Amartya Sen: hope for the other India
NEW DELHI, Jan 3 — What accounts for the frenzied reception accorded to Nobel laureate Amartya Sen since his return to the country of his birth and the sustained euphoria generated by him?

• Defines freedom

Indian companies will gain from euro
BONN, Jan 3 — The introduction of the new Pan-European currency “euro” will help more Indian companies to tap the European markets for resource requirements and provide an estimated one billion dollar market for the software industry.

Property prices to fall by 10 pc
NEW DELHI, Jan 3 — Real estate prices in the country, especially Mumbai and the Capital, will continue to decrease sharply this year, industry analysts have said.

Inflation falls NEW DELHI, Jan 3 — The inflation rate receded further by 0.80 per cent for the sixth consecutive week to touch a 34-week low of 6.21 per cent on December 19, on account of a slump in the prices of vegetables and pulses.

‘Inaction’ to blame for Japanese recession
IN a striking admission of error, the Japanese government has released a report blaming official inaction and delay during the past decade for triggering the country’s deepest recession since World War II.

Amartya Sen: hope for the other India
Inspires the poor, lifts sagging intellectual morale

NEW DELHI, Jan 3 (PTI) — What accounts for the frenzied reception accorded to Nobel laureate Amartya Sen since his return to the country of his birth and the sustained euphoria generated by him?

Is it only national pride or is it reflective of India’s search for icons at a time of economic recession and sagging morale?

Sociologists suggest the Amartya Sen phenomenon has reached such huge popularity among the common people largely due to the need of the poor and the underprivileged to look for saviours.

At a time when there were none, Amartya Babu won the world’s most prestigious award for a subject which concerns the poor,” says Dr Anand Kumar, Professor of Sociology at Jawaharlal Nehru University (JNU) here.

“It has given hope to the other India — the forgotten poor who had no articulation of their needs till now. And here comes a Nobel laureate speaking about poverty, basic education, primary health — issues which were not being discussed any more since the liberalisation.

“The politicians had failed to fulfil the aspirations of the poor. Economic reforms had not really yielded any benefit for the marginalised section of the society. It was at a time like this that Amartya won the Nobel and perfectly filled the slot,” says Kumar.

According to Dr Kiran Devendra, Reader in History at the National Council for Education, Research and Training (NCERT), “the common man is pleasantly surprised that there’s somebody who has won an international award for talking about things like poverty and primary health.

“All these things were in fact increasingly being pushed onto the backburner. So now they have found a voice in Amartya Sen. No wonder, he is also being elevated to the status of a national hero even in Bangladesh,” says Devendra, author of “The Government of India and the Position of Women (1947-75)”.

Dr Kumar of JNU attributes the Amartya phenomenon to the lack of constructive intellectual activity in the country during the last eight to 10 years.

“We are passing through a time when India does not have inspiring intellectuals. No meaningful intellectual work has been done in the country for the last few years. Amartya Sen has come at such a time, talking about things which are far from the concerns of those who are trying to convert India into Singapore or Hong Kong. He is, in fact, talking about economics of people,” he says.

It is no wonder then that people, and the government too, are looking up to the “conscience of economics” to offer solutions for many of the ills plaguing India.

Defines freedom
Tribune News Service

NEW DELHI, Jan 3 — Nobel laureate Prof Amartya Sen today said that “expansion of basic freedom” was an important element of the process of development and said India could draw lessons from the Chinese experience in this regard.

“India has a lot to learn from China as far as enabling freedom and economic freedom is concerned”, Prof Sen said at a special function organised by the University of Delhi to felicitate him.

Underlining the need for focussed attention towards freedom both for the individual and the society Prof Sen said the “real values of democracy are realised only in situations when things go wrong”.

The absence of political freedom in China was highlighted during the famine of 1958-61 in that country. “Democracy was really missed during the period,” he said.

There was however, no single model for development for India to adopt as the mistakes committed by other countries could be avoided. “We have the whole world to learn from”.

Giving a five-fold definition of “freedom”, he said freedom conceptually was a balanced mixture of enabling freedom,political freedom, economic freedom, transparency freedom and protective freedom.

Elaborating each of these elements, Prof Sen said one of the greatest achievements of China was in regard to enabling freedom which primarily concerned issues pertaining to health care and education.

