Rupee falling is disastrous

The recent sharp depreciation of rupee is a cause for concern. The depreciation was largely against the dollar, by more than 7.5% in this year 2018. The rupee’s decline is likely to continue due to rise in the current account deficit on India’s balance of payments, intensified by the recent sharp rise in the price of crude oil. The current account deficit rose from $41.6 billion in 2016 to $73.3 billion in 2017. A depreciating rupee affects the local economy in several ways.

• Periodical rupee depreciation is a symptom that India is a bubble economy. 
• The success of India's liberalizing reforms is not because it has transformed into a manufacture & export driven economy, but indicates its emergence as a favored destination for international financial investors resulting in large capital inflows. The large capital inflows resulted in stock market values, but the valuations are not warranted by its potential earnings.
• Large inflows of foreign capital, enhances the liquidity in the system, triggers a credit boom that spurs demand and drives domestic market growth. 
• The debt-financed consumption and investment results in excess liquidity that drives banks to increase lending. This increases the defaults which can lead to systemic fragility that can intensify the capital flight and exchange rate volatility.
• The import liberalization fuels the demand funded by debt and in the absence of matching enhance in exports, the import-intensive consumption and investment results in widening current account deficit.
• The net foreign exchange outflow is due to mismatch between imports and exports and remittances and the deficit gets financed by capital inflows. A country that cannot earn the foreign exchange to finance its current needs is vulnerable to balance of payments difficulties and cannot sustain the value of its currency. 
• The low oil prices, between 2014-17, had depressed the outflows on account of excess import of goods. Now as oil prices have risen to $80 a barrel, the reality is that India is a country that is vulnerable on the balance of payments front.
• Liberalized trade and liberalized capital flows have enhanced India’s vulnerability, of which periodical currency depreciation is a symptom which got concealed so far by the large capital inflows and by the benefits of low oil prices. Both those advantages are now under threat.
• Trade liberalization has increased dependence on imports for consumption and investment and now the depreciating rupee increases cost of imports that aggravates inflation. Increase in the price of crude oil has the potential for much higher inflation. Inflation forces RBI to raise interest rates. 
• Many companies have outstanding foreign currency loans, either as working capital or acquisition-related debt, will be seriously affected.
• The liberalizations results in surge in capital flows that in turn increases private foreign debt. Since large capital inflows make the domestic currency appear strong, much of this borrowing in foreign currency is not hedged for possible losses stemming from any currency depreciation.
• Any plunge in the rupee effectively accentuates foreign institutional investors' losses on their equity portfolios and triggers stop-losses, which forces further sales, dragging markets even further down. 
• A falling rupee, in theory, should help exporters. But due to other factors export gains due to a depreciating currency may be limited.
• A falling rupee impacts tourist & business foreign travelers and students joining foreign universities. 
• FIIs have been supporting the rupee in the last three years, their inflows have dried up. So far in 2018, FIIs have pulled out Rs 46,197 crore from the Indian markets. 
• The Indian currency's vulnerability is particularly heightened by the fact that among its emerging market peers, India runs a high current account deficit.
• Large number of expatriates returning from Saudi Arabia and modified H1B visa rules by USA will hit remittances in coming years and impact current account deficit.

When depreciation actually occurs, the rupee costs of servicing foreign debt rise sharply. When the stagflation afflicts the economy hurts corporate profits and makes the burden of servicing foreign debt too much to bear. The distress sale of assets that follows bankruptcies results in asset price deflation, which worsens the problem. Depending on the intensity of these effects, the bubble can burst and the game of speculation can unravel. It is for this reason the bubble economy becomes unsustainable.

India escaped the last two global financial crises, but it may not be as lucky this time. Rising oil prices & increasing inflation and combined with the bad loans & capital flights already occurring, there is trouble looming. Turkey and Argentina, two of the world's biggest emerging markets, have been plunged into economic turmoil. Both the Turkey's lira and the Argentina's pesos have gone into free fall in recent months due to panic-selling by investors. Emerging markets were under performing by 2.5% so far this year. The strong US dollar is putting pressure on other currencies. Turkey's inflation rate exceeded 10%. The Argentine peso has plummeted by more than 10% against the US dollar. In May 2018, Argentina's central bank hiked interest rates from 27.5%  to 40% to avoid further capital outflows. While Argentina had already requested IMF help to rescue its economy, it is only a matter of time for Turkey to request IMF to help rescue its economy. Other emerging markets may be able to adapt to rising US interest rates without facing such turbulence. The strong $ 400+ billion reserves are sufficient for meeting contingencies but uncontrolled current account deficit will compel FII's to withdraw their exposures in India that will spell doom for our economy. Hence reducing current account deficit and inflation control are paramount.

