B.R.P.BHASKAR
Gulf Today
The government of Kerala is laying the red carpet for investors once again. This time it is looking for investors willing to set up big or small projects in the rural areas.
The world investor meet, scheduled for July 24 and 25, will showcase the opportunities that the state’s village panchayats, numbering about 1,000, offer. Road shows were held in several Gulf States to build up interest in the meet.
The initiative for the meet came from the Kerala Chamber of Commerce and Industry. A study conducted by the chamber showed that there was scope for attracting investment to the villages in spite of the recessionary trends worldwide.
The chamber views the meet also as an opportunity to help rehabilitate non-resident Indians affected by the economic meltdown. Recent data shows that return migration now exceeds outmigration.
Rubber, spices, poultry and food processing are among the areas identified as suitable for the rural areas. The emphasis will be on small projects with a minimum investment of Rs.500,000, requiring not more than 1.50 acres of land. However, if there are takers the authorities are ready also to accommodate large investors with projects requiring 100 to 150 acres of land.
This investor meet is the latest in a series organised by the government in the last six years in collaboration with industrial and commercial interests. The government routinely claims success after every meet but so far there is little to show by way of results.
The promotional effort began in the wake of a 2002 study, conducted by the Confederation of Indian Industry and the World Bank, which rated the state’s investment climate as poor. The same year the department of Non-Resident Keralite Affairs (NoRKA) set up a field agency called NORKA-Roots. One of its stated objectives is to help NRKs identify investment opportunities in various sectors.
In 2007 NoRKA decided to float a company to facilitate structured investment by Non-Resident Keralites in the state. It was stated that the company would work as a subsidiary of NoRKA-Roots and ensure greater investment by Keralites working abroad in various upcoming projects. There is nothing to indicate that the proliferation of new agencies under NoRKa has resulted in increased investment.
Since 2003, the state government has organised several investor meets. After the first meet, it said it had received investment commitments of the order of Rs 260 billion. The figure was arrived at by totting up investments on Central government schemes like the Vallarpadam container terminal project and private projects like the Thiruvananthapuram International School which were already under way.
High hopes arose when the United Democratic Front ministry began negotiations with the Dubai Internet City authorities to set up Smart City in Kochi to attract global players. The Left Democratic Front ministry concluded the deal with the Dubai authorities in 2007 but a dispute over land rights has held up work on the project.
Two years ago the state government organised a road show at Bangalore as part of an effort to invite domestic investments in information technology and IT enabled services. An official spokesman said at the time the state had made a total investment of Rs. 30 billion in two parks, Technopark in Thiruvananthapuram and Infopark in Kochi and that it was seeking an investment of Rs. 60 billion to set up a new 507-acre Technocity in Thiruvananthapuram.
There was also talk of developing an IT corridor extending from Thiruvananthapuram to Kollam.
The changed global scenario has cast doubts on these plans. To make things worse, the first chief executive of Technopark has voiced fears about the future of that flagship IT park. In a magazine article, he said the government had raised funds for another park by mortgaging Technopark and the banks might take over the institution as the state was in default.
Last year Industry Minister Elamaram Kareem and Tourism Minister Kodiyeri Balakrishnan visited the US looking for investors interested in areas such as tourism, non-conventional energy, biotechnology and healthcare. An official said later that a New Jersey-based photovoltaic panels manufacturer was likely to invest about Rs. 40 billion in a manufacturing facility in the state. Nothing has been heard about it since then.
For more than three decades the state has benefited from remittances by Keralites working abroad, mostly in the Gulf States. The annual inflow grew from an estimated Rs. 3 billion in the late 1970s to about Rs.300 billion in the early part of this decade. Only a small portion of it went into productive channels.
Some who amassed money abroad have made investments. However, the vast potential of small and medium investors remains untapped.
A recent World Bank study has listed Kerala as one of India's most investor friendly states. The improved investment climate alone will not enthuse the large body of potential small and medium investors. Official agencies do not inspire much confidence in them. Credible, professionally managed institutions are a crying need. – Gulf Today, July 20, 2009.
Showing posts with label NRKs. Show all posts
Showing posts with label NRKs. Show all posts
Tuesday, July 21, 2009
Tuesday, February 3, 2009
Kerala government yet to act on report on economic downturn
BRP BHASKAR
Gulf Today
THE Kerala government displayed commendable sense of urgency when, immediately after the collapse of major global financial institutions, it asked the Centre for Development Studies (CDS), Thiruvananthapuram, to study the impact of the meltdown on the state and recommend remedial measures.
The CDS, too, acted with a sense of urgency. Within weeks, it came up with a report which pointed out that there may be slackening in some sectors of the economy, leading to loss of about 150,000 jobs. It also outlined some measures to mitigate the situation.