Dance of success
Tribune News Service

CHANDIGARH, Jan 3 — Canara Bank's Chandigarh circle today presented a unique musical programme to highlight the achievements of women entrepreneurs.

Dressed in their best silks, the ladies showcased their products to the tune of Hindi film songs and rhythms. Candles, flower bouquets, pottery, clothes, bakery items, lighted lamps, painted dupattas, beauticians techniques, furniture, toys and computers were staged at the Tagore Theatre this evening.

The short musical skit by Dev Samaj Polytechnic, Sector 21, Chandigarh, was appreciated by the audience and invited applause. The Punjabi wedding scene sought to highlight the importance and relevance of professional expertise in a woman's life.

The General Manager, of the bank, Mr H.D Pai, said Canara Bank has financed six lakh women with Rs 750 crore.

Mr I.K Gujral, a former Prime Minister of India, took pride in the fact that women were storming almost all male bastions. He suggested Mr K. Vijayaraghvan, Regional Director of the Reserve Bank of India, Chandigarh, who was the guest of honour to monitor the flow of funds extended to women and present a report to Parliament for deliberations.

Inflation falls

NEW DELHI, Jan 3 (UNI) — The inflation rate receded further by 0.80 per cent for the sixth consecutive week to touch a 34-week low of 6.21 per cent on December 19, on account of a slump in the prices of vegetables and pulses. It was 7.01 per cent in the previous week.

It had been the lowest since May 2, 1998, when it stood at 6.45 per cent. This also registers the steepest drop in the current fiscal year surpassing the old slump of 0.69 per cent on September 5 when it came down to 8.09 per cent from 8.78 per cent.

Indian companies will gain from euro

BONN, Jan 3 (PTI) — The introduction of the new Pan-European currency “euro” will help more Indian companies to tap the European markets for resource requirements and provide an estimated one billion dollar market for the software industry.

“Indian corporates seeking to access European capital may find access to funds easier due to greater depth and liquidity in these markets,” according to official sources here.

The sources said a huge array of financial instruments will become accessible to institutions and banks in India, especially bonds rated on sovereign and corporate rather than currency risk.

Indian borrowers, keen to move away from US dollar denominated debt could, find more ready access to bank debt in euro and Indian corporates looking for long-term financing.

Property prices to fall by 10 per cent

NEW DELHI, Jan 3 (PTI) — Real estate prices in the country, especially Mumbai and the Capital, will continue to decrease sharply this year due to weakening of the economy, buyers postponing purchases and absence of speculators, industry analysts have said.

“Real estate prices will plummet another seven to 10 per cent till June 1999 due to the general weakening of the economy and negative sentiment in the market,” said Sudhanshu Tandon, at Colliers Jardine.

G.P. Khungar, an independent property consultant, said no upturn in the real estate business was visualised until the second half of 2000, since the industry was going through a four-year recession.

“What we’ve seen in 1995 were actually unrealistic prices, fuelled by speculators and not the actual end users. Property will become affordable when prices begin to confirm to the 1992-93 level with the inflation factored into this,” he said.

Khungar’s formula takes into account the commensurate secondary market prices while forecasting the period over which prices are likely to begin an upward march.

Property developers DLF completed their apartments in Gurgaon (phase I) in 1995. But even after three years of completion, one-fourth of these are vacant, sources said.

“While their current selling price is Rs 2,200 per square foot (sq ft), the secondary market price is Rs 1,600-1,650 per sq ft,” says Khungar.

This illustrates that the developers are being forced to slash their asking prices even in locations considered ‘prime’ due to lack of buyers.

Vacant sites are not the only proof of the prevailing market situation. International property consultancy firms as well as domestic developers are going through a tough financial situation.

International names like Richard Ellis, Meghraj Chesterton, Colliers Jardine and many others set up shop in India in the wake of liberalisation. But they are yet to turn in any profits, since the property market has been on the downslide for over three years now.

While Sudhanshu Tandon and others deny that business is not profitable for them, their firms have meanwhile branched out to fringe areas like property management from developing.

Also, these firms now offer clients super-specialisations like feasibility and asset maximisation studies, re-development consultancy and even commercial reports for industrial clients.

To tackle the dwindling number of buyers, builders have begun to offer built-up flats over lesser area, using cheaper construction material to make these more affordable.

