to the forefront, especially as India and world’s other great economies 

tread on the path of globalization and economic liberalization. 

Your efforts at adding the human face to some very core management 

areas are indeed commendable.” 

Mr. Bharti Ali, Co-Director, HAQ: Centre for Child Rights, New Delhi 

“I have been reading it with great enthusiasm, interest and curiosity 

nonetheless. I would also like to congratulate you and your team for 

truly high-quality editions of IER that are of the prime importance to 

the future of India’s thriving economy.” 

Dr. Rok Spruk, Slovenia 

“I have received your energy /environment special issue. I enjoyed 

reading it. This is one of the most comprehensive reviews available 

on the subject today... This number is timely and will serve as a basic 

reference for leading policy makers/planners in India. In fact, I can say 

that all your volumes are packed with information/ideas for development 

workers. I wish you all the best in your new assignment.” 

Dr. G.Poyya Moli, Member, CEM, IUCN & Member, SEAC & SHCC, Govt of 

Puducherry, Reader, Department of Ecology & Environmental Sciences, Pondicherry 

University, Pondicherry 

“I am impressed particularly with the varieties of issues that you have 

been able to cover in this publication. Thank you for this spectacular 

piece of work.” 

Dr. Soumendra K. Dash, Chief Economist, CARE Ratings Ltd, Mumbai 

“I find that the journal covers a wide range of subjects in Economics, 

and is very useful both for reference and research.” 

Dr. Prabha Panth, Professor of Economics, Osmania University, Hyderabad 

“The copies of IER are excellently produced and its so nice to see 

that you have many new names from new institutions.” 

Dr. PadmaPrakash, Editor, eSocialSciences

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