Six weeks have elapsed since the CDS sent the report to the government.
So far there is no sign of any action by the government.
The chances are that the people have to wait until Finance Minister TM Thomas Isaac presents the budget to find out what action, if any, it plans to take to tide over the crisis.
The global economy matters more to Kerala than to other states for two reasons. One is that it is a major exporter of cash crops. The other is that the state's economy is sustained largely by remittances from about two million non-resident Keralites (NRKs), working mostly in the Gulf states.
The CDS prepared its report after taking a close look at six areas: remittances by NRKs, availability of bank credit, exports, tourism, input prices and import costs.
The CDS report says the state's growth rate to come down by two to three per cent for a couple of years. This may push up the state's revenue deficit. It estimates that marine exports may decline by 33 per cent and result in loss of 20,000 jobs. In the labour-intensive areas of coir and cashew, decline in exports may be only 15 or 20 per cent but as many as 50,000 jobs may be lost. A small decline is likely in the information technology sector too.
Sectors like coir and cashew, which, according to the report, will be badly hit, are notable for their unorganised nature. Job loss in these areas does not mean people will be rendered totally unemployed. It will manifest itself in the form of reduction in work days for a large number of people.
These sectors employ hundreds of thousands of rural poor. This means those affected will be from the most vulnerable sections of the society.
The report warns that the intensity of the problem may increase if appropriate measures are not initiated at the earliest to address the credit squeeze and find new markets for traditional goods. In this context, the state government's current tardiness is a matter of concern.
Kerala accounts for 90 per cent of India's rubber production.
This time last year natural rubber fetched a record price of Rs140 a kilogram. Over the year, its price has more than halved, causing distress to the growers, most of them small cultivators.
Some sources have estimated that the state has already suffered a loss of at least Rs16 billion as a result of the fall in the price rubber.
Migration to the Gulf states has slowed down and there have been reports of job loss among NRKs.
However, there is no reliable estimate of the extent to which the developments in the Gulf region, resulting from the low level of crude oil prices, has hurt Kerala.
While a fall in remittances from the Gulf is on the cards, some economists believe this will be offset by the decline in the value of the rupee.
Noted economist KP Kannan was recently quoted as saying, with the dollar rising from Rs40 to Rs50, the value of the state's foreign remittance, which is of the order of $8 billion has gone up from Rs320 billion to Rs400 billion. A net fall in remittances may upset such calculations.
The finance minister's public statements indicate that he is looking up to the Centre to bail out the state. He wants the Centre to widen the reach of the National Rural Employment Guarantee Scheme and raise the state's borrowing limit from Rs10 billion to Rs50 billion.
Reckless spending by successive governments has increased the state's debt burden over the years. The public debt, which stood at Rs114.2 billion in 1996-97, was estimated at Rs571.4 billion in 2007-08, a staggering fivefold increase in 11 years. The state will go deeper into debt if the government goes in for large-scale borrowing to tide over the crisis.--Gulf Today, Sharjah, February 3, 2009.
Gulf Today
THE Kerala government displayed commendable sense of urgency when, immediately after the collapse of major global financial institutions, it asked the Centre for Development Studies (CDS), Thiruvananthapuram, to study the impact of the meltdown on the state and recommend remedial measures.
The CDS, too, acted with a sense of urgency. Within weeks, it came up with a report which pointed out that there may be slackening in some sectors of the economy, leading to loss of about 150,000 jobs. It also outlined some measures to mitigate the situation.
Six weeks have elapsed since the CDS sent the report to the government.
So far there is no sign of any action by the government.
The chances are that the people have to wait until Finance Minister TM Thomas Isaac presents the budget to find out what action, if any, it plans to take to tide over the crisis.
The global economy matters more to Kerala than to other states for two reasons. One is that it is a major exporter of cash crops. The other is that the state's economy is sustained largely by remittances from about two million non-resident Keralites (NRKs), working mostly in the Gulf states.
The CDS prepared its report after taking a close look at six areas: remittances by NRKs, availability of bank credit, exports, tourism, input prices and import costs.
The CDS report says the state's growth rate to come down by two to three per cent for a couple of years. This may push up the state's revenue deficit. It estimates that marine exports may decline by 33 per cent and result in loss of 20,000 jobs. In the labour-intensive areas of coir and cashew, decline in exports may be only 15 or 20 per cent but as many as 50,000 jobs may be lost. A small decline is likely in the information technology sector too.
Sectors like coir and cashew, which, according to the report, will be badly hit, are notable for their unorganised nature. Job loss in these areas does not mean people will be rendered totally unemployed. It will manifest itself in the form of reduction in work days for a large number of people.