“What people call price fall is actually more affordable pricing. For example, builders are now offering three-bedroom houses at Rs 5 lakh cheaper than those being built in 1995,” said Unitech Managing Director Ramesh Chandra.

“The same three-bedroom house is now built over 1200 to 1500 square feet compared to 2000 sq ft earlier. I’ll provide flooring which comes at the initial price, not use the coveted teak wood for windows,” Chandra explained.

Sudhanshu Tandon at Colliers agrees that property developers have at last realised the need for making their product more affordable.

“Its no longer a sellers’ market. Price bands for individual housing needs have been redefined to fall in the range of Rs 6 to Rs 20 lakh,” Tandon said.

While Chandra of Unitech agrees that the price fall is continuing, he says the bottoming out has already begun in areas like Gurgaon.

“Gurgaon is now more affordable but there is no more a price fall visible in the city. In fact, bookings are happening faster than in the last two years,” Chandra said.

‘Inaction’ to blame for Japanese recession
From Tom McGhie in London

IN a striking admission of error, the Japanese government has released a report blaming official inaction and delay during the past decade for triggering the country’s deepest recession since World War II.

The year-end report, produced by the state Economic Planning Agency and issued on Sunday, details government and private firms’ failure to come to grips quickly with the collapse of the speculative “bubble” economy of the 1980s.

The troubles left over from the bubble-when property and stock markets soared to dizzying heights only to crash during the early 1990s-have plagued the Japanese economy “more than expected”, the EPA said.

The collapse in asset prices left behind a massive debt problem that has hobbled Japan’s financial system. But instead of moving quickly to resolve the bad loans, government and bank officials decided to “leave the embarrassing problem untouched” and hope for a recovery in prices, the report said.

That recovery never came. Instead, the burst of the bubble brought a combined capital loss of 840 trillion yen ($ 7.2 trillion) between 1990 and 1996 to businesses and households-about 1.7 times the nation’s gross domestic production during 1996.

The capital loss pulled down Japan’s GDP growth-rate by an average of around two percentage points each year in the period between 1991 and 1993. The negative effect on the GDP growth-rate diminished to about 0.8 points per year from 1994 to 1996, the EPA said.

The losses strangled consumption and triggered Japan’s worst recession since the end of the Second World War. The economy shrank for the first time in two decades last year. Unemployment in November was at a record high of 4.4. per cent.

“The slow handling of the bad loans problem has caused various serious problems,” a summary of the report said. These include the credit crunch that still troubles many private companies.

The EPA pointed to several reasons for the failure to take rapid action: optimism that prices would recover; uniform delay by banks dealing with bad loans; a lack of a system for bad-loan disposal; and a lack of transparency in the financial system as a whole.

To overcome the current economic slump, the EPA said Japan must purge itself of the “aftermath of bubble economy”. — The Guardian

‘IMF suicides’ are on the increase
From Walden Bello

BANGKOK: As the Asian financial crisis enters its second year, the deepening desperation and despair assumes many forms in the battered region:

What Koreans call “IMF suicides” are said to be on the increase in Seoul these days. This phenomenon refers to males who are laid off taking not only their own lives but also those of their wives and children, presumably out of a belief that no one will be left to care for them in this life.

Earlier in 1998, Thais woke up to television images of workers battling police in the streets, then being herded, prisoner-of-war style, into police vans. Viewers thought the scenes were from Korea and were surprised to learn that they were from Thailand, a country well known for its non-confrontative culture.

In Indonesia, the government’s implementation of an IMF directive to end energy subsidies provoked a mass uprising that overthrew the 32-year old Suharto dictatorship.

Welcome to Asia 1998 — a zone of economic collapse, social crisis, IMF suzerainty, and political turbulence.

Living through current events, one experiences a time warp, a throwback to 1968, when East Asia was the world’s prime crisis area. It is hard to imagine that this is the same region that was being touted as recently as 13 months ago as being the “engine of the world economy” far into the 21st century.

What happened? Why were these economies so fragile after all?

In recent months, “crony capitalism” has become the all-purpose explanation for the Asian economic collapse. Lack of transparency of financial institutions, a government-business relationship permeated with corruption, and the absence of accountability of political and economic authorities are said to be the practices that brought the Asian tigers to their knees.