India's domestic worker

• In India domestic worker is ubiquitous, where nearly all middle-class and wealthier households have a maid, a cook, a nanny or a driver - and sometimes all four.
• Domestic work means ‘being employed to perform household tasks in others’ homes for financial compensation. It is the largest female occupation in urban India with estimates ranging between 10 million to over 50 million.
• Most of India's domestic workers are girls and women that constitute over two-thirds of the workforce in this unorganised sector, which also includes chauffeurs and security guards.
• Live-in domestic workers are completely dependent on their employers for their basic needs such as food, living conditions, medical needs and freedom to leave the homes they work in, which makes their situation akin to modern day slavery.
• India's domestic worker is invisible, unrecognized, overworked, underpaid and abused.
• Horror stories are abound from physical and sexual violence to mental torture from being given rotten food to eat to jail like incarceration. 
• A survey indicated that 2.2% of women are employed as domestic workers. Unofficial estimates range widely from 2.5 to 9 million women. 
• There are at least 67 million domestic workers globally, and about 80% of them are women. There are more than 5 lakh Indian domestic workers in Gulf countries.
• Domestic work is a growing sector in India and has potential to be a valuable source of income for millions of women who are minimally educated and low skilled.
• In the decade after liberalization, there was a nearly 120% rise in the number of domestic between 1991 and 2001. Domestic workers has increased 222% since 1999 to 2011. The total domestic workers vary from 4.75 million to 6.4 million. 
• Number of female literates has jumped from 29.76% in 1981 to 65.46% in 2011. Despite this, the domestic service sector growing at an accelerated pace because most young educated and working urban women want to hire domestic help. The immense growth of the population, the numbers of women working outside the home have gone up.
• Even when there is no visible abuse there are violations amounting to torture.
• There are some employers who treat domestic workers with courtesy & respect and guarantee the rights they are entitled to but there are no laws to protect them at all. Domestic workers are not workers at all.
• Domestic workers can be made to work up to 15 hours a day, 7 days a week without break or leave. Livelihood of large number of women from most vulnerable marginalized backgrounds falls into this category.
• In this sector human rights abuse is rampant. No minimum wage and every benefit is at the employer's whim. Because they are poor and often uneducated they have very little bargaining power.
• Most abused women domestic workers don't complain as it is difficult to get the law into homes.
• A major amendment to the Child Labour Act prohibits employment of children below 14 years age. The sexual harassment of women workplace Act 2013 includes domestic workers within its purview. However without clarity and exclusive law safeguarding their interests implementation is an uphill task.
• As long as it is unrecognized by law and policy few changes here and there will remain individual acts of fairness and compassion. They are welcome but insufficient.
• A bill to provide domestic workers with a minimum monthly salary of Rs. 9,000 and benefits including social security cover and mandatory time off is awaiting passage.

Progress of a nation is inversely proportional to 

number of its maids employed as domestic workers

Television, cell phone and social media are now accessible to all including domestic workers. Their awareness is increasing and are getting networked. Very soon India will find their bargaining power increased and with home automation gadgets like washing machines etc number of people employed as domestic workers at below reasonable prices will diminish and vanish. That would be a good sign. An interesting observation is that some drivers refuse to accept employment in small cars without power steering, air conditioning and music systems. Minimum wages act may not do much wonders but supply-demand will rule the society.

Farmers woes: Relevance of Swaminathan Commission Report

National Commission on Farmers (NCF)’s Swaminathan Commission Report is aimed at working out a system for food and nutrition security, sustainability in farming system, enhancing quality and cost competitiveness of farm commodities and also to recommend measures for credit and other marketing related steps. 

