What Narendra Modi Can Do for Development

 

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Nearly one month after the landmark 2014 Lok Sabha election, India waits for newly-elected Prime Minister Narendra Modi to make good on his election promises. During his campaign, former Chief Minister Modi vowed to catalyze economic growth, curtail corruption, and defend the poor, a platform that surely helped him earn the largest margin of victory in the country’s history. Now, in the face of slowing economic growth and rising income inequality, Modi is expected to apply his development prowess for the rest of India.

But how?

The answer is simple: subsidy reform.

Since India’s independence from Britain, subsidies have had a major presence in India’s budget. India’s 2014-2015 interim budget estimated $21.2 billion in subsidies for food and petroleum alone. Until Modi’s election, this trend showed no sign of changing.

Next month, the Modi government is set to unveil its first budget, the first likely indicator of Modi’s fulfillment of campaign promises. Recently, Mr. Modi has hinted that his economic policies and corresponding budget will be unpopular with India, most likely due in part to the diminishing role of petroleum and agriculture subsidies.

India is host to a myriad of subsidies. From petroleum to education, India even subsidizes Muslim citizens to make the Haj. Of these, some of the most controversial are food subsidies. Within this broad scope, there are subsidies for fertilizer, irrigation, and electricity as well as in-kind food subsidies. The Government of India has barely reformed its food subsidy policy since the mid-1970s, with the exception of the 2013 National Food Security Act. The National Security Act provides food to two-thirds of India’s population, though only 22% live beneath the poverty line.

Designed with combating poverty in mind, subsidies are expected to boost production and increase efficiency while bolstering India’s recently declining growth rates. However, in reality, the inverse is true. Indian subsidies in agriculture are distributed unequally across the states. For example, the states of Assam and Madhya Pradesh, receive disproportionate agricultural subsidies, with the former receiving 600 rupees per agricultural person and the latter receiving 40 rupees per agricultural person. Both states, with active agricultural sectors, receive unequal subsidies for their efforts, leaving Madhya Pradesh to be one of the country’s more prosperous states and Assam one of the least developed.

Further, it is unlikely that in-kind food subsidies even reach India’s poorest. As early as 1985, the public distribution system was responsible for a mere 15% of the allocations meant for the poor, a track record that has worsened over time.

Though it may seem that business-centric Modi has neglected the poor in lieu of increasing foreign investment and freeing the labor markets, the new Prime Minister ’s policy reforms could be a key to reducing poverty. In a recent speech to Parliament, Modi alluded to administrative changes to increase the efficiency of the state-run Food Corporation of India. These reforms could come in the form of a nation-wide cash transfer system that could increase distribution efficiency and restore foodstuffs to market prices. With demonstrated effectiveness in neighboring Indonesia, cash transfers allow more targeted assistance and more effective poverty reduction. Though it is unlikely that Modi will eradicate subsidies altogether, it is clear that he is dedicated to their reform.

For better or for worse, Narendra Modi’s victory is a sign for changing times in Indian politics. The Modi government’s new budget is expected to be introduced in early July, but the transition from planning to implementation will be a challenge. Parliament must review and approve the budget, meaning that the Modi’s budget could be met with opposition before it even reaches the Rajya Sabha. Though scaling back subsidies and bolstering growth are ambitious, the greater obstacle could be a lack of political will.

 

 

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Food for Thought

The Intergovernmental Panel on Climate Change (IPCC) recently released its newest findings on global warming, and the general conclusion is unsurprising: pollution is harming our environment in such a way that there will be dire consequences in the future. But the report had an even more interesting finding: the framing around climate change is all wrong. Climate change has become much more than an environmental issue and, as a future determinant of food security, has bled into our understanding of human rights.images

The framing of an issue is critical to policy formation and resource mobilization. If an issue does not have the proper framing, one that appeals to the general public, then gaining public support becomes that much more difficult. Look at issues such as gay marriage. When gay marriage was a religious issue, no progress was made on legalizing it. Only when supporters framed gay marriage as a civil rights issue did legalization begin to occur. The same theory applies to development issues.

The current understanding of climate change is that it is an environmental issue that can affect the occurrence and size of natural disasters. Climate change can lead to massive blizzards, devastating typhoons, and the melting of the polar icecaps. But framing climate change in a natural disaster context does not convey the urgency of the issue. With or without climate change, natural disasters are going to occur. No human intervention can stop it. As a result, the common perception is that there are no immediate benefits to addressing climate change and this understanding promotes apathy in the general public.

Courtesy of IPCC
Courtesy of IPCC

The discussion of climate change, however, might be more productive if the development community transformed it into a food security issue that directly impacts human rights. IPCC findings show that agricultural yields could drastically decrease as soon as 2030, and just a two-degree change in temperature has the ability to kill crops and create food shortages. The IPCC report further shows that not only will there be a food shortage, but the shortage could cause a food price increase anywhere from 3% to 84%. So in addition to there being too little food, food will only be affordable for the wealthy, placing countries with high food insecurity at an elevated risk for civil unrest.