The problem with this explanation is that the practices of crony capitalism were very much part of economic life in the three decades that East Asian countries led the world in GNP growth.

While not denying that corruption may have contributed to the collapse, many analysts are coming around to the view that a far greater role was played by the unregulated flows of global capital. Like the Mexican financial collapse of 1994, the Asian crisis is essentially a product of the globalisation of financial markets.

A close look at the rise and fall of the South-East Asian “tigers” reveals the central role of a development process sustained not principally by domestic savings and investment but by the huge infusions of foreign capital.

Mediating the relationship between the banks and investors was the IMF, which pushed the Asian financial authorities incessantly to liberalise their capital account and open their financial sector more fully to foreign participation.

With the blessings of the Fund, the authorities added two more ingredients: high interest rates and a fixed rate of exchange between the local currency and the dollar to insure investors against the risk of devaluations that could erode the value of their investments.

Not surprisingly, a glut in real estate developed quite rapidly, with Bangkok leading the way with $20 billion worth of new commercial and residential space unsold by 1996. As it began to sink in that their borrowers were loaded with non-performing loans, foreign banks began to call in their investments.

What converted a nervous departure into a catastrophic stampede were the currency speculators who, gambling on the eventual devaluation of the baht, in fact accelerated it by unloading huge quantities of baht in search of dollars. So that the Thai currency went on to lose over 50% of its value in a few months’ time.

In Jakarta, Manila and Kuala Lumpur, there occurred the same sequence of property glut, non-performing loans, foreign capital’s departure turned into a panic by currency speculators, the currency crash. South-East Asia’s other currencies lost 30 to 80% of their value.

But there has only been one government that has behaved in a responsible fashion, and that is China. China contributed money to rescue funds for Thailand, Indonesia and Korea. It offered to back the proposed Asian Monetary Fund with its reserves. And it has refrained from devaluing its currency, the renminbi, so as not to stand in the way of an export-led recovery by its neighbours.

Washington seized the opportunity to use the IMF to batter down the tariff and investment barriers to US exports and capital and Japan instead of standing up to Washington and the IMF to provide an alternative economic programme to shore up the regional economy, meekly agreed to scrap its plan to set up the $100 billion Asian Monetary Fund (AMF) that would have defended the Asian currencies from investor panic and further speculative attack.

Critics also charge that the bailouts are actually a form of guarantee to the international private banks that the debt to them will be repaid by the borrowing countries.

The ‘miracle’ is definitely over. The dream of leaving underdevelopment that seemed within reach just a year ago has been replaced by the nightmare of falling back into the ranks of under-developed Third World. A future of political strength and cultural assertiveness based on growing economic power has been replaced by the fear of a new colonialism. — TWNF

by J.C. Anand
Cement, steel sectors may do better

THE calendar year 1998 was a disappointing one. The bear clawed even deeper into the stock market than in the previous year. The sensitive index lost 640 points (17.32 per cent), the broad-based BSE-100 dipped by 248 points (15 per cent) and S & P CNX NIFTY closed with a loss of 885 points (18 per cent). Except for software, multinational pharmaceutical and speciality chemicals scrips, almost all other sectors suffered sharp decline in their market prices.

It was, however, a year of change and radical reforms in the stock market procedures and mode of conducting business. The terminal-based transaction of buying and selling scrips was firmly established in all major cities for BSE and NSE. The buyback of shares by companies was permitted by of radical changes in the Companies Act. The shareholders were permitted to indicate nomination for transmission of shares in the case of the shareholder’s demise. The depository system was adopted, though its full operation would begin only in 1999 in an orderly manner.

The poor performance of the stock market in 1998 can be attributed to a number of factors: the currency and stock market crisis in South East Asia and Japan, the negative role of the FIIs, sharp economic depression in many of the sectors of industry in India, the collapse of non-banking financial enterprises, the lacklustre performance of the UTI and other mutual funds, the UGS-64 imbroglio an politics instability at the Centre in the wake of the defeat of the BJP in assembly elections in Madhya Pradesh, Rajasthan and Delhi.

What to expect in 1999? Many of the factors responsible for the poor performance of the stock market and the economy still persist. The Reserve Bank of India has officially stated that the GDP growth for the financial year1989-99 was likely to be lower than 6.1 per cent and that the Centre’s financial position had worsened during April-October 1998 with a sharp increase in revenue expenditure (higher by 11.7 per cent) and the consolidated finances of state government have further deteriorated.