These sectors employ hundreds of thousands of rural poor. This means those affected will be from the most vulnerable sections of the society.
The report warns that the intensity of the problem may increase if appropriate measures are not initiated at the earliest to address the credit squeeze and find new markets for traditional goods. In this context, the state government's current tardiness is a matter of concern.
Kerala accounts for 90 per cent of India's rubber production.
This time last year natural rubber fetched a record price of Rs140 a kilogram. Over the year, its price has more than halved, causing distress to the growers, most of them small cultivators.
Some sources have estimated that the state has already suffered a loss of at least Rs16 billion as a result of the fall in the price rubber.
Migration to the Gulf states has slowed down and there have been reports of job loss among NRKs.
However, there is no reliable estimate of the extent to which the developments in the Gulf region, resulting from the low level of crude oil prices, has hurt Kerala.
While a fall in remittances from the Gulf is on the cards, some economists believe this will be offset by the decline in the value of the rupee.
Noted economist KP Kannan was recently quoted as saying, with the dollar rising from Rs40 to Rs50, the value of the state's foreign remittance, which is of the order of $8 billion has gone up from Rs320 billion to Rs400 billion. A net fall in remittances may upset such calculations.
The finance minister's public statements indicate that he is looking up to the Centre to bail out the state. He wants the Centre to widen the reach of the National Rural Employment Guarantee Scheme and raise the state's borrowing limit from Rs10 billion to Rs50 billion.
Reckless spending by successive governments has increased the state's debt burden over the years. The public debt, which stood at Rs114.2 billion in 1996-97, was estimated at Rs571.4 billion in 2007-08, a staggering fivefold increase in 11 years. The state will go deeper into debt if the government goes in for large-scale borrowing to tide over the crisis.--Gulf Today, Sharjah, February 3, 2009.
Monday, May 19, 2008
Regular currency fluctuations continue to worry Keralites
A major foreign exchange earner, Keralites suffer when the value of the Indian currency appreciates because every dollar or dirham they earn then fetches fewer rupees. There is, however, no mechanism to compensate them for the consequent losses.
Currency fluctuations directly affect two groups of people: exporters, who include producers of cash crops, and about two million people working abroad, a large majority of them in the Gulf States.
As the rupee declined continuously against the dollar and the Gulf currencies pegged to it in the closing decades of the last century, both these sections were happy as their bank accounts kept swelling.
After the turn of the century, the rupee gained strength, eroding the earnings of non-resident Keralites. However, the extent to which it affected the State's economy was not immediately clear.
KK George, Chairman of the Centre for Socio-economic and Environmental Studies, Kochi, and Remya S, a research assistant in CSES, have now quantified the loss to the State resulting from the rise in the value of the rupee since 2003-04.
They have estimated that non-resident Malayalees (NRM) suffered an aggregate loss of Rs 86.60 billion during a period of four and a half years as the value of the rupee appreciated.
George and Remya are of the view that the rise in the value of the rupee was not entirely due to the growing strength of the Indian economy, as is widely assumed. It was partly a result of the steady depreciation of the US dollar. They believe the large inflow of funds to the Indian capital market, a good proportion of which was of a speculative nature, also contributed to it.
The CSES has published the findings of their study in a working paper titled "Impact of rupee appreciation on non-resident Malayalees".
According to George and Remya, as the Reserve Bank was reluctant to intervene in the exchange market and conduct sterilisation operations, the value of the rupee rose unhindered. The appreciation became steep after July 2006.
The average exchange rate of the US dollar, which stood at Rs.47.69 in 2001-02, rose to Rs.48.40 in 2002-03. Thereafter it fell continuously for three years -- to Rs.45.95 in 2003-04, Rs.44.93 in 2004-05 and Rs.44.27 in 2005-06. In 2006-07, it went up again to Rs.45.28 only to slump to an average of Rs.40.21 during April-December 2007.
"Despite the importance of agricultural commodities and products of labour-intensive traditional industries in the State's exports and the big role played by NRM remittances in the State's economy," they observe, "the steep appreciation of the rupee and its adverse impact have received very little attention among political leaders, policy makers and the media in the State, with very few exceptions."
They put NRM remittances in 2004 at 18.4% of Kerala's gross state domestic product. Non-Resident Indian remittances formed only 2.9% of India's GDP in that year. These figures show that NRM remittances are far more important to the State's economy than NRI remittances are to the national economy.
They point out that the annual loss to NRMs and the State economy on account of rupee appreciation (estimated at Rs.10.26 billion in 2003-04, Rs.13.10 billion in 2004-05, Rs.18.90 billion in 2005-06 and Rs.16.67 billion in 2006-07) exceeded the total Plan grants from the Centre to the State (Rs.6.97 billion, Rs.9.33 billion, Rs.8.00 billion and Rs.9.98 billion respectively).