• The government of India constituted the NCF on November 18, 2004. The NCF was chaired by Professor M.S. Swaminathan. It submitted its fifth and final report on October 4, 2006. 
• The reports had suggestions for “faster and more inclusive growth” for farmers and agriculture sector .
• M.S. Swaminathan had requested the government to implement the recommendations given in the report so that it could provide minimum support price for grains, safeguard the interest of small farmers and addressing the issue of increasing risk overtaking agriculture as a profession.
• The Commission observed that farmers needed to have an assured access to and control over rightful basic resources that includes land, water, bio resources, credit and insurance, technology and knowledge management, and markets.
• Agriculture must be implemented in the concurrent list from the state list — hence putting it as a matter of concern for both the Union and the states.
• The commission said that the inequality in landholdings in shown starkly in land ownership. It said that in 1991-92, the share of the bottom 50 per cent of the rural households in the country’s total land ownership was only 3%. The top 10% owned as much as 54% of land.  
• One of the key reforms was land reforms. It was aimed to address the issue of access to and for both crops and livestock.
• Land Reforms: Distribution of ceiling-surplus and waste lands; prevention of diversion of prime agricultural land and forest to corporate sector for non-agricultural use; to ensure grazing rights are provided and seasonal access is allowed in forests to tribals and pastoralists. It recommended access to common property resources. One main case was establishing a National Land Use Advisory Service. The purpose of this service would be to connect land usage decisions with ecological meteorological and marketing factors.
• Irrigation Reforms: It recommended framing a set of reforms to provide farmers with sustained and equitable access to water for irrigation. Ensuring boost in water supply by rainwater harvesting, water level recharging by mandatory aquifers; Million Wells Recharge programme to be initiated targeted at private wells. To target increase in investment in irrigation sector under 11th five year plan.
• Productivity Growth: NCF said that with the objective of achieving higher productivity growth, it recommended substantial increase in public investment in agriculture-related infrastructure particularly in irrigation, drainage, land development, water conservation, research development and road connectivity etc. It also recommended a national network of advanced soil testing labs with an aim to test areas for apt micronutrient levels.
• Credit and Insurance: Expand outreach of formal credit system; reduce crop loan interest rates to 4%; provide moratorium on debt recovery; agricultural risk fund; kisan credit cards for women farmers; integrated credit-cum-crop-livestock human health insurance package; crop insurance across country for all crops with reduced premiums; sustainable livelihoods for the poor, investment in human development; institutional development services etc.
• Food Security: The commission recommended implementation of a universal public distribution system; reorganising delivery of nutrition support programmes on a life-cycle basis with panchayat participation and that of local bodies; elimination of micronutrient deficiency induced hunger and food cum fortification; community food and water banks to be operated by women self-help groups; help small and marginal farmers; formulate national food guarantee act with features as food for work and employment guarantee programmes.
• Prevention of Farmer Suicides: Providing affordable health insurance at primary healthcare centres in villages; national rural health mission to be extended to suicide hotspots on priority basis; state level farmers’ commissions with representatives of farmers, restructuring of micro finance policies that may serve as a sort of livelihood finance; covering all crops by crop insurance; village to be the assessor and not the block, social security net that gives old age support with health insurance and aquifer recharge and rain water conservation; plans for decentralised water usage etc.

The first right on all resources rests with poor, peasants & workers.

My View:
Even today, agriculture employs over 1.3 billion people throughout the world, or close to 40% of the global workforce. The ratio of farmers has declined from 35 to 4% in developed nations between 1950 and 2010, and from 81 to 48% in developing countries. In India, the workforce in agriculture was 76% in 1961. The number decreased to 51% in 2010. Still agriculture provides the bulk of employment in the rural areas. Post liberalization, cutbacks in agricultural subsidies increased the costs of inputs but market prices have not seen a corresponding increase. The rising of costs of production and the falling prices of farm commodities have transformed agriculture from a positive economy into a negative economy for peasants. Both these factors are rooted in the policies of trade liberalization and corporate globalization. Today they barely make enough to feed themselves. Over three lakh farmers have committed suicide since 1995, mostly in Maharashtra, Madhya Pradesh, Andhra Pradesh, Karnataka and Chhattisgarh. Farmer suicides have largely been attributed to debt, drought, crop failure and poor returns. Debt is a reflection of a negative economy. Their main source of capital for farming remains loans. While bank's share is 60% only, most farmers depend on moneylenders, at exorbitant interest rates. Swaminathan commission recommended sweeping reforms and massive investments for viability of agriculture, successive governments makes promises for winning elections and forgets thereafter. Occasionally, they announce farm loan waivers as temporary relief but agriculture problems remains as they are and farmer suicides continue unabated, which is a national shame. During 2014 election campaigning, Modi made categorical promise to implement Swaminathan commission report with MSP of inputs cost plus 50% profit margin and doubling farmer's income in 5 years in real terms, with unforgettable rhetoric for garnering rural votes, and after getting the votes, he never bothered to do anything during the past three years and is following same style as Congress. His desperate attempt to win UP elections by announcing farmer loan waiver, much against BJP's stated policies, and after winning the scheme announced was scaled down to less than 25% is an outright atrocity on UP farmers and had ignited violent agitations in many states endangering national economy. In addition BJP's new "Anti slaughter rules" had destroyed dairying, along with beef export & leather industry, which is the second and last source of income for rural masses. Instead of alleviating farmer's woes, generating new jobs and improving economy, Modi successfully destroyed agriculture, dairying & rural economy and his acts of insanity resulted in loss of millions of jobs and millions of dollars of export income.