A more recent report indicates that the growth in GDP may be just 5.4 per cent. The industrial production is limping at 3.6 per cent and the service sector had decelerated at 6.5 per cent. The agricultural sector has, however, done well. The fiscal deficit is likely to be higher than the budgetary estimates.

The stock market may move within narrow limits of 3000-3200 points on the sensitive index for the next month and a half. The quarterly results are not likely to be very encouraging. The multinational pharmaceuticals, speciality chemical, software companies are likely to report even better results.

In other sectors, only some select companies are expected to present good results. There is little hope of salvage for the companies which have suffered losses exceeding more than 50 per cent of their net worth. It may be best for discriminating investors to get rid of them and to adjust their losses against long-term capital gains.

The Budget may bring some relief to the stock market but unless there is economic and industrial recovery, the market may continue limping. It is, however, expected that the second half may be better for the industry as well as for the stock market. But the political factor may continue to disturb the economy and the investor confidence in the stock market. The Vidhan sabha elections in a number of states would be a disturbing factor. The buyback of shares by the companies is likely to help the market to keep its poise. Essel packaging is one of the early birds to hold its board meeting on January 4 for this purpose. This is indeed a very promising share and was recommended in this column in 1998 when it was quoting around Rs 140/- or so.

The revised patents bill which could not be passed by the Lok Sabha in the winter session is likely to be passed in the Budget session in February. The multinational pharmaceutical and speciality chemicals scrips which declined due to the non-enactment of the patents Bill are likely to revive strongly. I expect their market prices to rise by 5 to 10 per cent in February. These scrips are also likely to retain their gains and should be held on a long-term basis. The same may be said of the good software scrips.

The amendments to the Companies Act are likely to be announced through an ordinance to be placed on the statute book in the Budget session later.

Looking back the recommendations made in 1998 in this column, it is quite satisfying to note that more than 80 per cent of these recommended scrips have done well and amply rewarded the investors.

Long-term investors have nothing to lose and a lot to gain in the coming years if they invest in well-managed companies. Cement and steel sectors may do a little better in 1999.

by K.R. Wadhwaney
Need for competent men on AI, IA boards

In an endeavour to make children understand the appropriate meaning of “rumour”, a teacher whispered privately to child number one: “Peter has an ear-ache today and hence he has not come to school”.

This simple information had to be relayed — again in strict privacy — from one child to another. The last child was asked to say aloud in class room as to what was told to him. He shouted: “Peter is dead”.

This is exactly the situation obtaining in the civil aviation industry ‘La Affarir’ dismissal of the joint board on two national airlines, Indian Airlines and Air India. There have been views, observations, interviews and even opinions since the sacking of the joint board more than a fortnight ago. Why can’t the government, through Minister for Civil Aviation Anatha Kumar, issue a statement as to what necessitated it in performing “mid-night coup”.

This is essential to reduce uncertainty obtaining among those who are at the helm of affairs of IA and AI.

No one yet knows when will the new boards be constituted. It will be in the interest of the country in general and the aviation industry in particular if knowledgeable persons are inducted on two boards so that airlines fly from turbulent weather into a serene atmosphere.

In the meantime, the standing committee chairman on tourism, shipping and airlines V.K. Malhotra will be meeting officials at Bangalore, Mumbai and Ahmedabad to review the existing situation obtaining on merger, fog and many other problems that have engulfed the two carriers and the aviation industry.

After the nine-day review meeting from January 1, the group will submit the report to the government for “consideration”.

The new Chairman and Managing Director of IA Anil Baijal is not new to aviation. He is aware of the working of the airline since he was a member of the two national carriers for more than three years.

No matter who the CMD, the airline can fly “commercially” and operate its flights smoothly if the person at the helm is given free hand to pilot the airline.

A survey of foreign carriers shows that governments do not dabble in their day-to-day functioning.

A good gesture

Indian Airlines recently embarked upon a fine gesture in showing the interior and cockpit of Airbus A-300 aircraft to 55 orphan children, all members of Literacy India.

All children were thrilled as they stepped on the aircraft. “We are grateful to officials of the airline for providing us this facility to get on to the aircraft”, echoed children. One of them, however, suggested that it would have been great if we were taken on a short trip.