Business organisations represented to the authorities the case of the exporters who were affected by the appreciation of the rupee. Following this, the Central government offered them relief by way of interest subsidy and other measures. While the exporters got interest subsidy of Rs.83.51 billion, not even a token subsidy was offered to NRI bank deposits.
George and Remya describe the silence of policy-makers and opinion leaders in Kerala in this matter as baffling. "The sheer number of emigrants and remittance receiving households should have made them sit up," they say.
They add, "It appears that despite their importance in Kerala economy, the NRMs have not acquired sufficient clout and lobbying power with the State government, not to mention the Central government."
From the NRM point of view, there was a slight improvement in the situation since the beginning of this year as the rupee declined in tune with the downward trend in the stock market. But financial experts expect the rupee to bounce back when capital inflows rise. Obviously Keralites still have cause for worry. --Gulf Today, Sharjah, May 19, 2008.
Currency fluctuations directly affect two groups of people: exporters, who include producers of cash crops, and about two million people working abroad, a large majority of them in the Gulf States.
As the rupee declined continuously against the dollar and the Gulf currencies pegged to it in the closing decades of the last century, both these sections were happy as their bank accounts kept swelling.
After the turn of the century, the rupee gained strength, eroding the earnings of non-resident Keralites. However, the extent to which it affected the State's economy was not immediately clear.
KK George, Chairman of the Centre for Socio-economic and Environmental Studies, Kochi, and Remya S, a research assistant in CSES, have now quantified the loss to the State resulting from the rise in the value of the rupee since 2003-04.
They have estimated that non-resident Malayalees (NRM) suffered an aggregate loss of Rs 86.60 billion during a period of four and a half years as the value of the rupee appreciated.
George and Remya are of the view that the rise in the value of the rupee was not entirely due to the growing strength of the Indian economy, as is widely assumed. It was partly a result of the steady depreciation of the US dollar. They believe the large inflow of funds to the Indian capital market, a good proportion of which was of a speculative nature, also contributed to it.
The CSES has published the findings of their study in a working paper titled "Impact of rupee appreciation on non-resident Malayalees".
According to George and Remya, as the Reserve Bank was reluctant to intervene in the exchange market and conduct sterilisation operations, the value of the rupee rose unhindered. The appreciation became steep after July 2006.
The average exchange rate of the US dollar, which stood at Rs.47.69 in 2001-02, rose to Rs.48.40 in 2002-03. Thereafter it fell continuously for three years -- to Rs.45.95 in 2003-04, Rs.44.93 in 2004-05 and Rs.44.27 in 2005-06. In 2006-07, it went up again to Rs.45.28 only to slump to an average of Rs.40.21 during April-December 2007.
"Despite the importance of agricultural commodities and products of labour-intensive traditional industries in the State's exports and the big role played by NRM remittances in the State's economy," they observe, "the steep appreciation of the rupee and its adverse impact have received very little attention among political leaders, policy makers and the media in the State, with very few exceptions."
They put NRM remittances in 2004 at 18.4% of Kerala's gross state domestic product. Non-Resident Indian remittances formed only 2.9% of India's GDP in that year. These figures show that NRM remittances are far more important to the State's economy than NRI remittances are to the national economy.
They point out that the annual loss to NRMs and the State economy on account of rupee appreciation (estimated at Rs.10.26 billion in 2003-04, Rs.13.10 billion in 2004-05, Rs.18.90 billion in 2005-06 and Rs.16.67 billion in 2006-07) exceeded the total Plan grants from the Centre to the State (Rs.6.97 billion, Rs.9.33 billion, Rs.8.00 billion and Rs.9.98 billion respectively).
Business organisations represented to the authorities the case of the exporters who were affected by the appreciation of the rupee. Following this, the Central government offered them relief by way of interest subsidy and other measures. While the exporters got interest subsidy of Rs.83.51 billion, not even a token subsidy was offered to NRI bank deposits.
George and Remya describe the silence of policy-makers and opinion leaders in Kerala in this matter as baffling. "The sheer number of emigrants and remittance receiving households should have made them sit up," they say.
They add, "It appears that despite their importance in Kerala economy, the NRMs have not acquired sufficient clout and lobbying power with the State government, not to mention the Central government."
From the NRM point of view, there was a slight improvement in the situation since the beginning of this year as the rupee declined in tune with the downward trend in the stock market. But financial experts expect the rupee to bounce back when capital inflows rise. Obviously Keralites still have cause for worry. --Gulf Today, Sharjah, May 19, 2008.
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