Framing climate change as a food security issue adds more urgency to the problem and could help mobilize the general public to take action, regardless of their history with natural disasters. It transforms the picture of climate change from being a disaster like Typhoon Haiyan to an issue directly on people’s doorstep that could affect them at any moment. Food insecurity directly affects people at an individual level and puts every individual’s human rights at risk. It encourages the “not in my backyard” mentality that Americans in particular are very fond of. Climate change no longer just places the rights of those in developing nations at risk. Even those far removed from natural disasters can feel its effect.

images-1Some argue that the IPCC is overdramatizing the threat to food security. While this is entirely possible, it does not change the fact that a changing the framework of climate change could be key to mobilizing the public to take preventative measures. The same applies to any development issue. The development community must place increasing importance on the framing of its issues as a way to mobilize support. Some issues have already benefited from changing its frame. Female empowerment as an economic necessity is the perfect example of an issue capitalizing on a universally appealing framework. But the development community must do even more to further its other causes. Framing will tell people why they should care about international development. How can private organizations benefit from foreign investment? Why should high-income individuals care about a problem thousands of miles away? If the proper framework is not in place, then development will continue to face an uphill battle against public apathy.

African Growth: the Role of Demographics and Urbanization

It may be hard to imagine that population growth in Africa could do anything but exacerbate the continents current issues with food shortages and infectious disease.  But according to Peter Pham, director of the Atlantic Council’s Michael S. Ansari Africa Center, Africa’s high population growth may propel Africa’s economy forward.

The continent has a young median age of 19.7 and the predicted population growth rate hints that this median may stay low for years to come. Since 2000, Africa’s population has increased from 200 million to 1 billion and the predicted average population growth rate is 2.2 %, compared to .9 % in Asia. The young and large consumer base and workforce in Africa may be just what some African countries need to kick-start their economies. Continue reading

Living with Drought: Testing Weather-Index Based Insurance

The Center for Strategic & International Studies hosted Dr. Shukri Ahmed on August 21, 2012 for his presentation Weather-Index Based Crop Insurance for Smallholder Farmers in Ethiopia: A Multi-Agency Pilot Project. Dr. Ahmed is a team leader for the Early Warning and Vulnerability Assessment and Analysis group with the Trade and Markets Division of the FAO. He is currently working on a pilot project in Ethiopia to see if weather- index based insurance can create an avenue for greater development in Ethiopia and allow for small scale farmers to reap more benefits from their hard work. Continue reading

Ethanol’s Hunger Games

Severe drought in the Midwest has resulted in widespread crop failure, causing spikes in food prices. Already, the costs of basic food commodities have shot to new highs: this week, corn traded at $8.14 a bushel, a new record. Food prices are expected to continue increasing as the effects of the drought deplete existing food supplies. While the drought is the primary cause of the recent shocks in the food market, there is also an underlying policy that has artificially bolstered the market prices for years.

The scheduled increases in ethanol production mandated by Congress.

Ethanol and its mandated use by the federal government have put significant pressure on already strained market prices. This year alone, 13.2 billion gallons of ethanol are required by law to be blended with gasoline as part of the Renewable Fuel Standards Program. That amount represents about half of the U.S. corn crop to be harvested this year.

Crafted with the best intentions, the program is part of a broader effort to reduce foreign oil consumption and decrease greenhouse gas emissions. To some extent, the two objectives can be considered successful from certain perspectives. Slowly, but surely, consumption of foreign oil has decreased, thanks in large part to the increasing use of ethanol. Also, when ethanol is compared directly to gasoline, it does produce lower greenhouse gas emissions, when greenhouse gases released during ethanol production are not considered. Continue reading

Haiti: Two Years On…

Last Thursday marked the second year anniversary of the 7.0 magnitude earthquake that caused horrific casualties and damage in Haiti. The reconstruction progress has reportedly been slow on many fronts. However, the expectation for tremendous results in two years in a country that has historically been divided along racial lines and rocked by political conflict is unrealistic and discouraging for development workers.

The outlook on Haiti appears frustrating. With the fate of the Interim Haiti Recovery Commission (IHRC) still up in the air, there is no governmental apparatus in place to determine which reconstruction projects will be awarded funds from international aid.

Source: http://www.npr.org

President Michel Martelly, better known as Sweet Micky to the locals, has done little to inspire confidence in the Haitian government. During his short term, his choices for Prime Minister were dismissed twice and he was unable to persuade his Parliament to extend IHRC’s mandate. The unemployment rate remains high at 40.6%, and tent cities remain the only housing option for 500,000 Haitians. Local Haitians complain that international aid is funneled directly to foreign nongovernmental organizations or contractors, bypassing local labor. When government projects are overlooked in favor of foreign firms, Haitians end up losing out as fewer jobs are created locally. Continue reading

The New Buzz in Development

Sweet Beginnings team

It seems that insects can be quite handy at times. In addition to malaria-fighting spiders, bees have also been doing their part in development abroad and here in the U.S. At the recent Inaugural Bipartisan Congressional Conference on Innovation in Giving and Philanthropy, Brenda Palms Barber discussed a business called Sweet Beginnings, developed through the North Lawndale Employment Network, which exclusively employs formerly incarcerated individuals. Originally, Lawndale provided job training to released offenders, however, Barber explains, “When people were ready for placement, we couldn’t find them jobs.” And that’s where the bees come in.

Based in Chicago, Sweet Beginnings produces its own honey, which is then used to create its line of all-natural beeline® products. It employs recently released felons in order to help them “establish work history, learn productive work habits, and gain marketable skills.” Employees assist in all forms of the business, from harvesting honey, creating the beeline® products, and selling the product at retail stores and events. This opens new and more lucrative employment opportunities, rather than falling back into a cycle of crime. Compared to the national average of 65 percent, the rate of former Sweet Beginnings employees returning to jail is below 4 percent. Along with this, the business, much to the surprise most, has been doing remarkably well. Annually, the company brings in $100,000 in sales and has made $2 million in project sales from the last five years.

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